1. Which of the following is considered a “third party” within the medical services industry?
A The medical provider, i.e. physician
B. The for-profit hospital
C. The private insurance company
D. The patient
2.Whenever an input makes up a large percentage of a good’s final cost, an increase in that input’s price will
A. cause the firm to shutdown.
B. affect only accounting profits.
C. affect total cost relatively more.
D. not affect total revenues.
3. Social costs are
A costs incurred in governmental welfare programs.
B. costs borne by society whenever a resource-using action takes place.
C. external costs minus internal costs.
D. costs incurred by government and borne by all taxpayers.
4.In the long run, input demand becomes more
C. cost efficient.
5.The marginal cost curve of pollution abatement is
B. upward sloping.
D. downward sloping.
6.The additional revenue earned from hiring one more worker is known as the
A. marginal revenue product of labor.
B. marginal factor cost of labor.
C. marginal physical product of labor.
D. marginal utility of labor.
7.Suppose at the current level of labor used, MRP = $100 and MFC = $100. To maximize profits, the firm should
A. shut down.
B. reduce the level of labor.
C. maintain the current level of labor.
D. hire more labor.
8.We assume that when a firm hires additional workers, the marginal physical product of labor will
A. decrease because each worker now has less capital and other resources to work with.
B. increase because large firms are more efficient.
C. decrease because the new workers are likely to be less able than the previously hired ones.
D. increase because more workers can always get more work done.
9.Holding other things constant, an increase in the use of capital in production would
A. decrease proportionately the marginal productivity of labor.
B. increase the marginal productivity of labor.
C. not change the marginal productivity of labor.
D. decrease, but not proportionately, the marginal productivity of labor.
10. In a Lorenz curve, perfect income equality is represented by
A. a vertical line.
B. a 45-degree line originating from the origin.
C. a rectangular hyperbola.
D. a horizontal line.
11.When both internal and external costs for using a scarce resource are included, then there is
A. an increase in the production of the good.
B. a negative externality.
C. a positive externality.
D. an increase in the price of the good.
12.Suppose at the current level of labor used, MRP = $100 and MFC = $50. To maximize profits, the firm should
A. hire more labor.
B. shut down.
C. reduce the level of labor.
D. maintain the current level of labor.
13.For a worker to be potentially available, he or she must
A. have the skills required by the firm and be in the relevant geographic market.
B. have most of the skills required by the firm only.
C. be in the relevant geographic market and be willing to work for minimum wage.
D. know about the jobs available at a particular firm.
14.When the costs of an action are not fully borne by the two parties engaged in a transaction, this is called a(n)
B. internal cost.
C. property right.
15.The optimal amount of pollution is not zero because
A. there are no benefits to anyone from having zero pollution.
B. it has been found that pollution in moderate amounts actually has positive benefits.
C. zero pollution would be too costly.
D. we don’t have the political structure that could accomplish the goal.
16.The firm’s demand curve for labor is
A. the demand curve for the good produced divided by the price of the good.
B. the marginal physical product curve for labor multiplied by the price of labor.
C. the marginal physical product curve for labor divided by the price of the good.
D. the marginal revenue product curve for labor.
17. If labor is 80 percent of total costs in industry A and 20 percent in industry B, then other things equal, we would expect the elasticity of demand for labor to be
A. uncertain since no general relationship exists between cost shares and elasticities.
B. greater in industry B than in industry A.
C. the same in both industries.
D. greater in industry A than in industry B.
18.Determinants of income differences include all of the following EXCEPT
B. marginal productivity.
C. moral hazard.
19.Pollution created by auto exhaust fumes is an example of a situation in which
A. social costs are equal to private costs.
B. social costs are approaching the shutdown point.
C. social costs are less than private costs.
D. social costs are greater than private costs.
20.Which of the following is NOT a correct criticism of the Lorenz curve?
A. It refers to money income after taxes.
B. It does not deal with differences in family size.
C. It ignores the impact of age distribution on income distribution.
D. It does not include payments in kind.
21.Which of the following statements about a perfectly competitive market are true?
I. The perfectly competitive industry faces an upward sloping labor supply curve.
II. The individual firm in a perfectly competitive industry faces a perfectly elastic labor supply curve.
A. I only
B. II only
C. Both I and II
D. Neither I nor II
22.New technologies increase health care costs for all the following reasons except
A. insurance companies often pay for the services of the new technologies
B. new technologies help people live longer, so the people need health care for more years.
C. new technologies are expensive.
D. new technologies tend to be ineffective
23.Which of the following would be considered income in kind?
