1) The dollar votes of consumers ultimately determine the composition of output and
the allocation of resources in a market economy. This statement best describes the
concept of:
A.derived demand.
B.consumer sovereignty.
C.the invisible hand.
D.market failure.
2) In a topographic map, each line represents a particular elevation above sea level, and
in an indifference map each line represents a particular level of:
A.Total utility
B.Marginal utility
C.Income
D.Demand
3) The population growth rate of the DVCs (developing countries) as a group in recent
decades has been:
A.Steady
B.Declining
C.Rising modestly
D.Rising rapidly
4) Answer the question on the basis of the following production possibilities data for
Gamma and Sigma. All data are in tons.
Gamma’s production possibilities:
Sigma’s production possibilities:
Refer to the given data. What are the limits of the terms of trade between Gamma and
Sigma?
A.1 tea = 2 pots to 1 tea = 6 pots
B.1 tea = 3 pots to 1 tea = 6 pots
C.1 tea = 2 pots to 1 tea = 3.5 pots
D.1 tea = 1 pot to 1 tea = 3 pots
5) Which of the following would call for inpayments to the United States?
A.Gold flows into the United States.
B.U.S. firms sell insurance to Brazilian shippers.
C.The United States sends foreign aid to developing countries.
D.The United States imports German automobiles.
6) The Patient Protection and Affordable Care Act (PPACA) includes the establishment
of “insurance exchanges” in each state, the purpose of which is to:
A.Create a monopoly or oligopoly of insurance companies in each state
B.Fix insurance premiums, similar to public utilities
C.Foster competition among insurance companies
D.Nationalize the insurance industry in each state
7) A society can consume a combination of goods outside its production possibilities if
there is:
A.Lower unemployment
B.International specialization and trade
C.A change in consumers’ tastes
D.A change in prices
8) The price elasticity of demand coefficient measures:
A.buyer responsiveness to price changes.
B.the extent to which a demand curve shifts as incomes change.
C.the slope of the demand curve.
D.how far business executives can stretch their fixed costs.
9) Other things being equal, if a once-competitive firm attains a high degree of
monopoly power in its product market, then its resource demand will:
A.Become perfectly inelastic
B.Remain perfectly elastic
C.Become more elastic
D.Become more inelastic
10) From an economic perspective, when a student decides to go to the movies instead
of studying for a test, it indicates that in the student’s thinking the marginal:
A.Benefit of studying is greater than the marginal cost of studying
B.Cost of going to the movies is less than the marginal benefit of going to the movies
C.Benefit of studying are greater than the marginal benefit of going to the movies
D.Cost of going to the movies is greater than the marginal cost of studying
11) Suppose the wage rate is $5, and the marginal revenue product (MRP) of the
seventh worker at a yo-yo factory is also equal to $5. The labor market was originally
purely competitive, but is then monopsonized without changing the MRP of the seventh
worker. That means:
A.More workers will be hired but they will be paid lower wages
B.More workers will be hired and they will be paid higher wages
C.Fewer workers will be hired and they will be paid lower wages
D.Fewer workers will be hired and they will be paid higher wages
12) At fast-food restaurants:
A.consumers enjoy complete and accurate information.
B.decisions are usually made by trial and error.
C.decisions entail comparisons of marginal costs and marginal benefits.
D.benefits always exceed costs.
13) When taxes and transfer payments are taken into account, the distribution of income
in the United States:
A.Is unchanged
B.Is less equally distributed
C.Is more equally distributed
D.Becomes more beneficial for the wealthy
14) The optimal extraction level in the present for a nonrenewable resource is:
A.zero.
B.where the market price of the resource equals the extraction cost of the last unit.
C.where the market price of the resource equals the extraction cost of the last unit plus
the user cost of the last unit.
D.where the extraction cost of the last unit equals the user cost of the last unit.
15) The four-firm sales concentration ratio for an industry measures the:
A.geographic concentration of firms.
B.extent to which the four largest firms dominate the production of a good.
C.percentage of the industry’s capital facilities owned by the four largest firms.
D.degree of X-inefficiency in the industry.
16) Use the following data to answer the question:
Refer to the data. Marginal product becomes negative with the hiring of the
__________ unit of labor.
A.third
B.fourth
C.sixth
D.seventh
17)
In the diagram, (1) is the:
A.expected-rate-of-return curve and (2) is the average total cost curve.
B.total revenue curve and (2) is the interest-rate cost-of funds-curve.
C.expected-rate-of-return curve and (2) is the interest-rate cost-of-funds curve.
D.marginal cost curve and (2) is the marginal benefit curve.
18) Use the graph to answer these questions for an unregulated pure monopolist:
(a)What is the price and quantity that will be charged by the monopoly?
(b)What area represents the efficiency loss?
(c)Suppose the government were to break-up the monopoly and create a purely
competitive market. What is the price and quantity will the market move toward? Will
this outcome be more or less efficient?
19) Which of the following is considered to be one of the more ill-advised public
policies that has contributed to Africa’s famine?
A.Maintenance of high prices for agricultural commodities
B.Rejection of foreign aid and technical assistance
C.Neglected investment of resources in agriculture
D.Acceptance of foreign aid and technical assistance
20) You can drive from Kansas City to St. Louis in five hours. You can fly between both
cities in two hours. The price of an airline ticket is $150. The cost of driving between
the cities is $50. About what hourly wage would make the “full” cost of driving equal
the “full” cost of flying, where “full” cost includes the value of time?
A.$17
B.$21
C.$29
D.$33