Paternalism describes a situation in which:
A. the government passes laws that require citizens to change their behavior.
B. people are likely to make bad decisions over and over.
C. there is no role for firms to influence people’s behavior.
D. people are led to make better decisions (as judged by an outside decision maker).
Answer:
When IBM sold its personal computer business to Lenovo, one analyst remarked that
the PC business was “a corner of the technology market where few companies have
been able to generate consistent profits.” This low-profit result would be expected if the
PC business:
A. is a cartel.
B. has barriers to entry.
C. is a winner-take-all market.
D. is monopolistically competitive.
Answer:
Most economists support free trade in part because trade restrictions:
A. provide no revenue for the government.
B. result in larger trade deficits for the nations imposing them.
C. increase international competition.
D. reduce international competition.
Answer:
What problem do economists see with free trade areas such as NAFTA and the
European Union?
A. They tend to lead to free trade rather than fair trade.
B. They can lead to regional trading blocs that restrict trade with outsiders.
C. They lead to globalization.
D. They encourage countries to rely on others rather than being self-sufficient.
Answer:
An optimal corrective tax levied on polluters will:
A. be equal to the marginal cost of their actions imposed on third parties.
B. not generate enough revenue to pay for the cost of the damage resulting from
pollution that occurs at the efficient output of the good.
C. decrease pollution to zero.
D. increase the supply of polluting goods.
Answer:
If the elasticity of demand for restaurant meals is 2.27, the demand for restaurant meals
is:
A. elastic.
B. inelastic.
C. unit elastic.
D. perfectly inelastic.
Answer:
In the 1700s and 1800s:
A. labor laws were passed to protect workers from job-related injuries.
B. labor laws were passes to prevent child labor.
C. the invisible hand was free to push wage rates down to subsistence levels.
D. the invisible hand was prevented from pushing wage rates down to subsistence
levels.
Answer:
More and more devices are being introduced in the market that perform tasks similar to
that of PCs, such as tablets and smartphones. At the same time, the price of computer
chips to make high-end PCs continues to fall. What is the effect of the events on
equilibrium price and quantity of high-end PCs?
A. Price falls continuously as does quantity sold
B. Price rises then falls while quantity sold falls continuously
C. Price falls continuously while quantity falls initially but then rises, recouping earlier
losses
D. Price falls continuously and quantity rises continuously
Answer:
When the labor supply curve is inelastic:
A. the percentage change in the quantity of labor supplied exceeds the percentage
change in the wage.
B. the percentage change in the quantity of labor supplied is less than the percentage
change in the wage.
C. the percentage change in the quantity of labor supplied equals the percentage change
in the wage.
D. employers cannot lower wages without losing all their workers.
Answer:
When wages rise, the opportunity cost of:
A. labor falls.
B. labor rises.
C. leisure falls.
D. leisure rises.
Answer:
The marginal cost curve:
A. first rises and then declines.
B. rises when the average total cost curve lies above the average variable cost curve.
C. rises when the point of diminishing marginal productivity is reached.
D. declines until average total cost increases.
Answer:
Suppose that at the current price consumers would like to purchase 10 million
large-screen televisions and 15 million are available. When the market coordinates the
demand and supply for large-screen televisions, the price of large-screen televisions
will:
A. rise.
B. fall.
C. stay the same.
D. be fixed by the government.
Answer:
Short-run decisions are:
A. constrained because all inputs are variable.
B. constrained because all inputs are fixed.
C. constrained because some inputs are fixed and others are variable.
D. unconstrained.
Answer:
Kuo S. Huang estimates that with every 20 percent increase in income, the quantity of
grapes purchased rises by 11.2 percent. From this information one would conclude that
grapes are:
A. a luxury.
B. not demanded.
C. an inferior good.
D. a normal good.
Answer:
What is true about the following payoff matrix?
A. Only player A has a dominant strategy.
B. Only player B has a dominant strategy.
C. Both player A and player B have dominant strategies.
D. Neither player A nor player B has a dominant strategy.
Answer:
Refer to the graphs shown. Higher costs of production combined with an expectation on
the part of consumers of higher prices in the future would result in the shifts depicted
in:
A. a.
B. b.
C. c.
D. d.
Answer:
Technological changes in telecommunications have:
A. reduced the importance of services in the world economy.
B. allowed increased foreign trade in many services.
C. reduced the need for foreign trade in many services.
D. profoundly affected trade in manufactured goods with little effect on trade in
services.
Answer:
Refer to the graph above. If product demand increases from D1 to D2, causing the
product price to increase, firm A (a supplier of this product) will:
A. pay a higher wage rate and reduce employment from q2 to q1.
B. pay a lower wage rate and increase employment from q3 to q4.
C. increase employment because its MRP curve will shift rightward.
D. decrease employment because its MRP curve will shift leftward.
Answer:
If a consumer is willing to pay $100 for a used Blu-ray player that is a “cherry” and $30
for a used Blu-ray player that is a “lemon,” the consumer will offer:
A. $30 for any used Blu-ray player even if the probability that it is a “lemon” is 50
percent.
