1) A price-discriminating monopolist will set a higher price where demand is more
elastic and a lower price where demand is less elastic.
2) Mutually-cancelling advertising by oligopolistic firms tend to improve economic
efficiency in the industry.
3) Economists widely agree that the value of the real-world multiplier is 2.5.
4) Definition of property rights is a key component to proper conservation of resources.
5) Two goods are considered to be related goods by many buyers: if the price of one
increases, buyers buy more of the other. This indicates that the two goods are
complements.
6) Suppose that a monopolist calculates that at its present output level, marginal cost is
$4.00 and marginal revenue is $5.00. The firm could increase profits by:
A.Decreasing price and increasing output
B.Increasing price and decreasing output
C.Decreasing price and leaving output unchanged
D.Decreasing output and leaving prices unchanged
7) Dividing nominal gross domestic product (GDP) by the money supply (M) is a way
to obtain the:
A.Velocity of money
B.Monetary multiplier
C.Equation of exchange
D.Monetary rule
8) Plant sizes get larger as you move from ATC-1 to ATC-4.
Refer to the above table. The firm experiences minimum efficient scale at what output
level?
A.2500
B.3000
C.3500
D.4000
9) An excise tax on imported items is known as a(n):
A.Quota
B.Tariff
C.Export restriction
D.Price ceiling
10) The total adult population of an economy is 175 million, the number of employed is
122 million, and the number of unemployed is 17 million. The percent of adults who
are not in the labor force is:
A.25.3 percent
B.20.6 percent
C.30.3 percent
D.13.9 percent
11) A fall in labor costs will cause aggregate:
A.Supply to increase
B.Demand to increase
C.Supply to decrease
D.Demand to decrease
12) The overall behavior of the economy:
A.is remarkably stable over time.
B.differs over time as prices become increasingly flexible in the months and years
following a shock.
C.differs over time as prices become increasingly sticky in the months and years
following a shock.
D.is easily controlled and stabilized by government policy.
13) Studies indicate that a lack of skill transferability in the U.S. has a particularly large
effect on the earnings of:
A.Domestic workers with low levels of human capital
B.First-generation immigrants
C.Immigrants who lack English-language skills
D.Highly-educated domestic workers
14) In a sequential game, the first mover into a new market:
A.always earns a greater payoff than the second mover.
B.may discourage the second mover from entering that market.
C.only enters when there is a dominant strategy.
D.guarantees that a Nash equilibrium will result.
15) The long-run total demand for commodity resources is driven by which of the
following forces?
A.Rising number of people alive and an increasing amount of consumption per person
B.Stable number of people alive and an increasing amount of consumption per person
C.Rising number of people alive and a stable amount of consumption per person
D.Rising number of people alive and a decreasing amount of consumption per person
16) Answer the question on the basis of the following balance of payments data for the
hypothetical nation of Econland. All figures are in billions of dollars.
(1) Goods exports +$220
(2) Goods imports -328
(3) Exports of services +54
(4) Imports of services -55
(5) Net investment income +18
(6) Net transfers -11
(7) Capital account -1
(8) Foreign purchases of Econland assets +124
(9) Econland purchases of foreign assets -21
Refer to the table above. Econland’s balance on the current account shows a:
A.Deficit of $91 billion
B.Deficit of $102 billion
C.Deficit of $109 billion
D.Surplus of $109 billion
17) If firms are losing money in a purely competitive industry, then the long run
adjustments in this situation will cause the market price to:
A.Increase, and the representative firm’s profits will increase
B.Decrease, and the representative firm’s profits will increase
C.Increase, and the representative firm’s profits will decrease
D.Decrease, and the representative firm’s profits will decrease
18) In the U.S. in the past six decades or so, we saw the following trends, except:
A.The average length of the workweek remained relatively constant
B.The size of the labor force expanded
C.Rising birthrates kept the native-born population growing at a steady rate
D.Women’s labor-force participation rate surged
19) Many economists agree that government should deal with monopolists on a
case-by-case basis. Policy options include the following, except:
A.If the monopoly is attained and maintained through anticompetitive behavior, the
government can file a suit based on antitrust laws
B.If the firm is a natural monopoly, the government may decide to regulate its prices
and operations
C.If the monopoly is maximizing economic profits, the government should subsidize
new firms to enter the industry
D.If the monopoly is subject, and vulnerable, to potential competition, the government
can decide to leave it alone
20) The implied risk-return point of a Ponzi scheme “asset”:
A.lies well above the Security Market Line.
B.lies well below the Security Market Line.
C.lies far out to the right along the Security Market Line.
D.lies at the intercept of the Security Market Line.
21) Explain the Solyndra Subsidy.
22) Explain the logic behind the fact that if the Federal Reserve lowers the risk-free
interest rate, return rates of other assets must fall by the same amount.
23) The following are three short-run average total cost schedules for the only three
possible plant sizes, 1, 2, and 3. Find the long-run average cost schedule and show the
result in the second table.
24) What is the difference between farm commodities and food products? How does the
number of competing firms change as farm commodities are processed into food?
25) A consumer has a daily income of $120 and purchases two products, X and Y. The
price of X is $3 and the price of Y is $4. The following six pairs of points for X and Y
define an indifference schedule: (7,40), (10,30), (15,20), (20,15), (30,10), and (40,8). In
the graph below, draw the budget line and the indifference curve. What amounts of X
and Y will allow the consumer to achieve equilibrium?
26) What are two affiliates of the World Bank? What do they do?
27) What is regulatory capture? Name an industry in which regulatory capture is
present.
28) What are the limitations to government’s role in the economy?
29)