1) A game in which one firm’s gain must equal the other firm’s loss is called a:
A.Positive-sum game
B.Zero-sum game
C.Negative-sum game
D.One-time game
2) A firm decides to make a $10 million expenditure on research and development that
will create a new product. This product is expected to increase the firms revenues by a
total of $12 million in the next year. The firm also estimates that the production cost of
the new product will be $11 million.
(a)What is the expected rate of return on this research and development expenditure?
(b)If the firm has to take out a loan to finance the project, what is the highest interest
rate they will pay and still do the project? Explain.
3) Free products offered by firms:
A.may or may not be free to society but are never free to individuals.
B.may or may not be free to individuals but are never free to society.
C.are produced and distributed at no cost to society.
D.are usually items nobody wants.
4) Suppose that a firm’s legal staff concludes that a new production process that the firm
is developing is patentable. Graphically, this new information would shift the firm’s
expected-rate-of-return curve on R&D to the:
A.right and reduce its optimal amount of R&D.
B.right and increase its optimal amount of R&D.
C.left and increase its optimal amount of R&D.
D.left and reduce its optimal amount of R&D
5) An increase in the price of product A will:
A.increase the marginal utility per dollar spent on A
B.decrease the marginal utility per dollar spent on A
C.not affect the marginal utility per dollar spent on A
D.cause utility-maximizing consumers to buy more of A
6) In what way, if any, does the invisible hand affect government resource allocation?
A.It enhances government efficiency by promoting competition for resources within
government.
B.It does not help resource allocation, as there are no competitive forces within
government that automatically direct resources to their best uses.
C.It rewards government bureaucrats who are most efficient at implementing public
policies.
D.It reduces government efficiency by sending market signals that interfere with
government decision making.
7) Funds lent to start-up firms in return for shares of the profit if the firms succeed are
called:
A.retained earnings.
B.time deposits.
C.venture capital.
D.transfer payments.
8) A product has utility if it:
A.takes more and more resources to produce successive units of it.
B.violates the law of demand.
C.satisfies consumer wants.
D.is useful.
9) Unions often oppose increases in the prices of complementary inputs (for example,
truck drivers may oppose increases in taxes on diesel fuel). They do this because
increases in the prices of complementary inputs might:
A.increase the supply of competing labor through the output effect.
B.increase the supply of competing labor through the substitution effect.
C.decrease the demand for union labor through the output effect.
D.decrease the demand for union labor through the substitution effect.
10) Which of the following is an example of statistical discrimination?
A.An employer hires only white workers even though there are otherwise identical
African-American workers available at lower pay.
B.Women students in college business schools are overrepresented in human resource
management courses and underrepresented in finance courses.
C.A young woman who plans to work for only five to seven years after graduating
college decides that getting an advanced degree “just won’t pay off.”
D.A firm hires a man rather than a woman for a specific job because, on average,
women have higher rates of absenteeism than do men.
11)
Immigration accounts for what percentage of annual population growth in the United
States in recent years?
A.About 10 percent
B.About 20 percent
C.About 33 percent
D.About 50 percent
12) In analyzing a market, the time horizon where technology can change and firms can
offer new products is referred to as the:
A.Short run
B.Very short run
C.Long run
D.Very long run
13) The difference between the maximum price a consumer is willing to pay for a
product and the actual price the consumer pays is called:
A.Utility
B.Consumer Surplus
C.Consumer Demand
D.Market failure
14) Most economists believe that property taxes:
A.Should be eliminated
B.Are progressive
C.Are regressive
D.Should become an important source of revenue for the Federal government
15) Examine the benefits and cons of employee pay in the form of salary and
commission, or incentive pay, in terms of the moral hazard problem.
16) Explain what allocative efficiency is and how it is achieved in pure competition.
17) (Consider This) What are some risk management techniques used by farmers to
reduce the uncertainty in farming?
18) The demand schedules of three individuals (Tom, Dick, and Harry) are shown. If
they are the only three buyers of DVDs, complete the market demand schedule for
DVDs. Graphically, is the market demand for a product the horizontal or vertical sum
of the individual demand schedules?
19) What is the median-voter model and what are two implications from it?