Refer to the graph shown. According to the graph, this monopolistically competitive
industry is currently:
A. not in long-run equilibrium, and we would expect more firms to enter this industry.
B. not in long-run equilibrium, and we would expect some firms to exit this industry.
C. in long-run equilibrium, and so the number of firms will remain unchanged.
D. in short-run equilibrium with economic profit equal to zero.
Answer:
Singapore has a system of traffic regulation called Electronic Road Pricing, in which
traffic congestion is reduced by charging motorists who drive into the city center during
certain hours of the day. Charging for use of a road is:
A. a price ceiling that reduces the excess demand for road usage.
B. a price floor that eases the shortage caused by the natural limit to how much roads
can be built in a certain geographic area.
C. a quantity restriction, as the system involves charging motorists only if they drive
into the city center during “certain hours” of the day.
D. shifting from a third-party-payer-market to one in which individual consumers have
to pay for their consumption of road usage, thus seeking to reduce excess demand.
Answer:
Suppose there are 1,000 firms in a perfectly competitive market and each maximizes
profit at 25 units of output when market price is $1.00 per unit. One of the points on the
market supply curve must be at:
A. price = $25 and quantity supplied = 125.
B. price = $25 and quantity supplied = 24,000.
C. price = $1 and quantity supplied = 125.
D. price = $1 and quantity supplied = 25,000.
Answer:
Mail-order sales of wine are illegal in some states. Some wineries argue that the ability
to ship directly to consumers helps small wineries and that shipping bans unfairly
protect home-state wineries, raising prices to consumers. Others argue that the bans
allow states to collect tax revenues and to keep wine from being sold to minors.
Economists looking at this case would say that one effect of the ban is to prevent:
A. reverse engineering.
B. a network externality.
C. competition to existing sellers.
D. a winner-take-all market.
Answer:
A basic difference between microeconomics and macroeconomics is that:
A. microeconomics focuses on the choices of individual consumers, whereas
macroeconomics considers the behavior of large businesses.
B. microeconomics focuses on financial reporting by individuals, whereas
macroeconomics focuses on financial reporting by large firms.
C. microeconomics examines the choices made by individual participants in an
economy, whereas macroeconomics considers the economy’s overall performance.
D. microeconomics focuses on national markets, whereas macroeconomics concentrates
on international markets.
Answer:
Business decisions about what and how much to produce are based on what:
A. maximizes market share.
B. consumers want.
C. the government wants.
D. maximizes profits.
Answer:
The profit-maximization assumption of economic theory does not fit reality because:
A. all real firms want to maximize long-term profits rather than short-run profits.
B. all real firms want to maximize their share of the market.
C. real-world firms have a single goal, but this goal has nothing to do with profits.
D. real-world firms have many goals, which depend on the incentive structure
embodied in the firm’s organization.
Answer:
Refer to the graph shown. A firm that shifts from SATC1 to SATC2 is most likely to do
so because planned output increases:
A. to 300.
B. from 300 to 900.
C. from 300 to 600.
D. from 600 to 900.
Answer:
A Nash equilibrium refers to a:
A. cooperative game.
B. a sequential game.
C. a repeated game.
D. a noncooperative game.
Answer:
Online music stores such as Apple’s iTunes have taken customers from traditional stores
selling CDs. Based on this information, you can conclude that online music:
A. and CDs are complementary goods.
B. and CDs are substitutes.
C. has a higher income elasticity than CDs.
D. has a higher price elasticity than CDs.
Answer:
Refer to the graph shown. Between points E and F demand is:
A. inelastic.
B. elastic.
C. unit elastic.
D. perfectly elastic.
Answer:
Refer to the graph shown. Which supply curve is elastic?
A. A
B. B
C. C
D. None of the curves
Answer:
In which markets will firms probably have the most difficulty recouping their
investment in technological innovations?
A. Monopoly markets
B. Oligopoly markets
C. Perfectly competitive and monopolistically competitive markets
D. All types of markets
Answer:
Refer to the following graph.
With a tariff of $10 a blouse on imported silk blouses from China, the revenue the
government would collect from the import of silk blouses from China would be:
A. $0.
B. $2,800.
C. $7,000.
D. $20,000.
Answer:
As a country develops economically, what changes usually take place in the goods it
exports?
