The basis of the argument favoring government intervention to correct informational
and rationality problems is that:
A. if information is not perfect or if one trader is not rational, a trade can result in one
party benefiting and the other losing.
B. entry into certain markets may be restricted so that excess profits cannot be
eliminated by the forces of competition.
C. people cannot possibly know how well off they will be as a result of a trade until
after the trade has occurred.
D. if individuals are free to produce whatever goods they want, when excess profit is
being made, more people will enter into the production of that good and consumers will
benefit as the price is pushed down.
Answer:
Refer to the graph above. If product demand increases from D1 to D2, the equilibrium
price of the product will:
A. increase from P1 to P2 and equilibrium quantity will increase from Q1 to Q2.
B. increase from P1 to P2 and equilibrium quantity will decrease from Q2 to Q1.
C. decrease from P2 to P1 and equilibrium quantity will increase from Q1 to Q2.
D. decrease from P2 to P1 and equilibrium quantity will decrease from Q2 to Q1.
Answer:
If air pollution control is a public good, it follows that:
A. the efficient output of air pollution control is zero.
B. additional persons can benefit from a given amount of air pollution control without
reducing the benefits enjoyed by others.
C. the efficient output of air pollution control can be attained by selling it by the unit in
a market.
D. the more air pollution control enjoyed by any one person, the less is available to
others.
Answer:
If robots are used to perform repetitive tasks formerly done by workers, the demand for
labor probably will:
A. fall in manufacturing but rise in other sectors, such as services.
B. rise in manufacturing but fall in other sectors, such as services.
C. fall overall, resulting in reduced living standards for workers as a group.
D. disappear entirely.
Answer:
Suppose that at the current price producers of CDs offer 5 million CDs for sale but
consumers want to buy 6 million. When the market coordinates the demand and supply
for CDs, the price of CDs will:
A. rise.
B. fall.
C. stay the same.
D. be fixed by the government.
Answer:
The central goal of the General Agreement on Tariffs and Trade (GATT) was to:
A. promote free trade associations and customs unions.
B. ensure a balance of trade between countries.
C. reduce trade barriers.
D. promote international security.
Answer:
Quantity restrictions benefit which group the most?
A. Consumers
B. Suppliers wanting to enter the market
C. Existing suppliers
D. Government
Answer:
The top four firms in the industry have 10 percent, 8 percent, 8 percent, and 6 percent
of the market. The four-firm concentration ratio of this market is:
A. 8.
B. 32.
C. 66.
D. 264.
Answer:
It is estimated that a 3 percent drop in the price of Asian and European autos will
decrease the demand for American cars by .84 percent. From this information one can
conclude that:
A. the income elasticity of demand for American cars is less than 1.
B. European and Asian cars are luxuries.
C. European and Asian cars are substitutes for American cars.
D. European and Asian cars are complements for American cars.
Answer:
The U.S. Justice Department argued that Microsoft maintained its monopoly position
because of:
A. reasonable business practices, but the result was still a monopoly.
B. lack of interest on the part of would-be competitors.
C. superior technological know-how.
D. unfair business practices.
Answer:
The president of a college has been told that when they raised their tuition by 15
percent the previous year, total revenue from tuition remained unchanged. Assuming the
change in revenue is due to the change in tuition only, the president could conclude that
demand for that college, over that tuition range, must be:
A. greater than 1.
B. less than 1.
C. equal to 1.
D. equal to zero.
Answer:
Refer to the following graph.
Although this monopolist could technically keep average total costs down to C0, its
costs are C1. This is an example of a(n):
A. lazy monopolist.
B. Y-inefficient firm.
C. monopolistic minimizer.
D. oligopolistic market.
Answer:
In the NAICS classification system, the broadest classification would be:
A. a two-digit industry.
B. a three-digit industry.
C. a four-digit industry.
D. a five-digit industry.
Answer:
Traditional economics assumes that:
A. the context of choices affects behavior.
B. the way choices are presented doesn’t matter.
C. people are predictably irrational.
D. laissez-faire is the right precept to apply.
Answer:
Refer to the table shown. If the market price is $6, a perfectly competitive
profit-maximizing firm will produce:
A. 1 unit of output.
B. 2 units of output.
C. 3 units of output.
D. 4 units of output.
Answer:
The marginal benefit from consuming another unit of a good:
A. must equal the marginal cost or the unit will not be consumed.
B. must be less than the marginal cost or the unit will not be consumed.
C. equals the increase in total benefits from consuming the unit.
D. equals the total benefit obtained from the consumption of all prior units.
Answer:
Which of the following would cause the demand curve for euros to shift left?
