In the graph shown, the country has a trade:
A. deficit.
B. surplus.
C. balance.
D. appreciation.
Answer:
Don and Dana have both been accused of insider trading. Don knows that if he
confesses while Dana keeps silent, he will receive a 1-month jail sentence. He also
knows that if Dana confesses and he keeps silent, he will receive a 12-month jail
sentence. If neither of them confesses, there will be insufficient evidence to convict
either of insider trading, but there is enough evidence to convict each of them
individually of obstructing justice, which carries a 2-month sentence. If both of them
confess, they will both serve a 3-month jail sentence. This situation is:
A. an example of cartel behavior.
B. an application of the prisoner’s dilemma.
C. not realistic because those accused of insider trading always keep silent.
D. not realistic because those accused of insider trading are never encouraged to
confess.
Answer:
Which of the following would be expected to cause an increase in the supply of fax
machines?
A. An increase in the number of business firms demanding fax machines
B. An increase in the price of fax machines
C. A decrease in the cost of manufacturing fax machines
D. The expectation that the price of fax machines will increase in future
Answer:
Despite the fact that the Quick-Buzz Coffee Company provides a coupon in the local
newspaper that can be redeemed for $1 off the price of its best-selling coffee beans, not
all buyers actually use the coupon. Assuming everyone has a subscription to the
newspaper, from this we know that:
A. all coffee drinkers have a highly elastic demand.
B. all coffee drinkers have a highly inelastic demand.
C. the coffee drinkers who use the coupons have less elastic demand than the coffee
drinkers who pay full price.
D. the coffee drinkers who use the coupons have more elastic demand than the coffee
drinkers who pay full price.
Answer:
The text mentions 10 sources of U.S. comparative advantage. Which of the following is
not one of them?
A. Relatively open immigration laws
B. Religious diversity
C. Skills of the U.S. labor force
D. A large stock of intellectual property rights
Answer:
The labor supply curve is generally considered to be upward-sloping because the
opportunity cost of leisure:
A. increases as wages get higher.
B. decreases as wages get higher.
C. remains unchanged as wages get higher.
D. has nothing to do with wages.
Answer:
The supply and demand model is the workhorse of the principles of economics because:
A. it is a useful model by which students can be introduced to economic reasoning.
B. it is a perfect model and can never be improved upon.
C. it does not have to have any empirical testing to back up the results of the model.
D. it follows directly from the inductive approach to economics.
Answer:
Refer to the table shown. The marginal product of the sixth worker is:
A. 6.
B. 7.
C. 8.
D. 9.
Answer:
Refer to the following graph.
This set of cost curves is:
A. correct.
B. wrong because the average total cost and marginal cost curves are switched.
C. wrong because the average total cost and average variable cost curves are reversed.
D. wrong because the average fixed cost curve is shown to be below the average
variable cost.
Answer:
If the supply curve intersects the vertical (price) axis, the supply curve has an elasticity:
A. less than 1.
B. equal to 1.
C. greater than 1.
D. that is indeterminate.
Answer:
A person will pay $1,000 (and not more) extra for a bigger car that he or she feels is
safer. This car will reduce the chance of dying in an automobile accident by 1/550. That
means that the buyer is implicitly valuing his or her life at roughly:
A. $5.500.
B. $55,000.
C. $550,000.
D. $5,500,000.
Answer:
Refer to the table shown. The average product when eight workers are employed is:
A. 3.
B. 4.
C. 5.
D. 6.
Answer:
The market demand curve for a product produced in a perfectly competitive industry is
normally:
A. a vertical line.
B. upward-sloping.
C. a horizontal line.
D. downward-sloping.
Answer:
If your cell phone bill is $40 when you use up to 300 minutes per month or $80 when
you use between 300 and 400 minutes per month, the marginal cost of the 301st minute
is:
A. $0.13.
B. $0.27.
C. $40.
D. $80.
Answer:
Market equilibrium maximizes the sum of:
A. total cost and total benefit.
B. consumer surplus and producer surplus.
C. marginal cost and marginal benefit.
D. excess demand and excess supply.
Answer:
Which of the following is a characteristic of a market economy?
A. Private property
B. Government ownership of the means of production
C. Distribution according to need
D. Tradition determines the what, how, and for whom decisions
Answer:
If the supply of a product is inelastic, this implies that a specific percentage change in
price leads to:
A. an equal percentage change in the quantity supplied.
B. a larger percentage change in the quantity supplied.
C. a smaller percentage change in the quantity supplied.
D. no percentage change in the quantity supplied.
Answer:
When marginal utility is zero, total utility is:
A. increasing.
B. decreasing.
C. zero.
D. at its maximum.
Answer:
The underlying psychological foundation of individual choice and economic reasoning
is:
A. generosity.
B. focal point equilibrium.
C. bounded rationality.
D. self-interest.
Answer:
Behavioral economists believe that in helping people make decisions about things such
as buying a house and getting married, ______ could be helpful.
A. an incentive compatibility problem
B. a push
C. a nudge
D. a shadow price
Answer:
The Herfindahl index and the concentration ratio fail to give a complete picture of an
economy’s competitiveness because:
A. they measure each firm’s share of sales rather than each firm’s share of profits.
B. many corporations are conglomerates, spanning a variety of different industries.
C. they don’t account for mergers within an industry.
D. they are based on market share, not market size.
Answer:
That price tends to fall when quantity supplied is greater than quantity demanded is an
example of:
A. an economic theorem.
B. an economic precept.
C. a natural experiment.
D. efficiency.
Answer:
When workers earn below-subsistence wages in a free market economy, some workers
will starve. As a result, the supply of labor curve will shift:
A. rightward, causing the wage to fall further.
B. rightward, causing the wage to rise.
C. leftward, causing the wage to fall further.
D. leftward, causing the wage to rise.
Answer:
Refer to the graph shown that depicts a third-party payer market for prescription drugs.
What happens to expenditures by consumers in this market if a $2 co-pay is established
compared to a free-market equilibrium?
A. Expenditures fall by $30
B. Expenditures rise by $90
C. Expenditures fall by $120
D. Expenditures remain at $150
Answer:
Refer to the graph below.
Which of the shifts explains what will happen to the production possibility curve if
political unrest and strikes disrupt all sectors of an economy equally?
A. I
B. II
C. III
D. IV
Answer:
Cartels are organizations that:
A. keep markets contestable.
B. encourage price wars.
C. coordinate the output and pricing decisions of a group of firms.
D. use predatory pricing to monopolize industries.
Answer:
Refer to the table show. Using the four-firm concentration ratio, the tire industry is best
categorized as:
A. perfectly competitive.
B. a pure monopoly.
C. monopolistically competitive.
D. oligopolistic.
Answer:
Sin taxes are most effective when imposed on goods for which:
A. both demand and supply are elastic.
B. both demand and supply are inelastic.
C. demand is inelastic and supply is elastic.
D. demand is elastic and supply is inelastic.
Answer:
Refer to the graph shown. Suppose Country X exports agricultural goods to Country Y
in exchange for industrial goods. This pattern of trade increases consumption in both
countries only if:
A. X and Y share production possibility curve A.
B. X’s production possibility curve is B and Y’s is A.
C. X’s production possibility curve is A and Y’s is B.
D. X and Y share production possibility curve B.
Answer:
Once a company like Microsoft has achieved market domination:
A. the chances of a competitor winning the business of dissatisfied customers will
increase, making continued market domination unlikely.
B. antitrust laws will automatically force the company to break up.
C. the commitment by consumers to the industry standard created by Microsoft makes
it very difficult for other firms to compete.
D. it is very unlikely to attempt further innovation.
Answer:
The elasticity of labor demand does not depend on the:
A. elasticity of demand for the firm’s product.
B. relative importance of the factor in the production process.
C. possibility of and cost of substitution in production.
D. elasticity of labor supply.
Answer:
Refer to the graph shown. If consumers had to pay $13 per unit for this product instead
of $10 per unit, consumer surplus would fall from:
A. 2,250 to 1,125.
B. 1,125 to 810.
C. 1,500 to 810.
D. 1,125 to 405.
Answer: