1)
Refer to the payoff matrix. Suppose that Speedy Bike and Power Bike are the only two
bicycle manufacturing firms serving the market. Both can choose large or small
advertising budgets. If this is a repeated game, it is in the long-term best interests of
both players to:
A.compete, attempting to maximize their own payoffs each time the game is played.
B.agree to cooperate, but then cheat on the agreement.
C.agree to cooperate and then follow through on the agreement.
D.match the advertising behavior of the other player each time the game is played.
2) Answer the question on the basis of the following information. A farmer who has
fixed amounts of land and capital finds that total product is 24 for the first worker hired;
32 when two workers are hired; 37 when three are hired; and 40 when four are hired.
The farmer’s product sells for $3 per unit and the wage rate is $13 per worker.
Refer to the given information. The marginal product of the second worker is:
A.24
B.8
C.5
D.1
3) In the long run, the economic profits for a monopolistically competitive firm will be:
A.The same as the profits for a monopolist
B.Slightly less than the profits of a monopolist
C.The same as the profits for a purely competitive firm
D.Slightly more than the profits of a purely competitive firm
4) Answer the question on the basis of the following information for four highway
programs of increasing scope. All figures are in millions of dollars.
On the basis of the data we can say that:
A.Program D is the most efficient on economic grounds.
B.Program C is the most efficient on economic grounds.
C.Program B is the most efficient on economic grounds.
D.Program A is the most efficient on economic grounds.
5) In the table below are data on five different industries and the market shares for each
of the firms in the industry. Assume that there is no foreign competition, entry into the
industry is difficult, and that no firm in each industry is on the verge of bankruptcy. In
the column to the right of the table, calculate the Herfindahl index.
(a)Which industry has the most monopoly power and which industry has the least
monopoly power?
(b)If the sixth firm in the automotive industry sought to merge with the fifth firm in that
industry, would the government be likely to challenge the merger?
(c)Would a conglomerate merger between the first firm in the computer industry and the
second firm in the textiles industry likely be challenged by the government?
6) We would expect:
A.the demand for Coca-Cola to be less price elastic than the demand for soft drinks in
general.
B.the demand for Coca-Cola to be more price elastic than the demand for soft drinks in
general.
C.no relationship between the price elasticity of demand for Coca-Cola and the price
elasticity of demand for soft drinks in general.
D.none of these to hold true.
7) Data on two individuals preferences for a public good are reflected in the table
below. PA and PB represent the prices individuals A and B, the only two people in the
society, are willing to pay for the last unit of a public good, rather than do without.
(a) Complete the table below showing the collective willingness to pay for the public
good in this society.
(b)Given the supply schedule for this public good as shown by the Qs column, what is
the optimal quantity of this public good and what is the optimal price?
(c)What is the perceived marginal benefit and perceived marginal cost when 4 units of
the public good are supplied? What does this indicate about the allocation of resources
to this public good?
8) A surplus of a product will arise when price is:
A.above equilibrium, with the result that quantity demanded exceeds quantity supplied.
B.above equilibrium, with the result that quantity supplied exceeds quantity demanded.
C.below equilibrium, with the result that quantity demanded exceeds quantity supplied.
D.below equilibrium, with the result that quantity supplied exceeds quantity demanded.
9) In 2012, the capital account in the U.S. balance of payments was in:
A.deficit, and larger than the current account deficit.
B.surplus, and larger than the current account surplus.
C.balance, with no deficit or surplus.
D.deficit, and smaller than the current account deficit.
10) A currency depreciation in the foreign exchange market will:
A.Encourage imports into the country whose currency has depreciated
B.Discourage imports into the country whose currency has depreciated
C.Discourage exports from the country whose currency has depreciated
D.Encourage foreign travel by the citizens of the country whose currency has
depreciated
11) Alex sees that his neighbors’ lawns all need mowing. He offers to provide the
service in exchange for a wage of $20 per hour. Some neighbors accept Alex’s offer and
others refuse. Economists would describe Alex’s behavior as:
A.rational self-interest because he is attempting to increase his own income by
identifying and satisfying someone else’s wants.
B.greedy because he is asking for a high wage that some of his neighbors can’t afford to
pay.
C.selfish because he is asking for a wage that is higher than others might charge.
D.irrational because some neighbors refused his offer.
12) The agency responsible for investigating instances of fraudulent or misleading
advertising is the:
A.Federal Trade Commission
B.Interstate Commerce Commission
C.Federal Communications Commission
D.Uniform Business Practices Commission
13) A trade deficit refers to a situation where:
A.Government spending (including transfer payments) exceeds tax revenues
B.A nation’s purchases from other nations are less than its sales to other nations
C.Assets are less than liabilities
D.Exports are less than imports
14)
In the figure are two linear production possibilities curves for countries Alpha and Beta.
We can conclude that:
A.different value systems make it impossible to compare opportunity costs in the two
countries.
B.the opportunity cost of shelter is greater in Beta than it is in Alpha.
C.the opportunity cost of food is greater in Alpha than it is in Beta.
D.the opportunity cost of shelter is greater in Alpha than it is in Beta.