Price controls on resources generally lead to surpluses.
a. True
b. False
As we move down a straight-line demand curve, the price elasticity becomes
a. larger.
b. smaller.
c. larger, then smaller.
d. smaller, then larger.
Figure 8-3
Figure 8-3 shows a firm’s total profit function. At an output of 40, the firm’s total profit
equals ____.
a. 10
b. 40
c. 200
d. 400
Figure 4-19
After a strike against the Financial News in London began, the number of copies of the
competing Broad Street Journal sold in England increased dramatically, yet there was
no increase in price. Which supply and demand graph in Figure 4-19 represents the
situation for the Broad Street Journal before the strike started?
a. 1
b. 2
c. 3
d. 4
An excise tax on gasoline is regressive if
a. rich people buy more gasoline than poor people.
b. the demand for gasoline is elastic.
c. the tax causes people to buy less gasoline.
d. poor people spend a larger portion of their incomes on gasoline than rich people.
Opportunity cost can best be defined as the
a. value of what must be given up in order to acquire an item.
b. money cost to the buyer to acquire a good or service.
c. total value of all the other items that otherwise could be acquired.
d. cost to the seller to produce an item.
e. time cost to obtain the money to buy an item.
The derived demand for borrowed funds has the characteristic negative slope of any
demand curve.
a. True
b. False
Figure 22-5
From the graph in Figure 22-5 (curves show output per unit of labor input), one can
infer that
a. Japan has an absolute advantage in TVs and computers, but a comparative advantage
only in TVs.
b. Japan has only a comparative advantage in TVs.
c. Japan has an absolute advantage in both TVs and computers, but a comparative
advantage only in computers.
d. China has a comparative advantage in computers.
Workers earn more than half of the income generated by the production process.
a. True
b. False
Figure 5-17
In Figure 5-17, which of the marked points would an economist use to help him
construct a single demand curve for X?
a. A and B
b. C and D
c. A and C
d. A and D
Above a certain income the marginal social security tax drops to zero.
a. True
b. False
Suppose Tammy grew up on a farm and is very good at plowing. In addition suppose
she is a popular country singer who earns $4,000 per performance. If her husband Bob
can plow (but not as well as Tammy) but he can’t carry a tune, then it would be most
efficient if
a. Tammy did both the plowing and the singing.
b. Tammy specialized in plowing and Bob in singing.
c. Bob did both the plowing and singing.
d. Tammy specialized in singing and Bob in plowing.
e. They both plowed and sang.
Many economists argue that the most efficient way to control pollution is to
a. ban all activities that create pollution.
b. enforce legal standards on air and water quality.
c. promote environmental awareness among citizens.
d. impose taxes on emissions.
Inventions like gunpowder and the wheelbarrow were created by the Chinese hundreds
of years ago. The fact that such items were not put to productive use was caused
primarily by a lack of ____.
a. financial capital
b. entrepreneurship
c. an adequate price system
d. marginal analysis
There is only a small difference in wages between college graduates and workers who
did not attend college.
a. True
b. False
Give a complete but concise definition of the following terms.
a. perfect competition
b. perfectly competitive firm’s demand curve
c. shutdown point
d. long-run equilibrium in perfect competition
Market demand curves are found by
a. vertically summing individual demand curves.
b. horizontally summing individual demand curves.
c. summing individual demand curves in a parallel fashion.
d. adding the slopes of individual demand curves.
In order for a central planner to achieve the invisible-hand type efficiency of a free
market, the planner would
a. need masses of statistics.
b. be required to makes enormous calculations.
c. need to be able to measure a consumer’s marginal utility in order to equate MU with
MC.
d. All of the above would be required.
Figure 6-4
In Figure 6-4, total expenditure ____ as price falls from P = 12 to P = 10.
a. falls
b. stays constant
c. rises
d. rises by more than $12
When can a country gain a price advantage on imports by imposing a tariff?
a. when it is the largest country with absolute advantage in all goods
b. when it has a comparative advantage in the production of all goods
c. when it can do so without other countries retaliating with tariffs
d. when trade agreements prohibit quotas but permit tariffs
For a perfectly competitive firm, marginal revenue equals average revenue because the
a. firm’s supply curve is horizontal.
b. industry’s demand curve is horizontal.
c. firm’s demand curve is horizontal.
d. industry’s supply curve is horizontal.
Table 7-1
In Table 7-1, the marginal physical product begins to diminish with the addition of the
a. second worker.
b. third worker.
c. fourth worker.
d. Marginal returns never diminish in Table 7-1.
Can positive economic profits persist under monopolistic competition in the long run.
Why?
Explain how a bilateral monopoly equilibrium outcome differs from a purely
competitive outcome.
“As long as total revenue slopes up, marginal revenue must slope up also.” Explain
whether this statement is true or false.
How do modern markets differ from other economic systems in their capacity to
produce “growth miracles”?
Distinguish between invention and innovation.
Many believe that fairness calls for higher income taxes on the wealthy. Using one of
the “Ideas for Beyond the Final Exam,” explain how higher taxes on the wealthy will
affect output.
Explain some important situations where direct controls have a clear advantage over
taxes.
Discuss the three principles of equity applied to taxation in the text.
How does correlation differ from causation? Give an example of each to illustrate your
answer.
Why do markets tend to underproduce public goods?