1) When critics of unemployment insurance claim that some of the unemployed are not
exerting much effort to find jobs because of the unemployment benefits, they are
referring to the moral hazard problem.
2) If the nominal rate of interest is 8 percent and the real rate of interest is 3 percent, the
inflation rate must be 11 percent.
3) Fish in the open ocean are protected by strong property rights.
4) A price-discriminating monopolist will set a higher price where demand is more
elastic and a lower price where demand is less elastic.
5) U.S. income statistics indicate that more than one-eighth of the nation lived in
poverty in 2011.
6) The vicious circle of poverty is based on the connections between low income, low
saving, low investment, and low productivity.
7) The percentage of the United States’ domestic output that is derived from
international trade is higher than that for any other industrially advanced nation.
8) Supporters of social regulation contend that it has provided net benefits to society in
the form of greater safety, a better environment, and less discrimination.
9) In 2010, the IACs (industrially advanced countries) had an average per capital
income that was about 67 times as high as that of the low-income nations.
10) Majority voting on whether or not a public good should be produced could lead to a
result where a public good whose costs are bigger than the benefits would end up
getting approved by the voters.
11) The term imperfect competition refers to every market structure besides pure
competition.
12) Monopolization is illegal under Section 1 of the Sherman Act.
13) A player is said to have a dominant strategy when one of the options available is
superior, regardless of what strategy the other player chooses.
14) The principal-agent problem is a problem for the private sector but does not apply
to political decision making.
15) “Tax Freedom Day” in the United States typically occurs in mid-July.
16) The tax which is most difficult to shift to others would be the:
A.Personal income tax
B.Corporate income tax
C.Specific excise taxes
D.Business property taxes
17) It is the custom for paper mills located alongside the Layzee River to discharge
waste products into the river. As a result, operators of hydroelectric power-generating
plants downstream along the river find that they must clean up the river’s water before it
flows through their equipment.
In the situation described above, we would expect an:
A.Overproduction of paper in the mills
B.Underproduction of paper in the mills
C.External cost resulting from the production of hydroelectric power
D.Attainment of allocative efficiency in the market
18) Answer the question on the basis of the following domestic supply and demand
schedules for a product. Suppose that the world price of the product is $1.
Refer to the given data. With a $1-per-unit tariff, price and total quantity sold will be:
A.$3 and 7 units.
B.$5 and 2 units.
C.$1 and 16 units.
D.$2 and 11 units.
19) In the table below, a monopsonist has the marginal-revenue-product schedule for
labor given in columns 1 and 2, and the supply schedule for labor is given by columns 1
and 3.
Refer to the above table and information. If, instead of being a monopsony, the labor
data shown in the table were for a competitive labor market, how many labor-units will
be hired and what will be the wage rate paid?
A.3 and $11
B.4 and $12
C.5 and $13
D.6 and $14
20) Which of the following is a supply factor in the health care market?
A.Defensive medicine.
B.The aging of the population.
C.Slow productivity growth in the health care industry.
D.Asymmetric information.
21) Process innovation can be depicted as:
A.an upward shift in a firm’s total product curve.
B.an upward shift in a firm’s marginal cost curve.
C.a downward shift in a firm’s marginal revenue curve.
D.an increase in product demand.
22) An auto rental company lowers the price of its rentals to increase its market share.
The price cut increases quantity demanded, but total revenue decreases. This result
suggests that over this price range, the demand for the auto rentals is:
A.Elastic
B.Inelastic
C.Unit elastic
D.Perfectly elastic
23) If an industry’s long-run average total cost curve has an extended range of constant
returns to scale, this implies that:
A.technology precludes both economies and diseconomies of scale.
B.the industry will be a natural monopoly.
C.both relatively small and relatively large firms can be viable in the industry.
D.the industry will be comprised of a very large number of small firms.
24) According to prospect theory, people tend to favor default options. This is known as
the:
A.self-serving bias.
B.availability heuristic.
C.status quo bias.
D.framing bias.
25) Famines in sub-Saharan Africa:
A.are solely the result of unalterable weather conditions.
B.have become less common in recent decades.
C.are the result of drought, civil strife, large populations, and inappropriate public
policies.
D.are solely the result of government policies that overprice agricultural products.
