1) Assume that in year 1 you pay an average tax rate of 20 percent on a taxable income
of $20,000. In year 2, you pay an average tax rate of 25 percent on a taxable income of
$30,000. Assuming no change in tax rates, the marginal tax rate on your additional
$10,000 of income is:
A.5 percent.
B.12 percent.
C.35 percent.
D.42 percent.
2) The incentive to cheat within a cartel increases with an increase in the following
factors, except:
A.The number of firms in the cartel
B.Economic performance and industry sales
C.The number of potential entrants into the industry
D.The cost-differences among firms
3) Which of the following is consistent with the law of demand?
A.A decrease in the price of tacos causes sellers to want to sell less
B.An increase in the people’s craving for pizza causes buyers to buy more pizza
C.An increase in the price of hamburgers causes buyers to buy fewer hamburgers
D.A decrease in the price of egg rolls causes a decrease in the quantity of egg rolls
demanded
4) Noncompeting groups of workers are the result of:
A.differences in the age-earnings profiles of workers.
B.differences in the “job tastes” of workers.
C.differences in the innate and acquired abilities of workers.
D.geographic immobility.
5) The long run is characterized by:
A.the relevance of the law of diminishing returns.
B.at least one fixed input.
C.insufficient time for firms to enter or leave the industry.
D.the ability of the firm to change its plant size.
6) Monopolists are said to be allocatively inefficient because:
A.They produce where MR > MC
B.At the profit-maximizing output price is greater than AVC
C.They produce only the type of product they desire and do not consider the consumer
D.At the profit-maximizing output the marginal benefit of the product to society
exceeds its marginal cost
7)
Refer to the graph above. Suppose that its shows the S and D graphs in a market where
usage of the product generates a lot of external benefits. In this case, the government
should use its coercive power to make:
A.The supply curve shift to the left
B.The supply curve shift to the right
C.The demand curve shift to the left
D.The demand curve shift to the right
8) With respect to state finance, for most states:
A.estate taxes are the major source of revenue and most expenditures are for health
services.
B.the corporate income tax is the major source of revenue and natural resource
development is the major type of expenditure.
C.property taxes are the basic source of revenue and education is the major type of
expenditure.
D.sales and excise taxes are the major source of revenue and education is the major
type of expenditure.
9) The following statements about the ‘sunk cost fallacy” are true, except:
A.It’s the tendency to drag past costs into current marginal cost-benefit calculations
B.It comes from a desire to “get one’s money’s worth” out of a past expenditure
C.It refers to the fact that average fixed costs are not a major part of production costs
D.It could lead one to “throw good money after bad”
10) Which of the following is a short-run adjustment?
A.A local bakery hires two additional bakers.
B.Six new firms enter the plastics industry.
C.The number of farms in the United States declines by 5 percent.
D.BMW constructs a new assembly plant in South Carolina.
11) Which of the following taxes is most likely to be regressive?
A.Personal income taxes
B.Corporate income taxes
C.Estate taxes
D.General sales taxes
12) Answer the question on the basis of the following domestic supply and demand
schedules for a product. Suppose that the world price of the product is $1.
Refer to the given data. With a $1-per-unit tariff, prices (revenue per unit) received by
domestic and foreign producers respectively will be:
A.$2 and $1.
B.$1 and $2.
C.$2 and $2.
D.$3 and $2.
13) “Heuristics” used by the human brain refer to the:
A.Ability of the brain to make sophisticated and accurate mental processes
B.Shortcuts that the brain uses in order to process information
C.Elements in the brain that lead to consistent interpretation of all visual information
D.Mental processes that burn and oftentimes waste a lot of energy
14) Which of the following best describes the relationship between market transactions
and the ultimatum and dictator games?
A.Market transactions operate more like the ultimatum game than the dictator game.
B.Market transactions operate more like the dictator game than the ultimatum game.
C.The ultimatum and dictator games both provide good representations of how market
transactions work.
D.Neither the ultimatum game nor the dictator game bears much similarity to market
transactions.
15)
Refer to the graph. Each of the three labor demand curves shown slopes downward
because of the:
A.law of diminishing marginal utility.
B.law of increasing opportunity costs.
C.principal-agent problem.
D.law of diminishing returns.
16) Economies and diseconomies of scale explain:
A.the profit-maximizing level of production.
B.why the firm’s long-run average total cost curve is U-shaped.
C.why the firm’s short-run marginal cost curve cuts the short-run average variable cost
curve at its minimum point.
D.the distinction between fixed and variable costs.
17) A recent study found that an increase in the federal tax on beer (and thus an increase
in the price of beer) would reduce the demand for marijuana. We can conclude that:
A.beer and marijuana are substitute goods.
B.beer and marijuana are complementary goods.
C.beer is an inferior good.