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1) The table below shows the rate of return and R&D spending for a hypothetical firm.
Refer to the above table. Assume the interest-rate cost of funds falls from 10 percent to
6 percent. What will happen to the optimal amount of R&D spending?
A.It increases from $24 billion to $36 billion
B.It increases from $24 billion to $42 billion
C.It decreases from $36 billion to $24 billion
D.It decreases from $42 billion to $24 billion
2) In statistical discrimination:
A.The average characteristics of the group are applied to individual members
B.The characteristics of individual members of a group are applied to describe the
group as a whole
C.Hiring characteristics for workers are based on set government requirements
D.Workers are given preferential treatment if they help fulfill a quota for a particular
type of characteristic
3) Housing subsidies for low-income households:
A.represent a cash transfer.
B.are a part of the U.S. social insurance programs.
C.represent a noncash transfer.
D.conflict with the leaky-bucket analogy.
4) The price of capital is $12 per machine-hour and the price of labor is $3 per hour.
Below are production schedules for a firm showing the possible combinations of capital
and labor that will produce 100 units of output. Which combination will this
cost-minimizing firm choose?
A.Choice A
B.Choice B
C.Choice C
D.Choice D
5) Health maintenance organizations (HMOs):
A.are based on the traditional fee-for-service system of paying physicians.
B.charge a fixed amount per member, hire many of their own physicians, and provide
health services only to members.
C.are also known as preferred provider organizations.
D.are illegal in several states.
6) An increase in demand will increase equilibrium price to a greater extent:
A.if the product is a normal good.
B.if the product is an inferior good.
C.the less elastic the supply curve.
D.the more elastic the supply curve.
7) The tendency of people to misjudge, at the present time, what they will want to do or
have at some future time is called:
A.Time inconsistency
B.Mental accounting
C.Anchoring
D.Framing
8) Which of the following statements is true about risk management in market systems
versus command systems?
A.Market systems manage risk better because entrepreneurs taking risks bear the costs
of poor decisions, where in command systems government decision makers don't bear
those costs.
B.Neither system is better than the other in terms of risk management; both systems are
equally susceptible to natural disasters and changes in consumer preferences.
C.Command systems manage risk better because the government controls most
economic activity and can therefore eliminate risk.
D.Market systems face risk because of the possibility of profits and losses; command
systems don't face risk because they are not profit driven.
9) A mining company has the opportunity to extract from a coal reserve this year for a
profit of $40 per pound. The current market rate of interest is 5 percent. The present
value of this future extraction is:
A.$36
B.$38
C.$40
D.$42
10) If the unit price of a product is P, then the amount of spending that the buyers would
need to pay for a given quantity Q is equal to:
A.P x Q
B.P + Q
C.P - Q
D.Q - P
11) Answer the questions based on production possibilities data for Francia and Galacia.
All data are in tons.
(a)If trade occurs between Francia and Galacia, which nation should export what
product? Why?
(b)What are the limits of the terms of trade between Francia and Galacia?
(c)Assume that prior to specialization and trade, Francia and Galacia chose production
possibility C. Now each specializes according to comparative advantage. What will be
the resulting gains from trade? Explain your answer.
12) Mutual interdependence means that each firm in an oligopoly:
A.Faces a perfectly inelastic demand for its product
B.Considers the reactions of its rivals when it determines its pricing policy
C.Depends on the other firms for its inputs
D.Depends on the other firms for its markets
13) "Earmarks" refer to:
A.the additional votes that must be taken when a voting paradox occurs.
B.taxes that redistribute wealth or income from one income group to another.
C.authorized expenditures benefiting a narrow, specifically designated group that are
included in more comprehensive spending legislation.
D.legislation focused on correcting negative externalities.
14) Which of the following products is a leading import of the United States?
A.Grains
B.Aircraft
C.Petroleum
D.Generating equipment
15) Answer the question on the basis of the information given in the following table:
Refer to the given data. Which of the following best represents the labor demand
schedule for this firm?
A.
B.
C.
D.
16) 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. Which of the following price-quantity schedules would
represent the demand for X in the $2 and $3 price-range?
A.Option A
B.Option B
C.Option C
D.Option D
17) If you pay $10,625 annually on a $125,000 loan and the rate of inflation is 3
percent, then the:
A.Real rate of interest is 4.5 percent
B.Nominal rate of interest is 8.5 percent
C.Real rate of interest is 6.5 percent
D.Nominal rate of interest is 11.5 percent
18) The following groups in the U.S. have higher-than-the-national-average poverty
rates in 2011, except:
A.Households headed by females
B.Foreign-born noncitizens
C.Persons 65 or older
D.Hispanics