26) Acreage allotments, which limit the number of acres planted with a particular crop,
has an effect on the crop’s price which is:
A.Consistent with a price-support program
B.Contradictory to a price-support program
C.Consistent with a price-ceiling for the crop
D.Disadvantageous to the farmers of the crop
27)
Younger workers are:
A.Much more likely to migrate than older workers because younger workers have lower
moving costs
B.Much less likely to migrate than older workers because younger workers have more
close friends at home
C.Much more likely to migrate than older workers because younger workers have more
human capital than older workers
D.Much less likely to migrate than older workers because younger workers do not have as
much experience
28) In 2011, advertising expenditures in the United States were:
A.10 to 12 percent of GDP.
B.about $137 billion.
C.about $103 billion.
D.about $498 billion.
29) Answer the question on the basis of the following marginal product data for
resources a and b. The output of these independent resources sells in a purely
competitive market at $1 per unit.
Refer to the given data. Assume now that the prices of a and b are $15 and $20
respectively. To maximize profits, what combination of a and b should the employer
hire?
A.3 of a and 5 of b.
B.5 of a and 7 of b.
C.7 of a and 7 of b.
D.6 of a and 2 of b.
30) Answer the question based on the table below showing the marginal utility
schedules for product X and product Y for a hypothetical consumer. The price of
product X is $4 and the price of product Y is $2. The income of the consumer is $20.
Refer to the above table. If the consumer buys product X or product Y one unit at a
time, which of the following will the consumer’s first two purchases be?
A.A first unit of X followed by a first unit of Y
B.A first unit of X followed by a second unit of X
C.A first unit of Y followed by a first unit of X
D.A first unit of Y followed by a second unit of Y
31)
Refer to the above graphs. Which graph shows an increase in the price of X and a
decrease in the price of Y?
A.Graph A
B.Graph B
C.Graph C
D.Graph D
32) Defensive medicine refers to the idea that:
A.it is more cost-efficient to prevent illnesses than to cure them.
B.physicians may require unnecessary testing as a means of protecting themselves
against malpractice suits.
C.doctors know much more about diagnosing and treating illnesses than do health care
consumers.
D.physicians do not advertise their services or fees.
33) Answer the question on the basis of the following demand and cost data for a
specific firm:
Refer to the data. Suppose that entry into this industry changes this firm’s demand
schedule from columns (1) and (3) shown to columns (2) and (3). We can conclude that
this industry is:
A.a pure monopoly.
B.purely competitive.
C.a constant cost industry.
D.monopolistically competitive.
34) Assume that a consumer has a given budget or income of $12, and that she can buy
only two goods, apples or bananas. The price of an apple is $1.50 and the price of a
banana is $0.75.
Refer to the information given above. If the consumer spent all of her budget on just
apples or just bananas, how many apples or bananas maximum would she be able to
buy?
A.12 apples or 8 bananas
B.8 apples or 12 bananas
C.16 apples or 12 bananas
D.8 apples or 16 bananas
35) Columns 1 through 3 in the table below show the marginal utility which a particular
consumer would get by purchasing various quantities of products A, B, and C.
If the prices of A, B, and C are $2, $3, and $1, respectively, and the consumer has $26
to spend on these three products, what combination of the three products should be
purchased in order to maximize utility?
36) Evaluate this argument for a trade barrier: The U.S. needs protection from cheap
foreign labor.
37) Explain how Steve Jobs was able to make an economic profit with his company,
Apple Computers.
38) What resource problem is created by positive externalities and what methods are
suggested for dealing with this problem?
39) Describe how marginal utility and demand are related.
40) Discuss the pros and cons of legalizing drugs such as heroin or cocaine from an
economic perspective using the concepts of supply, demand, and elasticity.
41) The table below shows the total production a firm will be able to obtain if it
employs varying amounts of resource X while the amounts of the other resources the
firm employs remain constant. Compute the marginal product of each of the seven units
of resource X and enter these figures in the table. Assume the product the firm produces
sells in the market for $3.00 per unit. Compute the total revenue of the firm at each of
the eight levels of output and the marginal revenue product of each of the seven units of
resource X. Enter these figures in the table below.
On the basis of your computations complete the firms demand schedule for resource X
by indicating in the table below how many units of resource X the firm would employ
at the given prices.
42) In the current presidential election, one candidate argues: The government is
extremely inefficient. To fix this, government spending should be substantially reduced.
Evaluate this statement.
43) In terms of consumer and producer surplus, when is economic efficiency achieved?
44) How would Adam Smith respond to neoclassical models that assume people are
purely self-interested?