1) Consider the following situations and determine whether they exhibit simultaneous
consumption, network effects, x-inefficiency or rent-seeking behavior. Assume the
businesses referenced function as monopolies.
(a)A pharmaceutical company discovers a vaccine for the common cold. The company
puts a significant effort into tests to get it FDA-approved and into hiring lawyers to
obtain a patent.
(b)An Internet service provider adds thousands of new customers.
(c)The head of a family-owned, major hotel chain decides to hire his wild, socialite
niece to work as an executive of the company after her reality TV career ends.
(d)An online profile company helps college and high school students from across the
country to connect with each other.
2) A nation can produce two products: steel and wheat. The table below is the nation’s
production possibilities schedule:
Refer to the above table. In moving stepwise from possibility A to B to C to F, the
opportunity cost of a unit of steel in terms of wheat:
A.Increases
B.Decreases
C.Remains constant
D.Increases at first then decreases
3)
Refer to the diagram. All other things equal, curve C:
A.reflects increasing opportunity costs because the slope of the curve becomes less
steep as one moves down along the curve.
B.is a less desirable production possibilities curve for an economy than curve B.
C.is a more desirable production possibilities curve for an economy than curve A.
D.has a steeper slope throughout than curve B.
4) A major implication of asymmetric information is that:
A.health care suppliers may reduce the supply of health care.
B.health care suppliers may increase the demand for health care.
C.collusion between health care suppliers and purchasers may accelerate the rise in
costs.
D.resources may be underallocated to the health care industry.
5) The table below shows the total production of a firm as the quantity of labor
employed increases. The quantities of all other resources employed are constant.
Compute the marginal and average products and enter them in the table.
(a)At what levels are there increasing returns to labor and at what levels are there
decreasing returns to labor?
(b)Describe the relationship between the total product and marginal product.
(c)Describe the relationship between marginal and average product.
6) Alex, Kara, and Susie are the only three people in a community and Alex is willing to
pay $20 for the fifth unit of a public good; Kara, $15; and Susie, $25. Government
should produce the fifth unit of the public good if the marginal cost is less than or equal
to:
A.$25.
B.$15.
C.$60.
D.$300.
7) According to estimates, what percentage of agricultural workers in the United States
are illegal immigrants?
A.12
B.19
C.25
D.50
8) The highly influential book by Adam Smith, who brought up the “invisible hand”
notion, is titled:
A.The Worldly Philosophers
B.The Affluent Society
C.The Age of the Economist
D.The Wealth of Nations
9) The incentive function of prices:
A.indicates that price increases bring forth more of that resource.
B.is the idea that competitive markets will always clear.
C.applies to all resources.
D.only applies to land.
10) If a local leader in a developing nation claims that there is little or no correlation
between a person’s efforts and the economic rewards which are given to that person,
this person is most likely expressing a:
A.Description of the vicious cycle of poverty
B.Theory of exploitation and dependence
C.Capricious view of the universe
D.Rationale for neocolonialism
11) Critics contend that imposing a minimum wage higher than the equilibrium wage in
a competitive industry would:
A.Decrease the number of workers employed in that industry
B.Decrease the quantity of labor supplied to that industry
C.Increase the demand for labor in the industry
D.Increase employment in that industry
12)
Majority of international migrants move to:
A.The U.S. and Canada
B.Western Europe
C.Countries relatively close to their home countries
D.Japan and Australia
13)
Refer to the given data. If the market wage rate is $8, this firm will employ:
A.2 workers.
B.3 workers.
C.4 workers.
D.5 workers.