1) Answer the question on the basis of the following cost data for a purely competitive
seller:
Refer to the data. If product price is $25, the firm will:
A.shut down and incur a $90 loss.
B.shut down and incur a $50 loss.
C.produce 3 units and incur a $65 loss.
D.produce 4 units and realize a $10 economic profit.
2) Neoclassical economics and behavioral economics disagree on the following
assumptions, except:
A.Rationality of people
B.Determinants of prices
C.Stability of people’s preferences
D.Strength of people’s willpower
3) A glass company making windows for houses also makes windows for other things
(cars, boats, stores, etc.). We would expect its supply curve for house windows to be:
A.Dependent on the demand for boat and plane windows
B.No different than that of firms which only make those windows
C.Relatively more elastic than those of firms which only make house windows
D.Relatively more inelastic than those of firms which only make house windows
4) The following can increase the profits of an innovating firm, except:
A.New product introductions
B.Existing product improvements
C.Imitation of its innovation by other firms
D.Successful process innovations
5) One major role that the government plays in the market economy of the U.S. is:
A.Setting production targets for major industries
B.Requiring minimum levels of employment in major industries
C.Allocating resources in various market activities
D.Setting laws governing economic activity
6) According to economists, economic self-interest:
A.is a reality that underlies economic behavior.
B.has the same meaning as selfishness.
C.means that people never make wrong decisions.
D.is usually self-defeating.
7)
Refer to the above graph showing a linear demand curve for a monopolist. In which
range of the demand curve (or output quantity) will the firm operate?
A.To the right of point W
B.Between V and W
C.Between S and T
D.Between quantity 0 and S
8)
Refer to the above graph, which shows the market for bicycles. S1 and D1 are the
original supply and demand curves. D2 and D3 and S2 and S3 are possible new demand
and supply curves. Starting from the initial equilibrium (point 1), which point on the
graph is most likely to be the new equilibrium after an increase in wages of bicycle
workers, and a significant increase in the price of gasoline?
A.6
B.3
C.4
D.5
9)
In short-run equilibrium, the monopolistically competitive firm shown will set its price:
A.below ATC.
B.above ATC.
C.below MC.
D.below MR.
10) Pure rate of interest refers to the interest rate that:
A.Borrowers pay to lenders in their own family or circle of close friends
B.Serves solely as payment to lenders for giving up current use of their funds
C.Is the difference between the actual rate and the theoretical rate
D.Measures the compensation to lenders for taking on the risks involved
11) According to the standard government definitions, the percentage of the U.S.
population now (2011) considered to be living in poverty is about:
A.15.0 percent.
B.20.5 percent.
C.9.8 percent.
D.13.2 percent.
12) If the price elasticity of demand for a product is 2.5, then a price cut from $2.00 to
$1.80 will:
A.increase the quantity demanded by about 2.5 percent.
B.decrease the quantity demanded by about 2.5 percent.
C.increase the quantity demanded by about 25 percent.
D.increase the quantity demanded by about 250 percent.
13) One primary reason why regulatory capture may occur in an industry is that:
A.The government designates unelected officials to head the various regulatory
agencies of different industries
B.There is a lot of bribery and corruption going on in all major industries that the
government seeks to regulate
C.The industry’s leaders are the ones who pushed for the government to impose
supervision and regulation over the industry
D.People who are qualified to supervise and regulate the industry often come from the
industry itself
14) Assume that a purely competitive firm uses two resourceslabor (L) and capital (C)to
produce a product. In which situation would the firm be maximizing profit?
A.Choice A
B.Choice B
C.Choice C
D.Choice D