If the elasticity of demand for electricity is 0.13, the demand for electricity is:
A. inelastic.
B. elastic.
C. perfectly inelastic.
D. unit elastic.
Answer:
Refer to the graph shown depicting a monopolistically competitive firm. The demand
curve is represented by curve:
A. A.
B. B.
C. C.
D. D.
Answer:
If frost in Florida reduces the quantity of vegetables sold by 20 percent and increases
their retail price by 30 percent, one can conclude that:
A. the demand has shifted to the right along a perfectly inelastic supply curve.
B. the demand has shifted to the right along a perfectly elastic supply curve.
C. the supply of vegetables has shifted to the left along an elastic demand curve.
D. the supply of vegetables has shifted to the left along an inelastic demand curve.
Answer:
Suppliers would be the most eager to organize to restrict output if they faced:
A. an inelastic demand.
B. an elastic demand.
C. a unit-elastic demand.
D. a perfectly elastic demand.
Answer:
The fallacy of composition refers to the false assumption:
A. that if A happens before B, then A caused B.
B. that what is true for a part will also be true for the whole.
C. that what is true for the whole must also be true for a part.
D. of all other things held constant.
Answer:
Refer to the table shown, which shows the demand schedule for a product sold by a
monopolist. Marginal revenue is negative:
A. when price is $10.
B. when price is above $10.
C. when price is below $10.
D. for every price.
Answer:
What do economists mean when they say a situation is Pareto optimal?
A. It is fair and equitable.
B. Any change that helps someone will harm someone else.
C. There are no changes that can help anyone.
D. It is a situation produced by market processes.
Answer:
Which of the following pairs of equations describes the supply and demand curves
given in the accompanying demand and supply tables?
A. Qs = 1; Qd = 1 – 3P, respectively
B. Qs = P; Qd = 3 – 3P, respectively
C. Qs = P + 1; Qd = 3 – P, respectively
D. Qs = P – 1; Qd = 3 – P, respectively
Answer:
World trade declined in the 1930s. Which of the following is the best explanation of
that decline?
A. World income shrank, and trade restrictions increased.
B. World income shrank, but there were few changes in trade restrictions.
C. Trade restrictions increased, but there was little change in world income.
D. The incomes of most nations increased, allowing them to become more
self-sufficient.
Answer:
The consumption of an additional unit of a good provides additional satisfaction, which
is called:
A. total benefit.
B. marginal social benefit.
C. average utility.
D. marginal utility.
Answer:
Suppose that a haircut will give Dawn 2,000 units of utility and cost her $40, whereas a
set of acrylic nails costs $25 and yields 1,000 units of utility. Most likely Dawn should:
A. choose the haircut because each unit of utility will cost her $0.2 compared with
$0.2.5 for the nails.
B. choose the nails because she will obtain 50 units of utility per dollar compared with
40 units of utility per dollar for the haircut.
C. be indifferent between the two choices.
D. choose the haircut because she will receive 50 units of utility per dollar compared
with 45 units of utility per dollar for the nails.
Answer:
In breaking up the Standard Oil Company, the U.S. Supreme Court established that a
company’s violation of the Sherman Antitrust Act was determined by:
A. the structure of the industry.
B. whether or not the firm engaged in “unfair business practices.”
C. the percentage of the market controlled by the firm.
D. concentration ratios.
Answer:
The law of diminishing marginal productivity does not apply in the long run because:
A. some inputs are fixed in the long run.
B. some inputs are variable in the long run.
C. no inputs are fixed in the long run.
D. all inputs are fixed in the long run.
Answer:
If a machine cost $50,000 initially and is expected to last for 20 years but is worth
$60,000 after one year because it is in short supply, an economist most likely would say
that:
A. the machine’s cost for each of its 20 years of existence is $2,500.
B. the machine’s cost for each of its 20 years of existence is $3,000.
C. during the first year the machine had no cost; it provides an implicit revenue of
$10,000 to the firm.
D. the value of the machine will continue to increase 20 percent per year for the next 20
years.
Answer:
U.S. government laws limit the importation of sugar into the United States. As a result,
the U.S. price of sugar is about three times as high as the world price of sugar. U.S.
sugar producers strongly support these rules. How would most economists explain this
policy?
A. It is an example of a form of sin tax intended to help people with a self-control
problem involving sweets.
B. It illustrates the public choice view that small gains concentrated to a few producers
can be more important politically than large losses spread over many consumers.
C. The policy is a way of solving an income distribution problem; it redistributes from
the rich to the poor.
D. It is an example of the government using cost/benefit analysis to correct a market
failure.
Answer:
Which of the following factors will help the United States regain comparative
advantages in industries in which it has lost comparative advantages?
A. The value of the U.S. dollar falls.
B. The value of the U.S. dollar rises.
C. The United States imports more goods.
D. Wages in the United States rise.
Answer:
A Nash equilibrium:
A. always exists.
B. is always reached in game playing.
C. sometimes may not be reached because people assume others react rationally.
D. sometimes may not be reached because people do not assume that others act
rationally.
Answer:
Since the minimum food budget used to determine the poverty line is not adjusted for
changes in the standard of living, it is, in principle, a(n):
A. absolute measure of poverty.
B. relative measure of poverty.
C. inaccurate measure of poverty.
D. optimal measure of poverty.
Answer:
Refer to the graph shown. Which price combination is consistent with the budget line
shown?
A. $3 a bagel, $2 a croissant.
B. $2 a bagel, $2 a croissant.
C. $2 a bagel, $4 a croissant.
D. $6 a bagel, $3 a croissant.
Answer:
Refer to the graph shown. Suppose the market price is $3. At this price, a perfectly
competitive firm should:
A. continue to produce in the short run but shut down in the long run.
B. continue to produce in both the short run and the long run.
C. shut down in the short run but continue production in the long run.
D. shut down immediately.
Answer:
If robotics and factory automation become more widespread in an industry and all else
is held constant:
A. both the demand for labor in that industry and the wage rate should increase.
B. both the demand for labor in that industry and the wage rate should decrease.
C. the demand for labor should decrease in that industry and the wage rate should
increase.
D. the demand for labor should increase in that industry and the wage rate should
decrease.
Answer:
To manufacture 1,000 pairs of shoes in a week, a firm must use at least 1,500 workers
and 5 machines or 100 machines and 150 workers. Which method can be technically
efficient?
A. 1,500 workers and 5 machines
B. 150 workers and 100 machines
C. both
D. neither
Answer:
Trade embargoes are generally implemented:
A. to benefit emerging industries.
B. to lower domestic unemployment rates.
C. for political reasons.
D. to raise revenue from trade.
Answer:
Refer to the graph shown. Say that there is a negative externality associated with the
production of the good depicted. The marginal social cost from consuming this good at
the competitive equilibrium output level is:
A. either greater than or less than P0, depending on the elasticities of supply and
demand.
B. greater than P0.
C. less than P0.
D. equal to P0.
Answer:
If the fast-food industry is monopolistically competitive, a profit-maximizing firm in
this industry sells its product at a price:
A. equal to average variable cost.
B. that maximizes the difference between marginal revenue and marginal cost.
C. that ensures that marginal revenue and marginal cost are equal.
D. equal to marginal cost.
Answer:
Refer to the graphs shown, which depict a perfectly competitive market and firm. If
market demand is D0, the:
A. firm shown in the graph will produce q0, but all of the firms in the market will
produce a total of Q0.
B. firm shown in the graph will produce q1, but all of the firms in the market will
produce a total of Q1.
C. output of the firm shown in the graph is the same as quantity supplied in the market.
D. firm is not producing where profit is maximized.
Answer:
Diminishing marginal utility implies that as an individual consumes more of a good,
beyond some point another unit will add:
A. more units of utility than the preceding units.
B. more pleasure than the preceding unit.
C. the same pleasure as the preceding unit.
D. less pleasure than the preceding unit.
Answer:
If the demand for cigarettes is inelastic, a per-unit tax on cigarettes will cause the
quantity demanded to:
A. fall proportionally more than the increase in price caused by the tax.
B. fall proportionally less than the increase in price caused by the tax.
C. rise proportionally more than the increase in price caused by the tax.
D. rise proportionally less than the increase in price caused by the tax.
Answer:
When OPEC reduces output to keep prices high, OPEC is acting as a:
A. cartel.
B. price taker.
C. producer in a contestable market.
D. producer moving along a supply curve, cutting output as price falls.
Answer:
Which of the following exchange rates between the dollar and the peso would a
Mexican buyer of American goods most prefer?
A. $0.25 = 1 peso
B. $0.20 = 1 peso
C. $0.15 = 1 peso
D. $0.05 = 1 peso
Answer:
Comparable worth laws:
A. always distort market outcomes because they interfere with the price mechanism.
B. may correct institutional biases in the labor market.
C. are necessary even when wages are completely determined by the interaction of
labor supply and labor demand.
D. are necessary even when institutional biases do not exist.
Answer:
Governments do all of the following except:
A. oversee the interaction of households and businesses in the goods and factor
markets.
B. demand labor services from households in the factor market.
C. demand goods and services from businesses in the goods market.
D. supply labor services to businesses in the factor market.
Answer: