1) An industry has five firms, each with a market share of 20 percent. There is no
foreign competition, entry into the industry is difficult, and no firm is on the verge of
bankruptcy. If two of the firms in the industry seek to merge, this action would most
likely be opposed by the government because the Herfindahl index for the industry is:
A.2000 and the merger would increase the index by 500
B.2000 and the merger would increase the index by 800
C.2500 and the merger would increase the index by 500
D.2500 and the merger would increase the index by 1200
2)
Refer to the diagram pertaining to two nations and a specific product. In equilibrium,
the nation represented by lines FA and FC will:
A.export H to the country represented by lines GB and GD.
B.import H from the country represented by lines GB and GD.
C.pay price F for its imports.
D.receive price G for its exports.
3) The main idea highlighted in the story about artist Pablo Picasso is:
A.derived demand.
B.human capital.
C.opportunity cost.
D.occupational licensure.
4) The greater the degree of inequality in the distribution of income, the more bowed
will be the Lorenz curve toward the:
A.Upper left-hand corner
B.Upper right-hand corner
C.Lower right-hand corner
D.Lower left-hand corner
5)
Refer to the diagram. The equilibrium price and quantity in this market will be:
A.$1.00 and 200.
B.$1.60 and 130.
C.$0.50 and 130.
D.$1.60 and 290.
6) With a downsloping demand curve and an upsloping supply curve for a product,
placing an excise tax on this product will:
A.increase equilibrium price and quantity.
B.decrease equilibrium price and quantity.
C.decrease equilibrium price and increase equilibrium quantity.
D.increase equilibrium price and decrease equilibrium quantity.
7)
Refer to the diagrams. The price will be _______ and the quantity will be _______ with
the industry structure represented by diagram (B) compared to the one represented in
(A).
A.higher; higher
B.higher; lower
C.lower; lower
D.lower; higher
8) In the table below are the supply and demand schedules for euros.
(a)What will be the rate of exchange for the euro and for the U.S. dollar?
(b)What happens if the U.S. and European governments fix or peg the price of a euro at
$0.95?
9) In a decreasing-cost industry:
A.there will be no firm entry because the increased supply will reduce the long-run
equilibrium price.
B.the law of demand does not apply.
C.greater demand leads to higher long-run equilibrium prices.
D.lower demand leads to higher long-run equilibrium prices.
10) Assume that product Alpha and product Beta are both priced at $1 per unit and that
Ellie has $20 to spend on Alpha and Beta. She buys 8 units of Alpha and 12 units of
Beta. The marginal utility of Alpha is 40 and the marginal utility of Beta is 20. This
indicates that:
A.Ellie should make no change in consumption
B.Given another dollar, Ellie should buy an additional unit of Beta
C.In order to maximize utility, Ellie should buy more of Beta and less of Alpha
D.In order to maximize utility, Ellie should buy more of Alpha and less of Beta
11) Critics of the managed floating exchange rate system argue that it:
A.Is dominated by G-8 nations
B.Is a “non-system” with unclear rules
C.Increased the growth in world trade at too fast a rate
D.Puts too much reliance on the adjustable-peg mechanism for stabilizing exchange
rates
12) The graphs below illustrate the market for a product on which an excise tax has
been imposed by government.
Refer to the above graph. What is the area that represents the efficiency loss due to the
tax?
A.XYT
B.XYZ
C.WXZU
D.WXYZU
13) Assume that Japan and the United States are engaged in a system of flexible
exchange rates.
Refer to the graph above. An increase in the demand for yen will result in:
A.A depreciation of the Japanese yen
B.An appreciation of the U.S. dollar
C.A depreciation of the U.S. dollar
D.A decrease in the dollar price of yen
14)
Refer to the above graph for a purely competitive firm in the short run. The price of the
firm’s product is given by:
A.0F/0C
B.0G/0C
C.0F/0B
D.0E/0A
15) The cornerstone of antitrust legislation in the U.S. is the:
A.Clayton Act
B.Sherman Act
C.Celler-Kefauver Act
D.Federal Trade Commission Act
16)
Refer to the given data. For the $16 to $14 range of wage rates, labor demand is:
A.perfectly elastic.
B.elastic.
C.perfectly inelastic.
D.inelastic.
17) In the short run, a profit-maximizing monopolistically competitive firm sets it price:
A.equal to marginal revenue.
B.equal to marginal cost.
C.above marginal cost.
D.below marginal cost.