Capitalism:
A. is based on private property and the market.
B. does not have a rationing mechanism.
C. gives private property rights to government.
D. relies on market forces to establish initial property rights.
Answer:
Which of the following statements is true?
A. Many different production processes can be economically efficient, but only the
method that involves the lowest possible cost is technically efficient.
B. Many different production processes can be technically efficient, but only the
method that involves the lowest possible cost is economically efficient.
C. There is only one production process that is technically efficient, and this process is
also economically efficient.
D. There are many production processes that are both technically and economically
efficient, but only one of these involves the lowest possible cost.
Answer:
If the long-run market supply curve is perfectly elastic, a fall in demand will cause the
final equilibrium to be at:
A. the same price but a lower output.
B. a lower price and a lower output.
C. a lower price but the same output.
D. the same price and the same output.
Answer:
When Williams-Sonoma introduced its first bread baker at $200, sales were low. But
when it decided to offer a fancier $300 version, sales of the $200 bread baker rose
tremendously. An economist concluded that consumers needed another bread baker for
comparison to decide whether the $200 bread-baker was a deal. This economist is likely
to be a(n):
A. traditional economist.
B. behavioral economist.
C. irrational economist.
D. engineering economist.
Answer:
Businesses fail because:
A. they follow the principle of consumer sovereignty too closely.
B. the invisible hand determines that they are not producing something that is socially
valuable.
C. they earn excessive profits.
D. entrepreneurship is present.
Answer:
Refer to the following graph.
Which price will create the greatest shortage?
A. P0
B. P1
C. P2
D. P3
Answer:
In the United States, globalization has caused workers in the education, healthcare, and
government sectors to face:
A. Lower wages.
B. Higher prices on consumer goods.
C. Little or no downward pressure on their wages.
D. Longer hours to compete with the higher production levels abroad.
Answer:
Wealth is defined as the:
A. total amount of income earned in a one-year period.
B. value of all assets minus the money that is owed.
C. value of assets that can be converted to cash on short notice.
D. value of monetary assets.
Answer:
All levels of government (federal, state, and local) consume about what percentage of
the total output of the United States?
A. 5 percent
B. 20 percent
C. 60 percent
D. 80 percent
Answer:
The labor demand curve:
A. shifts out when wages fall.
B. shifts in when wages rise.
C. slopes up because of the law of demand.
D. slopes down because of the law of demand.
Answer:
Refer to the graph shown. Demand is inelastic on line segment:
A. AB.
B. BC.
C. CD.
D. The demand is not inelastic on any of these line segments.
Answer:
The best example of a merit good or activity is:
A. excessive consumption of pork.
B. providing free beer to teenagers.
C. teaching baseball to boys and girls in the community.
D. exercising too much.
Answer:
Refer to the graph shown, which shows the demand and supply for a new vaccine
against the common cold. Once vaccinated, a person cannot catch a cold or give a cold
to someone else. At the competitively determined output level, the marginal social
benefit will be:
A. equal to P0.
B. less than P0.
C. greater than or less than P0 depending on the income elasticity of demand and the
effectiveness of the vaccine.
D. greater than P0.
Answer:
Refer to the graph shown. What level of output should the perfectly competitive firm
produce to maximize profits?
A. 7
B. 8
C. 6
D. 4
Answer:
Consumers tend to accept the market restrictions imposed by suppliers because:
A. government prevents them from organizing.
B. they see themselves as laborers and therefore benefit from restrictions.
C. their costs of organizing are higher than the cost of the collusion by the suppliers.
D. when combined, their losses are small for the group as a whole.
Answer:
Which statement best summarizes the invisible hand theorem?
A. Government policies direct people’s selfish desires (tempered by social and
economic forces) to the common good.
B. Cultural norms direct people’s selfish desires (tempered by political and economic
forces) to the common good.
C. Markets direct people’s selfish desires (tempered by political and social forces) to the
common good.
D. Social, political, and economic forces act against people’s selfish desires to promote
the common good.
Answer:
In principle, households ultimately control:
A. businesses.
B. the government.
C. both businesses and the government.
D. neither businesses nor the government.
Answer:
The Soviet socialist economy fell apart primarily because:
A. it was based on barter rather than monetary exchange.
B. individuals are not motivated by self interest.
C. workers lacked incentives to work and production was inefficient.
D. markets failed to develop.
Answer:
The Herfindahl index is calculated by:
A. adding the squared value of the market shares of all the firms in the industry.
B. multiplying the squared value of the market shares of all the firms in the industry.
C. adding the percentage of industry output produced by the largest four firms.
D. adding the percentage of industry output produced by the largest eight firms.
Answer:
Refer to the table shown. If the average product is 6, the number of workers could
equal:
A. 1.
B. 3.
C. 5.
D. 7.
Answer:
Refer to the graph shown. An unregulated, profit-maximizing monopolist will charge a
price of:
A. P1 and produce Q1 units of output.
B. P2 and produce Q2 units of output.
C. P3 and produce Q3 units of output.
D. P3 and produce Q1 units of output.
Answer:
If everyone’s utility function includes only conspicuous consumption goods:
A. the market will lead to the highest social welfare.
B. the market will lead to higher social welfare than it otherwise would.
C. we can say nothing about market and social welfare.
D. the market will lead to lower social welfare than it otherwise would.
Answer:
Under the Texas law known as “rule of capture,” land owners “get to pump as much of
the water under it as they want. . . . ‘This means whoever sucks it out first, it’s their
water’even if that means there isn’t enough left for others.” Under this law, pumping
large amounts of water:
A. imposes a negative externality on others.
B. imposes a positive externality on others.
C. imposes the free rider effect on others.
D. is a private decision with no effects on others.
Answer:
Grocery stores often place items people buy on impulse at the checkout lane. This is an
example of:
A. choice architecture.
B. government intervention.
C. price fixing.
D. irrational behavior.
Answer:
Refer to the following graph.
Elasticity is smallest at which point?
A. A
B. B
C. C
D. D
Answer:
Refer to the following graphs.
Floods in the U.S. Midwest reduce the U.S. corn crop. Which graph depicts the effect of
the floods on the U.S. corn market?
A. I
B. II
C. III
D. IV
Answer:
One reason economists oppose trade restrictions is that:
A. it is difficult to limit trade restrictions to instances when their use is justified.
B. they are an ineffective way to raise tax revenue.
C. they protect national security, particularly in wartime.
D. no nation can benefit from trade restrictions.
Answer:
Which of the following statements for a monopolistic competitor in long-run
equilibrium is true?
A. P = ATC = MC = MR.
B. P > ATC > (MC = MR).
C. P > (ATC = MC = MR).
D. (P = ATC) > (MC = MR).
Answer:
Refer to the graph shown. To maximize profit, the monopolistically competitive firm
represented in this graph will produce:
A. Q1 and set price equal to P1.
B. Q1 and set price equal to P3.
C. Q1 and set price equal to P4.
D. Q2 and set price equal to P2.
Answer:
In the years after the introduction of the European euro currency, the price of the euro
rose from about $1.1 = 1 € to $1.30 = 1 €. In terms of wage rates, this rise in the price
of the euro:
A. lowered U.S. wages relative to European wages.
B. lowered European wages relative to U.S. wages.
C. raised both European and U.S. wages.
D. lowered both European and U.S. wages.
Answer:
More than 10,000 visitors waited in line up to two hours to see the rare flower titan
arum at the Cambridge Botanic Gardens. Before the decision to wait in line is made,
economists consider the two-hour waiting time part of the:
A. marginal benefit of viewing the flower.
B. sunk costs of viewing the flower.
C. invisible hand.
D. opportunity cost of viewing the flower.
Answer:
Economists believe that if government provides information about product quality:
A. there will be less incentive for consumers to pay extra for quality guarantees
supplied by firms.
B. consumers will be forced to pay for information when otherwise it would have been
available for free.
C. the overall quality of products sold will increase substantially, eliminating the
information problem.
D. the cost of providing information will be zero.
Answer:
Cross-price elasticity of demand is defined as the:
A. percentage change in quantity demanded divided by percentage change in the price
of the same good.
B. percentage change in demand divided by percentage change in the price of another
good.
C. change in the price of another good divided by the change in quantity demanded.
D. percentage change in the price of another good divided by the percentage change in
quantity demanded.
Answer:
Which of the following is an international financial institution concerned primarily with
monetary issues and international financial arrangements?
A. International Monetary Fund
B. European Union
C. Group of Five
D. Group of Eight
Answer:
Suppose Jane has chosen a combination of two goods, A and B, such that MU/P of good
A is 10 (MUA/PA = 10), and the MU/P of good B is 10 (MUB/PB = 10). To increase
utility with the same amount of money, Jane should:
A. increase the number of B consumed.
B. increase the number of A consumed.
C. increase the number of A and B consumed.
D. do nothing; she cannot increase utility with the same amount of money.
Answer: