Which of the following is an example of a nudge?
A. Income is redistributed through tax and spending programs.
B. A farmer’s market raises prices because a storm destroyed crops.
C. Government taxes cigarettes.
D. An employee must check a box to opt out of a retirement program.
Answer:
The optimal quantity of pollution control occurs at the point where the:
A. level of pollution is reduced to zero.
B. marginal social benefit is at its maximum.
C. marginal social cost equals the marginal social benefit of pollution.
D. total benefit equals the total cost of pollution.
Answer:
Suppose both wages and employment increase. These changes most likely were caused
by:
A. an increase in labor demand.
B. an increase in labor supply.
C. a decrease in labor demand.
D. a decrease in labor supply.
Answer:
If the wages and productivity of U.S. workers are higher than those of Mexican
workers, a Japanese company would:
A. build a plant in the United States.
B. build a plant in Mexico.
C. be indifferent about where the plant is built.
D. require more information before deciding where the plant is built.
Answer:
Refer to the graph shown. The equilibrium quantity for the monopolistically
competitive firm represented is:
A. 30.
B. 50.
C. 60.
D. 70.
Answer:
Compared to the elasticity of demand for off-peak trains, one would expect elasticity of
demand for peak-time trains to be:
A. greater.
B. less.
C. unrelated.
D. the same.
Answer:
The general monitoring problem implies that:
A. profit maximization should always be considered to be a firm’s goal.
B. there is a cost of supervising employees so that they work toward the owner’s goals
rather than their own.
C. government must intervene to protect national goals.
D. competition will ensure common goals among the owners and managers of a firm.
Answer:
Refer to the graph below.
Which of the shifts explains what would happen to the production possibility curve if
improved technologies increased the production of prekindergarten (pre-k) toys by 25
percent and the production of children’s toys by 50 percent?
A. I
B. II
C. III
D. IV
Answer:
The model of supply and demand leads to the prediction that high interest rates cause:
A. an increase in the price of housing and a decrease in the number of homes
purchased.
B. a decrease in the price of housing and an increase in the number of homes purchased.
C. an increase in both housing prices and the number of homes purchased.
D. a decrease in both housing prices and the number of homes purchased.
Answer:
ALCOA was found guilty of violating the antitrust statutes in 1945 because it:
A. had engaged in unfair pricing practices.
B. forced competing firms out of business with unfair business practices.
C. exploited its monopoly power to charge high prices.
D. used its knowledge of the market to expand its capacity before any competitors had a
chance to enter the market.
Answer:
Having more money and a bigger house than other people is the key to happiness.
Which economic approach is most consistent with this idea?
A. Behavioral
B. Keynesian
C. Traditional
D. Engineering
Answer:
Households are on the:
A. supply side of factor markets and the demand side of goods markets.
B. demand side of factor markets and the supply side of goods markets.
C. supply side of both factor markets and goods markets.
D. demand side of both factor markets and goods markets.
Answer:
A Jackson Pollock painting can cost $1.2 million, whereas a poster reproduction of the
same painting costs only about $15. The reason is that:
A. the total utility of Jackson Pollock paintings is greater than the total utility of
Jackson Pollock posters.
B. the marginal utility of Jackson Pollock paintings is greater than the marginal utility
of Jackson Pollock posters.
C. the opportunity cost of Jackson Pollock paintings is greater than the opportunity cost
of Jackson Pollock posters.
D. Jackson Pollock paintings have more substitutes than Jackson Pollock posters.
Answer:
After one cow in Alberta was found with mad cow disease, the United States banned all
imports of Canadian cattle and beef. This action is an example of:
A. a tariff.
B. a quota.
C. a regulatory trade restriction.
D. an embargo.
Answer:
Even though 60,000 individuals in the United States wait for kidney transplants and, for
a price, there are many individuals who would be willing to supply a kidney (a healthy
person can donate one kidney without any problems), it remains illegal to buy and sell
organs in the United States. A market for kidneys does not exist because of:
A. political forces.
B. social forces.
C. economic forces.
D. market forces.
Answer:
In socialism:
A. economic forces do not operate.
B. individuals are encouraged to act for their own benefit.
C. government planning, rather than the market, is relied upon to coordinate economic
activity.
