1) The interest rate is the price paid for the use of money.
2) ITQs both limit catches and encourage fishing in the least costly way.
3) In analyzing a market system, economists often assume that firms will choose the
production techniques that will give them the maximum revenues.
4) A pure monopolist will maximize profits by producing at that output where price and
marginal cost are equal.
5) Employers in the U.S. started offering health insurance as a fringe benefit to their
employees during World War II as a way of getting around the wage controls that were
in effect then.
6) Consumer sovereignty means that legislation now protects the rights of consumers to
dispose of their incomes as they see fit.
7) When firms in a purely competitive industry are earning profits that are greater than
normal, the supply of the product will tend to decrease in the long run.
8) Raising deductibles and copayments in health insurance plans is one effective way to
contain health care costs.
9) The income and substitution effects will both induce the consumer to buy more of a
normal good when its price decreases.
10) Right-to-work laws prohibit the formation of labor unions.
11) The differences in the per capita incomes of the IACs and the DVCs have
diminished sharply since the Second World War because of U.S. aid programs.
12) The efficiency loss of a tax is the tax revenue collected by government minus the
value of the public goods financed through the tax.
13) A market system is characterized by the private ownership of resources and the use
of prices to coordinate economic activity.
14) Neoclassical economics focuses on predicting behavior of economic agents,
whereas behavioral economics focuses on the mental processes involved in
decision-making.
15) U.S. business firms channel a majority of their R&D expenditures to scientific
research.
16)
Symbols: Q = number of workers demanded; W = wage rate; and VTP = value of the
cumulative total product (output) of the particular number of workers.
Assumptions: (1) The current wage in Zinnia is $20 and the current wage in Marigold is
$12; (2) full employment exists in both countries.
Refer to the given data, symbols, and assumptions. If migration is costless and
unimpeded, the wage in both countries will equalize at:
A.$16
B.$18
C.$20
D.$14
17) Assume that a government is considering a new social program and may choose to
include in this program any number of four progressively larger projects. The marginal
cost and the marginal benefits of each of the four projects are given in the table.
Refer to the above table and information. What is the total cost and total benefit of
doing projects A, B, and C?
A.Total cost is $5 billion and total benefit is $7 billion
B.Total cost is $4 billion and total benefit is $7 billion
C.Total cost is $9 billion and total benefit is $12 billion
D.Total cost is $16 billion and total benefit is $20 billion
18) Under an agency shop agreement, firms can hire:
A.only union workers.
B.nonunion workers, but these workers must join the union within a specified period,
say, 30 days.
C.nonunion workers, but these workers must join the union within a specified period,
pay union dues, or donate an equivalent amount to charity.
D.only nonunion workers.
19) Answer the question based on the following data.
Refer to the above data. Over which price range is the demand inelastic?
A.$20-$18
B.$18-$16
C.$14-$12
D.$8-$6
20) The idea of compensating differences is used:
A.by inclusive unions as an argument in bargaining for wage rate increases.
B.to justify the application of minimum wages to low-wage labor markets.
C.to explain the divergence between wage rates and marginal resource cost.
D.to explain wage rate differences based on differing nonmonetary aspects of jobs.
21) A firm’s demand curve for labor:
A.Is its marginal product curve
B.Will shift to the left if the price of the product the labor is producing should fall
C.Is perfectly elastic if the firm is selling its product in a purely competitive market
D.Reflects a direct (positive) relationship between the number of workers hired and the
money wage rate
22) The outcomes from R&D expenditures by firms are:
A.Always profitable for the firms, if they have the funds available
B.The most costly use of funds by the firm
C.Subject to economies of scale
D.Expected, but not guaranteed
23) Susie knows that too many sugary treats, while delicious when eaten, have
long-term adverse effects on weight and health. Based on this information, a behavioral
economist would expect Susie to:
A.carefully weigh the short-term benefits against the long-term costs and make a
rational decision about how many treats to eat.
B.eat more sugary treats than is optimal, as she likely gives more weight to present
events and outcomes than to ones in the future.
C.give away most of her sugary treats in an effort to resist temptation.
D.compute the caloric intake and calculate how many hours of exercise would be
needed to burn off the calories from each treat.
24)
Refer to the data. The four-firm concentration ratio for the industry is:
A.100 percent.
B.indeterminate since we don’t know which four firms are included.
C.80 percent.
D.20 percent.
25) One of the economic effects of rising health care costs in the labor market is that:
A.Productivity in medical care decreases
B.The demand for medical workers is decreasing
C.Government is cutting health care coverage for workers
D.Employers are using more temporary and part-time workers
26) The maximum federal marginal tax rate on taxable personal income is, as of 2013:
A.50 percent.
B.39.6 percent.
C.35 percent.
D.28 percent.
27)
Refer to the diagram. A decrease in supply is depicted by a:
A.move from point x to point y.
B.shift from S1 to S2.
C.shift from S2 to S1.
D.move from point y to point x.
28) Greater income equality that is achieved through the redistribution of income is
thought to:
A.Stimulate innovation and entrepreneurship
B.Promote economic efficiency in the economy
C.Increase incentives to work, save, and invest in the economy
D.Come at the opportunity cost of reduced production and income
29) An indifference curve shows:
A.The maximum combinations of two products which a consumer can afford to buy,
given prices and the consumer’s income
B.The quantities of two products a consumer is willing to buy at different income levels
C.All combinations of two products from which the consumer derives a specific level
of total utility
D.Combinations of two products which yield the same marginal utilities
30) Which of the following is considered a firm’s “factor of production”?
A.Money or cash balances of the firm
B.The firm’s shares of common stock
C.U.S. Treasury bonds owned by the firm
D.The office building occupied by the firm
31)
Refer to the above graph. Which of the following movements would indicate economic
growth?
A.From point A to point C
B.From point B to point C
C.From point A to point E
D.From point C to point D
32) The U.S. demand for euros is:
A.downsloping because, at lower dollar prices for euros, Americans will want to buy
more European goods and services.
B.downsloping because, at higher dollar prices for euros, Americans will want to buy
more European goods and services.
C.downsloping because the dollar price of euros and the euro price of dollars are
directly related.
33) Answer the question on the basis of the following production possibilities tables for
two countries, Latalia and Trombonia:
Refer to the tables. In Latalia the domestic real cost of 1 ton of pork:
A.is 3 tons of beans.
B.diminishes with the level of pork production.
C.is 5 tons of beans.
D.is 1/5 of a ton of beans.
34) To reduce politicization of policy making, many countries have given control of
________ to politically independent central banks.
A.fiscal policy
B.monetary policy
C.unfunded liabilities
D.budget deficits
35) What is the importance of competition in relation to self-interest in a market
system?
36) What is the basic difference between a public good and a private good?
37) What conditions gave rise to the Temporary Assistance to Needy Families (TANF)
program?
38) Assume that labor and capital are substitutes in production. If there is an increase in
the price of capital, how can this lead to either an increase or decrease in the demand
for labor?
39) What condition causes a secondary market to arise?
40) What is the moral hazard problem associated with health care insurance?
41) How does the time dimension affect income inequality?
42) How are changes in one currency mirrored in changes in some other foreign
currency?
43) What can IACs do to expand trade with DVCs?