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1) Normative statements are expressions of facts.
2) An increase in the supply of farm products relative to the demand for them tends to
cause farm incomes to decline.
3) The Temporary Assistance for Needy Families (TANF) that replaced the old Aid for
Families with Dependent Children welfare program succeeded in reducing the number
of welfare recipients and increasing the employment rate among single mothers.
4) Sellers' sense of fairness in pricing can sometimes lead them to pricing-decisions that
do not maximize profits.
5) The World Trade Organization was established by the United States to force other
nations to open their markets to U.S. goods.
6) Supply-side market failures occur because it is impossible in certain cases for sellers
to charge consumers what they are willing to pay for a product.
7) Market economies use capital goods because they improve productive efficiency.
8) Public regulation rather than public ownership has been the primary means used in
the United States to ensure that the behavior of natural monopolists is socially
acceptable.
9) The benefits-received principle of taxation is used to support corporate and personal
income taxes.
10) The more elastic the demand for a product, the less elastic will be the demand for
the resources employed in producing it.
11) The industrially advanced nations can assist developing nations by reducing trade
barriers and by providing both private and public capital.
12) The United States is in imminent danger of running out of energy.
13) In the circular flow model, households act as buyers in the resource markets.
14) A system of fixed exchange rates is more likely to result in exchange controls than
is a system of flexible (floating) exchange rates.
15) If economic theories are solidly based on relevant facts, then appropriate economic
policy becomes obvious and uncontroversial.
16) Which of the following is a land resource?
A.A farmer.
B.An oil drilling rig.
C.A machine for detecting earthquakes.
D.Natural gas.
17)
Refer to the diagrams. Assume that only wheat can be grown on the three grades of land
shown in Figures (a), (b), and (c). Also assume that identical amounts of labor, capital,
and other needed inputs are used in farming each grade of land. On the basis of these
three figures, we:
A.can say that the land in Figure (a) is most productive.
B.can say that the land in Figure (b) is most productive.
C.can say that the land in Figure (c) is most productive.
D.cannot compare the productivity of the three grades of land.
18) If Nations Quirk and Turk only produce aluminum or oil, the table below shows the
maximum output of each nation:
Which one of the following terms of trade is most likely to produce mutually-beneficial
exchange between the two nations?
A.0.5 unit of oil for 1 unit of aluminum
B.0.5 unit of oil for 2 units of aluminum
C.1 unit of oil for 0.4 unit of aluminum
D.1 unit of oil for 4 units of aluminum
19) The successful commercial introduction of a new product, the use of a new method,
or the creation of a new form of business enterprise is called:
A.innovation.
B.invention.
C.creative destruction.
D.diffusion.
20) In 2001, Microsoft was found guilty of:
A.using anticompetitive means to maintain and broaden its "Windows" monopoly.
B.monopolizing the market for word processing software.
C.conspiring with Netscape and Sun to monopolize the market for Internet browsers.
D.deliberately pricing Windows 95 and 98 below marginal cost to monopolize the
market for operating systems for personal computers.
21) Which of the following is not a significant source of revenue for the U.S. Federal
government?
A.Personal income taxes
B.Corporate income taxes
C.Property taxes
D.Payroll taxes
22) A caption that can serve as a warning to proponents of social regulation is that:
A."There is no free lunch."
B."The rule of reason will prevail."
C."The public interest will prevail."
D."Protect the greatest number."
23)
Refer to the above graph. At which point does marginal product (MP) equal average
product (AP) at a level of output?
A.Point A
B.Point B
C.Point C
D.Point D
24) When a firm is experiencing economies of scale:
A.Minimum efficient scale has been achieved
B.Long-run average total cost is decreasing
C.An increase in output is accompanied by a more-than-proportionate increase in
long-run total cost
D.A given percentage increase in output requires a more-than-proportionate increase in
resources
25) One major consequence of the planning fallacy is that:
A.People may spend more resources to insure themselves against rare events, but leave
themselves uninsured against more common events
B.Someone could persist in pursuing a failed policy despite overwhelming evidence of
the failure
C.Major business projects may create bottlenecks in the organization because they are
not completed as scheduled
D.Some people may wrongly believe in their forecasting ability to predict future
outcomes of risky investments
26)
Refer to the above graphs. They show the long-run average total cost (LRATC) for a
product. For which graph would a firm NOT be experiencing diseconomies of scale?
A.Graph A
B.Graph B
C.Graph C
D.Graph D
27) With a tax of $4,000 on $24,000 taxable income, the average tax rate is:
A.16.67 percent
B.20 percent
C.23.45 percent
D.25 percent
28)
Refer to the diagram, in which solid arrows reflect real flows; broken arrows are
monetary flows. Flow (4) might represent:
A.the services of NASA astrophysicists.
B.the purchase of stealth bombers.
C.personal income taxes.
D.investment spending by private corporations.
29) Why arent the tools of product market analysis directly applicable to the resource
market?
30) Under what conditions will a purely competitive firm realize an economic profit?
Give a response from a marginal revenue and marginal cost perspective and from a total
revenue and total cost perspective.
31) Price discrimination is often used by businesses. Explain the conditions under
which price discrimination is practiced.
32) List the major outcomes from the General Agreement on Tariffs and Trade.
33) What was the importance of the Federal Trade Commission Act of 1914?
34) Describe how changes in tastes affect the value of a nations currency.
35) Discuss Amazons barriers of entry over others trying to enter the market.
36) In what ways, if any, do the demand schedules for a purely competitive firm and a
pure monopolist differ? What significance does this have for the price-output behavior
of each?
37) Explain how process innovation reduces cost and increases profits. How does this
innovation affect the firms total product curve and average cost curve?
38) Describe the major spending categories and percentage for health care spending.
