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A life insurance company is likely to require a health examination of a person applying
for insurance. This helps reduce the informational problem through the process of:
A. signaling.
B. screening.
C. creating an externality.
D. government regulation.
Answer:
Strategic decision making is most important in:
A. competitive markets.
B. monopolistically competitive markets.
C. oligopolistic markets.
D. monopolistic markets.
Answer:
For a market to exist:
A. private property rights must be allocated and defended by government.
B. government must guarantee equal treatment for all.
C. individuals must be concerned with the social good.
D. everyone must have identical wants and desires.
Answer:
Refer to the graph shown. The areas that represent the net gain to society of eliminating
the monopoly are:
A. A and B.
B. A and C.
C. D and B.
D. D and C.
Answer:
In the case of a natural monopoly, as the number of firms in the industry increases, the
average cost of producing a:
A. fixed number of units decreases.
B. fixed number of units stays the same.
C. variable number of units stays the same.
D. fixed number of units increases.
Answer:
If both buyers and sellers expect the price of a commodity to rise in the future, it is
likely that equilibrium:
A. price will fall with little change in equilibrium quantity.
B. price will rise with little change in equilibrium quantity.
C. quantity will fall with little change in equilibrium price.
D. quantity will rise with little change in equilibrium price.
Answer:
What is one reason the United States produces luxury cars such as the Chevy Corvette
but still does not provide health care for all individuals?
A. Income is highly unequally distributed in the United States.
B. Government manages the health care system.
C. Total surplus in the United States is too low.
D. Providing health care for all individuals is always inefficient.
Answer:
The law of demand states that consumers buy more of a good when its price declines:
A. because their income increases at the same time.
B. only if their income increases at the same time.
C. even if other demand determinants change at the same time.
D. provided all else remains constant.
Answer:
Natural monopolies enjoy strong economies of scale, and so as output increases:
A. marginal revenue is continually falling.
B. average costs are continually rising.
C. average costs are continually falling.
D. marginal costs are continually rising.
Answer:
Suppose that initially, the equations for demand and supply are Qd = 48 - 4P and Qs =
4P - 16, respectively. If the quantity demanded increases by 12 at every price (so that
the demand curve shifts to the right), the equilibrium price will change from:
A. $8 to $9.50.
B. $8 to $12.
C. $12 to $9.5.
D. $9.50 to $8.
Answer:
Which of the following Gini coefficients represents the income distribution closest to
being equal?
A. 0.02
B. 0.10
C. 0.50
D. 0.98
Answer:
Refer to the graph shown. Which of the following curves demonstrates a perfectly
inelastic demand curve?
A. A
B. B
C. C
D. None of the curves
Answer:
As firms leave a monopolistically competitive industry that is sustaining economic
losses:
A. the demand curves facing the remaining firms in the industry shift to the right.
B. the demand curves facing the remaining firms in the industry shift to the left.
C. total quantity demanded increases for the industry.
D. the market supply curve shifts to the right.
Answer:
Friedrich Nietzsche's views on income distribution and fairness can best be described
by the statement:
A. The lesser individuals' duty should be to work for the well-being of the brightest
individuals.
B. A high level of income inequality is necessary to sustain the arts, beauty, education,
and civilization.
C. Society's goal should be to maximize the welfare of the least well-off, but some
inequality is necessary to meet this goal.
D. An efficiently operating marketplace will generate an equal distribution of income
without government intervention.
Answer:
If a natural monopolist were forced to set price equal to average cost, it would:
A. earn a normal profit.
B. suffer losses.
C. earn excessive profit.
D. be forced to produce more than the socially optimal level of output.
Answer:
Which of the following would not be part of the empirical approach when studying
such question as "Has abortion led to a decrease in the crime rate?"?
A. Looking at the data
B. Creating informal models and hypotheses
C. Using deductive reasoning
D. Using models to structure the empirical study
Answer:
One way firms protect their monopoly is:
A. raising prices.
B. producing items that can be copied easily.
C. advertising.
D. taking advantage of short-run profits.
Answer:
The Lorenz curve:
A. is an absolute measure of income.
B. is a relative measure of income.
C. takes into account changes in the standard of living.
D. has elements of absolute and relative measures.
Answer:
Refer to the graph shown. If this perfectly competitive firm is producing 120 units of
output, the market price is equal to:
A. $48.
B. 2.50.
C. $0.40.
D. impossible to determine with the information given.
Answer:
Which of the following statements is true?
A. Income distribution became less equal from 1929 to 1970.
B. Income distribution became less equal from 1970 to today.
C. The income of the bottom fifth of families rose 10 percent from 1970 to today.
D. The income of the bottom fifth of families fell 10 percent from 1929 to today.
Answer:
A strategy that achieves a goal at the lowest cost in total resources without
consideration of who pays those costs is:
A. efficient.
B. inefficient.
C. impossible.
D. always the most profitable to the firm.
Answer:
Which of the following is not a characteristic of a public good?
A. Nonexclusivity
B. Available to nonbuyers
C. Nonrivalry in consumption
D. Can be consumed only once
Answer:
Suppose that initially, the equations for demand and supply are Qd = 48 - 4P and Qs =
4P - 16, respectively. If the quantity supplied decreases by 4 at every price (so that the
supply curve shifts to the left), the equilibrium price will change from:
A. $8 to $7.50.
B. $8 to $8.50.
C. $8.50 to $7.50.
D. $7.50 to $8.50.
Answer:
Suppose the dry cleaning industry is initially in long-run equilibrium but then
experiences a sharp increase in the price of its inputs. Assuming that the industry is
perfectly competitive, the increase in costs should:
A. decrease the number of firms in the industry in the long run and raise the market
price.
B. increase the number of firms in the industry in the industry and raise the market
price.
C. decrease the number of firms in the industry in the long run and reduce the market
price.
D. increase the number of firms in the industry in the industry and reduce the market
price.
Answer:
Refer to the graph below.
With which curve does the opportunity cost of an additional unit of good Y decrease as
more units of good Y are produced?
A. A
B. B
C. C
D. D
Answer:
Rachel left her job as a graphic artist, where she earned $42,000 per year, to open her
own graphic arts firm. Her total costs of the new business include:
A. only the expenses incurred for office space, equipment, and supplies.
B. only her forgone salary of $42,000 per year.
C. both the expenses incurred for office space, equipment, and supplies and her forgone
salary of $42,000 per year.
D. neither the expenses incurred for office space, equipment, and supplies nor her
forgone salary of $42,000 per year.
Answer:
Television broadcasts are often given as examples of a public good. However, it is
possible to code a broadcast so that only people who pay for the decoder box can view
it. The use of a coded signal does what to a television broadcast?
A. Makes it rival
B. Makes it nonrival
C. Makes it excludable
D. Makes it nonexcludable
Answer:
Refer to the graph shown. Suppose that at a price of $5.00, firm A is willing and able to
supply 4 units and firm B is willing and able to supply 4 units. Which of the following
statements is then true?
A. Curve S0 shows the quantity supplied of firm A and firm B combined.
B. Curve S1 shows the quantity supplied of firm A and firm B combined.
C. The addition of firm B to the market causes a movement upward and to the right
along S0.
D. The addition of firm B to the market causes a movement upward and to the right
along S1.
Answer:
Refer to the graphs shown, which show indifference curve analysis with the associated
demand curves. If a consumer is able to move from point B to point C, she is also able
to move from point:
A. D to point F.
B. E to point G.
C. H to point I.
D. H to point J.
Answer:
For normal goods, income elasticity is:
A. greater than 0.
B. greater than 1.
C. less than 0.
D. equal to 1.
Answer:
