1) The building of a new factory by a corporation would be an example of increasing
the infrastructure in a developing nation.
2) Reduction of tariff barriers against DVC imports would benefit both the DVCs and
the IACs.
3) About 10 percent of the U.S. labor force is in agriculture.
4) Natural monopoly may result where products produce substantial network effects
and can be simultaneously consumed by a large number of consumers.
5) Brand names and packaging are forms of product differentiation under monopolistic
competition.
6) In pure competition, resources are optimally allocated when production occurs at the
output level where P = MC.
7) A firm’s economic profit is usually higher than its accounting profit.
8) One prediction of the median-voter model is that during elections, candidates will
tend to become “centrists”.
9) In a market system, the income earned by owners of natural resources is called
interest income.
10) Chronic budget deficits can lead to all of the following, except:
A.Over-allocation of resources to the government sector, away from the private sector
B.”Smaller government” in the economy
C.Investors losing faith in the government’s ability to repay its debts
D.Government being forced to make drastic cuts in its spending
11) We use the midpoint formula in computing the price elasticity of demand coefficient
in order to:
A.Make the coefficient value become independent of whether price goes up or down
B.Convert absolute changes into percent-changes
C.Eliminate the negative sign of the coefficient
D.Make the coefficient become equal to the slope of the demand curve
12) Social insurance programs partially replace income that has been lost due to the
following, except:
A.Retirement
B.Disabilities
C.Temporary unemployment
D.Resignation from a job
13) Laissez-faire capitalism limits the government’s economic functions to the
following, except:
A.Protecting private property rights
B.Establishing a legal environment to enforce contracts among individuals
C.Preventing individuals and firms from coercing others
D.Setting prices of individual goods and services
14) Which of the following arguments is not generally made to justify farm subsidies?
A.The “family farm” is an American institution that should be protected and nurtured.
B.Agribusiness firms need subsidies to achieve economies of scale.
C.Farmers sell their output in purely competitive markets but must buy inputs from
imperfectly competitive firms.
D.Farmers cannot fully insure themselves against the risks unusual to farming, such as
floods, droughts, and pests.
15) A bank charges one borrower (A) 8 percent interest per year and another borrower
(B) 10 percent interest per year. Which of the following is a plausible reason for the
higher interest rate for B?
A.A is borrowing the money for a longer period than B
B.A is borrowing a larger amount than B
C.B is using the money for a less risky project than A
D.B has a better credit rating than A
16) If the price level rises by 4 percent in a year and nominal wages increase by 2
percent, then real wages will:
A.Decrease by 6 percent
B.Decrease by 4 percent
C.Decrease by 2 percent
D.Increase by 2 percent
17) If a purely competitive firm is producing at the P = MC output and realizing an
economic profit, at that output:
A.marginal revenue is less than price.
B.marginal revenue exceeds ATC.
C.ATC is being minimized.
D.total revenue equals total cost.
18) A decrease in the price of digital cameras would lead to a(n):
A.Increase in the price and quantity sold of memory cards
B.Decrease in the price and quantity sold of memory cards
C.Increase in the price and a decrease in quantity sold of memory cards
D.Decrease in the price and an increase in quantity sold of memory cards
19) The basic formula for the price elasticity of demand coefficient is:
A.absolute decline in quantity demanded/absolute increase in price.
B.percentage change in quantity demanded/percentage change in price.
C.absolute decline in price/absolute increase in quantity demanded.
D.percentage change in price/percentage change in quantity demanded.
20)
Refer to the diagrams. The profit-maximizing firm’s total revenue:
A.is 0abc.
B.is 0Wbc.
C.is Wab.
D.cannot be determined.
21) The agriculture industry includes both farm commodities and food products. Farm
commodities are usually sold in:
A.Monopolistically competitive or oligopolistic markets, while food-product markets
are highly competitive
B.Highly competitive markets, while food-product markets are monopolistically
competitive or oligopolistic
C.Monopolistically competitive or oligopolistic markets
D.Markets dominated by large firms
22) Ending discrimination against minority groups in educational processes and in
employment situations would cause total domestic output to:
A.Fall, because of the increased costs of training and living
B.Rise, because spending on consumer goods and services would decrease
C.Rise, because of an increase in the productivity of the labor force
D.Fall, since trained minority workers would force some present workers out of their
jobs
23) What three facts about people form the basis for prospect theory?
24) What are systematic errors? How does this conflict with the assumption of rational
decisions?
25) Explain how government intervention can improve economic efficiency in the
public good market.
26) Describe the diversity in the agriculture industry as it relates to farm commodities.
27) (Consider This) What is the hedonic treadmill? What are the implications of this
theory?