The text calls the type of comparative advantage that is not easily changed, such as
climate:
A. stable comparative advantage.
B. inherent comparative advantage.
C. equilibrium comparative advantage.
D. permanent comparative advantage.
Answer:
Compute the approximate elasticity of demand from the following data:
A. .87.
B. 1.15.
C. 1.5.
D. 5.0.
Answer:
If the marginal income tax rate falls from 50 percent to 40 percent:
A. the average tax rate rises.
B. the incentive to work becomes stronger.
C. the incentive to work becomes weaker.
D. after-tax wages decline.
Answer:
“I believe that consumer sovereignty is a good thing.” This person believes that:
A. people are often manipulated by advertisers.
B. businesses should produce for people’s needs, not for profits.
C. people often have self-control problems.
D. businesses should produce what people want.
Answer:
Gary Becker believes that traditional building blocks should be the essence of the
economic approach because:
A. they reflect people’s notions of fairness.
B. they contain more mathematical rigor.
C. they apply to most situations and give clear-cut results.
D. they allow for predictable irrationality.
Answer:
A firm will buy monopoly power until the marginal cost of having a monopoly:
A. equals the marginal benefit.
B. equals the price of its product.
C. is more than the marginal benefit.
D. is less than the marginal benefit.
Answer:
In a perfectly competitive market, the demand curve faced by an individual firm is:
A. perfectly inelastic.
B. relatively inelastic.
C. perfectly elastic.
D. relatively elastic.
Answer:
If a profit-maximizing oligopolist has a kinked demand curve, a downward shift in its
marginal cost curve:
A. may not affect output or price.
B. increases output or price but not both.
C. reduces both output and price.
D. reduces output but not price.
Answer:
Consider a market for fish whose market demand and market supply for fish are
specified as Qd = 300 – 2.5 P and Qs = – 20 + 1.5 P respectively. The government
decides to impose a price ceiling of $50 per ton. The possible black market price after
the ceiling is:
A. $140.
B. $110.
C. $80.
D. $40.
Answer:
Which of the following is not a likely conclusion in court cases that value human life?
A. Those who serve in high-paying occupations are more valued than those in other
occupations.
B. Happy people are more valuable than depressed people.
C. All lives have equal value.
D. Those who are younger have more value than those who are older.
Answer:
Which of the following would cause the supply curve for euros to shift left?
A. Americans want to buy more European goods.
B. Americans want to buy fewer European goods.
C. Europeans want to buy more American goods.
D. Europeans want to buy fewer American goods.
Answer:
Refer to the graph shown. The profit-maximizing monopolist would be:
A. earning accounting but not economic profits.
B. sustaining a loss.
C. making zero economic profits.
D. making economic profits.
Answer:
If MUA/PA > MUB /PB, an individual should choose to consume more of good A.
Answer:
The U.S. government does not allow toggle switches for power windows in
automobiles. The National Highway Traffic Safety Administration found that the
regulation will save about two children every three years and have negligible costs
because the industry will have plenty of time to incorporate new switches into future
vehicles. Evaluating this rule in terms of costs and benefits, an economist most likely
would conclude that:
A. it is a good decision because the benefits exceed the costs.
B. it fails because it should take effect immediately, not after four years.
C. it is a bad decision because the chances of a child dying (less than one per year) are
so small that they can be ignored.
D. we cannot tell if it is a good decision without knowing the ages of the children who
might be saved by the regulation.
Answer:
Music spreads easily and cheaply on computer networks. As a result, music has become
more like:
A. a private good.
B. a public good.
C. a merit good.
D. an inferior good.
Answer:
An increase in price and an indeterminate change in quantity are consistent with a:
A. leftward shift in demand and no shift in supply.
B. leftward shift in supply and no shift in demand.
C. rightward shift in supply and a leftward shift in demand.
D. leftward shift in supply and a rightward shift in demand.
Answer:
Refer to the graph shown for a small country that is a price taker internationally.
Assume the foreign supply of this product is perfectly elastic at a price of $4 per unit.
