1) In a monopoly at equilibrium, price is greater than marginal cost.
2) Monetary policy attempts to change the level of spending by altering interest rates.
3) One consequence of the confirmation bias is that many people believe that they
could “beat the (stock) market”.
4) The paradox of voting is that under majority voting rules the median voter decides
the election outcome.
5) Suppose that a competitive firm finds that in its short-run equilibrium situation, its
marginal cost is higher than its average total cost. If things are not expected to change
and there are constant returns to scale, then the firm will exit the industry in the long
run.
6) One recommended policy that IACs could adopt to help DVCs is to recruit and hire
skilled workers from DVCs for businesses in IACs.
7) Heuristics can be exploited to lead people to positive outcomes.
8) Toothpaste and toothbrushes are substitute goods.
9) The moral hazard problem created by health insurance induces consumers to
underconsume health care.
10) If demand increases and supply simultaneously decreases, equilibrium price will
rise.
11) Monopolistically competitive firms are inefficient because they produce at a point
on the rising segment of their average cost curves.
12) The farm price-support programs hurt consumers of the farm products, and
moreover, the burden tends to be disproportionately heavier on the low-income
consumers.
13) For a given future value, the higher is the interest rate, the higher will be the present
value.
14) A monopsonist in equilibrium will hire labor at a level where MRP = MRC >W.
15)
Refer to the two diagrams for individual firms. In Figure 1, line A represents the firm’s:
A.demand and marginal revenue curves.
B.demand curve only.
C.marginal revenue curve only.
D.total revenue curve only.
16) Answer the question on the basis of the following information. In 1985, the
exchange rate between the U.S. dollar and the Japanese yen was $1 = 262 yen; in 2003,
the rate was $1 = 110 yen.
Refer to the given information. Which one of the following might be a plausible
explanation for the change in the dollar-yen exchange rate from 1985 to 2003?
A.Japan exported much more to the United States during this period than it imported
from the United States.
B.Japan greatly increased its purchases of military equipment from the United States
during this period.
C.Japan’s economy grew far faster than the U.S. economy during this period.
D.Japan’s government devalued the yen during this period.
17) When the elasticity coefficient for resource demand is greater than one, resource
demand is:
A.inelastic.
B.elastic.
C.unit-elastic.
D.perfectly inelastic.
18) Suppose that Dairy Barn Foods produces a regular sour cream with 10 grams of fat
per serving and a “low fat” sour cream with only 5 grams of fat per serving (assume that
this is still considered a lot of fat to consume per serving). According to prospect theory,
how should Dairy Barn promote its “low fat” sour cream?
A.It should make no mention of fat content, either in absolute terms or relative to its
regular sour cream.
B.It should advertise that the “low fat” sour cream has only “half the fat” of the regular
sour cream.
C.It should advertise that the “low fat” sour cream has only 5 grams of fat per serving.
D.It won’t matter what strategy Dairy Barn uses, as consumers are sufficiently informed
as to not be affected by the advertising.
19) The reason that innovation promotes competition is because:
A.Innovative firms can charge any price they want for a new product
B.It lowers the research and development costs for innovative firms
C.Firms use it to make competitors’ products obsolete in the market
D.Government provides patent protection for innovation that lasts for a long time
20) Which of the following will increase the supply of loanable funds? An increase in
the:
A.Rates of return on potential investments
B.Productivity of business firms
C.Demand for business products
D.Savings of households
21) In the table below are the marginal-product and marginal-revenue-product
schedules for resource A and resource B. Both resources are variable and are employed
in purely competitive markets. The price of A is $1 and the price of B is $2.
(a)What is the least-cost combination of resources A and B that would enable the firm
to product 120 units of output?
(b)What is the profit-maximizing combination of A and B?
(c)What is total output and profit when the firm is employing the profit-maximizing
combinations of A and B?
22) Which of the following is not a reason why specialization and trade are beneficial to
society?
A.The total output of economic goods may be increased even without any increase in
resources
B.Scarce resources are utilized more efficiently by exploiting differences among them
C.Specialization fosters learning by doing, thus lowering the unit-costs of products
D.Firms and workers become less dependent on others for producing goods and
services
23) Fatal automobile accidents occur much more frequently than do fatal airplane
crashes, yet airplane crashes receive a disproportionate amount of media coverage. As a
result, some people are overly fearful of flying in planes yet have no problem riding in
cars. Which of the following cognitive biases best explains this disconnect between
these people’s fears and the statistical realities?
A.Overconfidence effect.
B.Availability heuristic.
C.Self-serving bias.
D.Confirmation bias.
24) Answer the question on the basis of the following output data for a firm. Assume
that the amounts of all nonlabor resources are fixed.
Refer to the data. Diminishing marginal returns become evident with the addition of
the:
A.sixth worker.
B.fourth worker.
C.third worker.
D.second worker.
25) The twin problems of the U.S. health care industry are:
A.rapidly rising costs and unequal access to health care.
B.declining quality of health care and the duplication of specialized equipment at
hospitals.
C.declining per capita spending on health care and the moral hazard problem.
D.the decline in the number of family physicians and the failure to vaccinate children.
26) What effect, if any, will each of the following have upon the elasticity or the
location of the demand curve for resource J that is being used in the production of
commodity X? If there is uncertainty as to the precise effect, explain the sources of that
uncertainty.
(a)A decline in the demand for product X.
(b)An increase in the price of Y, a substitute product for X.
(c)A decline in the price of substitute resource K.
(d)A decline in the number of available resources that are substitutable for J in the
production of X.
(e)An increase in the price of complementary resource L.
(f)An increase in the elasticity of demand for product X due to an increase in the
number of sellers in the market.
27) The 2010 health-care reform law commonly known as Obamacare required large
companies to provide costly health insurance to their full-time workers. In response,
some large companies started preferring to employ part-time workers rather than
full-time employees. This is an example of:
A.Unintended consequences
B.The principal-agent problem
C.Special-interest effect
D.Limited and bundled choice
28) In the U.S., the percentage of total population living in poverty fell significantly
during which of the following periods?
A.1959-1969
B.1969-1979
C.2001-2004
D.2008-2011
29) Discuss the reason take-home pay has not increased at the same rate as total
compensation in recent decades.
30) Government-set prices undermine the rationing function of competitive prices.
Explain carefully in terms of both price ceilings and price floors.
31) What advantage does a money economy have over a barter economy?
32) Contrast the two systems of the brain. How does this relate to heuristics?
33) Explain the major causes of the persistent trade deficits in the United States in the
past decade.
34) Discuss the basic determinants for an individuals demand for a specific good or
service.