1) If the supply of product X is perfectly elastic, an increase in the demand for it will
increase:
A.equilibrium quantity but reduce equilibrium price.
B.equilibrium quantity, but equilibrium price will be unchanged.
C.equilibrium price but reduce equilibrium quantity.
D.equilibrium price, but equilibrium quantity will be unchanged.
2) Answer the question on the basis of the following balance of payments data for the
hypothetical nation of Econland. All figures are in billions of dollars.
(1) Goods exports +$220
(2) Goods imports -328
(3) Exports of services +54
(4) Imports of services -55
(5) Net investment income +18
(6) Net transfers -11
(7) Capital account -1
(8) Foreign purchases of Econland assets +124
(9) Econland purchases of foreign assets -21
Refer to the table above. Econland’s balance on the capital and financial accounts is a:
A.Deficit of $110 billion
B.Surplus of $92 billion
C.Surplus of $102 billion
D.Surplus of $103 billion
3)
Refer to the above graph of the supply and demand for agricultural products. Which of
the following best describes the long-run decline of the U.S. agricultural industry?
A.A shift in supply from S1 to S2 and a shift in demand from D2 to D1
B.A shift in supply from S1 to S3 and a shift in demand from D1 to D2
C.A shift in supply from S3 to S1 and a shift in demand from D1 to D3
D.A shift in supply from S1 to S2 and a shift in demand from D3 to D1
4) In the U.S. Steel case, the court ruled that:
A.even though a firm’s behavior might be legal, the mere possession of monopoly
power was in violation of the Sherman Act.
B.only monopolies that unreasonably restrain trade are subject to antitrust action under
the Sherman Act.
C.when made by dominant firms, tying contracts are illegal, per se.
D.the company violated the Clayton Act and therefore should be dissolved into several
competing firms.
5) Economic discrimination puts the economy inside its production possibilities curve
because discrimination:
A.redistributes income from low-paid to high-paid persons.
B.promotes present consumption rather than production of capital goods.
C.arbitrarily blocks women and certain minorities from higher-productivity,
higher-wage jobs and thus keeps the economy from producing its maximum output.
D.often causes inflation, which reduces the nation’s real output.
6)
Refer to the above diagram for the milk market. In this market, the equilibrium price is
____ and equilibrium quantity is ___.
A.$1.50 per gallon; 28 million gallons
B.$1.50 per gallon; 30 million gallons
C.$28 per gallon; 150 million gallons
D.$1.00 per gallon; 35 million gallons
7) Answer the question on the basis of the accompanying table that shows average total
costs (ATC) for a manufacturing firm whose total fixed costs are $10:
Refer to the data. The profit-maximizing level of output for this firm:
A.is 3
B.is 4
C.is 5
D.cannot be determined from the information given.
8) A breakdown of the shares of economic production for two different countries is
listed below, along with per capita income and growth rate. Use this information to
calculate the growth rates per sector and answer the following questions.
(a)What is the amount of per capita growth in countries A and B? Will the growth
increase, decrease or maintain the income gap?
(b)Suppose country As economy becomes more industrialized, increasing the
productive share of services and industry. What likely effect will this having on country
As growth rate? Suppose as a result of this change the growth rate of services and
industry is now 3.5% and 2.5% respectively, while the rates for natural resources and
agriculture remain the same. What is the new total growth rate? What is the new
distribution of the economy? What is the effect of the new growth on the income gap?
(c)What growth rate would country A have to maintain to reduce the income gap with
country B by 10%, assuming country B grew by 5%? If country B grew by 2%? If
country B experienced no growth?
(d)What growth rate would country A have to maintain to reduce the income gap with
country B completely if country B experienced 3% growth?
(e)What do your answers in (a) through (d) tell you about the situation facing
developing countries? How does the element of time (growth over several years)
change your answer?
9) The ‘shadow heuristic” is all of the following, except:
A.When the brain assumes that light always fall from above
B.What makes us interpret two-dimensional shaded circles as three-dimensional bumps
or holes
C.What allows us to measure the height of a tall structure by analyzing its shadow
D.When we sometimes mistakenly interpret the contours of a picture of a ball or a box
10) The major source of new scientific knowledge in the United States is:
A.university and government research.
B.R&D work in large corporations.
C.entrepreneurs working alone.
D.purely competitive and monopolistically competitive firms.
11) Industry A has a 60 percent concentration ratio, while industry B has a 40 percent
concentration ratio. According to the inverted-U theory, all else equal, we can conclude
that:
A.industry A will be more technologically progressive than B.
B.industry C, with a 10 percent concentration ratio, will be more technologically
progressive than either industry A or B.
C.industry D, with an 80 percent concentration ratio, will be more technologically
progressive than either industry A or B.
D.industry A should have a similar amount of R&D spending as industry B, all else
equal.
12) The graph below depicts a Bobs budget line for 2 goods and three indifference
curves depicting his preferences. Use this graph to answer the following questions.
(a)Bobs friend Martha argues that B represents the least pleasurable bundle for Bob. Do
you agree?
(b)Bobs friend Michael argues that Bob should choose to consume bundle D since it
offers him the highest utility. Do you agree?
(c)If you were a friend of Bobs, which bundle would you advise him to take?
13) If at the MC = MR output, AVC exceeds price:
A.new firms will enter this industry.
B.the firm should produce the MC = MR output and realize an economic profit.
C.some firms should shut down in the short run.
D.the firm should expand its plant.
14) The supply curve of a pure monopolist:
A.is that portion of its marginal cost curve that lies above average variable cost.
B.is the same as that of a purely competitive industry.
C.is its average variable cost curve.
D.does not exist because prices are not “given” to a monopolist.
15) Suppose a local coffee shop in the downtown area decides to purchase a
neighboring abandoned lot and convert it into a garden area with outdoor seating.
(a)Does this decision create an externality? If so, what kind?
(b)Despite the citys positive response to the coffee shops renovation, other businesses
in the area have not followed suit in renovating the many decrepit buildings and
abandoned lots. How might the presence of an externality be in part the cause of this?
(c)In response to the lack of effort on the part of businesses to renovate the downtown
area, city council members to take action. What are some ways that the city government
could promote this kind of revival?
16) For an employer biased against African Americans, the discrimination coefficient d:
A.will decrease if the employer becomes more prejudiced against African Americans.
B.must equal the actual ratio of African-American to white wage rates.
C.measures the amount an employer is willing to pay to hire a white over hiring an
African-American worker.
D.varies inversely with the actual African-American-white wage ratio.
17)
Refer to the above graph. Comparing a monopsony against a purely competitive labor
market, the difference in the equilibrium wage rate will be:
A.W0 – W1
B.W1 – W2
C.W2 – W3
D.W1 – W3
18) The U.S. sugar program:
A.decreases the domestic price of sugar.
B.requires import quotas or tariffs on foreign sugar.
C.increases the export earnings of other sugar-producing countries.
D.aids developing countries that produce sugar.