1) the optimal or allocatively efficient point on a production possibilities curve is
achieved where:
a.the smallest physical amounts of inputs are used to produce each good.
b.each good is produced at a level where marginal benefits equal marginal costs.
c.large amounts of capital goods are produced relative to consumer goods.
d.large amounts of consumer goods are produced relative to capital goods.
2) (consider this) consumers might leave a fast-food restaurant without being served
because:
a.they are misinformed about the marginal cost and marginal benefits of the food being
served.
b.they conclude that the marginal cost (monetary plus time costs) exceeds the marginal
benefit.
c.the environment is not conducive to a rational choice.
d.the lines waiting for service are not of equal length.
3) In a private closed economy, when aggregate expenditures exceed GDP:
A.GDP will decline.
B.business inventories will rise.
C.saving will decline.
D.business inventories will fall.
4) A patent on a new product benefits the firm securing it by:
A.limiting the direct imitation of the product by rivals for many years.
B.enabling the firm to retain “trade secrets” about the product.
C.reducing the firm’s legal expenses.
D.increasing the speed of diffusion of the new product.
5) Differences in the amounts and quality of education and training:
A.combine with differences in mental, physical, and aesthetic talents to produce income
inequality.
B.explain none of the income inequality in the United States.
C.explain nearly all the income inequality in the United States.
D.have lessened in the United States in the past decade, sharply reducing income
inequality.
6) If the Fed were to increase the legal reserve ratio, we would expect:
A.lower interest rates, an expanded GDP, and depreciation of the dollar.
B.lower interest rates, an expanded GDP, and appreciation of the dollar.
C.higher interest rates, a contracted GDP, and appreciation of the dollar.
D.higher interest rates, a contracted GDP, and depreciation of the dollar.
7) The goldsmith’s ability to create money was based on the fact that:
A.withdrawals of gold tended to exceed deposits of gold in any given time period.
B.consumers and merchants preferred to use gold for transactions, rather than paper
money.
C.the goldsmith was required to keep 100 percent gold reserves.
D.paper money in the form of gold receipts was rarely redeemed for gold.
8) Which of the following gave the Federal Trade Commission responsibility to protect
the public against false and misleading advertising?
A.Celler-Kefauver Act of 1950
B.Wheeler-Lea Act of 1938
C.Clayton Act of 1914
D.Sherman Act of 1890
9) in long-run equilibrium, purely competitive markets:
a.minimize total cost.
b.maximize consumer surplus.
c.yield economic profits to most sellers.
d.inevitably degenerate into monopoly in increasing cost industries.
10) In the U.S. Steel case of 1920 the courts held that:
A.the structure of an industry is more important than its behavior in determining
violations of the antitrust laws.
B.any firm which faces substantial import competition is exempt from the antitrust
laws.
C.although U.S. Steel possessed monopoly power, it had not violated the Sherman Act
because it had not unreasonably used that power.
D.the fact that U.S. Steel possessed monopoly power was a violation of the Sherman
Act.
11) a consumer is maximizing her utility with a particular money income when:
a.the total utility derived from each product consumed is the same.
b.mua/pa = mub/pb = muc/pc = … = mun/pn.
c.mua = mub = muc = … = mun.
d.pa = pb = pc = … = pn.
12) When aggregate demand declines, many firms may reduce employment rather than
wages because wage reductions may:
A.reduce per unit production costs.
B.reduce worker morale and work effort, and thus lower productivity.
C.increase the firms’ cost of raising financial capital.
D.reduce the demands for their products.