1) The ceteris paribus assumption is employed in economic analysis, in order to:
A.State economic goals
B.Simplify the complex world
C.Evaluate an economic system
D.Approximate real-world conditions
2) Which act specifically outlawed price discrimination when such discrimination is not
justified on the basis of cost differences and when it reduces competition?
A.Sherman Act
B.Clayton Act
C.Wheeler-Lea Act
D.Federal Trade Commission Act
3) Answer the question on the basis of the following information: The equations for the
demand and supply curves for a particular product are P = 10 – .4Q and P = 2 + .4Q,
where P is price and Q is quantity expressed in units of 100. After an excise tax is
imposed on the product, the supply equation is P = 3 + .4Q.
Refer to the given information. The excise tax on each unit of the product:
A.is $1.
B.is $2.
C.is $3.
D.cannot be determined with the information given.
4) Monopolistically competitive firms:
A.realize normal profits in the short run but losses in the long run.
B.incur persistent losses in both the short run and long run.
C.may realize either profits or losses in the short run but realize normal profits in the
long run.
D.persistently realize economic profits in both the short run and long run.
5)
Refer to the diagram. Assuming no union or relevant minimum wage, the firm
represented will hire:
A.Q2 workers and pay a W4 wage rate.
B.Q2 workers and pay a W1 wage rate.
C.Q3 workers and pay a W2 wage rate.
D.Q4 workers and pay a W1 wage rate.
6) Answer the following questions based on the payoff matrix for a single-period,
two-firm game for firms, Firm X and Firm Z. The numbers in the matrix indicate the
profit in billions of dollars for a traditional or innovative strategy. The profit outcome
cells are A, B, C, and D.
(a)Which strategies are the dominate ones for Firm X and Firm Y?
(b)Suppose Firm X has superior technology and is able to move first. What outcome
will be present in the market?
7) Which of the following is a source of government failure?
A.The invisible hand.
B.The lack of bureaucracy in government.
C.The enormous size and scope of government.
D.Excessive flexibility.
8) The following table is for a purely competitive market for resources.
Refer to the above table. If the product price increases from $3 to $4, then at the wage
rate of $15, the firm will hire:
A.2 workers
B.3 workers
C.4 workers
D.5 workers
9)
Refer to the diagram. A government-set price ceiling is best illustrated by:
A.price A
B.quantity E
C.price C
D.price B
10) Answer the question on the basis of the following cost data:
Refer to the data. If the firm closed down in the short run and produced zero units of
output, its total cost would be:
A.zero.
B.$50.
C.$150.
D.$100.
11) Which of the following is a characteristic of monopolistic competition?
A.Standardized product
B.A relatively small number of firms
C.Absence of nonprice competition
D.Relatively easy entry
12) Economic profit is most closely associated with:
A.the process of saving and investing.
B.monopoly, innovation, and uninsurable risks.
C.long-run competitive equilibrium.
D.a static economy.
13) Firms seek to maximize:
A.per unit profit.
B.total revenue.
C.total profit.
D.market share.
14)
Refer to the payoff matrix. Which of the following statements is true regarding the
outcome of this game?
A.Both firms will price high, and this outcome is a Nash equilibrium.
B.Both firms will price low, and this outcome is a Nash equilibrium.
C.Both firms will price high, but this outcome is not a Nash equilibrium.
D.Both firms will price low, but this outcome is not a Nash equilibrium.
15) Which of the following is not a component of the demand for loanable funds?
A.Household purchases of housing and durable consumer goods.
B.Business purchases of capital goods.
C.Government financing of the public debt.
D.Household saving.
16)
In the diagram the equation for this line is:
A.y = 4 – 11/3x.
B.y = 3 + 3/4x.
C.y = 4 – 3/4x.
D.y = 4 + 11/3x.
17) Besides market structure, another factor that seems to influence the level of R&D
spending in an industry is the:
A.Number of firms in the industry
B.Length of time for government patents
C.Scientific character of the industry
D.Imitation problem in the industry
18) Technological advance improves productivity in a purely competitive industry. This
change will result in a shift:
A.Down of the individual firm’s MC curve, causing the market supply curve to shift to
the left
B.Down of the individual firm’s MC curve, causing the market supply curve to shift to
the right
C.Up of the individual firm’s MC curve, causing the market supply curve to shift to the
left
D.Up of the individual firm’s MC curve, causing the market supply curve to shift to the
right
19) If a profit-seeking competitive firm is producing its profit-maximizing output and
its total fixed costs fall by 25 percent, the firm should:
A.use more labor and less capital to produce a larger output.
B.not change its output.
C.reduce its output.
D.increase its output.
20) Rent-seeking behavior in public choice theory refers to:
A.Politicians trading votes with one another
B.Receiving perks and freebies from businesses trying to sway their votes
C.Specific groups appealing to government for special benefits at someone else’s
expense
D.Politicians getting low rent for their living quarters when government is in session