1) Suppose that the Anytown city government asks private citizens to donate money to
support the town’s annual holiday lighting display. Assuming that the citizens of
Anytown enjoy the lighting display, the request for donations suggests that:
A.the display creates negative externalities.
B.government should tax the producers of holiday lighting.
C.resources are currently overallocated to the provision of holiday lighting in Anytown.
D.resources are currently underallocated to the provision of holiday lighting in
Anytown.
2)
Refer to the cost table above. Now suppose that there are 600 identical firms in this
industry, each with the same cost data as the single firm discussed above. Suppose, too,
that the demand curve for this industry is as follows:
Based on all these data, the equilibrium price of the product in the market will be:
A.$60
B.$95
C.$120
D.$75
3) Answer the question on the basis of the given supply and demand data for wheat:
Refer to the data. If price was initially $4 and free to fluctuate, we would expect the:
A.quantity supplied to continue to exceed the quantity demanded.
B.quantity of wheat supplied to decline as a result of the subsequent price change.
C.quantity of wheat demanded to fall as a result of the subsequent price change.
D.price of wheat to rise.
4) In game theory, the credibility of a threat:
A.determines whether or not a Nash equilibrium to a game exists.
B.influences the degree of cooperation between two rivals.
C.is relevant only in simultaneous games.
D.determines whether or not a firm has a dominant strategy.
5)
Refer to the diagram above. Cheri’s budget line shifts inward from CD to AB. Which
statement below is consistent with this shift?
A.Both prices double, while her income also doubles
B.Both prices increase by 20 percent, while her income increases by 15 percent
C.Both prices decrease by 10 percent, while her income falls by 15 percent
D.Both prices decrease by 10 percent, while her income falls by 6 percent
6) An example of derived demand in the auto industry is the demand for:
A.New automobiles
B.Used automobiles
C.Auto workers
D.Drivers’ insurance
7) An electricity company is considering damming a small river to generate electricity
at a cost of $160,000 and a profit of $200,000 in 5 years. The current market rate is 5
percent. Should the company make the investment?
A.Yes, the future value of the profit is greater than the present value of the cost
B.No, the future value of the profit is less than the present value of the cost
C.Yes, the present value of the profit is greater than the present value of the cost
D.No, the present value of the profit is less than the present value of the cost
8) The following is cost information for the Creamy Crisp Donut Company:
Entrepreneur’s potential earnings as a salaried worker = $50,000
Annual lease on building = $22,000
Annual revenue from operations = $380,000
Payments to workers = $120,000
Utilities (electricity, water, disposal) costs = $8,000
Value of entrepreneur’s talent in the next best entrepreneurial activity = $80,000
Entrepreneur’s forgone interest on personal funds used to finance the business = $6,000
Refer to the data. Creamy Crisp’s implicit costs, including a normal profit, are:
A.$136,000.
B.$150,000.
C.$94,000.
D.$156,000.
9) In presidential elections, voters often find that they do not agree with any single
candidate on all the issues that matter to them (the voters). This is known as the:
A.Principal-agent problem
B.Limited and bundled choice problem
C.Rent-seeking behavior problem
D.Lack of accountability problem
10) Which of the following contributes most to the reduction in income inequality?
A.Taxes
B.Wealth
C.Transfer payments
D.Earned income tax credits
11) Problems with collective decision-making and economic inefficiency in government
are subjects that are studied in an area of economics called public:
A.Finance
B.Choice
C.Policy
D.Interest
12)
Refer to the diagram for a monopolistically competitive firm in short-run equilibrium.
The profit-maximizing output for this firm will be:
A.100
B.160
C.180
D.210
13) What do neoclassical economics and behavioral economics believe about giving
people options?
A.Both believe that people make better decisions when they are given a greater set of
options.
B.Behavioral economics focuses on providing more options; neoclassical economics
focuses on helping people make more rational decisions with the options available.
C.Neoclassical economics focuses on providing more options; behavioral economics
focuses on helping people make better decisions with the options available.
D.Both believe that people are better off with fewer options, allowing them to spend
more time calculating the benefits and costs of each available option.
14) When the Defense Department ordered 132 new airplanes, the cost per plane was
estimated to be $580 million. A cut in the order to 75 planes increased the per plane cost
to $800 million. This change in per unit cost can be explained by:
A.A move to minimum efficient scale
B.The law of diminishing returns
C.The loss of economies of scale
D.An increase in fixed cost