1) The fundamental economic question regarding the distribution of output in the
economy is equivalent to the question of who will produce the output.
2) The dictator and ultimatum games reveal that fairness and concern for others
motivate people’s behavior.
3) A firm’s demand schedule for a resource is the firm’s marginal product schedule for
the resource.
4) Illegal immigrants overall contribute more in taxes than they receive in services from
state and local governments.
5) There will be no principal-agent problem if a firm’s owner (like a business
consultant) does all the work of the firm.
6) Economists generally view offshoring as detrimental to the U.S. economy.
7)
The simple immigration model suggests that, for a high-wage country like the United
States, immigration tends to reduce domestic output as well as the total income of
businesses.
8) The supply of loanable funds is perfectly elastic.
9) ITQs generate the most efficient use of resources when everyone keeps and fills their
own quotas.
10) Most of the DVCs of the world are located in Western Europe.
11) Money is an economic resource referred to as capital.
12) A kingdom where only the king earns all income would have a Gini ratio of:
A.100
B.0
C.1
D.2
13) The labor demand curve of a purely competitive seller:
A.slopes downward because the elasticity of demand is always less than unity.
B.slopes downward because of diminishing marginal productivity.
C.is perfectly elastic at the going wage rate.
D.slopes downward because of diminishing marginal utility.
14) One major consequence of the overconfidence effect is that:
A.Some people cannot correct a personal trait that might be causing them to fail in
many ventures
B.Someone could persist in pursuing a failed policy despite overwhelming evidence of
the failure
C.Bad decisions can be made because people will act without pausing to see whether
their intuition is correct or not
D.Some people may wrongly believe in their forecasting ability to predict future
outcomes of risky investments
15) A typical concave (bowed out from the origin) production possibilities curve
implies:
A.that economic resources are unlimited.
B.that society must choose among various attainable combinations of goods.
C.decreasing opportunity costs.
D.that society is using a market system to allocate resources.
16) In energy economics, “BTU” stands for:
A.boiling temperature unit.
B.base tax utility.
C.British thermal unit.
D.base technology utility.
17) Assume that Abby, Ben, Clara, Joe, and Matt are the only citizens in a community.
A proposed public good has a total cost of $1000. All five citizens will share an equal
portion of this cost in taxes. The benefit of the public good is $220 to Abby, $210 to
Ben, $210 to Clara, $180 to Joe, and $120 to Matt. In a majority vote, this proposal will
most likely be:
A.Accepted; the public good is produced even though it is economically inefficient
B.Defeated; the public good is not produced even though it would have been efficient to
do so
C.Accepted; the public good is produced which is economically efficient
D.Defeated; the public good is not produced, which is the proper outcome
18) With a natural monopoly, the fair return price:
A.Is allocatively efficient; the socially optimal price is allocatively inefficient
B.Is allocatively inefficient; the socially optimal price is allocatively efficient
C.And the socially optimal price are both allocatively inefficient
D.And the socially optimal price are both allocatively efficient
19) Use the following graph to answer question. It shows the extraction costs for TX
Oil Company in the first year in a situation where it will extract oil from a reserve over
two years.
Refer to the above graph. If the current market price rises from $60 to $70 and user
costs are not considered, the extraction quantity:
A.Rises by 10 units to 20 units
B.Falls by 10 units to 20 units
C.Rises by 10 units to 40 units
D.Falls by 20 units to 10 units
20) Answer the question on the basis of the following information for Manfred’s Shoe
Shine Parlor. Assume Manfred hires labor, its only variable input, under purely
competitive conditions. Shoe shines are also sold competitively.
Refer to the given data. If the wage rate is $11, how many workers will Manfred hire to
maximize profits?
A.1
B.2
C.3
D.5
21) Construction workers frequently sponsor political lobbying in support of greater
public spending on highways and public buildings. One reason for this is to:
A.restrict the supply of construction workers.
B.increase the elasticity of demand for construction workers.
C.increase the demand for construction workers.
D.increase the price of substitute inputs.
22) Of the following countries, which one best exhibits the characteristics of a market
economy?
A.Canada.
B.Cuba.
C.North Korea.
D.Belarus.
23) The schedule shows various interest rates, the associated quantity demanded of
loanable funds, and the quantity supplied of loanable funds in billions of dollars at those
interest rates.
Refer to the above table and information. What is the equilibrium interest rate?
A.4 percent
B.6 percent
C.8 percent
D.10 percent
24) Plant sizes get larger as you move from ATC-1 to ATC-4.
Refer to the above table. The firm experiences minimum efficient scale at what output
level?
A.2500
B.3000
C.3500
D.4000
25)
The major reasons why people immigrate into the U.S. include the following, except:
A.Taking advantage of superior economic opportunities
B.Escaping religious or political oppression in their home countries
C.Reuniting with family members who are already U.S. immigrants
D.Being kicked out of their home countries
26) A major shortcoming of the Sherman Act was that:
A.It was too specific
B.It was never enforced by the courts
C.Violators of the act were forced out of business
D.It did not explicitly state which activities were illegal
27) In a market system, as one industry expands while another contracts, resources will
flow:
A.Away from the expanding industry towards the contracting one
B.From one industry due to the changes in resource prices paid by firms
C.Towards the industry where the product demand is declining
D.Because resource allocation will have to equalize between the two industries
28)
Refer to the diagrams, which pertain to a purely competitive firm producing output q
and the industry in which it operates. Which of the following is correct?
A.The diagrams portray neither long-run nor short-run equilibrium.
B.The diagrams portray both long-run and short-run equilibrium.
C.The diagrams portray short-run equilibrium but not long-run equilibrium.
D.The diagrams portray long-run equilibrium but not short-run equilibrium.
29) Which of the following is considered a factor contributing to famine in Africa?
A.Environmental regulations
B.A slow rate of population growth
C.Investment in industrial development over agriculture
D.Policies that price agricultural products at low levels
30) Development experts are less enthusiastic than they used to be about three decades
ago about the positive role of DVC governments in promoting economic growth in their
less developed nations because of the:
A.Corruption in government
B.Availability of foreign aid
C.Need for a greater tax collection
D.Need for more public capital goods
31) Explain the main characteristics of a corporation.
32)
33) What have been the trends in income inequality since 1975?
34) The following table gives the index of prices farmers paid in three different years.
The price farmers received in year 1, the base year, for a certain agricultural product
was $4.00 per bushel. Compute the parity price of the product in years 2 and 3 and enter
them in the table. Compute the parity ratio and enter it into the table.
35) Describe the two extreme views on illegal immigration and their employment
effects. Why are these two views misleading?
36) How might innovation create or reduce monopoly power?
37) Use supply and demand analysis to explain what is most likely to happen to price
and quantity in a competitive market for a crop such as lettuce, tomatoes, or oranges,
when extreme weather destroys a large portion of the crop.
38) Name the problems government faces in directing and managing the economy.