1) Why, according to behavioral economics, would supermarkets place gum, candy, and
other small convenience items near the cash registers?
A.Those are the shelving locations that minimize costs.
B.Stores try to make frequently purchased items quicker and easier for consumers to
access.
C.Smaller items tend to fall through shopping cart holes, so stores reduce that problem
for consumers by having smaller items at the checkout stands.
D.Many of these are small items that people will buy on an impulse.
2) What will be the elasticity of resource demand in the following cases?
(a)unit wages rise by 10% and the number of employed workers falls by 5%
(b)unit wages rise by 4% and the number of employed workers falls by 6%
(c)unit wages rise by 3% and the number of employed workers falls by 3%
3) Other things being equal, a firm’s demand for labor is likely to be more elastic than
its demand for capital if:
A.Labor costs are a smaller proportion of total costs than capital costs
B.The firm uses labor-intensive production techniques
C.Substitutions of one resource for another are difficult
D.The demand for its final product is price elastic
4) Answer the question on the basis of the following information. In 1985, the exchange
rate between the U.S. dollar and the Japanese yen was $1 = 262 yen; in 2003, the rate
was $1 = 110 yen.
Refer to the given information. Between 1985 and 2003, the:
A.dollar appreciated in value relative to the yen.
B.yen appreciated in value relative to the dollar.
C.dollar price of yen fell.
D.yen price of dollars rose.
5) The franchising of fast-food restaurants would be an example of how a private
business:
A.Overcomes market information problems
B.Solves the moral hazard problem in insurance
C.Expands the limits of the Coase theorem
D.Corrects the problem of externalities
6) The price elasticity of demand for health care is such that an increase in the price of
health care will:
A.decrease total health care expenditures.
B.increase total health care expenditures.
C.shift the demand for health care rightward.
D.shift the demand for health care leftward.
7) Behavioral economists have discovered the following things about people’s reaction
to losses:
A.People judge losses in relative terms; i.e., relative to the status quo
B.People experience increasing marginal disutility from losses
C.People would feel the loss of $1,000 more intensely than they would feel the gain of
$1,000
D.When people lose successive equal amounts, the initial losses are more painful than
later ones
8)
Refer to the above table. What percentage of households made $35,000 or more?
A.23
B.35
C.65
D.77
9) Economic models do not reflect the full complexity of reality, but instead are based
on:
A.Simplifications
B.Tradeoffs
C.Value judgments
D.Predictions
10)
Refer to the above graph. If the firm is producing at Q1, the area BADE represents:
A.Total costs
B.Total variable costs
C.Total fixed costs
D.Average variable costs
11)
Refer to the diagram. An increase in quantity supplied is depicted by a:
A.move from point y to point x.
B.shift from S1 to S2.
C.shift from S2 to S1.
D.move from point x to point y.
12) For a firm selling its product in a purely competitive market, the marginal revenue
product of labor can be found by:
A.adding marginal product to total product as one more unit of labor is employed.
B.adding marginal revenue to total product as one more unit of labor is employed.
C.multiplying marginal product by product price.
D.dividing marginal product by product price.
13) A change in an input price will alter both production costs and the
profit-maximizing output. Thus, a decline in the price of capital will reduce production
costs, increase the profit-maximizing output, and thereby increase the demand for labor.
This describes the:
A.output effect.
B.substitution effect.
C.idea of derived demand.
D.law of diminishing returns.