1) If income inequality is increasing, it means that the income levels of the poor are
falling while the income levels of the rich are rising.
2) The risk that the firm’s employees might get hurt while working is an example of the
uninsurable risks faced by an entrepreneur.
3) A price floor in a competitive market will result in persistent shortages of a product.
4) Economic efficiency entails producing a certain output with the minimum number of
units of inputs.
5) Choices entail marginal costs because resources are scarce.
6) Both collusive and noncollusive oligopoly models suggest that price changes will be
relatively infrequent in these types of industries.
7) Creative destruction is the situation where the creation of new products destroys the
monopoly market positions of firms producing existing products.
8) The increasing relative importance of agricultural exports has increased the
instability of the demand for U.S. farm products.
9) The levying of licensing fees for automobiles is an example of taxation based on the
ability-to-pay principle.
10) Many economists view technological advance as mainly a response to profit
opportunities arising within a capitalist economy, and not some random external force.
11) Consumer surplus is the difference between the maximum price a consumer is
willing to pay for a good and the market price of the product.
12) Medicare is the nationwide Federal health care program available to Social Security
beneficiaries and the disabled.
13) The Lorenz curve is a graph that relates income to household spending.
14) Property rights over fish in the open ocean exist once the fish are caught.
15) Which of the following countries had the smallest share of exports as a percentage
of GDP in 2011?
A.Canada
B.France
C.United Kingdom
D.United States
16)
Based on the diagram above, which of the following statements is true?
A.Average total cost at Q2 is the slope of line 0A
B.Average total cost at Q1 is the slope of line AB
C.Marginal cost at Q2 is the slope of line CB
D.Marginal cost at Q1 is the slope of line 0A
17) When the price of a product increases, a consumer is able to buy less of it with a
given money income. This describes the:
A.cost effect.
B.inflationary effect.
C.income effect.
D.substitution effect.
18) One of the provisions of the Temporary Assistance for Needy Families (TANF)
program was to:
A.Guarantee cash assistance for poor families
B.Set a 5-year lifelong limit on welfare benefits
C.Get the Federal government to pay more of the cost of welfare
D.Make welfare benefits more equitable among those receiving them
19)
Refer to the diagram where D and S are the United States’ demand for and supply of
Swiss francs. At the equilibrium exchange rate, E, the United States’ balance of
payments is in equilibrium. A shift of the demand curve to D’ might be the result of:
A.a relative decline in interest rates in Switzerland.
B.a reduction in the United States’ relative price level.
C.a recession in the United States that slows its rate of growth.
D.a relative decline in interest rates in the United States.
20) Among the following examples, the one that best illustrates a public good is:
A.The laptops used by students in a college or university
B.The movies produced by Hollywood companies
C.The bike paths around a city or town
D.The airline tickets bought by vacationers
21) Insurance exchanges:
A.are government-regulated markets where individuals can purchase health insurance
to satisfy the personal mandate provision of the PPACA.
B.are expected to significantly increase health care costs by expanding government
regulation.
C.are government-regulated markets where prices are set directly by federal regulators.
D.allow patients to get medical treatment when away from the providers covered by
their regular health insurance.
22)
Refer to the graph. Which of the following schedules correctly reflects “demand”?
A.Option A
B.Option B
C.Option C
D.Option D
23) As it relates to corporations, the principal-agent problem is that:
A.the goals of the corporate managers (the principals) may not match the goals of the
corporate owners (the agents).
B.the goals of the corporate managers (the agents) may not match the goals of the
corporate owners (the principals).
C.the federal government (the agent) taxes both corporate profits and the dividends paid
to stockholders (the principals).
D.it is costly for the corporate owners (the principals) to obtain a corporate charter from
government (the agent).
24) Public choice theory would suggest that the lobbying of Congress by farm
organizations for legislation that would increase the appropriations from the U.S.
government for agricultural programs is an example of:
A.Revealed preference
B.Rent-seeking behavior
C.The paradox of voting
D.The median voter model
25)
Refer to the diagram. Technological advance in producing both capital goods and
consumer goods is shown by the shift of the production possibilities curve from AB to:
A.CD.
B.EB.
C.AF.
D.GH.
26) The vertical distance between the TC curve and TVC curve is equal to:
A.ATC
B.AVC
C.TFC
D.MC
27)
Refer to the diagram. Technological advance that improves the ability to produce
capital goods but not consumer goods is shown by the shift of the production
possibilities curve from AB to:
A.CD.
B.BE.
C.AF.
D.GH.
28) An increase in the demand for a product and a reduction in its costs of production
would:
A.Decrease the profits of producers
B.Encourage firms to leave an industry
C.Encourage firms to enter an industry
D.Cause a shortage of the product
29) Economic profit affects:
A.the allocation of resources but not the level of resource use.
B.the level of resource use but not the allocation of resources.
C.the allocation of resources and the level of resource use.
D.neither the allocation of resources nor the level of resource use.
30) Which of the following represents a long-run adjustment?
A.A farmer uses an extra dose of fertilizer on his corn crop.
B.Unable to meet foreign competition, a U.S. watch manufacturer sells one of its
branch plants.
C.A steel manufacturer cuts back on its purchases of coke and iron ore.
D.A supermarket hires four additional clerks.
31) Answer the question based on the following payoff matrices for a repeated game
involving two firms that are considering introducing new products to the market. The
numbers indicate the profit from following either a strategy to introduce a new product
or a strategy to not introduce a new product.
First game:
Second game:
Refer to the above table. In the second game:
A.Introducing a new product is the dominant strategy for both firms
B.Not introducing a new product is the dominant strategy for both firms
C.Introducing a new product is the dominant strategy for firm A while not introducing a
new product is the dominant strategy for firm B
D.Not introducing a new product is the dominant strategy for firm A while introducing
a new product is the dominant strategy for firm B
32) The typical production possibilities curve is:
A.an upsloping line that is bowed out from the origin.
B.a downsloping line that is bowed in toward the origin.
C.a downsloping line that is bowed out from the origin.
D.a straight upsloping line.
33) What is the dilemma of regulation in the case of a regulated monopoly?
34) Describe R&D expenditures in the United States. What percentage of spending goes
for invention, innovation, and diffusion?
35) How can technological advance result in creative destruction?
36) Draw a graph that illustrates X-inefficiency. Explain the concept of X-inefficiency
using the graph.
37) The owner of a restaurant is considering lowering menu prices to draw in more
customers. He is debating between lowering the price for the steak entre or the salmon
entre. When he lowered prices last year, a $2.00 decrease in price for the $15 steak
resulted in a growth in steak sales from 75 per week to 100 per week. A $2.50 decrease
in the price of the $17 salmon entre increased sales from 40 to 75 meals per week.
Which entre should he choose to put on sale?
38) What are the roots of the persistent famines in sub-Saharan Africa?