1) Precommitments must impose costs on people to be effective.
2) The World Trade Organization (WTO) is an international organization designed to
provide short-term advances of foreign monies to those nations faced with trade
deficits.
3) The Food, Conservation, and Energy Act of 2008 provides farm subsidies in the form
of direct payments, countercyclical payments and marketing loans to farmers.
4) If a purely competitive firm is producing a level of output where the marginal
revenue is less than the marginal cost, then its profits must be negative.
5) In the median-voter model, half the voters have stronger or more positive preferences
than the median voter, while half of the voters have weaker or more negative
preferences.
6) In the long run for a purely competitive market, firms may enter or exit the industry
but the firms that stay in the industry will maintain their initial plant sizes.
7) Agriculture is overcrowded because of absolute and relative increases in the size of
farm employment.
8) The inverted-U theory suggests that R&D effort is strongest in very high
concentration industries.
9) Malthus argued that any increase in living standards would cause a decrease in
population growth.
10) Social regulation consists of regulating the behavior of people in society in order to
promote the safety and harmony in neighborhoods.
11) Pure monopoly is the best market structure for encouraging R&D and innovation.
12) The XYZ Corporation can make a real (inflation-adjusted) return on an investment
of 9 percent. The nominal rate of interest is 13 percent and the rate of inflation is 7
percent. We can conclude that the:
A.investment will be profitable.
B.investment will be unprofitable.
C.real rate of interest is 4 percent.
D.real rate of interest is 2 percent.
13)
The profit-maximizing level of employment by the monopsonist in the labor market
shown above will be:
A.A
B.B
C.C
D.D
14) In a two-nation two-good world, if both nations have identical production
possibilities curves with constant costs, then one nation would have:
A.No comparative advantage over the other nation
B.A comparative advantage in one good and a comparative disadvantage in the other
good
C.No absolute advantage over the other nation
D.An absolute advantage in one good and an absolute disadvantage in the other good
15) Which of the following statements about the right to private ownership is false?
A.It enables individuals to obtain, use, and dispose of land and capital resources as they
see fit
B.It encourages investment and innovation, and thus fosters economic growth
C.It extends to intangibles such as pieces of music and computer programs
D.It weakens the incentive to maintain the property that one already owns
16)
Assumptions: (1) Employers in this market are willing and able to ignore minimum
wage laws; (2) Sd represents the supply of domestic-born (and legal immigrant)
workers; (3) St represents the total supply of workers in this labor market (Sd plus
illegal immigrants); and (4) unless otherwise stated, illegal immigration is not
effectively blocked by the government.
Refer to the given figure and assumptions. If the government effectively prevents illegal
immigrants from working in this labor market, the equilibrium wage and level of
employment are, respectively:
A.$4.00 and 50,000.
B.$4.00 and 60,000.
C.$6.50 and 60,000.
D.$4.00 and 70,000.
17) Which of the following statements best reflects how a behavioral economist views
individual decision making?
A.Alex makes wrong decisions sometimes, but usually it is only when he has been
given bad information.
B.Kara carefully calculates and weighs the expected benefits and costs of every option
before making a decision.
C.Alicia may appear to care about others, but even her seemingly altruistic behaviors
are really about furthering her own interests.
D.Balin tries to make good, well-thought-out decisions, but his desire for utility in the
present means that he often gives in to costly temptations.
18) Consider the mining of a nonrenewable resource over a two-year period by a
company.
(a)Use a graph to help explain the choice between present and future extraction of a
nonrenewable resource over a two-year period. In the explanation state the difference
between extraction and user cost.
(b)How does the addition of user cost to extraction costs affect the quantity extracted in
the present compared with the future?
(c)How do profit calculations influence the quantity extracted the first year or the
second year?
(d)What will happen to the quantity extracted in the present compared with profitability
increase in the future? Explain the effects on the graph.
19)
Refer to the above graphs. (Assume that the pre-migration labor force in Country A is 100
and that it is 150 in country B.) The migration of labor will:
A.Increase domestic output in both countries
B.Decrease domestic output in both countries
C.Increase domestic output in country A and decrease domestic output in country B
D.Decrease domestic output in country A and increase domestic output in country B
20)
Refer to the above graph. The producer illustrated:
A.Is a monopsonist since MR = P for every unit of output sold
B.Is a pure competitor in the output market, since it must charge a constant price
C.Hires labor as a monopsonist, since it has control over the market wage rate
D.Hires labor in a competitive market, since it must pay each worker the market wage
rate
21) Answer the question based on the following table which shows a demand schedule.
Refer to the above table. The largest decline in total revenue will occur when price falls
from:
A.$5 to $4
B.$4 to $3
C.$3 to $2
D.$2 to $1
22) Voluntary migration of skilled craftworkers from low-paying to high-paying nations
is most likely to be opposed by:
A.business groups in the high-paying nations.
B.craft workers who stay in the low-paying nations.
C.industrial unions in the high-paying nations.
D.craft unions in the high-paying nations.
23) In a market where negative externalities are associated with consumption and
production, the equilibrium will not be efficient because:
A.Too few resources will be allocated towards producing the good
B.Firms will shut down until costs are reduced
C.Costs of production will, on average, be too high
D.Too many resources will be allocated towards producing the good
24) Other things equal, patents:
A.decrease the expected rate of return on an R&D expenditure.
B.increase the expected rate of return on an R&D expenditure.
C.increase the interest-rate cost of funds used to finance an R&D expenditure.
D.decrease the interest-rate cost of funds used to finance an R&D expenditure.
25) The reason the substitution effect works to encourage a consumer to buy less of a
product when its price increases is:
A.The real income of the consumer has been increased
B.The real income of the consumer has been decreased
C.The product is now relatively more expensive than it was before
D.Other products are now relatively more expensive than they were before
26) Since the 1930s, the U.S. government has subsidized agriculture with a “farm
program” that includes the following, except:
A.Attracting higher employment in the farm sector
B.Support for agricultural prices and income
C.Subsidized sale of U.S. farm products in world markets
D.Farm credit and financing
27) When economists talk about a “new normal” in terms of conditions in the
production and employment sectors, they are suggesting a change in people’s
perceptions influenced by the:
A.Hindsight bias
B.Confirmation bias
C.Availability heuristic
D.Framing effect
28) Price discrimination refers to:
A.selling a given product for different prices at two different points in time.
B.any price above that which is equal to a minimum average total cost.
C.the selling of a given product at different prices to different customers that do not
reflect cost differences.
D.the difference between the prices a purely competitive seller and a purely
monopolistic seller would charge.
29) Below is a table with data on the supply and demand of health care. Use this
information to answer the following questions.
(a)Assume initially there is no health insurance. What would be the equilibrium level
and price of health care?
(b)Suppose the introduction of health insurance decreased medical costs by one half.
What would be the new price and quantity of health care? What would be the marginal
cost and marginal benefit at this output?
(c)Suppose that the government decided to subsidize the cost of medical school. How
would this change the supply and demand situation of the health care market?
(d)Suppose the government subsidy causes the supply of health care to shift by 200 at
every price? What would be the new equilibrium price and quantity in the absence of
insurance? What would be the marginal benefit and marginal cost if insurance coverage
of 50% were in place?
(e)Suppose that doctors shift away from a fee-per-visit system and are instead paid set
annual salaries. What effect will this have on the supply and demand situation for the
health care market?
(f)Given the supply condition in (d), suppose the shift in policy causes health care
demand to shift down by 200 at every price. What is the new equilibrium price and
quantity? What is the marginal benefit and cost if 50% insurance coverage were in
place?
(g)How have the previous policies influenced the impact of the 50% insurance policy?
30) Which of the following is an example of a noncash transfer that is typically not
included in the income-distribution data?
A.Social Security benefits
B.Welfare assistance
C.Unemployment compensation
D.Medicare
31) Differentiated oligopoly exists where a small number of firms are:
A.producing goods that differ in terms of quality and design.
B.setting price and output collusively.
C.setting price and output independently.
D.producing virtually identical products.
32) Why cant indifference curves intersect?
33) Why is recent immigration a vital contributor to the American economy?
34) Why is the interest rate such an important price in the economy?
35) In theory, the representative firm in monopolistic competition earns only a normal
profit. Why might that outcome not always occur in the real world of small firms?
36) Evaluate the argument: Restricting imports from other nations will save U.S. jobs.
37) What is the difference between farm commodities and food products? How does the
number of competing firms change as farm commodities are processed into food?