1)
Refer to the diagrams for two separate product markets. Assume that society’s optimal
level of output in each market is Q0 and that government purposely shifts the market
supply curve from S to S1 in diagram (a) on the left and from S to S2 in diagram (b) on
the right. The shift of the supply curve from S to S1 in diagram (a) might be caused by a
per-unit:
A.subsidy paid to the producers of this product.
B.tax on the producers of this product.
C.subsidy paid to the buyers of this product.
D.tax on the buyers of this product.
2) Which of the following statements is correct?
A.Rent performs an incentive function, but not a rationing function
B.Wage rate does not perform an incentive function in the supply of labor
C.Profits are payments to capital resource owners
D.Demand is the “active,” and supply the “passive,” determinant of land rent
3) Other things equal, if the prices of a firm’s variable inputs were to fall:
A.one could not predict how unit costs of production would be affected.
B.marginal cost, average variable cost, and average fixed cost would all fall.
C.marginal cost, average variable cost, and average total cost would all fall.
D.average variable cost would fall, but marginal cost would be unchanged.
4) If all discrimination in the United States were eliminated, the economy would:
A.have a less concave production possibilities curve.
B.produce at some point closer to its production possibilities curve.
C.be able to produce at some point outside of its production possibilities curve.
D.produce more consumer goods and fewer investment goods.
5) The table below shows the total utility data for products X and Y. Assume that the
prices of X and Y are $3 and $4, respectively, and that consumer income is $18.
Refer to the above table. How many units of the two products will the consumer buy, to
get maximum utility?
A.1 of X and 4 of Y
B.2 of X and 2 of Y
C.2 of X and 3 of Y
D.3 of X and 4 of Y
6) Answer the question on the basis of this table showing the marginal benefit that a
particular public project will provide to each of the three members of a community. No
vote trading is allowed.
If the tax cost of this proposed project is $600 per person, a majority vote will:
A.defeat this project and resources will be underallocated to it.
B.defeat this project and resources will be allocated efficiently.
C.pass this project and resources will be overallocated to it.
D.defeat this project and resources will be overallocated to it.
7) 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. Assuming the prices of resources a and b are $5 and $8
respectively, when the firm hires the profit-maximizing combination of resources, its
economic profit will be:
A.$170
B.$76
C.$145
D.$138
8) If a nation is operating at a point inside the production possibilities curve, it indicates
that the nation could:
A.Increase its production of both goods X and Y simultaneously
B.Increase its production of one good, but only at the expense of reducing the other
good
C.Not produce any more of one of the goods X or Y
D.Not employ any more resources because all resources are now employed
9)
Refer to the graph above. If Canadian investors buy more U.S. financial and real assets,
then:
A.The demand curve will shift left
B.The demand curve will shift right
C.The supply curve will shift left
D.The supply curve will shift right
10) In the short run, a purely competitive firm will earn a normal profit when:
A.P = AVC.
B.P > MC.
C.that firm’s MR = market equilibrium price.
D.P = ATC.
11) A shift to the right in the demand curve for product A can be most reasonably
explained by saying that:
A.consumer incomes have declined, and consumers now want to buy less of A at each
possible price.
B.the price of A has increased and, as a result, consumers want to purchase less of it.
C.consumer preferences have changed in favor of A so that they now want to buy more
at each possible price.
D.the price of A has declined and, as a result, consumers want to purchase more of it.
12) Evaluate how the following situations will affect the demand curve for iPods.
(a)Income statistics show that income of 1825-year-olds have increased by 10 percent
over the last year.
(b)Efforts of music artists wanting greater protection of their music result in more
stringent enforcement of copyrights and the shutdown of numerous illegal downloading
sites.
(c)Believing that it has significant control of the market for portable digital music
players, Apple decides to raise the price of iPods with the goal of increasing profits.
(d)The price of movie tickets decreases.
13) To control production costs in the face of huge intra-day fluctuations in electricity
demand, electricity companies often:
A.Operate all plants at full capacity
B.Operate all plants at less than full capacity
C.Produce at several plants with different operating costs
D.Produce at one plant with the lowest possible operating cost
14) Other things being equal, how would the market for tablet computers be affected by
a large increase in productivity in the tablet-computer industry?
A.A decrease in price and a leftward movement along the supply curve
B.A decrease in price and a rightward movement along the demand curve
C.A decrease in price and a rightward movement along the supply curve
D.An increase in price and a rightward movement along the demand curve