1) The marginal cost to a firm of R&D expenditures is the market interest rate the firm
must pay to obtain the needed financing.
2) Present value allows us to weigh the benefits and costs of using resources today or in
the future.
3) Marginal cost is a measure of the alternative goods that society forgoes in using
resources to produce an additional unit of some specific product.
4) A reduction in the collective discrimination coefficients of employers will increase
the wage rate of those discriminated against but reduce their employment.
5) The supply of antiques is highly inelastic so increases in demand would have a small
effect on price.
6) Government bailouts of failing businesses, like banks during the recent economic
crisis, will tend to reduce the motivation among entrepreneurs to make prudent
decisions is dealing with business risk.
7) All else being equal, increased U.S. exports to nations in the European Union create
a:
A.Demand for euros
B.Supply of euros
C.Shortage of euros
D.Surplus of euros
8)
Refer to the diagram. Which of the following is a positive statement?
A.A point inside the production possibilities curve is superior to a point on the curve
because the former requires less work effort.
B.Because any society should stress economic growth as its major goal, point D is
superior to point C.
C.Point B is preferable to point C because the ultimate goal of economic activity is to
maximize consumption.
D.Given its resources and technology, this society is incapable of simultaneously
producing 3 units of tractors and 15 units of bread.
9) The experiences of Singapore, Whole Foods Markets, and the State of Indiana all
point to one major factor that could reduce, if not eliminate, overconsumption of health
care. And that is:
A.Reducing the coverage of insured illnesses
B.High out-of-pocket costs to consumers
C.Raising the health-insurance premiums
D.Privatizing health insurance
10) Answer the question on the basis of the following demand and cost data for a pure
monopolist:
Refer to the data. The profit-maximizing monopolist will realize a:
A.profit of $8.50.
B.profit of $7.50.
C.profit of $16.
D.loss of $14.
11) The following table contains hypothetical data for the U.S. balance of payments in a
year. Answer the following question on the basis of these data. All figures are in billions
of dollars.
U.S. goods exports +$390
U.S. goods imports -498
U.S. service exports +133
U.S. service imports -107
Net investment income +12
Net transfers -22
Capital account -5
Foreign purchases of U.S. assets +156
U.S. purchases of foreign assets -59
Refer to the table above. The balance on the financial account was a:
A.$92 billion surplus
B.$97 billion surplus
C.$92 billion deficit
D.$97 billion deficit
12) Interlocking directorates refers to a situation where:
A.A director of one firm is also a board member of a competing firm
B.Members of the Board of Directors of a firm could not agree on a clear strategy for
the firm
C.Competing firms have separate and different members in their boards
D.A company’s board splits into two rival camps locked in constant struggle
13) Which of the following will tend to socialize losses and privatize gains?
A.Lowering interest rates to encourage private borrowing and investment.
B.Government regulation to promote human safety and environmental protection.
C.Government creating projects rather than supporting private efforts.
D.Government guarantees to private investors that they will get their money back even
if the company fails.
14) Fill in the following table on the total and marginal utilities of a certain product A.
Use your results to answer the following questions.
(a)Graph both the total utility and marginal utility curves together on the same graph.
(b)Explain the shape of their curves.
(c)Identify the point where utility is maximized on both curves. Discuss the reasoning
behind each value.
15) The following table gives data for the market for a product.
Refer to the table above. If an excise tax of $3 per unit is imposed on this product, the
incidence of the tax will be:
A.$3 on the buyers and $0 on the sellers
B.$0 on the buyers and $3 on the sellers
C.$2 on the buyers and $1 on the sellers
D.$1 on the buyers and $2 on the sellers
16) The purpose of the ceteris paribus assumption used in economic analysis is to:
A.Avoid making normative statements
B.Distinguish macroeconomics from microeconomics
C.Make sure that all relevant factors are considered
D.Focus on the effect of a single factor on a certain variable
17) Adam Smith recognized the benefits from trade based on ____, and David Ricardo
recognized the benefits from trade based on ____:
A.Comparative advantage; resource endowments
B.Absolute advantage; comparative advantage
C.Absolute advantage; resource endowments
D.Comparative advantage; absolute advantage
18) When critics of U.S. farm policy say that it treats symptoms rather than causes, they
mean that the:
A.policy attempts to bolster low farm income, while the real problem is an
overallocation of resources to agriculture.
B.policy deals with the overallocation of resources to agriculture, while the basic farm
problem is low incomes.
C.policy attempts to bolster low farm incomes, while the real problem is an
underallocation of resources to agriculture.
D.restriction of output in the short run may reduce productive capacity in agriculture in
the long run.
19) Use the graph below to identify: (a) break-even points; (b) the profit-maximizing
level of output; and, (c) letters showing largest difference between total revenue and
total costs and the output level.
20)
Refer to the diagram, which shows demand and supply conditions in the competitive
market for product X. Other things equal, a shift of the supply curve from S0 to S1
might be caused by a(n):
A.increase in the wage rates paid to laborers employed in the production of X.
B.government subsidy per unit of output paid to firms producing X.
C.decline in the price of the basic raw material used in producing X.
D.increase in the number of firms producing X.
21)
Refer to the above graph of the market for low-skilled labor. Sd is the supply of domestic
resident workers, and St is the total supply of labor including undocumented workers.
What is the equilibrium wage rate and equilibrium employment if there were no illegal
immigration?
A.$14 and 142M, respectively
B.$13 and 135M, respectively
C.$14 and 120M, respectively
D.$17 and 135M, respectively
22) Ticket scalping refers to:
A.the surplus of tickets that occurs when price is set below equilibrium.
B.the shortage of tickets that occurs when price is set above equilibrium.
C.pricing tickets so high that an athletic or artistic event will not be sold out.
D.reselling a ticket at a price above its original purchase price.
23) Answer the question on the basis of the following cost data for a firm that is selling
in a purely competitive market.
Refer to the data. If the market price for this firm’s product is $87, it will produce:
A.9 units at an economic profit of zero.
B.6 units at a loss of $90.
C.9 units at an economic profit of $281.97.
D.8 units at an economic profit of $130.72.
24) Gigantic Corporation follows a strategy of waiting for rivals to innovate, then
quickly imitating any successful innovations. This behavior is known as:
A.collusion.
B.an entrepreneurial strategy.
C.a fast-second strategy.
D.pricing the demand curve.
25) One basic difference between “land” and “capital” resources is that land is:
A.Manufactured while capital is man-made
B.Unlimited while capital is limited
C.Natural while capital is man-made
D.Limited while capital is unlimited
26) What is money and what important function does it perform? Explain how it
overcomes the disadvantages associated with barter. What conditions are necessary for
people to accept paper currency in exchange for the goods and services which they sell?
27) Can you think of explanations beyond those discussed in the text for the relative
decline of unionism in the United States?
28) Describe the essential features of the kinked-demand model of oligopoly pricing.
29) Economic development in DVCs often focuses on capital accumulation. Why?
30) What is the relationship between total product, marginal product, and average
product shown by the law of diminishing returns?