1) Elephants are moving closer to extinction in places where they are treated as private
property.
2) An economy cannot produce at a point outside of its production possibilities curve
because human economic wants are insatiable.
3) Normal profit is an implicit cost.
4) Nobody gains from pork-barrel politics other than the politicians.
5) Behavioral economists believe that while people try to make rational decisions, they
are frequently subject to systematic errors.
6) If the government regulates a natural monopoly and sets a “fair return” pricing
policy, then the regulated firm will have greater incentive to improve its operating
efficiency.
7) For a purely competitive firm, the demand curve facing it is the same as its marginal
revenue curve.
8) One of the economic effects of monopoly is an income transfer from consumers to
the firm.
9) The law of diminishing marginal utility implies that in order to induce a buyer to buy
more of a product, the seller must lower its price.
10) If a monopolist finds itself operating in the inelastic portion of its demand curve,
then it should never lower its price because doing so would reduce its profits.
11) In general for an excise tax on a product, given supply, the more elastic is the
demand for the product, the larger will be the portion of the tax shouldered by the
buyers.
12) In the diagrams below, the subscript “1” refers to the initial position of the curve,
while the subscript “2” refers to the final position after the curve shifts.
Which diagram above illustrates the effects on the peanut butter market, if severe
flooding destroys a large portion of the peanut crop in the economy?
A.A
B.B
C.C
D.D
13) Empirical studies suggest that, other things equal, the smaller the number of
hospitals in a city, the lower are nurses’ wages. This is evidence that:
A.the labor markets of nurses are purely competitive.
B.hospitals may possess some degree of monopsony power.
C.the minimum wage does not apply to nurses.
D.labor unions have been ineffective in increasing the wages of nurses.
14)
Assumptions: (1) The demand for labor in Alphania and Betania are as shown by DA
and DB, respectively; (2) Alphania’s native labor force is F and that of Betania is g; (3)
wage L in Alphania is equal to wage m in Betania; and (4) full employment exists in
both countries.
Refer to the given diagram and assumptions. After migration has ceased:
A.world output will have increased by mljh – MLJH.
B.Betania’s output will have increased and Alphania’s output will have decreased, but
world output will not have changed.
C.world output will have increased by gjhf – GJHF.
D.world output will have decreased by gjhf – GJHF.
15) Which of the following statements is correct?
A.Economic profits can properly be regarded as the salaries received by the hired
managers of corporations.
B.Economic rent is a price paid for productive land resources whose supply is perfectly
inelastic.
C.Economic profits would be nonexistent in a dynamic, purely competitive economy.
D.Economic or pure profit is the minimum return that entrepreneurs must receive to
continue in a particular line of production.
16) Which of the following would be an indication that a nation has a balance of
payments deficit?
A.It is buying gold abroad
B.Its imports exceed its exports
C.Its holdings of official reserves are declining
D.It is borrowing abroad to finance capital investments
17) Assume that a consumer has a given budget or income of $12, and that she can buy
only two goods, apples or bananas. The price of an apple is $1.50 and the price of a
banana is $0.75.
Refer to the information given above. If the consumer decides to buy 4 apples, how
many bananas can she also buy with the remainder of her budget?
A.8 bananas
B.4 bananas
C.6 bananas
D.10 bananas
18) Which of the following is a likely result of imposing tariffs to increase domestic
employment?
A.A decrease in consumer prices
B.A decrease in the tariff rates of foreign nations
C.An increase in the number of jobs
D.An increase in the possibility of retaliatory tariffs
19) By freedom of enterprise, we mean that individual:
A.Workers are free to look for jobs and work in whichever firm will hire them
B.Firms are free to employ resources, to produce their output, and to sell their products
C.Producers are free to produce whatever the government decides are needed by the
society
D.Consumers are free to buy whatever products will satisfy their needs the most
20) Answer the question based on the following payoff matrix for a duopoly in which
the numbers indicate the profit in thousands of dollars for a high-price or a low-price
strategy.
Refer to the above payoff matrix. If both firms operate independently and do not
collude, the most likely profit is:
A.$400,000 for firm X and $400,000 for firm Y
B.$725,000 for firm X and $475,000 for firm Y
C.$475,000 for firm X and $725,000 for firm Y
D.$625,000 for firm X and $625,000 for firm Y
21) Answer the question on the basis of the following information is for public good. Pa
and Pb represent the prices that citizens (a) and (b), the only two people in this nation,
are willing to pay for additional units of a quantity (Qc) of the public good. Qs
represents the quantity of the public good supplied by government at each of the
collective prices.
Refer to the above information. The collective willingness of this nation to pay for the
fourth unit of the public good is:
A.$7
B.$6
C.$5
D.$3
22)
Refer to the above table. What percentage should be reported in blank A of column 2?
A.5
B.6
C.12
D.17
23) As it relates to R&D, a firm’s expected-rate-of-return-curve, r:
A.slopes downward because the firm arrays, highest to lowest, the rates of return on
R&D activities.
B.slopes upward because of the law of diminishing returns.
C.is a horizontal line.
D.depends on whether it borrows from the bank or used retained earnings in financing
R&D.
24) “Player drafts” of professional athletes:
A.increase the competitiveness of the labor market for professional athletes.
B.reduce the profitability of professional sports franchises.
C.promote monopsony in the hire of professional athletes.
D.increase salaries of professional athletes.
25) The sometimes inconsistent results coming from a series of paired-choice voting is
due to:
A.Voters changing their preferences
B.Irrational preferences among some voters
C.A normal consequence of majority voting
D.Voters not having a good idea of their preferences
26) What is the Trade Adjustment Assistance Act? What do critics say about it?
27) What is the practical significance of income elasticity coefficients? Explain the
significance using as examples an income elasticity of 3.0 for automobiles and an
income elasticity of 0.20 for home-cooked meals.
28) How has the European Union differed from the United States in the treatment of a
monopoly? Consider the treatment of Microsoft.
29) Why might income gains in the poorest DVCs increase population growth, at least
for a while?
30) Use data in the following table to explain the economic effects of a price floor at $8,
at $9, and at $10. Explain the economic effects.
31) Explain how neoclassical economics and behavioral economics can describe
behavior at the supermarket.
32) Why is the distinction between fixed and variable cost important?