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1) In equilibrium, if $1 = 0.5 pound sterling and 1 pound sterling = 40 Swiss francs, the
exchange rate between dollar and franc will be:
A.1 franc = $.10
B.1 franc = $.20
C.$1 = 80 francs
D.$1 = 20 francs
2) The principal concept behind comparative advantage is that a nation should:
A.Maximize its volume of trade with other nations
B.Use tariffs and quotas to protect the production of vital products for the nation
C.Concentrate production on those products for which it has the lowest domestic
opportunity cost
D.Strive to be self-sufficient in the production of essential goods and services
3) The equilibrium interest rate equates:
A.nominal and real interest rates.
B.the quantities demanded and supplied of loanable funds.
C.consumption and saving.
D.taxes and government spending.
4) The basic type of intervention by central banks under the managed floating exchange
rate system is to:
A.Readjust the peg for exchange rates
B.Buy and sell currencies to influence supply and demand for foreign exchange
C.Renegotiate the rate at which foreign currencies can be converted into gold
D.Make pronouncements but then do nothing and let the market set the exchange rate
5) Assume that a monopolist faces a linear demand curve. If the firm is operating at an
output level where marginal revenue is positive, the firm:
A.Has maximized total revenues
B.Could raise revenues by raising prices
C.Can always increase profits by lowering its price
D.Is operating on the elastic portion of its demand curve
6) For a purely competitive firm, total revenue:
A.is price times quantity sold.
B.increases by a constant absolute amount as output expands.
C.graphs as a straight upsloping line from the origin.
D.has all of these characteristics.
7) Product innovation would be successful only if it makes the product's:
A.Marginal utility increase
B.Price decrease
C.Marginal-utility-to-price ratio increase
D.Marginal-utility-to-price ratio decrease
8) The supply curve for loanable funds is upward-sloping because:
A.Lenders are more willing to lend at lower, rather than higher, interest rates
B.Lenders are more willing to lend at higher, rather than lower, interest rates
C.Borrowers are more willing to borrow at lower, rather than higher, interest rates
D.Borrowers are more willing to borrow at higher, rather than lower, interest rates
9) A monopolistic firm has a sales schedule such that it can sell 10 prefabricated
garages per week at $10,000 each, but if it restricts its output to 9 per week it can sell
these at $11,000 each. The marginal revenue of the tenth unit of sales per week is:
A.-$1,000.
B.$9,000.
C.$10,000.
D.$1,000.
10) Answer the question on the basis of the following table, which indicates the dollar
price of libras, the currency used in the hypothetical nation of Libra. Assume that a
system of freely floating exchange rates is in place.
Refer to the table. The exchange rate is:
A.4 libras for one dollar.
B.0.25 libra for one dollar.
C.0.40 libra for one dollar.
D.3 libras for one dollar.
11) The nominal annual wage increases from $20,000 to $21,000 while the price level
increases by 7 percent. In this case, the percentage change in the real annual wage is
about:
A.-1 percent
B.-2 percent
C.3 percent
D.5 percent
12) The market shares of firms in three different industries are listed in the table below.
Use this information to calculate the Herfindahl index for each industry.
(a)Which industry is has the greatest market power? The least?
(b)Based on your findings, is the number of firms in the industry a good predictor of the
competitiveness of an industry? Why or why not?
13) Which of the following arguments for trade protection is based on the premise that a
nation should have a wide enough range of domestic industries to be self-sufficient if
necessary?
A.The increased domestic employment argument.
B.The cheap foreign labor argument.
C.The diversification-for-stability argument.
D.The infant industry argument.
14) Suppose an economist says that "other things equal, the lower the price of bananas,
the greater the amount of bananas purchased." This statement indicates that:
A.the quantity of bananas purchased determines the price of bananas.
B.all factors other than the price of bananas (for example, consumer tastes and incomes)
are assumed to be constant.
C.economists can conduct controlled laboratory experiments.
D.one cannot generalize about the relationship between the price of bananas and the
quantity purchased.
15)
Refer to the table. The outcomes of the three possible sets of paired-choice majority
votes illustrate the:
A.paradox of voting.
B.inefficiency of logrolling.
C.principal-agent problem.
D.the benefits of majority rule.
16) Which of the following is not a barrier to entry?
A.Patents.
B.X-inefficiency.
C.Economies of scale.
D.Ownership of essential resources.
17) The table below shows the quantity of gold bars (Qb) in thousands, the extraction
cost for each thousand bars (in millions of dollars), and the user cost of each thousand
bars (in millions of dollars) facing the OZ Mining Company this year.
Refer to the data. If the price of a bar of gold is $30,000 this year, how many bars (in
thousands) should OZ extract and sell?
A.2
B.3
C.4
D.5
18)
Refer to the diagram. Economies of scale:
A.are evident over the entire range of output.
B.develop over the 0Q1 range of output.
C.begin at output Q3
D.occur only over the Q1Q3 range of output.
19) Allocative efficiency occurs whenever:
A.consumer surplus is maximized.
B.it is impossible to produce a net benefit for society by changing the combination of
goods and services produced.
C.firms have maximized their profits.
D.it is impossible to make someone in society better off without making someone else
worse off.
20) Based on the determinants of elasticity as discussed in the text, compare the price
elasticity for each set of goods: (a) soda pop and Pepsi; (b) tooth brushes and cookies;
(c) rent today and rent in the future; (d) an oven and diamond bracelet.
