1) In a zero-sum game, the gains by one player will be exactly offset by the losses of
the other.
2) The demand for cocaine among addicts is relatively elastic.
3) As a monopolist lowers the price of its product from a high level, it finds that its total
revenue may at first increase and then, below a certain price, its total revenue begins to
decrease.
4) Innovation is the first discovery of a new product or production process; invention is
the first successful commercial introduction of the product or process.
5) Marginal resource (labor) cost will always exceed the wage rate when the employer
is selling its product in an imperfectly competitive market.
6) Human capital investment refers to spending on education and worker training.
7) Efficiency or deadweight losses occur in purely competitive markets when P = MC =
lowest ATC.
8) The first mover in a sequential game always has the advantage over the second
mover.
9) Which one of the following is not correct?
A.In antitrust cases defendants attempt to define the relevant market broadly.
B.The courts have varied over time in their interpretations of the antitrust statutes.
C.Antitrust suits can only be originated by the Federal Trade Commission.
D.In antitrust cases the prosecution attempts to define the relevant market narrowly.
10) A vertical merger involves a combining of one or more firms:
A.as the result of one firm purchasing the assets of the other.
B.that are operating in entirely different industries.
C.operating at different stages of the production process in a particular industry.
D.operating at the same stage of the production process.
11) Answer the question on the basis of the following data:
The tax represented is:
A.optimal.
B.proportional.
C.regressive.
D.progressive.
12)
Refer to the diagram where D and S are the United States’ demand for and supply of
Swiss francs. At the equilibrium exchange rate, E, the United States’ balance of
payments is in equilibrium. Under a system of fixed exchange rates, the shift in demand
from D to D’ will cause:
A.the United States to increase its stocks of international monetary reserves.
B.a Swiss balance of payments deficit.
C.a U.S. balance of payments deficit.
D.a U.S. balance of payments surplus.
13) A major difference between social insurance and welfare is that social insurance:
A.exclusively involves older Americans whereas welfare is confined mainly to mothers
with young children.
B.forces recipients to demonstrate need while welfare does not.
C.is normally financed by earmarked payroll taxes while welfare is financed out of
general tax revenues.
D.provides cash transfers while welfare does not.
14) Property rights for fish from the open ocean:
A.do not exist.
B.are established by the United Nations.
C.exist once the fish are sold at market.
D.exist once the fish are caught.
15) What two conditions must hold for a competitive market to produce efficient
outcomes?
A.Demand curves must reflect all costs of production, and supply curves must reflect
consumers’ full willingness to pay.
B.Supply curves must reflect all costs of production, and demand curves must reflect
consumers’ full willingness to pay.
C.Firms must minimize production costs, and consumers must minimize total
expenditures.
D.Firms must maximize profits, and consumers must all pay prices equal to their
maximum willingness to pay.
16) Which of the following is not a main function of the entrepreneur?
A.To make routine pricing decisions.
B.To innovate.
C.To assume the risk of economic losses.
D.To make strategic business decisions.
17) Because the marginal product of a variable resource at first increases and then
decreases as the output of the firm is increased:
A.total cost at first increases at a decreasing rate and then increases at an increasing
rate.
B.total variable cost at first increases at an increasing rate and then increases at a
decreasing rate.
C.average total cost at first increases and then diminishes.
D.average fixed cost will rise beyond the point of diminishing returns.
18)
Refer to the diagram. Which line(s) show(s) a positive vertical intercept?
A.A and D only.
B.B and C only.
C.A, D, and E.
D.A, D, and B.
19)
Refer to the above graphs for a competitive market in the short run. What will happen
to the firm’s economic profits as long-run market adjustments occur?
A.Profits will increase to some positive value
B.Profits will decrease to some negative value
C.Profits will increase to zero
D.Profits will stay the same as they are now
20) Tariffs:
A.may be imposed either to raise revenue (revenue tariffs) or to shield domestic
producers from foreign competition (protective tariffs).
B.are also called import quotas.
C.are excise taxes on goods exported abroad.
21) Fiscal policy refers to the government’s attempt at regulating the economy through
the use of changes in:
A.Taxes and government spending
B.Interest rates and borrowing
C.Wage rates and contracts
D.Exchange rates and foreign trade
22) The supply of product X is elastic if the price of X rises by:
A.5 percent and quantity supplied rises by 7 percent.
B.8 percent and quantity supplied rises by 8 percent.
C.10 percent and quantity supplied remains the same.
D.7 percent and quantity supplied rises by 5 percent.
23)
Refer to the labor market diagrams. The economic impact of occupational licensing can
best be demonstrated through Figure:
A.4
B.3
C.2
D.1
24) Competition means that:
A.sellers can manipulate market price by causing product scarcities.
B.there are independently acting buyers and sellers in each market.
C.a product can be purchased at a number of different prices.
D.there is more than one seller in a market.
25) Which of the following statements best illustrates the time-value of money concept?
A.Bob is willing to forgo receiving $100 today in order to receive $110 next month.
B.Tom is indifferent between receiving $50 now and receiving $50 six months from
now.
C.Terry works for an hourly wage instead of a fixed salary.
D.Jeff would prefer to receive $200 at the end of the year instead of $220 now.
26) An industry has a single firm, and is found to have violated antitrust laws. The
government breaks its up into two firms that will share the market equally. The
Herfindahl index for this industry would change from:
A.100 to 50
B.10000 to 2500
C.100000 to 50000
D.10000 to 5000
27) How is price fixing among firms treated under antitrust policy? Give two examples
of legal actions against price fixing.
28) Assume that a person only purchases two goods, food and clothing, and has a fixed
budget constraint. Both goods are normal goods. If the price of food decreases, what
will happen to the consumption of clothing based on the income effect?
29) How is consumer sovereignty at work at McDonalds? Give an example of a hit and
a miss.
30) Describe the positive and negative views of the economics of advertising.
31) Use the graph below to identify the efficiency loss when there is underproduction
(Q1) and the efficiency loss when there is overproduction (Q3) in a market.
32) Does it matter whether capital and labor are substitutes or complements when
figuring out what will happen to the demand for labor if the price of capital increases?
Explain.
33) John Wannamaker, a marking genius and department store entrepreneur, stated:
Half the money I spend on advertising is wastedthe trouble is, I dont know which half!
Explain how businesses are using new technology to overcome this problem.
34) If IACs admit more temporary workers from DVCs, will it help DVCs? Explain.