In the early 2000s car sales in China had slowed in part caused by the government’s
actions to limit businesses from lending funds to consumers. Assuming the car market
in China can be analyzed with demand and supply curves, what best reflects the change
in the market?
A. Demand curve shifts to the left with no change in supply.
B. Supply curve shifts to the left with no change in demand.
C. Both the supply and demand curves shift to the left.
D. Both the supply and demand curves shift to the right.
Answer:
In the United States, the income distribution is shaped like a:
A. pyramid.
B. diamond.
C. square.
D. pentagon.
Answer:
Requiring people to opt out of organ donation when getting a driver’s license is an
example of a(n):
A. pricing nudge.
B. encouragement nudge.
C. information nudge.
D. advantageous default option nudge.
Answer:
In the Microsoft antitrust case:
A. the government ruled that Microsoft was a monopoly and was involved in
anti-competitive practices.
B. the government divided Microsoft into two companies.
C. Microsoft agreed to government regulation of its prices.
D. Microsoft was forced to get out of the Internet business.
Answer:
Refer to the following graphs.
In the early 1990s, mounds of newspapers and worthless plastic piled up at recycling
centers. As the nation’s economy continued to grow, increased demand eliminated the
mounds and turned them into shortages. In the mid-1990s, as recycling became more
popular, the mounds of recycled materials returned. What graph best depicts these
events on the market for recycled materials?
A. Price remained constant at P0. Quantity demanded first rose, while supply remained
constant; quantity supplied then rose, while demand remained constant.
B. Price remained constant at P0. Supply first shifted from S1 to S0 and then back to S1.
C. Price remained constant at P0. Demand shifted from D0 to D1 then supply shifted
from S0 to S1.
D. Price remained constant at P0. Demand shifted from D0 to D1 and then back to D0.
Answer:
Which of the following provides the best explanation for diseconomies of scale?
A. increased specialization
B. diminishing marginal productivity
C. monitoring costs
D. Indivisible setup costs
Answer:
The WTO authorized several countries to impose about $150 million in trade sanctions
against the United States in retaliation for a U.S. import law that the WTO ruled to be
illegal. The organization that issued this ruling against the United States is known as
the:
A. Wage Tariff Objective.
B. World Trade Organization.
C. Wealth Technology Order.
D. Welfare Tax Order.
Answer:
Refer to the graph shown. Between points C and E, demand is:
A. inelastic.
B. elastic.
C. unit elastic.
D. perfectly elastic.
Answer:
If demand is highly elastic and supply shifts to the left:
A. price will rise significantly; quantity hardly changes at all.
B. price will hardly change at all; quantity will decline significantly.
C. price will rise significantly and quantity will fall significantly.
D. price and quantity will hardly change at all.
Answer:
Refer to the graph shown. The Nash equilibrium for the duopolists is:
A. A gains $150,000, and B gains $150,000.
B. neither A nor B gains.
C. A gains $400,000, and B gains $400,000.
D. A gains $400,000, and B loses $150,000.
Answer:
When positive externalities exist in the consumption of a good, the marginal social
benefit:
A. equals the marginal benefit received by consumers of the good minus the marginal
benefit to third parties.
B. equals the marginal cost of producing the good plus the marginal cost to third
parties.
C. equals the marginal benefit received by consumers of the good plus the marginal
benefit to third parties.
D. could be either greater than or less than the marginal benefit received by consumers
of the good depending on the equilibrium price determined in competitive markets.
Answer:
In a noncooperative duopoly a key assumption is that:
A. each firm abides by the rules they establish.
B. each firm thinks the other firm is cheating.
C. each firm ignores what the other firm does.
D. each firm has monopoly power in its sales territory.
Answer:
When negative externalities exist in the production of a good, the marginal social cost
of producing the good:
A. is equal to the marginal benefit received by consumers if competitive markets exist
and there is no government intervention.
B. equals the marginal cost borne by the firm minus marginal cost borne by a third
party that results from the production and consumption of the good.
C. is less than the marginal cost borne by the firm.
D. equals the marginal cost borne by the firm plus the marginal cost borne by third
parties from the production and consumption of the good.
Answer:
Suppose that the total utility of consuming the first piece of chewing gum in a packet is
30. This means that marginal utility of consuming the first piece of gum is:
A. zero.
B. less than 30.
C. 30.
D. more than 30.
Answer:
A firm’s profits equal $100 if
A. its total revenue is $100.
B. the sum of its total revenue and its total cost is $100.
C. the difference between its total revenue and its total cost is $100.
D. its total cost is $100.
Answer:
Which of the following puts downward pressure on U.S. manufacturing wages?
A. A declining value of the dollar.
B. Rising foreign wages.
C. Technological innovation.
D. Immigration.
Answer:
Refer to the graph shown. Which point has an elasticity greater than 1?
A. E
B. B
C. C
D. D
Answer:
In monopolistic competition there:
A. are only a few sellers.
B. is only one seller.
C. are many sellers.
D. is only one buyer.
Answer:
All economists believe that:
A. people are selfish.
B. incentives are important.
C. people follow principles of enlightened self-interest.
D. assumptions are irrelevant to the outcome of a model.
Answer:
If the price of chicken rises and the price of beef does not rise, consumers will respond
by:
A. substituting beef for chicken.
B. substituting chicken for beef.
C. reducing purchases of beef and chicken.
D. increasing purchases of beef and chicken.
Answer:
When production increases, the average variable cost and average total cost curves:
A. spread farther apart.
B. become horizontal.
C. cross.
D. move closer together.
Answer:
Economists generally agree that:
A. trade restrictions will increase the welfare of a large country even if other countries
retaliate.
B. trade between two nations generally benefits one at the expense of the other.
C. infant industry protection, although justified in theory, often becomes permanent
because infant industries fail to grow up.
D. trade embargoes are not an effective way of achieving international political
objectives.
Answer:
When the wage rate paid to labor is above equilibrium, the:
A. supply of labor increases.
B. demand for labor decreases.
C. number of workers seeking jobs exceeds the number of jobs available.
D. number of jobs available exceeds the number of workers seeking jobs.
Answer:
The market where businesses sell goods and services to households and the government
is called the:
A. goods market.
B. factor market.
C. capital market.
D. money market.
Answer:
Cockfighting is against the law in New Jersey, resulting in high-priced events held
illegally in that state. What idea from Chapter 1 of the text does this story best
illustrate?
A. There ain’t no such thing as a free lunch.
B. The invisible hand is always invisible.
C. Social and political forces sometimes rein in market forces.
D. Maintaining objectivity is easiest in positive economics.
Answer:
Refer to the table shown, which shows the demand schedule for a firm that has a
monopoly on the sale of personal computers in the country of Oz. If the monopolist is
currently producing 400 computers per year and it seeks to maximize profit, it should:
A. increase output.
B. decrease output.
C. continue producing 400 units per year.
D. lower the price of computers.
Answer:
The difference between capitalism and mercantilism is that under capitalism:
A. craft guilds rather than merchants own capital.
B. the invisible hand is more important than the government.
C. industrialists’ views are represented by craft guild organizations.
D. the state plays a more active role in coordinating economic activity.
Answer:
If people generally believe that “you get what you pay for,” it is reasonable for them to:
A. assume that an expensive item is of higher quality, creating the possibility of an
upward-sloping demand curve.
B. assume that an expensive item is of higher quality, which eliminates the possibility
of an upward-sloping demand curve.
C. make every effort to get complete information about a product before making a
purchase to make sure that the purchase is optimal.
D. assume that a cheaper brand is always a better deal than expensive brands.
Answer:
The top four firms in the industry have 10 percent, 8 percent, 8 percent, and 6 percent
of the market. The Herfindahl index of this market is closest to which of the following?
A. 8.
B. 32.
C. 66.
D. 264.
Answer:
If a positive externality exists in the provision of education when education is provided
in a perfectly competitive market without government intervention, at the market
equilibrium level of education:
A. additional net gains to society are possible by reducing the level of education.
B. additional net gains to society are possible by raising the level of education.
C. the marginal social benefit of education equals the marginal social cost.
D. additional net gains to society are not possible by either increasing or decreasing the
level of education.
Answer: