1) Which of the following appears as a positive item on the balance of payments
accounts for the United States?
A.U.S. government sending aid to natural-disaster victims in Asia
B.American tourists spending money in the other countries
C.The buying of U.S. Treasury bonds by a foreign bank
D.The payment of stock dividends by U.S. firms to foreign shareholders
2) Monopolistically competitive and purely competitive industries are similar in that:
A.both are assured of short-run economic profits.
B.both produce differentiated products.
C.the demand curves facing individual firms are perfectly elastic in both industries.
D.there are few, if any, barriers to entry.
3) The kinked-demand schedule that an oligopolist believes confronts the firm is given
in the table below. Compute the oligopolists total revenue at each of the nine prices, and
enter these figures in the table. Also compute marginal revenue for each unit between
the nine prices and enter these figures in the table.
(a)Where is the kink in the demand curve? What is the current selling price at that kink
and how much output will be demanded?
(b)What is the range of marginal cost that will keep the price set at the kink?
4) Suppose product X is an input in the production of product Y. Product Y in turn is a
substitute for product Z. An increase in the price of X can be expected to:
A.decrease the demand for Z.
B.increase the demand for Z.
C.have no effect on the demand for Z.
D.decrease the supply of Z.
5) Answer the question on the basis of the following production possibilities data for
two countries, Alpha and Beta, which have populations of equal size.
Refer to the given data. Beta:
A.should specialize in catching fish and trade with Alpha for chips.
B.should specialize in producing chips and trade with Alpha for fish.
C.will not realize gains from specialization and trade.
D.will export both fish and chips to Alpha.
6) The basic difference between the short run and the long run is that:
A.all costs are fixed in the short run, but all costs are variable in the long run.
B.the law of diminishing returns applies in the long run but not in the short run.
C.at least one resource is fixed in the short run, while all resources are variable in the
long run.
D.economies of scale may be present in the short run but not in the long run.
7) Suppose the courts declare that XYZ Corporation violated the antitrust laws and as a
result the ABC Corporation lost $100 million of profits. XYZ Corporation will have to
pay ABC Corporation a monetary award of:
A.$100 million.
B.$33.3 million.
C.$150 million.
D.$300 million.
8) A natural monopoly exists when:
A.unit costs are minimized by having one firm produce an industry’s entire output.
B.several formerly competing producers merge to become the only firm in an industry.
C.short-run average total cost curves are tangent to long-run average total cost curves.
D.minimum efficient scale is attained at a small level of output.
9) The wages of plumbers are likely to increase when:
A.Licensing standards for the occupation are increased
B.There is an increase in the cost of plumbing supplies
C.The length of the training period for plumbers is decreased
D.More do-it-yourself home improvement centers open across the nation
10) Answer the question on the basis of the following total utility data for products L
and M. Assume that the prices of L and M are $3 and $4 respectively and that the
consumer’s income is $18.
Refer to the data. What level of total utility does the rational consumer realize in
equilibrium?
A.87 utils.
B.104 utils.
C.51 utils.
D.58 utils.