1) The concept of limited and bundled choice, as used in public choice theory, refers to
the fact that:
A.Politicians may not be objective in evaluating economic policy programs
B.Because of the importance of television and other modern communication
techniques, the best and brightest candidates may not be selected by voters
C.In an election, voters must select a candidate who has various preferences in a wide
array of issues
D.The most economically efficient public policy programs may not be selected because
political leaders do not know enough about economics
2) The Freedom to Farm Act of 1996 was designed to encourage farmers to:
A.Seek more subsidies from government
B.Plant more corn and less soybeans
C.Plant more wheat and less corn
D.Respond to market prices
3) Studies show that:
A.it is impossible to estimate the benefits of trade barriers.
B.costs and benefits of trade barriers are about equal.
C.benefits of trade barriers exceed their costs in developing nations.
D.costs of trade barriers exceed their benefits, creating an efficiency loss for society.
4) The public (or national) debt refers to the:
A.Same thing as a budget deficit
B.Deadweight loss in a market
C.Accumulation of all past budget deficits
D.Sum of all the debts of households and businesses
5) Over the next 15 years, what percentage of the world population increase will come
from DVCs?
A.25%
B.50%
C.70%
D.90%
6) One major consequence of the framing effect is that:
A.People may spend more to insure themselves against rare events, but leave
themselves uninsured against more common events
B.Someone could persist in pursuing a failed policy despite overwhelming evidence of
the failure
C.Major business projects may create bottlenecks in the organization because they are
not completed as scheduled
D.Decision-makers may make faulty decisions if they are lulled by the environment in
which they are making their decisions
7)
Refer to the diagram, where Sd and Dd are the domestic supply and demand for a
product and Pc is the world price of that product. Sd + Q is the product supply curve
after an import quota is imposed. A tariff of PcPt will:
A.lower domestic price and increase domestic consumption.
B.increase the revenues of domestic producers by areas E + F + K.
C.increase the revenues of domestic producers by areas G + H.
D.increase the revenues of domestic producers by areas E + F + G + H + J.
8) Which of the following is a true statement?
A.Direct foreign investment to DVCs is increasingly provided by commercial banks.
B.Direct foreign investment to DVCs has dwindled to near zero in recent years.
C.Approximately 5 percent of the GDP of IACs goes to foreign aid.
D.Foreign aid from the IACs to the DVCs has greatly expanded in the past several
years.
9) In the space below each of the following, indicate the effect [increase (+), decrease
(-)] on equilibrium price (P) and equilibrium quantity (Q) of each of these changes in
demand and/or supply.
P Q
(a) Increase in demand, supply constant ________ ________
(b) Increase in supply, demand constant ________ ________
(c) Decrease in demand, supply constant ________ ________
(d) Decrease in supply, demand constant ________ ________
10) The lack of an entrepreneurial class in developing nations tends to:
A.Keep workers from migrating to cities from rural areas
B.Reduce the level of capital investment
C.Force the need for land reform
D.Keep governments stable
11) Which of the following is incorrect? Imperfectly competitive producers:
A.face downsloping demand curves.
B.do not compete with one another.
C.can alter their output by changing price.
D.find that, when they reduce price, their total revenue increases by less than the new
price.
12) Answer the question on the basis of the following domestic supply and demand
schedules for a product. Suppose that the world price of the product is $1.
Refer to the given data. If the economy was opened to free trade and the world price of
$1 prevailed, the price and quantity sold of this product would be:
A.$1 and 1 unit.
B.$1 and 16 units.
C.$3 and 7 units.
D.$2 and 11 units.
13) Assume six firms comprising an industry have market shares of 30, 30, 10, 10, 10,
and 10 percent. The Herfindahl index for this industry is:
A.2,000
B.1,600
C.2,200
D.80
14)
Refer to the diagram. Suppose that point y represents the optimal combination of
civilian goods and defense goods. We can conclude that at y the marginal benefit of
defense goods:
A.exceeds the marginal cost of defense goods.
B.equals the marginal cost of defense goods.
C.is zero.
D.is negative.
15) If a firm wanted to know how much it would save by producing one less unit of
output, it would look to:
A.MC.
B.ATC.
C.AVC.
D.AFC.
16) “The Case of ATMs” best illustrates the:
A.law of diminishing marginal utility.
B.the substitutability of resources.
C.idea of derived demand.
D.principle of unintended side-effects.
17) A nation’s annual balance of payments statement must always balance because:
A.A nation’s imports are limited to the value of its exports
B.A nation’s exports and imports are always paid with dollars
C.All international transactions must be settled in one way or another
D.A trade deficit must be matched by an equal surplus of investment income
18) Tying contracts are illegal under the:
A.Wagner Act of 1935.
B.Clayton Act of 1914.
C.FTC Act of 1914.
D.Celler-Kefauver Act of 1950.