Economics

The nations of the Euro Zone have: Select one: a. abandoned their national currencies and switched to a common currency. b. abandoned their national currencies and switched to American dollars. c. formed a single country called the Union of European Nations (UEN). d. recently admitted 10 new members.

A

The two basic markets shown by the simple circular flow model are: Select one: a. capital goods and consumer goods. b. free and controlled. c. product and resource. d. household and business.

C

In the United States, the rate of unionization is: Select one: a. higher for sales workers than for transportation workers. b. lower for managers than for teachers. c. lower for craft workers than for sales workers. d. higher for technicians than for protective service workers.

B

Occupational licensing can best be understood in terms of: Select one: a. the inclusive unionism model. b. the exclusive unionism model. c. the bilateral monopoly model. d. the monopsony model.

B

One consequence of the long-run problem faced by farms has been a: Select one: a. rapid increase in the price of farm output. b. massive exit of workers from agriculture to other sectors of the economy. c. smaller average farm size. d. reduction in U.S. exports of farm products.

B

The first successful commercial introduction of a new product refers to: Select one: a. invention. b. innovation. c. diffusion. d. diversification.

B

A well-tested economic theory is often called: Select one: a. a hypothesis. b. a prototype. c. a principle. d. an anomaly.

C

Allocative efficiency occurs only at that output where: Select one: a. marginal benefit exceeds marginal cost the by the greatest amount. b. consumer surplus exceeds producer surplus by the greatest amount. c. the combined amounts of consumer surplus and producer surplus are maximized. d. the areas of consumer and producer surplus are equal.

C

About half of United States international trade is with: Select one: a. other industrially advanced capitalist countries. b. the OPEC countries. c. developing countries. d. Russia and China.

A

In 2004, the average income for households in the United States was about: Select one: a. $60,500. b. $22,800. c. $9,600. d. $82,700.

A

Productive efficiency refers to: Select one: a. the use of the least-cost method of production. b. the production of the product-mix most wanted by society. c. the full employment of all available resources. d. production at some point inside of the production possibilities curve.

A

To say that land rent performs no incentive function means that: Select one: a. higher rental payments will not bring forth a larger quantity of land. b. rent is not a cost to specific firms but it is a cost from the standpoint of the economy as a whole. c. rent does not allocate land in terms of productive efficiency. d. rent tends to allocate land into the most productive uses.

A

Which of the following countries recently joined the ranks of the world's leading trading nations by total dollar volume? Select one: a. China b. Chile c. Ireland d. Belgium

A

Which of the following is not characteristic of long-run equilibrium under monopolistic competition? Select one: a. price equals minimum average total cost b. marginal cost equals marginal revenue c. price is equal to average total cost d. price exceeds marginal cost

A

As it relates to the R&D decision, the interest-rate-cost-of-funds curve: Select one: a. usually slopes downward. b. is the marginal cost element in the MB = MC decision framework. c. indicates a constant rate of return, r. d. reflects the interest rate on bank loans, but not the implicit interest rate on the use of retained earnings.

B

For an increase in demand the price effect is smallest and the quantity effect is largest: Select one: a. when supply is least elastic. b. in the long run. c. in the short run. d. in the immediate market period.

B

In which of the following cases did the final court decision result in a breakup of the firm into competing businesses? Select one: a. Microsoft case b. Standard Oil case c. U.S. Steel case d. DuPont cellophane case

B

Nonprice competition refers to: Select one: a. low barriers to entry. b. product development, advertising, and product packaging. c. the differences in information which consumers have regarding various products. d. an industry or firm in long-run equilibrium.

B

Small changes in the demand for agricultural products cause large changes in farm prices and incomes because: Select one: a. demand is relatively elastic with respect to price. b. demand is relatively inelastic with respect to price. c. agricultural supply is stable in the long run. d. the supply of agricultural products is perfectly elastic.

B

The spread of innovation through imitation refers to: Select one: a. invention. b. diffusion. c. duplication. d. diversification.

B

Externalities: Select one: a. relate to costs only. b. relate to benefits only. c. relate to both costs and benefits. d. have been legislated out of existence.

C

If average total cost is declining, then: Select one: a. marginal cost must be greater than average total cost. b. the average fixed cost curve must lie above the average variable cost curve. c. marginal cost must be less than average total cost. d. total cost must also be declining.

C

Suppose a worker feels unhappy with his job and consequently quits. This illustrates: Select one: a. the voice mechanism. b. featherbedding. c. the exit mechanism. d. blacklisting.

C

The law of diminishing returns describes the: Select one: a. relationship between total costs and total revenues. b. profit-maximizing position of a firm. c. relationship between resource inputs and product outputs in the short run. d. relationship between resource inputs and product outputs in the long run.

C

The trading of votes by elected officials to secure favorable outcomes is called: Select one: a. splitting the difference. b. social engineering. c. logrolling. d. grandstanding.

C

When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes: Select one: a. the cost effect. b. the inflationary effect. c. the income effect. d. the substitution effect.

C

Specialization in production is important primarily because it: Select one: a. results in greater total output. b. allows society to avoid the coincidence-of-wants problem. c. allows society to trade by barter. d. allows society to have fewer capital goods.

A

For a purely competitive firm total revenue: Select one: a. is price times quantity sold. b. increases by a constant absolute amount as output expands. c. graphs as a straight upsloping line from the origin. d. has all of these characteristics.

D

Suppose an increase in product demand occurs in a decreasing-cost industry. As a result: Select one: a. the new long-run equilibrium price will be lower than the original long-run equilibrium price. b. equilibrium quantity will decline. c. firms will eventually leave the industry. d. the new long-run equilibrium price will be higher than the original price.

A

Studies show that: Select one: a. it is impossible to estimate the benefits of trade barriers. b. costs and benefits of trade barriers are about equal. c. benefits of trade barriers exceed their costs in developing nations. d. costs of trade barriers exceed their benefits, creating an efficiency loss for society.

D

The failure of Soviet central planning was reflected in: Select one: a. a declining growth rate. b. poor quality goods. c. the failure to provide promised consumer goods. d. all of these.

D

The majority of personal consumption expenditures go to purchase: Select one: a. nondurable goods. b. durable goods. c. capital goods. d. services.

D

The purchase by an American firm of the right to produce a prescription drug patented in Germany best illustrates a: Select one: a. trade flow. b. capital flow. c. goods and services flow. d. technology flow.

D

The wide imitation and spread of an innovation is called: Select one: a. innovation. b. invention. c. creative destruction. d. diffusion.

D

Total fixed cost (TFC): Select one: a. falls as the firm expands output from zero, but eventually rises. b. falls continuously as total output expands. c. varies directly with total output. d. does not change as total output increases or decreases.

D

The optimal (economically-efficient) level of air pollution is zero emissions. Select one: True False

False

The supply of loanable funds is perfectly elastic. Select one: True False

False

The top 20 percent of U.S. income earners receive nearly 80 percent of total U.S. income. Select one: True False

False

Which of the following describes a purely competitive labor market? Select one: a. MRP < Wage Rate b. MRP > Wage Rate c. Wage Rate = MRC d. Wage Rate < MRC

C

Which of the following terms implies the greatest degree of confidence in an economic generalization? Select one: a. a hypothesis. b. a theory. c. a principle. d. an anomaly.

C

Fiber-optic telephone lines are rapidly replacing copper telephone cable. This is an example of: Select one: a. capital-labor substitutability. b. economies of scale. c. market (or monopoly) power. d. technological advance.

D

In which of the following instances will total revenue decline? Select one: a. price rises and supply is elastic b. price falls and demand is elastic c. price rises and demand is inelastic d. price rises and demand is elastic

D

There will be a surplus of a product when: Select one: a. price is below the equilibrium level. b. the supply curve is downward sloping and the demand curve is upward sloping. c. the demand and supply curves fail to intersect. d. consumers want to buy less than producers offer for sale.

D

Well-defined property rights: Select one: a. discourage investment and growth. b. discourage hard work. c. impede exchange. d. encourage owners to maintain or improve their property.

D

When total utility is at a maximum, marginal utility is zero. Select one: True False

True

(Last Word) Microsoft charges a substantially lower price for a software upgrade than for the initial purchase of the software. This implies that Microsoft views the demand curve for the software upgrade to be: Select one: a. more elastic than the demand for the original software. b. upsloping rather than downsloping. c. less elastic than the demand for the original software. d. of less value than the original software.

A

(Last Word) The final settlement of the United States v. Microsoft case: Select one: a. requires that Microsoft provide technical information to competing companies so they can develop software programs that work as well with Windows as Microsoft's own products. b. broke up Microsoft into two competing firms. c. found Microsoft not guilty of violating the Sherman Act. d. forced Microsoft to sell off its major applications programs such as Word and PowerPoint.

A

(Last Word) When patents on new medications expire, the market for those drugs: Select one: a. change from being monopolistic to being competitive. b. change from being competitive to being monopolistic. c. collapse. d. encourage firms to leave the market.

A

A budget line shows the: Select one: a. alternative combinations of two goods that a consumer can purchase with a given money income. b. alternative combinations of two goods that will yield the same level of total utility to a consumer. c. quantities of a particular good that a consumer will buy at various prices. d. ratio of money income to product price.

A

A large hospital in a relatively small city finds that, if its demand for nurses increases, the wages of nurses will rise. We can say that the hospital: Select one: a. is a monopsonist. b. faces a perfectly elastic supply of nurses. c. is functioning in a perfectly competitive labor market. d. will confront a surplus of nurses.

A

A nation will neither export nor import a specific product when its: Select one: a. domestic price (no-international-trade price) equals the world price. b. export supply curve lies above its import demand curve. c. export supply curve is upsloping. d. import demand curve is downsloping.

A

A pure monopolist: Select one: a. will realize an economic profit if price exceeds ATC at the profit-maximizing/loss-minimizing level of output. b. will realize an economic profit if ATC exceeds MR at the profit-maximizing/loss-minimizing level of output. c. will realize an economic loss if MC intersects the downsloping portion of MR. d. always realizes an economic profit.

A

According to the purchasing power parity theory of exchange rates: Select one: a. a dollar, when converted to other currencies at the prevailing floating exchange rate, has the same purchasing power in various countries. b. in equilibrium, national currencies have equal value in terms of gold. c. the higher a nation's price level in terms of its own currency, the greater is the amount of foreign exchange it can obtain for a unit of its currency. d. nominal currency values will tend to equalize (become 1 = 1) in the long run.

A

An increasing-cost industry is the result of: Select one: a. higher resource prices which occur as the industry expands. b. a change in the industry's minimum efficient scale. c. X-inefficiency. d. the law of diminishing returns.

A

An industry producing a differentiated product whose four-firm concentration ratio is 18 percent is an example of: Select one: a. monopolistic competition. b. oligopoly. c. pure monopoly. d. pure competition.

A

Answer the next question(s) on the basis of the following information about the cost ratios for two products-fish (F) and chicken (C)-in Singsong and Harmony. Assume that production occurs under conditions of constant costs and these are the only two nations in the world.Singsong: 1F = 2CHarmony: 1F = 4CRefer to the above information. In Singsong the domestic real cost of each chicken: Select one: a. is 1/2 a fish. b. is 2 fish. c. increases with the level of fish caught. d. decreases with the level of fish caught.

A

As a firm produces successive units of output in the short run we would expect: Select one: a. TVC to increase initially by declining amounts, but eventually increase by increasing amounts. b. TVC to increase initially by increasing amounts, but eventually by decreasing amounts. c. TFC to increase by constant amounts. d. the sum of TVC and TFC to increase initially by increasing amounts, but eventually by decreasing amounts.

A

As it applies to insurance, the adverse selection problem is the tendency for: Select one: a. those most likely to collect on insurance to buy it. b. those who buy insurance to take less precaution in avoiding the insured risk. c. sellers to price discriminate. d. sellers to restrict output and charge high prices.

A

As it relates to a public good, nonexcludability means that: Select one: a. free riders cannot be barred from receiving the benefits. b. there is no need or demand for the good. c. either the public sector or the public sector can produce the good, but not both. d. one person's benefit from the good does not reduce the benefit available to others.

A

As it relates to owners and managers, the principal-agent problem results from the: Select one: a. separation of corporate ownership and control. b. double taxation of corporate profit. c. limited liability of corporate owners. d. differing interests of corporate stockholders and bondholders.

A

Assume that you pay $5,000 of tax on a taxable income of $20,000. If your taxable income were $40,000, your tax payment would be $12,000. This suggests the tax is: Select one: a. progressive. b. proportional. c. regressive. d. discriminatory.

A

Assume the demand curve for product X shifts to the right. This might be caused by: Select one: a. a decline in income if X is an inferior good. b. a decline in the price of Z if X and Z are substitute goods. c. a change in consumer tastes that is unfavorable to X. d. an increase in the price of Y if X and Y are complementary goods.

A

Economists who adhere to the laissez-faire antitrust perspective: Select one: a. view competition as a long-run dynamic process in which firms battle for dominance of markets but rarely can sustain such dominance once it is achieved. b. believe the antitrust laws are as important today as they were when they were passed in the early 1900s. c. say that an industry's structure, which is based on economies of scale, usually predicts the behavior of the industry firms. d. contend that large, dominant firms should be broken into smaller competitive firms and then government should stand back and let competition prevail.

A

Firms are not likely to provide sufficient workplace safety if: Select one: a. workers are unaware of workplace hazards. b. they have some degree of monopoly power. c. they are pure competitors and therefore price takers. d. they are profit-maximizers.

A

Government lotteries are: Select one: a. used by a large number of states to supplement their tax revenues. b. illegal in the United States, but are a common source of revenue in other countries. c. used by local governments, but not by state governments. d. a form of progressive taxation.

A

If a nation's goods exports are $55 billion, while its goods imports are $50 billion, we can conclude with certainty that this nation has a: Select one: a. balance of trade (goods) surplus. b. balance of payments surplus. c. positive balance on current account. d. positive balance on goods and services.

A

If an exclusive union is successful in restricting the supply of labor, the: Select one: a. wage rate will rise. b. the quantity of labor demanded will rise. c. the number of job opportunities in the firm or industry will increase. d. the demand for labor curve will shift leftward.

A

If negative externalities are not internalized, the: Select one: a. equilibrium output will exceed the most efficient output. b. most efficient output will exceed the equilibrium output. c. product must be a public good. d. distribution of income will necessarily become more equal.

A

If total utility is increasing, marginal utility: Select one: a. is positive, but may be either increasing or decreasing. b. must also be increasing. c. may be either positive or negative. d. will be increasing at an increasing rate.

A

If we are considering the relationship between two variables and release one of the other-things-equal assumptions, we would expect: Select one: a. the relationship to change from direct to inverse. b. the line representing that relationship on a graph to change locations. c. the data points to have a tighter fit to the line representing the relationship. d. the relationship to change from inverse to direct.

A

If you would have to pay $5000 in taxes on a $25,000 taxable income and $7000 on a $30,000 taxable income, then the marginal tax rate on the additional $5000 of income is: Select one: a. 40 percent and the average tax rate is about 23 percent at the $30,000 income level. b. 50 percent and the average tax rate is 40 percent at the $30,000 income level. c. 40 percent and the average tax rate is 25 percent at the $25,000 income level. d. 30 percent but average tax rates cannot be determined from the information given.

A

In a competitive market: Select one: a. demand will not always reflect all external benefits. b. demand will always reflect all external benefits. c. supply will always reflect all external costs. d. supply will always reflect all external benefits.

A

In a market for pollution rights an increase in demand would: Select one: a. raise the price of pollution rights, but leave the quantity unchanged. b. stimulate the economic incentive to pollute. c. increase the actual amount of pollution. d. induce an increase in the supply of pollution rights.

A

In considering yen and dollars, when the dollar rate of exchange for the yen rises: Select one: a. the yen rate of exchange for the dollar will fall. b. the yen rate of exchange for the dollar will also rise. c. the yen rate of exchange for the dollar may either fall or rise. d. U.S. net exports to Japan will fall.

A

In economists' models, technological advance occurs in: Select one: a. the very long run. b. either the short run, long run, or very long run. c. manufacturing industries but not in service industries. d. pure competition, but not in monopolistic competition, oligopoly, and pure monopoly.

A

In presenting the idea of a demand curve economists presume that the most important variable in determining the quantity demanded is: Select one: a. the price of the product itself. b. consumer income. c. the prices of related goods. d. consumer tastes.

A

In which of the following instances will the effect on equilibrium price be dependent on the magnitude of the shifts in supply and demand? Select one: a. demand rises and supply rises. b. supply falls and demand remains constant. c. demand rises and supply falls. d. supply rises and demand falls.

A

In which of the following market models do demand and marginal revenue diverge? Select one: a. pure monopoly, oligopoly, and monopolistic competition b. pure monopoly, oligopoly, and pure competition c. pure monopoly only d. oligopoly only

A

Legal protections against competitors producing and selling a product identical to the one you invented are called _________; legal protections against competitors using your product's name are called __________. Select one: a. patents; trademarks b. trademarks; copyrights c. copyrights; patents d. trademarks; patents

A

Mexican imports of U.S. goods: Select one: a. create a supply of pesos. b. create a supply of dollars. c. reduce the demand for dollars. d. have no effect on the peso-dollar exchange rate.

A

Mr. Chan has an income of $20 that he is spending on donuts and cheese in such amounts that he derives 25 utils of satisfaction from the donuts and 25 utils of satisfaction from the cheese. On the basis of this information we: Select one: a. cannot say whether or not Chan is buying donuts and cheese in equilibrium amounts. b. can say that Chan should buy more cheese and fewer donuts. c. can say that Chan should buy more donuts and less cheese. d. can say that Chan is buying the utility-maximizing amounts of donuts and cheese.

A

Other things equal, in which of the following cases would economic profit be the greatest? Select one: a. an unregulated monopolist which is able to engage in price discrimination b. an unregulated, nondiscriminating monopolist c. a regulated monopolist charging a price equal to average total cost d. a regulated monopolist charging a price equal to marginal cost

A

Senator A agrees to vote for Senator K's state project in exchange for Senator K voting for Senator A's state project. This is an example of: Select one: a. logrolling. b. the paradox of voting. c. the principal-agent problem. d. the median voter model.

A

Suppose that a firm introduces a highly profitable new product. If this new product is priced higher than existing substitute products, then the: Select one: a. new product has greater marginal utility than the existing products. b. laws of economics have been violated. c. new product must have increasing, not diminishing, marginal utility. d. existing products were unprofitable to produce.

A

Suppose that a pure monopolist can sell 10 units of output at $5 per unit and 11 units at $4.90 per unit. The marginal revenue of the eleventh unit is: Select one: a. $3.90. b. $.10. c. $53.90. d. $4.90.

A

Suppose that at prices of $5, $4, $3, $2, and $1 for product Z, the corresponding quantities supplied are 3, 4, 5, 6, and 7 units, respectively. Which of the following would increase the quantities supplied of Z to, say, 6, 8, 10, 12, and 14 units at these prices? Select one: a. improved technology for producing Z b. an increase in the prices of the resources used to make Z c. an increase in the excise tax on product Z d. increases in the incomes of the buyers of Z

A

Suppose that wages for African-American and white workers of equal productivity are $12 and $13 an hour, respectively. If a particular firm hires only whites, its discrimination coefficient must be: Select one: a. greater than $1. b. less than $1. c. zero. d. infinity.

A

Suppose you go to a doctor but your health insurance plan reimburses you for only 80 percent of the bill. This is an example of: Select one: a. coinsurance. b. a deductible. c. monopsony power. d. a deferred benefit plan.

A

The XYZ Corporation can make a real (inflation-adjusted) return on an investment of 9 percent. The nominal rate of interest is 13 percent and the rate of inflation is 7 percent. We can conclude that the: Select one: a. investment will be profitable. b. investment will be unprofitable. c. real rate of interest is 4 percent. d. real rate of interest is 2 percent.

A

The crowding model of discrimination suggests that: Select one: a. women and selected minorities are systematically excluded from high-paying occupations and crowded into low-paying occupations, decreasing their wages and reducing domestic output. b. employers having high discrimination coefficients will be crowded out by nondiscriminating employers in the long run. c. firms will base hiring decisions on group averages, rather than on individual characteristics and productivity. d. occupational segregation is largely the result of freely made rational choices of women and minorities.

A

The equilibrium interest rate: Select one: a. affects both the size of total output and its composition. b. falls when the demand for loanable funds increases. c. determines the composition of R&D spending but not its total amount. d. increases when the expected rate of return on R&D spending falls.

A

The essential difference between sales and excise taxes is that: Select one: a. sales taxes apply to a wide range of products, while excises apply only to a select group of products. b. excise taxes apply to a wide range of products, while sales taxes apply only to a select list of products. c. sales taxes are consumption taxes, while excises are not. d. excise taxes are consumption taxes, while sales taxes are not.

A

The kinked-demand curve describes a situation in which an oligopolist will be: Select one: a. interested in maintaining the going price unless there is a rather large change in costs. b. anxious to either increase or lower price. c. anxious to increase price but not to lower price. d. anxious to lower price but not to increase price.

A

The kinked-demand curve of an oligopolist is based on the assumption that: Select one: a. competitors will follow a price cut but ignore a price increase. b. competitors will match both price cuts and price increases. c. competitors will ignore a price cut but follow a price increase. d. there is no product differentiation.

A

The law of supply: Select one: a. reflects the amounts that producers will want to offer at each price in a series of prices. b. is reflected in a downsloping supply curve. c. shows that the relationship between producer revenue and quantity supplied is negative. d. reflects the income and substitution effects of a price change.

A

The production possibilities curve shows: Select one: a. the various combinations of two goods that can be produced when society employs all of its scarce resources. b. the minimum outputs of two goods that will sustain a society. c. the various combinations of two goods that can be produced when some resources are unemployed. d. the ideal, but unattainable, combinations of two goods that would maximize consumer satisfactions.

A

The terms of trade: Select one: a. show the ratio at which nations will exchange two goods. b. show how the gains from trade can be equally shared. c. show the value of one nation's currency in terms of another nation's currency. d. compare the volume of a nation's exports and imports.

A

The twin problems of the U.S. health care industry are: Select one: a. rapidly rising costs and unequal access to health care. b. declining quality of health care and the duplication of specialized equipment at hospitals. c. declining per capita spending on health care and the moral hazard problem. d. the decline in the number of family physicians and the failure to vaccinate children.

A

The voice mechanism is important because it may: Select one: a. reduce worker turnover and increase productivity. b. increase worker mobility. c. increase the number of strikes. d. conflict with the Taft-Hartley Act.

A

Trade Adjustment Assistance: Select one: a. helps worker dislocated by international trade without erecting barriers that impede foreign trade. b. subsidizes new firms trying to compete in international markets. c. protects domestic jobs by reducing imports. d. establishes a series of gradually loosened import quotas so that domestic firms have time to improve their international competitiveness or transition to new markets.

A

Use the following cost information for the Creamy Crisp Donut Company to answer questions 16-23:Entrepreneur's potential earnings as a salaried worker = $50,000Annual lease on building = $22,000Annual revenue from operations = $380,000Payments to workers = $120,000Utilities (electricity, water, disposal) costs = $8,000Entrepreneur's potential economic profit from the next best entrepreneurial activity = $80,000Entrepreneur's forgone interest on personal funds used to finance the business = $6,000Refer to the above data. Creamy Crisp's total economic costs (explicit + implicit costs, including a normal profit) are: Select one: a. $286,000. b. $150,000. c. $94,000. d. $156,000.

A

Wage differentials can arise from: Select one: a. both the demand-side and supply-side of labor markets. b. the demand-side of labor markets only. c. the supply-side of labor markets only. d. neither the demand-side or supply-side of labor markets.

A

We know with certainty that a consumer will buy a newly introduced product rather than an existing product when the: Select one: a. MU/P of the new product exceeds the MU/P of the existing product. b. price of the new product is less than the price of the existing product. c. MU of the new product is more than the MU of the existing product. d. law of diminishing marginal utility applies to the existing product.

A

Which of the following best describes the invisible-hand concept? Select one: a. The desires of resource suppliers and producers to further their own self-interest will automatically further the public interest. b. The nonsubstitutability of resources creates a conflict between private and public interests and calls for government intervention. c. The market system is the best system for overcoming the scarce resources-unlimited wants problem. d. Central direction by the government will improve resource allocation in a capitalistic economy.

A

Which of the following generalizations is correct? Select one: a. the more elastic the supply of a product, the larger the portion of an excise tax that is borne by buyers b. the more elastic the demand for a product, the larger the portion of an excise tax that is borne by buyers c. the more inelastic the supply of a product, the larger the portion of an excise tax that is borne by buyers d. the more inelastic the demand for a product, the larger the portion of an excise tax that is borne by sellers

A

Which of the following is not characteristic of pure competition? Select one: a. price strategies by firms b. a standardized product c. no barriers to entry d. a larger number of sellers

A

Which of the following statements applies to a purely competitive producer? Select one: a. It will not advertise its product. b. In long-run equilibrium it will earn an economic profit. c. Its product will have a brand name. d. Its product is slightly different from those of its competitors.

A

Which of the following statements is incorrect? Select one: a. A monopolist's 100 percent market share ensures economic profits. b. The monopolist's marginal revenue is less than price for any given output greater than 1. c. A monopolistic firm produces a product having no close substitutes. d. A pure monopolist's demand curve is the industry demand curve.

A

Which of the following statements is most consistent with the benefits-received principle of taxation? Select one: a. A childless couple should not be required to pay taxes for the support of public schools. b. Prosperous corporations should pay substantial taxes even if they use few government goods and services. c. The best tax is the income tax. d. People with high incomes should pay more taxes than people with low incomes.

A

Which of the following terms implies the least degree of confidence in an economic generalization? Select one: a. a hypothesis. b. a theory. c. a principle. d. a law.

A

(Last Word) Suppose that a firm has "pricing power" and can segregate its market into two distinct groups based on differences in elasticities of demand. The firm might charge: Select one: a. a lower price to the group that has the less elastic demand. b. a higher price to the group that has the less elastic demand. c. the same price to both groups but include a "free" related product for the group that has an inelastic demand. d. the same price to both groups but make it difficult for the group with the more elastic demand to gain access to the product.

B

A consumer will buy a new product rather than an existing product: Select one: a. when the MU/P of the new product is less than the MU/P of the existing product. b. when the substitution of the new product for the old product increases the consumer's total utility. c. only if the new product has a lower price than the existing product. d. only if the MU of the new product exceeds the MU of the existing product.

B

A consumer's demand curve for a product is downsloping because: Select one: a. total utility falls below marginal utility as more of a product is consumed. b. marginal utility diminishes as more of a product is consumed. c. time becomes less valuable as more of a product is consumed. d. the income and substitution effects precisely offset each other.

B

A country can achieve some combination of goods outside its production possibilities curve by: Select one: a. idling some of its resources. b. specializing and engaging in international trade. c. buying the debt (bonds and stocks) of foreign nations. d. producing more capital goods and fewer consumer goods.

B

A firm finds that at its MR = MC output, its TC = $1,000, TVC = $800, TFC = $200, and total revenue is $900. This firm should: Select one: a. shut down in the short run. b. produce because the resulting loss is less than its TFC. c. produce because it will realize an economic profit. d. liquidate its assets and go out of business.

B

A merger of several firms operating in different industries-for example, a trucking company, a fast-food chain, and a brokerage house-is called: Select one: a. an integrated merger. b. a conglomerate merger. c. a vertical merger. d. a horizontal merger.

B

A nation's import demand curve for a specific product: Select one: a. is upsloping. b. shows the amount of the product it will import at prices below its domestic price. c. lies above its export supply curve for the product. d. depends on domestic demand for the product, but not on domestic supply.

B

A positive externality or spillover benefit occurs when: Select one: a. product differentiation increases the variety of products available to consumers. b. the benefits associated with a product exceed those accruing to people who consume it. c. a firm produces at the P = MC output. d. economic profits are zero in the long run

B

A profit-maximizing firm should not undertake a R&D project for which the: Select one: a. expected rate of return exceeds its interest-rate cost of funds. b. interest-rate cost of funds exceeds the expected rate of return. c. expected returns are in the distant future. d. the expected returns, though potentially very large, are uncertain.

B

A unique characteristic of taxes on economic rents is that such taxes: Select one: a. stimulate aggregate production. b. do not lead to a reallocation of the resource. c. are paid by consumers. d. are always regressive.

B

Advertising can enhance economic efficiency when it: Select one: a. increases brand loyalty. b. expands sales such that firms achieve substantial economies of scale. c. keeps new firms from entering profitable industries. d. is undertaken by pure competitors.

B

Appreciation of the Mexican peso will: Select one: a. make Mexico's exports and imports both more expensive. b. make Mexico's exports more expensive and its imports less expensive. c. make Mexico's exports less expensive and its imports more expensive. d. increase Mexican exports.

B

Assume a household would consume $100 worth of goods and services per week if its weekly income were zero and would spend an additional $80 per week for each $100 of additional income. Letting C represent consumption and Y represent income, the equation that summarizes this relationship is: Select one: a. C = 80 + 100Y. b. C = 100 + .8Y. c. C = 100 + 80Y. d. C = 80 + .1Y.

B

Assume that society places a higher value on the last unit of X produced than the value of the resources used to produce that unit. With no spillovers, this information means that: Select one: a. total cost is greater than total revenue. b. price is greater than marginal cost. c. marginal cost is greater than price. d. resources are being overallocated to X.

B

Behavioralists believe that: Select one: a. if four or fewer firms control more than half of the market for a product, then the Sherman Act is being violated. b. industries should be judged on the basis of their price-output behavior and their technological progressiveness. c. there is no evidence that any monopolistic industries has abused its market power. d. all concentrations of economic power are socially undesirable.

B

Compensating differences in wages: Select one: a. compensate workers for differences in their human capital. b. are wage differences that compensate for differences in the desirability of jobs. c. describe the tendency for the wages of all occupations to adjust to the median level. d. do not exist if jobs have different nonmonetary characteristics.

B

Economic profits and losses: Select one: a. are both considered by economists to be a part of production costs. b. are essential to the reallocation of resources from less desired goods to more desired goods. c. have no influence on the composition of the domestic output. d. equalize the distribution of income in the long run.

B

Economies and diseconomies of scale explain: Select one: a. the profit-maximizing level of production. b. why the firm's long-run average total cost curve is U-shaped. c. why the firm's short-run marginal cost curve cuts the short-run average variable cost curve at its minimum point. d. the distinction between fixed and variable costs.

B

For a monopolistically competitive firm in long-run equilibrium: Select one: a. price will equal marginal cost. b. price will equal average total cost. c. marginal revenue will exceed marginal cost. d. economic profits will be some positive amount.

B

Given the availability of the Medicaid program, why are so many poor people uninsured? Select one: a. Because only a fixed percentage of the population can participate in Medicaid at any time. b. Because many poor people earn enough that they do not qualify for Medicaid. c. Because nonincome requirements screen many poor people from the program. d. Because only native-born Americans are eligible for the program.

B

Households in the aggregate use the largest share of their total income to: Select one: a. pay taxes. b. consume. c. save. d. buy capital goods.

B

If a firm doubles its output in the long run and its unit costs of production decline, we can conclude that: Select one: a. technological progress has occurred. b. economies of scale are being realized. c. the firm is encountering diminishing returns. d. diseconomies of scale are being encountered.

B

If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue: Select one: a. may be either greater or less than $5. b. will also be $5. c. will be less than $5. d. will be greater than $5.

B

If a pure monopolist is operating in a range of output where demand is elastic: Select one: a. it cannot possibly be maximizing profits. b. marginal revenue will be positive but declining. c. marginal revenue will be positive and rising. d. total revenue will be declining.

B

If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then: Select one: a. the selling price for this firm is above the market equilibrium price. b. new firms will enter this market. c. some existing firms in this market will leave. d. there must be price fixing by the industry's firms.

B

If an economy produces its most wanted goods but uses outdated production methods, it is: Select one: a. achieving productive efficiency, but not allocative efficiency. b. not achieving productive efficiency. c. achieving both productive and allocative efficiency. d. engaged in roundabout production.

B

If discrimination based on gender and race was eliminated, we would expect the: Select one: a. personal distribution of income to become less equal. b. personal distribution of income to become more equal. c. personal distribution of income to be unaffected. d. functional distribution of income to change in favor of profits and interest.

B

If the demand for bacon is relatively elastic, a 10 percent decline in the price of bacon will: Select one: a. decrease the amount demanded by more than 10 percent. b. increase the amount demanded by more than 10 percent. c. decrease the amount demanded by less than 10 percent. d. increase the amount demanded by less than 10 percent.

B

If the variable costs of a profit-maximizing pure monopolist decline, the firm should: Select one: a. produce more output and charge a higher price. b. produce more output and charge a lower price. c. reduce both output and price. d. raise both output and price.

B

In recent decades, total health care spending in the United States has: Select one: a. increased, but health care spending as a percentage of GDP has decreased. b. increased, and so has health care spending as a percentage of GDP. c. decreased, and so has health care spending as a percentage of GDP. d. decreased, but health care spending as a percentage of GDP has increased.

B

In recent years, the United States has had large: Select one: a. current account surpluses. b. current account deficits. c. balance of trade surpluses. d. balance of payments surpluses.

B

In the U.S. balance of payments account for a certain year, a positive number in the financial account means a: Select one: a. net buildup of assets held by the U.S. b. net reduction in the ownership of assets by U.S. interests. c. buildup of total foreign debt. d. reduction of total foreign debt.

B

In the short run a purely competitive firm that seeks to maximize profit will produce: Select one: a. where the demand and the ATC curves intersect. b. where total revenue exceeds total cost by the maximum amount. c. that output where economic profits are zero. d. at any point where the total revenue and total cost curves intersect.

B

Other things equal, an increase in the productivity of capital goods will: Select one: a. increase the demand for loanable funds and decrease the equilibrium interest rate. b. increase the demand for loanable funds and increase the equilibrium interest rate. c. increase the supply of loanable funds and decrease the equilibrium interest rate. d. increase the supply of loanable funds and increase the equilibrium interest rate.

B

Protective tariffs are: Select one: a. maximum limits on the quantity or total value of specific products imported to a nation. b. excise taxes or duties placed on imported products. c. licensing requirements, unreasonable quality standards, and the like designed to impede imports. d. government payments to domestic producers to reduce the world prices of exported goods.

B

Responsibility for enforcing the antitrust laws rests: Select one: a. with the Interstate Commerce Commission. b. with both the Department of Justice and the Federal Trade Commission. c. solely with the Federal Trade Commission. d. solely with the Department of Justice.

B

Since 1940 personal taxes have: Select one: a. risen absolutely, but declined as a percentage of personal income. b. risen both absolutely and as a percentage of personal income. c. fallen absolutely, but risen as a percentage of personal income. d. fallen both absolutely and as a percentage of personal income.

B

Some people argue that the three main television networks all have similar programming. If true, this observation might best be explained by the: Select one: a. paradox of voting. b. median-voter model. c. law of diminishing marginal utility. d. ability-to-pay principle.

B

The elasticity of supply of product X is unitary if the price of X rises by: Select one: a. 5 percent and quantity supplied rises by 7 percent. b. 8 percent and quantity supplied rises by 8 percent. c. 10 percent and quantity supplied stays the same. d. 7 percent and quantity supplied rises by 5 percent.

B

The first discovery, as opposed to first commercial application, of the water-soluble material used in contact lens is an example of: Select one: a. innovation. b. invention. c. creative destruction. d. diffusion.

B

The incentive problem under communist central planning refers to the idea that: Select one: a. planners had to direct required inputs to each enterprise. b. workers, managers, and entrepreneurs could not personally gain by responding to shortages or surpluses or by introducing new and improved products. c. the immediate effect of more investment was less consumption. d. exports had to be equal to imports for a central plan to work.

B

The income and substitution effects account for: Select one: a. the upward sloping supply curve. b. the downward sloping demand curve. c. movements along a given supply curve. d. the "other things equal" assumption.

B

The market supply curve for labor is upsloping because: Select one: a. of diminishing returns. b. of the opportunity cost of labor in housekeeping, leisure, or alternative employments. c. of declining MRC. d. each employer is a "wage taker."

B

The practice of price discrimination is associated with pure monopoly because: Select one: a. it can be practiced whenever a firm's demand curve is downsloping. b. monopolists have considerable ability to control output and price. c. monopolists usually realize economies of scale. d. most monopolists sell differentiated products.

B

The price elasticity of demand for health care is: Select one: a. perfectly inelastic. b. relatively inelastic. c. relatively elastic. d. perfectly elastic.

B

The pursuit through government of a transfer of wealth at someone else's expense refers to: Select one: a. logrolling. b. rent-seeking behavior. c. the paradox of voting. d. the median-voter model.

B

The short-run average total cost curve is U-shaped because: Select one: a. average fixed costs decline continuously as output increases. b. of increasing and diminishing returns. c. of economies and diseconomies of scale. d. minimum efficient scale is encountered.

B

The socially optimal amount of pollution abatement occurs where society's marginal: Select one: a. benefit of abatement exceeds its marginal cost of abatement by the greatest amount. b. benefit of abatement equals its marginal cost of abatement. c. benefit of abatement is zero. d. cost of abatement is at its maximum.

B

The supply curve of loanable funds is upsloping because: Select one: a. businesses find more investments to be profitable at low interest rates than at high interest rates. b. households are willing to save more at high interest rates than they are at low interest rates. c. government budget deficits vary inversely with the equilibrium interest rate. d. banks lend more at low interest rates than they do at high interest rates.

B

The vertical distance between a firm's ATC and AVC curves represents: Select one: a. AFC, which increases as output increases. b. AFC, which decreases as output increases. c. marginal costs, which decrease as output decreases. d. marginal costs, which increase as output increases.

B

Tying agreements: Select one: a. establish common boards of directors for previously competing firms. b. obligate a purchaser of product X to also buy product Y from the same seller. c. allow manufacturers to specify the retail prices of their products. d. prohibit firms from selling their products outside of specified geographic areas.

B

Use the following cost information for the Creamy Crisp Donut Company to answer questions 16-23:Entrepreneur's potential earnings as a salaried worker = $50,000Annual lease on building = $22,000Annual revenue from operations = $380,000Payments to workers = $120,000Utilities (electricity, water, disposal) costs = $8,000Entrepreneur's potential economic profit from the next best entrepreneurial activity = $80,000Entrepreneur's forgone interest on personal funds used to finance the business = $6,000Refer to the above data. Creamy Crisp's explicit costs are: Select one: a. $286,000. b. $150,000. c. $94,000. d. $156,000.

B

Usury laws: Select one: a. allocate funds from low-productivity to high-productivity investments. b. establish a legal ceiling on interest rates. c. make more funds available to low-income borrowers. d. create a surplus of loanable funds.

B

When a consumer shifts purchases from product X to product Y the marginal utility of: Select one: a. X falls and the marginal utility of Y rises. b. X rises and the marginal utility of Y falls. c. both X and Y rises. d. both X and Y falls.

B

When economists say that health care services are overconsumed, they mean that: Select one: a. rich people buy too much health care and poor people buy too little. b. some resources now used in the health care industry could produce alternative goods and services that society values more highly. c. health care is being purchased in amounts such that marginal benefits exceed marginal costs. d. the price of health care is below equilibrium so that quantity demanded exceeds quantity supplied.

B

Which of the following gave the Federal Trade Commission responsibility to protect the public against false and misleading advertising? Select one: a. Celler-Kefauver Act of 1950 b. Wheeler-Lea Act of 1938 c. Clayton Act of 1914 d. Sherman Act of 1890

B

Which of the following generalizations is not correct? Select one: a. The larger an item is in one's budget, the greater the price elasticity of demand. b. The price elasticity of demand is greater for necessities than it is for luxuries. c. The larger the number of close substitutes available, the greater will be the price elasticity of demand for a particular product. d. The price elasticity of demand is greater the longer the time period under consideration.

B

Which of the following is a distinguishing feature of a command system? Select one: a. private ownership of all capital. b. central planning. c. heavy reliance on markets. d. wide-spread dispersion of economic power.

B

Which of the following is correct? Select one: a. If the demand for a product is inelastic, a change in price will cause total revenue to change in the opposite direction. b. If the demand for a product is inelastic, a change in price will cause total revenue to change in the same direction. c. If the demand for a product is inelastic, a change in price may cause total revenue to change in either the opposite or the same direction. d. The price elasticity coefficient applies to demand, but not to supply.

B

Which of the following is incorrect? Imperfectly competitive producers: Select one: a. face downsloping demand curves. b. do not compete with one another. c. can alter their output by changing price. d. find that, when they reduce price, their total revenue increases by less than the new price.

B

Which of the following is most likely to be a fixed cost? Select one: a. shipping charges b. property insurance premiums c. wages for unskilled labor d. expenditures for raw materials

B

Which of the following is not a basic characteristic of monopolistic competition? Select one: a. the use of trademarks and brand names b. recognized mutual interdependence c. product differentiation d. a relatively large number of sellers

B

Which of the following is not correct? Select one: a. Other things equal, a monopsonist will pay a lower wage rate than will a firm hiring labor competitively. b. A monopsonistic employer will pay workers a wage rate equal to their MRP. c. A purely competitive seller will pay workers a wage rate equal to their MRP. d. An imperfectly competitive seller will pay workers a wage rate equal to their MRP.

B

Which of the following statements is correct? Select one: a. Economic profits can properly be regarded as the salaries received by the hired managers of corporations. b. Economic rent is a price paid for productive resources whose supply is perfectly inelastic. c. Economic profits would be nonexistent in a dynamic, purely competitive economy. d. Economic or pure profit is the minimum return which entrepreneurs must receive to continue in a particular line of production.

B

(Consider This) In 1975 McDonald's introduced its Egg McMuffin breakfast sandwich, which remains popular and profitable today. This longevity illustrates the idea of: Select one: a. opportunity cost. b. upsloping supply. c. consumer sovereignty. d. specialization.

C

(Consider This) The Consider This box "Of Catfish and Art (and Other Things in Common)" lists examples of recent antitrust cases involving: Select one: a. monopolization. b. tying contracts. c. price fixing. d. horizontal mergers.

C

(Consider This) Ticket scalping implies that: Select one: a. event sponsors have established ticket prices at above-equilibrium levels. b. an event is not likely to be sold out. c. event sponsors have established ticket prices at below-equilibrium levels. d. the demand for tickets has fallen between the time tickets were originally sold and the event takes place.

C

(Last Word) The U.S. sugar program has: Select one: a. improved the world allocation of agricultural resources. b. caused the world price of sugar to rise above its domestic price. c. increased domestic sugar production. d. lowered the incomes of U.S. sugar growers.

C

(Last Word) The fallacy of composition states that: Select one: a. generalizations relevant to microeconomics never apply to macroeconomics. b. expectations give rise to self-fulfilling prophesies. c. generalizations pertaining to individuals always apply to the group. d. quantifiable economic goals are always incompatible with one another.

C

A particular employer's discrimination coefficient d: Select one: a. will decrease if the employer becomes more prejudiced against African-Americans. b. must equal the actual ratio of African-American to white wage rates. c. measures the amount an employer is willing to pay to hire a white rather than a African-American worker. d. varies inversely with the actual African-American-white wage ratio.

C

A purely competitive seller should produce (rather than shut down) in the short run: Select one: a. only if total revenue exceeds total cost. b. only if total cost exceeds total revenue. c. if total revenue exceeds total cost or if total cost exceeds total revenue by some amount less than total fixed cost. d. if total cost exceeds total revenue by some amount greater than total fixed cost.

C

A single-price pure monopoly is economically inefficient: Select one: a. only because it produces beyond the point of minimum average total cost. b. only because it produces short of the point of minimum average total cost. c. because it produces short of minimum average cost and price is greater than marginal cost. d. because it produces beyond minimum average total cost and marginal cost is greater than price.

C

A vertical merger involves a combining of one or more firms: Select one: a. as the result of one firm purchasing the assets of the other. b. that are operating in entirely different industries. c. operating at different stages of the production process in a particular industry. d. operating at the same stage of the production process.

C

Advertising can impede economic efficiency when it: Select one: a. reduces entry barriers. b. reduces brand loyalty. c. leads to greater monopoly power. d. provides consumers with useful information about product quality.

C

All else equal, depreciation of the Mexican peso relative to the U.S. dollar would make a trip by: Select one: a. an American to Mexico more expensive. b. a Mexican to the United States less expensive. c. an American to Mexico less expensive. d. an Australian to the United States more expensive.

C

Allocative efficiency involves determining: Select one: a. which output-mix will result in the most rapid rate of economic growth. b. which production possibilities curve reflects the lowest opportunity costs. c. the mix of output that will maximize society's satisfaction. d. the optimal rate of technological progress.

C

An employer whose discrimination coefficient is $4 will: Select one: a. refuse to hire African-Americans at any wage rate. b. hire only African-Americans if the actual African-American-white wage differential is $3 an hour. c. hire only whites if the actual African-American-white wage differential is $3 an hour. d. hire only whites if the African-American-white wage differential is $4.

C

An important economic problem associated with pure monopoly is that, at the profit maximizing outputs, resources are: Select one: a. overallocated because price exceeds marginal cost. b. overallocated because marginal cost exceeds price. c. underallocated because price exceeds marginal cost. d. underallocated because marginal cost exceeds price.

C

As a percentage of GDP, U.S. exports are: Select one: a. greater than U.S. imports. b. about 20 percent. c. considerably lower than in several other industrially advanced nations. d. higher than in Canada but lower than Mexico.

C

Assume the supply curve for product X is perfectly elastic and that government imposes a $2 per unit excise tax. We can conclude that the resulting: Select one: a. increase in output will be greater the less elastic the demand curve. b. decrease in output will be greater the less elastic the demand curve. c. decrease in output will be greater the more elastic the demand curve. d. increase in output will be greater the more elastic the demand curve.

C

At the optimal quantity of a public good: Select one: a. marginal benefit exceeds marginal cost by the greatest amount. b. total benefit equals total cost. c. marginal benefit equals marginal cost. d. marginal benefit is zero.

C

Brenda says, "You would have to pay me $50 to attend that pro wrestling event." For Brenda, the marginal utility of the event is: Select one: a. zero. b. positive, but declines rapidly. c. negative. d. positive, but less than the ticket price.

C

Economic models: Select one: a. are of limited use because they cannot be tested empirically. b. are limited to variables that are directly related to one another. c. emphasize basic economic relationships by purposefully simplifying the complexities of the real world. d. are unrealistic and therefore of no practical consequence.

C

Effective usury laws cause: Select one: a. a surplus of money in money markets. b. the quantity of money demanded to be brought into balance with the quantity supplied. c. the quantity of money demanded to exceed the quantity supplied. d. the quantity of money supplied to exceed the quantity demanded.

C

Evidence of a chronic balance of payments deficit is: Select one: a. a decline in amount of the nation's currency held by other nations. b. an excess of exports over imports. c. diminishing reserves of foreign currencies. d. an increase in the international value of the nation's currency.

C

Farm share of U.S. GDP has: Select one: a. declined from about 14 percent in 1950 to 1 percent today. b. declined from about 14 percent in 1950 to 7 percent today. c. declined from about 7 percent in 1950 to 1 percent today. d. remained relatively stable over the past fifty years.

C

For a pure monopolist marginal revenue is less than price because: Select one: a. the monopolist's demand curve is perfectly elastic. b. the monopolist's demand curve is perfectly inelastic. c. when a monopolist lowers price to sell more output, the lower price applies to all units sold. d. the monopolist's total revenue curve is linear and slopes upward to the right.

C

For which of the following goods or services would a government subsidy be most likely to improve the allocation of resources? Select one: a. wheat b. newspaper publishing c. cancer research d. toys

C

If a rational consumer is in equilibrium, which of the following conditions will hold true? Select one: a. MUa = MUb = MUc = ... = MUn. b. The marginal utility of each good purchased will be zero. c. The marginal utility of the last dollar spent on each good purchased will be the same. d. The total utility obtained from each good purchased will be the same.

C

If all workers are homogeneous, all jobs are equally attractive to workers, and labor markets are perfectly competitive: Select one: a. compensating differences would cause wage differentials. b. noncompeting groups of workers would result in wage differentials. c. all workers would receive the same wage rate. d. worker mobility would occur such that wage differentials would widen.

C

If products were in short or surplus supply in the Soviet Union: Select one: a. price and profit signals eliminated those shortages and surpluses. b. price and profit signals intensified those shortages and surpluses. c. producers would not react because no price or profit signals occurred. d. the planners would immediately adjust production to achieve equilibrium.

C

If the demand for a product is perfectly inelastic and the supply curve is upsloping, a $1 excise tax per unit of output will: Select one: a. raise price by less than $1. b. raise price by more than $1. c. raise price by $1. d. lower price by $1.

C

If the price of product L increases, the demand curve for close-substitute product J will: Select one: a. shift downward toward the horizontal axis. b. shift to the left. c. shift to the right. d. remain unchanged.

C

In a purely competitive static economy: Select one: a. the demand for loanable funds would disappear. b. uncertainty would increase, causing profit to rise. c. economic profit would be zero. d. economic profit would be maximized.

C

In terms of the circular flow diagram, businesses obtain revenue through the _____ market and make expenditures in the _____ market. Select one: a. product; financial b. resource; product c. product; resource d. capital; product

C

In the U.S. Steel case of 1920 the courts held that: Select one: a. the structure of an industry is more important than its behavior in determining violations of the antitrust laws. b. any firm which faces substantial import competition is exempt from the antitrust laws. c. although U.S. Steel possessed monopoly power, it had not violated the Sherman Act because it had not unreasonably used that power. d. the fact that U.S. Steel possessed monopoly power was a violation of the Sherman Act.

C

In the United States: Select one: a. taxes decrease, but transfers increase, income inequality. b. taxes increase, but transfers reduce, income inequality. c. both taxes and transfers decrease income inequality. d. both taxes and transfers increase income inequality.

C

In the balance of payments of the United States, U.S. goods imports are recorded as a: Select one: a. positive entry. b. capital account entry. c. current account entry. d. official reserves entry.

C

In the quintile distribution of income, the term "quintile" represents: Select one: a. 5 percent of the income receivers. b. 10 percent of the income receivers. c. 20 percent of the income receivers. d. 25 percent of the income receivers.

C

Income: Select one: a. is a stock concept. b. consists of accumulated assets. c. is a flow concept. d. consists of wages only.

C

Inefficiencies occur under monopolistic competition because: Select one: a. each firm's demand curve becomes more elastic as we move down the curve. b. each firm's marginal revenue curve coincides with its demand curve. c. each firm's downsloping demand curve is tangent to the ATC curve in the long run. d. entry barriers greatly restrict the entry of new firms.

C

NAFTA refers to the: Select one: a. National Association of Free Trade Agencies. b. National Alliance for Foreign Trade and Assistance. c. North American Free Trade Agreement. d. Northern Alliance For Tariff Adjustment.

C

Other things equal, a rapid rise in profits relative to other types of income would affect: Select one: a. the functional distribution of income only. b. the personal distribution of income only. c. both the functional and personal distributions of income. d. the relative size of the public sector.

C

Other things equal, if the prices of a firm's variable inputs were to fall: Select one: a. one could not predict how unit costs of production would be affected. b. marginal cost, average variable cost, and average fixed cost would all fall. c. marginal cost, average variable cost, and average total cost would all fall. d. average variable cost would fall, but marginal cost would be unchanged.

C

Other things equal, the voluntary relocation of employable migrants from low-paying nations to high-paying nations will: Select one: a. increase business or capitalist incomes in the low-paying nations. b. reduce real output in the world. c. increase business or capitalist incomes in the high-paying nations. d. reduce wage rates in the low-paying nations.

C

Patents: Select one: a. give firms the exclusive right to produce or control a product for 100 years. b. discourage research and innovation. c. are a source of monopoly. d. are also called trademarks.

C

Prashanth decides to buy a $75 ticket to a particular New York professional hockey game rather than a $50 ticket for a particular Broadway play. We can conclude that Prashanth: Select one: a. is relatively unappreciative of the arts. b. obtains more marginal utility from the play than from the hockey game. c. has a higher "marginal utility to price ratio" for the hockey game than for the play. d. has recently attended several other Broadway plays.

C

Public choice theorists hold that politicians will: Select one: a. favor programs entailing immediate and clear-cut costs and vaguely defined or deferred benefits. b. follow policies leading to an optimal allocation of resources between public and private sectors. c. favor programs entailing immediate and clear-cut benefits and vaguely defined or deferred costs. d. objectively weigh the costs and benefits of various government programs and vote accordingly.

C

Since 1975, United States exports and imports have: Select one: a. grown absolutely, but remained a constant proportion of GDP. b. grown absolutely, but declined as a proportion of GDP. c. grown both absolutely and as a percentage of GDP. d. declined both absolutely and as a percentage of GDP.

C

Suppose a firm anticipates that a R&D expenditure of $100 million will result in a new production process that will reduce costs and thus create a one-time added profit of $112 million a year later. The firm's expected rate of return is: Select one: a. 0.12 percent. b. 112 percent. c. 12 percent. d. 2 percent.

C

Suppose a pure monopolist is charging a price of $12 and the associated marginal revenue is $9. We thus know that: Select one: a. demand is inelastic at this price. b. the firm is maximizing profits. c. total revenue is increasing. d. total revenue is at a maximum.

C

Suppose an oligopolistic producer assumes its rivals will ignore a price increase but match a price cut. In this case the firm perceives its: Select one: a. demand curve as being of unit elasticity throughout. b. supply curve as kinked, being steeper below the going price than above. c. demand curve as kinked, being steeper below the going price than above. d. demand curve as kinked, being steeper above the going price than below.

C

Suppose that a pure monopolist can sell 20 units of output at $10 per unit and 21 units at $9.75 per unit. The marginal revenue of the twenty-first unit of output is: Select one: a. $9.75. b. $204.75. c. $4.75. d. $.25.

C

Suppose the transportation industry has been regulated for many years. Government now proposes to deregulate the industry, only to find that firms in the industry oppose this action. This is consistent with the: Select one: a. public interest theory of regulation. b. theory of natural monopolies. c. legal cartel theory of regulation. d. Alcoa and U.S. Steel court decisions.

C

The Coase theorem states that: Select one: a. government should levy excise taxes on firms that generate spillover or external costs. b. taxes should be levied such that they change private behavior as little as possible. c. bargaining between private parties will remedy externality problems where property rights are clearly defined, the number of people involved are few, and bargaining costs are small. d. trading of votes to secure favorable voting outcomes may increase efficiency.

C

The World Trade Organization (WTO) Select one: a. sets tariffs to balance international trade among nations. b. is the successor to NAFTA. c. hears and rules on trade disputes between nations. d. sets exchange rates to balance international trade among nations.

C

The division of labor means that: Select one: a. labor markets are geographically segmented. b. unskilled workers outnumber skilled workers. c. workers specialize in various production tasks. d. each worker performs a large number of tasks.

C

The first Pepsi yields Craig 18 units of utility and the second yields him an additional 12 units of utility. His total utility from three Pepsis is 38 units of utility. The marginal utility of the third Pepsi is: Select one: a. 26 units of utility. b. 6 units of utility. c. 8 units of utility. d. 38 units of utility.

C

The food-stamp program is designed to: Select one: a. increase the supply of farm products. b. decrease the supply of farm products. c. increase the demand for farm products. d. decrease the demand for farm products.

C

The greater the elasticity of supply of and demand for a good the: Select one: a. smaller will be the efficiency loss of an excise tax on the good. b. more likely the good will be a public good rather than a private good. c. larger will be the efficiency loss of an excise tax on the good. d. larger will be the proportion of an excise tax on the good that will be shifted forward to consumers.

C

The idea of efficiency wages is that: Select one: a. the wages of each type of labor must be proportionate to their marginal products. b. the wages of each type of labor must be equal to their marginal products. c. firms might get greater work effort by paying above-equilibrium wage rates. d. workers are more diligent when paid below-equilibrium wages.

C

The long-run trend of real wages: Select one: a. cannot be determined from available data on nominal wages and the price level. b. has been downward because the price level has risen faster than nominal wages. c. has been upward. d. has been downward because labor's share of the domestic income has fallen.

C

The main problem posed by trade blocs for nonmember nations is that: Select one: a. member nations may achieve growth rates that exceed those of nonmember nations. b. nonmembers must exchange their currencies for foreign monies before they can engage in export or import transactions. c. nonmembers face tariffs that member nations do not. d. member nations refuse to participate in tariff negotiations sponsored by GATT.

C

The movement of individuals and households from one income quintile to another over time is called: Select one: a. income averaging. b. wealth turnover. c. income mobility. d. the ratchet effect.

C

The production possibilities curve illustrates the basic principle that: Select one: a. the production of more of any one good will in time require smaller and smaller sacrifices of other goods. b. an economy will automatically obtain full employment of its resources. c. if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced. d. an economy's capacity to produce increases in proportion to its population size.

C

The simple circular flow model shows that: Select one: a. households are on the buying side of both product and resource markets. b. businesses are on the selling side of both product and resource markets. c. households are on the selling side of the resource market and on the buying side of the product market. d. businesses are on the buying side of the product market and on the selling side of the resource market.

C

The term productive efficiency refers to: Select one: a. any short-run equilibrium position of a competitive firm. b. the production of the product-mix most desired by consumers. c. the production of a good at the lowest average total cost. d. fulfilling the condition P = MC.

C

The term quantity demanded: Select one: a. refers to the entire series of prices and quantities that comprise the demand schedule. b. refers to a situation in which the income and substitution effects do not apply. c. refers to the amount of a product that will be purchased at some specific price. d. means the same thing as demand.

C

The two main types of managed care organizations are: Select one: a. U.S. veterans hospitals and university health clinics. b. health maintenance organizations (HMOs) and university health clinics. c. health maintenance organizations (HMOs) and preferred provider organizations (PPOs). d. preferred provider organizations (PPOs) and nonprofit hospitals.

C

The view that the antitrust laws should be enforced relatively leniently because of the tendency for monopoly power to erode over time is known as the: Select one: a. structuralist view of antitrust. b. behavioralist view of antitrust. c. laissez-faire perspective on antitrust. d. active antitrust perspective.

C

Traveling sales representative Harold Hill only calls on clients four days a week rather than the five days expected by his employer. This is an example of: Select one: a. equalizing differences. b. a nonmonetary job disadvantage. c. shirking. d. the free-rider problem.

C

Unionized firms pay higher wages and are therefore at a cost disadvantage compared to nonunion firms. Employers therefore want to resist unionization. This perspective best describes: Select one: a. the structural change hypothesis. b. the voice mechanism. c. the managerial-opposition hypothesis. d. the substitution hypothesis.

C

Use the following cost information for the Creamy Crisp Donut Company to answer questions 16-23:Entrepreneur's potential earnings as a salaried worker = $50,000Annual lease on building = $22,000Annual revenue from operations = $380,000Payments to workers = $120,000Utilities (electricity, water, disposal) costs = $8,000Entrepreneur's potential economic profit from the next best entrepreneurial activity = $80,000Entrepreneur's forgone interest on personal funds used to finance the business = $6,000Refer to the above data. Creamy Crisp's accounting profit is: Select one: a. $150,000. b. $380,000. c. $230,000. d. $294,000.

C

Using antitrust law to split up an unregulated natural monopoly into several competing firms: Select one: a. would reduce product price. b. would increase product price. c. might either increase product price or reduce product price. d. will reduce average total cost.

C

We would expect the cross elasticity of demand for Pepsi in relation to other soft drinks to be greater than that for soft drinks generally because: Select one: a. soft drinks are normal goods. b. the income effect always exceeds the substitution effect. c. there are fewer good substitutes for soft drinks generally than for Pepsi. d. there are more good substitutes for soft drinks generally than for Pepsi.

C

When diseconomies of scale occur: Select one: a. the long-run average total cost curve falls. b. marginal cost intersects average total cost. c. the long-run average total cost curve rises. d. average fixed costs will rise.

C

Where total utility is at a maximum, marginal utility is: Select one: a. negative. b. positive and increasing. c. zero. d. positive but decreasing.

C

Which of the following approximates a pure monopoly? Select one: a. the foreign exchange market b. the Kansas City wheat market c. the diamond market d. the soft drink market

C

Which of the following best describes the main problem faced by farms in the long run? Select one: a. Lagging technology has decreased the productivity of farmers and therefore resulted in low farm prices and incomes. b. The highly inelastic nature of agricultural demand has caused small year-to-year fluctuations in farm output to result in highly unstable farm incomes. c. The supply of farm products has increased relative to the demand for them, and, because demand is inelastic, farm prices and incomes have therefore declined. d. The demand for farm products has increased relative to their supply, but the highly elastic nature of agricultural demand has caused these shifts to result in declining farm incomes.

C

Which of the following is correct? Select one: a. The Federal tax system is regressive, while the state and local tax system is progressive. b. Both the Federal tax system and the state and local tax system are regressive. c. The Federal tax system is progressive, while the state and local tax system is regressive. d. Both the Federal tax system and the state and local tax systems are progressive.

C

Which of the following is not a characteristic of the market system? Select one: a. private property. b. freedom of enterprise. c. government ownership of the major industries. d. competition in product and resource markets.

C

Which of the following statements about U.S. agriculture is true as it relates to the past several decades? Select one: a. The demand for farm products has declined, the supply of farm products has increased, and the price of farm products has declined. b. The demand for farm products has become both more income elastic and more price elastic. c. Minimum efficient scale has increased, the price of farm products has declined, and the number of farms has declined. d. The price of farm products have increased, minimum efficient scale has declined, and the supply of farm products has been stagnant.

C

Which of the following will not cause the demand for product K to change? Select one: a. a change in the price of close-substitute product J b. an increase in consumer incomes c. a change in the price of K d. a change in consumer tastes

C

(Consider This) Children are charged less than adults for admission to professional baseball games but are charged the same prices as adults at the concession stands. Which of the following conditions of price discrimination explain why this occurs? Select one: a. The seller must have some monopoly power; that is, it must be able to set the product price. b. The seller must be able to identify buyers by group characteristics such as age or income. c. Groups must have different elasticities of demand for the product. d. The items cannot be bought by people in the low-price group and transferred to members of the high-price group.

D

(Consider This) The main focus of the story about hand-held ultrasound devices is: Select one: a. cost-saving medical technology. b. cost reductions from spreading an overhead expense over many patients. c. longer-lasting equipment than the equipment being replaced. d. benefit-producing, but cost-increasing, medical technology. Question 16 Correct 1.25 points out of 1.25 Flag question Question text When economists say that health care services are overconsumed, the

D

(Consider This) Ticket scalping refers to: Select one: a. the surplus of tickets that occurs when price is set below equilibrium. b. the shortage of tickets that occurs when price is set above equilibrium. c. pricing tickets so high that an athletic or artistic event will not be sold out. d. reselling a ticket at a price above its original purchase price.

D

(Last Word) A cost that cannot be partly or fully recovered through any subsequent action is known as a: Select one: a. variable cost. b. fixed cost. c. marginal cost. d. sunk cost.

D

(Last Word) The fallacy of composition is essentially the error of: Select one: a. omitting relevant variables in constructing a model. b. reasoning from the general to the particular. c. confusing cause and effect in economic relationships. d. generalizing from the particular to the general.

D

(Last Word) Which of the following groups is most likely to support the World Trade Organization (WTO)? Select one: a. anarchists. b. extreme environmentalists. c. labor union leaders in industrially advanced countries. d. economists. Question

D

A firm's supply curve is upsloping because: Select one: a. the expansion of production necessitates the use of qualitatively inferior inputs. b. mass production economies are associated with larger levels of output. c. consumers envision a positive relationship between price and quality. d. beyond some point the production costs of additional units of output will rise.

D

All of the following can file antitrust charges under the Sherman Act except: Select one: a. the U.S. Justice Department. b. state attorney generals. c. injured private parties. d. the Federal Energy Regulatory Commission.

D

As pizza topped with barbecue chicken became popular at specialty restaurants, Pizza Hut introduced a similar pizza. This imitation illustrates: Select one: a. innovation. b. invention. c. creative destruction. d. diffusion.

D

As used in strategic trade policy, tariffs are a variation of the: Select one: a. military self-sufficiency argument for tariffs. b. increased-domestic-employment argument for tariffs. c. diversification-for-stability argument for tariffs. d. infant-industry argument for tariffs

D

Assume a pure monopolist is currently operating at a price-quantity combination on the inelastic segment of its demand curve. If the monopolist is seeking maximum profits, it should: Select one: a. retain its current price-quantity combination. b. increase both price and quantity sold. c. charge a lower price. d. charge a higher price.

D

Assume initially that the price of X (measured on the horizontal axis) is $9 and the price of Y (measured on the vertical axis) is $4. If the price of X now declines to $6, the budget line will: Select one: a. be unaffected. b. shift outward on the vertical axis. c. shift inward on the horizontal axis. d. shift outward on the horizontal axis.

D

Competition means that: Select one: a. sellers can manipulate market price by causing product scarcities. b. there are independently-acting buyers and sellers in each market. c. a product can be purchased at a number of different prices. d. there is more than one seller in a market.

D

Critics of U.S. farm policy: Select one: a. argue that most of the farm subsidies go to high-income farmers. b. argue that various components of agricultural policy are contradictory and seek conflicting goals. c. argue that the cost of farm policies increased sharply in the past two decades. d. make all of these arguments.

D

Diminishing marginal utility explains why: Select one: a. the income effect exceeds the substitution effect. b. the substitution effect exceeds the income effect. c. supply curves are upsloping. d. demand curves are downsloping.

D

Each of the following contributes to income inequality except: Select one: a. differences in ability and training. b. differences in job tastes. c. differences in wealth ownership. d. government transfers.

D

Externalities weaken the efficiency of the market system because they: Select one: a. are a major source of inflation. b. mean that certain essential goods and services do not get produced at all. c. are a major source of employment. d. cause certain goods to be overproduced or underproduced.

D

For a purely competitive seller, price equals: Select one: a. average revenue. b. marginal revenue. c. total revenue divided by output. d. all of these.

D

Government can promote workplace safety by: Select one: a. breaking up concentrations of monopoly power. b. reducing monopsony power. c. promoting the use of recycled inputs. d. providing workers information about workplace hazards.

D

If consumer desire for product X increases, all of the following will occur except: Select one: a. an increase in the profits of industry X. b. an increase in the quantity of resources employed by industry X. c. an increase in the output of industry X. d. a decrease in the quantity of resources employed in industry X.

D

If the Japanese yen appreciates relative to the Swedish krona, then the krona: Select one: a. will be more expensive to the Japanese. b. may either appreciate or depreciate relative to the yen. c. will appreciate relative to the yen. d. will depreciate relative to the yen.

D

If the United States has full employment and the dollar dramatically depreciates in value, we can expect (other things equal): Select one: a. both U.S. imports and U.S. exports to rise. b. both U.S. imports and U.S. exports to fall. c. U.S. exports to fall and U.S. imports to increase. d. inflation to occur.

D

If the demand for a product is elastic, then total revenue will: Select one: a. increase whether price increases or decreases. b. be constant in response to a price change. c. fall as price falls. d. rise as price falls.

D

In the short run a pure monopolist: Select one: a. always earns an economic profit. b. always earns a normal profit. c. always realizes a loss. d. may realize an economic profit, a normal profit, or a loss.

D

New scientific knowledge mainly comes from university and government laboratories, not private firms, because: Select one: a. large corporations do not have funds available to channel toward basic research. b. government pays scientists higher salaries than do private firms. c. entrepreneurs find it difficult to secure venture capital to finance innovation. d. basic scientific principles, as such, cannot be patented and do not always have commercial applicability. Question

D

One can say with certainty that equilibrium quantity will increase when supply: Select one: a. and demand both decrease. b. increases and demand decreases. c. decreases and demand increases. d. and demand both increase.

D

Purchases of land in the United States by people from Canada create a: Select one: a. supply of U.S. dollars and a demand for Canadian dollars. b. both a supply of U.S. dollars and a demand for U.S. dollars. c. demand for Canadian dollars and a demand for U.S. dollars. d. demand for U.S. dollars and a supply of Canadian dollars. Question

D

Research studies indicate that: Select one: a. U.S. producers gain more from tariffs than U.S. consumers lose. b. the costs of trade restrictions are proportionately higher for high-income groups than for low-income groups. c. the revenue from tariffs equals the total cost that tariffs impose on consumers. d. U.S. consumers lose more from tariffs than U.S. producers gain.

D

Select one: a. upsloping because of increasing marginal opportunity costs. b. upsloping because successive units of a specific product yield less and less extra benefit. c. downsloping because of increasing marginal opportunity costs. d. downsloping because successive units of a specific product yield less and less extra benefit.

D

Suppose that MUx/Px exceeds MUy/Py. To maximize utility the consumer who is spending all her money income should buy: Select one: a. less of X only if its price rises. b. more of Y only if its price rises. c. more of Y and less of X. d. more of X and less of Y.

D

Suppose the supply of product X is perfectly inelastic. If there is an increase in the demand for this product, equilibrium price: Select one: a. will decrease but equilibrium quantity will increase. b. and quantity will both decrease. c. will increase but equilibrium quantity will decline. d. will increase but equilibrium quantity will be unchanged.

D

The increased-domestic-employment argument for tariff protection holds that: Select one: a. domestic inflation is a desirable policy goal because it stimulates exports. b. domestic deflation is a desirable policy goal because it stimulates imports. c. an increase in tariffs will reduce net exports and stimulate domestic employment. d. an increase in tariffs will increase net exports and stimulate domestic employment.

D

The location of the supply curve of a product depends on: Select one: a. the technology used to produce it. b. the prices of resources used in its production. c. the number of sellers in the market. d. all of these.

D

The minimum efficient scale of a firm: Select one: a. is realized somewhere in the range of diseconomies of scale. b. occurs where marginal product becomes zero. c. is in the middle of the range of constant returns to scale. d. is the smallest level of output at which long-run average total cost is minimized.

D

The production possibilities curve tells us: Select one: a. the specific combination of two products that is most desired by society. b. that costs do not change as society varies its output. c. costs are irrelevant in a society that has fixed resources. d. the combinations of two goods that can be produced with society's available resources.

D

The structural-change hypothesis suggests that: Select one: a. the structure of industry has changed so as to encourage union growth. b. in the past two decades management has more aggressively opposed unionization. c. labor market discrimination has decreased because of the changing composition of the labor force. d. changes in the structure of industry have contributed to the decline of union membership.

D

Under a system of freely floating exchange rates, an increase in the international value of a nation's currency will: Select one: a. cause an international surplus of its currency. b. contribute to disequilibrium in its balance of payments. c. cause gold to flow into that country. d. cause its imports to rise.

D

Ward Planter exclusively grew soybeans in each of the past three years and currently participates in the marketing loan program of the Farm Act of 2002. If the "crop price" of soybeans at harvest is less than the pre-harvest "loan price", Planter can: Select one: a. sell his crop in the market and receive the difference between the crop price and loan price as a direct payment from the Federal government. b. take a "crop credit" based on the difference between the crop price and the loan price and use the credit to reduce Federal income taxes owed. c. receive an "emergency loan" that can be paid back over the following five years. d. forfeit the harvest to the lender and be free of the loan, thus receiving a subsidy because the proceeds from the loan exceed the revenues from the sale of the crop in the market.

D

What do the income effect, the substitution effect, and diminishing marginal utility have in common? Select one: a. All are required to explain the utility-maximizing position of a consumer. b. They are all empirically measurable. c. They all help explain the upsloping supply curve. d. They all help explain the downsloping demand curve.

D

What percentage of their spending do U.S. consumers allocate to food purchases? Select one: a. 1 percent b. 7 percent c. 11 percent d. 14 percent

D

Which of the following is correct? Select one: a. The Federal government can delay any strike for eighty days. b. About 3 percent of total work-time is lost in the United States because of strikes. c. Work-time lost may overstate the cost of a strike if the work stoppage disrupts production in related industries. d. Work-time lost may overstate the cost of a strike if nonstruck firms increase their production.

D

Which of the following is not a component of the demand for loanable funds? Select one: a. household purchases of housing and durable consumer goods b. business purchases of capital goods c. government financing of the public debt d. household saving

D

Which of the following is not a feature of the Farm Act of 2002? Select one: a. direct payments (direct subsidies) based on crops previously grown b. countercyclical payments c. marketing loans d. acreage allotments (restrictions on the number of acres that can be planted)

D

A competitive firm will produce in the short run so long as its price exceeds its average fixed cost. Select one: True False

False

A firm's economic profit is usually higher than its accounting profit. Select one: True False

False

A firm's optimal amount of R&D occurs where the interest-rate cost of funds and the expected rate of return are equal. Select one: True False

False

A linear demand curve has a constant elasticity over the full range of the curve. Select one: True False

False

A nation that imports more goods and services than it exports is necessarily realizing an international balance of payments deficit. Select one: True False

False

A nation's export supply curve is downsloping and its import demand curve is upsloping. Select one: True False

False

About 20 percent of the labor force is in agriculture. Select one: True False

False

Agriculture is overcrowded because of absolute and relative increases in the size of farm employment. Select one: True False

False

Although sleeping in on a work day or school day has an opportunity cost, sleeping late on the weekend does not. Select one: True False

False

Because of health insurance, resources are underallocated to the health care industry. Select one: True False

False

Because of the ability to influence price, a pure monopolist can increase price and increase volume of sales simultaneously. Select one: True False

False

Diffusion is the first successful commercial introduction of a product, the use of a new method, or the creation of new form of business enterprise. Select one: True False

False

Economists agree that corporations always shift the corporate income tax to consumers by raising product prices. Select one: True False

False

Environmentalists generally support price supports because these subsidies motivate additional farm production. Select one: True False

False

Generally speaking, oligopolistic industries producing raw materials and semifinished goods usually offer differentiated products, while oligopolists producing consumer goods usually offer standardized products. Select one: True False

False

HMO stands for holistic medical organization. Select one: True False

False

Health care is an inferior good. Select one: True False

False

Homogenous oligopolists tend to advertise more than do differentiated oligopolists. Select one: True False

False

If market demand increases and market supply decreases, the change in equilibrium price is unpredictable without first knowing the exact magnitudes of the demand and supply changes. Select one: True False

False

If the elasticity coefficient of supply is 0.7, supply is elastic. Select one: True False

False

If total income is $200 billion, personal taxes are $40 billion, and consumption is $140 billion, then personal saving must be $60 billion. Select one: True False

False

In the kinked demand curve model, the firm's marginal revenue curve and demand curve are identical. Select one: True False

False

Indifference curves are linear and budget lines are convex to the origin. Select one: True False

False

It is generally agreed that the most promising reform of the health care system is for government to fix doctors' fees below current levels. Select one: True False

False

It is possible for a consumer's indifference curves to intersect. Select one: True False

False

Labor market discrimination increases the size of the nation's GDP. Select one: True False

False

Limited liability means all members of a partnership are liable for the debts incurred by one another. Select one: True False

False

Monopolistically competitive sellers produce efficiently because they obtain only normal profits in the long run. Select one: True False

False

The Celler-Kefauver Act made vertical mergers legal, provided each firm does not have more than 30 percent of its relevant market. Select one: True False

False

The Celler-Kefauver Act outlawed interlocking directorates. Select one: True False

False

The Personal Responsibility Act of 1996 required all employees to buy insurance against industrial accidents and diseases. Select one: True False

False

The U.S. poverty rate for the elderly (65 and over) is higher than for the general population. Select one: True False

False

The World Trade Organization (WTO) is an international organization designed to provide short-term advances of foreign monies to those nations faced with trade deficits. Select one: True False

False

The adverse selection problem is the tendency for workers to shirk when they are not being monitored. Select one: True False

False

The efficiency loss of a tax is the tax revenue collected by government minus the value of the public goods financed through the tax. Select one: True False

False

The entrepreneur's sole function is to combine other resources (land, labor, and capital) in the production of some good or service. Select one: True False

False

The fact that most of a farmer's costs are variable costs has hastened the movement of resources from agriculture to industry. Select one: True False

False

The law of diminishing returns explains why the long-run average total cost curve is U-shaped. Select one: True False

False

The lower the consumer's income, the higher his or her budget line. Select one: True False

False

The misallocation of resources resulting from large positive externalities can best be corrected by levying a specific tax on the production of that good or service. Select one: True False

False

The paradox of voting is that under majority voting rules the median-voter decides the election outcome. Select one: True False

False

The percentage of the United States' domestic output that is derived from international trade is higher than that for any other industrially advanced nation. Select one: True False

False

The present choice of position on the production possibilities curve will not influence the future location of the curve. Select one: True False

False

Tying agreements are contracts by which retailers agree to charge the prices that manufacturers set on branded goods. Select one: True False

False

Union workers have higher rates of job turnover than do nonunion workers. Select one: True False

False

Water has greater marginal utility than diamonds, yet diamonds have greater total utility than water. Select one: True False

False

We would expect the coefficient of cross elasticity of demand for DVD players and DVDs to be positive. Select one: True False

False

Critics of affirmative action plans claim that such plans are themselves discriminatory. Select one: True False

True

Critics of the minimum wage contend that higher minimums cause employers to move up their labor demand curves, reducing employment of low-wage workers. Select one: True False

True

Demand is the active and supply the passive determinant of land rent. Select one: True False

True

Diseconomies of scale stem primarily from the difficulties in managing and coordinating a large-scale business enterprise. Select one: True False

True

Generally speaking, the demand for luxury goods is more price elastic than is the demand for necessities. Select one: True False

True

Given supply, the more inelastic the demand for a product, the larger the portion of an excise tax that is shifted to consumers. Select one: True False

True

If the demand for agricultural products is inelastic, a relatively small increase in supply will cause farm prices and incomes to decline. Select one: True False

True

If the demand for wheat is highly price inelastic, an extraordinarily large crop may reduce farm incomes. Select one: True False

True

If the marginal-cost curve lies below the average-variable-cost curve, the average-variable-cost curve must be falling. Select one: True False

True

If you pay a $1,000 tax on $10,000 of taxable income and a $3,000 tax on a taxable income of $16,000, the tax is progressive. Select one: True False

True

In drawing a particular budget line, money income and the prices of the two products are fixed. Select one: True False

True

International trade based on the principle of comparative advantage creates a more efficient allocation of world economic resources. Select one: True False

True

Mexican importers are suppliers of pesos in the foreign exchange market. Select one: True False

True

Piece-rates may not be appropriate pay in some situations because they might reduce product quality. Select one: True False

True

Price fixing is illegal under Section 1 of the Sherman Act. Select one: True False

True

Shirking refers to the behavior of workers who provide less-than-expected effort on the job. Select one: True False

True

Technological advance includes new and improved products, new and improved production techniques, and new and improved distribution methods. Select one: True False

True

The U.S. Justice Department, the Federal Trade Commission, state attorneys general, and injured private parties can independently file charges against firms under the Sherman Act. Select one: True False

True

The United States, Japan, China and Germany are the major international traders in terms of overall volume. Select one: True False

True

The basic function of profits and losses is to allocate society's scarce resources to their highest valued uses. Select one: True False

True

The current, on-going round of trade negotiations is called the Doha Round. Select one: True False

True

The demand curve of a monopolistically competitive firm is more elastic than that of a pure monopolist. Select one: True False

True

The moral hazard problem is the tendency of some parties to a contract to alter their behavior as a result of the contract in ways which are costly to the other party. Select one: True False

True

The most-favored-nation clause in reciprocal trade agreements means that any tariff reductions the United States negotiates with a specific nation will automatically apply to many other nations. Select one: True False

True

The principle that private negotiation can resolve potential externalities without resort to government intervention is known as the Coase theorem. Select one: True False

True

The process by which new firms and new products destroy existing dominant firms and their products is called creative destruction. Select one: True False

True

The rate of unionization is substantially higher for protective service workers than for sales workers. Select one: True False

True

The short-run supply curve slopes upward because producers must be compensated for rising marginal costs. Select one: True False

True

The standard data on income distribution do not include the value of noncash transfers as income. Select one: True False

True

The theory that R&D expenditures as a percentage of firms' sales first rise, reach a peak, and then fall with increases in industry concentration is called the inverted-U theory. Select one: True False

True

Third-party (insurance) payment of health care costs causes health care to be overconsumed. Select one: True False

True

Under freely flexible (floating) exchange rates, if the dollar price of pounds rises, the pound price of dollars will fall. Select one: True False

True

Unemployment compensation payments are an example of a transfer payment. Select one: True False

True

Unions prefer agency shops to open shops. Select one: True False

True

When a consumer is maximizing total utility, he or she cannot increase total utility by reallocating expenditures among different products. Select one: True False

True

Process innovation is represented as a downshift in a firm's total product curve and its average total cost curve. Select one: True False

False

Seniority pay is the same as piece rate pay. Select one: True False

False

(Consider This) If 10 fair tickets are needed to ride the roller coaster and each fair ticket costs $.50, the dollar-ticket exchange rate is: Select one: a. $1 = 2 tickets and the dollar cost of the ride is $5. b. $1 = 1/2 ticket and the dollar cost of the ride is $5. c. 1 ticket = $2 and the dollar cost of the ride is $20. d. $1 = 2 tickets and the dollar cost of the ride is $10.

A

(Consider This) In 1996 McDonald's introduced its Arch Deluxe hamburger, which failed to catch on with the public and was subsequently dropped from the menu. This failure illustrates the idea of: Select one: a. consumer sovereignty. b. technological change. c. downsloping demand. d. specialization.

A

(Consider This) The main focus of the vignette "Slicing the Pizza" is the: Select one: a. equality-efficiency tradeoff. b. principal-agent problem. c. impact of market power on economic efficiency. d. the highly unequal distribution of U.S. wealth.

A

Unemployment compensation is financed by taxes levied on employers. Select one: True False

A

Which of the following terms describes a system of subsidized health insurance available to the aged? Select one: a. Medicare b. Supplemental Security Income (SSI) c. Medicaid d. TANF

A

(Last Word) The leading seller of beer in the United States is: Select one: a. Coors. b. Anheuser-Busch. c. Miller Brewing Company. d. Corona.

B

(Consider This) Free products offered by firms: Select one: a. may or may not be free to society, but are never free to individuals. b. may or may not be free to individuals, but are never free to society. c. are produced and distributed at no cost to society. d. usually are items nobody wants.

B

(Last Word) Suppose you borrow $500 and agree to pay this $500 plus $75 of interest at the end of a year. The interest rate is: Select one: a. 10 percent. b. 15 percent. c. 12.5 percent. d. 7.5 percent.

B

(Consider This) Children are charged less than adults for admission to professional baseball games but are charged the same prices as adults at the concession stands. This pricing system occurs because: Select one: a. children have an elastic demand for game ticket but an inelastic demand for concession items. b. children have an inelastic demand for game tickets but an elastic demand for concession items. c. the seller can prevent children from buying game tickets for adults but cannot prevent children from buying concession items for adults. d. children can personally "consume" only a single game ticket, but can personally consume more than one concession item.

C

Which of the following lists includes only capital resources (and therefore no labor or land resources)? Select one: a. an ice arena; a professional hockey player; hockey uniforms. b. the owner of a new startup firm; a chemistry lab; a researcher. c. a hydroelectric dam; water behind the dam; power lines. d. autos owned by a car rental firm; computers at the car rental agency; the vans that shuffle rental customers to and from the airport.

D

Which of the following lists of exchange rates is arranged in proper historical order? Select one: a. Bretton Woods system, gold standard, managed float b. gold standard, managed float, Bretton Woods system c. managed float, Bretton Woods system, gold standard d. gold standard, Bretton Woods system, managed float

D

Which of the following statements best describes the parity concept? Select one: a. The prices of farm commodities should vary inversely with changes in the prices-paid index for farmers. b. Because of productivity increases, farmers are entitled to the same real income for a smaller volume of output. c. The money incomes of farmers should always be the same, regardless of increases or decreases in the prices of the products they buy. d. The production of a given real output entitles the producer to the same real income over time.

D

Which of the following would we expect to have the highest poverty rate? Select one: a. white households headed by males b. elderly white households c. white households headed by females d. African-American households headed by females

D

NAFTA is an international accord that will eliminate all tariffs and quotas worldwide by the year 2025. Select one: True False

False

Noncompeting groups of workers are the result of geographic immobilities. Select one: True False

False

Pollution is a good example of the moral hazard problem. Select one: True False

False

"Tax Freedom Day" in the United occurs in mid-July. Select one: True False

False

Terms of trade of 1X=5Y will be acceptable to two countries that have domestic opportunity costs of 1X=4Y and 1X=1Y, respectively. Select one: True False

False

(Last Word) Construction of the first working computer "mouse" best exemplifies: Select one: a. invention. b. scientific determinism. c. diffusion. d. creative destruction.

Invention

A demand curve which is parallel to the horizontal axis is: Select one: a. perfectly inelastic. b. perfectly elastic. c. relatively inelastic. d. relatively elastic.

Perfectly Elastic

A progressive tax takes relatively more from the rich than it does from the poor. Select one: True False

True

A side benefit of international trade is that it links national interests and increases the opportunity costs of war. Select one: True False

True

A vertically integrated firm is a group of plants each operating at different stages of production. Select one: True False

True

A government tax per unit of output reduces supply. Select one: True False

True

At zero units of output a firm's variable costs are zero. Select one: True False

True

Average fixed costs diminish continuously as output increases. Select one: True False

True

Barriers to free trade impair efficiency in the international allocation of resources. Select one: True False

True

Broadly defined, labor's share of national income has been remarkably stable since 1900. Select one: True False

True

Continued losses in an industry will cause some firms to reduce output or eventually leave the industry. Select one: True False

True

The free-land era of U.S. history reflected a situation in which the quantity of land available at a zero price exceeded the quantity of land demanded. Select one: True False

True

The marginal cost to a firm of R&D expenditures is the market interest rate the firm must pay to obtain the needed financing. Select one: True False

True

The process by which capital goods are accumulated is known as investment. Select one: True False

True