B. $100 for any used Blu-ray player even if the probability that is a “cherry” is 50
percent.
C. $65 for any used Blu-ray player if the probability that it is a “lemon” is 50 percent.
D. $130 for any used Blu-ray player if the probability that it is a “cherry” is 50 percent.
Answer:
Stricter environmental regulations and increased demand for energy have caused an
increase in the demand for relatively clean natural gas. In the last several years,
improved extraction technologies and new discoveries have increased the availability of
natural gas. What has been the net effect on price and quantity for natural gas?
A. Quantity sold and price both fell with certainty.
B. Quantity sold fell and the effect on price is ambiguous.
C. Quantity sold and price both rose with certainty.
D. Quantity sold rose while the effect on price is ambiguous.
Answer:
Public television periodically runs pledge drives to raise money. Only a small
percentage of the people who benefit from public television are willing to pay. This low
percentage of people willing to contribute illustrates a difficulty with:
A. government regulation.
B. voluntary programs.
C. tax incentive policies.
D. market incentive programs.
Answer:
Suppose a lazy monopolist’s fixed costs are higher than the fixed costs of an efficient
monopolist. In all other respects the monopolists are the same. Which of the following
statements about this lazy monopolist is true?
A. It charges a higher price than the monopolist producing efficiently.
B. It charges a lower price than the monopolist producing efficiently.
C. It produces fewer goods than the monopolist producing efficiently.
D. It sets price and quantity the same as the monopolist producing efficiently.
Answer:
The term efficiency involves achieving a goal as:
A. quickly as possible.
B. cheaply as possible.
C. well as possible.
D. steadily as possible.
Answer:
Refer to the graph shown. The marginal rate of substitution at point C is:
A. 2/3.
B. 1.
C. 1.5.
D. impossible to determine with the information given.
Answer:
Suppose that the following table shows the supply and demand schedules for Arabian
light crude oil on the free market:
Given the information in the table, the only price at which there is neither shortage nor
surplus is:
A. $26 per barrel.
B. $27 per barrel.
C. $28 per barrel.
D. $29 per barrel.
Answer:
The marginal revenue product of an input tends to decrease as:
A. the price of output increases.
B. more of the input is used.
C. the price of the input decreases.
D. productivity increases.
Answer:
Refer to the graph shown. The graph demonstrates Saudi Arabia’s and the United States’
production possibility curves for widgets and wadgets. Given these production
possibility curves, you would suggest that:
A. Saudi Arabia specialize in widgets and the United States in wadgets.
B. No trade should take place.
C. Saudi Arabia specialize in wadgets and the United States in widgets.
D. Both countries should produce an equal amount of each.
Answer:
Refer to the graph shown. A firm that produces 900 units of output using the plant size
associated with SATC3 minimizes:
A. both long-run and short-run average total cost.
B. long-run average total cost only.
C. short-run average total cost only.
D. neither long-run nor short-run average total cost.
Answer:
For a given benefit, a rational person chooses the option that has:
A. the lowest opportunity cost.
B. the highest opportunity cost.
C. the average opportunity cost.
D. no opportunity cost.
Answer:
Suppose the demand for margarine increases from 800 to 1,000 pounds when income
falls from $40,000 to 30,000. Income elasticity is:
A. 0.02.
B. 50.
C. -0.77.
D. 0.77.
Answer:
Suppose you paid $300 to take this economics course, which meets 30 times for one
hour a class during the course of the semester. Instead of attending class you could have
either flipped hamburgers for $8 an hour or waited tables for $5 an hour. Given this
information, the opportunity cost of attending each class session is:
A. $30.
B. $8.
C. $5.
D. $13.
Answer:
In the factor market:
A. households supply factors of production to business and are paid by business for
doing so.
B. households supply factors of production to business and are paid by government for
doing so.
C. business produces goods and services and sells them to households and government.
D. government produces goods and services and supplies them to households and
business.
Answer:
Suppose that the market labor supply and labor demand equations are given by Qs =
5W and Qd = 30 – 5W. If a minimum wage is set at $4.00 (W = 4), then:
A. 15 workers will be supplied and demanded.
B. 20 workers will be supplied and demanded.
C. 20 workers will be supplied, but only 10 workers will be demanded.
D. 10 workers will be supplied, but 20 workers will be demanded.
Answer:
The two economic groups competing for power during the transition from mercantilism
to capitalism were:
A. craft guilds and industrialists.
B. serfs and craft guilds.
C. craft guilds and the lords of the manor.
D. merchants and the lords of the manor.
Answer: