1) According to prospect theory, firms are more likely to shrink packages than raise
prices because:
A.consumers feel the loss of a price increase more than they feel the loss of buying a
smaller package for their money.
B.they don’t understand that consumers recognize price increases easily, regardless of
what form they take.
C.consumers associate smaller packages with higher quality luxury goods.
D.consumers are generally trying to downsize their purchases and lead simpler lives.
2) Unlike a private good, a public good:
A.has no opportunity costs.
B.has benefits available to all, including nonpayers.
C.produces no positive or negative externalities.
D.is characterized by rivalry and excludability.
3) Answer the question based on the following data.
Refer to the above data. What is the price elasticity of demand over the range of $8 to
$10?
A.0.11
B.0.47
C.1.93
D.1.43
4) When the price of a product rises, consumers with a given money income shift their
purchases to other products whose prices are now relatively lower. This statement
describes:
A.an inferior good.
B.the rationing function of prices.
C.the substitution effect.
D.the income effect.
5) Answer the question on the basis of the following information about the cost ratios
for two productsfish (F) and chicken (C)in countries Singsong and Harmony. Assume
that production occurs under conditions of constant costs and these are the only two
nations in the world.
Singsong: 1F = 2C
Harmony: 1F = 4C
Refer to the given information. Which one of the following would not be feasible terms
for trade between Singsong and Harmony?
A.1 fish for 2 chicken
B.1 fish for 3 chicken
C.1 chicken for 1/5 of a fish
D.1 chicken for 1/3 of a fish
6) Price-fixing is considered to be a per se violation of the antitrust laws because:
A.a guilty verdict requires proof of injury to consumers.
B.a guilty verdict requires proof of injury to other competitors.
C.the rule of reason is applicable.
D.a guilty verdict need only show that there was a conspiracy to fix prices, not that it
succeeded.
7) Specialization in production is important primarily because it:
A.results in greater total output.
B.allows society to avoid the coincidence-of-wants problem.
C.allows society to trade by barter.
D.allows society to have fewer capital goods.
8)
Refer to the labor market diagram where D is the labor demand curve, S is the labor
supply curve, and MRC is the marginal resource (labor) cost curve. If an inclusive
union was formed and was able to get the monopsonist to agree to a $7 wage rate, then
the monopsonist would:
A.reduce employment from 5 to 3 workers.
B.reduce employment from 5 to 2 workers.
C.increase employment from 3 to 5 workers.
D.not alter its level of employment.
9) A budget line is a graph that shows the various combinations of two products that a:
A.Consumer can buy with a given amount of money income
B.Business firm can produce with a given budget
C.Household can produce with a given amount of resources
D.Nation can trade with another nation
10) Two resource inputs, capital and labor, are complementary and used in fixed
proportions. An increase in the price of capital will:
A.Increase the demand for labor
B.Decrease the demand for labor
C.Decrease the quantity demanded for labor
D.Have no effect because the relationship is fixed
11)
Which of the diagrams illustrate(s) the effect of a decrease in incomes on the market for
secondhand clothing?
A.A and C.
B.A only.
C.B only.
D.C only.
12)
Refer to the diagram. This firm’s average fixed costs are:
A.not shown.
B.the vertical distance between AVC and MC.
C.the vertical distance between AVC and ATC.
D.equal to the per unit change in MC.
13) Entrepreneurs differ from other innovators because they:
A.Are more inventive
B.Bear personal financial risk
C.Have better management skills
D.Have the capacity to work in teams
14) Suppose a salsa manufacturers sells 1 million bottles of salsa at $4 a bottle in year
1; 2 million bottles at $5 in year 2; and 3 million bottles at $6 in year 3. Do these data
show that the law of demand does not hold? Explain.
15) Define and illustrate noncompeting groups and compensating differences.
16) Describe the main characteristics of direct foreign aid from IACs to DVCs.
17) What are four characteristics of pure competition?
18) What are the major arguments in the case for income inequality?
19) A consumer makes purchases of an existing product A such that the marginal utility
is 40 and the price is $20. The consumer also tries a new product B and at the current
level of consumption it has a marginal utility of 72 and a price of $24. What does the
utility-maximizing rule suggest that this consumer should do?