1) Total allowable catch policies promote economic efficiency better than individual
transferable quotas.
2) Self-control problems, say among people on a diet, is caused by the cognitive bias
known as time inconsistency.
3) Government guarantees that socialize losses and privatize gains tend to encourage
risky and imprudent investment.
4) A normal good would have a positive price-elasticity of demand.
5) Asymmetric information always results in adverse selection.
6) If the quantity demanded for good A increases from 40 to 60 when price decreases
from $9 to $7, price elasticity of demand in this price range is 1.6.
7) Definition of property rights is a key component to proper conservation of resources.
8) The prices of resources are an important factor in the determination of money
income.
9) The current account portion of a nation’s balance of payments statement includes net
investment income.
10) Marginal revenue is the addition to total revenue resulting from the sale of one
more unit of output.
11) Which of the following is considered to be a severe obstacle to economic growth for
DVCs?
A.Low trade barriers
B.Large international debts
C.An increase in the rate of saving
D.A slowing of the population growth
12) What is a major opportunity cost of going to college on a full-time basis?
A.The cost of transportation to college instead of to a job
B.The cost of living expenses (room and board) to attend college
C.The foregone income that could be earned working full-time job
D.The greater income that will be earned from having a college degree
13) The price-elasticity coefficients are 2.6, 0.5, 1.4, and 0.18 for four different demand
schedules D1, D2, D3, and D4, respectively. A 2 percent increase in price will result in
an increase in total revenues in which of the following cases:
A.D1 and D3
B.D1 and D4
C.D2 and D4
D.D1, D2, and D3
14)
Refer to the diagram for the corn market. What effect will a price support of B have on
the gross income of farmers?
A.Gross income will be unchanged, although profits will rise.
B.Gross income will increase from 0MFG to 0BKL.
C.Gross income will increase from 0AJH to 0BCG.
D.Gross income will decrease from 0BCG to 0BKL.
15) A monopsonist’s wage cost in hiring an additional worker is the:
A.worker’s wage rate.
B.worker’s wage rate plus the wage increases paid to all workers already employed.
C.worker’s wage rate adjusted for the lower price that must be charged for the extra
output.
D.marginal wage cost less the wage rate.
16) Forestry companies typically harvest and replant an area when trees are:
A.very young and growing slowly.
B.middle aged and growing rapidly.
C.near the end of their rapid growth period.
D.extremely old and about to die anyway.
17)
The graph above represents the market for a product where D1 and S1 show the initial
supply and demand curves, and supply shifts to S2 due to a sales tax. The deadweight
loss due to the tax is represented by area:
A.EIG
B.EFI
C.BCEF
D.ABFG
18) Answer the question on the basis of the following information: Suppose a firm hires
both labor (L) and capital (C) under purely competitive conditions. The price of labor is
PL and that of capital is PC. The marginal product of labor is MPL and that of capital is
MPC. The firm sells its product competitively at a price of PX.
Refer to the given information. If MPC/PC > MPL/PL, the firm:
A.may be maximizing profits, but it is not minimizing costs.
B.may be minimizing costs, but it is not maximizing profits.
C.is neither minimizing costs nor maximizing profits.
D.is minimizing costs and maximizing profits.
19)
Refer to the given data. At the profit-maximizing level of employment, this firm’s total
revenue will be:
A.$16.
B.$32.
C.$24.
D.$30.
20) Data on per capita trash generation in the United States indicate that since 1990 it
has:
A.Increased moderately
B.Continually decreased
C.
D.Sharply increased
21) If the equilibrium exchange rate changes so that fewer dollars are needed to buy a
South Korean won, then:
A.Americans will buy fewer Korean goods and services.
B.the won has appreciated in value.
C.fewer U.S. goods and services will be demanded by the South Koreans.
D.the dollar has depreciated in value.
22) Which of the following resource payments is considered by economists as surplus
payments?
A.Wages for labor
B.Rent for land
C.Interest for capital
D.Profits for entrepreneurship
23)
Refer to the above graph. If the price decreases from P3 to P2, then the total revenue
will lose area:
A.B + E, but it will gain area H + I
B.H + I, but it will gain area A + B + C
C.E + F + G but it will gain area H + I + J
D.A + B + C + D, but it will gain area E + F + G
24)
Refer to the figure above, which shows four different Lorenz curves (I, II, III, and IV).
The movement from point b to point a in the graph would indicate that the:
A.Lower 40% of households increased their share of total income from 25% to 40%
B.Lower 40% of households decreased their share of total income from 60% to 40%
C.Lower 60% of households decreased their share of total income from 40% to 25%
D.Lower 40% of households increased their share of total income from 40% to 60%
25) Many state and local governments in the U.S. have balanced-budget laws in order
to prevent politicians from:
A.Creating a ‘small government” economy
B.Succumbing to voters’ strong preference for budget deficits
C.Facing a principal-agent problem
D.Collecting too much taxes
26) The prices paid to a productive resource usually perform an incentive function
except with what resource?
A.Land
B.Labor
C.Capital
D.Entrepreneurial ability
27)
Refer to the graph above. Suppose that its shows the S and D graphs in a market where
the product has all the characteristics of a public good. In this case, the government
should use its coercive power to make:
A.The supply curve shift to the left
B.The supply curve shift to the right
C.The demand curve shift to the left
D.The demand curve shift to the right
28) In 2011, about what percentage of U.S. households had annual before-tax incomes
of less than $15,000?
A.About 6 percent
B.About 13 percent
C.About 25 percent
D.About 33 percent
29) The demand for a resource is derived from the goods and services that the resource
is used to produce. Give three examples.
30) What factors might increase the demand for carpenters in a medium-sized town? Be
specific.
31) Describe three ways that human specialization contributes to societys output.
32) What are the major characteristics of pure monopoly?
33) Comment on the problem with this statement: Of course, there are diminishing
marginal returns from adding more workers to a fixed quantity of plant and equipment
because additional workers are not as good as initial workers.
34) What happens to the budget line when the price of a product falls? Use indifference
curve analysis to explain how this change affects consumption of the product.
35) What is X-inefficiency? Why is it likely to occur in monopoly?
36) Explain the basic conclusions from inverted-U theory of R&D. What will be the
optimal market structure for technological progress? What does the evidence suggest
about its validity?
37) Describe and give reasons for the characteristics of the elasticity of supply of a farm
product that is sold at a farmers market on a particular day.