1) Voters’ preference for having government programs serve them is inherently in
conflict with their preference to pay no taxes.
2) Allocative efficiency occurs where (for the last unit) maximum willingness to pay
exceeds minimum acceptable price by the greatest amount.
3) Regulatory capture occurs when government exerts excessive control over an
industry.
4) A Nash equilibrium can only occur in repeated games.
5) An increase in the price of capital will reduce the demand for labor if capital and
labor are complementary resources.
6) Homogeneous oligopolists tend to advertise more than do differentiated oligopolists.
7) Which of the following conditions is true for a purely competitive firm in long-run
equilibrium?
A.P > MC = minimum ATC.
B.P > MC > minimum ATC.
C.P = MC = minimum ATC.
D.P < MC < minimum ATC.
8) In some games, one firm may avoid taking advantage of another firm because it
knows that the other firm can take advantage of it in subsequent games. This behavior is
called:
A.The first-mover advantage
B.Reciprocity
C.Price leadership
D.Preemption of entry
9) Assume that the resource market is purely competitive. If the price of the resource
falls, other factors constant, then a firm that sells its product in a purely competitive
market will:
A.Increase production by a larger amount than a firm with some monopoly power in its
product market
B.Increase production by a smaller amount than a firm with some monopoly power in
its product market
C.Decrease production by a larger amount than a firm with some monopoly power in its
product market
D.Decrease production by a smaller amount than a firm with some monopoly power in
its product market
10) Answer the question on the basis of the following production possibilities data for
two countries, Alpha and Beta, which have populations of equal size.
The given data show that:
A.Beta has a comparative advantage in producing chips.
B.Alpha has a comparative advantage in catching fish.
C.Alpha is subject to constant costs and Beta is subject to increasing costs.
D.Beta is more efficient than Alpha both in catching fish and in producing chips.
11) An increase in the demand for HDTV sets leads to an increase in demand for LCD
and LED TV screens. This situation arises because:
A.LCD and LED screens minimize the costs of production
B.The supply of LCD and LED screens has decreased
C.The demand for LCD and LED screens is a derived demand
D.Of foreign production of LCD and LED screens
12) Since 1950, the energy efficiency of the U.S. economy in terms of producing goods
and services has:
A.not changed.
B.more than doubled.
C.risen about 50 percent.
D.risen more than threefold.
13)
Refer to the above graph. At which point is average product (AP) at its maximum?
A.Point A
B.Point B
C.Point C
D.Point D
14) In the long run, economic theory predicts that a monopolistically competitive firm
will:
A.earn an economic profit.
B.realize all economies of scale.
C.equate price and marginal cost.
D.have excess production capacity.
15) Approximately what percentage of the world’s fisheries in 2009 was overexploited?
A.1 percent
B.10 percent
C.30 percent
D.50 percent
16) Real wages would rise if the:
A.Prices of goods and services rose more rapidly than nominal-wage rates
B.Prices of goods and services rose less rapidly than nominal-wage rates
C.Prices of goods and services and wage rates both rose
D.Prices of goods and services and wage rates both fell
17) Suppose that a university decides to spend $1 million to upgrade personal
computers and scientific equipment for faculty rather than spend $1 million to expand
parking for students. This example illustrates:
A.distorted priorities.
B.opportunity costs.
C.increasing opportunity costs.
D.productive efficiency.
18) Federal employment in the United States is dominated by what two functions?
A.National defense and postal service.
B.Health care and police.
C.Postal service and education.
D.Health care and national defense.
19) Suppose that a consumer who spends her budget on X and Y is initially at
equilibrium. If the price of X increases, then the MU/P of X will:
A.Decrease and the consumer will respond by buying more Y and less X
B.Decrease and the consumer will respond by buying more X and less Y
C.Increase and the consumer will respond by buying more Y and less X
D.Increase and the consumer will respond by buying more X and less Y
20)
Refer to the graph above showing the domestic demand and supply curves for a specific
product in a hypothetical nation called Econland. If the world price for this product is
$2.00, then Econland will:
A.Export 200 units
B.Export 400 units
C.Import 200 units
D.Import 400 units
21) In 2010, the Medicare and Medicaid programs reimbursed approximately what
percentage of hospitals’ total cost of providing care to the patients covered by those
programs?
A.80 percent.
B.92 percent.
C.100 percent.
D.105 percent.
22) In 2012, the primary sources of U.S. electricity generation, in order from largest to
smallest, were:
A.coal, natural gas, nuclear, and hydropower.
B.coal, hydropower, nuclear, and renewables (wind and solar).
C.natural gas, coal, hydropower, and petroleum.
D.hydropower, nuclear, coal, and petroleum.
23) The short run is characterized by:
A.plenty of time for firms to either enter or leave the industry.
B.increasing but not diminishing returns.
C.fixed plant capacity.
D.zero fixed costs.
24) What taxes will be used to help pay for the PPACA?
25) Why would farmland closer to the limits of a city be worth more than farmland
farther out?
26) Of what significance is the will to develop?
27) Explain how government intervention can improve economic efficiency in a market
with a negative externality.
28) Economists often speak as if there is a single interest rate when in fact there are
many interest rates. What factors explain the differences in these interest rates?
29) The welfare state is not a mechanism which provides something for nothing; every
piece of social insurance must be paid for. Evaluate and explain. Can you think of any
circumstances in which unemployment compensation might provide something for
nothing?
30) What is meant by the term moral hazard? What is an example of a moral hazard
problem?
31)