Refer to the graph shown. The profit-maximizing monopolist would sell its output at
price:
A. P1.
B. P2.
C. P3.
D. P4.
Answer:
Refer to the graph shown. If the price of this product fell from $10 to $8, producer
surplus would fall from:
A. 250 to 180.
B. 750 to 220.
C. 750 to 270.
D. 1,000 to 540.
Answer:
The existence of negative externalities:
A. prevents the market from working efficiently.
B. prevents government from intervening in the marketplace.
C. causes the market to work more effectively.
D. necessarily means that government must intervene in the marketplace.
Answer:
Infant industry protection can be justified in theory by:
A. both the “learning by doing” argument and the existence of economies of scale.
B. the “learning by doing” argument but not by the existence of economies of scale.
C. the existence of economies of scale but not by the “learning by doing” argument.
D. neither the “learning by doing” argument nor the existence of economies of scale.
Answer:
A decrease in price and an indeterminate change in quantity are consistent with a:
A. leftward shift in demand and no shift in supply.
B. leftward shift in supply and no shift in demand.
C. rightward shift in supply and a leftward shift in demand.
D. leftward shift in supply and a rightward shift in demand.
Answer:
Refer to the graph shown. At a price of $1.20 per dozen:
A. there is a surplus of 2,000 dozen eggs per week.
B. there is a surplus of 3,000 dozen eggs per week.
C. there is a shortage of 2,000 dozen eggs per week.
D. the market is in equilibrium.
Answer:
The Rent Control Authority of Chicago has found that total market demand for single
occupancy apartments is Qd = 400,000 – 250 P. The Authority also noted that supply is
given by Qs = 200,000 + 250P. Price of an apartment is measured in hundreds of dollars
and quantity is measured in thousands of apartments. Suppose the Authority decides to
impose a rent control of $300 per single-occupant apartment, how many people will be
unable to find an apartment at that price?
A. 325,000
B. 300,000
C. 50,000
D. 275,000
Answer:
Under monopolistic competition:
A. firms can sell all the output they wish without affecting the price.
B. firms face a downward-sloping demand curve.
C. firms have no monopoly power.
D. a single seller serves the market.
Answer:
Consider the following payoff matrix facing two criminals.
Their options are to confess or not to confess. The payoffs represent the number of
years each will spend in jail. The Nash equilibrium for the payoff matrix shown is:
A. A: 20 years, B: 20 years.
B. A: 50 years, B: 2 years.
C. A: 2 years, B: 50 years.
D. A: 10 years, B: 10 years.
Answer:
If the U.S. dollar appreciates against the Japanese yen:
A. U.S. goods will be cheaper for Japanese consumers.
B. Japanese goods will be more expensive in the United States.
C. the U.S. dollar will buy fewer Japanese yen.
D. Japanese goods will be cheaper in the United States.
Answer:
This table shows the marginal benefits from widgets obtained by the only three people
who value them.
Refer to the table shown. Suppose widgets cost $8.50 to produce. If widgets are a
public good, how many will be produced by market incentives, and is that the right
(efficient) number?
A. Zero will be produced, and this is below the socially optimal amount.
B. One will be produced, and this is the socially optimal amount.
C. One will be produced, and this is below the socially optimal amount.
D. Two will be produced, and this is the socially optimal amount.
Answer:
The criterion that no person can be made better off without another being made worse
off is known as the:
A. normative criterion.
B. Pareto criterion.
C. nirvana criticism.
D. second-best criticism.
Answer:
Fishing for king crabs for a living is risky business. Their migration habits along the
Bering Strait are just not understood. The king crabs seem to disappear one year but
return mysteriously a few years later, wreaking havoc on the income of crabbers. When
crabs disappear, consumers buy lobster instead. What best describes this situation in the
king crab market?
A. The supply curve shifts to the left when crabs disappear (their price rises) and shift
to the right when they reappear (their price declines).
B. The supply curve shifts to the left when crabs disappear, (their price rises) and the
demand curve shifts to the left when consumers substitute lobster for crab (lowering
their price). The supply curve then shifts to the right when crabs reappear (their price
declines).
C. The price of crab rises when crabs are scarce creating excess demand. The price of
crab falls when crabs are abundant creating excess supply.
D. The quantity of crab falls and then rises as crabs disappear and reappear in response
to shifts in demand. Demand shifts to the left as consumers substitute toward lobster
when crab is scarce and shift to the right when crab is abundant.
Answer:
Price-discriminating behavior by a profit maximizer is:
A. the inability to pass along cost increases to those with inelastic demands.
B. the inability to pass along cost increases to those with elastic demands.
C. charging lower prices to those with inelastic demand than to those with elastic
demands.
D. charging higher prices to those with inelastic demand than to those with elastic
demands.
Answer:
If the demand for agricultural output is highly inelastic, an improvement in the
technology used in the agricultural industry most likely will cause a:
A. small drop in the price of agricultural output combined with a small increase in
quantity.
B. small drop in the price of agricultural output combined with a large increase in
quantity.
C. large drop in the price of agricultural output combined with a small increase in
quantity.
D. large drop in the price of agricultural output combined with a large decrease in
quantity.
Answer:
The cartel model of oligopoly assumes that:
A. monopolists sometimes act like oligopolists when they pit divisions of the same
corporation against one other.
B. oligopolies act as if they were perfectly competitive when there are no barriers to
entry.
C. oligopolies act as if they were monopolists by assigning output quotas to each
member so that joint profits are maximized.
D. oligopolies act as if they were monopolists by setting prices competitively for each
member.
Answer:
Refer to the graph shown. If this monopolist produces 45 units of output per day, it will:
A. be maximizing profit.
B. charge a price that exceeds its marginal cost.
C. be able to increase profit by producing less per day.
D. be able to increase profit by producing more per day.
Answer:
The message of the ultimatum game is that:
A. people pursue self-interest and the good of the group suffers.
B. people pursue self-interest and the good of the group is served.
C. people like to make threats.
D. sometimes concerns of fairness top rational selfishness.
Answer:
To see if abortion lowers crime rates, economists would have to:
A. use the ACE model.
B. carry out a controlled experiment.
C. look for a natural experiment.
D. survey a sample of the population for their opinion.
Answer:
How do economists explain the value firms and consumers place on brand names?
A. Brand names show that firms can easily manipulate consumers.
B. Brand names are a way firms can provide information about quality to consumers.
C. Brand names are a way of turning private goods into public goods, increasing their
value to both seller and buyer.
D. Brand names are an example of adverse selection, by which producers advertise the
options to consumers.
Answer:
A British waste management company acquired two other companies that specialized in
disposal of hazardous wastes even though the two companies were losing money.
Planning and regulatory requirements in the United Kingdom make it difficult for firms
to establish new hazardous waste landfills, and the combined companies would control
most hazardous waste landfills in some parts of the country. How do the planning and
regulatory requirements affect the market for hazardous waste?
A. They create a burden on the company, and so it probably will lobby to repeal them.
B. They make the market for hazardous waste disposal into a contestable market.
C. They make the market for hazardous waste disposal into a monopolistically
competitive market.
D. They help the merged companies because it will be expensive for other firms to enter
the market to compete with them.
Answer:
Economists tend to distrust voluntary approaches as a way to deal with externalities.
What is their most common concern?
A. Voluntary approaches do not make people develop an awareness of the problem that
would lead them to make good lifestyle changes.
B. Voluntary approaches often are perceived as unfair, imposing a heavy burden on the
poor.
C. Voluntary approaches usually require people to ignore their self-interest, and
economists do not think people do that well.
D. Voluntary approaches are often too effective and lead to excessive reduction in the
externality.
Answer:
Say a pill existed that made people selfless. After taking it they were only interested in
others, not themselves. Under the coordination definition of economics:
A. no economic problem would exist.
B. there still would be an economic problem.
C. there would be a political problem but not an economic problem.
D. there would be a social problem but not an economic problem.
Answer:
Refer to the graph shown. Area F is:
A. smaller than areas B and C, because demand is elastic between $10 and $30.
B. larger than areas B and C, because demand is elastic between $10 and $30.
C. larger than areas B and C, because demand is inelastic between $10 and $30.
D. smaller than areas B and C, because demand is inelastic between $10 and $30.
Answer:
In a sealed-bid Vickrey auction, the person who bids:
A. the highest gets the object of the bid at the price he or she bid.
B. the second highest bidder gets the good and pays that price.
C. the second highest bidder has the option to receive the good if he or she pays the
price of the highest bidder.
D. the highest bidder gets the object but pays the price bid by the second highest bidder.
Answer:
Suppose that in Colombia one unit of labor can produce 8 tons of papayas or 2 tons of
bananas and in Brazil, one unit of labor can produce either 2 tons of papayas or 4 tons
of bananas. If each country has two units of labor, which of the following consumption
combinations can be attained only with trade?
A. Brazil consumes 8 tons of bananas and no papayas.
B. Colombia consumes 16 tons of papayas and no bananas.
C. Brazil consumes 2 tons of papayas and 4 tons of bananas.
D. Colombia consumes 8 tons of papayas and 4 tons of bananas.
Answer:
In a perfectly competitive decreasing-cost industry, a decrease in market demand in the
long run causes:
A. a decrease in quantity, an increase in price, and no change in profit.
B. a decrease in quantity, price, and profit.
C. a decrease in quantity, no change in price, and no change in profit.
D. a decrease in quantity, an increase in price, and an increase in profit.
Answer:
According to Thorstein Veblen, a successful businessman would be most likely to
demonstrate his worth to others by:
A. anonymously giving financial support to worthwhile charitable organizations.
B. purchasing tasteful pieces of art and enjoying them only in private.
C. avoiding vulgar displays of wealth such as mansions and expensive cars.
D. buying expensive jewels for his trophy wife and showing her off at parties.
Answer:
“Price controls in competitive markets cause shortages” is an example of:
A. positive economics.
B. normative economics.
C. the art of economics.
D. classical economics.
Answer:
When countries decide they will no longer buy U.S. assets or lend to the United States:
A. adjustments will be set in motion to equalize comparative advantages.
B. adjustments will be set in motion so that the U.S. has more comparative advantages.
C. the United States can begin to run a trade deficit.
D. The is no reason foreign countries will not want to buy more U.S. assets than the
U.S. buys of foreign assets.
Answer: