The discovery of a significant new source of oil that can be exported will lead to:
A. depreciation of the currency and a loss of comparative advantage in other sectors.
B. depreciation of the currency and a gain of comparative advantage in other sectors.
C. appreciation of the currency and a loss of comparative advantage in other sectors.
D. appreciation of the currency and a gain of comparative advantage in other sectors.
Answer:
A policy is considered optimal if it:
A. is supported by a majority of voters.
B. equates total costs with total benefits.
C. equates marginal costs with marginal benefits.
D. forces people to conserve on scarce resources.
Answer:
Refer to the graph shown of a monopolistically competitive firm. If the firm maximizes
profit, it will:
A. produce 8,000 dresses per year.
B. produce 5,000 dresses per year.
C. produce 12,000 dresses per year.
D. go out of business because it cannot earn a profit.
Answer:
All of the following are considered sources of market failure except:
A. public goods.
B. imperfect information.
C. profit-maximizing behavior.
D. externalities.
Answer:
Refer to the graph shown. If the seller expects a price of $48:
A. it is not economically feasible to produce any level of output.
B. any level of output is profitable.
C. the minimum level of profitable production is 18.
D. the minimum level of profitable production is 21.
Answer:
Refer to the graph shown. When price rises from $30 to $40:
A. lost revenue is represented by areas C and E and gained revenue is represented by
area A.
B. gained revenue is represented by areas C and E and lost revenue is represented by
area A.
C. lost revenue is represented by areas B, C, D, and E and gained revenue is represented
by area A.
D. gained revenue is represented by areas B, C, D, and E and lost revenue is
represented by area A.
Revenue at price $40 is A, B, and D. Revenue at a price of $30 is areas B, C, D, and E.
Answer:
Which of the following is the best example of a macroeconomic externality?
A. One person saving less without considering the effect on their retirement needs
B. Many people saving more without considering the effect on unemployment
C. One person starting a business without knowing whether the goods will sell
D. One person spending more in order to help stimulate the economy
Answer:
Many fast-food restaurants have begun offering value meals with fruit or salad instead
of French fries. If consumers find this idea attractive, the market demand for potatoes
most likely will:
A. decrease, which may result in short-run losses for potato growers.
B. decrease but have no effect on the profits earned by potato growers in the short run.
C. increase, which may result in short-run losses for potato growers.
D. increase but have no effect on the profits earned by potato growers in the short run.
Answer:
Which of the following is not an example of government’s role as an actor?
A. Equal opportunity and labor laws that restrict businesses’ freedom to hire and fire
whomever they want
B. Tax cuts
C. Increases in social security spending
D. Laws that require states and the federal government to balance their budgets
Answer:
Demand for healthy kidneys is high in both India in Nepal. But it is also illegal to buy
or sell organs. Despite the legal and social disapproval, there is an illegal market for
organs. Assuming the legal and social disapproval does not influence buyers but
discourages sellers from offering organs, the disapproval will:
A. raise price and raise quantity.
B. raise price but lower quantity.
C. lower price but raise quantity.
D. lower price and lower quantity.
Answer:
When a country runs a trade deficit, it does so by:
A. borrowing from foreign countries or selling assets to them.
B. borrowing from foreign countries or buying assets from them.
C. lending to foreign countries or selling assets to them.
D. lending to foreign countries or buying assets from them.
Answer:
An economist observes that a monopolist does not take full advantage of its market
power. She concludes that there must be some rational reason for this behavior that she
has not yet discovered. This economist is most likely to be a(n):
A. traditional economist.
B. behavioral economist.
C. irrational economist.
D. engineering economist.
Answer:
A regional airline owns 10 aircraft and employs 20 pilots. The airline makes an average
of three trips per day with each of its 10 aircraft. The aircraft and their ground crews are
idle part of the day. Minimum rest requirements for its pilots mean that if the airline
wants to increase its flights, it must hire more pilots. The decision to hire more pilots is:
A. a short-run decision because the number of aircraft is held constant while the labor
input is changed.
B. a short-run decision because the number of pilots is being increased; if the number of
ground crew were decreased instead, it would be a long-run decision.
C. a long-run decision because hiring pilots will increase revenues over a long period of
time for the airline.
D. a long-run decision because customers will become accustomed to the new flight
schedule.
Answer:
Which of the following is not a concern about nudge policies?
A. Very few policies meet the criterion of libertarian paternalism.
B. Designing helpful policies is complicated.
C. It is unclear that government knows best.
D. Nudge policy is not strong enough to have much of an effect.
Answer:
Suppose a market has an excess demand and price starts to rise. What will the rise in
price cause?
A. A fall in both quantity supplied and quantity demanded.
B. A rise in both quantity supplied and quantity demanded.
C. A rise in quantity supplied and a fall in quantity demanded.
D. A fall in quantity supplied and a rise in quantity demanded.
Answer:
An industry that has many sellers offering slightly differentiated products is called:
A. perfectly competitive.
B. monopolistically competitive.
C. oligopolistic.
D. monopolistic.
Answer:
An elasticity of supply of 2.7 means that:
A. supply is inelastic.
B. quantity supplied changes 2.7 units for each 1 percent change in price.
C. quantity supplied changes 2.7 percent for each 1 percent change in price.
D. price changes by 2.7 percent for each 1 percent change in quantity supplied.
Answer:
Which of the following would best explain a decrease in the supply of squash?
A. An increase in the price of other vegetables
B. An increase in the price of squash
C. A decrease in the price of squash
D. A decrease in the cost of growing squash
Answer:
What is true about the following payoff matrix?
A. Players cannot jointly do better by cooperating.
B. Players cannot escape the 0-0 payoff.
C. Player A is better off lying that he will choose column 1 and then choosing column 2.
D. Player B is better off lying that she will choose row 1 and then choosing row 2.
Answer:
Since deregulation, airfares have declined by 30 percent. Deregulation is an example of
political forces:
A. letting the market move toward equilibrium, reducing excess supply.
B. letting the market move toward equilibrium, reducing excess demand.
C. making the market move away from equilibrium, creating excess supply.
D. making the market move away from equilibrium, creating excess demand.
Answer:
One study of the distribution of wealth indicates that the bottom 40 percent of
households hold 1 percent or less of total marketable wealth in the United States and the
top 1 percent owns close to 40 percent of it. An economist might observe that these data
do not include the value of human capital: the value of labor and skills embodied in a
person. If we were to include human capital, which of the following people’s net worth
would change the most?
A. Debra, who recently received a $25,000 bonus from her job that she has spent on an
around-the-world trip
B. Carol, who has just bought an apartment for $500,000 using savings and bank loans
C. Betty, who has just retired but expects to live well because her retirement account is
worth $1,000,000
D. Alice, who has just completed her education as a medical doctor and now has student
loans of $100,000
Answer:
A monopolist:
A. earns a profit in the short run and the long run.
B. earns a profit in the short run but not in the long run.
C. can earn profits or incur losses in the short run.
D. can never incur losses.
Answer:
If the law of diminishing marginal product holds true and workers emigrate from Haiti,
the wage rate of workers who remain in Haiti would be expected to:
A. rise because more workers are working with the same amount of capital.
B. rise because fewer workers are working with the same amount of capital.
C. fall because more workers are working with the same amount of capital.
D. fall because fewer workers are working with the same amount of capital.
Answer:
Game theory is designed to study situations in which each agent’s decisions are:
A. interdependent.
B. independent.
C. constrained.
D. uninformed.
Answer:
Economists are most likely to suggest that societies address the inefficiencies created by
negative externalities by:
A. direct regulation.
B. voluntary conservation.
C. making the price people pay reflect the cost of the externality.
D. leaving environmental problems alone so that the market can deal effectively with
them.
Answer:
The Nash equilibrium in the following payoff matrix is:
A. -1, -1.
B. -1, 1.
C. 1, -1.
D. There is no Nash equilibrium.
Answer:
For a cartel to be successful in increasing economic profits for its members:
A. entry of new firms must be blocked.
B. price must be set equal to marginal cost.
C. individual firms must be encouraged to adjust output so as to maximize their own
profits at the cartel price.
D. price must be set equal to average total cost.
Answer:
Suppose a factory that produces toasters experiences a decline in its average total cost
with no change in its output level. This decline might be explained by:
A. economies of scale.
B. decreasing marginal utility.
C. increasing marginal productivity.
D. technological change.
Answer:
The demand for a good is elastic. Which of the following would be the most likely
explanation for this?
A. The good is a necessity.
B. The good is broadly defined.
C. The good costs a small portion of one’s total income.
D. The time interval considered is long.
Answer:
Refer to the graph shown. When price rises from $10 to $30:
A. lost revenue is represented by areas B and C and gained revenue is represented by
area F.
B. gained revenue is represented by areas B and C and lost revenue is represented by
area F.
C. lost revenue is represented by areas B, C, and D and gained revenue is represented
by area A.
D. gained revenue is represented by areas B, C, and D and lost revenue is represented
by area A.
Revenue at price $40 is B, C, D, and E. Revenue at price of $10 is areas D, E, and F.
Answer:
Which of the following would likely result in an increase in the demand for beef?
A. A decrease in the supply of beef
B. An increase in family incomes
C. An increase in the price of feed grains for cattle
D. A decrease in the price of pork
Answer:
Since the late 1980s:
A. the Soviet socialist economic and political structure has spread to other nations.
B. the Soviet socialist economic and political structure has fallen apart.
C. the Soviet Union installed Soviet-dominated governments in a number of Eastern
European countries.
D. socialism has gained popularity among the governments of Eastern Europe.
Answer:
When the United States imposed restrictions on imported steel in the 1950s and 1960s,
the U.S. steel industry responded by:
A. raising prices and investing more in steel production.
B. raising prices and channeling profits from their steel production into other activities.
C. lowering prices and investing more in steel production.
D. lowering prices and channeling profits from their steel production into other
activities.
Answer: