Principles of Microeconomics

CH 2: The lesson of __________ is to forget about the money that's irretrievably gone and instead to focus on the marginal costs and benefits of future options. A: Sunk costs B: Opportunity costs C: Marginal Analysis D: Budget Constraints

A: Sunk costs

CH 14: A decrease in the wage rate causes A: an increase in the quantity of labor demanded. B: a rightward shift of the firm's labor demand curve. C: a leftward shift of the firm's labor demand curve. D: a decrease in labor's productivity.

A: an increase in the quantity of labor demanded.

CH 5: The price elasticity of demand for tickets to local baseball games is estimated to be equal to 0.89. In order to boost ticket revenues, an economist would advise: A: increasing the price of game tickets because demand is inelastic. B: not changing the price of game tickets because demand is unit elastic. C: increasing the price of game tickets because demand is elastic. D: decreasing the price of game tickets because demand is elastic.

A: increasing the price of game tickets because demand is inelastic.

CH 7: Which of the following are implicit costs for a typical firm? A: opportunity costs of capital owned and used by the firm B: the cost of labor hired by the firm C: utilities cost D: a business licensing fee

A: opportunity costs of capital owned and used by the firm

CH 2: The opportunity cost of attending university is likely to include all except which of the following? A: the cost of haircuts received during the school term B: the income you forgo in order to attend classes C: tuition fees D: the cost of required textbooks

A: the cost of haircuts received during the school term

CH 1: In which of the following countries will the national government have the greatest influence with respect to the nation's economy? A: China B: Cuba C: Canada D: Chile

B: Cuba

CH 19: The ability of a firm or country to produce a good or service at a lower opportunity cost than other producers is called absolute advantage. A: True B: False

B: False

CH 11: Figure 15-15 shows the cost and demand curves for the Erickson Power Company.Refer to Figure 15-15. If the government regulates Erickson Power Company so that the firm can earn a normal profit, the price would be set at ________ and the output level is ________. A: P1, Q4 B: P2, Q3 C: P2, Q2 D: P3, Q2

B: P2, Q3

CH 15: A statistical tool used to measure income inequality is A: the Herfindahl-Hirschman index. B: the Gini coefficient. C: the absolute poverty rate. D: the relative poverty rate.

B: the Gini coefficient.

CH 12: A major problem with using a tradable emission allowances system to control pollution is A: that it grants firms a license to pollute. B: the difficulty in determining the emissions target. C: it discourages firms from implementing cost-effective pollution control technology. D: that it does not eliminate pollution completely.

B: the difficulty in determining the emissions target.

CH 7: Implicit costs can be defined as A: accounting profit minus explicit cost. B: the non-monetary opportunity cost of using the firm's own resources. C: the deferred cost of production. D: total cost minus fixed costs.

B: the non-monetary opportunity cost of using the firm's own resources.

CH 15: What is the poverty rate? A: the rate at which the number of people relative to the size of the population fall below the poverty line B: the percentage of the population earning an annual income below the poverty line, according to the federal government's definition C: the percentage of working adults whose annual income is sufficiently low as to be are exempt from paying income taxes D: the percentage of households who qualify for government assistance to meet the minimal requirement for adequate nutrition

B: the percentage of the population earning an annual income below the poverty line, according to the federal government's definition

CH 15: Studies by the U.S. Census Bureau have shown that A: families remain below the poverty line for an average of five years. B: there is significant income mobility in the U.S. over time. C: income mobility in the U.S. is minimal. D: over half the people below the poverty line never move out of poverty.

B: there is significant income mobility in the U.S. over time.

CH 17: If a corporation earns a profit, how do owners of the firm share in the profit? A: through coupon payments on that firm's bonds B: through dividend payments on shares of that firm's stock C: by selling any bonds or stocks owned and realizing a capital gain D: by raising the interest rate on bonds

B: through dividend payments on shares of that firm's stock

CH 13: A product is considered to be non excludable if A: you can keep those who did not pay for the item from enjoying its benefits. B: you cannot keep those who did not pay for the item from enjoying its benefits. C: your consumption of the product reduces the quantity available for others to consume. D: it is jointly owned by all members of a community.

B: you cannot keep those who did not pay for the item from enjoying its benefits.

CH 19: In 2016, the largest exporter in the world was A: Germany B: Japan C: China D: United States

C: China

CH 15: Economists caution that conventional statistics used to estimate the extent of poverty in the United States fail to account for benefits people receive that, if considered, would reduce the amount of poverty. Which of the following is an example of these benefits? A: State and local sales taxes are regressive. As a result, the poor have lower after-tax incomes than they would have if these taxes were proportional or progressive. B: The federal income tax system is progressive. As a result, the poor have higher after-tax incomes than they would have if the income tax system was proportional or regressive. C: Individuals with low incomes receive non-cash benefits such as free school lunches and food stamps. D: The federal minimum wage forces employers to pay workers with low skills an efficiency wage.

C: Individuals with low incomes receive non-cash benefits such as free school lunches and food stamps.

CH 6: As a consumer consumes more and more of a product in a particular time period, eventually marginal utility A: rises. B: is constant. C: declines. D: fluctuates.

C: declines.

CH 10: For a monopolistically competitive firm, marginal revenue A: equals the price. B: is greater than the price. C: is less than the price D: and the price are unrelated

C: is less than the price

CH 10: A monopolistically competitive firm faces a downward-sloping demand curve because A: it is able to control price and quantity demanded. B: there are few substitutes for its product. C: of product differentiation. D: its market decisions are affected by the decisions of its rivals.

C: of product differentiation.

CH 4: The United States has approximately ___________ credit card holders. A: 1.8 million B: 18 million C: 80 million D: 180 million

D: 180 million

CH 3: If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that: A: the price of Good Y will increase. B: Goods X and Y are normal goods. C: Goods X and Y are substitute goods. D: Goods X and Y are complement goods.

D: Goods X and Y are complement goods.

CH 12: Some policymakers have argued that products like cigarettes, alcohol, and sweetened soda generate negative externalities in consumption. If the government decided to impose a tax on soda, the government will cause A: consumers to internalize the externality. B: producers to internalize the externality. C: the external cost to drinking soda to become a private cost paid by the government. D: the external cost to drinking soda to become a private cost paid by producers.

A: consumers to internalize the externality.

CH 5: When economists are sketching examples of a demand or supply curve that is close to horizontal, they refer to that demand or supply curve as ____________. A: elastic B: inelastic C: having zero elasticity D: price inelasticity

A: elastic

CH 18: A situation where a member of Congress votes to approve a bill in exchange for favorable votes from other members on other bills is called A: logrolling. B: special interest legislation.. C: regulatory capture D: rent seeking.

A: logrolling.

CH 13: Free riding refers to a situation in which A: people consume a pure public good without payment, even though the good may not be produced if no one chooses to pay. B: the marginal cost of allowing additional consumers to consume a public good is zero. C: high income individuals subsidize the production of goods, such as education, that make society better off. D: markets fail to allocate resources efficiently when benefits outweigh costs.

A: people consume a pure public good without payment, even though the good may not be produced if no one chooses to pay.

CH 16: In the United States, the bulk of health care spending is paid by health insurance companies. Such a system is also called a third-party payer system where consumers of health care pay a nominal fee and the rest are paid by the health insurance provider. Why might such a system lead to an inefficient outcome? A: Health insurance companies have an incentive to control cost and therefore tend to deny consumers many cutting edge medical treatments. B: Consumers have an incentive to over-consume health care services because they pay prices well below the cost of providing these services. C: Physicians concerned that insurance companies may not approve payments tend not to order expensive tests for their patients. D: Consumers fearing that excessive use of health care services may lead to a rise in insurance premiums tend to under-consume health care services.

B: Consumers have an incentive to over-consume health care services because they pay prices well below the cost of providing these services.

CH 1: Because of their relatively small national economies, which of the following is most likely considered to be the most important factor for Belgium, Korea, and Canada to take full advantage of specialization? A: Division of labour B: International trade C: Economies of scale D: Command Economy

B: International Trade

CH 12: Coal burning utilities release sulfur dioxide and nitric acid which react with water to produce acid rain. Acid rain damages trees and crops and kills fish. Because the utilities do not bear the cost of the acid rain, they overproduce the quantity of electricity. This is illustrated in Figure 5-11.Refer to Figure 5-11. S1 represents the supply curve that reflects the marginal private cost of production and S2 represents the supply curve that reflects the marginal social cost of production. One way to internalize the external cost generated by utilities is to impose a Pigovian tax on the production of electricity. What is the size of the Pigovian tax that will internalize the cost of the externality? A: P0 B: P2-P0 C: P1-P0 D: P2-P1

B: P2-P0

CH 8: If, in a perfectly competitive industry, the market price facing a firm is above its average total cost at the output where marginal revenue equals marginal cost, then A: firms are breaking even. B: new firms are attracted to the industry. C: existing firms will exit the industry. D: market supply will remain constant.

B: new firms are attracted to the industry.

CH 1: The basic difference between macroeconomics and microeconomics is that: A: microeconomics looks at the forest (aggregate markets) while macroeconomics looks at the trees (individual markets). B: macroeconomics is concerned with groups of individuals while microeconomics is concerned with single countries. C: microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets). D: macroeconomics is concerned with generalization while microeconomics is concerned with specialization.

C: microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets).

CH 19: If the opportunity costs of production for two goods is different between two countries, then A: trade will only benefit both countries if one can lower its opportunity costs. B: only one country can be made better off by trade. C: mutually beneficial trade is possible. D: trade cannot benefit either country.

C: mutually beneficial trade is possible.

CH 8: When a perfectly competitive firm finds that its market price is below its minimum average variable cost, it will sell A: the output where marginal revenue equals marginal cost. B: any positive output the entrepreneur decides upon because all of it can be sold. C: nothing at all; the firm shuts down. D: the output where average total cost equals price.

C: nothing at all; the firm shuts down.

CH 18: What is the voting paradox? A: the observation that less than 60 percent of those eligible to vote actually vote B: people are aware that their votes will not change the political outcome since these outcomes are predetermined by a group of influential politicians C: the observation that majority voting may not always result in consistent choices D: the idea that wealthy corporations are able to sway politicians to act in ways contrary to the desires of the majority

C: the observation that majority voting may not always result in consistent choices

CH 10: What is the profit-maximizing rule for a monopolistically competitive firm? A: to produce a quantity that maximizes market share B: to produce a quantity that maximizes total revenue C: to produce a quantity such that marginal revenue equals marginal cost D: to produce a quantity such that price equals marginal cost

C: to produce a quantity such that marginal revenue equals marginal cost

CH 13: A product is considered to be rival if A: you can keep those who did not pay for the item from enjoying its benefits. B: you cannot keep those who did not pay for the item from enjoying its benefits. C: your consumption of the product reduces the quantity available for others to consume. D: it is jointly owned by all members of a community.

C: your consumption of the product reduces the quantity available for others to consume.

CH 7: Which of the following equations is correct? A: AVC - ATC = AFC B: AVC + ATC = AFC C: AFC + AVC = ATC D: ATC + AVC = AFC

C: AFC + AVC = ATC

CH 19: Assume that China has a comparative advantage in producing corn and exports corn to Japan. We can conclude that A: Japan has an absolute disadvantage in producing corn relative to China. B: labor costs are higher for corn producers in Japan than in China. C: China has a lower opportunity cost of producing corn relative to Japan. D: China also has an absolute advantage in producing corn relative to Japan.

C: China has a lower opportunity cost of producing corn relative to Japan.

CH 6: The amount of income a consumer has to spend on goods and services is known as A: purchasing power. B: effective demand. C: a budget constraint. D: wealth.

C: a budget constraint.

CH 18: According to public choice theory, policymakers A: act in ways to bring about an equitable distribution of society's wealth. B: act in ways to maximize economic efficiency. C: are likely to pursue their own self-interest, even if their self-interest conflicts with the public interest. D: place the interests of the public above their own self-interest.

C: are likely to pursue their own self-interest, even if their self-interest conflicts with the public interest.

CH 16: A key difficulty facing insurance companies is that people know more about their health than do insurance companies. What is this phenomenon called? A: moral hazard B: economic irrationality C: asymmetric information D: adverse selection

C: asymmetric information

CH 11: The Sherman Act prohibited A: marginal cost pricing. B: setting price above marginal cost. C: collusive price agreements among rival sellers. D: selling below average total cost.

C: collusive price agreements among rival sellers.

CH 11: The Federal Trade Commission (FTC) Act A: gave the FTC full power to regulate mergers. B: closed the loopholes in the Sherman and Clayton Acts. C: divided authority to police mergers between the FTC and the Department of Justice. D: prohibited charging buyers different prices if the result would reduce competition.

C: divided authority to police mergers between the FTC and the Department of Justice.

CH 7: The average total cost of production A: is the extra cost required to produce one more unit. B: equals the explicit cost of production. C: equals total cost of production divided by the level of output. D: equals total cost of production multiplied by the level of output.

C: equals total cost of production divided by the level of output.

CH 6: Marginal utility is the A: total satisfaction received from consuming a given number of units of a product. B: average satisfaction received from consuming a product. C: extra satisfaction received from consuming one more unit of a product. D: satisfaction achieved when a consumer has had enough of a product.

C: extra satisfaction received from consuming one more unit of a product.

CH 9: When the government wants to give an exclusive right to one firm to produce a product, it A: imposes a quota on imports of the product. B: uses antitrust laws to keep other firms from entering the market. C: grants a patent or copyright to an individual or firm. D: imposes a tariff on imports of the product.

C: grants a patent or copyright to an individual or firm.

CH 9: Figure 15-9 shows the demand and cost curves for a monopolist.Refer to Figure 15-9. What is the difference between the monopoly output and the perfectly competitive output? A: 240 units B: 140 units C: 560 units D: 340 units

D: 340 units

CH 16: The term that is used to refer to a situation in which one party to an economic transaction has less information than the other party is A: inefficient market hypothesis. B: moral hazard. C: information disparity. D: asymmetric information.

D: asymmetric information.

CH 9: Figure 15-2 above shows the demand and cost curves facing a monopolist.Refer to Figure 15-2. If the firm's average total cost curve is ATC1, the firm will A: break even. B: face competition. C: suffer a loss. D: make a profit

D: make a profit

CH 19: NAFTA refers to a 1994 agreement that eliminated most tariffs among which countries? A: the United States, the United Kingdom, and Mexico B: Canada, the United Kingdom, and Mexico C: the United States, Mexico, and Cuba D: the United States, Canada, and Mexico

D: the United States, Canada, and Mexico

CH 4: Table 4-1 Refer to Table 4-1. If D2 and S2 represent the demand and supply schedules in a particular market, then the equilibrium price and quantity are __________ and __________, respectively. A: $12; 12 B: $10; 12 C: $8; 15 D: $6; 18

B: $10; 12

CH 4: Table 4-1 Refer to Table 4-1. If D1 and S1 represent the demand and supply schedules in a particular market, then the equilibrium price and quantity are __________ and __________, respectively. A: $4; 11 B: $4; 16 C: $6; 13 D: $8; 15

B: $4; 16

CH 3: If new manufacturers enter the computer industry, then (ceteris paribus): A: the supply curve shifts to the left. B: the supply curve shifts to the right. C: the demand curve shifts to the left. D: some established manufacturers must exit the industry.

B: the supply curve shifts to the right.

CH 8: If, for a given output level, a perfectly competitive firm's price is less than its average variable cost, then the firm A: is earning a profit B: should shut down C: should increase output D: should increase price

B: should shut down

CH 1: In a discussion of economics, which of the following would exert the most influence on an individual firm's decision to hire workers? A: wage levels B: the macroeconomy C: the firm's income D: household income

B: the macroeconomy

CH 4: Many states do have ____________, which impose an upper limit on the interest rate that lenders can charge. A: price ceiling laws B: usury laws C: price floor laws D: price floor laws

B: usury laws

CH 7: Marginal cost is equal to the A: change in total cost divided by the change in output. B: change in average total costs divided by the change in output. C: change in total product divided by the change in output. D: change in average product divided by the change in output.

A: change in total cost divided by the change in output.

CH 1: In the first chapter of The Wealth of Nations, Smith introduces the idea of the __________, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers. A: division of labor B: interconnected economy C: task economy D: modern economy

A: Division of labor

CH 2: Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be. A: Normative statement B: Budjet constraint C: Trade-off D: Opportunity cost

A: Normative statement

CH 2: The model that economists use for illustrating the process of individual choice in a situation of scarcity is the budget constraint, sometimes also called the _______________, a diagram which shows what choices are possible. A: Opportunity set B: Consumption choice C: Time value of money D: Risk premium

A: Opportunity Set

CH 9: Figure 15-2 above shows the demand and cost curves facing a monopolist.Refer to Figure 15-2. The firm's profit-maximizing price is A: P3. B: P2. C: P4. D: P1.

A: P3.

CH 5: Refer to Figure 5-1. Graph B represents a demand curve that is relatively __________. Total revenue __________ as the price decreases from $10 to $5. A: inelastic; decreases B: elastic; decreases C: elastic; increases D: inelastic; increases

A: inelastic; decreases

CH 8: If a perfectly competitive firm's price is above its average total cost, the firm A: is earning a profit. B: should shut down. C: is incurring a loss. D: is breaking even.

A: is earning a profit.

CH 10: The key characteristics of a monopolistically competitive market structure include A: many small (relative to the total market) sellers acting independently. B: all sellers sell a homogeneous product. C: barriers to entry are strong. D: sellers have no incentive to advertise their products.

A: many small (relative to the total market) sellers acting independently.

CH 3: A demand curve shows the relationship between price and _________________ on a graph. A: quantity demanded B: quantity produced C: economies of scale D: costs

A: quantity demanded

CH 9: Economic efficiency in a free market occurs when A: the sum of consumer surplus and producer surplus is maximized. B: consumer surplus is maximized. C: price is as low as possible. D: producer surplus is maximized.

A: the sum of consumer surplus and producer surplus is maximized.

CH 10: Monopolistic competition is a market structure in which A: firms produce and sell products for which there are no close substitutes. B: the demand curve for a typical firm is horizontal. C: firms cannot influence the market price. D: barriers to entry are low

D: barriers to entry are low

CH 4: Table 4-1 Refer to Table 4-1. Suppose that D1 and S1 are the prevailing demand and supply curves for a product. If the demand schedule changes from D1 to D2, then: A: equilibrium price decreases from $6 to $4. B: equilibrium quantity decreases from 15 to 13. C: equilibrium quantity increases from 13 to 18. D: equilibrium price increases from $6 to $8

D: equilibrium price increases from $6 to $8

CH 1: Macroeconomics: A: is concerned with the expansion of a small business into a large corporation. B: is narrower in scope than microeconomics. C: analyzes mergers and acquisitions between firms D: is concerned with the expansion and contraction of the overall economy.

D: is concerned with the expansion and contraction of the overall economy.

CH 8: A firm's total profit can be calculated as all of the following except A: total revenue minus total cost. B: average profit per unit times quantity sold. C: (price minus average total cost) times quantity sold. D: marginal profit times quantity sold.

D: marginal profit times quantity sold.

CH 5: The elasticity of supply is defined as the ________ change in quantity supplied divided by the _______ change in price. A: total; percentage B: percentage; marginal C: marginal; percentage D: percentage; percentage

D: percentage; percentage

CH 6: The income effect of a price change refers to A: the change in demand that occurs when consumer income changes. B: the change in the quantity demanded that results from a change in price, making the good more or less expensive relative to other goods, holding everything else constant. C: the change in demand that occurs when both income and price change. D: the change in the quantity demanded of a good that results from the effect of a change in price on consumer purchasing power, holding everything else constant.

D: the change in the quantity demanded of a good that results from the effect of a change in price on consumer purchasing power, holding everything else constant.

CH 9: The demand curve for a monopoly's product is A: more inelastic than the market demand for the product. B: undefined. C: more elastic than the market demand for the product. D: the market demand for the product.

D: the market demand for the product.

CH 3: When quantity demanded decreases in response to a change in price: A: the demand curve shifts to the right. B: the demand curve shifts to the left. C: there is a movement down along the demand curve. D: there is a movement up along the demand curve.

D: there is a movement up along the demand curve.

CH 14: If an additional worker can produce an additional 20 units of output which can be sold for $4 per unit, what is the maximum wage that this perfectly competitive firm should pay to hire this worker? A: $80 B: $80 minus the firm's profit markup C: It depends on what the going wage rate is in the labor market. D: There is insufficient information to answer the question.

A: $80

CH 5: __________ is the change in what is on the horizontal axis (quantity) divided by the change in what is on the vertical axis (price). A: Elasticity B: Demand C: Supply D: Revenue

A: Elasticity

CH 18: What is meant by the term "rational ignorance"? A: It means the lack an economic incentive for voters to become informed about a pending legislation. B: It refers to the absence of a negative incentive, for example, a fine for not voting, which results in a low voter turnout. C: It refers to a situation where one policymaker deliberately approves a bill he does not support in exchange for a future favorable vote for his own cause. D: It refers to the fact that policymakers and their constituents have different ideas of what it means to behave rationally and each party deliberately ignores the other's view.

A: It means the lack an economic incentive for voters to become informed about a pending legislation.

CH 19: Which of the following statements about the importance of trade to the U.S. economy is true? A: The United States is the second largest exporter in the world. B: Since 1950, both exports and imports have steadily decreased as a fraction of U.S. gross domestic product. C: Overall, about 80 percent of U.S. manufacturing jobs depend directly or indirectly on exports. D: The U.S. economy is highly dependent on international trade for growth in its gross domestic product.

A: The United States is the second largest exporter in the world.

CH 12: Anyone can purchase sulfur dioxide emission allowances on the Chicago Mercantile Exchange. Several environmental groups have raised money to buy allowances (which they subsequently destroy). As part of their fund-raising, these groups have urged contributors to buy the allowances as gifts. As one newspaper story put it, "For the environmentalist in your life, here's a gift that is sold by the ton, fits in an envelope and will last forever."Source for quote: Randall Edwards, "Dear Santa: Please Bring Me Sulfur Dioxide for Christmas," Columbus Dispatch, December 19, 1999.What would be the impact on the price of the emission allowances in the market if more people buy sulfur emission allowances and destroy them? A: The price rises. B: The price falls to zero. C: The price falls but not to zero. D: The price remains unchanged because the allowances purchased by the environmental groups are destroyed.

A: The price rises.

CH 8: Which of the following is a characteristic of an oligopolistic market structure? A: There are few dominant sellers. B: Each firm sells a unique product. C: It is easy for new firms to enter the industry. D: Each firm need not react to the actions of rivals.

A: There are few dominant sellers.

CH 9: In reality, because few markets are perfectly competitive, some loss of economic efficiency occurs in the market for nearly every good or service. A: True B: False

A: True

CH 9: To maximize profit, a monopolist will produce and sell a quantity such that for the last unit sold, marginal revenue equals marginal cost, and charges a price given by the demand curve at that output level. A: True B: False

A: True

CH 12: If policymakers use a pollution tax to control pollution, the tax per unit of pollution should be set A: equal to the marginal external cost at the economically efficient level of pollution. B: equal to the marginal private cost of production at the economically efficient level of pollution. C: equal to the amount of the deadweight loss created in the absence of a pollution tax. D: at a level low enough so that producers can pass along a portion of the additional cost onto consumers without significantly reducing demand for the product.

A: equal to the marginal external cost at the economically efficient level of pollution.

CH 15: The distribution of income typically refers to how income is distributed across the population ________. Income mobility looks at how a person or family's income changes ________. A: in a particular year; over time B: over a lifetime; each year C: by age group; by education level D: by race and gender; based on the state of the economy

A: in a particular year; over time

CH 12: An advantage of imposing a tax on the producer that generates pollution is that A: it forces the polluting producer to internalize the external cost of the pollution. B: the government can keep tabs on exactly what is produced in an industry. C: it will eliminate pollution. D: a producer can pass the cost of the pollution to consumers.

A: it forces the polluting producer to internalize the external cost of the pollution.

CH 14: A firm's demand for labor curve is also called its A: marginal revenue product of labor curve. B: marginal factor cost of labor curve. C: marginal valuation curve. D: marginal benefit of labor curve.

A: marginal revenue product of labor curve.

CH 16: When people who buy insurance change their behavior after the purchase because they are protected from loss by the insurance, the insurance market is said to face the problem of A: moral hazard. B: adverse selection. C: asymmetric information. D: economic irrationality.

A: moral hazard.

CH 13: Public goods are distinguished by two primary characteristics. What are they? A: non rivalry and non excludability B: government intervention and low prices C: market failure and high prices D: rivalry and exclusivity

A: non rivalry and non excludability

CH 17: Unlike firms that sell stock in financial markets, which are known as ________ firms, companies which do not sell stock in financial markets are known as ________ firms. A: public; private B: open; closed C: corporate; proprietary D: stock market; bond market

A: public; private

CH 11: Governments grant patents to encourage A: research and development on new products. B: competition. C: low prices. D: firms to form public enterprises.

A: research and development on new products.

CH 16: One reason why adverse selection problems arise in health insurance markets is that A: sick people are more likely to want health insurance than healthy people. B: because of advances in medical technology, people are living longer. These medical advances are costly and drive up the price of insurance for everyone. C: the average age of citizens of the United States has increased in recent years, and will continue to increase over the next 20 to 30 years. As older citizens retire, more and more of their medical bills will have to be paid by younger workers. D: fewer men and women are choosing medical careers because of the increase in the cost of malpractice insurance.

A: sick people are more likely to want health insurance than healthy people.

CH 12: Governments can increase the consumption of a product that creates positive externalities by A: subsidizing the production of the product so that the supply is increased and market price is reduced. B: taxing the production and consumption of the product. C: convincing everyone to consume the product. D: assigning property rights to the producers of the product.

A: subsidizing the production of the product so that the supply is increased and market price is reduced.

CH 17: The interest payment on a bond is called A: the coupon payment B: principal. C: the interest rate D: the face value

A: the coupon payment

CH 15: If official poverty statistics for the United States included transfer payments individuals receive from the government, such as Social Security payments and other non-cash benefits such as food stamps A: the poverty rate would be lower. B: poverty would be eliminated. C: income inequality would be greater. D: the poverty rate would be overstated.

A: the poverty rate would be lower.

CH 3: A severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of: A: the supply curve. B: the demand curve, as consumers try to economize because of the shortage. C: both the supply and demand curves. D: the supply curve and a rightward shift of the demand curve, resulting in a higher equilibrium price.

A: the supply curve.

CH 18: Which of the following is used to argue that the self-interest of public policymakers will often lead to actions that are inconsistent with the preferences of the voters they represent? A: the voting paradox B: rent seeking C: transitivity of voters' preferences D: the median voter theorem

A: the voting paradox

CH 19: An economic principle that explains why countries produce different goods and services is A: absolute advantage. B: comparative advantage. C: trade as a percentage of GDP. D: NAFTA.

B: Comparative advantage

CH 16: What is the principal-agent problem? A: It is a problem caused by a person (principal) who hires an agent to act on his behalf but is unwilling to delegate authority to the agent to carry out the task in the best possible way. B: It is a problem caused by agents pursuing their own interests rather than the interests of the principals who hired them. C: It is a problem of the power system of boss and subordinate where the boss (principal) exerts influence over his subordinates (agents) using punishment or threat. D: It is a problem that exists when a person (principal) has more information about the task than the agent he hires to perform the task.

B: It is a problem caused by agents pursuing their own interests rather than the interests of the principals who hired them.

CH 16: What is moral hazard? A: It refers to the private, self-interested actions that people pursue, which when taken collectively leads to a loss in economic surplus. B: It refers to the actions people take after they have entered into a transaction that makes the other party to the transaction worse off. C: It refers to the situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction. D: It refers to the actions people take before they enter into a transaction so as to mislead the other party to the transaction.

B: It refers to the actions people take after they have entered into a transaction that makes the other party to the transaction worse off.

CH 11: Peet's Coffee and Teas produces some flavorful varieties of Peet's brand coffee. Is Peet's a monopoly? A: Yes, there are no substitutes to Peet's coffee. B: No, although Peet's coffee is a unique product, there are many different brands of coffee that are very close substitutes. C: Yes, Peet's is the only supplier of Peet's coffee in a market where there are high barriers to entry. D: No, Peet's is not a monopoly because there are many branches of Peet's.

B: No, although Peet's coffee is a unique product, there are many different brands of coffee that are very close substitutes.

CH 12: Companies producing toilet paper bleach the paper to make it white. The bleach is discharged into rivers and lakes and causes substantial environmental damage. Figure 5-9 illustrates the situation in the toilet paper market.Refer to Figure 5-9. The efficient output is A: Q1. B: Q2. C: Q3. D: Q4.

B: Q2.

CH 15: During the past 30 years, income inequality in the United States has increased in part due to rapid technological change. How does technological change contribute to income inequality? A: Advancements in technology displace skilled and unskilled workers in certain fields, leading to higher unemployment rates. B: Technology complements the skills of the well-educated while rendering redundant the labor services of unskilled and low-skilled workers. This causes a decline in the wages of low and unskilled workers relative to other workers. C: The opportunity cost of investing in technology is investments in human capital. The resulting decrease in labor's marginal productivity has led to lower wages. D: Technological change favors the owners of capital and since high-income individuals tend to own capital, income inequality is further exacerbated.

B: Technology complements the skills of the well-educated while rendering redundant the labor services of unskilled and low-skilled workers. This causes a decline in the wages of low and unskilled workers relative to other workers.

CH 13: A public good is A: a good that is rival and excludable. B: a good that is non rival and non excludable. C: a good that is non rival and excludable. D: a good that is rival and non excludable.

B: a good that is non rival and non excludable.

CH 11: Compared to a monopolistic competitor, a monopolist faces A: a more elastic demand curve. B: a more inelastic demand curve. C: a more elastic demand curve at higher prices and a more inelastic demand curve at lower prices. D: a demand curve that has a price elasticity coefficient of zero.

B: a more inelastic demand curve.

CH 16: An insurance company is likely to attract customers like Clancy, who wants to purchase insurance because he knows better than the company that he is more likely to make a claim on a policy. What is the term used to describe the situation above? A: moral hazard B: adverse selection C: asymmetric information D: economic irrationality

B: adverse selection

CH 11: Collusion is A: common among monopoly firms. B: an agreement among firms to charge the same price or otherwise not to compete. C: necessary for firms to raise money by borrowing from investors or from banks in order to fund research and development required to develop new products. D: legal under U.S. antitrust laws if the intent is to increase competition.

B: an agreement among firms to charge the same price or otherwise not to compete.

CH 18: Some individuals seek to use government action to make themselves better off at the expense of others. The actions of these individuals A: offer proof that Adam Smith's "invisible hand" is not valid. B: are examples of rent seeking. C: are examples of fraud; but these individuals usually avoid prosecution because of logrolling and rational ignorance. D: are evidence of the voting paradox.

B: are examples of rent seeking.

CH 19: Many economists support trade agreements, maintaining that the agreements improve economic efficiency because they result in goods being produced A: at the highest profit margin. B: at the lowest opportunity cost. C: with maximum deadweight loss. D: with zero producer surplus.

B: at the lowest opportunity cost

CH 14: Firms use information on labor's marginal revenue product to determine A: how much to produce at each output price. B: how many workers to hire at each wage rate. C: how much marginal product to produce at each wage rate. D: how much labor services to supply at each wage rate.

B: how many workers to hire at each wage rate.

CH 14: A reason why a perfectly competitive firm's demand for labor curve slopes downward is that A: each additional unit of labor hired is less efficient than previously hired units. B: in the short run, as more labor is hired, labor's marginal product falls because of the law of diminishing returns. C: the extra cost of hiring additional units of labor increases as a firm hires more units of labor. D: the firm's demand curve for the product that uses labor is downward sloping.

B: in the short run, as more labor is hired, labor's marginal product falls because of the law of diminishing returns.

CH 13: The "tragedy of the commons" refers to the phenomenon where A: individuals are free riders. B: people overuse a common resource. C: people do not internalize an externality. D: there is rivalry in consumption.

B: people overuse a common resource

CH 11: A possible advantage of a horizontal merger for the economy is that A: the merging firms could avoid losses. B: the merged firm might reap economies of scale which could translate into lower prices. C: the degree of competition in the industry will be intensified. D: the government stands to collect more corporate income tax revenue.

B: the merged firm might reap economies of scale which could translate into lower prices.

CH 14: A firm should hire more workers to increase its profits if A: the marginal product of labor is greater than the wage the firm will pay these workers. B: the wage rate is less than the marginal revenue product of labor. C: there is enough capital and other resources for the workers to use. D: the demand for labor is elastic.

B: the wage rate is less than the marginal revenue product of labor.

CH 13: Common resources differ from public goods in that A: common resources are non excludable while public goods are excludable to those who do not pay for the good. B: unlike public goods, common resources are rival in consumption. C: common resources are collectively owned by a group of people while public goods are government owned. D: common resources are resources that cannot be renewed but the production of public goods can be increased any time.

B: unlike public goods, common resources are rival in consumption.

CH 5: Suppose that Mimi plays golf 5 times per month when the price is $40 and 4 times per month when the price is $50. What is the price elasticity of Mimi's demand curve? A: 0.1 B: 0.8 C: 1.0 D: 10.0

C: 1.0

CH 16: What is adverse selection? A: It refers to the private, self-interested actions people that people pursue, which when taken collectively leads to a loss in economic surplus. B: It refers to the actions people take after they have entered into a transaction that make the other party to the transaction worse off. C: It refers to the situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction. D: It refers to the actions people take before they enter into a transaction so as to mislead the other party to the transaction.

C: It refers to the situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction.

CH 14: An increase in the wage rate causes A: a rightward shift of the firm's labor demand curve. B: a leftward shift of the firm's labor demand curve. C: a decrease in the quantity of labor demanded. D: an increase in labor's marginal productivity.

C: a decrease in the quantity of labor demanded.

CH 13: A private good is A: a good that is rival and non excludable. B: a good that is non rival and non excludable. C: a good that is rival and excludable. D: a good that is non rival and excludable.

C: a good that is rival and excludable.

CH 17: What is a primary market? A: a market where primary inputs like steel are sold B: a market where you can sell any bonds you own as a private investor C: a market where newly issued claims are sold to initial buyers by the borrowing firm D: a market where you can sell any stocks you own as a private investor

C: a market where newly issued claims are sold to initial buyers by the borrowing firm

CH 13: The market demand for a public good can be determined by A: adding up the total private benefits and external benefits that each quantity provides the citizens of a country. B: adding up how much each citizen expects to consume at each possible price. C: adding up how much each consumer is willing to pay for each unit of the public good. D: estimating the value of the benefit that each unit provides and multiplying that by the number of consumers.

C: adding up how much each consumer is willing to pay for each unit of the public good.

CH 11: The Clayton Act prohibited A: all vertical mergers. B: all horizontal mergers. C: any merger if its effect was to substantially lessen competition or create a monopoly. D: all conglomerate mergers.

C: any merger if its effect was to substantially lessen competition or create a monopoly.

CH 18: The public choice model assumes that government policymakers A: will often act irrationally in their personal affairs, but will act rationally when they promote the public interest. B: will pursue their self-interests in personal affairs but only if it does not conflict with the public interest. C: are likely to pursue their own self-interests, even if their self-interests conflict with the public interest. D: must promote the public interest at the expense of their own self-interests in order to be re-elected.

C: are likely to pursue their own self-interests, even if their self-interests conflict with the public interest.

CH 1: Macroeconomics primarily examines: A: the behavior of individual households and firms. B: how prices are determined within individual markets. C: broad issues such as national output, employment and inflation D: the output levels that maximize the profits of business firms

C: broad issues such as national output, employment and inflation

CH 13: For-profit producers will produce only private goods because A: markets exist for private goods but not for public goods. B: the cost of production can be easily determined. C: buyers will be willing to pay for the goods since the benefits are excludable. D: all external benefits can be internalized using market prices.

C: buyers will be willing to pay for the goods since the benefits are excludable.

CH 17: The central role of ________ in a market economy is bringing together savers and borrowers. A: corporations B: sole proprietors C: financial intermediaries D: stock exchanges

C: financial intermediaries

CH 11: A patent or copyright is a barrier to entry based on A: ownership of a key necessary raw material. B: large economies of scale as output increases. C: government action to protect a producer. D: widespread network externalities.

C: government action to protect a producer.

CH 14: The demand for labor is described as a derived demand because A: it is derived by workers seeking to earn income to fund the consumption of goods and services. B: it is derived by producers seeking to make profits by starting new businesses. C: it is derived from the demand for products that use labor in the production process. D: it is derived from government institutions which rely on labor markets for the purpose of raising tax revenue.

C: it is derived from the demand for products that use labor in the production process.

CH 10: If a firm faces a downward-sloping demand curve, A: the demand for its product must be inelastic. B: it has no control over the price or the quantity sold. C: it must reduce its price to sell more units. D: it will always make a profit.

C: it must reduce its price to sell more units.

CH 16: Consider a used car market in which half the cars are good and half are bad (lemons). A rational buyer in this market should A: offer to pay a price equal to the most she would pay for a good car. B: offer to pay a price equal to the most she would pay for a lemon. C: offer to pay a price somewhere between the price she would pay for a good car and the price she would pay for a lemon. D: save up and buy a new car.

C: offer to pay a price somewhere between the price she would pay for a good car and the price she would pay for a lemon.

CH 15: Income inequality in the United States has increased somewhat over the past 25 years. Two factors that appear to have contributed to this are A: tax cuts on high-income individuals and large increases in prices of stocks. B: strong economic growth and low inflation. C: rapid technological change and expanding international trade. D: outsourcing of jobs by U.S. firms and cuts in taxes on capital gains.

C: rapid technological change and expanding international trade.

CH 6: The income effect of an increase in the price of salmon A: is the change in the demand for salmon when income increases. B: refers to the relative price effect—salmon is more expensive compared to other types of fish—which causes the consumer to buy less salmon. C: refers to the effect on a consumer's purchasing power which causes the consumer to buy less salmon, holding all other factors constant. D: is the change in the demand for other types of fish, say trout, that results from a decrease in purchasing power.

C: refers to the effect on a consumer's purchasing power which causes the consumer to buy less salmon, holding all other factors constant.

CH 14: A firm's primary interest when it hires an additional worker is A: the cost of hiring the additional worker. B: how the average output of the firm will be affected by this new worker. C: the extra revenue the firm realizes from hiring that worker. D: whether or not the new worker gets along with the firm's existing workers.

C: the extra revenue the firm realizes from hiring that worker.

CH 18: The proposition that the outcome of a majority vote is likely to represent the preferences of the voter who is in the political middle is called A: the mean (or average) voter theorem. B: the Arrow impossibility theorem. C: the median voter theorem. D: the voting paradox.

C: the median voter theorem.

CH 6: If, as a person consumes more and more of a good, each additional unit adds less satisfaction than the previous unit consumed, we are seeing the workings of A: the law of demand. B: the law of supply. C: the law of increasing marginal opportunity cost. D: the law of diminishing marginal utility.

D:

CH 17: What happens in the secondary market? A: Secondary inputs like electricity are sold. B: A corporate financial manager will raise funds for expansion of the firm. C: Newly issued claims are sold by the borrowing firm to the initial buyer. D: Already issued claims are sold from one investor to another.

D: Already issued claims are sold from one investor to another.

CH 15: What is the United States government's formal definition of the poverty line? A: It is a level of annual income equal to total income in society divided by the population, adjusted for a family of four. B: It is a level of annual income equal to the amount of money necessary to purchase the minimum quantity of food required for adequate nutrition. C: It is the annual income level below which a household is exempt from taxes. D: It is a level of annual income equal to three times the amount of money necessary to purchase the minimum quantity of food required for adequate nutrition.

D: It is a level of annual income equal to three times the amount of money necessary to purchase the minimum quantity of food required for adequate nutrition.

CH 17: Which of the following is a characteristic of stock? A: Stock represents a promise to repay a fixed amount of funds. B: The face value or principal plus interest is repaid at a specified period of time. C: The length of coupon payments is fixed by the stated maturity period. D: Stock represents ownership in a firm

D: Stock represents ownership in a firm

CH 17: A bond is a financial security that represents A: ownership in a corporation. B: the portion of profits paid to shareholders. C: the interest rate paid on a share of stock. D: a promise to repay a fixed amount of funds.

D: a promise to repay a fixed amount of funds.

CH 16: In markets with asymmetric information, A: moral hazard causes adverse selection which in turn causes asymmetric information. B: adverse selection causes moral hazard which in turn causes asymmetric information. C: asymmetric information causes moral hazard and then it causes adverse selection. D: asymmetric information causes adverse selection and then it causes moral hazard.

D: asymmetric information causes adverse selection and then it causes moral hazard.

CH 18: Why is a typical person likely to gather more information when buying a new car than when voting for a member of Congress? A: because a person's preferences are more likely to be met with little effort in the political sphere but this is not the case when buying a car in the private marketplace B: because the effects of buying a car are long term while a member of Congress has a relatively short tenure C: because it is less costly to acquire information about consumer items than it is about political candidates D: because buying a new car affects a person more immediately and personally compared to voting for a member of Congress; in the latter, a person's vote is only one of many voters and therefore, not likely to have a large impact on the outcome

D: because buying a new car affects a person more immediately and personally compared to voting for a member of Congress; in the latter, a person's vote is only one of many voters and therefore, not likely to have a large impact on the outcome

CH 19: Whenever a buyer and a seller agree to trade, A: the agreement is made based on absolute advantage. B: they must have identical opportunity costs in producing their respective products. C: one party will always be worse off. D: both must believe they will be made better off.

D: both must believe they will be made better off.

CH 12: Some policymakers have argued that products like cigarettes, alcohol, and sweetened soda generate negative externalities in consumption. All else equal, if the government decided to impose a tax on soda, the equilibrium quantity of soda would ________ and the equilibrium price of soda would ________. A: increase; increase B: increase; decrease C: decrease; increase D: decrease; decrease

D: decrease; decrease

CH 13: In economics, the term "free rider" refers to A: a person who evades taxes. B: a supervisor who delegates menial time-consuming activities to others. C: one who volunteers her services. D: one who waits for others to produce a good and then enjoys its benefits without paying for it.

D: one who waits for others to produce a good and then enjoys its benefits without paying for it.

CH 15: The poverty rate is defined as the percentage of the A: labor force that is poor according to the federal government's definition of poverty. B: population that is exempt from paying federal income taxes. C: population who qualify to receive welfare payments and food stamps. D: population that is poor according to the federal government's definition of poverty.

D: population that is poor according to the federal government's definition of poverty.

CH 9: Market power refers to A: the ability of a firm to sell at a lower price than rival sellers. B: the ability of a firm to advertise its product and succeed in selling more output. C: the ability of consumers to dictate what products should be produced. D: the ability of a firm to charge a price higher than the marginal cost of production.

D: the ability of a firm to charge a price higher than the marginal cost of production.

CH 19: Absolute advantage is A: the ability to produce higher quality goods compared to one's competitors. B: the ability to produce more of a good or service than competitors that have fewer resources. C: the ability to produce a good or service at a higher opportunity cost than one's competitors. D: the ability to produce more of a good or service than competitors when using the same amount of resources.

D: the ability to produce more of a good or service than competitors when using the same amount of resources.

CH 14: The marginal product of labor is A: the payment made to workers for their contribution to the output they produce. B: equal to the demand for labor. C: the change in a firm's revenue as a result of hiring one more worker. D: the additional output a firm produces as a result of hiring one more worker.

D: the additional output a firm produces as a result of hiring one more worker.

CH 17: One of the most widely followed stock indexes in the United States is the Dow Jones Industrial Average. This index represents A: the stock prices of 500 large U.S. firms. B: an over-the-counter market. C: the stock prices of more than 4,000 U.S. firms. D: the stock prices of 30 large U.S. corporations.

D: the stock prices of 30 large U.S. corporations.

CH 12: What is the rationale behind a tradable emission allowance scheme? A: to create a market for externalities: the scheme brings together buyers and sellers of marketable permits B: to discipline polluting firms by specifying the maximum amount of emissions allowed and giving them permits to pollute up to their allowance C: to raise revenue for the government through the sale of emission permits and at the same time set an emissions target D: to provide firms with the incentive to consider less costly alternatives to pollution reduction by making firms pay for the right to pollute beyond their specified allowance

D: to provide firms with the incentive to consider less costly alternatives to pollution reduction by making firms pay for the right to pollute beyond their specified allowance

CH 13: What is the rationale behind a tradable emission allowance scheme? A: to create a market for externalities: the scheme brings together buyers and sellers of marketable permits B: to discipline polluting firms by specifying the maximum amount of emissions allowed and giving them permits to pollute up to their allowance C: to raise revenue for the government through the sale of emission permits and at the same time set an emissions target D: to provide firms with the incentive to consider less costly alternatives to pollution reduction by making firms pay for the right to pollute beyond their specified allowance

D: to provide firms with the incentive to consider less costly alternatives to pollution reduction by making firms pay for the right to pollute beyond their specified allowance

CH 1: Which of the following best characterizes the circular flow of income? A: Businesses buy resources from the government, and households buy goods and services from businesses. B: Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses. C: The government purchases resources from businesses and households and then sells goods and services to businesses and households. D: Households buy factors of production from businesses, and businesses buy goods and services from households.

B: Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.

CH 4: Are markets always in equilibrium? A: No, they never "settle down" into a stable price and quantity. B: No, but if there is no outside interference, they tend to move toward equilibrium. C: Yes, because very few things tend to alter supply and demand. D: Yes, they are always at the equilibrium point, or very close to it.

B: No, but if there is no outside interference, they tend to move toward equilibrium.

CH 10: Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 13-2 shows the firm's demand and cost schedules.Refer to Table 13-2. What is the output (Q) that maximizes profit and what is the price (P) charged? A: P = $55; Q = 5 cases B: P = $50; Q = 6 cases C: P = $45; Q = 7 cases D: P = $40; Q = 8 cases

B: P = $50; Q = 6 cases

CH 2: Philosophers draw a distinction between ___________________, which describe the world as it is, and normative statements, which describe how the world should be. A: Negative statements B: Positive statements C: Trade-offs D: Utilitarianism

B: Positive statements

CH 3: A change in price of a good or service typically causes ___________________________ for that specific good or service. A: a new equilibrium price B: a change along the supply curve C: the supply curve to shift D: a decreased demand

B: a change along the supply curve

CH 2: Which of the following would most likely shift the production possibilities curve inward? A: an increase in the number of hours factories are in use B: a decrease in the average number of hours worked per week as the labor force chooses to enjoy more leisure time C: an increase in the production of capital goods D: technological progress

B: a decrease in the average number of hours worked per week as the labor force chooses to enjoy more leisure time

CH 7: The explicit cost of production is also called A: variable cost. B: accounting cost. C: direct cost. D: overhead cost.

B: accounting cost.

CH 6: If the price of lattes, a normal good you enjoy, falls, then A: the income and substitution effects offset each other but the price effect leads you to buy more lattes. B: both the income and substitution effects lead you to buy more lattes. C: the income effect which causes you to increase your latte consumption outweighs the substitution effect which causes you to reduce your latte consumption, resulting in more lattes purchased. D: the substitution effect which causes you to increase your latte consumption outweighs the income effect which causes you to reduce your latte consumption, resulting in more lattes purchased.

B: both the income and substitution effects lead you to buy more lattes.

CH 5: A 10 percent decrease in the price of potato chips leads to a 30 percent increase in the quantity of soda demanded. It appears that: A: elasticity of demand for potato chips is 3. B: cross-price elasticity of demand for soda is -3. C: elasticity of demand for potato chips is 3. D: elasticity of demand for soda 3.

B: cross-price elasticity of demand for soda is -3.

CH 7: A: Economic costs of production differ from accounting costs in that B: economic costs add the opportunity costs of a firm using its own resources while accounting costs do not. C: accounting costs include expenditures for hired resources while economic costs do not. D: accounting costs are always larger than economic cost.

B: economic costs add the opportunity costs of a firm using its own resources while accounting costs do not.

CH 5: Demand is said to be _____________ when the quantity demanded is not very responsive to changes in price. A: independent B: inelastic C: unit elastic D: elastic

B: inelastic

CH 7: The long run refers to a time period A: during which a firm is able to purchase all of its inputs, including its plant and equipment. B: long enough for a firm to vary all of its inputs, to adopt new technology, and change the size of its physical plant. C: long enough for a firm to pay all of its creditors in full. D: long enough for a firm to change the use of its variable inputs.

B: long enough for a firm to vary all of its inputs, to adopt new technology, and change the size of its physical plant.

CH 6: Economists assume that the goal of consumers is to A: do as little work as possible to survive. B: make themselves as well off as possible. C: spend all their income. D: consume as much as possible.

B: make themselves as well off as possible.

CH 4: Many economists believe that the trend toward greater wage inequality across the U.S. economy was primarily caused by _____________. A: the recession B: new technologies C: the rise of global markets D: inflation

B: new technologies

CH 10: Unlike a perfectly competitive firm, for a monopolistically competitive firm, A: price ≠ marginal cost for all output levels. B: price ≠ marginal revenue for all output levels. C: price ≠ average revenue for all output levels. D: marginal revenue = marginal cost at the profit-maximizing output.

B: price ≠ marginal revenue for all output levels.

CH 3: A supply curve is a graphical illustration of the relationship between price, shown on the vertical axis, and ____________, shown on the horizontal axis. A: demand B: quantity C: quantity supplied D: quantity demanded

B: quantity

CH 3: _________________ refers to the total number of units that are purchased at that price. A: quantity B: quantity demanded C: supply D: market quantity

B: quantity demanded

CH 5: If the demand curve for a life-saving medicine is perfectly inelastic, then a reduction in supply will cause the equilibrium price to: A: rise and the equilibrium quantity to fall. B: rise and the equilibrium quantity to stay the same. C: rise and the equilibrium quantity to rise. D: rise and the equilibrium quantity to rise.

B: rise and the equilibrium quantity to stay the same.

CH 8: Refer to Figure 12-11. Suppose the prevailing price is $20 and the firm is currently producing 1,350 units. In the long-run equilibrium, the firm represented in the diagram A: will continue to produce the same quantity. B: will reduce its output to 1,100 units. C: will reduce its output to 750 units. D: will cease to exist.

B: will reduce its output to 1,100 units.

CH 6: Optimal decisions are made A: in the marketplace. B: if information about prices and marginal utilities is known. C: when marginal utility is minimized. D: at the margin

D: at the margin

CH 2: The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good. A: Personal preference B: Utility level C: Budjet constraint D: Opportunity set

C: Budjet constraint

CH 8: In long-run perfectly competitive equilibrium, which of the following is false? A: There is efficient, low-cost production at the minimum efficient scale. B: Economic surplus is maximized. C: Firms earn economic profit. D: Economies of scale are exhausted.

C: Firms earn economic profit.

CH 6: Which of the following is a common mistake consumers commit when they make decisions? A: They take into account non monetary opportunity costs but ignore monetary costs. B: They are overly pessimistic about their future behavior. C: They fail to ignore sunk costs. D: They sometimes value fairness too much.

C: They fail to ignore sunk costs.

CH 7: Marginal cost is the A: change in average cost when an additional unit of output is produced. B: additional output when total cost is increased by one dollar. C: additional cost of producing an additional unit of output. D: change in the price of inputs if a firm buys more inputs to produce an additional unit of output.

C: additional cost of producing an additional unit of output.

CH 4: Which of the following will not result in a rightward shift of the market supply curve for labor? A: a decrease in non-wage income B: an increase in the working-age population C: an increase in labor productivity D: an increase in immigration

C: an increase in labor productivity

CH 1: When nations desire a healthy macroeconomy, they typically focus on three goals, one of these being: A: balanced budget B: prudent monetary policy C: low inflation D: assuring competition between firms

C: low inflation

CH 8: For a perfectly competitive firm, at profit maximization, A: market price exceeds marginal cost. B: total revenue is maximized. C: marginal revenue equals marginal cost. D: production must occur where average cost is minimized.

C: marginal revenue equals marginal cost.

CH 2: The marginal benefit of a slice of pizza is the: A: total amount that a consumer is willing to pay for a whole pizza, divided by the number of slices B: difference between the value of the slice to the consumer and the price of the slice. C: maximum amount that a consumer is willing to pay for the slice. D: price of the slice of pizza

C: maximum amount that a consumer is willing to pay for the slice.

CH 1: The basic difference between macroeconomics and microeconomics is: A: microeconomics concentrates on individual markets while macroeconomics focuses primarily on international trade. B: microeconomics concentrates on the behavior of individual consumers while macroeconomics focuses on the behavior of firms. C: microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy. D: microeconomics explores the causes of inflation while macroeconomics focuses on the causes of unemployment.

C: microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.

CH 2: Attending college is a case where the ________________ exceeds the monetary cost. A: Budet constraint B: Marginal Analysis C: Opportunity cost D: Marginal utility

C: opportunity cost

CH 5: The elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in __________. A: quantity supplied B: the slope of the demand curve C: price D: the slope in the supply curve

C: price

CH 3: When economists talk about supply, they are referring to a relationship between price received for each unit sold and the _________________. A: demand schedule B: market price C: quantity supplied D: demand curve

C: quantity supplied

CH 4: A straightforward example of a _______________, often used for simplicity, is the interest rate. A: price ceiling B: financial investment C: rate of return D: price floor

C: rate of return

CH 10: A major difference between monopolistic competition and perfect competition is A: the number of sellers in the markets. B: the degree by which the market demand curves slope downwards. C: that products are not standardized in monopolistic competition unlike in perfect competition. D: the barriers to entry in the two markets.

C: that products are not standardized in monopolistic competition unlike in perfect competition.

CH 10: Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 13-2 shows the firm's demand and cost schedules.Refer to Table 13-2. How much additional profit will be made if the firm chooses to produce and sell 5 cases instead of 4 cases? A: $275 B: $145 C: $35 D: $20

D: $20

CH 8: Which of the following is not a characteristic of a monopolistically competitive market structure? A: There is a large number of independently acting small sellers. B: All sellers sell products that are differentiated. C: There are low barriers to entry of new firms. D: Each firm must react to actions of other firms.

D: Each firm must react to actions of other firms.

CH 9: Figure 15-2 above shows the demand and cost curves facing a monopolist.Refer to Figure 15-2. To maximize profit, the firm will produce at output level A: Q4. B: Q3. C: Q1. D: Q2.

D: Q2.

CH 4: Refer to Table 4-1. Suppose that D1 and S2 are the demand and supply schedules for Product A. If the government imposes a price ceiling of $4, then: A: a 5 unit shortage will result. B: a 5 unit surplus will result. C: a 10 unit surplus will result. D: a 10 unit shortage will result

D: a 10 unit shortage will result

CH 7: Which of the following costs will not change as output changes? A: marginal cost B: total variable cost C: average variable cost D: average fixed cost E: total fixed cost

E: total fixed cost