The infant industry argument for protection is:
A. rejected by many economists because they oppose any government intervention.
B. accepted by most economists because historical experience supports it.
C. rejected by most economists because many infant industries become reliant on
protection and do not mature.
D. rejected by most economists because protection usually is provided only temporarily.
Answer:
Refer to the graph shown. Calculate the approximate elasticity of demand for the line
segment CD:
A. 3.
B. 1/3.
C. 1/5.
D. 5.
Answer:
Refer to the graph shown that depicts a third-party payer market for prescription drugs.
What is the cost of this program to the third-party if a $2 co-pay is established?
A. $270
B. $240
C. $180
D. $120
Answer:
Reverse engineering is the process of a firm buying other firms’ products and:
A. selling them in the market for a cheaper price than those firms do.
B. selling them in the black market for an exorbitant price.
C. copying them within the limits of law.
D. copying them unlawfully.
Answer:
Refer to the graph shown. Assume that the market is initially in equilibrium at a price of
$6 and a quantity of 40 units. If the government imposes a $2 per-unit tax on this
product, equilibrium quantity will change to:
A. 30.
B. 50.
C. 60.
D. 100.
Answer:
When negative externalities are present, market failure often occurs because:
A. the cost borne by a third party not involved in the trade is not reflected in the market
price.
B. the borne by a third party not involved in the trade is reflected in the market price.
C. the existence of imports from foreign countries takes jobs (and income) away from
U.S. citizens.
D. consumers will consume the good at a level at which their individual marginal
benefits exceed the marginal costs borne by the firm producing the good.
Answer:
Governments can make trading easier and more beneficial by:
A. establishing externalities.
B. limiting private restrictions on trade.
C. setting quotas.
D. providing merit goods.
Answer:
Workers in education, health care and government sectors have:
A. seen their incomes fall just like in manufacturing.
B. been mostly hurt from globalization.
C. benefited from globalization in terms of lower consumer prices.
D. been hurt because the sector has been shrinking.
Answer:
The principle of increasing marginal opportunity costs states that the initial opportunity
costs are:
A. high but decrease the more you concentrate on the activity.
B. low but increase the more you concentrate on the activity.
C. high but increase the more you concentrate on the activity.
D. low but decrease the more you concentrate on the activity.
Answer:
Refer to the following figure.
Jerry likes avocados; each additional avocado she consumes adds as much to her total
utility as did the previous one. Which of the four graphs best represents Jerry’s marginal
utility curve for avocados?
A. A
B. B
C. C
D. D
Answer:
Which of the following cost curves is most often drawn with a U shape?
A. Marginal cost
B. Fixed cost
C. Total cost
D. Average fixed cost
Answer:
In 2010, the Gini coefficient of income inequality for the United States was .469. In
1975, it had been .397. What do these numbers tell us?
A. Wealth is distributed less equally than income.
B. The number of rich people has fallen.
C. Income has become more unequally distributed.
D. The official definition of poverty has changed.
Answer:
Refer to the following graphs,
Which curve depicts the market demand from the following individual demand tables?
A. I
B. II
C. III
D. IV
Answer:
In the United States, the class system is a:
A. triangle, and in most developing countries the class system is a triangle.
B. pentagon, and in most developing countries the class system is a diamond.
C. pentagon, and in most developing countries the class system is a triangle.
D. triangle, and in most developing countries the class system is a diamond.
Answer:
If marginal cost exceeds average total cost:
A. average total cost decreases as output increases.
B. average fixed cost increases as output increases.
C. average variable cost increases as output increases.
D. average variable cost decreases as output increases.
Answer:
If marginal cost equals average total cost:
A. average total cost is minimized.
B. marginal cost is minimized.
C. average variable cost is minimized.
D. average variable cost is falling.
Answer:
Refer to the graphs shown. Which of the following combinations of points best
illustrates rational consumer choice assuming the consumer’s budget is $60, the price of
X is $3, and the price of Y is $3?
A. A and D.
B. B and E.
C. C and F.
D. A and F.
Answer:
Behavioral economic policy examines:
A. the level of mathematics required to make sound judgments.
B. people’s unpredictable irrational behavior.
C. people’s predictable irrational behavior.
D. people’s rational behavior.
Answer:
Spam (junk e-mail) is a major annoyance for many people who use the Internet.
However, spammers sometimes have to send thousands of messages to get just one
response that pays money. Given this information:
A. spamming cannot be profitable because of the low numbers of buyers; its sole
purpose is to annoy others.
B. spamming cannot be profitable because of the low numbers of buyers; it is
fraudulently profitable.
C. spamming can be profitable even with a very low number of buyers because the
marginal cost of sending spam is virtually zero.
D. as with many other activities on the Internet, spammers are profitable only because
they rely on the fees from advertising.
Answer:
From the point of view of consumer surplus and producer surplus, what problem was
created when Thailand subsidized the cost of energy to consumers to help alleviate the
burden of higher energy costs?
A. It hurt the poor and benefited the rich.
B. It led to less fuel being used than the amount that maximizes consumer surplus.
C. It encouraged the consumption of too much fuel at the expense of other goods.
D. It has no effect; consumers gained consumer surplus, but taxpayers lost the same
amount because they had to finance the subsidy.
Answer:
If the marginal utilities are constant for travel and food and the marginal utility per
dollar of travel is 50 and the marginal utility per dollar of food is 30:
A. the total utility of food and travel is 80.
B. we can gain 20 units of utility net by spending one less dollar on food and one more
dollar on travel.
C. we can gain 20 units of utility net by spending one more dollar on food and one less
dollar on travel.
D. we can gain 30 units of utility net by spending one less dollar on food and one more
dollar on travel.
Answer:
Suppose when you are offered $7.00 per hour to work in the campus library, you choose
not to work, but when you are offered $10.00 per hour, you accept a part-time position.
Your behavior can best be explained by the fact that your supply of labor curve is:
A. horizontal.
B. vertical.
C. downward-sloping.
D. upward-sloping.
Answer:
A policy that requires all the people to certify that they have reduced total consumption,
not necessarily their own individual consumption, by a specified amount, is a(n):
A. external incentive plan.
B. internal incentive plan.
C. tax incentive plan.
D. market incentive plan.
Answer:
John can clean the house in three hours and do the laundry in four. Jane can clean the
house in two hours or do the laundry in two. Can they benefit by specialization and
trade?
A. Neither can benefit because John has nothing to offer.
B. John could benefit from an exchange, but Jane cannot because she is better at both.
C. Both can benefit because John has a comparative advantage in laundry.
D. Both can benefit because John has a comparative advantage in cleaning.
Answer:
Adverse selection is most likely to be a problem when:
A. one side of the market, either buyer or seller, has better information than the other
side.
B. there are public goods involved.
C. the good being exchanged has negative externalities.
D. the good being exchanged has free rider problems.
Answer:
In the cartel model of oligopoly, the firms would decide how much to produce where:
A. marginal cost equals marginal revenue.
B. marginal cost equals price.
C. marginal cost equals average total cost.
D. the kink in the demand curve is.
Answer:
Proposals in Flint Hills, Kansas, to build wind turbines to generate electricity have
pitted environmentalist against environmentalist. Members of the Kansas Sierra Club
support the turbines as being a way to reduce use of fossil fuel, but local chapters of the
Nature Conservancy say they will befoul the landscape. The chapters of the Nature
Conservancy argue that wind turbines:
A. are a source of negative externalities.
B. reduce negative externalities elsewhere in the economy.
C. create a free rider problem.
D. are a way of solving a free rider problem.
Answer:
Which of the following costs is independent of output?
A. Variable costs
B. Total costs
C. Marginal costs
D. Fixed costs
Answer:
Refer to the graph shown. In equilibrium, producer surplus is equal to:
A. 600.
B. 1,200.
C. 1,400.
D. 2,000.
Answer:
The official poverty income threshold in the United States is:
A. adjusted for changes in the basket of food purchased by the average family.
B. not adjusted for the effects of inflation.
C. adjusted for inflation.
D. adjusted for increases in standard of living.
Answer:
The difference between a perfectly competitive firm and a monopolistically competitive
firm is that a monopolistically competitive firm faces a:
A. horizontal demand curve and price equals marginal cost in equilibrium.
B. horizontal demand curve and price exceeds marginal cost in equilibrium.
C. downward-sloping demand curve and price equals marginal cost in equilibrium.
D. downward-sloping demand curve and price exceeds marginal cost in equilibrium.
Answer:
Refer to the following graph.
The Gini coefficient is calculated as area:
A. B divided by area A.
B. A divided by area A + B.
C. A divided by area B.
D. A + area B divided by area B.
Answer: