A system in which power plants buy and sell the right to pollute in the form of emission
credits is known as:
A. a voluntary program.
B. direct regulation.
C. a tax incentive program.
D. a market incentive program.
Answer:
If a consumer is willing to pay $5,000 for a used car that is a free of mechanical
problems and $1,000 for a used car that will require extensive repairs, the consumer
will offer:
A. $1,000 for a used car if the probability that it is free of mechanical problems is 50
percent.
B. $3,000 for a used car if the probability that it is free of mechanical problems is 50
percent.
C. $5,000 for a used car if the probability that it is free of mechanical problems is 50
percent.
D. $6,000 for a used car if the probability that it is free of mechanical problems is 50
percent.
Answer:
Since capital is relatively scarce in India, the economically efficient method of
producing food would probably:
A. be land-intensive.
B. be capital-intensive.
C. not be labor-intensive.
D. not be capital-intensive.
Answer:
A firm in which all workers must join the union is called:
A. a closed shop.
B. a union shop.
C. an open shop.
D. a restricted shop.
Answer:
Which of the following would cause the supply curve for euros to shift right?
A. Americans want to buy more European goods.
B. Americans want to buy fewer European goods.
C. Europeans want to buy more American goods.
D. Europeans want to buy fewer American goods.
Answer:
A firm can use 50 workers and 10 machines, 70 workers and 9 machines, or 75 workers
and 9 machines to produce 40 chairs. If each worker costs $20 and each machine is
rented for $500, the economically efficient input combination is:
A. 50 workers and 10 machines.
B. 70 workers and 9 machines.
C. 75 workers and 9 machines.
D. none of these input combinations.
Answer:
In the short run, average variable cost equals:
A. output divided by total cost.
B. total cost divided by output.
C. total cost minus total fixed cost.
D. average total cost minus average fixed cost.
Answer:
If average movie ticket prices rise by about 5 percent and attendance falls by about 2
percent, other things being equal, the elasticity of demand for movie tickets is about:
A. 0.0.
B. 0.4.
C. 0.6.
D. 2.5.
Answer:
Refer to the table shown. The firm would definitely not hire:
A. 5 workers.
B. 7 workers.
C. 9 workers.
D. 10 workers.
Answer:
When modern economists cannot solve a model analytically, they can estimate the
solution by:
A. coming up with a completely new model.
B. changing from the inductive back to the deductive approach.
C. simulating the model with a computer to arrive at a numerical solution.
D. using induction to solve a series of equations.
Answer:
The prisoner’s dilemma is a well-known game in which:
A. cooperation is always the best independent action.
B. noncooperation is not the best joint action but is the best independent action.
C. players always cheat.
D. players never cheat.
Answer:
Refer to the graph shown. The elasticity of demand is closest to 1 on line segment:
A. AB.
B. BC.
C. CD.
D. The elasticity is not close to 1 on any of these line segments.
Answer:
If price is lowered by law from the market equilibrium value of $5 to a lower value of
$4:
A. both producer surplus and consumer surplus will increase.
B. consumer surplus will decrease and there will be some lost total surplus.
C. producer surplus will decrease and there will be some lost total surplus.
D. there will be lost surplus, as both producer surplus and consumer surplus decrease.
Answer:
What distinguishes modern economists from earlier economists?
A. Modern economists are much more certain of the validity of the assumptions in their
models.
B. Modern economists are willing to use a wider range of models than were earlier
economists.
C. Modern economists are more likely to use a deductive approach to modeling.
D. Modern economists have access to data; earlier economists did not.
Answer:
The elasticity of labor demand is higher when:
A. there are many substitutes for labor in the production process.
B. the inputs that could be substituted for labor are relatively expensive.
C. a large amount of labor is essential to the production process.
D. labor productivity falls rapidly when output is increased.
Answer:
If elasticity of demand is greater than 1:
A. a rise in price lowers total revenue.
B. a decline in price will not change total revenue.
C. a rise in price increases total revenue.
D. a decline in price lowers total revenue.
Answer:
When the going rate is $2.00 per hour, Ann wants to babysit 6 hours each week and Pat
wants to baby sit 4 hours each week. If the rate goes up to $4.00, Ann and Pat both
double the number of hours they are willing to babysit each week. Based on this
information, a combined supply curve will pass through the points:
A. price = $2.00, quantity supplied = 20 and price = $4.00, quantity supplied = 10.
B. price = $2.00, quantity supplied = 10 and price = $4.00, quantity supplied = 20.
C. price = $2.00, quantity supplied = 6 and price = $4.00, quantity supplied = 4.
D. price = $2.00, quantity supplied = 4 and price = $4.00, quantity supplied = 6.
Answer:
Since trash generation involves an externality, the way economists might address the
problem of trash generation that is most likely to be optimal is by:
A. integrating the cost of the externality into the initial price of the good.
B. having the government require mandatory sorting and recycling of trash.
C. having the cost of the externality be paid by the government.
D. not allowing persons to throw away more trash than is acceptable as a maximum.
Answer:
The slope of a line that is vertical is:
A. zero.
B. 1.
C. infinite.
D. dependent on where it intersects the horizontal axis.
Answer:
Which of the following would most likely generate a negative externality?
A. education
B. a lighthouse
C. cigarette smoke
D. employment
Answer:
Refer to the graph shown. The approximate elasticity of segment AB is:
A. 1/3.
B. 1/2.
C. 2/3.
D. 3/2.
Answer:
The prisoner’s dilemma is an example of:
A. a noncooperative game.
B. a cooperative game.
C. a nonstrategic game.
D. a sequential game.
Answer:
Refer to the following graph.
Elasticity is greatest at point:
A. A.
B. B.
C. C.
D. It is the same everywhere along this supply curve.
Answer:
When your wages rise, the:
A. opportunity cost of an hour of work decreases.
B. opportunity cost of an hour of leisure stays the same.
C. cost of working increases.
D. opportunity cost of an hour of leisure increases.
Answer:
The table below shows how the marginal benefit of videotape rentals varies for Carol
with the number rented per month.
The price of each tape rental is reduced from $2.99 to $1.99. Assuming that the price of
a rental accurately reflects the marginal cost to Carol and that she is rational, she will
increase the number of tapes rented per month from:
A. one to two.
B. two to three.
C. three to four.
D. four to five.
Answer:
A bilateral monopoly is a market in which there are:
A. many sellers but only a single buyer.
B. many buyers but only a single seller.
C. only a single seller and a single buyer.
D. many sellers and many buyers.
Answer:
A firm could be guilty of antitrust violations using the judgment by structure criteria
despite:
A. pricing goods above the competitive price.
B. producing the best product it could at the lowest possible cost.
C. controlling only 10 percent of the market.
D. restraining trade through cartels.
Answer:
In a foreign exchange market diagram with dollars per peso on the vertical axis, the
quantity of __________ would be on the horizontal axis and the U.S. demand for
Mexican goods would help to determine the __________ curve.
A. dollars; demand
B. dollars; supply
C. pesos; demand
D. pesos; supply
Answer:
The point at which the supply curve and the demand curve intersect is called:
A. equilibrium, because quantity demanded equals quantity supplied so there is no
tendency for price to change.
B. equilibrium, because quantity demanded exceeds quantity supplied so there is a
shortage.
C. equilibrium, because quantity supplied exceeds quantity demanded so there is a
surplus.
D. irrelevant, because real-world prices never reach this point.
Answer:
It is estimated that a 10 percent decline in income will reduce cigarette smoking by 1.4
percent. From this information one can conclude that cigarettes are most likely:
A. a luxury.
B. a necessity.
C. an inferior good.
D. a large portion of one’s budget.
Answer:
The North American Industry Classification System categorizes firms by:
A. market structure, ranking them from perfectly competitive to monopoly.
B. profits, since profits tend to be higher in more concentrated industries.
C. type of economic activity, and groups firms with like production processes.
D. market share, and groups firms with like market power.
Answer:
Which of the following is not a characteristic of pure capitalism?
A. Government ownership of capital
B. Private ownership of land
C. Freedom of enterprise
D. Worker freedom
Answer:
If the price of steel rises, the law of supply predicts that, other things constant, the:
A. supply of steel will increase.
B. supply of steel will decrease.
C. quantity supplied of steel will increase.
D. quantity supplied of steel will decrease.
Answer:
Refer to the graph shown. If price changes from $.50 to $2.00, what will be the change
in the market quantity supplied?
A. 1 CDs per week
B. 6 CDs per week
C. 7 CDs per week
D. 8 CDs per week
Answer:
In a tax incentive program, the person who conserves the most pays:
A. relatively less tax.
B. relatively more tax.
C. no tax.
D. no penalties.
Answer: