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1) There is an adverse selection problem in the market for used cars because:
A.Owners of poor-quality cars have a strong incentive to sell their cars, while owners of
high-quality used cars have more incentive to keep their cars
B.Owners of high-quality cars will have a strong incentive to sell their cars to obtain the
higher prices, while owners of poor-quality cars will have more incentive to keep theirs
C.Most people prefer new cars, but the high prices for new cars force most of them to
buy used cars
D.Government actions to pass "lemon" laws have reduced information on used cars
2) Wealth in the United States is:
A.distributed in a way that reduces the degree of income inequality.
B.more unequally distributed than is income.
C.less unequally distributed than is income.
D.distributed in a way that has no effect on income inequality.
3) The main purpose of the antitrust laws is:
A.to encourage firms to produce where P > MC.
B.the elimination of both negative and positive externalities.
C.to prevent the monopolization of industries.
D.to regulate natural monopolies.
4) If a product has a short-run elasticity of supply equal to zero, then an increase in the
demand for the product will:
A.Have no effect on price or quantity sold
B.Increase price and leave quantity sold unchanged
C.Increase price and reduce the quantity sold to zero
D.Leave the price unchanged and reduce the quantity sold
5) In foreign exchange markets, speculators help:
A.Decrease the influence of the futures market because their trades demand current
payments
B.Increase fluctuations in exchange rates because of wild buying and selling
C.Decrease the value of most currencies because they tend to hedge the market
D.Increase international trade because they absorb risk which others do not want to bear
6)
Refer to the diagram, representing Slippery Slope Oil Company. A $5 decrease in the
user cost would:
A.decrease the optimal quantity extracted in the present.
B.increase the optimal quantity extracted in the present.
C.not affect the optimal quantity extracted in the present.
D.reduce extraction costs in the present.
7) Answer the question on the basis of the following five data sets wherein it is assumed
that the variable shown on the left is the independent variable and the one on the right is
the dependent variable. Assume in graphing these data that the independent variable is
shown on the horizontal axis and the dependent variable on the vertical axis.
Refer to the data sets. The equation for data set 3 is:
A.P = 90 - .5N.
B.P = 90 + .5N.
C.P = .5N.
D.P = 40 + .5N.
8) A logging company is considering logging an area for a current cost of $500 per acre
to obtain a profit the next year for $600 per acre. The market rate of interest is 10
percent. Should the company make the investment?
A.Yes, the future value of the profit is greater than the present value of the cost
B.No, the future value of the profit is less than the present value of the cost
C.Yes, the present value of the profit is greater than the present value of the cost
D.No, the present value of the profit is less than the present value of the cost
9) Paying an above-equilibrium wage rate might reduce unit labor costs by:
A.permitting the firm to attract lower-quality labor.
B.increasing the opportunity cost to workers of being fired for shirking.
C.increasing voluntary worker turnover.
D.increasing the supply of labor.
10) Picture a competitive market with the usual upsloping supply curve and
downsloping demand curve. If the current price is creating a shortage, then market
forces will cause the price to adjust and:
A.Quantity supplied will increase
B.Quantity supplied will decrease
C.Quantity demanded will increase
D.Demand will decrease
11) Which of the following has not contributed to the development of oligopolies in the
U.S. economy?
A.Mergers
B.Patents
C.Economies of scale
D.Interindustry competition
12) The law of demand states that, other things equal:
A.price and quantity demanded are inversely related.
B.the larger the number of buyers in a market, the lower will be product price.
C.price and quantity demanded are directly related.
D.consumers will buy more of a product at high prices than at low prices.
13)
In the diagram, the elimination of discrimination is best represented by:
A.a move from C to E
B.an inward shift of the production possibilities curve.
C.a move from A to D
D.a move from E to C
14) A firm sells a product in a purely competitive market. The marginal cost of the
product at the current output of 500 units is $1.50. The minimum possible average
variable cost is $1.00. The market price of the product is $1.25. To maximize profits or
minimize losses, the firm should:
A.Continue producing 500 units
B.Continue production, but produce less than 500 units
C.Increase production to more than 500 units
D.Shut down