A. Americans want to buy more European goods.
B. Americans want to buy fewer European goods.
C. Europeans want to buy more American goods.
D. Europeans want to buy fewer American goods.
Answer:
A Wall Street Journal headline reads: “Cigar Shortage Draws New Brands into Market.”
The shortage resulted from a renewed interest in smoking cigars. What best describes
the facts behind the headline?
A. Price is too low, demand exceeds supply
B. Price is too low, quantity demanded exceeds quantity supplied
C. The cigar market is in equilibrium
D. A shift in supply has equilibrated supply and demand
Answer:
A market economy:
A. requires government to set prices.
B. allocates according to need.
C. distributes property rights.
D. expects people to be self-interested.
Answer:
In prisoner-of-war camps during World War II, the prisoners received identical packets
of food and supplies. Nonetheless, prisoners traded items from those identical packets
because their tastes differed. The initial distribution of packets was:
A. Pareto optimal because the packets were identical.
B. Pareto optimal because there was no fairer system.
C. not Pareto optimal because improvements were possible.
D. not Pareto optimal because improvement was not possible.
Answer:
The demand for a good is elastic. Which of the following would be the most likely
explanation for this?
A. The good is a necessity.
B. The good is broadly defined.
C. The good costs a large portion of one’s total income.
D. The time interval considered is short.
Answer:
The following graph shows average fixed costs, average variable costs, average total
costs, and marginal costs of production.
In the graph shown, the marginal cost curve is represented by which curve?
A. I
B. II
C. III
D. IV
Answer:
The average variable cost curve is a mirror image of the:
A. total product curve.
B. marginal product curve.
C. average product curve.
D. marginal cost curve.
Answer:
Laissez-faire is an economic:
A. theorem because it is based on deductive analysis of a model that is based on
assumptions.
B. theorem because it is the logical conclusion of a model with carefully stated
relationships among variables.
C. precept because it is based on a model and normative judgments about the relevance
of the model to the real world.
D. precept because it is the logical conclusion of a model with widely held assumptions.
Answer:
It is estimated that a 5 percent decline in income will reduce health care purchases by
2.5 percent and reduce dental service purchases by 8 percent. From this information,
one can conclude that:
A. health care is a necessity and dental services are a luxury.
B. health care is a luxury and dental services are necessities.
C. both health care and dental services are necessities.
D. both health care and dental services are luxuries.
Answer:
When the exchange rate value of the dollar rises and other things stay the same, what
happens to relative wage rates between the United States and other countries?
A. They rise.
B. They fall.
C. They don’t change.
D. It’s impossible to say.
Answer:
If the demand for legal services decreases, the demand for legal assistants probably
will:
A. not be affected.
B. increase.
C. decrease.
D. change in a manner that cannot be predicted.
Answer:
Specialization according to comparative advantage means that a country is producing
the goods:
A. that it wants to consume.
B. for which it has a relatively high opportunity cost.
C. for which it has a relatively low opportunity cost.
D. that it can produce at zero cost.
Answer:
Experiments based on the “ultimatum game” indicate that people are generally:
A. rational because they will take any amount offered to avoid the possibility of losing
money.
B. willing to pay money (reduce their income) to enforce their own sense of fairness.
C. not interested in utility.
D. irrational because they reject every offer.
Answer:
According to economist Colin Camerer of the California Institute of Technology, many
New York taxi drivers decide when to finish work by setting an income goal for
themselves. Since the effective hourly wage is higher on busy days, choosing to stop
working when a particular income goal is reached is:
A. consistent with an upward-sloping labor supply curve since the quantity of labor
supplied is higher when the wage is higher.
B. consistent with an upward-sloping labor supply curve since the quantity of labor
supplied is lower when the wage is higher.
C. inconsistent with an upward-sloping labor supply curve since the quantity of labor
supplied is lower when the wage is higher.
D. inconsistent with an upward-sloping labor supply curve since the quantity of labor
supplied is higher when the wage is higher.
Answer: