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1) Maximum profits are what motivate consumers to decide who will get the goods and
services in a market system.
2) The era after the Industrial Revolution proved that it was impossible to have
improved standards of living with large population growth.
3) The idea of "nudging" people into certain choices is one major contribution of
behavioral economics to policy-making.
4) Only a few states use state-run lotteries to increase their revenues and pay for
expenditures.
5) Selfishness and self-interest are identical concepts.
6) The major expenditure of local governments is for education.
7) All social insurance programs are welfare or public charity programs.
8) Assuming that interest rates are positive, the present value of an $80 barrel of oil in
two years is less than an $80 barrel today.
9) A government subsidy per unit of output increases supply.
10) DVCs tend to have permanent shortages of farm labor.
11) Six of the 50 states account for approximately half of all union members in the
United States.
12) Medicare is the U.S. government's largest unfunded liability.
13) Monopolistically competitive firms exist due to high barriers to entry.
14) Insurance companies use deductibles and copayments to control increases in the
amount of health care demanded.
15) Monopolistically competitive firms will achieve the most efficient allocation of
society's resources because there are no significant barriers to entry into the industry.
16)
Refer to the diagram in which S is the before-tax supply curve and St is the supply
curve after an excise tax is imposed. The efficiency loss of the tax is shown by areas:
A.A + B + C + E + F.
B.A + B + C.
C.A + B + F.
D.E + F.
17) In a duopoly, if one firm increases its price, then the other firm can:
A.Keep its price constant and thus increase its market share
B.Keep its price constant and thus decrease its market share
C.Increase its price and thus increase its market share
D.Decrease its price and thus decrease its market share
18)
Refer to the diagram. If this somehow was a costless product (that is, the total cost of
any level of output was zero), the firm would maximize profits by:
A.selling the product at the highest possible price at which a positive quantity will be
demanded.
B.producing Q1 units and charging a price of P1.
C.producing Q3 units and charging a price of P3.
D.producing Q2 units and charging a price of P2.
19) Which factor will decrease the demand for loanable funds?
A.A change in the tax law to exempt savings from taxation
B.Expansion of social insurance to cover more fully the cost of retirement
C.A general business recession that produces high rates of unemployment
D.A technological advance that increases returns on investments
20) The crowding of women and minorities into a restricted number of occupations:
A.has no impact on the size of the domestic output or its distribution in the long run.
B.will increase the size of the domestic output and make its distribution more equal.
C.will decrease the size of the domestic output and make its distribution less equal.
D.will increase the size of the domestic output but make its distribution less equal.
21)
Refer to the graph above representing the purely competitive market for a product.
When the market is at equilibrium, the total revenues from selling the equilibrium
output level would be represented by the area:
A.a + b + c
B.b
C.b + c
D.b + c + d
22) The inelastic demand for agricultural products means that relatively small increases
in supply will result in a relatively:
A.Large decrease in farm prices and total revenue for farmers
B.Small increase in farm prices and total revenue for farmers
C.Small decrease in farm prices and a relatively large increase in total revenue for
farmers
D.Large increase in farm prices and a relatively small decrease in total revenue for
farmers
23) Loan guarantees provided by the government for specific private-sector investments
tend to:
A.Generate high positive returns for the government
B.Increase the financial risk faced by the private investors
C.Attract private investors into the specific project
D.Eliminate the moral hazard problem among investors
24)
Refer to the table above for a certain product's market in Econland. If Econland were
entirely closed to international trade, the equilibrium price and quantity would be:
A.$9 and 2,000 units
B.$8 and 1,800 units
C.$7 and 2,000 units
D.$6 and 1,400 units
25) Which of the following statements is correct?
A.Price supports may induce either an underallocation or an overallocation of resources
to farm products.
B.Supported prices have no effect on the allocation of resources to farm products.
C.Supported prices induce an underallocation of resources to farm products.
D.Price supports induce an overallocation of resources to farm products.
26) The Overnight Construction Company has just signed a collective bargaining
contract in which it agrees that all workers it hires must be union members in good
standing at the time they are hired. This provision reflects:
A.preferential hiring.
B.a maintenance-of-membership shop.
C.a union shop.
D.a closed shop.
27) All of the following statements are true about pure competition in the long run,
except:
A.Entry and exit of firms will push economic profits of firms in the industry towards
zero
B.Entry and exit of firms will shift the demand curve facing the representative firm in
the industry
C.The long-run adjustment in pure competition happens through shifts in the industry
supply curve
D.The long-run adjustment in pure competition happens through shifts in the industry
demand curve
28) What quantity should the purely competitive firm produce to maximize profits?
Analyze from a total revenue and total cost perspective and a marginal revenue and
marginal cost perspective.
29) Explain the problem of adverse selection. How might this problem affect
transactions in the insurance industry?
30) Pure competition or pure monopoly industries will tend to be one-price industries.
Monopolistic competition, however, is a multiprice industry. Explain.
31) List the four main categories of Federal spending.
32)
33) What is meant by the term government failure as described in this chapter?
34) What is the shadow heuristic? How does it work?
35) Monopolistic firms will always be against regulation. Evaluate.
36) Why might a country seek to protect an industry, even when the benefits are greatly
outweighed by the cost?
37) Explain how changes in relative real interest rates affect the value of a nations
currency.
