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1) "Price maker" means that a monopoly can decide whatever price it wants to, in order
to sell a specific given quantity of its product.
2) In general for an excise tax on a product, given supply, the more elastic is the
demand for the product, the larger will be the portion of the tax shouldered by the
buyers.
3) In the short run, a competitive firm will not produce unless price is at least equal to
average total costs.
4) Successful price discrimination requires that buyers charged the different prices be
physically separated.
5) Marginal utility is the accumulation of the total utility from successive units of a
good or service consumed.
6) In a command economy, the head of each household makes the fundamental
economic choices such as what to produce and how to produce output.
7) If total utility increases as consumption of a good increases, then marginal utility
must be increasing also.
8) Along a supply curve, product price and producer surplus are inversely related.
9) The demand for productive resources has grown faster than the supply of productive
resources for the past 150 years.
10) Answer the question on the basis of the following information. Assume that by
devoting all its resources to the production of X, nation Alpha can produce 40 units of
X. By devoting all its resources to Y, Alpha can produce 60Y. Comparable figures for
nation Beta are 60X and 40Y.
Refer to the given information. Alpha would prefer terms of trade at, or close to, 1X =
1Y.
11) As long as government officials have to be elected, they are always held accounted
for their policy decisions and choices.
12) Repeated games may involve either simultaneous or sequential decision making.
13) Other things equal, younger workers are more likely to migrate than older workers.
14) Statistical discrimination is also known as occupational discrimination.
15)
Refer to the two diagrams for individual firms. Figure 2 pertains to:
A.a market characterized by government regulation of price and output.
B.either an imperfectly competitive or a purely competitive seller.
C.a purely competitive seller.
D.an imperfectly competitive seller.
16) The reason that superstars are very highly paid is because:
A.They have a high marginal revenue product
B.They have a much higher level of talent
C.There is a large supply of superstar talent
D.There is a low demand for superstar talent
17) Use the following graph of the demand for coffee:
Refer to the above diagram of three demand curves for coffee. Which of the following
would cause a shift in coffee demand from D1 to D3?
A.A decrease in the cost of producing coffee
B.A scientific report stating that coffee improves memory
C.A decrease in the prices of cream and sugar
D.A decrease in the price of tea
18) In general, the:
A.number of firms in the industry is far more important than the industry's scientific
character and extent of technological opportunities.
B.greater an industry's concentration ratio, the higher are its R&D expenditures in
relation to sales.
C.industry's scientific character and extent of technological opportunities often are more
important than the industry's concentration ratio.
D.higher the industry's interest cost of borrowing funds for R&D, the greater is the
industry's progressiveness.
19) If price (P) and quantity (Q) are directly related, this means that:
A.a change in Q will alter P, but a change in P will not alter Q.
B.if P increases, Q will decrease.
C.if P increases, Q will also increase.
D.an increase in P will cause Q to change, but the direction in which Q changes cannot
be predicted.
20) In 2009, the 20 percent of families with the lowest incomes paid an effective
average federal tax rate (on all federal taxes) of about ____, whereas the 20 percent of
families with the highest incomes paid an effective average tax rate of about ____.
A.5.5 percent; 50 percent
B.10.3 percent; 30.9 percent
C.8.4 percent; 27.5 percent
D.1.0 percent; 23.2 percent
21) The relationship between a consumer's monthly income and monthly consumption
of four products, A-D, is shown below.
Which product listed is an example of an inferior good?
A.A
B.B
C.C
D.D
22) If the entry or exit of firms does not affect the resource prices in an industry, we
refer to it as a:
A.Fixed-price industry
B.Price-controlled industry
C.Constant-cost industry
D.Price-taking industry
23) If two combinations of goods X and Y give a consumer equal satisfaction, then
these two combinations must both be on the same:
A.Budget line
B.Indifference curve
C.Demand curve
D.Supply curve
24) Eliminating patents would tend to:
A.stimulate innovation in all industries.
B.discourage innovation in all industries.
C.encourage innovation in products made up of many different technologies but
discourage innovation of easy-to-copy products requiring large R&D costs to create.
D.discourage innovation in products made up of many different technologies but
encourage innovation of easy-to-copy products requiring large R&D costs to create.
25) Sotheby's and Christy's were found guilty of conspiring over a 6-year period to:
A.Set the same commission rates for sellers at auctions
B.Split the royalties from the sale of oil and gas leases
C.Fix the price of photographs sold to newspapers
D.Divide up the market for book publishing
26) In recent years, the governments of the IACs have:
A.forgiven a portion of the debt owed by some low-income DVCs.
B.substantially reduced foreign aid to the DVCs.
C.substantially reduced their contributions to the World Bank.
D.discouraged skilled DVC workers from emigrating to the IACs.
27) The fixed cost of the firm is $500. The firm's total variable cost is indicated in the
table.
Refer to the above table and information. The average total cost of the firm when 3
units of output are being produced is:
A.$350
B.$400
C.$500
D.$700
28) A major criticism of the welfare system that led to reforms in the mid-1990s is that
welfare payments:
A.Encourage overuse of the medical system
B.Create dependency on government programs
C.Give strong incentives for people to change jobs
D.Fail to provide a minimum income for young children
29) The following are the respective numbers for the four-firm concentration ratio and
Herfindahl index in an industry. Which set of numbers would suggest that the industry
was monopolistically competitive?
A.25 and 207
B.76 and 2662
C.80 and 1800
D.89 and 2582
30) Assume that a monopolist faces a linear demand curve and that it produces the
output quantity where total revenue is maximized. At that output, the price elasticity of
demand for the product is:
A.Greater or equal to one
B.Less than one
C.Equal to one
D.Impossible to determine
31)
Refer to the diagram. Demand is relatively inelastic:
A.at price P3.
B.at any price below P2.
C.in the P2P4 price range.
D.in the P2P3 price range.
32) Suppose that the U.S. government is trying to garner support from Central
American countries to pass the newest free trade agreement, Central American Free
Trade Agreement (CAFTA). Why might Central American countries argue that in terms
of agricultural products, trade with the United States is not really truly competitive?
33) In monopolistic competition, if a firm advertises and raises its product, it tends to:
A.Raise costs and increase demand for its product
B.Raise costs and decrease demand for its product
C.Lower costs and increase demand for its product
D.Lower costs and decrease demand for its product
34) How do copayments and deductibles help contain health care costs?
35) How does price elasticity affect the price-quantity combination and segment of the
demand curve that the monopolist would prefer for price and output?
36) How does the supply of land differ from the supply of most labor? How will the
effect on price of an outward shift in demand for labor differ from the effect on price of
an equivalent shift in the demand for land?
37) Describe and give a reason for the law of supply.
38) Why are there two plants run by one firm that produce large commercial aircraft
and thousands of plants run by hundreds of firms that produce ready-mix concrete?
Explain in terms of economies of scale.
39) Why may majority voting produce economically inefficient outcomes? Give a
numerical example that leads to the rejection of a public good.
40) Why is there emphasis on nonprice competition in oligopoly?
41) Why would a farmer continue farming in the short run, even though his ATC was
greater than the price he received for his crops?
42) How does consumer sovereignty determine the types and quantities of the goods
produced in an economy?
43) What are the net costs of tariffs and quotas on consumption and income
distribution?
