Alan is sitting in a bar drinking beers that cost $1 each. According to the economic
decision rule, Alan will quit drinking when the marginal:
A. benefit to him of an additional beer is less than $1.
B. cost to him of an additional beer is less than the marginal benefit.
C. cost remains at $1.
D. benefit to him of an additional beer is greater than $1.
Answer:
If the average total cost of supplying a good exceeds the price at which the good can be
sold, then entrepreneurs have:
A. an incentive to supply the good.
B. no incentive to supply the good.
C. an incentive to supply only a small amount of the good.
D. an incentive to raise the average total cost of producing the good.
Answer:
Refer to the graph shown. There is a $.010 per-gallon marginal cost external to the trade
associated with the use of gasoline. Assuming that gasoline is sold in perfectly
competitive markets, the market equilibrium price will be:
A. $0.95
B. $1.00
C. $1.05.
D. $1.10.
Answer:
Chuck offers $70,000 for a house. The seller turns down the offer but says she will sell
the house for $72,000. However, Chuck refuses to pay the higher price. If Chuck is
following the economic decision rule, the marginal benefit of the house to:
A. Chuck must be less than $72,000.
B. Chuck must be greater than $72,000.
C. the seller must be less than $72,000.
D. the seller must be less than $70,000.
Answer:
A researcher has estimated the elasticity of labor supply for primary wage earners in a
household to be 0.1. If international limitations on immigration were reduced, the
estimate would most likely:
A. become larger.
B. become smaller.
C. remain the same.
D. change in a manner that cannot be predicted.
Answer:
Backward induction means a player:
A. studies his opponent’s moves to figure out what she did wrong.
B. studies what other players have done in similar situations.
C. studies the rules of the game to determine how to make his next move.
D. works from the desired outcome to determine the decisions that lead to that outcome.
Answer:
Refer to the graph shown. The Lorenz curve showing the most income equality is:
A. A.
B. B.
C. C.
D. D.
Answer:
If the percentage increase in the quantity supplied is smaller than the percentage
increase in the price, the supply:
A. is elastic.
B. is inelastic.
C. is unit elastic.
D. is perfectly elastic.
Answer:
After adjusting for institutional factors, economists have found that:
A. institutional factors explain all of the pay difference between men and women.
B. workplace discrimination explains all of the pay difference between men and
women.
C. institutional factors explain some of the lower pay that women receive, but
workplace discrimination also appears to play a role.
D. there is no discrimination; all of the pay difference between men and women can be
explained by differences in education and experience.
Answer:
A traditional economist probably would not want to give up the assumption of
consumer sovereignty because it:
A. would violate Hume’s dictum.
B. is an empirically verifiable assumption.
C. opens up a Pandora’s box of problems.
D. would violate the Schroeder principle.
Answer:
The marginal cost curve is a mirror image of the:
A. total product curve.
B. marginal product curve.
C. average product curve.
D. average variable cost curve.
Answer:
The trend back toward greater inequality in the 1970s and 1980s was caused by:
A. a movement toward progressive taxation.
B. a fall in the real income of the poor.
C. an increase in government funding for social programs.
D. a rise in the real income of the poor.
Answer:
The tax revenues of federal, state, and local governments have different sources, in that
the federal government relies primarily on:
A. income taxes; state and local governments rely to a greater extent on sales and
property taxes.
B. sales and property taxes; state and local governments rely to a greater extent on
income taxes.
C. excise and property taxes; state and local governments rely on sales taxes.
D. sales taxes; state and local governments rely on excise and property taxes.
Answer:
In a perfectly competitive increasing-cost industry:
A. factor prices do not change as industry output increases.
B. factor prices rise as industry output increases.
C. factor prices fall as industry output increases.
D. there is no way to predict what will happen to factor prices as industry output
increases.
Answer:
An individual with a highly elastic demand for gasoline will:
A. cut consumption more than an individual with a highly inelastic demand when price
goes up.
B. cut consumption less than an individual with a highly inelastic demand when price
goes up.
C. refuse to cut consumption for any reason.
D. stop using gasoline entirely if a tax is imposed.
Answer:
Supply is said to be inelastic when the:
A. percentage change in quantity supplied is less than the percentage change in price.
B. percentage change in quantity supplied is greater than the percentage change in
price.
