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1) Assume that the graphs show a competitive market for the product stated in the
question.
Select the graph above that best shows the change in the market specified in the
following situation: In the market for leather coats, when leather coats become more
fashionable among young consumers.
A.Graph A
B.Graph B
C.Graph C
D.Graph D
2) Assume in a competitive market that price is initially below the equilibrium level. We
can predict that price will:
A.decrease, quantity demanded will decrease, and quantity supplied will increase.
B.decrease and quantity demanded and quantity supplied will both decrease.
C.increase, quantity demanded will increase, and quantity supplied will decrease.
D.increase, quantity demanded will decrease, and quantity supplied will increase.
3) The basic argument for income inequality is that:
A.the very rich establish consumption patterns that are desirable for the rest of society
to emulate.
B.the rich buy luxury goods that soon become affordable to everyone else because of
economies of scale.
C.income inequality is essential to maintain incentives to produce.
D.inequality undermines incentives and tends to reduce the size of the national income.
4) Over time, technological change has:
A.reduced both the price elasticity and income elasticity of the demand for farm
products.
B.reduced the minimum efficient scale of production in agriculture and increased the
prices of farm products.
C.increased both price elasticity and income elasticity of the demand for farm products.
D.increased the minimum efficient scale of production in agriculture and reduced the
prices of farm products.
5) The purchase of a British Rolls-Royce by a U.S. citizen would result in all of the
following except a(n):
A.Supply of payments to England
B.Sale of dollars and the purchase of British pounds
C.Increase in imports to the United States
D.Gain of foreign exchange for the United States
6) The H1-B provision of immigration law:
A.allows 65,000 high-skilled workers in specialty occupations to enter and work in the
United States for six years.
B.raised U.S. annual immigration quotas from 500,000 to 700,000.
C.established a lottery for the admission of diversity immigrants into the United States.
D.provided amnesty to over one million illegal immigrants in 1989-1991, allowing
them to become legal citizens of the United States.
7) For the music industry, the rise of Internet file-sharing of music has:
A.Worsened the free-rider problem
B.Diminished or alleviated the free-rider problem
C.Reduced the options for musicians to have their music heard
D.Eliminated the problem of digital piracy
8) Compared to pure competition, monopolistic competition:
A.Provides greater product differentiation at the cost of some excess capacity
B.Offers less product differentiation but attains equal productive efficiency
C.Provides greater product differentiation and achieves greater productive efficiency
D.Offers less product differentiation and lower productive efficiency
9) What is the problem with saving in DVCs, even when saving as a percentage of
domestic output is the same as in industrially advanced countries?
A.The interest rate paid on money kept in a bank in DVCs is not as high as the interest
rate on money kept in a bank in an IAC
B.Capital flight reduces investment opportunities and the need for saving in DVCs
C.There is a continual brain drain that removes skilled labor from the work force and
reduces labor productivity and the need for saving
D.The domestic output of DVCs is so low that the absolute volume of saving is small
10) A profit-maximizing firm should hire an input as long as the:
A.Firm can increase its total revenue
B.Price of the input doesn't exceed the price of the other inputs used in the firm's
production
C.Marginal revenue product of the input is at least as much as the cost of hiring the
input
D.Marginal revenue product of the input is greater than the marginal revenue product of
other inputs the firm is using
11) Sam decides to join the Gigantic State University's rugby team when he learns that
his health insurance will pay for any subsequent injury. This illustrates:
A.the diagnosis-related-group system.
B.a "pay or play" system.
C.the moral hazard problem.
D.the Coase theorem.
12) There is some evidence to suggest that X-inefficiency is:
A.absent whenever two or more producers are competing with one another.
B.not encountered in either competitive or monopolistic firms.
C.more likely to occur in monopolistic firms than in competitive firms.
D.more likely to occur in competitive firms than in monopolistic firms.
13)
Refer to the diagram, which shows demand and supply conditions in the competitive
market for product X. A shift in the demand curve from D0 to D1 might be caused by
a(n):
A.decrease in income if X is an inferior good.
B.increase in the price of complementary good Y.
C.increase in money incomes if X is a normal good.
D.increase in the price of substitute product Y.
14) An economic system:
A.requires a grouping of private markets linked to one another.
B.is a particular set of institutional arrangements and a coordinating mechanism used to
respond to the economizing problem.
C.requires some sort of centralized authority (such as government) to coordinate
economic activity.
D.is a plan or scheme that allows a firm to make money at some other firm's expense.
15) An example of a government organization involved primarily in public regulation or
industrial regulation of natural monopolies would be the:
A.Food and Drug Administration
B.Environmental Protection Agency
C.Federal Energy Regulatory Commission
D.Occupational Safety and Health Administration
