1) China is very close to catching up with the United States in its standard of living as
measured by per capita income.
2) If all nations prohibited the international migration of labor, we would expect world
output to decline.
3) The process by which new firms and new products destroy existing dominant firms
and their products is called creative destruction.
4) The politicization of monetary and fiscal policies tends to enhance their effectiveness
in stabilizing the economy.
5) Per capita energy use in the United States has remained fairly constant since 1980.
6) Rational individuals may make different choices because their preferences and
circumstances differ.
7)
Refer to the diagram for a nondiscriminating monopolist. From society’s point of view
it would be desirable to have the monopolist produce a larger output than M.
8) One policy recommended by most economists for promoting economic growth in
DVCs is the nationalization and protection of domestic industries.
9) One major element of the command system is:
A.An emphasis on private ownership of resources
B.Individual decentralized decision-making
C.Reliance on supply-and-demand forces to guide economic activity
D.Central planning conducted by the government
10) Answer the question on the basis of the following information. A farmer who has
fixed amounts of land and capital finds that total product is 24 for the first worker hired;
32 when two workers are hired; 37 when three are hired; and 40 when four are hired.
The farmer’s product sells for $3 per unit and the wage rate is $13 per worker.
Refer to the given information. The marginal revenue product of the second worker is:
A.$24.
B.$8.
C.$15.
D.$9.
11)
Refer to the diagram. To maximize profit or minimize losses, this firm will produce:
A.K units at price C.
B.D units at price J.
C.E units at price A.
D.E units at price B.
12) Brinley is the hottest new pop singer, but his agent discovers that Internet sales of
Brinley’s music have been poor due to Internet piracy, but concerts are regularly sold
out and merchandise (such as T-shirts) sells well. If Brinley wants to enhance profits,
economists would most likely recommend that he:
A.charge more for downloads, concerts, and merchandise.
B.cut prices for downloads, concerts, and merchandise.
C.only give concerts.
D.keep prices of downloads low and raise prices for concerts and merchandise.
13) The increased-domestic-employment argument for tariff protection holds that:
A.domestic inflation is a desirable policy goal because it stimulates exports.
B.domestic deflation is a desirable policy goal because it stimulates imports.
C.an increase in tariffs will reduce net exports and stimulate domestic employment.
D.an increase in tariffs will increase net exports and stimulate domestic employment.
14) To maximize utility, a consumer should allocate money income so that the:
A.elasticity of demand on all products purchased is the same.
B.marginal utility obtained from the last dollar spent on each product is the same.
C.total utility derived from each product consumed is the same.
D.marginal utility of the last unit of each product consumed is the same.
15)
Refer to the above table. What percentage of households made $50,000 or more?
A.35
B.49
C.51
D.65
16) Answer the question on the basis of the following information for Manfred’s Shoe
Shine Parlor. Assume Manfred hires labor, its only variable input, under purely
competitive conditions. Shoe shines are also sold competitively.
Refer to the given data. If the wage rate is $11 and Manfred’s only fixed input is capital,
the total cost of which is $30, then what will be his economic profit?
A.$62.
B.$42.
C.$28.
D.$32.
17) If the taxes by state and local governments were combined with the Federal tax
system, the overall tax structure in the U.S. would best be characterized as:
A.Progressive
B.Highly regressive
C.Slightly regressive
D.Proportional
18) The fact that a purely competitive firm’s total revenue curve is linear and upsloping
to the right implies that:
A.product price increases as output increases.
B.product price decreases as output increases.
C.product price is constant at all levels of output.
D.marginal revenue declines as more output is produced.
19) Reasons for the growing income inequality in the United States since 1975 include
the following, except:
A.A shift in labor demand toward highly-skilled and better-educated workers
B.The entrance of larger numbers of less-experienced less-skilled workers into the
workforce
C.An increase in the number of households headed by single or divorced women
D.The decline of unionism in the U.S. workforce
20) The voluntary relocation of employable migrants from low-paying nations to
high-paying nations reduces:
A.wage rate disparities among nations.
B.business or capitalist income in the world.
C.labor productivity in the world.
D.total wage income in the world.
21) Suppose that a monopolist calculates that at present its output level, marginal
revenue is $1.00 and marginal cost is $2.00. He or she could maximize profits or
minimize losses by:
A.Decreasing price and increasing output
B.Increasing price and decreasing output
C.Decreasing price and leaving output unchanged
D.Decreasing output and leaving price unchanged
22) Assuming no government intervention, describe the market behavior that should
result if the price of a product is below its equilibrium price; then describe the behavior
that should occur if the price is above its equilibrium price.
23) In what ways did government subsidize agriculture over the past sixty years? What
were the most important aspects of this assistance?
24) What is the difference between the short run, long run and very long run?
25) Define economic immigrants.
26) Explain why the economic analysis of monopolistic competition is so complex.
27) A monopolistically competitive firm is producing 50 units of output in the short run
where marginal cost is $3.00, average total costs are $5.00, price is $4.50, average
variable cost is $4.00, and marginal revenue is $3.00. How much profit is the firm
making? What output recommendation would you make for the firm?
28) Explain the principal-agent problem in business.