1) Price and marginal revenue are identical for an individual purely competitive seller.
2) In a well-functioning “cap-and-trade system” for pollution rights, society benefits
because pollution will be brought down to insignificant levels.
3) There is no evidence that unions are able to increase wage rates above those that the
market would otherwise provide.
4) A moral hazard problem occurs before a transaction – when people alter their
behavior before they sign a contract, imposing costs on the other party.
5) When a profit-maximizing competitive firm decides to produce at a loss because its
price is below average cost but above average variable cost, that is a long-run decision.
6) Between System 1 and System 2 in the brain, System 1 makes most of the decisions.
7) Economic theory suggests that immigration should be allowed into a country until
the marginal benefit of the last immigrant is zero.
8) A competitive firm’s marginal revenue product of labor will fall as it employs more
labor because of the decrease in the price of labor as more of it is employed.
9) Government borrowing:
A.is the primary means of financing public expenditures.
B.provides a stimulus to government spending with no opportunity cost.
C.may crowd out private sector investment.
D.is prohibited by the U.S. constitution.
10) Which of the following statements about specific excise taxes is true?
A.These taxes are levied on a full wide range of consumer goods
B.These taxes are usually transparent to (and easily reckoned by) the buyers
C.A large portion of these taxes are often borne by the sellers, not shifted to the buyers
D.In the U.S., these taxes are more common than sales taxes
11) In a supply and demand model of the labor market for non-preferred workers, a
reduction in employer prejudice against non-preferred workers will:
A.Increase supply, raise the wage rate, and decrease the employment of these workers
B.Decrease supply, lower the wage rate, and decrease employment of these workers
C.Decrease demand, lower the wage rate, and decrease the employment of these
workers
D.Increase demand, raise the wage rate, and increase the employment of these workers
12) Farm programs such as those of the United States and the European Union:
A.are consistent with free world trade in agricultural products.
B.cause a misallocation of agricultural resources internationally.
C.cause the United States and the European Union to underproduce, while other nations
overproduce, farm products.
D.raise productivity in developing nations.
13) Answer the question based on the table below showing the marginal utility
schedules for product X and product Y for a hypothetical consumer. The price of
product X is $4 and the price of product Y is $2. The income of the consumer is $20.
Refer to the above table. Suppose that the consumer’s income increased from $20 to
$30. What would be the utility-maximizing combination of products X and Y?
A.3X and 3Y
B.4X and 4Y
C.5X and 4Y
D.5X and 5Y
14) The major virtues of the market system include all of the following, except:
A.It promotes an efficient allocation of resources
B.It leads to equality in the distribution of income
C.It provides incentives for greater production and higher incomes
D.It emphasizes the freedom to pursue self-interest
15) The Herfindahl index measures the:
A.Size of the market share of the four largest firms in an industry
B.Sum of the squared values of market shares of firms in an industry
C.Increase in economic concentration resulting from a conglomerate merger
D.Effect of per se violation in antitrust cases
16) A pure monopolist is producing an output such that ATC = $4, P = $5, MC = $2,
and MR = $3. This firm is realizing:
A.a loss that could be reduced by producing more output.
B.a loss that could be reduced by producing less output.
C.an economic profit that could be increased by producing more output.
D.an economic profit that could be increased by producing less output.
17) Which pitfall to sound economic reasoning is reflected in a person’s view that
“pharmaceutical and oil companies are price-gouging the consumers”?
A.Faulty definition
B.Post hoc fallacy
C.Loaded terminology
D.Confusing correlation and causation
18) Suppose that the quantity of a certain type of farmland available is 400,000 acres,
and the demand for this land is given in the table below.
Refer to the above information and table. How much of the farmland will be rented?
A.200,000 acres
B.300,000 acres
C.400,000 acres
D.500,000 acres
19) Which of the following most closely relates to the idea of opportunity costs?
A.trade-offs.
B.economic growth.
C.technological change.
D.capitalism.
20) The price of diamonds is substantially greater than the price of water because:
A.The total utility of water is greater than the total utility of diamonds
B.The total utility of diamonds is greater than the total utility of water
C.The marginal utility of the last unit of a diamond is significantly greater than the
marginal utility of the last gallon of water consumed by a typical person
D.The marginal utility of the last unit of a diamond is significantly less than the
marginal utility of the last gallon of water consumed by a typical person
21) If there is a small surplus in the combined current account plus capital and financial
account for a certain year, then to make the two accounts balance there will be:
A.An increase in the exchange rate
B.A decrease in the exchange rate
C.An increase in official reserve holdings
D.A decrease in official reserve holdings
22) Describe the trends in total and per capita water use, energy consumption, and trash
generation in the United States from 1950 to 2010 . What do they indicate about
resource use?
23) What are the major features of monopolistic competition compared to pure
competition and pure monopoly?
24) What have been the poverty trends in the past forty-five years?
25) What is regulatory capture? Name an industry in which regulatory capture is
present.
26) What is the meaning of the incidence of a tax? Give an example using a landlord
and tenants.
27) Differentiate between a normal (superior) and an inferior good.