A. food stamps
B. reduction in the tax rates
C. tax refunds
D. yard sales
24.When increased demand raises the price of the product, the
A. sales will fall.
B. marginal revenue product will fall.
C. marginal revenue product will also increase.
D. marginal revenue product will remain unchanged.
25.The Black Ash Steel Company’s plant belches large quantities of noxious fumes and black ash into the air. Residents in the surrounding area have higher medical bills because of Black Ash’s pollution. If the firm is forced to pay the social costs of its production,
A. its supply curve will shift to the right.
B. the price it charges for its steel will decrease.
C. the amount of steel it produces will increase in order to pay the additional costs.
D. it will produce less and charge more for its steel.
26.Which of the following will cause a shift in the demand curve of labor?
A. A decline in the price of a complementary input .
B. An increase or decrease in the demand for the product labor produces.
C. An increase or decrease in the productivity of labor.
D. all of the above
27.All of the following are private costs of operating an automobile EXCEPT
A. car insurance.
B. depreciation of the vehicle.
C. gasoline for the car.
D. harm to the environment from emissions.
28.Going to college to get more knowledge and skills is considered to be an increase in
A. net exports.
C. physical capital.
D. human capital.
29.When U.S. computer companies hire workers in India to staff their customer service call centers, they are engaging in
B. predatory pricing.
C. labor engagement.
D. unfair trade practices.
30.Suppose at the current level of labor used, MRP = $100 and MFC = $150. To maximize profits, the firm should
A. maintain the current level of labor.
B. hire more labor.
C. expand production.
D. reduce the level of labor.
31.The optimal quantity of air pollution is
A. found by equating the marginal benefits from further reductions in pollution and the marginal costs of further reductions in pollution.
B. whatever amount of pollution is produced by the profit maximizing firm.
C. a meaningless concept since monetary values cannot be attached to problems associated with pollution.
D. found by setting the quantity of air pollution equal to the quantity of water pollution.
32.According to the text, today’s Lorenz curve is
A. more bowed than in 1929.
B. a vertical line.
C. a straight line.
D. less bowed than in 1929.
33.Derived demand means
A. labor demand is determined by the supply of labor.
B. labor demand is derived from demand for the product it produces.
C. labor demand will shift about in a random fashion.
D. the labor demand curve will be upward sloping.
34.The marginal cost to society of reducing pollution increases with the increased use of pollution abatement because
A. of the diminishing returns from abatement.
B. of the reduced demand for abatement.
C. of the diminishing marginal utility of abatement.
D. of the high cost of abatement.
35.Costs that are borne solely by the individuals who incur them are called
A. social costs.
B. private costs.
C. public costs.
D. external costs.
36.The additional cost associated with the hiring of one more unit of labor is known as the
A. marginal factor cost of labor.
B. marginal utility of labor.
C. marginal revenue product of labor.
D. marginal physical product of labor.
37.Which of the following is not a reason for rising health care costs?
A. Third party financing of medical insurance.
B. An aging population.
C. Preventive techniques that lead to a shortage of patients forcing health care providers to increase costs.
D. Higher-quality technologies for diagnosing and treating health problems
38.Which of the following CANNOT be eliminated in a growing economy such as the U.S. economy?
A. absolute poverty
B. relative poverty
C. both absolute and relative poverty
D. Neither absolute nor relative poverty can be eliminated.
39.The belief that everyone should have exactly the same amount of income is
A. Lorenz principle.
B. egalitarian principle.
C. comparableminus−worth doctrine.
D. merit standard.
40.The additional production resulting from hiring one more worker is
A. additional production.
B. marginal production.
C. marginal cost.
D. marginal physical product.
41.Which of the following does NOT contribute to the marginal productivity of workers?
42.The less bowed the Lorenz Curve, the
A. more equal the income distribution.
B. greater the number of high-income people.
C. greater the number of low-income people.
D. less equal the income distribution.
43.All of the following are choices for the polluter when faced with additional costs to abate the externality EXCEPT
A. ignore the government regulations.
B. pay the price to pollute.
C. reduce the pollution-causing activity.
D. install pollution abatement equipment
44.There is “too much” steel production if the
A. social costs of steel production are declining.
B. social costs of steel production are significantly lower than the private costs.
C. social costs of steel production are significantly higher than the private costs.
D. social benefits of steel production are declining.
45.The graph which represents the distribution of income in an economy is called the
A. distribution curve.
B. Laffer curve.
C. Lorenz curve.
D. aggregate demand curve.
46.If the supply of labor to a firm is perfectly elastic at the going wage rate established by the forces of supply and demand then
A. the firm can only hire additional units of labor by driving the wage rate up.
B. full employment exists in the labor market.
C. the wage rate has been decreasing.
D. the firm is price taker.
47.Your neighbor has just planted some fragrant flowers. The wonderful scent drifts into your room and makes you happy.
A. This scent is an internal cost to you.
B. This cannot be an externality since you are enjoying the scent.
C. The social cost of this activity is entirely borne by you neighbor.
D. This is an externality since you get a benefit from your neighbor’s flowers.