In Minnesota, tax collectors found that threatening late filers with warnings and fines
does not increase tax compliance. Instead, they publicized the fact that most
Minnesotans had already filled in their returns. What type of nudge is this?
A. an information nudge
B. a pricing nudge
C. an advantageous default option nudge
D. There is no nudge involved.
Answer:
Which of the following is the best example of a long-run decision?
A. An automobile manufacturing company is considering whether to invest in robotic
equipment to develop a more cost-effective production technique.
B. An automobile manufacturing company is considering whether to expand its existing
workforce while keeping the same factory and equipment.
C. A business consulting firm is considering whether to hire some interns to assist with
research and data processing.
D. A business consulting firm is considering whether to add new computers while
maintaining the same number of employees.
Answer:
Microsoft filed a lawsuit against people who sent spam (junk e-mail) and a website
owner who hosted spam services. A spokesman for Microsoft said that Microsoft was
“trying to change the economics of spam” by increasing the cost of being a spammer.
An economist most likely would agree with which statement about Microsoft’s actions?
A. A more effective approach would be to educate spammers about the costs they
impose on others.
B. A more effective approach would be to appeal to the morals of the spammers and tell
them to follow the Golden Rule.
C. Microsoft’s approach of trying to change the costs of spamming is the most effective
way to change behavior.
D. Microsoft should not be involved because spamming is just part of the invisible hand
at work and should be left alone.
Answer:
The U.S. textile industry is relatively small because the United States imports most of
its clothing. A clear result of the importation of clothing is that:
A. there is less variety available than there would be without imports.
B. the quality of clothing is lower than it would be without imports.
C. the price of clothing is higher than it would be without imports.
D. the price of clothing is lower than it would be without imports.
Answer:
Refer to the graphs shown, which depict a perfectly competitive market and firm. If
market demand is D0:
A. this market is in long-run equilibrium because the firm is earning positive economic
profit.
B. this market is in long-run equilibrium because the firm is earning zero economic
profit.
C. this market is in short-run equilibrium but not long-run equilibrium.
D. the firm will raise the price above P0 to increase profit.
Answer:
Assume the graph shown reflects demand in the automobile market. Which arrow best
captures the impact of increased consumer income on the automobile market?
A. A
B. B
C. C
D. D
Answer:
Assuming government’s goal is to benefit society as much as possible:
A. actions with negative and positive externalities should be encouraged.
B. actions with negative and positive externalities should be restricted.
C. actions with negative externalities should be encouraged and actions with positive
externalities should be restricted.
D. actions with negative externalities should be restricted and actions with positive
externalities should be encouraged.
Answer:
During a recession, the price of restaurant meals falls by over 10 percent. The most
likely cause is:
A. a shift of the demand curve to the left.
B. a shift of the supply curve to the left.
C. a shift of the supply curve to the right.
D. a shift of the demand curve to the right.
Answer:
Joe is maximizing utility by consuming three colas at $2 apiece and four hot dogs at $3
apiece. The last cola gave him 200 units of utility. How many units of utility did the last
hot dog give him?
A. 133.33
B. 300
C. 10
D. 600
Answer:
Sending people letters about their energy usage along with energy-saving tips:
A. is an example of an information nudge.
B. is an example of an advantageous default option nudge.
C. is an example of a pricing nudge.
D. is not a nudge.
Answer:
A marketing student observes that when the price of ice cream rises by 10 percent, the
quantity of ice cream a supplier is willing to sell rises by 5 percent. The student
correctly concludes that the elasticity of supply for ice cream is:
A. .2.
B. .5.
C. 2.
D. 5.
Answer:
In 1966, the merger between Pabst Brewing and Blatz Brewing was:
A. allowed because the two companies accounted for only 4.5 percent of U.S. beer
sales.
B. allowed because the two companies held only a 24 percent share of the Wisconsin
market.
C. disallowed because the two companies accounted for 4.5 percent of U.S. beer sales.
D. disallowed because the two companies held a 24 percent share of the Wisconsin
market.
Answer:
Economist Kuo S. Huang estimated the elasticity of demand for beef to be 0.62 and the
elasticity of demand for milk to be 0.04. Which of the following is a possible
explanation of the difference in elasticities?
A. Milk accounts for a greater portion of one’s income.
B. Milk has fewer substitutes than does beef.
C. Milk is more of a luxury good than beef.
D. Milk is more narrowly defined than beef.
Answer:
The fact that the United States has a trade deficit means that:
A. the United States is producing more than it is consuming.
B. foreign countries can have comparative advantages in all goods.
C. foreign countries can have comparative advantages in more goods compared to the
United States.
D. the United States is lending more to foreign countries than it is borrowing from
foreign countries.
Answer:
The best example of a positive externality is:
A. roller coaster rides.
B. pollution.
C. alcoholic beverages.
D. education.
Answer:
Refer to the graph shown. The fourth quintile (a quintile is a fifth) of the families earn:
A. 52 percent of the income.
B. 28 percent of the income.
C. 24 percent of the income.
D. 20 percent of the income.
Answer:
When the top marginal tax rate fell from 40 to 35 percent, with other things the same,
the U.S. income tax system became:
A. more progressive.
B. less progressive.
C. proportional.
D. regressive.
Answer:
A cultural norm is:
A. an economic force.
B. a social force.
C. a political force.
D. a market force.
Answer:
When Ross Perot ran for president as a third party candidate in 1992, he argued that
free trade with Mexico would result in massive job losses in the United States because
Mexican wages were so low. Which of the following is the best explanation of why few
economists agreed with Perot?
A. Economists did not believe that any jobs would be lost in the United States.
B. Economists believed that the U.S. unemployment rate would rise.
C. Although economists agreed that in some areas the United States would lose jobs,
they expected that the United States would gain jobs in other areas.
D. Although economists predicted that unemployment would rise, the increased profits
of corporations would raise stock prices enough to compensate for the lost jobs.
Answer:
Refer to the graph shown of a monopolistically competitive firm. If the firm maximizes
profit, it will earn:
A. zero economic profit this year.
B. $320,000 economic profit this year.
C. $84,000 economic profit this year.
D. $56,000 economic profit this year.
Answer:
If P = Q/15 represents market supply for a competitive industry and market demand is
given by Qd = 500 – 10P, the equilibrium quantity is:
A. 150.
B. 187.5.
C. 250.
D. 300.
Answer:
Which of the following will not shift the demand for labor to the right?
A. An increase in the price of a competing input
B. An increase in the demand for output
C. An increase in the wage rate
D. An increase in the competitiveness of an industry
Answer:
Certificates of ownership of a company are called:
A. financial liabilities.
B. limited liabilities.
C. profits.
D. stocks.
Answer:
Suppose there are only four airlines that service the air route between two cities. If there
is a barrier to entering the market (such as a limited number of gates), the market is best
characterized as:
A. a pure monopoly.
B. monopolistically competitive.
C. oligopolistic.
D. perfectly competitive.
Answer:
In the graph shown, what change would increase production efficiency?
A. Moving from A to D
B. Moving from A to B
C. Moving from C to D
D. Moving from D to B
Answer:
A market incentive plan:
A. regulates the amount of a resource a person can consume through direct limits.
B. requires that people choose to consume until the marginal costs exceed the marginal
benefits.
C. makes the price of a resource reflect not only the marginal private costs but also the
marginal social costs of consuming that resource.
D. makes the price of a resource reflect the marginal private costs of consuming that
resource.
Answer:
Refer to the graph shown. In the graph, the opportunity cost of good X in terms of good
Y is:
A. higher along segment AB than along segment BC.
B. lower along segment AB than along segment BC.
C. the same everywhere on the two segments.
D. always increasing as we move from A to C.
Answer:
Economic reasoning would argue that there is an opportunity cost to:
A. all choices.
B. more choices.
C. only choices that involve money.
D. only choices that do not involve money.
Answer:
A government airline safety regulation reduces the probability of a fatal airline crash by
0.005. If the costs associated with each airplane crash are equal to $600 million and the
costs of performing more frequent safety inspections equal $4 million, the regulation is:
A. cost-effective since only $4 million is spent and the gain is $600 million.
B. not cost-effective because the marginal cost is $4 million and the marginal benefit is
$1 million.
C. not cost-effective because the marginal cost is $4 million and the marginal benefit is
$2 million.
D. not cost-effective because the marginal cost is $4 million and the marginal benefit is
$3 million.
Answer:
Refer to the graph shown. If this monopolist were allowed to choose the
profit-maximizing level of output, it would produce:
A. 125 units of output.
B. 200 units of output.
C. 400 units of output.
D. 450 units of output.
Answer:
Which of the following companies was the target of antitrust scrutiny because it had
gained market share as a result of technological innovation?
A. Apple Computers.
B. Parker Pens.
C. Microsoft.
D. Standard Oil.
Answer:
Assume that the home construction industry is perfectly competitive and is in long-run
competitive equilibrium. It follows that:
A. marginal cost equals long-run average total cost.
B. there will be incentive for new firms to enter the industry.
C. marginal cost exceeds long-run average total cost.
D. firms in the industry enjoy economic profits.
Answer:
Patrick McCarthy has estimated that on average, for every 1 percent increase in income,
the quantity of European cars demanded increases by 1.93 percent. From this
information one can conclude that European cars are:
A. a luxury.
B. a necessity.
C. an inferior good.
D. a negative good.
Answer: