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1) Alex and Ben are both loggers wanting to harvest timber from the same forest. Alex
prefers to harvest and replant at a sustainable rate; Ben wants to harvest as many trees
as possible to maximize short-run profit, and then move on. They face the same
production costs.
Refer to the information given. The forest is more likely to be harvested and replanted
at a sustainable rate if:
A.property rights are well-defined and enforced.
B.property rights are weak or nonexistent.
C.there is no government protection of property rights and the parties can negotiate a
settlement.
D.Ben is given sole ownership of the property.
2) Assume that a government is considering a new social program and may choose to
include in this program any number of four progressively larger projects. The marginal
cost and the marginal benefits of each of the four projects are given in the table.
Refer to the above table and information. What project should the government select to
achieve the maximum net benefit?
A.A
B.B
C.C
D.D
3) The idea that the desires of resource suppliers and firms to further their own
self-interest will automatically further the public interest is known as:
A.Consumer sovereignty
B.The invisible hand
C.Derived demand
D.Creative destruction
4) In a purely competitive labor market, a profit-maximizing firm will hire labor up to
the point where the marginal revenue product of labor equals the:
A.Wage rate or price of labor
B.Price of the product
C.Marginal cost of one extra unit of output
D.Average cost of each unit of output
5) In the circular flow diagram, firms get their ability to pay for the costs of production
from the:
A.Revenues they receive for their products
B.Resources they acquire in the resource markets
C.Incomes they earn for their resources
D.Goods and services they get in the product markets
6) In competing with rivals, oligopolistic firms will tend to use:
A.Price cuts because they do not add to costs like advertising
B.Advertising because it is less easily duplicated than price cuts
C.Collusion because it is a legal way to increase market share
D.Price wars because they will increase the profits of firms
7)
Refer to the data. The value for X is:
A.15
B.5
C.55
D.10
8) Specializationthe division of laborenhances productivity and efficiency by:
A.allowing workers to take advantage of existing differences in their abilities and skills.
B.avoiding the time loss involved in shifting from one production task to another.
C.allowing workers to develop skills by working on one, or a limited number, of tasks.
D.all of the means identified in the other answers.
9)
Refer to the above table. The marginal product of the third unit of the resource is:
A.3
B.4
C.5
D.6
10) Answer the next three questions on the basis of the following data:
(a)What type of tax is represented by the tax schedule?
(b)What will your average tax rate be if your taxable income is $50,000?
(c)If your taxable income increases from $30,000 to $40,000, what will your marginal
tax rate be?
11) A cause of the unequal distribution of income in the United States is:
A.Differences in work preferences and risks
B.Differences in noncash transfers
C.High expenditures for social insurance
D.A low benefit-reduction rate for income
12) Approximately what percentage of local government expenditures goes to finance
education?
A.36
B.44
C.53
D.69
13) Which of the following outcomes is consistent with a purely competitive market in
long-run equilibrium?
A.Consumer and producer surplus will be maximized.
B.P = MC = lowest AVC.
C.The minimum willingness to pay equals the maximum acceptable price.
D.We would expect all of these to occur in the long run in a purely competitive market.
14) One main complaint about the official income thresholds used in defining poverty is
that they:
A.Fail to account for the effects of the minimum wage
B.Have remained fixed for over the past two decades
C.Include non-cash benefits such as food stamps and rent subsidies
D.Are inadequate to meet basic needs in major metropolitan areas
15) Assume that Japan and the United States are engaged in a system of flexible
exchange rates.
Refer to the graph above. If more Japanese tourists decide to visit the United States for
their vacations:
A.The yen will appreciate and the U.S. dollar will depreciate
B.The yen will depreciate and the U.S. dollar will appreciate
C.The yen and the U.S. dollar will appreciate
D.The yen and the U.S. dollar will depreciate
16)
Refer to the above graph for a purely competitive firm in the short run. The firm would
suffer losses if it operates at which of the following range of output?
A.0A
B.AB
C.BC
D.Any level below C
17) For economists, "myopia" refers to:
A.visual nearsightedness.
B.people's difficulty in conceptualizing the future.
C.people's tendency to put too much emphasis on the future and ignore important
present concerns.
D.people's tendency to focus on microeconomic concerns because of an inability to
conceptualize macroeconomics.
