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1) The demand curve in a purely competitive industry is ______, while the demand
curve to a single firm in that industry is ______.
A.perfectly inelastic; perfectly elastic
B.downsloping; perfectly elastic
C.downsloping; perfectly inelastic
D.perfectly elastic; downsloping
2) The view that the mere possession of monopoly power is a violation of the antitrust
laws, as in the Alcoa case of 1945, suggests that the application of antitrust laws should
be based on industry:
A.Behavior
B.Size
C.Efficiency
D.Structure
3) Assume that the short-run cost and demand data given in the tables below confront a
monopolistic competitor selling a given product and engaged in a given amount of
product promotion
Refer to the above tables. If the firm sells 3 units of output, marginal revenue will be:
A.-$5
B.$35
C.$135
D.$165
4) In the long-run equilibrium of a monopolistically competitive industry:
A.P = minimum (ATC)
B.P> minimum (ATC)
C.P = MC
D.P< MC
5) "Consumer sovereignty" refers to the:
A.fact that resource prices are higher than product prices in capitalistic economies.
B.idea that the pursuit of self-interest is in the public interest.
C.idea that the decisions of producers must ultimately conform to consumer demands.
D.fact that a federal agency exists to protect consumers from harmful and defective
products.
6) Pure competition produces a socially optimal allocation of resources in the long run
because:
A.Marginal cost equals marginal revenue
B.Marginal cost equals average total cost
C.Marginal revenue equals price
D.Marginal cost equals price
7) In 2012, total government spending (comprising purchases and transfers) in the U.S.
was about:
A.10 percent of the economy's total output
B.35 percent of the economy's total output
C.60 percent of the economy's total output
D.75 percent of the economy's total output
8) If an individual is less careful about avoiding accidents or illness because she has
health insurance, this is an example of:
A.the free-rider problem.
B.the moral hazard problem.
C.the adverse selection problem.
D.the Coase theorem.
9) The fact that international specialization and trade based on comparative advantage
can increase world output is demonstrated by the reality that:
A.the production possibilities curves of any two nations are identical.
B.a nation's production possibilities and trading possibilities lines coincide.
C.a nation's trading possibilities line lies to the right of its production possibilities line.
D.a nation's production possibilities line lies to the right of its trading possibilities line.
10) Answer the question on the basis of the following information. A farmer who has
fixed amounts of land and capital finds that total product is 24 for the first worker hired;
32 when two workers are hired; 37 when three are hired; and 40 when four are hired.
The farmer's product sells for $3 per unit and the wage rate is $13 per worker.
Refer to the given information. How many workers should the farmer hire?
A.1
B.2
C.3
D.4
