1) If the market demand for the product increases, in the short run a purely competitive
firm:
A.Will not change its output quantity because there are so many firms that the
individual firm will not be affected by the change
B.Will earn higher profits or experience smaller losses as a result of the change in the
market
C.Will experience no change in costs as it steps up production in response to the change
in the market
D.Can employ more inputs and increase the size of its plant, to respond to the change in
the market
2) Entry fees at national parks and monuments are an example of:
A.the ability-to-pay principle of taxation.
B.the benefits-received principle of taxation.
C.government bureaucracy and inefficiency.
D.the principle of limited and bundled choice.
3) Capital flight is a problem to DVCs because it:
A.causes the value of a DVC’s currency to appreciate.
B.reduces the volume of DVC investment.
C.reduces the flow of foreign aid from the IACs.
D.causes inflation in the DVCs.
4) Answer the question on the basis of the following cost data for a firm that is selling
in a purely competitive market.
Refer to the data. The marginal cost column reflects:
A.the law of diminishing returns.
B.the law of diminishing marginal utility.
C.diseconomies of scale.
D.economies of scale.
5) Suppose two workers can harvest $46 and three workers can harvest $60 worth of
apples per day. On the basis of this information we can say that the:
A.Marginal product of each of the first two workers is 23
B.Marginal revenue product of each of the first two workers is $23
C.Marginal revenue product of the third worker is $14
D.Third worker should not be hired
6) “Income receivers should be paid in accordance with the value of output each
produces.” This statement is consistent with the:
A.monopoly theory of income distribution.
B.marginal productivity theory of income distribution.
C.least-cost, but not profit-maximizing, combination of inputs.
D.concept of compensating wage differences.
7) College students living off-campus frequently consume large amounts of ramen
noodles and boxed macaroni and cheese. When they finish school and start careers,
their consumption of both goods frequently declines. This suggests that ramen noodles
and boxed macaroni and cheese are:
A.inferior goods.
B.normal goods.
C.complementary goods.
D.substitute goods.
8) In a sequential game with two firms, the first mover into a new market:
A.is guaranteed positive economic profits.
B.is assured of blocking any potential second mover from entering the market.
C.runs the risk that the untested new market will not provide enough customers.
D.will likely set a high price to reap greater profits until the second mover enters.
9) When economic efficiency is attained, it implies all of the following, except:
A.Per-unit cost of output produced is at minimum
B.Allocative efficiency is achieved
C.Total consumer and producer surplus is at a maximum
D.The gap between marginal benefits and marginal costs of production is at maximum
10) Suppose that a 20 percent increase in the price of normal good Y causes a 10
percent decline in the quantity demanded of normal good X. The coefficient of cross
elasticity of demand is:
A.negative and therefore these goods are substitutes.
B.negative and therefore these goods are complements.
C.positive and therefore these goods are substitutes.
D.positive and therefore these goods are complements.
11) If the real GDP of a DVC increases from $600 billion to $630 billion and its
population increases from 200 million to 216 million, its real per capita GDP will have:
A.increased by about $83.
B.decreased by about $83.
C.remained unchanged.
D.decreased by about $19.
12) Assume that a 3 percent increase in income across the economy produces a 1
percent decline in the quantity demanded of good X. The coefficient of income
elasticity of demand for good X is:
A.negative and therefore X is an inferior good.
B.negative and therefore X is a normal good.
C.positive and therefore X is an inferior good.
D.positive and therefore X is a normal good.