“People are at war with themselves. Part of them says that they want to quit smoking,
but another part says they need a cigarette right now. Or part of them says they want to
be healthy, and another part says they need to satisfy their cravings for fatty food and
sweets.” These statements are suggesting that:
A. people have difficulties with self-control.
B. fairness should be considered in evaluating outcomes.
C. sometimes inalienable rights are more important than people’s desires.
D. needs should be taken seriously, but wants may be frivolous.
Answer:
Suppliers who are kept out of the market generally do not retaliate because:
A. government prevents them from organizing.
B. they aren’t hurt by the restriction.
C. the costs of organizing are higher than those of demanders.
D. the costs of organizing and lobbying exceed the expected gains.
Answer:
The determination of prices and the behavior of individual markets are studied in
__________, whereas topics such as business cycles, unemployment, and inflation are
studied in ___________:
A. macroeconomics, microeconomics.
B. positive analysis, normative analysis.
C. microeconomics, normative analysis.
D. microeconomics, macroeconomics.
Answer:
The following graph shows average fixed costs, average variable costs, average total
costs, and marginal costs of production.
Refer to the graph shown. Marginal cost is minimized when output equals:
A. 6 units.
B. 12 units.
C. 21 units.
D. 25 units.
Answer:
Which program has been very successful in keeping the elderly out of poverty?
A. Temporary Assistance for Needy Families
B. The Department of Housing and Urban Development’s housing programs
C. Supplemental Security Income
D. The Social Security system
Answer:
Inelastic demand creates an incentive for suppliers to:
A. try to get together and limit quantity supplied.
B. try to get together and increase quantity supplied.
C. compete with each other and increase quantity supplied.
D. stop producing altogether.
Answer:
Regulatory trade restrictions:
A. are always justified.
B. are never justified.
C. may be justified depending on the nature of the restriction.
D. are irrelevant since they are seldom used.
Answer:
Informal game theory:
A. relies on deductive logic.
B. shows how the Nash equilibrium is reached.
C. assumes people calculate their optimal strategy.
D. considers how people actually think and behave.
Answer:
Refer to the table shown to answer the question. Between $1.60 and $1.80, demand is:
A. elastic.
B. unit elastic.
C. inelastic.
D. perfectly elastic.
Answer:
The average fixed cost curve is:
A. U-shaped.
B. horizontal.
C. always upward-sloping.
D. always downward-sloping.
Answer:
Transshipments, which are used commonly in international trade, tend to:
A. undermine the effectiveness of an embargo.
B. strengthen the national security argument for trade restrictions.
C. increase the effectiveness of trade restrictions.
D. reduce the volume of world trade.
Answer:
The text mentions 10 sources of U.S. comparative advantage. Which of the following is
not one of them?
A. Wealth from past production
B. The fact that English is the international language of business
C. A substantial policy to limit immigration
D. Extensive natural resources
Answer:
Refer to the table shown. From this table we can conclude that if the two countries trade
with each other, it is most likely that:
A. France exports both goods to Germany.
B. Germany exports both goods to France.
C. France exports wine to Germany and imports electric generators from Germany.
D. France exports electric generators to Germany and imports wine from Germany.
Answer:
A business owner makes 50 items by hand in six hours. She could have earned $10 an
hour working for someone else. If each item sells for $5 and the explicit costs total $14,
accounting profit for 50 items is:
A. $64.
B. $176.
C. $236.
D. $300.
Answer:
A student who has paid nonrefundable tuition of about $45 a lecture estimates the
marginal benefit of each lecture to be $60. What additional information would she need
to make a rational decision to attend class?
A. The tuition for other classes
B. The value of her time that she could spend doing something else
C. The value of the professor’s time
D. None, since she has enough information already
Answer:
As the price of beachfront cottages in Florida was raised from $400,000 to $500,000,
their quantity supplied rose from 2,000 to 2,100. Rounding to the nearest tenth, the
elasticity of supply of beachfront cottages is:
A. 0.4.
B. 0.2.
C. 1.0.
D. 4.6
Answer:
Refer to the table shown. If seven workers are employed, total output equals:
A. 5.
B. 35.
C. 53.
D. 56.
Answer:
The opportunity cost of leisure:
A. increases as wages get higher.
B. decreases as wages get higher.
C. remains the same as wages get higher.
D. has nothing to do with wages.
Answer:
The price of a McDonald’s dinner is $5; the price of a Burger King dinner is $5. The
marginal utility you would get from the next McDonald’s dinner is 15; the marginal
utility you would get from the next Burger King dinner is 20. You should:
A. consume more McDonald’s dinners.
B. consume more Burger King dinners.
C. not consume either Burger King or McDonald’s dinners.
D. realize you cannot make a rational decision.
Answer:
Positive expected profits:
A. discourage people from supplying goods.
B. encourage people to supply goods.
C. have no effect on supply decisions.
D. increase product demand.
Answer:
Refer to the graph shown, which shows the demand and supply for a new vaccine
against the common cold. Once vaccinated, a person cannot catch a cold or give a cold
to someone else. As a result, the marginal social benefit curve will:
A. coincide with the market demand curve.
B. lie strictly below the market supply curve.
C. lie below the market demand curve.
D. lie above the market demand curve.
Answer:
Refer to the graph shown. If Countries X and Y face the production possibility curves A
and B, respectively, Country X has a comparative advantage in the production of:
A. neither agricultural goods nor industrial goods.
B. both agricultural goods and industrial goods.
C. agricultural goods only.
D. industrial goods only.
Answer:
For a monopolistic competitor:
A. P = MR.
B. P > MR.
C. P = MC.
D. MR > MC.
Answer:
Refer to the graph shown, which depicts a perfectly competitive firm. When
maximizing profit, the firm represented will earn per-unit profit roughly equal to:
A. $2.00.
B. $5.
C. $7.50
D. $10.
Answer:
Sometimes price cuts can have an unintended result of consumers waiting for deeper
discounts. What does this waiting suggest about supply and demand?
A. The demand curve slopes the wrong way because price cuts have lead to smaller
sales.
B. If buyers are buying less when price falls, the supply curve must have moved left.
C. If buyers are buying less when price falls, the supply curve must have moved right.
D. Price cuts have changed buyers’ expectations, and the change in expectations has
moved the demand curve left.
Answer:
Refer to the graph below.
The graph indicates that as more eggs are produced, the marginal opportunity cost of:
A. both eggs and rye increases.
B. eggs increases while the marginal opportunity cost of rye remains constant.
C. eggs increases while the marginal opportunity cost of rye decreases.
D. eggs decreases while the marginal opportunity cost of rye remains constant.
Answer:
Policy makers with conservative values usually ask for policy recommendations from:
A. “conservative” economists.
B. “liberal” economists.
C. both “liberal” and “conservative” economists.
D. all economists.
Answer:
In the contestable market model, an oligopoly with no barriers to entry sets a:
A. monopoly price.
B. price that significantly exceeds average total cost.
C. price that is equal to average total cost.
D. collusive price.
Answer:
Which of the following provides the best explanation for diseconomies of scale?
A. the presence of fixed inputs
B. reduced monitoring costs
C. loss of team spirit
D. Indivisible setup costs
Answer:
In election campaigns, presidents often promise more of everything (that is, more guns
and more butter). What would help those elected president fulfill that promise?
A. The economy becomes more efficient.
B. The United States limits imports into the country.
C. Illegal immigration into the United States is severely limited.
D. A minimum wage bill is passed.
Answer:
Refer to the graph shown. At a price of $4.00, what is the quantity supplied by each of
the producers?
A. Charlie: 4, Barry: 5, Ann: 15 CDs per week
B. Charlie: 0, Barry: 4, Ann: 14 CDs per week
C. Charlie: 1, Barry: 5, Ann: 8 CDs per week
D. Charlie: 3, Barry: 6, Ann: 7 CDs per week
Answer:
If P = Q/15 represents marginal cost for a monopolist and market supply for a
competitive industry and market demand is given by Qd = 500 – 10P, the difference
between the monopoly equilibrium and the competitive equilibrium is that a monopolist
would produce:
A. 187.5 units of output at a price of $31.25 each, whereas competitive output would be
300 units at a price of $20.
B. 300 units of output at a price of $20, whereas competitive output would be 187.5
units at a price of $31.25.
C. 250 units of output at a price of $25, whereas competitive output would be 300 units
at a price of $20.
D. 187.5 units of output at a price of $31.25, whereas competitive output would be 250
units at a price of $25.
Answer: