If 1 Canadian dollar costs 0.60 U.S. dollar, 1 U.S. dollar costs:
A. 0.40 Canadian dollar.
B. 0.60 Canadian dollar.
C. 1.40 Canadian dollars.
D. 1.67 Canadian dollars.
Answer:
Judgment by performance means that the competitiveness of a market is determined by:
A. the actual behavior of firms in the market.
B. the structure of the industry.
C. the number of firms in the market.
D. technological considerations.
Answer:
One advantage of the Herfindahl index over the concentration ratio is that it:
A. takes into account only the leading firms in an industry.
B. gives extra weight to firms that are especially large.
C. tells about only the top 50 firms in an industry.
D. is easier to calculate.
Answer:
In the United States, government performs all of the following functions except:
A. redistributing income.
B. purchasing goods and services.
C. regulating the economy.
D. determining production levels.
Answer:
Refer to the graph shown. If price is increased from $3 to $4, total surplus will fall by:
A. 50.
B. 100.
C. 150.
D. 200.
Answer:
Many drugs are illegal in the United States. Despite this law, illegal drugs are usually
available at a price many times higher than they would be if the drugs weren’t illegal.
The high price of illegal drugs is an example of:
A. the market affecting political forces.
B. political forces affecting the market.
C. the failure of the market.
D. the failure of political forces.
Answer:
If labor costs $10 per unit and machines rent for $20 apiece, a movement along a given
isocost line might imply a substitution of:
A. one unit of labor for one unit of machinery.
B. one unit of labor for two units of machinery.
C. one unit of machinery for two units of labor.
D. two units of machinery for three units of labor.
Answer:
A price elasticity of demand for a good or service of 1.8 tells us that:
A. the price changes by $1.80 when quantity changes by 1 unit.
B. quantity demanded falls by 1.8 percent when price rises by 1 percent.
C. the price rises by 1.8 percent when quantity demanded falls by 1 percent.
D. quantity demanded falls by 1.8 units when price changes by $1.
Answer:
Refer to the graph shown. When price declines by 11 percent, quantity supplied falls by
8 percent. Which curve best demonstrates the elasticity in this example?
A. A
B. B
C. C
D. None of the curves
Answer:
Suppliers would be less eager to organize to restrict output if they faced a:
A. less elastic demand.
B. more elastic demand.
C. perfectly inelastic demand.
D. unit-elastic demand curve.
Answer:
Refer to the graphs above. The maximum profits that an efficient monopolist that
produces a profit-maximizing quantity could earn is best shown by the area:
A. A + B in graph (1).
B. A in graph (1).
C. C + D in graph (2).
D. C in graph (2).
Answer:
Refer to the graph shown. Which supply curve is perfectly inelastic?
A. A
B. B
C. C
D. D
Answer:
If a firm shuts down for a week, during that week:
A. total cost is zero.
B. total cost equals total fixed cost.
C. total cost equals total variable cost.
D. total variable cost exceeds total fixed cost.
Answer:
Which of the following is not an example of an externality?
A. Carbon dioxide from energy generation that adds to the worldwide long-term
greenhouse effect
B. Heat from a factory that makes the neighboring tomato patches more productive
C. A defective part that causes an automobile to break down three months after
purchase
D. Acidic by-products of fossil fuel combustion that produce acid rain
Answer:
Which of the following is not an argument in favor of protecting domestic industries
from foreign competition?
A. National security
B. Reducing structural unemployment
C. Protection against subsidized foreign producers
D. Making domestic firms more efficient
Answer:
Failure of market outcomes occurs when:
A. there are market failures such as externalities.
B. there are no market failures but the market is not achieving society’s goals.
C. the market outcome is not efficient.
D. the market outcome is not Pareto optimal.
Answer:
Refer to the graph shown, which shows an oligopolist facing a kinked demand curve.
The firm will not increase price when marginal costs fluctuate between which two
points?
A. a and b.
B. b and c.
C. c and d.
D. a and d.
Answer:
Given a production possibility curve for good X (on the x-axis) and good Y (on the
y-axis), the opportunity cost of increasing good X is greatest when the slope of the
production possibility curve is:
A. -6.
B. -4.
C. 6.
D. 4.
Answer:
Suppose wages increase but employment decreases. These changes most likely were
caused by:
A. an increase in labor demand.
B. an increase in labor supply.
C. a decrease in labor demand.
D. a decrease in labor supply.
Answer:
Refer to the graph shown. Assuming that the monopoly maximizes profit, the social
cost of monopoly will be:
A. $10,000 per day.
B. $20,000 per day.
C. $40,000 per day.
D. zero.
Answer:
When marginal utility is positive, total utility is:
A. increasing.
B. decreasing.
C. zero.
D. at its minimum.
Answer:
Refer to the table shown. The average fixed cost of producing eight bicycles is:
A. $100.
B. $150.
C. less or equal to $12.50.
D. greater than $20.
Answer:
Refer to the graph shown. If the firm maximizes profit, its daily output will be:
A. 10 units.
B. 20 units.
C. 30 units.
D. 45 units.
Answer:
The text mentions 10 sources of U.S. comparative advantage. Which of the following is
not one of them?
A. Wealth from past production
B. The fact that English is the international language of business
C. U.S. natural resources
D. Weak environmental protection laws
Answer:
In a market there are many firms selling differentiated products. This market is:
A. a competitive market.
B. a monopolistically competitive market.
C. an oligopolistic market.
D. a monopoly.
Answer:
The values in a payoff matrix show:
A. the gains and losses of decisions for each player regardless of the decisions of other
players.
B. the best possible outcomes of various players in a game.
C. the gains and losses of decisions for each player given the decisions of other players.
D. the worst possible outcomes of various players in a game.
Answer:
Determining whether a good is a merit good is:
A. an objective exercise.
B. a subjective exercise.
C. best done using economic theory.
D. best left to economists.
Answer:
Which of the following do firms take advantage of to maintain high profits?
A. There is relatively little government oversight in the marketplace.
B. People tend to gravitate toward the default option.
C. People are unaffected by default options.
D. The government only fines companies that have over $2 million in sales each year.
Answer:
Refer to the graph shown. Suppose the market price is $4. At this price, a perfectly
competitive firm should:
A. continue to produce in the short run but shut down in the long run.
B. continue to produce in both the short run and the long run.
C. shut down in the short run but continue production in the long run.
D. shut down immediately.
Answer:
Which of the following Lorenz curves is closest to the diagonal line?
A. The before-tax, before-transfer income distribution
B. The after-tax income distribution
C. The after-transfer income distribution
D. The before-tax distribution of income
Answer:
Mercantilism was a system in which all of the following were true except:
A. political rather than social forces controlled the central economic decisions.
B. economic rather than social forces controlled the central economic decisions.
C. governments encouraged growth by supporting trading activities.
D. governments limited growth by protecting monopolies.
Answer:
Refer to the graph shown. If the firm is producing 450 units of output, profit is equal to:
A. $38.
B. -$30.
C. $0.
D. $30.
Answer: