1) Environmentalists generally support price supports because these subsidies motivate
additional farm production.
2) It is impossible for a nation to have a comparative advantage in producing
everything.
3) A government tax per unit of output reduces supply.
4) Most developed countries have fertility rates less than 2.1.
5) Even if individual voters have clear preferences, and they stay consistent in their
preferences, we could still end up with the paradox of voting.
6) The guiding function of prices tends to keep resources flowing toward their most
highly valued uses.
7) Illegal immigration has little effect on the average level of wages in the United
States.
8) Competitive markets produce equilibrium prices and quantities that maximize the
sum of consumer and producer surpluses.
9) If the United States wants to regain ownership of domestic assets sold to foreigners,
it will have to:
A.Increase domestic consumption
B.Increase its national debt
C.Export more than it imports
D.Import more than it exports
10) If Tyson Corporation, a firm that raises and processes chickens, combines with
Kentucky Fried Chicken, the resulting merger would be an example of a:
A.Horizontal merger
B.Geographic merger
C.Vertical merger
D.Conglomerate merger
11)
Refer to the diagrams. The demand for Firm B’s product is:
A.perfectly elastic over all ranges of output.
B.perfectly inelastic over all ranges of output.
C.elastic for prices above $4 and inelastic for prices below $4.
D.inelastic for prices above $4 and elastic for prices below $4.
12) The theory of consumer behavior assumes that:
A.consumers behave rationally, attempting to maximize their satisfaction.
B.consumers have unlimited money incomes.
C.consumers do not know how much marginal utility they obtain from successive units
of various products.
D.marginal utility is constant.
13) Let us suppose Harry’s, a local supplier of chili and pizza, has the following revenue
and cost structure:
A.Harry’s should stay open in the long run
B.Harry’s should shut down in the short run
C.Harry’s should stay open in the short run
D.Harry’s should shut down in the short run but reopen in the long run
14) The production possibilities curve illustrates the basic principle that:
A.the production of more of any one good will in time require smaller and smaller
sacrifices of other goods.
B.an economy will automatically obtain full employment of its resources.
C.if all the resources of an economy are in use, more of one good can be produced only
if less of another good is produced.
D.an economy’s capacity to produce increases in proportion to its population size.
15)
Refer to the diagram where the numerical data show profits in millions of dollars. Beta’s
profits are shown in the northeast corner and Alpha’s profits in the southwest corner of
each cell. With independent pricing, the outcome of this duopoly game will gravitate to
cell:
A.A
B.B
C.C
D.D
16)
Refer to the diagram above. If box E represents government, box C businesses, and box
A households, then flows (11) and (12) would represent:
A.Goods and services
B.Government expenditures
C.Resources
D.Net taxes
17) Suppose that a fully employed economy produces only two goods, hamburgers and
flat-panel TVs. If the economy is currently producing more than the optimal quantity of
hamburgers, then to attain the optimal allocation of resources it should:
A.produce more hamburgers and fewer TVs.
B.produce more TVs and fewer hamburgers.
C.produce more of both goods.
D.produce fewer of both goods.
18) A monopolistically competitive firm’s marginal revenue curve:
A.is downsloping and coincides with the demand curve.
B.coincides with the demand curve and is parallel to the horizontal axis.
C.is downsloping and lies below the demand curve.
D.does not exist because the firm is a “price maker.”
19) (Consider This) Examine the goal of Electronic Medical Records. What was the
actual outcome?
20) What is meant by the term compound interest? Give an example based on $1000
and a 10 percent interest rate over a two-year period.
21) What domestic macroeconomic adjustments would be necessary to maintain fixed
exchange rates when there are persistent balance-of-payments deficits? What are the
problems with these adjustments?
22) A pure monopolist determines that at the current level of output the marginal cost of
production is $2.00, average variable costs are $2.75, and average total costs are $2.95.
The marginal revenue is $2.75. What would you recommend that the monopolist do to
maximize profits?
23) Use the case of electrical power generation to explain why the energy resource
inputs that are used are sometimes low-cost and other times high-cost.
24) How does collective bargaining work? What are the major features of the process?
25) Why does pure competition provide consumers with the largest consumer and
producer surpluses?
26) Explain why the long-run product price for a perfectly competitive firm will equal
its minimum average total cost.