1)
Assume that if the interest rate that businesses must pay to borrow funds were 20
percent, it would be unprofitable for businesses to invest in new machinery and
equipment, so investment would be zero. But if the interest rate were 16 percent,
businesses would find it profitable to invest $10 billion. If the interest rate were 12
percent, $20 billion would be invested. Assume that total investment continues to
increase by $10 billion for each successive 4 percentage point decline in the interest
rate. Refer to the graph. Which of the following is the correct graphical presentation of
the indicated relationship?
A.Line D.
B.Line C.
C.Line B.
D.Line A.
2) The percentage of total before-tax household income received by the lowest 20% of
households in 2011 was about ____ percent, while the top 20% received about ___
percent.
A.1; 30
B.3; 50
C.8; 60
D.12; 40
3) Because the demand for food is relatively price-inelastic, what effects would you
expect to see as a result of technological advances that reduce the cost of food
production?
A.Food prices would rise, but farm incomes would decline
B.Food prices would rise and farm incomes would rise
C.Food prices would decline and farm incomes would decline
D.Food prices would decline, but farm incomes would rise
4) The term “laissez-faire” suggests that:
A.land and other natural resources should be privately owned, but capital should be
publicly owned.
B.land and other natural resources should be publicly owned, but capital should be
privately owned.
C.government should not interfere with the operation of the economy.
D.government action is absolutely necessary if the economy is to achieve full
employment and full production.
5)
Refer to the diagram for a nondiscriminating monopolist. Marginal revenue will be zero
at output:
A.q1.
B.q2.
C.q3.
D.q4.
6)
Refer to the above graph showing the marginal product (MPL) and the average product
of labor (APL). At which quantity of labor employed is total product maximized?
A.A
B.B
C.C
D.D
7) A change in the slope of a budget line is solely the result of a change in:
A.consumer preferences.
B.the price of one good relative to the other.
C.money income.
D.the slope of the indifference curve that is tangent to the budget line.
8) Answer the question based on the following payoff matrices for a repeated game
involving two firms that are considering introducing new products to the market. The
numbers indicate the profit from following either a strategy to introduce a new product
or a strategy to not introduce a new product.
First game:
Second game:
Refer to the above table. In the first game, if firm B doesn’t introduce a new product and
firm A does, then firm A would be better off if:
A.Both firms introduce new products in game 2
B.Neither firm introduces new products in game 2
C.Firm B reciprocates in game 2
D.Game 2 reaches a Nash equilibrium
9)
Refer to the above graph which shows the supply and demand for unionized
manufacturing workers. The initial equilibrium point is point 1. The wages paid in
comparable nonunion occupations increase significantly, while at the same time the
price of manufactured goods increases. Which point would represent the new
equilibrium?
A.2
B.3
C.4
D.5
10) Some behavioral economists explain the so-called “endowment effect” to be a
consequence of people’s tendency to:
A.Feel gains more intensely than losses
B.Feel losses more intensely than gains
C.Focus mentally on a recently-viewed number
D.Feel strongly about fairness and generosity
11) The marginal cost curve is:
A.upsloping because of increasing marginal opportunity costs.
B.upsloping because successive units of a specific product yield less and less extra
utility.
C.downsloping because of increasing marginal opportunity costs.
D.downsloping because successive units of a specific product yield less and less extra
utility.
12) Over the past several decades, farm employment has:
A.grown absolutely but declined as a percentage of total employment.
B.declined both absolutely and as a percentage of total employment.
C.increased both absolutely and as a percentage of total employment.
D.declined absolutely but increased as a percentage of total employment.
13)
Refer to the above graphs. (Assume that the pre-migration labor force in Country A is 0d
and that it is 0u in country B.) The migration of labor from low-income country B to
high-income country A will:
A.Increase wages in country A and decrease wages in country B
B.Decrease wages in country A and decrease wages in country B
C.Decrease wages in country A and increase wages in country B
D.Increase wages in country A and increase wages in country B
14)
Refer to the diagram. Land:
A.will cease to be used in production if demand falls below D4.
B.would be a free resource if demand is D4 or less.
C.would be an economic (scarce) resource in the case of all four demand curves.
D.would be a free resource in the case of all four demand curves.
15)
Refer to the above graph. Suppose that a competitive firm in long-run equilibrium along
MRP2 faces a market wage rate of W0. If the price of the firm’s product increases, other
things remaining the same, the effect of this change in price would be to:
A.Increase the firm’s demand for labor from MRP2 to MRP3
B.Decrease the firm’s demand for labor from MRP2 to MRP1
C.Move along MRP2 from point A to point B
D.Move along MRP2 from point B to point A
16) In the following question you are asked to determine, other things equal, the effects
of a given change in a determinant of demand or supply for product X upon (1) the
demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the
equilibrium quantity (Q) of X.
Refer to the given information. An increase in the price of a product that is a
complement to X will:
A.decrease S, decrease P, and decrease Q.
B.decrease D, decrease P, and decrease Q.
C.increase D, increase P, and increase Q.
D.increase D, increase P, and decrease Q.
17)
Refer to the diagram. At P2, this firm will:
A.produce 44 units and realize an economic profit.
B.produce 44 units and earn only a normal profit.
C.produce 68 units and earn only a normal profit.
D.shut down in the short run.
18) Which of the following is not a characteristic of pure competition?
A.Price strategies by firms.
B.A standardized product.
C.No barriers to entry.
D.A larger number of sellers.