1) If the price in a competitive market falls and goes below the equilibrium price, then
consumer surplus might increase, but producer surplus will definitely decrease.
2) Because of the ability to influence price, a pure monopolist can increase price and
increase volume of sales simultaneously.
3) The unequal distribution of wealth among households in the United States is one of
the causes of income inequality.
4) If a firm increases all its inputs by 10 percent and its output increases by 15 percent,
the firm is experiencing diseconomies of scale.
5) The poverty rate in the U.S. increased significantly in the period 2007-2010.
6) Even with the use of money, exchange and trade cannot occur if there is no
coincidence of wants.
7) In recent years, the United States has had large:
A.current account surpluses.
B.current account deficits.
C.balance of trade surpluses.
D.balance of payments surpluses.
8) Suppose that a consumer purchases just two goods, X and Y. The ratio of the price of
good X to the price of good Y is the:
A.Intercept on the Y axis of the budget line
B.Intercept on the X axis of the budget line
C.Size of the shift in the budget line
D.Slope of the budget line
9) A government may be able to reduce the international value of its currency by:
A.selling its currency in the foreign exchange market.
B.buying its currency in the foreign exchange market.
C.selling foreign currencies in the foreign exchange market.
D.increasing its domestic interest rates.
10) If the demand curve reflects consumers’ full willingness to pay, and the supply
curve reflects all costs of production, then which of the following is true?
A.The benefit surpluses shared between consumers and producers will be maximized.
B.The benefit surpluses received by consumers and producers will be equal.
C.There will be no consumer or producer surplus.
D.Consumer surplus will be maximized, and producer surplus will be minimized.
11) In assessing the efficiency of government policy, economic analysis would focus
on:
A.The size of government: big versus small
B.Marginal benefits versus costs of government policy and action
C.Presence or absence of the “invisible hand”
D.Revenues and profitability of the government agencies
12)
Refer to the above graph, where TP = total product and L = labor input. The marginal
product of labor (MP):
A.Is constant at all levels of L
B.Increases at an increasing rate as L increases
C.Decreases as the labor input L increases
D.Increases at a decreasing rate as L increases
13)
Refer to the above graph. Suppose you had tastes as described by the indifference
curves above. If your income was $100, Px = 20 and Py = 25, which combination of X
and Y would maximize your utility?
A.5X and 0Y
B.0X and 4Y
C.3X and 1Y
D.5X and 4Y
14)
Refer to the diagram, in which solid arrows reflect real flows; broken arrows are
monetary flows. Flow (2) might represent:
A.the provision of national defense by government.
B.a government subsidy to farmers.
C.corporate income tax payments.
D.welfare payments to low-income families.
15)
Refer to the table. In relation to column (3), a change from column (4) to column (5)
would most likely be caused by:
A.government placing an excise tax on the good.
B.an improvement in production technology.
C.an increase in consumer income.
D.an increase in input prices.
16)
Refer to the above graph. Assume the market for this product is in equilibrium at the
intersection of D2 and S1. The shift in supply from S1 to S2 is due to an excise tax
imposed on the product. How much is the tax per unit of product?
A.$2
B.$3
C.$4
D.$6
17) One way that the Patient Protection and Affordable Care Act (PPACA) hopes to
foster competition among health insurance companies is through so-called insurance
exchanges.
18) Three people on a city council have three different spending proposals for snow
removal. Mitchell wants to spend $2 million to purchase more trucks and equipment.
Williams wants to spend $1 million and purchase half the equipment. Symmes doesnt
want to purchase any new equipment but prefers to spend $200,000 for additional
stocks of deicing chemicals. What does the median-voter model suggest will happen in
this case? Explain the likely outcome.
19) Why is the economic analysis of oligopoly so difficult? What two generalizations
can be made about the pricing behavior of oligopolists?
20) Why do solutions to the principalagent problem sometimes produce problems? Give
an example.
21) Monopolists are not technologically competitive. Explain.
22) How can embracing globalization by governments in DVCs promote economic
growth?
23) What are the economic implications of rising health care costs?
24) Do protectionist policies benefit producers, consumers, workers, or the
government? Explain.
25) Immigration can be viewed as an investment decision. Explain.
26) Explain how each of four different factors can affect the price elasticity of demand.
Give an example for each determinant.