1) Price support programs for agricultural products tend to cause shortages of these
products.
2) Restricting the supply of labor is a means of increasing wage rates more commonly
used by industrial unions than craft unions.
3) The rationing function of prices refers to the fact that government must distribute any
surplus goods that may be left in a competitive market.
4) If the price of a good increases, it will tend to make the MU-to-P ratio for the good
rise and the good becomes more attractive to the buyer.
5)
Refer to the diagram for a nondiscriminating monopolist. At the profit-maximizing
output the firm’s economic profit will be BAFG.
6) Corporate income taxes contribute more to Federal tax revenues than do personal
income taxes.
7) Dominant firms which assigned control to a single decision group, that formed in
several industries in the U.S. in the 1870s and 1880s, were referred to as:
A.Trusts
B.Mergers
C.Tying contracts
D.Single-seller monopoly
8) The demand for capital by a firm is based on the demand for the product that the
capital produces. This relationship is referred to as:
A.Product demand
B.Derived demand
C.Resource utilization
D.Cost minimization
9) A prediction from the kinked demand curve model of oligopoly is that, for an
individual firm, small changes in:
A.Demand will lead to changes in price or output
B.Marginal revenue will lead to changes in price and output
C.Marginal cost will lead to changes in price and output
D.Marginal cost will not lead to changes in price or output
10) Suppose an employer is biased against African Americans. If his discrimination
coefficient is $2, the employer will:
A.randomly hire African-American and white workers if the actual
African-American-white wage differential is more than $2.
B.randomly hire African-American and white workers if the actual
African-American-white wage differential is less than $2.
C.hire only African Americans if the actual African-American-white wage differential is
less than $2.
D.hire only whites if the actual African-American-white wage differential is less than
$2.
11) One consequence of the asymmetric-information problem in the used car market, if
left unresolved, is the higher probability of:
A.New cars being better than used-cars in quality
B.A declining quality of used cars in the market
C.A rising quality of used cars in the market
D.Used-car buyers willing to pay higher prices
12) An increase in consumer desire for strawberries is most likely to:
A.increase the number of strawberry pickers needed by farmers.
B.reduce the supply of strawberries.
C.reduce the number of people willing to pick strawberries.
D.reduce the need for strawberry pickers.
13) Increasing the share of your income that you save is good for you. Therefore it
would be good for the whole economy if everyone saved more. This exemplifies the:
A.Post hoc fallacy
B.Fallacy of composition
C.Use of loaded terminology
D.Confusion between correlation and causation
14) Assume a purely competitive increasing-cost industry is initially in long-run
equilibrium and that an increase in consumer demand occurs. After all economic
adjustments have been completed, product price will be:
A.lower, but total output will be larger than originally.
B.higher and total output will be larger than originally.
C.lower and total output will be smaller than originally.
D.higher, but total output will be smaller than originally.
15) A natural monopoly is characterized by:
A.Collusion with other competitors to divide up the market
B.A decreasing average-cost curve extending beyond the market’s size
C.A firm protected from competition by a government regulation
D.A firm having control over the entire supply of a basic input in the production
process
16) The Celler-Kefauver Act of 1950:
A.modified patent legislation by reducing the number of years over which a patent is
applicable.
B.prohibited any firm from acquiring the real assets of another firm where the effect
was to lessen competition.
C.declared all conglomerate mergers to be illegal.
D.prohibited any firm from buying the stock of another firm where the effect was to
lessen competition.
17) The law of diminishing returns describes the:
A.relationship between total costs and total revenues.
B.profit-maximizing position of a firm.
C.relationship between resource inputs and product outputs in the short run.
D.relationship between resource inputs and product outputs in the long run.
18) In year 1 the price level is constant and the nominal rate of interest is 6 percent. But
in year 2 the inflation rate is 3 percent. If the real rate of interest is to remain at the
same level in year 2 as it was in year 1, then in year 2 the nominal interest rate must:
A.rise by 9 percentage points.
B.rise by 3 percentage points.
C.fall by 3 percentage points.
D.rise by 6 percentage points.
19) If a purely competitive firm is facing a situation where the price of its product is
lower than the average cost, then all of the following applies, except:
A.The firm is suffering losses, and if things are not expected to improve, the firm will
leave the industry
B.The firm may be earning some accounting profits, but less than what it could earn
elsewhere
C.Other firms will want to enter the industry because of the positive economic profits
D.The firm may earn economic profits in the long run if it expands its plant in order to
exploit economies of scale.
20)
Refer to the above graphs. They show the long-run average total cost (LRATC) for cars.
Just after World War II the Ford Motor Company opened a large automobile
manufacturing facility near Detroit with capacity Q0 autos per year. Shortly thereafter,
the plant was closed and two smaller ones were opened in the same vicinity, each more
profitably producing about one-half as many cars as the old facility. Which graph best
shows the situation described above, when only one plant was operating?
A.Graph A
B.Graph B
C.Graph C
D.Graph D
21) Which of the following is not a major reason for the decline of unionism in the
U.S.?
A.Employment has shifted away from manufacturing towards services
B.Management has greatly intensified its opposition to unions
C.Consumer demand has shifted toward foreign manufactured goods and away from
union-produced domestic goods
D.Nonunion firms continue to have poor working conditions
22) What is energy economics and what does it have to say about energy demand and
efficiency?
23) Explain the economic rationale for Henry Georges proposal for a single tax on land.
24) Monopoly has developed in both product and resource markets because of the
shortcomings and inefficiencies of competitive markets. Do you agree? Explain.
25) What is the extent of income inequality among nations? Explain, citing relevant
data on incomes received by populations and total GDP in the United States and
developing nations.
26) Is innovation within existing firms important? Explain and give examples.
27) Explain the importance of self-interest in the operation of a market system.
28) Explain the differences in economic systems between North and South Korea and
the economic outcomes of the two systems.
29) The following is a monopsonists employment schedule. What is the firms marginal
resource cost when it hires the eleventh worker?
30) What are likely factors that have contributed the rapid increase in population from
1800 to today?