1) The income effect explains an exception to the law of demand.
2) The fee-for-service arrangement for paying doctors is one way to reduce health care
costs.
3) The world price for a traded product will be between the domestic no-trade prices of
the trading nations.
4) Deregulation of an industry will always lead to an improvement in economic
efficiency.
5) Answer the question on the basis of the following information. Assume that by
devoting all its resources to the production of X, nation Alpha can produce 40 units of
X. By devoting all its resources to Y, Alpha can produce 60Y. Comparable figures for
nation Beta are 60X and 40Y.
Refer to the given information. If Alpha had produced 20X and 30Y and Beta had
produced 30X and 20Y before specialization and trade, then we can say that the gains
from specialization and trade are 10X and 10Y.
6)
Refer to the diagram. If this represents a typical firm in the industry and the firm is
producing at the profit-maximizing level of output in the short run, then in the long run
we would expect more firms to enter the market.
7) If marginal utility is diminishing, total utility must also be declining.
8) One characteristic of sequential games is that they all have first-mover advantages.
9) As a consumer moves down a given indifference curve, his or her total utility will
diminish.
10) Producing a good in the least costly way is known as allocative efficiency.
11) Thomas Malthus argued that increases in living standards tend to reduce birthrates.
12) An upward-sloping long-run supply curve indicates a constant-cost industry.
13) The purchase of a foreign hotel by a U.S. company is recorded as a credit in the
financial account of the U.S. balance-of-payments statement.
14) In 2011, food workers had a much higher unionization rate than teachers.
15) Capital flight from DVCs (developing countries) tends to offset much of the foreign
loans and aid that they receive from IACs (industrially advanced countries).
16) Compared to the mid-1960s, the percentage of the U.S. Federal budget spent on
R&D in recent years is:
A.About the same
B.Much smaller
C.Slightly bigger
D.Much bigger
17) Assume that A and B are both priced at $1 per unit and that Mary has $10 to spend
on A and B. She buys 6 units of A and 4 units of B. The marginal utility of the final unit
of A bought is 12 and that of B is 8. This indicates that:
A.Mary’s consumption is in equilibrium
B.Given another dollar, Mary should buy an additional unit of B
C.In order to maximize utility, Mary should buy more of B and less of A
D.In order to maximize utility, Mary should buy more of A and less of B
18) Since the 1930s, the U.S. government has supported agriculture with a “farm
program” that includes the following, except:
A.Price ceilings for farm products
B.Agricultural research
C.Farm crop insurance
D.Soil and water conservation
19) Microfinance refers to:
A.Small-size stock markets with very limited capitalization
B.A system of providing credit to small-business owners
C.Bond markets for governments of small nations
D.Deposits in small banks in developing nations
20) Assume an economy is incurring unemployment. The effect of resolving this
problem will be to:
A.move the level of actual output on to the economy’s production possibilities curve.
B.create a less equal distribution of income.
C.shift its production possibilities curve to the left.
D.shift its production possibilities curve to the right.
21) Some economists prefer to look at the distribution of consumption rather than that
of income. A Review of Economic Studies article in 2006 reported that consumption
inequality in the U.S. is:
A.About the same as the income inequality
B.Worse than the income inequality
C.Less severe than the income inequality
D.Highly unstable from one year to the next
22) What are the effects on U.S. imports and exports when the U.S. experiences
economic growth stronger than its major trading partners?
A.U.S. imports will increase more than U.S. exports
B.U.S. exports will increase more than U.S. imports
C.U.S. imports will decrease, but U.S. exports will increase
D.There will be no effect on U.S. imports and exports
23) The moral hazard problem created when consumers acquire health insurance leads
them to:
A.Take more care of their health
B.Consume more health care services
C.Seek less care from their physicians
D.Exercise more and eat healthier food
24) Assume a diagram in which a budget line is imposed on an indifference map. A
consumer will maximize her utility:
A.at any point where the budget line and an indifference curve intersect.
B.at either point where the budget line intersects the horizontal and vertical axes.
C.where the budget line is tangent to an indifference curve.
D.where the ratio of the two product prices equals the reciprocal of the consumer’s
income.
25) Which of the following is not a necessary characteristic of a purely competitive
industry?
A.The industry- or market demand is highly elastic
B.Firms can enter or leave the industry
C.There are so many firms that none can influence market price
D.Consumers see no difference between the product of one firm and that of another
26) In answering the question, assume a graph in which dollars are measured on the
vertical axis and output on the horizontal axis.
Refer to the information. For a purely competitive firm, total revenue graphs as a:
A.straight, upsloping line.
B.straight line, parallel to the vertical axis.
C.straight line, parallel to the horizontal axis.
D.straight, downsloping line.
27) Suppose a worker feels unhappy with his job and consequently quits. This
illustrates:
A.the voice mechanism.
B.featherbedding.
C.the exit mechanism.
D.blacklisting.
28)
Refer to the diagrams, which pertain to a purely competitive firm producing output q
and the industry in which it operates. The predicted long-run adjustments in this
industry might be offset by:
A.a decline in product demand.
B.an increase in resource prices.
C.a technological improvement in production methods.
D.entry of new firms into the industry.
29) If a nation has a current account surplus and it does not have to make any
inpayments or outpayments of official reserves, it must have a:
A.surplus in its capital and financial account.
B.balance of payments deficit.
C.balance of payments surplus.
D.deficit in its capital and financial account.
30)
Refer to the diagrams. The firm:
A.has a principal-agent problem.
B.has a constant marginal resource cost of $5.
C.has a marginal resource cost that exceeds the wage rate for each worker.
D.will fail to maximize profits if it hires 5 workers.
31) Economic profits are equal to:
A.Total revenues minus fixed costs
B.Total revenues minus the costs of raw materials
C.Total revenues minus the opportunity costs of all inputs
D.Gross profit minus selling and operating expenses
32) External benefits in consumption refer to benefits accruing to:
A.Those who are selling the product to the consumers
B.Those who bought and consumed the product
C.Those other than the ones who consumed the product
D.Those who are consuming the product abroad
33)
Refer to the above graphs. (Assume that the pre-migration labor force in Country A is 0d
and that it is 0u in country B.) If business income is total output minus total labor cost,
then business income in country A after the immigration occurs is equal to area:
A.haf
B.habg
C.hcg
D.hce0
34) “Present value” refers to the:
A.value today of a specific amount of money to be received in the future.
B.current value of money held in a bank account.
C.amount to which some current amount of money will grow over time.
D.interest rate specified when a loan contract is signed.
35) What has been the recent view of antitrust laws?
36) In terms of economic and social conditions, how do industrially advanced countries
and developing countries differ?
37) Briefly explain the loanable funds theory of interest rate determination.
38) How effective have antitrust laws been in breaking up existing monopolies?
39) Does having an absolute advantage in producing both goods mean that youre
guaranteed to have a comparative advantage in both goods? Explain your answer.
40) Evaluate the statement: Tariffs and quotas are needed to protect American products
from dumping.
41) Describe the number of legal and unauthorized immigrants that have entered the
United States annually since the year 2000. What has been the effect of this
immigration on population and labor force growth in the United States?
42) Who gains and who loses from a protective tariff? Explain.
43) What are the basic differences between behavior economics and traditional
economic theory about consumer behavior?