Takeovers and takeover attempts waste valuable capital.
a. True
b. False
Debt grew faster than GDP during and after the recent Great Recession, when the
government had to spend more (as for unemployment benefits), while its tax revenue
shrank.
a. True
b. False
The payroll tax is the federal government’s biggest source of revenue.
a. True
b. False
A perfectly competitive firm may, under some circumstances, be able to affect the
market price.
a. True
b. False
The term opportunity cost refers to the
a. value of what is gained when a choice is made.
b. difference between the value of what is gained and the value of what is forgone when
a choice is made.
c. value of what is forgone when a choice is made.
d. direct costs involved in making a choice.
In 2012, what percentage of total income in the U.S. was earned by the poorest fifth of
all U.S. households?
a. 1.5%
b. 1.8%
c. 2.0%
d. 3.2%
Which of the following will not lead to increase in the marginal revenue product?
a. MPP increases without any changes in the price.
b. Price of the product increases without any changes in MPP.
c. MPP and price of the product increases.
d. MPP remains the same and price of the product falls.
The United States suffers more from strikes than Japan but fewer strikes than Canada.
a. True
b. False
Probably the simplest approach to the problem of oligopolistic interdependence is to
a. conduct market experiments.
b. assume that rivals will pursue a course most detrimental to the firm concerned.
c. ignore the actions of rivals.
d. increase the firm’s advertising outlay considerably.
Figure 22-1
In Figure 22-1,
a. Great Britain has an absolute advantage over Germany in the production of both
scientific equipment and woolens.
b. Germany has a comparative advantage over Great Britain in the production of
woolens.
c. Great Britain has a comparative advantage in the production of woolens.
d. Great Britain should export scientific equipment to Germany, and Germany should
export woolens to Great Britain.
The theory of land rent holds that
a. all plots of land are identical.
b. all land yields a positive rent return.
c. rent on any piece of land will equal the difference between the cost of producing the
output on that land and the cost of producing it on marginal land.
d. competition for superior plots of land will force the rent on those lands to a marginal
return of zero.
As hourly wages have risen in the United States in the twentieth century, the number of
hours of labor supplied by most wage workers has
a. fallen.
b. stayed roughly constant.
c. risen.
d. generally risen, but has fallen during periods of recession.
In the last decade, spending on education has been slowing.
a. True
b. False
When a firm leaves a perfectly competitive industry,
a. the individual demand curves facing remaining firms shift towards the point of
minimum average cost in the long run.
b. short-run industry equilibrium is re-established at a new point along the original
short-run industry supply curve.
c. the short-run industry supply curve shifts to the right.
d. at the new long-run equilibrium, the remaining firms in the industry will each receive
a higher profit.
Something other than exploiting cheap foreign labor must be driving international trade.
a. True
b. False
Abstraction is used in economics to omit unnecessary details and focus on the essence
of the problem being studied.
a. True
b. False
The concept of “random walk” applies most closely to predictions of
a. consumer demand for a product after a price increase.
b. the effects of a tax on the supply of oil.
c. the effects of transfer payments on labor supply.
d. the price of a particular stock one year from now.
Many fear that cheap foreign labor will destroy American jobs; in reality, wages in
a. the United States have risen spectacularly in the last 33 years as trade grew.
b. countries that export to the United States are very low relative to the United States
and show no sign of rising.
c. countries that export to the United States have risen spectacularly in the last 33 years.
d. United States export industries are very low relative to wages in the same industry in
other countries.
e. All of the above are correct.
Adam Smith’s diamond-water puzzle
a. can be resolved by distinguishing between marginal and total utility.
b. occurs because diamonds have no utility.
c. occurs because scarcity increases total utility.
d. will likely never be resolved with existing economic tools.
Cross elasticity of demand for
a. substitutes will normally be positive.
b. complements will normally be positive.
c. substitutes will normally be negative.
d. complements will normally be infinite.
If in a given market of more than one producer, there were to exist for a long interval of
time a positive gap between price and average cost (P > AC), this would suggest that
a. there are many sellers in the industry.
b. there exists an oligopoly or cartel in the industry.
c. this is a contestable market.
d. the firm cannot be a monopolistic competitor.
Figure 5-18
In Figure 5-18, point D for the consumer
a. will be chosen because total utility is larger there than at point C.
b. would not be chosen because it is less desirable than point C.
c. is unattainable, given the consumer’s budget.
d. has total utility equal to point C.