1) The larger the diameter of a natural gas pipeline, the lower is the average total cost of
transmitting 1,000 cubic feet of gas 1,000 miles. This is an example of one reason for:
A.Economies of scale
B.Diminishing returns to scale
C.Diminishing marginal returns
D.Increasing marginal cost
2) Assume the price of a product sold by a purely competitive firm is $5. Given the data
in the accompanying table, at what output level is total profit highest in the short run?
A.20
B.30
C.40
D.50
3) When the government provides loan guarantees and in effect ‘socializes losses and
privatizes gains” of a project or firm, it can lead to a:
A.Moral hazard problem among investors
B.Regulatory capture problem
C.Principal-agent problem within the firm
D.Limited and bundled choice problem
4) In the diagrams below, the subscript “1” refers to the initial position of the curve,
while the subscript “2” refers to the final position after the curve shifts.
Which diagram above illustrates the effect on the natural-gas market, with the
widespread use of “fracking” or hydraulic fracturing by gas-drilling companies?
A.A
B.B
C.C
D.D
5) In the following question you are asked to determine, other things equal, the effects
of a given change in a determinant of demand or supply for product X upon (1) the
demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the
equilibrium quantity (Q) of X.
Refer to the given information. A decrease in the number of consumers of product X
will:
A.decrease S, decrease P, and decrease Q.
B.increase D, increase P, and increase Q.
C.decrease D, decrease P, and decrease Q.
D.decrease D, decrease P, and increase Q.
6) In the long run, a representative firm in a monopolistically competitive industry will
end up:
A.Having an elasticity of demand that will be less than it was in the short run
B.Having a larger number of competitors than it will in the short run
C.Producing a level of output at which marginal cost and price are equal
D.Earning a normal profit, but not an economic profit
7)
Refer to the table representing Kara’s bank account. Assuming that $2,000 was
deposited into her account at the beginning of year 1, and no further deposits or
withdrawals were made, the value for cell D:
A.is $662.
B.is $242.
C.is $420.
D.cannot be determined.
8) Which of the following includes only examples of industrially advanced countries
(IACs)?
A.The United States, Canada, and Mexico.
B.Pakistan, India, and China.
C.Japan, South Korea, and China.
D.Germany, Italy, and France.
9) The first successful commercial introduction of a new product is called:
A.Innovation
B.Research
C.Invention
D.Diffusion
10) Suppose that a particular industry has a four-firm concentration ratio of 85 and a
Herfindahl index of 3,000. Most likely, this industry would achieve:
A.both productive efficiency and allocative efficiency.
B.allocative efficiency but not productive efficiency.
C.neither productive efficiency nor allocative efficiency.
D.productive efficiency but not allocative efficiency.
11) Because there are so many sources of carbon dioxide, making monitoring difficult
and costly, many economists:
A.prefer a carbon tax to cap-and-trade for reducing carbon dioxide emissions.
B.prefer cap-and-trade to a carbon tax for reducing carbon dioxide emissions.
C.believe that cap-and-trade and a carbon tax are both costly but should be
implemented to reduce carbon dioxide emissions.
D.believe that neither cap-and-trade nor carbon taxes can effectively reduce carbon
dioxide emissions.
12) A factor that limits the amount of saving in developing countries is the fact that:
A.The banking system does not encourage saving
B.There is too much foreign aid so savings is not needed
C.The level of aggregate domestic output is low
D.The government controls financial institutions and makes it difficult for people to
save
13) Which of the following will shift the production possibilities curve to the right?
A.An increase in the unemployment rate from 6 to 8 percent.
B.A decline in the efficiency with which the present labor force is allocated.
C.A decrease in the unemployment rate from 8 to 6 percent.
D.A technological advance that allows farmers to produce more output from given
inputs.
14) Excise taxes of the Federal government include the following items, except:
A.Alcoholic beverage tax
B.Tobacco tax
C.General sales tax
D.Gasoline tax
15)
Refer to the above demand graph for a farm product. It suggests that farmers’ revenues
or incomes tend to:
A.Fall when the demand for the farm product increases
B.Fall when the supply of the farm product increases
C.Increase when the supply of the farm product increases
D.Be constant when supply of the farm product changes
16) Extraction costs of a nonrenewable resource include the:
A.cost of removal from the ground only.
B.cost of removal from the ground plus the cost of preparation for sale.
C.cost of removal from the ground, the cost of preparation for sale, and the cost of not
being able to extract and sell the resource in the future.
D.cost of removal from the ground plus replanting costs.