Starting from a free trade equilibrium, an import quota of 2,500 would cause domestic
consumption to:
A. increase from 6,100 to 7,400.
B. increase from 2,400 to 3,600.
C. decrease from 4,800 to 3,600.
D. decrease from 7,400 to 6,100.
Answer:
If consumers won’t pay more than 59 cents for a pack of gum and at 59 cents they will
buy an almost infinite amount, price elasticity of demand at 59 cents is:
A. inelastic.
B. elastic.
C. perfectly elastic.
D. perfectly inelastic.
Answer:
The supply curve of a perfectly competitive firm is:
A. the marginal cost curve only if price exceeds average variable cost.
B. the marginal cost curve only if price exceeds average total cost.
C. the average total cost curve only if price exceeds average variable cost.
D. nonexistent.
Answer:
The standard supply/demand framework:
A. can be modified to explain real-world events.
B. cannot be modified to explain real-world events.
C. should not be modified to explain real-world events.
D. explains real-world events with no need for modification.
Answer:
Consider a market for fish whose market demand and market supply for fish are
specified as Qd = 300 – 2.5 P and Qs = – 20 + 1.5 P respectively. The government
decides to impose a price floor of $50 per ton. What would be the resulting market
distortion?
A. Shortage of 120 tons of fish
B. Shortage of 175 tons of fish
C. Surplus of 120 tons of fish
D. There would be no market distortion
Answer:
Behavioral economic policy:
A. builds on traditional economic policy.
B. replaces traditional economic policy.
C. is based on laissez-faire principles.
D. supports pushes as opposed to nudges.
Answer:
Taxing cigarettes:
A. is an example of an information nudge.
B. is an example of an advantageous default option nudge.
C. is an example of a pricing nudge.
D. is not a nudge.
Answer:
The slopes of the curve at points A and B (maximum and minimum) are:
A. zero and zero.
B. infinity and zero.
C. zero and 1.
D. 1 and zero.
Answer:
When car makers began to cut costs of producing cars by designing the chassis, engine,
and transmissions so that different models could be produced on the same assembly
line, production costs fell $240 per car. This change caused car makers’ short-run
average cost curves to:
A. shift up.
B. shift down.
C. remain unchanged; only the long-run average cost curve was affected.
D. remain unchanged, though there was a movement along the short-run average cost
curve.
Answer:
Refer to the graph shown. Say that there is a negative externality associated with the
production of the good depicted. The marginal social benefit from consuming this good
at the competitive equilibrium output level is:
A. greater than P0.
B. equal to P0.
C. either greater than or less than P0, depending on the elasticities of supply and
demand.
D. less than P0.
Answer:
Why are the poor given little weight in the measure of consumer surplus?
A. The poor don’t tend to vote.
B. Many of the poor receive welfare payments.
C. The poor don’t produce many goods.
D. The poor have little income.
Answer:
If the primary purpose of a tariff is to eliminate foreign competition completely, it will
be expected to:
A. raise either a large or a small amount of revenue depending on the magnitude of the
tariff imposed.
B. raise a relatively large amount of tax revenue.
C. raise an amount of revenue equal to the amount of the tariff multiplied by the volume
of exports.
D. raise a relatively small amount of tax revenue.
Answer:
If P = 3Qs + 3 represents market supply for a competitive industry and market demand
is given by Qd = 31 – 1/3 P, the equilibrium price is:
A. $10.
B. $15.
C. $20.
D. $48.
Answer:
If marginal cost is less than average total cost:
A. average total cost is increasing with output.
B. average total cost is decreasing with output.
C. average variable cost is increasing with output.
D. average variable cost is decreasing with output.
Answer:
Based on the information shown, a perfectly competitive profit-maximizing firm would
produce:
A. 10 units of output.
B. 20 units of output.
C. 30 units of output.
D. 40 units of output.
Answer:
Refer to the graph shown that depicts a third-party payer market for prescription drugs.
If the co-payment is $6 per pill, total expenditures under the third-party payer system
will be:
A. greater than if the market were left alone.
B. less than if the market were left alone.
C. the same as if the market were left alone.
D. undetermined.
Answer:
Shadow prices:
A. are set by the government.
B. are illegal.
C. exist only in black markets.
D. are paid in terms of opportunity costs.
Answer:
Refer to the graph shown. Total revenue is at a maximum when price is:
A. $2.
B. $4.
C. $6.
D. $8.
Answer: