1) All of the following statements about economic profits are correct, except that they:
A.Act as a signal to producers who make decisions about how to allocate scarce
resources
B.Are influenced by the degree of monopoly power
C.Represent a reward for risk taking
D.Are an explicit cost of production
2) A consumer’s weekly income is $300 and the consumer buys 5 bars of chocolate per
week. When income increases to $330, the consumer buys 6 bars per week. The income
elasticity of demand for chocolate by this consumer is about:
A.0
B.0.5
C.1
D.2
3)
Consider the purely competitive firm pictured above. The firm is earning:
A.Normal profits, since its price is above AVC
B.Economic profits, since its price is above AVC
C.Normal profits, since its price just covers ATC
D.Losses, since it is operating at the shutdown point
4) What is the relationship between living standards and birthrates?
A.The relationship is negative at low levels of income but becomes increasingly
positive as incomes rise.
B.They are unrelated.
C.The relationship is positive (directly related).
D.The relationship is negative (inversely related).
5)
Refer to the diagram where curves (a) through (e) are for five different countries. The
Gini ratio is:
A.zero in country (e) and 1 in country (a).
B.greater in country (b) than in country (c).
C.zero in country (a) and 1 in country (e).
D.less than 0.5 in country (d).
6) Which of the following best expresses the law of diminishing returns?
A.Because large-scale production allows the realization of economies of scale, the real
costs of production vary directly with the level of output.
B.Population growth automatically adjusts to that level at which the average product
per worker will be at a maximum.
C.As successive amounts of one resource (labor) are added to fixed amounts of other
resources (capital), beyond some point the resulting extra or marginal output will
decline.
D.Proportionate increases in the inputs of all resources will result in a
less-than-proportionate increase in total output.
7) Inflows of immigrant workers tend to reduce the wages of domestic-born workers.
Under which of the following circumstances is this least likely to occur?
A.Migration between countries is unimpeded.
B.Immigrant workers make remittances to their home country.
C.Immigrant workers and domestic-born workers are substitute resources.
D.Immigrant workers and domestic-born workers are complementary resources.
8) The cost of not being able to extract and sell a nonrenewable resource in the future
(because it is being extracted in the present) is known by natural resource economists as
the:
A.extraction cost.
B.future cost.
C.conservation cost.
D.user cost.
9) A direct cost of going to college is:
A.tuition, while an indirect cost (opportunity cost) is books and other supplies.
B.forgone income while in college, while an indirect cost (opportunity cost) is tuition.
C.tuition, while an indirect cost (opportunity cost) is forgone income while in college.
D.books and supplies, while an indirect cost (opportunity cost) is food and housing.
10) One of the major advantages of being the first to develop a product is:
A.An increase in the average total cost of production
B.Less need for legal protection for the product
C.The opportunity to be bought out for a profit
D.The ability to use the fast-second strategy
11) All of the following statements are true about technological advance, except:
A.It enhances both productive and allocative efficiency in the society
B.It can increase monopoly power through, for example, patents
C.It can eventually destroy old existing monopolies
D.It progresses automatically and inevitably
12) Money is not an economic resource because:
A.money, as such, does not produce anything.
B.idle money balances do not earn interest income.
C.it is not scarce.
D.money is not a free gift of nature.
13)
The graph above depicts a situation where, if the market demand for the product
increases, the prices of the resources used by the firms in the industry would:
A.Increase
B.Decrease
C.Stay constant
D.Be set by the government
14) Answer the question on the basis of the following table showing the demand
schedule facing a nondiscriminating monopolist:
Refer to the table. The monopolist will select its profit-maximizing level of output
somewhere within the:
A.3-5 unit range of output.
B.1-3 unit range of output.
C.1-4 unit range of output.
D.2-4 unit range of output.
15) Which would definitely not be an example of price discrimination?
A.A theater charges children less than adults for a movie
B.Universities charge higher tuition for out-of-state residents
C.A doctor charges for services according to the income of patients
D.An electric power company charges less for electricity used during off-peak hours
when production costs are lower
16) Answer the question on the basis of the following 2008 balance of payments
statement for Transylvania. All figures are in billions of dollars.
Refer to the given data. Transylvania had a $2 billion balance of trade (goods) surplus
in 2008.
17) In 2007, the price of oil increased, which in turn caused the price of natural gas to
rise. This can best be explained by saying that oil and natural gas are:
A.complementary goods and the higher price for oil increased the demand for natural
gas.
B.substitute goods and the higher price for oil increased the demand for natural gas.
C.complementary goods and the higher price for oil decreased the supply of natural gas.
D.substitute goods and the higher price for oil decreased the supply of natural gas.