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It is important for a business firm to have an entrepreneur (also called a "residual claimant") because

Select one:

a. income not claimed for accounting purposes is lost.

b. otherwise surplus profits would set off a process of "profit inflation.'

c. residuals account for as much as thirty percent of the wealth generated annually in the United States.

d. then we have someone to blame for the troubles of a capitalist economy.

e. this produces an effective incentive to consider more completely the opportunity costs and the benefits that might affect the firm.

Legislators who come up for election every two years are likely to support policies

Select one:

a. that are beneficial to all people who vote.

b. that are beneficial only to those citizens who are now living.

c. that are beneficial to all present voters and especially to future generations of voters.

d. that promise early benefits and defer the costs well into the future.

e. that only represent the public interest.

Drivers are charged a price to use a tollway. But even tollways such as the Tri-State Tollway near Chicago become heavily congested during the morning and evening rush hours. Economists look at a congestion as a *shortage* of driving possibilities. This suggests that

Select one:

a. the rush hour represents a total failure of traffic planning.

b. your textbook authors are wrong in claiming congestion is caused by zero prices.

c. substantially higher tolls -- closer to the market-clearing level -- during rush hours could reduce congestion.

d. growing population is indeed the problem.

Minimum wage laws are designed to help unskilled workers, by making their price (wage) higher in the market. But if employers view skilled and unskilled labor as substitutes, then an increase in the minimum wage, say, from $7.25 to $10.00 per hour would tend to

Select one:

a. reduce the overall demand (curve) for both unskilled and skilled workers.

b. reduce the quantity demanded of unskilled workers and increase the overall demand for skilled workers.

c. reduce the overall demand for unskilled workers and increase the quantity demanded of unskilled workers.

d. reduce the quantity demanded for both unskilled and skilled workers.

It would probably help to draw a graph for this one: Suppose the supply of oranges decreases while the overall demand remains unchanged. This would tend to

Select one:

a. reduce the price and increase the quantity demanded.

b. increase the price and increase the quantity demanded.

c. reduce the price and decrease the quantity demanded.

d. increase the price and decrease the quantity demanded

Which of the following would be included in the total costs of production when an entrepreneur tries to estimate her economic profit?

Select one:

a. Any foregone wages.

b. Any foregone interest.

c. Any foregone rent.

d. All of the above.

e. None of the above, because real-world entrepreneurs don't consider "economic profit." Only economists do.

A so-called "free rider" is someone who does not help pay the costs of goods that he desires because he

Select one:

a. doesn't care one bit about his fellow citizens.

b. believes that his paying (or not paying) will make no difference -- he can still enjoy the goods he desires without having to pay for them.

c. completely fails to believe in the system of representative democracy.

d. doesn't believe that people should have to pay anything for most of the goods they desire.

e. has studied the economic way of thinking and learned that greed is good.

Suppose the market clearing price of wheat is $2.50 per bushel. What would happen if wheat farmers persuaded the government to set a legally-mandated price support at $3.75 per bushel? (It might help if you draw a graph.)

Select one:

a. The quantity demanded of wheat would fall.

b. The quantity supplied of wheat would rise.

c. A surplus of wheat would occur.

d. All of the above.

In Chapter 7 your authors argue that the key difference between profit-oriented institutions and non-profit institutions (such as governments, hospitals, or schools) is that profit-oriented institutions usually

Select one:

a. don't cooperate with their customers.

b. have a residual claimant (a clear owner) who has strong incentives to use resources profitably.

c. pursue policies that are usually at odds with their customers' objectives,

d. work against the public interest.

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