C. change in quantity supplied is less than the change in price.
D. change in quantity supplied is greater than the change in price.
Answer:
The proposed merger between Pabst Brewing and Blatz Brewing in 1966 was:
A. blocked because the relevant geographic market was narrowly defined.
B. allowed because the relevant geographic market was broadly defined.
C. blocked because both companies used unfair business practices.
D. allowed because both companies priced fairly.
Answer:
Evan can grow both roses and carnations in his garden. His production possibility table
is shown below. If he is currently producing 110 roses, his opportunity cost of
producing 40 more roses is:
A. 20 carnations.
B. 26 carnations.
C. 31 carnations.
D. 78 carnations.
Answer:
Our ability to manage Social Security as a “pay-as-you-go” program (in which taxes
collected from those currently working are used to make benefits payments to those
currently retired) is impaired when the “dependency ratio” (defined as the number of
retirees per worker) increases. The current concern about the stability of Social Security
is based primarily on projections that there will many more retirees per worker when
the baby boomers begin to retire. Then, if we want to maintain a pay-as-you-go system,
we can:
A. reduce benefits to compensate for the increase in the dependency ratio.
B. raise benefits to compensate for the increase in the dependency ratio.
C. maintain current benefit levels with no changes to how Social Security is financed.
D. reduce benefits to compensate for the decrease in the dependency ratio.
Answer:
Refer to the graph shown, which depicts a perfectly competitive firm. When the
industry is in long-run competitive equilibrium:
A. the price of the product will be $6.
B. the firm will produce 100 units of output.
C. the firm will earn economic profits of $300 per day.
D. the marginal cost of production will be $3.
Answer:
A theorem is:
A. the application of models combined with judgment.
B. a policy rule that concludes that a particular course of action is preferable.
C. a proposition that is logically true based on the assumptions of a model.
D. a set of equations that define a model.
Answer:
As a consumer moves along an indifference curve:
A. prices are held constant, but the consumer’s budget changes.
B. the consumer’s budget is held constant, but prices change.
C. prices and the consumer’s budget are held constant, but total utility changes.
D. total utility is held constant, but prices, quantities, and the consumer’s budget may
change.
Answer:
Which of the following would be expected to cause the quantity of wool supplied to
decrease?
A. A decrease in the price of wool
B. A decrease in the number of wool producers
C. An increase in the cost of raising sheep
D. An increase in wages paid to workers in the wool industry
Answer:
The effect that explains why workers might supply fewer hours when their hourly
wages increase is called the:
A. income effect.
B. leisure effect.
C. substitution effect.
D. work effect.
Answer:
Refer to the graph shown. When price is $40, revenue equals areas:
A. A only.
B. A and B only.
C. A, B, and D only.
D. A, B, C, D, and E.
Answer:
Which of the following methods of reducing the amount of trash society generates is
most likely to be efficient?
A. A mandatory recycling program
B. A completely voluntary recycling program
C. A “trash tax”
D. Landfills and incinerators
Answer:
If the quantity of picture frames supplied increases 15 percent when the price goes up
20 percent, the elasticity of supply is:
A. 15.
B. 20.
C. 1.33.
D. 0.75.
Answer:
Because the invisible hand allocates resources efficiently, economies ought to minimize
government interference is an example of:
A. an economic theorem.
B. an economic precept.
C. a natural experiment.
D. efficiency.
Answer:
For me to stop getting speeding tickets for a year, I gave five friends devices that
measure my driving speed. If I drove over the speed limit by more than 5 miles per
hour, I would have to pay them each $1,000. This would be an example of:
A. a deductive decision.
B. opportunity costs.
C. a precommitment strategy.
D. sunk costs.
Answer:
Refer to the table shown. The marginal product of the third worker is:
A. 2.
B. 8.
C. 9.
D. 17.
Answer:
Refer to the graph shown. If government establishes a price floor of $7.25 per hour,
there will be a:
A. shortage of 400 labor hours.
B. surplus of 400 labor hours.
C. shortage of 300 labor hours.
D. surplus of 300 labor hours.
Answer:
The existence of positive economic profits induces firms to:
A. enter an industry, which shifts the market supply curve to the left and decreases
market price.
B. enter an industry, which shifts the market supply curve to the right and increases
market price.
C. exit an industry, which shifts the market supply curve to the right and decreases
market price.
D. enter an industry, which shifts the market supply curve to the right and decreases
market price.
Answer:
When my neighbors benefit from my cleaning up of my yard, they are experiencing a:
A. merit good.
B. partnership.
C. economic pressure.
D. positive externality.
Answer:
Refer to the graph shown. What area represents total economic profits?
A. DAFM
B. CBWT
C. MFWT
D. DABC
Answer:
If the price elasticity of supply is 0.5, a 10 percent increase in price will cause a:
A. 5 percent increase in quantity supplied.
B. 5 percent decrease in quantity supplied.
C. 20 percent increase in quantity supplied.
D. 20 percent decrease in quantity supplied.
Answer: