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1) If you know that when a firm produces 10 units of output, total costs are $1,030 and
average fixed costs are $10, then total variable costs are:
A.$104
B.$930
C.$1,040
D.$1,130
2) A fundamental difference between the command system and laissez-faire capitalism
is that, in command systems:
A.the division of output is decided by central planning rather than by individuals
operating freely through markets.
B.all economic decisions are made by the government, whereas there is no government
in laissez-faire capitalism.
C.scarcity does not exist, whereas it does in laissez-faire capitalism.
D.money is not used, whereas it is in laissez-faire capitalism.
3) If a single large employer bargains with an inclusive union, the resulting labor
market model can best be described as:
A.a cartel.
B.countervailing power.
C.a bilateral monopoly.
D.an internal labor market.
4) Which of the following best illustrates the circular flow model in action?
A.Bobbie goes to work and builds cars, and uses the income she receives to buy food at
the grocery store.
B.Evan buys a new couch; the owner of the furniture store uses some of the money
from the sale to pay her supplier, and uses the rest to take her family out to dinner.
C.Boeing experiences a surge in orders for new airplanes, prompting the company to
hire more workers.
D.All of these answers illustrate the workings of the circular flow model.
5)
Refer to the diagram showing the average total cost curve for a purely competitive firm.
At the long-run equilibrium level of output, this firm's total revenue:
A.is $10.
B.is $40.
C.is $400.
D.cannot be determined from the information provided.
6) One cause of income inequality in the United States is:
A.the free public school system.
B.differences in preferences for market work relative to nonmarket activities as well as
differences in preferences for types of work.
C.antidiscrimination laws.
D.a system of taxes and government transfers that redistributes income away from the
lowest earners.
7) We use percent-changes in the formula for estimating the price elasticity of demand
coefficient in order to:
A.Make the coefficient's value become independent of whether price goes up or down
B.Take the midpoints of P and of Q in the computation
C.Eliminate the negative sign of the coefficient
D.Make it irrelevant how we measure price: be it in cents, in dollars, or in thousands of
dollars
8)
Refer to the graph above for the health care market. The marginal cost of health care
would be greater than the marginal benefit if the quantity consumed is:
A.100
B.200
C.300
D.400
9) When the percentage change in price is greater than the resulting percentage change
in quantity demanded:
A.a decrease in price will increase total revenue.
B.demand may be either elastic or inelastic.
C.an increase in price will increase total revenue.
D.demand is elastic.
10) If Countries A and B produce only either rubber bands or paper clips, their
maximum outputs are shown in the production possibilities schedules below:
In country A the opportunity cost of 1 paper clip is:
A.2 rubber bands
B.1 rubber band
C.1/2 rubber band
D.1/4 rubber band
11) Advertising can impede economic efficiency when it:
A.increases entry barriers.
B.reduces brand loyalty.
C.enables firms to achieve substantial economies of scale.
D.increases consumer awareness of substitute products.
12) The food-stamp program is designed to:
A.increase the supply of farm products.
B.decrease the supply of farm products.
C.increase the demand for farm products.
D.decrease the demand for farm products.
13) Compared to coffee, we would expect the cross elasticity of demand for:
A.tea to be negative, but positive for cream.
B.tea to be positive, but negative for cream.
C.both tea and cream to be negative.
D.both tea and cream to be positive.
14) Which of the following statements concerning a pure public good is false?
A.It is impossible to exclude non-taxpayers from the enjoyment of the public good
B.All benefits associated with the production and use of a public good are received by
the government
C.The availability of a public good to one person simultaneously makes it available to
all members of society
D.The private sector does not have an economic incentive to produce a socially optimal
amount of a public good
15) Some nations are increasing the amount of land covered by forests, while others are
experiencing rapid deforestation. According to economists, this is largely because:
A.different nations have different ethical views regarding treatment of the environment.
B.nations with increasing forest cover have poorly enforced or nonexistent property
rights.
C.nations with declining forest cover treat forests as private property or strictly
regulated government property.
D.nations with increasing forest cover treat forests as private property or strictly
regulated government property.
