For an inferior good: (Multiple Choice)

For an inferior good:
 a. the income elasticity is positive.
  b. the income elasticity if negative.
  c. the income elasticity is zero.
  d. the income elasticity is unity.

QUESTION 2

A firm's accounting profit is called a normal profit when its:
 a. accounting profit is equal to zero.
  b. economic profit is equal to zero.
  c. opportunity cost is equal to zero.
  d. average cost is minimum.
  e. economic profit is equal to accounting profit.

QUESTION 3

Which of the following is false about the long run?
 a. The long-run equilibrium output for a firm in perfect competition occurs at the lowest point on the average total cost curve.
  b. The shape of the long-run supply curve depends on the extent to which input costs change when there is entry or exit of firms in the industry.
  c. In a constant-cost industry, the prices of inputs do not change as output is expanded.
 d. In an increasing-cost industry, the cost curves of the individual firms rise as the total output of the industry decreases.

QUESTION 4

Suppose labor productivity differences are the only determinants of comparative advantage, and Brazil and Chile both produce only coffee and sugar. In Chile, either 5 units of coffee or 2 units of sugar can be produced in one day. In Brazil, a day of labor produces either 2 units of coffee or 1 unit of sugar. Which of the following statements is true?
 a. Brazil has an absolute advantage in producing only coffee.
  b. Brazil has an absolute advantage in producing only sugar.
  c. Chile has an absolute advantage in the production of both coffee and sugar.
  d. Chile has an absolute advantage in producing only coffee.
  e. Brazil has an absolute advantage in the production of both coffee and sugar.

QUESTION 5

Which of the following commodities can be considered as an inferior good?
 a. Dwelling in a small apartment located in a suburb
  b. Washing clothes in a washer at home
  c. Eating out at an upscale restaurant
  d. Spending vacations at exotic locations

QUESTION 6

When a firm incurs negative economic profit, it should:
 a. hire more laborers to make the business activity profitable.
  b. transfer the resources from its current use to other alternative uses.
  c. purchase additional raw materials to produce more output.
  d. transfer additional resources from other alternative uses to the current activity.
  e. continue to operate with the same resources.

QUESTION 7

When perfectly competitive firms are earning zero accounting profits,
 a. we would expect entry into the industry.
 b. we would expect stability in the industry, since it is in long run equilibrium.
  c. we would expect exit from the industry.
 d. we would expect none of the above.

QUESTION 8

If Japan has a comparative advantage over Canada in the production of computers, which of the following must be true?
 a. Supply of unskilled labor in Japan is higher than that in Canada.
  b. Japan incurs a lower input cost in the production of computers.
  c. Japan incurs a higher input cost in the production of computers.
  d. Japan has a lower opportunity cost in the production of computers.
  e. Japan has a higher opportunity cost in the production of computers.

QUESTION 9

Suppose Betty spends her monthly allowance on buying computer games, watching movies, and parasailing. If an increase in her monthly allowance increases her expenditure on parasailing activities we can say that:
 a. parasailing is an inferior good.
  b. computer games are inferior goods.
  c. parasailing is a normal good.
  d. computer games are normal goods.