D. distribution is determined by the individual’s ability.
Answer:
In the United States, the ratio of the income of the top 20 percent to that of the bottom
20 percent is closest to:
A. 3:1.
B. 15:1.
C. 50:1.
D. 110:1.
Answer:
Refer to the graphs shown, which depict a perfectly competitive market and firm. If
market demand increases from D0 to D1, the firm will:
A. lower the price it charges.
B. earn negative economic profit in the short run.
C. earn positive economic profit in the short run.
D. earn positive economic profit in the long run.
Answer:
The supply of leather jackets would be expected to increase as a result of:
A. a decrease in the cost of producing leather jackets.
B. an increase in the price of leather jackets.
C. an increase in the popularity of leather jackets.
D. the expectation that the price of leather jackets will rise in the future.
Answer:
If pizzas and quesadillas are substitutes and the price of pizzas decreases, we would
expect to see:
A. an increase in the demand for quesadillas.
B. a decrease in the demand for quesadillas.
C. an increase in the quantity demanded for quesadillas.
D. a decrease in the quantity demanded for quesadillas.
Answer:
Paternalism leads people to:
A. make decisions that are good for themselves that they might not have made on their
own.
B. consider what their parents would do when making decisions even though they
themselves might not make those same decisions.
C. buy only what they need instead of what they want because doing otherwise is bad
environmental stewardship.
D. use their abilities as well as possible and purchase only what they need regardless of
price.
Answer:
Refer to the graph shown. If the market price is $3, a perfectly competitive firm:
A. breaks even.
B. earns a profit.
C. incurs a loss but can still cover its variable costs and some of its fixed costs.
D. incurs a loss and cannot cover its variable costs.
Answer:
If an industry has a Herfindahl index of 3,000, the contestable market model probably
would predict that the industry would be more likely to have a:
A. monopolistic price.
B. competitive price.
C. monopolistic price if there are no barriers to entry.
D. competitive price if there are no barriers to entry.
Answer:
Suppose that initially, supply is given by the equation Qs = 4P – 16. If, as a result of
lower production costs, the quantity supplied increases by 4 at every price, the new
supply equation would be:
A. Qs = 8P – 16.
B. Qs = P – 16.
C. Qs = 4P – 20.
D. Qs = 4P – 12.
Answer:
Refer to the graph shown. At which point is elasticity infinite?
A. A
B. B
C. C
D. D
Answer:
Which of the following games has a first-mover advantage?
A. tic-tac-toe
B. prisoner’s dilemma
C. rock, paper, scissors
D. Vickrey auction
Answer:
Refer to the graph shown. If the firm increases output from 30 to 40, total revenue will
increase:
A. more than total cost, and so profit will increase.
B. more than total cost, and so profit will decrease.
C. less than total cost, and so profit will increase.
D. less than total cost, and so profit will decrease.
Answer:
SNAP provides:
A. financial assistance to families with children under age 19.
B. nutritional assistance, often in the form of coupons redeemable at food stores.
C. medical assistance for the poor, paid for by the individual states.
D. assistance to poor people when emergencies arise that aren’t taken care of by any of
the other programs.
Answer:
Richard Vedder argues that the states that have spent the most on higher education in
the last 25 years have experienced the least economic growth. One might conclude that
higher education:
A. does not have important positive externalities.
B. does not have important negative externalities.
C. is a nonexcludable service.
D. has problems of adverse selection.
Answer:
Some argue that Sweden’s generous welfare benefits, which pay people who lose their
jobs as much as 80 percent of previous incomes for three years, has resulted in too-high
unemployment. This can be seen as an example of:
A. market failure due to unfair conditions produced by the labor market.
B. government not correcting externalities produced by the market.
C. government failure in fostering a competitive market environment.
D. globalization causing hardworking youth to emigrate.
Answer: