1) The long-run supply curve for a decreasing-cost industry is downsloping.
2) Hiring the profit-maximizing combination of resources ensures that production costs
will be minimized.
3) Prospect theory and the work of behavioral economists confirm that consumers are
economically rational.
4) One of the causes of the rising trade deficits of the past decade has been a declining
saving rate in the United States.
5) If the demand for labor in a country receiving immigrants is inelastic, the
immigration will increase the total wages paid in that country.
6) The marginal productivity theory of income distribution holds that all resources are
paid according to their marginal contribution to society’s output.
7) If consumers are convinced by ads that Brand X has a lot more value than they
originally thought, then the MU/P of X will decrease.
8) The following question is based on the demand and cost data for a pure monopolist
given in the table below.
Refer to the above table for a monopolist. A non-discriminating monopolist would
maximize profits at a price and quantity of:
A.$250 and 2 units
B.$200 and 3 units
C.$150 and 4 units
D.$100 and 5 units
9) What is most likely to happen as the output of a natural monopoly increases over the
range of market demand?
A.There is a small decrease in average total cost and then it increases as output
increases
B.There is an increase in average total cost and then it decreases as output increases
C.Average total cost increases as output increases
D.Average total cost decreases as output increases
10) Describe the flows that occur between (a) households and the product market, (b)
businesses and the product market, and (c) households and the resource market.
11) The value today of a specific sum of money to be received in the future is referred
to as:
A.the future value of that sum of money.
B.the present value of that sum of money.
C.compound interest.
D.the time-value of money.
12) If the market price is above the equilibrium price:
A.A shortage will occur and producers will produce more and lower prices
B.A surplus will occur and producers will produce less and lower prices
C.A surplus will result and consumers will bid prices up
D.Producers will make extremely high profits
13) French and German farmers wanting to buy equipment from an American
manufacturer based in the U.S. will be:
A.Supplying dollars and also supplying euros in the foreign exchange market
B.Demanding dollars and also demanding euros in the foreign exchange market
C.Supplying dollars and demanding euros in the foreign exchange market
D.Supplying euros and demanding dollars in the foreign exchange market
14)
Refer to the diagram. At any price below R the firm will shut down in the short run.
15) A supply curve that is a vertical straight line indicates that:
A.production costs for this product cannot be calculated.
B.the relationship between price and quantity supplied is inverse.
C.a change in price will have no effect on the quantity supplied.
D.an unlimited amount of the product will be supplied at a constant price.
16) If the demand for a product is perfectly elastic and supply is upsloping, a $1 excise
tax per unit on suppliers will:
A.not raise price at all.
B.lower price by $1.
C.raise price by more than $1.
D.raise price by $1.
17) Local electric or gas utility companies mostly operate in which market structure?
A.Monopolistic competition
B.Pure competition
C.Pure monopoly
D.Oligopoly
18) If a nation imposes a tariff on an imported product, then the nation will experience
a(n):
A.Decrease in total supply and an increase in the price of the product
B.Decrease in demand and a decrease in the price of the product
C.Decrease in supply of, and an increase in demand for, the product
D.Increase in supply of, and a decrease in demand for, the product
19) “Creative destruction” in a market system is brought about by:
A.Entrepreneurship
B.Striking workers
C.Regulation by the government
D.Money-based trade
20) Health care expenditures coming directly out of consumers’ pockets, primarily in
the form of deductibles and copayments, account for what percent of U.S. health care
spending?
A.17 percent.
B.33 percent.
C.50 percent.
D.83 percent.
21) Negative externalities from energy production should be considered when
comparing the cost of an energy source because they:
A.Improve energy production
B.Reduce the total costs of production
C.Are an additional cost of using that source
D.Are taxed or subsidized by government to encourage production
22) Insurance companies require male drivers under age 25 to pay higher insurance
rates than female drivers under age 25. Craig Raymond, however, is a safer driver than
the average female driver under age 25. Craig’s higher insurance rate reflects:
A.monopoly power.
B.statistical discrimination.
C.the insurance firm’s taste for discrimination.
D.human-capital discrimination.
23) Suppose a competitive firm in both the factor and product markets is using inputs
such that the marginal product of labor is 16 and the price of labor is $4 per unit, while
the marginal product of capital is 12 and the price of capital is $3 per unit. At the
maximum profit equilibrium point, the price of the product is:
A.$3
B.$4
C.$.25
D.Between $3 and $4
24) What is the meaning of negative self-selection as it relates to unemployment in
low-income nations and immigration?
25) In practice the antitrust laws deal more with oligopolies than with pure monopolies.
Is this true?
26) What is shown by the indifference map for two goods? Which indifference curve
would a consumer want to be on?
27) Distinguish between the nominal and real rates of interest using an example.
28) What ways do firms have to finance R&D activities? What is the cost of these
forms of funding?
29) How does simultaneous consumption affect economies of scale?
30) Illegal immigration has been shown to have an overall negative fiscal impact on
local and state governments. Describe the fiscal benefits and cost of illegal immigration
for local and state governments.
31) Explain: Ironically, by taking the rough edges off of capitalism, social regulation
may be a strong pro-capitalist force.
32) An airline is flying between two cities. The airline has the following costs
associated with the flight:
The airline has an average of 40 passengers paying an average of $200 for this flight.
Do you think the airline should be flying between the two cities? Evaluate from a
short-run perspective.