1) Some low-income workers are not covered by Medicaid because of the income that
they are earning from their jobs.
2)
In 2011, China overtook Mexico to become the number one country of origin of U.S. legal
immigrants.
3) When entrepreneurs use their own personal savings to finance the R&D for their new
venture, the marginal cost of financing is zero.
4) An employer (biased against African Americans) whose discrimination coefficient is
$5 will hire only whites if the actual African-American-white wage gap is $7.
5) One of the worst systems for encouraging conservation of fisheries is the
combination of totally allowable catch (TAC) with individual transferable quota (ITQ).
6) If the expected rates of return on investments increase, the loanable funds theory
predicts that the equilibrium interest rate would decrease.
7) An economic model is an ideal or utopian type of economy that society should strive
to obtain through economic policy.
8) Several countries in the world today peg their currencies to the U.S. dollar, causing
those currencies’ values to fluctuate as the U.S. dollar fluctuates.
9) The law of diminishing returns explains diseconomies of scale.
10) The transformative effects of competition that foster the development of new
products or new production methods benefit everyone in society.
11) Energy demand is relatively stable over the course of a day.
12) When the special-interest effect is the major reason for the passage of a government
policy or project, then economic efficiency will always improve.
13) Marginal revenue product (MRP) is the change in total product (total output)
associated with hiring an additional unit of labor.
14) In the taste-for-discrimination model, an increase in the prejudice of employers will
decrease the demand for African-American workers, lower the African-American wage
rate and the ratio of African-American to white wages.
15) Offshoring benefits some firms by reducing their producing costs and maintaining
their global competitiveness.
16) The so-called “rule of reason”, based on the 1920 U.S. Steel case, stipulates that a
merger of two firms in an industry is:
A.Illegal if the firms are large
B.Illegal because it increases the monopoly power of the resulting firm
C.Legal if there is no resulting unreasonable restraint of trade
D.Legal because the firm will be subject to regulatory control
17) The wages and salaries that people earn differ partly because of differences in:
A.Wealth
B.Ability
C.Social Security payments
D.In-kind transfer payments
18) One major consequence of the availability heuristic is that:
A.People may spend more resources to insure themselves against rare events, but leave
themselves uninsured against more common events
B.Someone could persist in pursuing a failed policy despite overwhelming evidence of
the failure
C.Bad decisions can be made because people will act without pausing to see whether
their intuition is correct or not
D.Some people may wrongly believe in their forecasting ability to predict future
outcomes of risky investments
19) The legislation that prohibited “every contract or conspiracy, in restraint of trade
and commerce ” is the:
A.Federal Trade Commission Act
B.Clayton Act
C.Celler-Kefauver Act
D.Sherman Act
20) An increase in the productivity of labor over time will:
A.Decrease the value of time
B.Increase the value of time
C.Decrease the demand for labor-saving devices
D.Decrease the demand for consumer goods and services
21) In recent years, the strictest application of antitrust laws has been for:
A.Breaking up firms with monopoly power
B.Prosecuting firms for price fixing activity
C.Blocking vertical mergers
D.Limiting foreign competition
22) In the real world, specialization is rarely complete because:
A.nations normally experience increasing opportunity costs in producing more of the
product in which they are specializing.
B.production possibilities curves are straight lines rather than curves bowed outward as
viewed from the origin.
C.one nation’s imports are necessarily another nation’s exports.
D.international law prohibits monopolies.
23)
Refer to the diagram for a purely competitive producer. If product price is P3:
A.the firm will maximize profit at point d.
B.the firm will earn an economic profit.
C.economic profits will be zero.
D.new firms will enter this industry.
24) Product innovation contributes to technological advance primarily by:
A.Decreasing allocative efficiency
B.Increasing allocative efficiency
C.Decreasing productive efficiency
D.Increasing productive efficiency
25) Mrs. Arnold is spending all her money income by buying bottles of soda and bags
of pretzels in such amounts that the marginal utility of the last bottle is 60 utils and the
marginal utility of the last bag is 30 utils. The prices of soda and pretzels are $.60 per
bottle and $.40 per bag respectively. It can be concluded that:
A.the two commodities are substitute goods.
