1) All of the following are consequences of a government’s having to deal with a “debt
crisis”, except:
A.Very restricted ability to borrow money
B.Being forced to drastically raise taxes
C.Being forced to make drastic cuts in spending
D.Being forced to make huge increases in government spending
2)
Refer to the graph above which shows the import demand and export supply curves for
two nations that produce a certain product. The import demand curves for the two
nations are represented by lines:
A.5 and 6
B.5 and 7
C.6 and 8
D.7 and 8
3) In a market system, employees and suppliers:
A.are usually shielded from risk, but at the cost of not sharing in the profits of the firm.
B.are usually shielded from risk and share in the profits of the firm.
C.are generally subject to as much risk as firm owners but get to share in the profits.
D.bear as much risk as firm owners but don’t get to share in the profits.
4) Which of the following has been an effect of the U.S. government’s ethanol program?
A.Prices for crops such as soybeans and sorghum have fallen dramatically.
B.Prices for beef, pork, and chicken have risen.
C.Water use has declined as corn is a less water-intensive crop.
D.All of these effects have resulted from the ethanol program.
5) Answer the question based on the table below showing the marginal utility schedules
for product X and product Y for a hypothetical consumer. The price of product X is $4
and the price of product Y is $2. The income of the consumer is $20.
Refer to the above table. If the consumer buys both product X and product Y, how much
will the consumer buy of each in order to maximize utility?
A.4X and 2Y
B.3X and 4Y
C.4X and 3Y
D.5X and 3Y
6) For a new product to be profitable, it must:
A.enable customers to obtain greater total utility from their money income.
B.be less expensive than existing substitute products.
C.have greater marginal utility than existing substitute products.
D.embody process innovation.
7) Demand is said to be inelastic when:
A.An increase in price results in a reduction in total revenue
B.A reduction in price results in an increase in total revenue
C.A reduction in price results in a decrease in total revenue
D.The elasticity coefficient exceeds one
8) In the face of rising costs, some firms reduce the quality of the goods they produce
rather than maintain quality and increase prices. How would behavioral economics
explain this strategy?
A.People have an aversion to losses, and consumers are more likely to feel the loss of a
price increase than a quality reduction.
B.Consumers are more tolerant of diminished quality because diminishing marginal
utility causes people to get rid of goods sooner than in the past.
C.Firms are myopic in their decision making, with little regard for future profitability.
D.The availability heuristic will cause people to buy whatever is offered, regardless of
the quality.
9) A decrease in the quantity of soybeans produced could result from:
A.Elimination of farm subsidies to soybean producers
B.A decrease in the price of another farm crop that could be grown
C.A decrease in the cost of soybean production
D.An increase in consumer incomes
10) The economic inefficiencies of monopolistic competition may be offset by the fact
that:
A.advertising expenditures shift the average cost curve upward.
B.available capacity is fully utilized.
C.resources are optimally allocated to the production of the product.
D.consumers have increased product variety.
11) Answer the question on the basis of the following data for the hypothetical nations
of Alpha and Beta. Qs is domestic quantity supplied and Qd is domestic quantity
demanded.
Refer to the given data. At a world price of $5:
A.Alpha will want to import 50 units of steel.
B.Beta will want to import 60 units of steel.
C.Alpha will want to export 50 units of steel.
D.neither country will want to export steel.
12) If per capita trash generation is constant over time, this implies that:
A.per capita consumption of solids has also been constant.
B.per capita consumption of goods and services has also been constant.
C.total consumption of solids has also been constant.
D.total consumption of goods and services has also been constant.
13) When a firm is on the inelastic segment of its demand curve, it can:
A.increase total revenue by reducing price.
B.decrease total costs by decreasing price.
C.increase profits by increasing price.
D.increase total revenue by more than the increase in total cost by increasing price.
14) Movie producers A, B, and C secretly meet and agree to release their summer
blockbuster films in sequence, rather than at the same time. The U.S. Justice
Department learns of the agreement and files an antitrust suit. The federal government
would most likely file charges under the:
A.Sherman Act, Section 1
B.Sherman Act, Section 2
C.Clayton Act.
D.Federal Trade Commission Act.
15) Adam and Becky both recently started new jobs. Both have determined that they
should save 10 percent of their monthly income toward retirement. Adam’s employer
has no program established for payroll deduction, but he could easily set up automatic
withdrawals to go into a retirement fund. Becky’s employer automatically directs 8
percent of the paycheck into a retirement fund, but the employee can change the
percentage deducted. Behavioral economists would expect:
A.Adam to save more as he would set up a 10 percent automatic withdrawal while
Becky would stay at the default of 8 percent.
B.Becky would save more, as both would tend to stay at the defaults provided by their
employers.
C.them both to save 10 percent eventually, as both had predetermined that that was the
optimal amount to save.
D.Becky to feel a greater sense of loss by seeing funds automatically withheld each
month.
16) Through the Freedom to Farm Act of 1996, farmers were:
A.Guaranteed declining annual “transition payments” through 2002
B.Given higher price supports for a larger number of agricultural products
C.Protected by tariffs on imported agricultural products after 2002
D.Allowed to consolidate smaller farms with larger farms to make farming more
efficient
17)
Refer to the diagram. The concave shape of each production possibilities curve
indicates that:
A.resources are perfectly substitutable.
B.wants are virtually unlimited.
C.prices are constant.
D.resources are not equally suited for alternative uses.
18) The supply of product X is inelastic (but not perfectly inelastic) if the price of X
rises by:
A.5 percent and quantity supplied rises by 7 percent.
B.8 percent and quantity supplied rises by 8 percent.
C.10 percent and quantity supplied remains the same.
D.7 percent and quantity supplied rises by 5 percent.
19) Which of the following nations had the fastest growing area of forested land in the
period 2005-2010?
A.Brazil
B.United States
C.Nigeria
D.Iceland
20) If the long-run supply curve is upward-sloping, it indicates that resource prices fall
when:
A.Production in the industry decreases in the long run
B.Production in the industry increases in the long run
C.New firms enter the industry
D.Short-run profits in the industry are positive