Flu vaccinations of school children have the unintended effect of protecting the
vulnerable elderly from contracting the virus. This is an example of a:
A. free rider problem.
B. social force.
C. goods distribution.
D. positive externality.
Answer:
If the demand for flat screen television sets is rising while at the same time the price of
a flat screen TV is falling, there is evidence of:
A. economies of scale.
B. diseconomies of scale.
C. constant returns to scale.
D. diminishing marginal product.
Answer:
Refer to the following table to answer the question. Demand is most elastic between:
A. $2 and $4.
B. $4 and $6.
C. $6 and $8.
D. $8 and $10.
Answer:
Suppose caviar sales soars at the same time price increases. What would lead to both a
higher quantity sold and higher price of caviar?
A. A shift in demand to the right and a larger shift in supply to the right.
B. A shift in demand to the left and a smaller shift in supply to the left.
C. A shift in demand to the right and a shift in supply to the left.
D. A shift in demand to the left and a smaller shift in supply to the right.
Answer:
Refer to the graph shown. The short-run equilibrium price for the monopolistically
competitive firm represented is:
A. $0.60.
B. $0.85.
C. $0.95.
D. $1.00.
Answer:
Variable costs:
A. exist only in the short run.
B. change as output changes.
C. are positive even when a firm produces no output.
D. do not vary with output.
Answer:
Oligopoly is probably the best market for technological change because:
A. the typical oligopoly has the funds to carry out research and development and
believes that its competitors are innovating, which motivates it to conduct research and
development.
B. the typical oligopoly keeps price very close to average total cost because it fears the
entry of new rivals if its profits are excessively high.
C. the typical oligopoly lacks the funds to carry out research and development and
therefore will use basic research from universities.
D. research and development occurs only if government subsidizes such activity, and
government tends to subsidize oligopolies.
Answer:
The principle of diminishing marginal utility states that marginal utility:
A. is negative.
B. is positive.
C. is always falling.
D. falls after some point.
Answer:
Which of the following is one of the reasons economists sometimes differ in their views
on social policy?
A. Economists’ subjective value judgments will differ.
B. Most so-called economists have received no formal training.
C. Different models focus on the same aspects of a problem.
D. Empirical evidence is so precise that there is little room for different interpretations.
Answer:
In 1996, Archer Daniels Midland Company was found guilty of fixing the price of
lysine. This is an example of:
A. judgment by performance.
B. judgment by structure.
C. judgment by design.
D. Such a judgment is not part of U.S. antitrust policy.
Answer:
Don and Dana have both been accused of insider trading. Don knows that if he
confesses while Dana keeps silent, he will receive a 1-month jail sentence. He also
knows that if Dana confesses and he keeps silent, he will receive a 12-month jail
sentence. If neither of them confesses, there will be insufficient evidence to convict
either and they will serve no time. If both of them confess, they will both serve a
3-month jail sentence. Don’s best strategy is to:
A. confess in order to avoid the possibility of a 1-year jail sentence.
B. confess because then he will not have to serve a jail sentence.
C. not confess because keeping silent ensures that they will not have to serve jail
sentences.
D. not confess because doing so guarantees a jail sentence.
Answer:
Refer to the graph shown. A firm that produces 900 units of output using the plant size
associated with SATC2 minimizes:
A. both long-run and short-run average total cost.
B. long-run average total cost only.
C. short-run average total cost only.
D. neither long-run nor short-run average total cost.
Answer:
Markets can exist:
A. with or without property rights.
B. only if there are property rights.
C. only if there is perfect information.
D. only if all goods are private.
Answer:
Refer to the following graph.
If the demand curve is curve D for a monopoly, the marginal revenue curve is:
A. A, which intersects the x-axis at 1/4 the quantity where the demand curve intersects
the x-axis.
B. B, which intersects the x-axis at 1/2 the quantity where the demand curve intersects
the x-axis.
C. C, which intersects the x-axis at 3/4 the quantity where the demand curve intersects
the x-axis.
D. D, which intersects the x-axis at the same quantity where the demand curve
intersects the x-axis
Answer:
Refer to the graph shown. The monopolistically competitive firm represented is in:
A. both short-run and long-run equilibrium because price equals marginal cost at the
profit-maximizing output level.
B. both short-run and long-run equilibrium because price exceeds average total cost at
the profit-maximizing output level.
C. short-run equilibrium because price exceeds average total cost at the
profit-maximizing output level.
D. long-run equilibrium because economic profits are zero at the profit-maximizing
output level.
Answer:
The efficient amount of pollution control is:
A. the amount for which the total social benefit equals the total social cost of pollution.
B. the amount for which the marginal social benefit equals the marginal social cost of
pollution.
C. always zero.
D. always a 100 percent abatement.
Answer:
Refer to the following table.
If the price of one can of Alpo is $0.50 and the price of each McBurger is $1, which of
the following would Ms. Tightwad, a utility-maximizing consumer, buy with her $4?
A. 4 McBurgers
B. 3 McBurgers and 2 cans of Alpo
C. 2 McBurgers and 4 cans of Alpo
D. 1 McBurger and 6 cans of Alpo
Answer:
Refer to the graph shown. Assuming each carnival game costs $1 and each Ferris wheel
ride costs $2, a consumer with $10 to spend will optimally choose to consume at point:
A. A.
B. B.
C. C.
D. D.
Answer:
When taxation is proportional, the tax rate an individual pays:
A. remains constant as the individual’s income increases.
B. increases as the individual’s income increases.
C. falls as the individual’s income increases.
D. varies as the individual’s income changes.
Answer:
When a country imposes a tariff:
A. the domestic price of the imported good falls.
B. domestic consumption of the imported good falls.
C. domestic production of the good falls.
D. domestic production of the good is unchanged.
Answer:
Both liberal and conservative economists believe that:
A. people are little influenced by sociological effects.
B. they have nothing in common.
C. economic incentives are important.
D. that people make choices without reasoning.
Answer:
A price-discriminating monopolist will charge a higher price to:
A. individuals with a more inelastic demand.
B. individuals with a more elastic demand.
C. women.
D. minorities.
Answer:
If the government imposes an excise tax on gasoline equal to $0.25 per gallon and the
demand curve for gasoline is downward-sloping, the supply of gasoline will:
A. shift upward and the price will increase by $0.25 per gallon.
B. shift upward and the price will increase by less than $0.25 per gallon.
C. shift downward and the price will decrease by $0.25 per gallon.
D. shift downward and the price will decrease by less than $0.25 per gallon.
Answer:
Adam Smith advocated laissez-faire because he believed it was in the interest of:
A. capitalists, whom he regarded as the most dynamic and progressive element in
society.
B. the proletariat, who would receive higher wages.
C. the government, which would profit from higher taxes.
D. society as a whole.
Answer:
Perfectly competitive firms:
A. are price takers.
B. are individually able to influence the market price.
C. will succeed by charging a price higher than that charged by the rest of the market.
D. can influence the prices of other firms in the same industry by altering their own
prices.
Answer:
Mainstream economists focus on:
A. how the invisible hand achieves equilibrium through the market.
B. the tensions among social classes.
C. political restrictions that provide rents to various groups.
D. cultural and historical aspects of the market.
Answer:
At the socially optimum quantity of production, price equals:
A. marginal cost.
B. marginal revenue.
C. average total cost.
D. average variable cost.
Answer:
A screening question is structured:
A. to screen unqualified applicants for a job.
B. to extract information from prisoners.
C. to alter a respondent’s behavior.
D. to reveal strategic information about the person who answers.
Answer:
Monopolistically competitive firms:
A. can earn economic profits or losses in both the short run and the long run.
B. can earn either profits or losses in the short run but earn zero economic profits in the
long run.
C. earn economic profits in the short run but zero economic profits in the long run.
D. earn zero economic profits in both the short run and the long run.
Answer:
Suppose a lazy monopolist’s fixed costs are higher than the fixed costs of an efficient
monopolist. In all other respects the monopolists are the same. Which of the following
statements about this lazy monopolist is true?
A. Its total profit is lower than that of the monopolist producing efficiently.
B. Its total profit is the same as that of the monopolist producing efficiently.
C. Its total revenue is less than that of the monopolist producing efficiently.
D. It produces less than does the monopolist producing efficiently.
Answer:
Refer to the graph shown. To maximize profit, this perfectly competitive firm should
produce:
A. 30 units of output.
B. 40 units of output.
C. 50 units of output.
D. 60 units of output.
Answer:
The main advantage that ACE models have over other models is that:
A. economists do not have to ‘solve” the model on their own.
B. they look only at single equilibrium outcomes.
C. they eliminate the importance of mathematics.
D. they primarily use deductive methods.
Answer: