1)
In the graph above, what is the price elasticity of supply (using the midpoint formula)
between points A and B above?
A.1
B.3
C.2
D.1/3
2) Suppose an excise tax is imposed on product X. We expect this tax to:
A.increase the demand for complementary good Y and decrease the demand for
substitute product Z.
B.decrease the demand for complementary good Y and increase the demand for
substitute product Z.
C.increase the demands for both complementary good Y and substitute product Z.
D.decrease the demands for both complementary good Y and substitute product Z.
3) Which of the following best describes a Nash equilibrium?
A.An outcome from which one or both competitors can improve their position by
adopting an alternative strategy.
B.The unstable outcome of a repeated game.
C.An outcome that is stable only because of credible threats.
D.An outcome that both competitors see as optimal, given the strategy of their rival.
4) Economic systems differ according to which two main characteristics?
A.Who owns the factors of production and the methods used to coordinate economic
activity.
B.The technology used in production and the quantity and quality of natural resources.
C.How goods are produced and who gets them.
D.The political system in place and the degree of scarcity facing the economy.
5) The primary focus of energy economics is how:
A.Energy consumption is increasing
B.Energy production is decreasing
C.People deal with the scarcity of energy
D.People conserve crude oil for future use
6) Compensation paid in proportion to the number of units of personal output best
describes:
A.royalties.
B.profit-sharing.
C.bonuses.
D.piece rates.
7)
Refer to the budget line shown in the diagram. If the consumer’s money income is $20,
the:
A.prices of C and D cannot be determined.
B.price of C is $2 and the price of D is $4.
C.consumer can obtain a combination of 5 units of both C and D.
D.price of C is $4 and the price of D is $2.
8) Suppose we find that the price elasticity of demand for a product is 3.5 when its price
is increased by 2 percent. We can conclude that quantity demanded:
A.increased by 7 percent.
B.decreased by 7 percent.
C.decreased by 9 percent.
D.decreased by 1.75 percent.
9) Other things equal, economists would prefer:
A.free trade to tariffs and tariffs to import quotas.
B.free trade to import quotas and import quotas to tariffs.
C.import quotas to tariffs and tariffs to voluntary export restrictions.
D.import quotas to free trade and free trade to tariffs.
10) Which of the following is not a source of economies of scale?
A.Learning-by-doing.
B.Labor specialization.
C.Use of larger machines.
D.Inelastic resource supply curves.
11)
Refer to the diagram. The slope of curve ZZ at point B is:
A.infinity.
B.zero.
C.+1.
D.-1.
12) Which of the following is the best example of a System 2 decision and action?
A.Marty learns that his usual driving route to work will have significant delays due to
construction but forgets and goes that way anyway.
B.Doug eats a whole plate of nachos despite the fact it compromises his carefully
planned diet.
C.Bruce “goes with his gut” when choosing between two kinds of motorcycles to
purchase.
D.Chuck, who has contemplated a job change for a month and has other offers, chooses
to quit when his boss makes him mad.
13) If the representative firm in a purely competitive industry is in short-run
equilibrium and at its current output level, its marginal cost exceeds its average total
cost, then we can conclude that:
A.The firm is suffering economic losses
B.The firm is not maximizing profits in the short run
C.Some firms will exit the industry in the long run
D.Other firms will enter the industry in the long run
14) If demand for farm crops is inelastic, a good harvest will cause farm revenues to:
A.Increase because of the increase in the quantity that farmers can sell
B.Increase because of a downward movement along the supply curve, encouraging an
increase in demand
C.Decrease because of a percentage fall in price greater than the percentage increase in
quantity sold
D.Remain unchanged, because the increase in quantity that can be sold will be matched
by an equal decrease in price
15) The region of demand in which the monopolist will choose a price-output
combination will be:
A.Inelastic because as price declines and output increases, total revenue will increase
B.Inelastic because as price declines and output increases, total revenue will decrease
C.Elastic because as price declines and output increases, total revenue will decrease
D.Elastic because as price declines and output increases, total revenue will increase
16) A child is given $4 of pocket money to be spent on either hard candies or
chocolates. Chocolates cost 40 cents and hard candies 80 cents each. The marginal
utilities derived from each product are as shown in the following table:
Refer to the above table. Based on taste and preference alone, which good does the
child prefer?
A.Chocolates
B.Hard candies
C.The child equally likes chocolates and hard candies
D.One cannot tell from the given data
17) Explain the utility maximizing rule for two products in words and using algebra.
18) Critics of a single tax on land oppose the idea because:
A.it would overtax the population.
B.changes in land ownership would cause the tax burden to fall unfairly on people who
did not receive economic rents.
C.it would disproportionately tax the richest members of society.
D.it would cause too much land to be brought out of production.