The statement, “Assuming that if it is rational for one person to stand at a football game
to get a better view then it is rational for everyone to stand at a football game to get a
better view” is an example of:
A. economic reasoning.
B. the fallacy of division.
C. the fallacy of composition.
D. the ceteris paribus assumption.
Answer:
Refer to the graphs shown, which depict a perfectly competitive market and firm. If
market demand decreases from D0 to D1, output in the market will:
A. fall to Q3 in the long run if this is a decreasing-cost industry.
B. fall to Q3 in the long run if this is a constant-cost industry.
C. fall to Q3 in the long run if this is an increasing-cost industry.
D. return to Q1 in the long run.
Answer:
Socialism in theory is an economic system in which:
A. government sees to it that people work for the common good until they could be
relied upon to do that on their own.
B. the invisible hand insures that individual decisions are made for the common good.
C. government owns the means of production, but individual self-interest determines
how production is organized.
D. individuals are able to act in the best interest of everyone without direction from
government or the invisible hand.
Answer:
If individuals can credibly cooperate and split the gains, which payoff is the most
likely?
A. 1, 50
B. 1, 1
C. 2, 1
D. 5. 5
Answer:
Refer to the graph shown. Total variable cost of producing Q * is represented by:
A. area 0Q * AF.
B. area 0Q * BE.
C. area 0Q * CD.
D. cannot be determined.
Answer:
Learning by doing:
A. causes average total cost curves to be downward-sloping.
B. shifts average total cost curves downward.
C. offsets diseconomies of scale, making the average total cost curve flat.
D. is not important in the real world.
Answer:
Refer to the graph shown. The equilibrium price for the monopolistically competitive
firm represented is:
A. $4.
B. $6.
C. $7.
D. $10.
Answer:
When judging the competitiveness of markets by the behavior of firms in that market,
one is using the:
A. “judgment by performance” criteria.
B. “judgment by structure” criteria.
C. “judgment by merger” criteria.
D. “judgment by antitrust” criteria.
Answer:
Waste produced by a power plant that harms local fishing industries is an example of a:
A. demerit good.
B. private good.
C. limited liability.
D. negative externality.
Answer:
Graphically, a change in price causes:
A. both supply and demand to shift.
B. the demand curve to shift.
C. a movement along a given supply curve, not a shift.
D. the supply curve to shift.
Answer:
Refer to the following graphs.
Americans nationwide have been complying with recycling regulations with
unexpected zeal. The effect on the market for recycled paper is best shown by which
graph?
A. I
B. II
C. III
D. IV
Answer:
Among jobs that you like, you would be wise to choose a job in a field in which:
A. labor demand and labor supply are both increasing.
B. labor supply and labor demand are both decreasing.
C. labor supply is decreasing while labor demand is increasing.
D. labor supply is increasing while labor demand is decreasing.
Answer:
Which of the following cannot be determined by using a production possibility table?
A. What combination of outputs can be produced
B. How much less of one output must be produced if more of another output is
produced
C. What combination of outputs is best
D. How much output can be produced from a given level of inputs
Answer:
Economists of many different political persuasions often agree with one another and
differ from journalists and the public because economists:
A. try to let the facts speak for themselves.
B. emphasize the long run, whereas noneconomists often focus on the short run.
C. put more emphasis on fairness than noneconomists do.
D. depend more on their value judgments than noneconomists do.
Answer:
Most economists believe that:
A. government cannot correct failures of market outcome.
B. a government policy designed to correct the failure of a market outcome is always
more desirable than living with the failure.
C. a policy decision must weigh the costs of market failure against the costs of
government failure.
D. it is always better to change the price structure by subsidizing goods than to openly
give money to individuals to achieve distributional goals.
Answer:
Economic models generally:
A. focus on all important aspects of economic reality.
B. reflect certain value judgments, since they must focus on certain aspects of economic
reality and not on others.
C. do not involve value judgments because they are purely mathematical.
D. are close representations of real-world economic reality.
Answer:
The reason economists and accountants have problems using cost analysis in the real
world is that:
A. economists do not believe in the existence of explicit costs.
B. although implicit costs do not show up in accounting profits, they nevertheless affect
managerial decisions.
C. although explicit costs do not show up in accounting profits, they nevertheless affect
managerial decisions.
D. explicit costs cannot be measured.
Answer:
Marginal analysis suggests that you will engage in more of an activity if the:
A. total benefit of the activity is less than the total cost.
B. additional benefit from the activity exceeds the additional cost.
C. total benefit from the activity exceeds the total cost.
D. additional cost of the activity exceeds the additional benefit.
Answer:
For which of the following markets would the fallacy of composition least likely apply?
A. Labor market
B. Market for savings and investment
C. World market for oil
D. Poultry market
Answer:
Suppose there are only two firms that pollute, A and B, and each emits 10 tons of waste
into the air. Firm A can reduce its pollution at a cost of $100 per ton, and Firm B can
reduce its pollution at a cost of $500 per ton. Each has been given an emission credit
that allows it to pollute 6 tons. If firms maximize profits, what will happen?
A. Each firm will clean up 4 tons and pollute 6 tons.
B. Firm B will buy four credits from A; B will emit 10 tons, and A 2 tons.
C. Firm A will buy four credits from B; A will emit 10 tons, and B 2 tons.
D. Firm B will buy one credit from A; it will cut pollution to 7 tons, and firm A will cut
it to 5 tons.
Answer:
As a consumer moves along a budget constraint:
A. prices are held constant, but income changes.
B. income is held constant, but prices change.
C. prices and income are held constant, but quantities change.
D. total utility is held constant, but prices and income change.
Answer:
Some nutritionists consider junk food or eating junk food an example of:
A. merit goods or activities.
B. demerit goods or activities.
C. positive externalities.
D. public goods.
Answer:
The economist who mathematically proved that a complete set of competitive markets
could yield a socially (or Pareto) optimal result was:
A. Adam Smith.
B. Kenneth Arrow.
C. Milton Friedman.
D. Ronald Coase.
Answer:
If allocating dorm rooms changes from allocation by lottery to allocation by the market:
A. it becomes an economic problem.
B. it becomes a political problem but not an economic problem.
C. it becomes a social problem but not an economic problem.
D. the allocation problem is still an economic problem.
Answer:
____ economists are economists who rely on the widest array of models.
A. Traditional
B. Keynesian
C. Modern
D. Formal
Answer:
The following table describes utility for consuming cans of soda. At what point does the
law of diminishing marginal utility set in?
A. Between three and four cans
B. Between four and five cans
C. Marginal utility diminishes everywhere.
D. Marginal utility never diminishes.
Answer:
Refer to the following table. Fill in the table and answer the following question.
What is the marginal utility of the fourth can of soda?
A. 44 units of utility
B. 10 units of utility
C. 8 units of utility
D. 2 units of utility
Answer:
Consider a market for fish whose market demand and market supply for fish is
specified as Qd = 300 – 2.5 P and Qs = – 20 + 1.5 P respectively. The equilibrium price
and quantity is:
A. $40 and 200 respectively.
B. $80 and 100 respectively.
C. $100 and 80 respectively.
D. $100 and 130 respectively.
Answer:
In the mercantilist system:
A. markets rather than political forces make the central economic decisions.
B. serfs make the central economic decisions.
C. governments let the market decide what to produce.
D. governments distributed the rights to produce.
Answer:
A market structure in which one firm makes up the entire market is:
A. a monopoly.
B. perfect competition.
C. an oligopoly.
D. monopolistic competition.
Answer:
Government failure occurs when:
A. government fails to implement policy designed to correct a market failure.
B. government intervention in the market to improve a market failure succeeds.
C. government intervention in the market to correct a market failure makes things
worse.
D. there is no need for government intervention into the market because there is no
market failure.
Answer:
Refer to the graph shown. If the price is changed from $12.00 to $4.00, the quantity
demanded increases by:
A. 2 CDs per week.
B. 4 CDs per week.
C. 6 CDs per week.
D. 8 CDs per week.
Answer:
Economists and laypeople see the pros and cons of international trade in different ways.
Which of the following is one of those ways?
A. Laypeople enjoy the benefits of trade in terms of lower consumer prices.
B. Laypeople believe in the law of one price and economists do not.
C. Laypeople tend to think of foreign trade only in terms of manufactured goods.
D. Laypeople recognize that the United States has a comparative advantage in services.
Answer:
Refer to the graph shown. The difference between total surplus in equilibrium and total
surplus when price is $8.15 and quantity is 220 is:
A. 405.
B. 423.5.
C. 600.
D. 800.
Answer:
Refer to the graph shown. The middle quintile (the middle fifth) of families earn:
A. 10.7 percent of the income.
B. 15.3 percent of the income.
C. 22.1 percent of the income.
D. 32.6 percent of the income.
Answer: