1) The exchange rate system that we now have for major currencies like the U.S. dollar,
yen, and euro is a “managed-floating” system.
2) The short-run supply curve of a purely competitive industry tends to be steeper than
the long-run supply curve.
3) The optimal quantity of a public good occurs where the marginal benefit of the
citizen who has the highest preference for the good just equals the good’s marginal cost.
4) Oligopolists use limit pricing to maximize short-run profits.
5) The price of chicken = 5 while the price of pork = 9. If, after spending her entire
budget, the consumer has MU of chicken = 6 while the MU of pork = 12, then the
consumer should have bought more chicken and less pork in order to increase his total
utility.
6) NAFTA is a trade agreement that covers trade between the United States and the
European Union.
7) A homogeneous oligopoly means that the few firms in the industry have identical
cost and demand curves.
8) Faster economic growth in the United States relative to other nations tends to worsen
the U.S. trade deficit.
9) Nash equilibriums can exist even in games that lack dominant strategies.
10) “Backflows” are payments made by immigrants back to their home countries.
11) Differences in skills or ability are one major reason for income differences in the
United States.
12) In the U.S., the top 20% of households received a little more than 50% of total
pre-tax income in 2011.
13) The health care industry includes the manufacture and sale of low-fat food.
14) The adverse selection problem is the tendency for insured drivers to drive
recklessly.
15)
In the graph above:
S0 = supply curve for bourbon (seller’s supply)
D = demand curve for bourbon
St = supply for bourbon plus excise tax on bourbon
(effective supply as seen by buyers)
tax = an excise tax on bourbon (of $20 per case)
The excise tax on bourbon as described in the diagram is ultimately paid:
A.By buyers only
B.By sellers only
C.40 percent by buyers and 60 percent by sellers
D.60 percent by buyers and 40 percent by sellers
16) According to economist Donald Boudreaux:
A.private property eliminates the possibility that resource arrangements will be random.
B.the market system threatens to do irreparable harm to the world’s ecosystem.
C.arranging resources under the market system is much like shuffling a deck of cards.
D.the market system works wondrously for advanced industrial nations but not for
developing nations.
17) Where there are spillover (or external) benefits from having a particular product in a
society, the government can make the quantity of the product approach the socially
optimal level by doing the following except:
A.Subsiding the buyers of the product
B.Taxing the sellers of the product
C.Subsidizing the sellers of the product
D.Providing the product itself
18)
Given the indifference curve and budget line above, this individual:
A.Prefers B to A, but B costs more
B.Prefers B to A, and they cost the same
C.Is indifferent between A and B, but A costs less
D.Is indifferent between A and B, and they cost the same
19) If a positive relationship exists between x and y:
A.an increase in x will cause y to decrease.
B.a decrease in x will cause y to increase.
C.the relationship will graph as an upsloping line.
D.the vertical intercept must be positive.
20)
Refer to the above graph for the labor market. The government decides to impose a
wage tax as shown on the graph. The result is that:
A.More workers enter the labor market due to the higher wage rate being paid
B.The employers and laborers will split the tax evenly, each paying $.25 to the
government
C.The wage received by laborers will rise to $5.40 and the labor cost to employers will
fall to $4.90
D.The wage received by laborers will fall to $4.90 and the labor cost to employers will
rise to $5.40
21) As a percentage of GDP, health care spending in the United States has:
A.decreased substantially since 1960
B.increased slightly since 1960
C.increased substantially since 1960
D.remained relatively constant since 1960
22) An unregulated pure monopolist will maximize profits by producing that output at
which:
A.P = MC.
B.P = ATC.
C.MR = MC.
D.MC = AC.
23) The threat of rejection in market transactions:
A.leads to higher prices as sellers try to cover possible losses.
B.leads to better products and lower prices for consumers.
C.leads to less cooperation between buyers and sellers.
D.does all of these.
24) Which of the following best illustrates the post hoc, ergo propter hoc fallacy?
A.Because it was 90 degrees today, I worked up a sweat playing tennis.
B.I took the day off work to go to the beach and that’s why it rained.
C.Because it rained at the football game, my new sweater got wet.
D.Because I have studied diligently this semester, my grade average has improved.
25)
Refer to the above graph of the representative firm in monopolistic competition. Excess
capacity for this firm would be illustrated by the quantity:
A.D – 0
B.E – C
C.E – D
D.D – C
26)
Refer to the diagram. If the supply of loanable funds is S0 and the demand for loanable
funds is D0, the equilibrium interest rate and quantity of funds borrowed will be:
A.G and A.
B.F and A.
C.F and C.
D.E and A.
27) A market for a product reaches equilibrium when:
A.The actual quantity bought by buyers equals actual quantity sold by sellers
B.The price rises further after there is a surplus
C.Buyers intend to buy a quantity equal to the quantity that sellers intend to sell
D.Price falls further after there is a shortage
28) Which of the following is true about U.S. energy consumption and per capita real
GDP since 1988?
A.Per capita energy consumption and per capita real GDP have both risen.
B.Per capita consumption of energy has been relatively constant, while per capita real
GDP has risen.
C.Per capita energy consumption and per capita real GDP have both fallen.
D.Per capita energy consumption has fallen, while per capita real GDP has risen.
29) What are three qualifications to the view that allocative and productive efficiency
are not realized in oligopoly?
30) What is the difference between social insurance and public assistance in income
maintenance programs? What are examples of each type of government program?
31) What are some complications and modifications of the simple model of
immigration and its conclusions about wage rates, domestic output, and business
incomes in a poorer nation and a richer nation?
32) How has the European Union benefited member nations?
33) Answer the following question on the basis of the following diagram which shows
the effects of a union-negotiated wage level Wu on a portion of a labor market which
now has two sectors: union and nonunion.
34) Discuss private-sector risks and the role government intervention has in improving
economic efficiency.
35) The Freedom to Farm Act of 1996 was supposed to get the government out of
agriculture. So, why was emergency aid been given to farmers?
36) Discuss how trade policies can be used to maintain a fixed exchange rate.
37) Explain the phenomenon of anchoring and give an example of it based on a student
receiving a good grade on a test and a resulting consumer purchase.
38) Describe the collective action problem as it applies to mohair.