1) The fallacy of composition states that:
A.because economic systems are composed of so many diverse economic units,
economic laws are necessarily inexact.
B.the anticipation of a particular event can affect the composition of that event when it
occurs.
C.what is true for the individual must necessarily be true for the group.
D.because event A precedes event B, A is necessarily the cause of B.
2) The “too big to fail” policy of the Fed, whereby some banks are bailed out if they are
in danger of failing because they are too big and could bring the system down, leads to
which of the following problems?
A.Adverse selection
B.Externalities
C.Moral hazard
D.Public goods
3)
Refer to the above data. If government adopts a price support program that sets the
price at $9, then the total amount that government will pay to farmers of this product is:
A.$300
B.$900
C.$1,800
D.$2,000
4) Assume a single firm in a purely competitive industry has variable costs as indicated
in the following table in column 2 . Complete the table and answer the questions.
(a)At a product price of $52, will this firm produce in the short run? Explain. What will
its profit or loss be?
(b)At a product price of $28, will this firm produce in the short run? Explain. What will
its profit or loss be?
(c)At a product price of $22, will this firm produce in the short run? Explain. What will
its profit or loss be?
(d)Complete the following short-run supply schedule for this firm.
Assume there are 500 identical firms in this industry, that they have identical cost data
as the firm above, and that the industry demand schedule is as follows:
(e)What will the equilibrium price be?
(f)What will the equilibrium output for each firm be?
(g)What will profit or loss be per unit?
(h)What will profit or loss be per firm?
5)
If the diagram were relevant to an individual firm, we could conclude that the firm is:
A.a pure competitor in the hire of labor.
B.a monopsonist in the hire of labor.
C.selling its product in an imperfectly competitive market.
D.selling its product in a purely competitive market.
6) Suppose a firm anticipates that a particular R&D expenditure of $100 million will
result in a new product and thus create a one-time added profit of $108 million a year
later. The firm will:
A.undertake the R&D expenditure if its interest-rate cost of borrowing is 12 percent.
B.undertake the R&D expenditure if its interest-rate cost of borrowing is 10 percent.
C.not undertake the R&D expenditure if its interest-rate cost of borrowing is 9 percent.
D.not undertake the R&D expenditure if its interest-rate cost of borrowing is 7 percent.
7)
Refer to the diagram above, which shows three supply curves for corn. Which of the
following would cause the supply of corn to shift from S1 to S3?
A.A decrease in the cost of equipment used in corn farming
B.An increase in the price of soybeans
C.A decrease in the price of corn
D.An increase in the number of acres of farmland allocated to corn
8) If economic resources are perfectly interchangeable between the two products shown
on a production possibilities graph:
A.The economy will always be at full employment
B.More of one product can be produced without producing less of the other product
C.The production possibilities curve would be a straight line
D.The two products are of equal value to the economy
9) The use of money for exchange and trade:
A.Increases the importance of barter
B.Fosters more specialization in production
C.Reduces consumer sovereignty
D.Raises the need for a coincidence of wants
10) The Food for Peace program:
A.Established price supports of 100 percent of parity
B.Restricted American exports by restricting shipments to specific communist nations
C.Expanded American exports by permitting less-developed countries to buy American
surplus products with their own currencies
D.Provided job training to farmers and farm workers who move to urban areas seeking
employment
11) Answer the question based on the following payoff matrices for a repeated game
involving two firms that are considering introducing new products to the market. The
numbers indicate the profit from following either a strategy to introduce a new product
or a strategy to not introduce a new product.
First game:
Second game:
Refer to the above table. In the first game:
A.Introducing a new product is the dominant strategy for both firms
B.Not introducing a new product is the dominant strategy for both firms
C.Introducing a new product is the dominant strategy for firm A while not introducing a
new product is the dominant strategy for firm B
D.Not introducing a new product is the dominant strategy for firm A while introducing
a new product is the dominant strategy for firm B
12) Which of the following does not illustrate the asymmetric information problem:
A.Ordinary financial investors do not know the motivations of financial advisers
B.Ordinary customers do not know how sanitarily the food is prepared in a restaurant
C.Ordinary stock-buyers do not know what will happen to the stock’s price next week
D.Ordinary car buyers do not know the actual quality of the various cars in the dealer’s
lot
13)
Refer to the diagram. The slope of curve ZZ at point C is approximately:
A.-4.
B.-2.
C.-22/5.
D.+3.