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1) The introduction of automatic elevator equipment allowed firms to handle the
movement of people in a multi-story building at less cost, thus decreasing the demand
for elevator operators. The best explanation for this change is that the:
A.Marginal product of elevator operators was equal to its price
B.Marginal product of automatic elevator equipment was equal to its price
C.Marginal product of automatic elevator equipment divided by its price was greater
than that for elevator operators
D.Marginal product of elevator operators divided by its price was greater than that for
automatic elevator equipment
2)
Refer to the above data. If government adopts a price support program that sets the
price at $8, then there will be a:
A.Shortage of 100 bushels
B.Surplus of 100 bushels
C.Surplus of 200 bushels
D.Surplus of 300 bushels
3) A user cost of zero implies that:
A.a firm will extract all of a resource in the present.
B.a firm will extract resources at a faster rate than if the user cost was positive.
C.a firm will extract resources at a faster rate than if the user cost was negative.
D.the price of the resource will not change.
4) Answer the question on the basis of the following information. A farmer who has
fixed amounts of land and capital finds that total product is 24 for the first worker hired;
32 when two workers are hired; 37 when three are hired; and 40 when four are hired.
The farmer's product sells for $3 per unit and the wage rate is $13 per worker.
Refer to the given information. What is the farmer's profit-maximizing output?
A.20
B.32
C.37
D.40
5) If marginal costs decrease and the MC curve shifts down, a typical monopolist will:
A.Reduce price and reduce quantity of output
B.Reduce price and increase quantity of output
C.Increase price and reduce quantity of output
D.Increase price and increase quantity of output
6) Which of the following is the largest expenditure item of state governments?
A.Education
B.Highways
C.Public welfare
D.Health and hospitals
7) As pizza topped with barbecue chicken became popular at specialty restaurants,
Pizza Hut introduced a similar pizza. This imitation illustrates:
A.innovation.
B.invention.
C.creative destruction.
D.diffusion.
8) Use the table below to answer the question for a purely competitive firm.
Refer to the above table. When the firm produces 3 units of output, it makes an
economic:
A.Profit of $3
B.Loss of $3
C.Profit of $9
D.Loss of $9
9) Answer the question on the basis of the data contained in the following table.
Assume that the firm is hiring labor in a purely competitive market.
The given data reveal that:
A.the firm is selling its product in a purely competitive market.
B.the firm is selling its product in an imperfectly competitive market.
C.there is no level of output at which this firm can operate at a profit.
D.the law of diminishing returns is not applicable to this firm.
10) A recommended policy for developing countries to stimulate economic growth
would be:
A.Abolishing central banks
B.More central planning by government
C.Encouraging more direct foreign investment
D.Expansion of employment in state industries
11) Which of the following is the best synonym for "marginal" in economics?
A.Scarce
B.Additional
C.Basic
D.Minor
12) In "Slicing the Pizza," the shrinkage of the pizza refers to the:
A.fact that poor people are not helped by the income-maintenance system.
B.efficiency lossesthe losses of output and income associated with the tax-transfer
system.
C.tendency of rich people in developing nations to hoard their wealth overseas.
D.failure of the Internal Revenue Service to collect all the tax revenues owed by
taxpayers.
13)
On the basis of the information, it can be said that:
A.no coincidence of wants exists between any two states.
B.a coincidence of wants exists between Michigan and Washington.
C.a coincidence of wants exists between Texas and Washington.
D.a coincidence of wants exists between Michigan and Texas.
14) The marginal tax rate is the:
A.Sum of all individual tax rates
B.Tax rate paid by those with the lowest family incomes
C.Total amount of taxes paid as a percentage of total income
D.Increase in taxes as a percentage of an increase in income
15) "The government deregulated the electricity industry in California and a shortage of
electricity soon occurred. It is clear that the deregulation caused the shortage." This
statement needs careful analysis because it may reflect the:
A.fallacy of composition.
B.post hoc, ergo propter hoc fallacy.
C.use of loaded terminology.
D.law of averages.
16) The presence of market failures implies that:
A.money is not an effective tool for exchange in a market system.
B.there is an active role for government, even in a market system.
C.individuals and firms should strive to be self-sufficient rather than specialize.
D.command systems are superior to market systems in the allocation of resources.
17) What happened in the banking industry with the introduction of ATMs which had a
higher MP/P than for the substitute resource of human tellers?
A.Human tellers replaced many ATMs because people did not want to use ATMs
B.ATMs replaced many human tellers because it reduced banks' costs
C.More of both ATMs and human tellers were used because banks were more
productive
D.Less of both ATMs and human tellers were used because banks did not know how to
use the new technology
18) "In the corn market, demand often exceeds supply and supply sometimes exceeds
demand." "The price of corn rises and falls in response to changes in supply and
demand." In which of these two statements are the terms demand and supply being used
correctly?
A.In neither statement.
B.In the second statement.
C.In the first statement.
D.In both statements.
19) If Japanese autos surge in popularity in the United States, then this event is most
likely to cause the Japanese yen to:
A.Appreciate and the U.S. dollar to depreciate
B.Depreciate and the U.S. dollar to appreciate
C.Appreciate and the U.S. dollar to appreciate
D.Depreciate and the U.S. dollar to depreciate
20)
In the diagram, at $10 million of R&D expenditure, the:
A.expected rate of return exceeds the interest-rate cost of funds.
B.firm is spending an optimal amount on R&D.
C.interest-rate cost of funds exceeds the expected rate of return.
D.marginal benefit of R&D is less than the marginal cost of R&D.
