1) During the past thirty-five years or so, the degree of income inequality in the United
States has decreased considerably.
2) The entrepreneur’s sole function is to combine other resources (land, labor, and
capital) in the production of some good or service.
3) It is possible that as a result of the budget line shifting outwards, the consumer will
buy less of a product.
4) If the representative firm in a monopolistically competitive industry has an optimal
output where P< ATC, the industry will expand in the long run.
5) The quantity of loanable funds supplied is inversely related to the interest rate.
6) The highest possible value of the Herfindahl index is 1,000.
7) Pure competition results in a lower price but identical output level compared to those
in monopolistic competition.
8) Cross elasticity of demand measures the effect of a change in the price of one
product on the quantity demanded of another product.
9) Society’s marginal cost of pollution abatement curve slopes upward because of the
law of diminishing marginal utility.
10) The monopolistic competition model assumes that:
A.allocative efficiency will be achieved.
B.productive efficiency will be achieved.
C.firms will engage in nonprice competition.
D.firms will realize economic profits in the long run.
11)
Refer to the diagrams, which pertain to monopolistically competitive firms. A short-run
equilibrium entailing economic profits is shown by:
A.diagram a only.
B.diagram b only.
C.diagram c only.
D.both diagrams b and c.
12) Which of the following statements about state lotteries is false?
A.State lotteries are monopolies, with competing private lotteries banned
B.State lotteries are highly controversial, with critics and defenders still debating their
merits
C.Less than half of the states in the U.S. have state lotteries because of their
controversial nature
D.The payout rates of state lotteries are substantially lower than in private betting
operations like casinos
13) When voters have different opinions about an issue, the position that is most likely
to be adopted is that of the:
A.Lobbyist
B.Logroller
C.Rent-seeker
D.Median voter
14) Assume that, under a system of floating exchange rates, Mexicans decide to
increase their investments in the United States. As a result:
A.the peso and the dollar will both depreciate.
B.the peso and the dollar will both appreciate.
C.the peso will depreciate and the dollar will appreciate.
D.the peso will appreciate and the dollar will depreciate.
15) 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 income, if X is a normal good, will:
A.increase D, increase P, and increase Q.
B.increase D, increase P, and decrease Q.
C.increase S, increase P, and increase Q.
D.decrease D, increase P, and increase Q.
16) Given the products below and the events that affect them, indicate what happens to
demand, supply, equilibrium quantity, and equilibrium price in a competitive market.
Identify the determinant of demand and supply that causes the shifts.
(a)Home heating oil. There is a severe winter in the regions using the oil; the cost of a
barrel of oil rises for producers of home heating oil.
(b)Organic foods. People become more concerned about chemical additives in food;
traditional farms are switching to more organic methods.
(c)Film cameras. The price of digital cameras falls for consumers; there is a decline in
the number of stores selling film cameras.
(d)Bread. Many consumers adopt a low carbohydrate diet and avoid bread products; the
price of flour falls for bread producers.
17) According to the Consider This box on catfish and art, which of the following firms
were convicted of price-fixing?
A.Dell and Gateway (personal computer makers).
B.Boeing and Airbus (aircraft manufacturers).
C.Heinz and Del Monte (food product firms).
D.Sotheby’s and Christie’s (art auction houses).
18) Answer the question based on the following table which shows a demand schedule.
Refer to the table above. At a price of $3, the total revenues of sellers will be:
A.$18
B.$12
C.$45
D.$5
19) In the past several decades, U.S. health care expenditures have:
A.risen absolutely but declined as a percentage of GDP.
B.declined absolutely but risen as a percentage of GDP.
C.risen absolutely and as a percentage of GDP.
D.declined absolutely and as a percentage of GDP.
20) A nation will neither export nor import a specific product when its:
A.domestic price equals the world price.
B.export supply curve lies above its import demand curve.
C.export supply curve is upsloping.
D.import demand curve is downsloping.
21) Answer the question on the basis of the following table that shows the total costs
and total benefits facing a city of five different potential baseball stadiums of increasing
size. All figures are in millions of dollars.
Refer to the table. Based on cost-benefit analysis, the city should:
A.not build any of these stadiums.
B.build stadium E.
C.build stadium C.
D.build stadium D.
22) The main function of the entrepreneur is to:
A.make routine pricing decisions.
B.innovate.
C.purchase capital.
D.create market demand.
23) Which of the following pairs are not considered to be complementary goods?
A.Steel and cars
B.Digital cameras and memory cards
C.Gasoline and motor oil
D.Fertilizer and irrigation systems
24) The equilibrium point in the market is where S and D curve intersect.
Refer to the graph above. At equilibrium, the producer surplus would be represented by
the area:
A.b
B.b + c
C.a + b
D.b + c + d
25) Explain how a nation might persistently import more than it exports and still
maintain an equilibrium in its balance of payments.
26) Indicate whether the inputs below are variable (V) or fixed (F) in the short run.
27) When does the marginal rate of substitution (MRS) in an indifference curve equal
the ratio of marginal utilities in marginal-utility analysis? Explain.
28) Describe the graph for a long-run supply curve in an increasing-cost industry. Why
does it have this slope?
29) A perfectly competitive firm in the factor and product markets sells its output for $1
and pays factors PL = $9 and Pc = $12. What is the profit-maximizing combination of
labor (L) and capital (C) for the firm?
The firm would employ 5 units of labor and 3 units of capital to maximize profit.