B.Mrs. Arnold should spend more on pretzels and less on soda.
C.Mrs. Arnold should spend more on soda and less on pretzels.
D.Mrs. Arnold is buying soda and pretzels in the utility-maximizing amounts.
26)
Refer to the above graphs for a competitive market in the short run. What will happen
in the long run to industry supply and the equilibrium price P of the product?
A.S will decrease, P will decrease
B.S will increase, P will decrease
C.S will decrease, P will increase
D.S will increase, P will increase
27) Suppose that in a series of paired-choice votes a new park is preferred to a new
recreation center and a new recreation center is preferred to street widening. Also
suppose that street widening is preferred to a new park. This set of votes is an example
of the:
A.principal-agent problem.
B.benefits-received principle.
C.median-voter model.
D.paradox of voting.
28) Approximately what percentage of American consumers’ total spending is on food?
A.Less than 15 percent
B.20-25 percent
C.About 30 percent
D.More than 40 percent
29) Answer the question on the basis of the following production possibilities tables for
two countries, Latalia and Trombonia:
Refer to the tables. Which of the following would be feasible terms for trade between
Latalia and Trombonia?
A.1 ton of beans for 1 ton of pork
B.2 tons of beans for 1 ton of pork
C.6 tons of beans for 1 ton of pork
D.4 tons of beans for 1 ton of pork
30) Determine whether a behavioral economist or a neoclassical economist would be
more likely to agree with the following statements:
(a)People are often selfless and generous.
(b)People avoid making difficult decisions when possible.
(c)People are rational and adjust choices to make optimal decisions.
(d)People treat others well if doing so will further themselves.
(e)Peoples preferences are influenced by framing effects.
(f)People put insufficient weight on future outcomes.
(g)People have no trouble resisting temptation.
31) Suppose an oligopolistic producer assumes its rivals will ignore a price increase but
match a price cut. In this case the firm perceives its:
A.demand curve as being of unit elasticity throughout.
B.supply curve as kinked, being steeper below the going price than above.
C.demand curve as kinked, being steeper below the going price than above.
D.demand curve as kinked, being steeper above the going price than below.
32) A purely competitive firm will be willing to produce even at a loss in the short run,
as long as:
A.The loss is smaller than its total variable costs
B.The loss is smaller than its marginal costs
C.The loss is smaller than its total fixed costs
D.Price exceeds marginal costs
33) A nation’s import demand curve for a specific product:
A.is upsloping.
B.shows the amount of the product it will import at prices below its domestic price.
C.lies above its export supply curve for the product.
D.depends on domestic demand for the product, but not on domestic supply.
34) In the graph below, if the government imposes an excise tax as shown, what is the
tax burden to the seller? And to the buyer? Explain.
35) Discuss a situation in which a government loan guarantee may be socially
beneficial.
36) Compare the real cost of commodity resources today (circa 2009) with their cost in
the 1845-1850 period. What explains the change?
37) How is price discrimination treated under antitrust laws?
38) What is the difference between the short run and the long run?
39) Assuming the basic purpose is to raise additional revenue, should government levy
an excise tax on cigarettes whose demand is highly inelastic or on a product whose
demand is highly elastic? Are there any other reasons to levy such a tax?
40) Suppose that by devoting all of its resources to the production of rice (R), Japan can
produce 40 units. By devoting all of its resources to corn (C), it can produce 20 units.
Comparable figures for Mexico are 15 units of rice (R) and 15 units of corn (C).
Explain why each nation will specialize in which product. What are the limits to the
terms of trade?
41) How can innovation foster creative destruction? What are the objections to that
idea?
42) Why is it important to distinguish between explicit and implicit costs?
43) What are some of the sources of cost savings for business start-ups in the U.S.
economy such as Google, Intel, Starbucks, and Microsoft?