1) Insurance co-pays and deductibles are methods used by insurance companies to
reduce moral hazard.
2) Reducing the payment of rent to land-owners will decrease the quantity of land
supplied.
3) If MRP of labor < wage rate, a firm should hire more workers.
4) Demand is the active and supply the passive determinant of land rent.
5) A current account deficit will reduce U.S. foreign indebtedness.
6) We would expect the income elasticity of demand for steak to be positive, and that
for hamburger to be negative.
7) Due to high fixed costs relative to variable costs in farming, farm production is quite
sensitive to price-changes in the short run.
8)
Refer to the above graph for a monopolist in short-run equilibrium. This monopolist
will charge a price:
A.0A
B.0B
C.0C
D.Not labeled on the graph
9) An excise tax on an imported good that is not produced domestically is called a:
A.protective tariff.
B.import quota.
C.revenue tariff.
D.voluntary export restriction.
10) Which of the following statements best describes the parity concept?
A.The prices of farm commodities should vary inversely with changes in the
prices-paid index for farmers.
B.Because of productivity increases, farmers are entitled to the same real income for a
smaller volume of output.
C.The money incomes of farmers should always be the same, regardless of increases or
decreases in the prices of the products they buy.
D.The production of a given real output entitles the producer to the same real income
over time.
11) After eating four slices of pizza, you are offered a fifth slice for free. You turn down
the fifth slice. Your refusal indicates that the:
A.Marginal utility for four pizza slices is negative
B.Total utility for five pizza slices is negative
C.Marginal utility is positive for the fourth slice and negative for the fifth slice
D.Marginal utility for the fourth slice is the largest among all slices
12) The table below shows the marginal utility schedules for old product X and new
product Y for a hypothetical consumer. The price of X is $2 and the price of good Y is
$1. The budget of the consumer is $10.
Refer to the above table. If the consumer can only buy old product X, how much will
the consumer buy and what will be the total utility from spending the given budget?
A.4X and 52
B.4X and 10
C.5X and 8
D.5X and 60
13) Which of the following individuals least likely suffers from myopia?
A.Marilyn, who struggles to lose weight because she regularly cheats on her diet.
B.Myrna, who lived through the Great Depression and tends to spend frugally and save
most of her money.
C.Malcolm, who currently spends all his income and saves nothing for retirement.
D.Marvin, who regularly sleeps in and is constantly late for work, much to the chagrin
of his boss.
14) In recent years the economy of Japan has grown, despite the fact that the population
of Japan has declined. Which of the following would best explain Japan’s economic
growth despite having a smaller population?
A.Immigration of new workers into Japan.
B.Advancements in technology that make labor more productive.
C.Reduced employment of capital because fewer workers are available to use it.
D.Greater consumption of goods imported from other countries.
15) If a nation produces more consumer goods and less capital goods, then the nation
will have:
A.More consumption now, but less consumption later
B.Less consumption now, but more consumption later
C.More consumption now, with no effect on consumption later
D.Less consumption later, with no effect on consumption now
16) The fact that monopoly and monopsony exist in resource markets means that:
A.the marginal productivity theory of income distribution is valid.
B.resource prices do not always measure contributions to output.
C.the resulting income distribution is ethically correct.
D.income shares do not exhaust the total output.
17) Which two market structures have a strong need to innovate but have low expected
returns on R&D expenditures?
A.Monopoly and oligopoly
B.Oligopoly and pure competition
C.Monopoly and monopolistic competition
D.Monopolistic competition and pure competition
18) Which of the following helps finance the medical expenses of individuals receiving
TANF or SSI?
A.Medicare.
B.Supplemental Security Income (SSI).
C.Medicaid.
D.Social Security.
19) The government’s budget deficit refers to the:
A.Total amount of debt that the government has incurred over the years
B.Difference the nation’s amount of exports and its total amount of imports
C.Gap between high government spending and its lower tax revenues
D.Decrease in the amount of government spending form one year to the next
20) Which of the following statements is true?
A.Diminishing marginal returns sets in after marginal product intersects average
product
B.Diminishing marginal returns means that in order to increase output at a constant rate,
the firm must add larger and larger quantities of the variable inputs
C.Diminishing marginal returns implies that there will never be increasing returns to
scale
D.Diminishing marginal returns implies that the firm’s profits will be shrinking
21) One of the major investment obstacles in less developed nations is:
A.An accumulation of savings with no place to invest the funds
B.A poor public infrastructure that hurts returns on private investment
C.A progressive tax system that is efficient in collecting taxes on investment
D.A low unemployment rate that makes it difficult to find the needed workers for
businesses
22) In order to help pay for the costs of extending health insurance to previously
uninsured people, the PPACA imposes new taxes including the following, except:
A.An increase in Medicare payroll tax for individuals earning more than $200,000
($250,000 for married couples) per year
B.An increase in the capital gains tax for individuals earning more than $200,000
($250,000 for married couples) per year
C.A tax levied on indoor tanning
D.A tax on junk foods and soda
23)
Refer to the diagram, where Sd and Dd are the domestic supply and demand for a
product and Pc is the world price of that product. Sd + Q is the product supply curve
after an import quota is imposed. The effect of the import quota on domestic price and
domestic consumption is:
A.the same as that of a tariff of PcPt.
B.the same as that of a tariff of PtPa.
C.the same as that of a tariff of PcPa.
D.to raise price by more and reduce consumption less than a tariff of PcPt.
24) Which of the following is an example of a negative externality?
A.An increase in the value of land you own when a nearby development is completed
B.The costs paid by a company to build an automated factory
C.Falling property values in a neighborhood where a disreputable nightclub is operating
D.The higher price you pay when you buy a heavily advertised product
25) The vertical distance between a firm’s ATC and AVC curves represents:
A.AFC, which increases as output increases.
B.AFC, which decreases as output increases.
C.marginal costs, which decrease as output decreases.
D.marginal costs, which increase as output increases.
26) Matt fishes for tuna at a cost of $4 per ton. John fishes at a cost of $6 per ton. Each
has a 1000 ITQ. The current market price is $8 per ton. What amount could Matt pay
John to induce him to sell his ITQ?
A.$1000
B.$2000
C.$3000
D.It would not be profitable for Matt to buy John’s ITQ
27) What actions has government taken to improve buyer information in the market for
surgery?
28) Explain the utility maximizing rule in terms of hot dogs and hamburgers purchased
at a ballgame.
29) Comment on the statement: Americans must be the healthiest people on earth
because they spend the most on health care and have the best health care system.
30) A firm combines two resources, A and B, to produce an output level Q in a purely
competitive market. The cost of a unit of A is $5 and the cost of a unit of B is $12. The
marginal revenue product of A is $5 and the marginal revenue product of B is currently
$12. What would you recommend that the firm do given this resource combination?
31) What are the two key factors that determine the strength of demand? How do they
determine whether a good is in high demand or low demand?