With the resources available, you can make the combinations of Ums and Umies
(trinkets from a place called Bandarban) shown in the table. The opportunity cost of
producing 60 Umies instead of 30 Umies is:
A. 10 Ums.
B. 20 Ums.
C. 30 Ums.
D. 40 Ums.
Answer:
Conspicuous consumption refers to the consumption of goods and services:
A. not for one’s direct pleasure but simply to show off to others.
B. not to show off to others but for one’s direct pleasure.
C. that do not provide any kind of satisfaction to the consumer.
D. that generally provide more satisfaction to the consumer than any other kind of
consumption.
Answer:
If your latest test grade and your average test grade on previous exams are equal, your
average test grade will:
A. rise.
B. remain constant.
C. fall.
D. be good enough to pass.
Answer:
Refer to the graph shown. The output range in region b is associated with:
A. diminishing marginal productivity.
B. constant returns to scale.
C. economies of scale.
D. diseconomies of scale.
Answer:
Economists are trained to be as:
A. subjective as they can be.
B. objective as they can be.
C. deconstructionist as they can be.
D. opinionated as they can be.
Answer:
Refer to the graph shown. If the monopolist produces at the output level at which price
equals marginal cost, it will:
A. maximize profits.
B. earn zero profits.
C. earn positive profits but not maximum profits.
D. incur a loss.
Answer:
If the marginal revenue of the next widget a firm produces is $50 and its marginal cost
is $35, a firm should:
A. reconsider past production decisions.
B. decrease production.
C. increase production.
D. hold production constant.
Answer:
There is only one firm in the market. The economist analyzing that market has said she
would expect the price to equal the firm’s average total costs.
A. She must be analyzing this market using a contestable market model.
B. She must be analyzing this market using a game theory model.
C. She must be analyzing this market using a cartel model.
D. She must not be an economist, because that answer is clearly wrong.
Answer:
Suppose Jack purchases four rolls of brown paper for which he receives 100 units of
total utility and two quarts of vinegar for which he receives 50 units of total utility.
Assuming Jack maximizes utility, if the price of brown paper is $2 a roll, the cost of
two quarts of vinegar must be:
A. $1 a quart.
B. $2 a quart.
C. $0.50 a quart.
D. It is impossible to tell.
Answer:
Which of the following occur in the real world?
A. Neither market failures nor government failures
B. Government failures but not market failures
C. Market failures but not government failures
D. Both market failures and government failures
Answer:
Refer to the table above. Using the four-firm concentration ratio, the upholstered
furniture industry is best categorized as:
A. perfectly competitive.
B. a pure monopoly.
C. monopolistically competitive.
D. oligopolistic.
Answer:
Refer to the graph shown. If hamburger dinners are produced by a pure monopoly firm
that maximizes profit, the social cost of monopoly will be represented by the area:
A. BFC.
B. GFHJ.
C. ABFG.
D. ABCG.
Answer:
Refer to the graph above. If labor supply shifts from S1 to S2, the firm will:
A. reduce employment from q0 to q1 to maximize profit where MRP = W.
B. reduce employment from q1 to q2 to maximize profit where MRP = W.
C. raise employment from q1 to q0 to maximize profit where MRP = W.
D. raise employment from q2 to q1 to maximize profit where MRP = W.
Answer:
The underclass in the United States has expanded over the last several decades as a
fraction of the overall population partly because:
A. there are more people in the United States.
B. there has been a substantial movement of blacks into the middle class.
C. there has been a substantial amount of well-educated immigrants from Southeast
Asia.
D. there has been a substantial amount of illegal immigration.
Answer:
You’re deciding whether to install a $400 moonroof and a $200 security system in your
car. Suppose the marginal benefit from the moonroof is $350 and the marginal benefit
from the security system is $300. The economic decision rule dictates that you should:
A. purchase only the moonroof because that will provide you with the greatest marginal
benefit.
B. purchase only the security system because its marginal benefit exceeds its marginal
cost.
C. purchase both options because the combined cost of both is less than the combined
benefit.
D. not purchase either because the benefits of each do not exceed the costs.
Answer:
The Medicaid program in the United States:
A. is not available to the poor.
B. pays the medical expenses of the poor.
C. pays the medical expenses of the elderly.
D. is financed by the federal government alone.
Answer:
The theory that quantity supplied and price are positively related, other things constant,
is referred to as the law of:
A. opportunity cost.
B. profit maximization.
C. supply.
D. demand.
Answer:
Suppose that the table shown shows the demand and supply schedules for pork bellies.
Based on the table, the equilibrium price of pork bellies is:
A. $0.10/lb.
B. $0.25/lb.
C. $0.50/lb.
D. $0.75/lb.
Answer:
On average, women receive ____________ of the pay that men receive.
A. 100 percent
B. between 30 and 40 percent
C. between 50 and 60 percent
D. between 70 and 90 percent
Answer:
“The distribution of income should be left to the market” is an example of:
A. positive economics.
B. normative economics.
C. the art of economics.
D. negative economics.
Answer:
Which two systems require the least amount of government intervention?
A. Mercantilism and capitalism
B. Feudalism and socialism
C. Capitalism and feudalism
D. Mercantilism and socialism
Answer:
The following table describes utility for consuming cans of soda. Fill in the blank
spaces and answer the following question: At what point does the law of diminishing
marginal utility set in?
A. Between three and four cans
B. Between four and five cans
C. Marginal utility diminishes everywhere.
D. Marginal utility never diminishes.
Answer:
The more the current price exceeds the equilibrium price, the:
A. greater the resulting shortage will be.
B. smaller the resulting shortage will be.
C. greater the resulting surplus will be.
D. smaller the resulting surplus will be.
Answer:
Refer to the graphs above. The maximum profits that a lazy monopolist whose average
total costs are given by the ATC (X-inefficient) curve but who still produces the
profit-maximizing quantity might earn is best shown by the area:
A. A+ B in graph (1).
B. A in graph (1).
C. C + D in graph (2).
D. D in graph (2).
Answer:
Economists generally oppose direct regulation because:
A. it is unlikely to achieve the desired end as efficiently as possible.
B. it assumes that people behave rationally.
C. it is generally unfair.
D. it does not assume that people behave rationally.
Answer:
The DeBeers Company is a profit-maximizing monopolist that exercises monopoly
power in the distribution of diamonds. If the company earns positive economic profits
this year, the price of diamonds will:
A. be equal to the marginal cost of diamonds.
B. be equal to the average total cost of diamonds.
C. exceed the marginal cost of diamonds but be equal to the average total cost of
diamonds.
D. exceed both the marginal cost and the average total cost of diamonds.
Answer:
The following table shows four firms, the amount each pollutes, the marginal cost for
each firm to clean up pollution, and the total cost to each firm of eliminating all
pollution.
The total discharge of these four companies is 300 tons. Assume there is no one else
who pollutes.
Refer to the table shown. Assume that these firms want to maximize profits. If the
government wishes to cut discharge by 50 percent, it could do so by establishing an
effluent fee of:
A. $3.00.
B. $4.50.
C. $5.50.
D. $10.00.
Answer:
Across the United States, fire departments are fighting with private companies over the
right to respond to medical emergencies. Each side will fight harder the:
A. more inelastic the demand.
B. more elastic the demand.
C. less inelastic the demand.
D. more elastic the supply.
Answer:
Refer to the table above. The marginal physical product of the sixth worker is _____,
and the average product of six workers is _____.
A. 15; 6
B. 6; 15
C. 13; 2
D. 2; 13
Answer:
Suppose that the table shown shows the demand and supply schedules for pork bellies.
Which of the following statements is true?
A. There would be a surplus of pork bellies if the price were $0.50 per pound.
B. There would be a shortage of pork bellies if the price were $0.50 per pound.
C. There would be a shortage of pork bellies if the price were $0.25 per pound.
D. There would be a surplus of pork bellies if the price were $0.25 per pound.
Answer:
The formal game theory model assumes that:
A. markets are contestable when no barriers to entry exist.
B. the dominant firm in the industry will set product price and other firms will follow.
C. each player tries to anticipate the reaction of his or her rivals when making a
decision.
D. each player ignores the possible reaction of his or her rivals when making a decision.
Answer:
Refer to the graph shown. The price and quantity that would prevail if all social costs
and benefits were taken into account is:
A. $5 and 2,600 units.
B. $3.50 and 2,000 units.
C. $3.95 and 6,800 units.
D. $1.80 and 2,000 units.
Answer:
Refer to the graph shown. If a firm expected to produce 900 units when it built its plant
but now desires to reduce its output to 600 units in the short run, it will use the plant
size represented by:
A. SATC1.
B. SATC2.
C. SATC3.
D. SATC4.
Answer:
Season tickets to the Miami Heat games are sold out at $30 a game and some people
who wanted to get tickets couldn’t buy them. As the season progresses, it is clear that
the Heat will make it to the playoffs. What is the effect on resale price of tickets to
Miami Heat games, assuming resale is legal?
A. Resale price will remain at $30 a game.
B. Resale price will rise and quantity supplied will rise.
C. Resale price will rise and supply will rise.
D. Resale price will decline as supply rises.
Answer: