1) When people look at consumption options in isolation, such as when considering to
buy an over-priced warranty to go with the purchase of a new high-end refrigerator, and
focusing on the value of the refrigerator in isolation (not relative to the large picture of
their total income stream), prospect theory calls this:
A.Framing bias
B.Anchoring
C.Mental accounting
D.Confirmation bias
2) Zippy’s and Tony’s are rival pizza restaurants in a small town (together they form a
local duopoly). Zippy’s management determines that if it increases its advertising
expenditures, it will increase profits regardless of whether Tony’s increases its
advertising budget. Based on this information, we can conclude that:
A.this is a one-time game.
B.Zippy’s has a dominant strategy in this advertising game.
C.this advertising game will reach a Nash equilibrium.
D.Zippy’s has first-mover advantages in this advertising game.
3) In constructing a demand curve for product X:
A.consumer preferences are allowed to vary.
B.the prices of other goods are assumed constant.
C.money incomes are allowed to vary.
D.the supply curve of product X is assumed constant.
4) Brazil, Russia, and Thailand are referred to as:
A.Industrially advanced countries
B.Middle-income developing countries
C.Low-income developing countries
D.Command economies
5) The world’s population increased so rapidly from 1800 to the present day because of
higher:
A.Birthrates and lower standards of living
B.Standards of living and higher birthrates
C.Standards of living and lower death rates
D.Death rates and higher standards of living
6) Suppose in some economy there are 100 million workers; 10 million of those
workers work in retail trade, and 1 million of the retail workers belong to unions. Total
union membership in this economy is 40 million. The rate of unionization in retail trade
is:
A.1 percent.
B.10 percent.
C.40 percent.
D.100 percent.
7) In the short run, which of the following statements is correct?
A.The marginal cost curve intersects the average variable and average fixed cost curves
at their minimum points.
B.Average variable cost declines continuously as total output is expanded.
C.Total cost will exceed variable cost.
D.If the inputs of all resources are increased by equal amounts, total output will expand
by diminishing amounts.
8) Which of the following statements is not true?
A.Some public goods are paid for by private philanthropy.
B.Private provision of public goods is usually unprofitable.
C.The free-rider problem results from the characteristics of nonrivalry and
nonexcludability.
D.Public goods are only provided by government.
9) Productivity measures (such as output per worker-hour) and wage rates adjusted for
inflation in the United States are:
A.Inversely related
B.Unrelated
C.Directly, but not closely, related
D.Directly and closely related
10) The rapid spread of ATMs has:
A.resulted from changes in banking laws.
B.increased the demand for bank tellers.
C.reduced the demand for bank tellers.
D.increased the hourly wage paid to bank tellers.
11) The demand schedule or curve confronted by the individual, purely competitive
firm is:
A.relatively elastic, that is, the elasticity coefficient is greater than unity.
B.perfectly elastic.
C.relatively inelastic, that is, the elasticity coefficient is less than unity.
D.perfectly inelastic.
12) A production system where various workers concentrate on different specialized
tasks to contribute towards a whole product is referred to as:
A.A coincidence of wants
B.Roundabout production
C.Freedom of enterprise
D.Division of labor
13) If an oligopolist is faced with a marginal revenue curve that has a gap in it, we may
assume that:
A.it is colluding with its rivals to maximize joint profits.
B.its demand curve is kinked.
C.it is selling a standardized product.
D.it is selling a differentiated product.
14) World commodity prices over the past 150 years have:
A.steadily decreased in both the short run and long run.
B.decreased in the long run despite occasional short-run increases.
C.remained constant in the long run despite occasional short-run fluctuations.
D.steadily increased in both the short run and long run.
15) One key is difference between government activities and private transactions is that:
A.Government can enforce involuntary transactions, whereas private transactions are
mostly voluntary
B.Government can only produce services, whereas private producers can produce both
goods and services
C.Government does not run any production operations, whereas private firms have the
main purpose of running production operations
D.Government does not earn revenues from its activities, whereas private firms aim to
earn revenues and profits
16) Assume in a competitive market that price is initially above the equilibrium level.
We can predict that price will:
A.decrease, quantity demanded will decrease, and quantity supplied will increase.
B.decrease and quantity demanded and quantity supplied will both decrease.
C.decrease, quantity demanded will increase, and quantity supplied will decrease.
D.increase, quantity demanded will decrease, and quantity supplied will increase.
17) Defensive medicine:
A.solves the moral hazard problem.
B.increases the demand and costs for health care.
C.solves the principal-agent problem.
D.is the same as preventive medicine.