1) If the interest rate is 10%, what is the present value of $25,000 received two years
from now?
A.$20,000
B.$20,661
C.$30,250
D.$30,000
2) The supply of higher education in the United States is:
A.highly price elastic.
B.highly price inelastic.
C.unitary elastic with respect to price.
D.perfectly price elastic.
3) A purely competitive firm in the factor and product markets sells its output for $1
and pays factors PL = $4 and PC = $3. What is the profit-maximizing combination of L
and C for the firm?
A.8 of L and 8 of C
B.4 of L and 3 of C
C.5 of L and 2 of C
D.6 of L and 6 of C
4) Consider the diagram below. Curves 18 are the short-run curves that occur with
different plant sizes. Answer the next two questions.
(a)On the graph show the range of outputs for: (1) economies of scale; (2)diseconomies
of scale: Indicate (3) minimum efficient scale.
(b)In the long run, what plant size should the firm build if it wants to produce: (1) 6000
units; (2) 14,000 units?
5) If a pure monopolist is operating in a range of output where demand is elastic:
A.it cannot possibly be maximizing profits.
B.marginal revenue will be positive but declining.
C.marginal revenue will be positive and rising.
D.total revenue will be declining.
6) A firm sells a product in a purely competitive market. The marginal cost of the
product at the current output of 1,000 units is $2.50. The minimum possible average
variable cost is $2.00. The market price of the product is $2.50. To maximize profits or
minimize losses, the firm should:
A.Continue producing 1,000 units
B.Continue production, but produce less than 1,000 units
C.Increase production to more than 1,000 units
D.Shut down
7) The situation where “the few who yell the loudest gets heard” is referred to as the:
A.Special-interest effect
B.Principal-agent problem
C.Moral hazard problem
D.Adverse selection effect
8) The supply of meat is more elastic in the long run than in the short run. Ceteris
paribus, as time goes by, the burden of a tax on cattle will be increasingly be shouldered
by the:
A.Grocer
B.Government
C.Rancher
D.Consumer
9) Answer the question on the basis of the following information: The equations for the
demand and supply curves for a particular product are P = 10 – .4Q and P = 2 + .4Q,
where P is price and Q is quantity expressed in units of 100. After an excise tax is
imposed on the product, the supply equation is P = 3 + .4Q.
Refer to the given information. The equilibrium quantity after the excise tax is imposed
is:
A.750 units.
B.850 units.
C.875 units.
D.950 units.
10) A leftward shift of the supply curve for oil in the United States is most likely to
result from:
A.A decrease in the fees that oil companies must pay for drilling licenses
B.An increase in the subsidy for oil exploration and drilling
C.A decrease in the world price of oil
D.An increase in the costs of exploration and drilling for oil
11) The following question is based on the demand and cost data for a pure monopolist
given in the table below.
Refer to the above table for a monopolist. If the monopolist perfectly
price-discriminated and sold each unit of the product at the maximum price the buyer of
that unit would be willing to pay, and if the monopolist sold 4 units, then total revenue
would be:
A.$600
B.$900
C.$1000
D.$1400
12) If there is a widespread bias against African-American workers, an increase in the
collective discrimination coefficients of employers will:
A.reduce the African-American wage rate, increase African-American employment, and
lower the actual African-American-white wage ratio.
B.reduce the African-American wage rate, decrease African-American employment,
and lower the actual African-American-white wage ratio.
C.increase the African-American wage rate, increase African-American employment,
and increase the actual African-American-white wage ratio.
D.increase the African-American wage rate, reduce African-American employment, and
increase the actual African-American-white wage ratio.
13) The federal gasoline tax is assessed on a per-gallon basis and the proceeds are used
for highway maintenance and improvements. This tax is consistent with the:
A.ability-to-pay principle of taxation.
B.benefits-received principle of taxation.
C.single-tax theory of taxation.
D.pay-as-you-go theory of taxation.
14) Which would usually not be an entrepreneurial function?
A.Introducing a new product in a business
B.Assuming uninsurable risks of owning a business
C.Combining and directing resources in an uncertain business environment
D.Managing the accounting department of a Fortune 500 corporation
15) The table below shows the rate of return and R&D spending for a hypothetical firm.
Refer to the above table. Assume the interest-rate cost of funds is 8 percent. What will
be the marginal cost and the marginal benefit of the optimal amount of R&D spending?
A.MC = 8 percent; MB = 6 percent
B.MC = 8 percent; MB = 8 percent
C.MC = 6 percent; MB = 8 percent
D.MC = 6 percent; MB = 6 percent
16) Answer the question on the basis of the following information: Suppose a firm hires
both labor (L) and capital (C) under purely competitive conditions. The price of labor is
PL and that of capital is PC. The marginal product of labor is MPL and that of capital is
MPC. The firm sells its product competitively at a price of PX.
Refer to the given information. Which of the following must pertain if the firm is to
minimize the cost of producing any output?
A.MPC = MPL = PX.
B.MPC = PC and MPL = PL.
C.MPC/PC = MPL/PL.
D.MPC/PX = MPL/PX.
17) A price ceiling means that:
A.there is currently a surplus of the relevant product.
B.government is imposing a legal price that is typically below the equilibrium price.
C.government wants to stop a deflationary spiral.
D.government is imposing a legal price that is typically above the equilibrium price.
18) The following graph shows a total revenue curve for a monopolist.
Refer to the above graph. When the total revenue curve reaches a maximum, marginal
revenue is:
A.Positive
B.Negative
C.Zero
D.Greater than price at that level of output
19) Economic growth may be represented by:
A.A movement from one end of the production possibilities curve to the other
B.An upward-sloping production possibilities curve
C.A movement from a point inside to a point on the production possibilities curve
D.A rightward shift of the production possibilities curve