1) The legal cartel theory of regulation argues that:
A.regulation encourages firms to inflate their production costs.
B.firms in certain industries want to be regulated rather than face the rigors of
competition.
C.social regulation has been carried beyond the point at which marginal benefits and
marginal costs are equal.
D.the government is the logical agency to protect consumers from natural monopolies.
2) By an “increase in demand,” economists mean that:
A.product price has fallen so consumers move down to a new point on the demand
curve.
B.the quantity demanded at each price in a set of prices is greater.
C.the quantity demanded at each price in a set of prices is smaller.
D.a leftward shift of the demand curve has occurred.
3)
Refer to the diagram. At the profit-maximizing output, the firm will realize:
A.a loss equal to BCFG.
B.a loss equal to ACFH.
C.an economic profit of ACFH.
D.an economic profit of ABGH.
4) A firm sells a product in a purely competitive market. The marginal cost of the
product at the current output of 200 units is $4.00. The minimum possible average
variable cost is $3.50. The market price of the product is $3.00. To maximize profits or
minimize losses, the firm should:
A.Continue to produce 200 units
B.Continue production, but produce less than 200 units
C.Increase production to more than 200 units
D.Shut down
5) When universities announce a large tuition increase and follow it with an
announcement that more financial aid will be available, they are assuming that students
who pay full tuition:
A.Have elastic demand and students who use financial aid have inelastic demand
B.Have inelastic demand and students who use financial aid have elastic demand
C.View a college education as an inferior good and students who use financial aid view
it as a normal good
D.View a college education as a normal good and students who use financial aid view it
as an inferior good
6)
Refer to the above graph. If the firm is producing at Q1, the area 0ADQ1 represents:
A.Total costs
B.Total variable costs
C.Total fixed costs
D.Average total costs
7) The NAFTA established a free-trade area and eliminated trade barriers between:
A.The U.S. and Canada only
B.The U.S., Mexico, and China
C.The U.S., Mexico, and Canada
D.The U.S., China, and Canada
8)
Refer to the diagram. As it relates to production possibilities analysis, the law of
increasing opportunity cost is reflected in curve:
A.A
B.B
C.C
D.D
9) Consumer surplus arises in a market because:
A.At the current market price, quantity supplied is greater than quantity demanded
B.At the current market price, quantity demanded is greater than quantity supplied
C.The market price is below what some consumers are willing to pay for the product
D.The market price is higher than what some consumers are willing to pay for the
product
10) The mutual interdependence that characterizes oligopoly arises because:
A.the products of various firms are homogeneous.
B.the products of various firms are differentiated.
C.each firm in an oligopoly depends on its own pricing strategy and that of its rivals.
D.the demand curves of firms are kinked at the prevailing price.
11) Can economic analysis precisely determine the proper levels of government
spending and taxation? In your answer explain the problems in using cost-benefit
analysis.
12) Why is the demand for resources called a derived demand? On what two factors
does the strength of the demand for resources depend? How are these two factors
related?
13) Describe the basic features of the circular flow diagram.
14) List five basic determinants of market demand that could cause demand to increase.
15) What is the meaning of perfectly inelastic demand and perfectly elastic demand?
How would each be graphed?