A. There is little change because comparative advantage does not change.
B. Raw materials and agricultural products decline in importance and are replaced by
services and manufactured goods.
C. Services and manufactured goods decline in importance and are replaced by raw
materials and agricultural products.
D. Exports go from being diversified to being specialized in whatever the country finds
to be its comparative advantage.
Answer:
Suppose marginal cost is constant and equal to 50 and marginal revenue equals 100 –
10Q. A profit-maximizing monopolist will set quantity equal to:
A. 3.
B. 5.
C. 7.
D. 10.
Answer:
If pizzas and quesadillas are substitutes and the price of pizzas increases, we would
expect to see:
A. an increase in the demand for quesadillas.
B. a decrease in the demand for quesadillas.
C. an increase in the quantity demanded for quesadillas but no change in demand.
D. a decrease in the quantity demanded for quesadillas but no change in demand.
Answer:
The study of inflation is a topic in:
A. microeconomics.
B. macroeconomics.
C. classical economics.
D. normative economics.
Answer:
Which of the following is not a regulatory trade restriction?
A. Vegetables prohibited because of excess pesticide usage
B. Inspections designed to impede trade processes
C. A limit on the number of imported cars
D. Leather products banned because of tanning by urine
Answer:
The idea that small changes can render behavior or another complex system completely
unpredictable is referred to as the:
A. heuristic model.
B. path-dependent model.
C. butterfly effect model.
D. regression model.
Answer:
Median household income is:
A. higher for workers age 25 to 45 than for workers age 45 to 65.
B. higher for black households than for Hispanic households.
C. lower for workers over 65 than for workers less than 25.
D. the same for white, black, and Hispanic households.
Answer:
The unwillingness of individuals to share in the cost of a public good is called the:
A. free rider problem.
B. social conscience problem.
C. volunteer problem.
D. public choice problem.
Answer:
Refer to the table shown. The average fixed cost of producing 5 units of output is:
A. $0.
B. $1.
C. $2.
D. $3.
Answer:
Macroeconomics includes the study of:
A. inflation.
B. firm pricing policies.
C. the relative prices of oil and coal.
D. individual choice.
Answer:
Production Possibility Schedules for Two South Pacific Island Nations
Refer to the table shown. A comparative advantage in the production of coconuts is held
by:
A. Kiribati.
B. Tuvalu.
C. both countries.
D. neither country.
Answer:
If an industry has exactly 10 firms with identical sales, the four-firm concentration ratio
must be:
A. 10.
B. 40.
C. 60.
D. 90.
Answer:
The price of a new model of iPod tends to fall significantly a year after it is introduced.
Suppose Jane bought an iPod as soon as it was introduced (a year ago) and paid a
premium price for it. Now she wants to buy a new iPod cover. Which of the following
should she consider before buying the new accessory?
A. The price she paid for her iPod, the price of the iPod cover, and the benefit she’ll
receive from using the iPod cover.
B. The price of replacing her iPod, the price of the iPod cover, and the benefit she’ll
receive from using the iPod cover.
C. The price of the iPod cover and the benefit she’ll receive from using the iPod cover.
D. The price of the iPod cover had she bought it with the iPod, the current price of the
iPod cover, and the benefit she’ll receive from using the iPod cover.
Answer:
Social Security is:
A. a pension program that returns benefits to participants equal to the amount paid in.
B. not purely a pension program, because some people receive more than they paid in.
C. a means-tested public assistance program designed to reduce income inequality.
D. a means-tested public assistance program designed to assist the poor.
Answer:
Any economic system:
A. can eliminate scarcity.
B. addresses the questions what is produced, how it is produced, and for whom it is
produced.
C. provides all the goods people want and desire.
D. provides equal distribution of well-being among its participants.
Answer:
At the level of output where marginal product begins to fall, marginal costs will:
A. begin to fall.
B. begin to rise.
C. remain constant.
D. equal marginal product.
Answer:
A monitoring problem most likely will occur when:
A. employees’ self-interest is the same as the firm’s interest.
B. employees’ self-interest differs from the firm’s interest.
C. the owner makes all the decisions for the business.
D. a company is employee-owned.
Answer:
Refer to the graph shown. The poorest 25 percent of the families earn:
A. 6 percent of the income.
B. 19 percent of the income.
C. 36 percent of the income.
D. 64 percent of the income.
Answer: