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1) Why is the percentage of business research and development spending for basic
research so small?
A.Basic research is the sole responsibility of university research labs
B.Scientific knowledge has minimal effect on technological advance
C.Scientific principles cannot be easily patented or commercialized
D.Basic research is confusing and not well understood by business executives
2) One important consequence of the confirmation bias is that:
A.Some people cannot correct a personal trait that might be causing them to fail in
many ventures
B.Someone could persist in pursuing a failed policy despite overwhelming evidence of
the failure
C.Bad decisions can be made because people will act without pausing to see whether
their intuition is correct or not
D.Some people may wrongly believe in their forecasting ability to predict future
outcomes of risky investments
3) Attaining "allocative efficiency" means that:
A.The law of increasing opportunity costs has reached a maximum
B.The least costly methods are being used to produce a product
C.Resources are being devoted to the production of products most desired by society
D.The gap between marginal benefits and marginal costs of the product is biggest
4)
Refer to the above graph. An inclusive union or an industrial union will set the wage
rate at:
A.Wc
B.Wu
C.Wm
D.Cannot be determined
5) The tendency of people to underestimate the time required to complete a task is
called the:
A.Planning fallacy
B.Framing effect
C.Hindsight bias
D.Availability heuristic
6) Total fixed cost (TFC):
A.falls as the firm expands output from zero, but eventually rises.
B.falls continuously as total output expands.
C.varies directly with total output.
D.does not change as total output increases or decreases.
7) One argument for having the government regulate natural monopolies is that without
regulation:
A.These monopolies usually produce things that are potentially harmful to our health
B.These monopolies produce at a level where marginal benefit is greater than marginal
cost
C.These monopolies produce at a level where marginal benefit is less than marginal
cost
D.The industry would become competitive and there would be too many firms in the
market to achieve efficiency
8)
Refer to the above graph showing the marginal product (MPL) and the average product
of labor (APL). At which quantity of labor employed does diminishing marginal returns
set in?
A.A
B.B
C.C
D.D
9) If resources A and B are complementary and employed in fixed proportions:
A.a change in the price of A will have no effect on the quantity of B employed.
B.an increase in the price of A may either increase or decrease the demand for B.
C.an increase in the price of A will increase the demand for B.
D.an increase in the price of A will decrease the demand for B.
10) The trains of the Transcontinental Railway Company, when shipping goods,
sometimes emit sparks that start fires along the tracks and damage the property of
others. If Transcontinental does not pay for the damage it causes, what has occurred?
A.Positive externality.
B.Demand-side market failure.
C.Supply-side market failure.
D.All of these.
11) Melanie and Oli are competing Pacific halibut fishers. Both have been allocated
ITQs that limit their catch to 1,000 tons of Pacific halibut each. Melanie's cost per ton is
$20; Oli's cost per ton is $28.
Refer to the information given. If the market price of Pacific halibut is $40 per ton,
what is the maximum amount Melanie would be willing to pay per ton for Oli's ITQs?
A.$20.
B.$28.
C.$40.
D.$12.
12) Sharon purchases two products with a given fixed budget, orange juice and soda.
Her marginal utility from orange juice is 60 and her marginal utility from soda is 30.
The price of a bottle of orange juice is $2.00 and the price of soda is $1.00. These data
suggest that:
A.Sharon is maximizing her utility from the given fixed budget
B.Sharon should buy more orange juice and less soda
C.Sharon should buy more soda and less orange juice
D.Sharon should buy less orange juice and soda
13) The higher prices charged by monopolists:
A.are like a private tax that redistributes income from consumers to monopoly sellers.
B.are socially optimal because they better reflect how much society values the good
relative to the resources used to produce it.
C.return to consumers through the public goods provided by monopolies.
D.have no effect on the distribution of income.
14) The equilibrium point in the market is where S and D curve intersect.
Refer to the graph above. At equilibrium, the total amount of spending that consumers
would be paying for the product is represented by the area:
A.a + b
B.a + b + c
C.a
D.b + c
