1) To maximize profits, a competitive firm will maximize the difference between MRP
and the wage rate for the laborers it hires.
2) In the U.S., the taxes mostly come from the rich and government spending mostly
goes to programs that benefit the rich.
3) Recognition heuristics help advertisers gain customers.
4) A key difference between neoclassical economics and behavioral economics is that in
behavioral economics context affects preferences.
5) When entrepreneurs in competitive industries successfully innovate to lower
production costs, it usually results in long-run economic profits for the firm.
6) Although state and local taxes are highly progressive, federal taxation is
predominantly regressive.
7) TAC policies help reduce overfishing and reduce costs for fishers.
8) The 2010 Health Care Reform Law, also known as “Obamacare”, includes a part
known as universal coverage which requires everyone to have health insurance. One
reason for this is to address the problem of:
A.Moral hazard
B.Externalities
C.Adverse selection
D.Public goods
9) Compensating wage differentials:
A.refer to the wage premium given to domestic-born workers.
B.refer to the wage premium necessary to attract illegal immigrant workers.
C.discourage illegal immigrants from entering low-wage labor markets.
D.will attract U.S. workers to undesirable jobs if the differential over less unpleasant
work is sufficiently high.
10) Alex was willing to pay $50 for the new World Cup soccer ball. When he received it
as a gift, he was willing to sell it, but for no less than $80. According to behavioral
economists:
A.Alex’s behavior is consistent with the endowment effect.
B.Alex’s behavior is irrational because of inconsistent anchoring.
C.Alex should sell the ball if he’s offered any amount over $50.
D.Alex’s behavior is irrational because his frame has changed.
11)
Refer to the diagram. The initial demand for and supply of pesos are shown by D1 and
S1. Suppose the United States reduces its imports of Mexican goods, shifting its
demand for pesos from D1 to D2. If the United States and Mexico were both on the
international gold standard:
A.gold would flow from Mexico to the United States.
B.the exchange rate would rise from B dollars equals 1 peso to C dollars equals 1 peso.
C.gold would flow from the United States to Mexico.
D.the exchange rate would fall from B dollars equals 1 peso to A dollars equals 1 peso.
12) Answer the question on the basis of the following marginal product data for
resources a and b. The output of these independent resources sells in a purely
competitive market at $1 per unit.
Refer to the given data. Assuming the prices of resources a and b are $5 and $8
respectively, what is the least costly combination of resources for the firm to employ in
producing 192 units of output?
A.2 of a and 6 of b.
B.6 of a and 2 of b.
C.4 of a and 3 of b.
D.3 of a and 4 of b.
13) Answer the question on the basis of the data contained in the following table.
Assume that the firm is hiring labor in a purely competitive market.
Refer to the given data. If the wage rate is $20, how many workers will the firm choose
to employ?
A.5
B.4
C.3
D.2
14) Which of the following is a valid counterargument to a call for higher tariffs “to
save U.S. jobs”?
A.The need to protect U.S. workers from the dumping of foreign products
B.Strategic trade policy calls for equal treatment of all trading nations so that they will
have the same competitive conditions
C.U.S. firms and workers must be protected from the ruinous competition of nations
where wages for workers are low
D.Imports may eliminate some U.S. jobs, but they create others, so they may have little
or no effect on employment
15) The diamond-water paradox occurs because:
A.the price of a product is related to its total utility, not its marginal utility.
B.the price of a product is related to its marginal utility, not its total utility.
C.water is, in fact, very scarce in certain regions of the world.
16) The fact that the major indicator of enterprise success in the Soviet Union and
pre-reform China was the quantity of output implied that:
A.product quality was neglected.
B.production costs were minimized.
C.product-mix met consumer needs.
D.technological advance was too rapid.
17) If the supply and demand curves for a product both decrease, then equilibrium:
A.quantity must fall and equilibrium price must rise.
B.price must fall, but equilibrium quantity may rise, fall, or remain unchanged.
C.quantity must decline, but equilibrium price may rise, fall, or remain unchanged.
D.quantity and equilibrium price must both decline.
18)
Refer to the diagram. The highest price that buyers will be willing and able to pay for
100 units of this product is:
A.$30.
B.$60.
C.$40.
D.$20.
19) Anchoring:
A.can influence decision making with irrelevant information.
B.explains why, for example, hamburger will be advertised as 80% lean rather than
20% fat.
C.causes losses to be felt more intensely than gains.
D.explains why, for example, firms prefer to reduce package sizes to raising prices.
20) Which one of the following best exemplifies the principal-agent problem in the
employer-employee relationship?
A.A worker takes 20-minute coffee-breaks although the employer allots only 15
minutes for this purpose.
B.A worker is on the job 50 hours per week although only 40 hours are required for
promotion.
C.A worker opts for early retirement in response to the firm’s incentive plan.
D.A worker’s productivity is independent of the wage paid.
21) How can debt policies for DVCs create a moral hazard?
22) What restrictions does the PPACA place on health insurance companies? How will
these restrictions affect the costs for health insurance companies?
23) Explain: The land value tax is the economists ideal; it is neutral in its economic
effects.
24) What are the three basic criticisms of foreign aid to DVCs?
25) What was the purpose of the Celler-Kefauver Act of 1950?
26) Use a leaky bucket to discuss the tradeoff between income equality and economic
efficiency.