1) Normal profit is considered an economic cost.
2) The fundamental reason that newspapers have such high prices is the high production
costs from diseconomies of scale.
3) One implication of the median-voter model as applied to a vote regarding how much
government involvement to have in the economy is that most voters would find the
resulting government involvement either too large or too small.
4) The monopolistically competitive seller maximizes profits by equating price and
marginal cost.
5) When a competitive firm sees losses because the product falls below the minimum
average cost of production at its current plant, it may decide to expand if there are
economies of scale.
6) If an oligopolist’s several rivals exactly match any price changes it initiates, the
demand curve will be less elastic than if its price changes are ignored by its rivals.
7) Neoclassical economics and behavioral economics are similar in the assumption that
people are capable of making accurate, sometimes complex, calculations with respect to
their utility-maximizing decisions.
8) The less the elasticity of product demand, the greater the elasticity of resource
demand.
9) In the United States since 1975, the poor have gotten poorer and the rich have gotten
richer in both relative and absolute terms.
10)
Refer to the diagram for a nondiscriminating monopolist. At output M total cost will be
0CHM.
11) In the United States:
A.whites have higher unionization rates than African Americans.
B.men have higher unionization rates than women.
C.managers have higher unionization rates than transportation workers.
D.workers in mining have higher unionization rates than workers in government.
12) Xavier produces and sells tomatoes in a purely competitive market. This implies
that Xavier’s marginal revenue from an extra unit of tomatoes is always equal to the:
A.Unit price
B.Average cost
C.Variable cost
D.Unit profit
13) Other things equal, increased emphasis on providing the best possible medical care
for all, regardless of income, will:
A.increase the demand for health care.
B.increase the supply of health care.
C.have no effect.
D.decrease the demand for health care.
14) Per capita incomes must first grow for birth rates to decline. This statement
describes the:
A.human capital view of population growth.
B.traditional view of population growth.
C.capricious universe view.
D.demographic transition view of population growth.
15)
On the above graph, if the oligopolist’s MC curve shifts from MC1 to MC2, the firm
will charge:
A.A higher price than before and total revenue will increase
B.The same price as before and sell more output; total revenue will increase
C.The same price as before and sell the same amount of output; total revenue will
remain the same
D.A higher price than before and sell less output; it can’t be determined whether total
revenue will change
16) Some people argue that the three main television networks all have similar
programming. If true, this observation might best be explained by the:
A.paradox of voting.
B.median-voter model.
C.law of diminishing marginal utility.
D.ability-to-pay principle.
17) Health care costs have tended to rise more rapidly in the United States than in
Canada because:
A.state insurance regulators in the United States do not face the budget constraints that
national regulators in Canada face.
B.people in the United States want more health care than people in Canada.
C.private insurance in the United States encourages overconsumption of health care;
public insurance in Canada does not.
D.Canada has better achieved economies of scale in the production of health care.
18) The monopolistically competitive seller maximizes profit by producing at the point
where:
A.total revenue is at a maximum.
B.average costs are at a minimum.
C.marginal revenue equals marginal cost.
D.price equals marginal revenue.
19) U.S. exports create a:
A.Supply of foreign currencies and a demand for dollars in the foreign exchange
markets
B.Demand for foreign currencies and a supply of dollars in the foreign exchange
markets
C.Supply of foreign currencies and a supply of dollars in the foreign exchange markets
D.Demand for foreign currencies and a demand for dollars in the foreign exchange
markets
20) When an economist says that the demand for a product has increased, this means
that:
A.consumers are now willing to purchase more of this product at each possible price.
B.the product has become particularly scarce for some reason.
C.product price has fallen and, as a consequence, consumers are buying a larger
quantity of the product.
D.the demand curve has shifted to the left.
21) In his Essay on the Principles of Population, Thomas Malthus argued that:
A.Human living standards could permanently rise above subsistence levels, so that
populations would grow exponentially
B.Any increase in living standards would be temporary because people will have more
children and increase the population thus bringing living standards back down
C.As the population increases, the standard of living would grow as well because of
rising productivity
D.As economic efficiency declined, standards of living would first fall and then
eventually rise as the population starts increasing
22) Answer the question on the basis of the following cost data for a firm that is selling
in a purely competitive market.
Refer to the data. At 3 units of output, total variable cost is ____ and total cost is ____.
A.$20; $70
B.$60; $210
C.$20; $210
D.$60; $350
23) Prashanth decides to buy a $75 ticket to a particular New York professional hockey
game rather than a $50 ticket for a particular Broadway play. We can conclude that
Prashanth:
A.is relatively unappreciative of the arts.
B.obtains more marginal utility from the play than from the hockey game.
C.has a higher “marginal utility-to-price ratio” for the hockey game than for the play.
D.has recently attended several other Broadway plays.
24)
Refer to the above table. If supply decreased by 2 units at each price, what would the
new equilibrium price and quantity be?
A.$3 and 5 units
B.$4 and 4 units
C.$5 and 5 units
D.$6 and 6 units
25) Behavioral economists believe that people can be made better off by:
A.Giving them more options, just like the belief of neoclassical economists
B.Giving them more options, contrary to the belief of neoclassical economists
C.Getting them to select better from the same set of options as they had initially
D.Requiring them to follow an externally-determined best choice among their options
26) Private firms can hardly produce a public good profitably because of:
A.Liability rules and lawsuits
B.The free-rider problem
C.Shortages and surpluses
D.Moral hazard and adverse selection
27) A purely competitive firm’s output is currently such that its marginal cost is $4 and
marginal revenue is $5. Assuming profit maximization, the firm should:
A.Cut its price and raise its output
B.Raise its price and cut output
C.Leave price unchanged and raise output
D.Leave price unchanged and cut output
28) Suppose the demand for good X, an agricultural product, is price-inelastic. This
means that small variations in the quantity of X produced will be associated with large
variations in the:
A.Price of good X
B.Incomes of consumers of good X
C.Cost of producing good X
D.Quantity of good X exchanged
29) The key demand-side factors that cause the depletion of finite natural resources are:
A.Population and productivity
B.Productivity and per capita consumption
C.Per capita consumption and efficiency
D.Population and per capita consumption
30) What are the two conflicting incentives that politicians must deal with? What is the
result of this conflict?
31) Explain how the exchange rate gets determined in a flexible exchange rate system.
32) Explain the probable incidence of a general sales tax imposed by a state.
33) What is the difference between a deductible and a copayment as it applies to
medical insurance?
34) Explain this quote from Adam Smith: It is not from the benevolence of the butcher,
the brewer, or the baker that we expect our dinner but from their regard to their own
interest.
35) Explain how present value calculations are used to evaluate future possibilities in
the case of oil. Give an example using a present value calculation.
36) Explain what is meant by a competitive market.
37) The iPhone costs billions of dollars to develop. Discuss why this product is
available to the average person in the United States.
38) Discuss the market for gasoline and the Organization of Petroleum Exporting
Countries (OPEC) role in determining price.