1) When a competitive firm is in long-run equilibrium, its accounting profits are greater
than zero.
2) Answer the question on the basis of the following information. Assume that by
devoting all its resources to the production of X, nation Alpha can produce 40 units of
X. By devoting all its resources to Y, Alpha can produce 60Y. Comparable figures for
nation Beta are 60X and 40Y.
Refer to the given information. Alpha should specialize in Y and Beta in X.
3) Time inconsistency refers to the persistent underestimation of how long a task will
take to perform.
4) Along a demand curve, product price and consumer surplus are inversely related.
5) The government may create barriers to entry that serve to foster monopoly power of
firms.
6) A demand curve for a public good is determined by summing horizontally the
individual demand curves for the public good.
7) If an R&D activity is affordable, the firm should spend on that activity.
8) The invisible hand guides government’s economic activity just as it does with private
economic activity.
9) The principle that private negotiation can resolve potential externalities without
resort to government intervention is known as the Coase theorem.
10) As long as its total revenues are greater than its total costs, a firm will earn positive
economic profits.
11) Efficient energy usage in electricity generation often involves using a mix of energy
inputs, some of which are much more expensive than others.
12) If two resources are complementary, a decrease in the price of one will reduce the
demand for the other.
13) “Voter failure” is one cause of government failure.
14) If MR > MC for a competitive firm, it should reduce its level of output in order to
make MR equal to MC.
15) Competitive firms are price takers largely because of intensive advertising by their
competitors.
16)
Refer to the diagrams. The firm:
A.is a monopsonist in the hiring of labor.
B.must be selling its product in an imperfectly competitive market.
C.is a “wage taker.”
D.must pay a higher marginal resource cost for each successive worker.
17) The “too much of a good thing” situation in health care in the U.S. is a result of the
following causes, except:
A.The information asymmetry between health-care providers and consumers
B.The way health care spending is financed in the U.S.
C.The interaction between insurance and technological progress in the health care
industry
D.The rising wages of health-care workers
18) The nondiscriminating pure monopolist’s demand curve:
A.is the industry demand curve.
B.shows a direct or positive relationship between price and quantity demanded.
C.tends to be inelastic at high prices and elastic at low prices.
D.is identical to its marginal revenue curve.
19) The burden of a specific sales tax falls entirely on the consumer when the:
A.Elasticity of supply is zero
B.Demand curve is perfectly elastic
C.Price elasticity of demand is greater than the elasticity of supply
D.Price elasticity of demand is zero
20) Suppose Gina and Henry play two rounds of the ultimatum game. In the first round
they play for $10; in the second round they play for $1,000. In the first round Gina
suggests an 80/20 split ($8 to Gina, $2 to Henry), but Henry quickly rejects the offer as
unfair. Assuming Gina is interested in gaining financially from the experience and that
she understands behavioral economics, we would expect her to:
A.offer the same relative split ($800/$200), knowing that Henry will accept the offer
because the dollar amount he would forgo by rejecting it is substantial.
B.offer a more unequal split ($900/$100) in order to gain more for herself and figuring
Henry will accept the split because $100 is better than nothing.
C.offer a more equal split ($700/$300) to increase the probability that Henry will accept
the offer.
D.offer Henry more than half of the pot to ensure acceptance of the offer.
21) What measure of economic development is used most often to classify nations as
industrially advanced or as developing?
A.Per capita income
B.Life expectancy at birth
C.Per capita energy consumption
D.Daily per capita calorie supply
22) A consumer with a fixed income will maximize utility when each good is purchased
in amounts such that the:
A.Total utility is the same for each good
B.Marginal utility of each good is maximized
C.Marginal utility per dollar spent is the same for all goods
D.Marginal utility per dollar spent is maximized for each good
23) Which of the following is correct?
A.There is no relationship between MP and MC.
B.When AP is rising MC is falling, and when AP is falling MC is rising.
C.When MP is rising MC is rising, and when MP is falling MC is falling.
D.When MP is rising MC is falling, and when MP is falling MC is rising.
24) Which of the following is not part of a nation’s infrastructure?
A.Communications facilities.
B.Roads, highways, and bridges.
C.The electrical power system.
D.Industrial plants and equipment.
25) The concept of “wages” includes the following items, except:
A.Direct money payments like salaries and commissions
B.Bonuses and royalties
C.Amounts spent by workers
D.Fringe benefits like health insurance and paid leave
26) A union argues that a price cut will boost the revenues of the firm, while
management argues that the opposite is true. This suggests that the price elasticity of
demand is:
A.Unit-elastic from the union’s perspective and unit-inelastic from management’s
perspective
B.Perfectly inelastic from the union’s perspective and perfectly elastic from
management’s perspective
C.Elastic from the union’s perspective; inelastic from management’s perspective
D.Inelastic from the union’s perspective; elastic from management’s perspective
27) Many economists believe that the neoclassical theories of human behavior and the
insights being accumulated in behavioral economics are basically:
A.Opposed to one another
B.Mutually exclusive to one another
C.Complementary to one another
D.In agreement with one another
28) Briefly describe the historical background that gave rise to antitrust and regulation
in the United States.
29) What was the General Agreement on Tariffs and Trade (GATT)?
30) How could legal immigration increase a nations stock of capital and what effects
would such an increase have on productivity, production costs and product prices?
31) What is the relative importance of demand and supply factors in explaining rising
health care costs?
32) What are the conditions necessary to produce neither an underallocation nor
overallocation of resources?
33) Why do entrepreneurs and other innovators actively study the scientific output of
universities and government laboratories?
34) What does it mean to have an absolute advantage in the production of two goods?