1) Process innovation is represented as a downward shift in a firm’s total product curve
and its average total cost curve.
2) A cross elasticity of demand coefficient of +2.5 indicates that the two products are
substitutes.
3) In a natural monopoly case, the socially-optimal pricing policy rule will often yield a
higher price than the fair-return pricing rule.
4) At the inelastic portion of a monopolist’s demand curve, the marginal revenue of each
extra unit of output is positive.
5) A monopolist can use its pricing strategy as a barrier to entry by other firms.
6) Two industries that have the same four-firm concentration ratio can have
significantly different Herfindahl indexes.
7) The free-land era of U.S. history reflected a situation in which the quantity of land
available at a zero price exceeded the quantity of land demanded.
8) The benefits-received principle of taxation is most evident in:
A.inheritance taxes.
B.excise taxes on gasoline.
C.the personal income tax.
D.the corporate income tax.
9) Which situation is consistent with the law of diminishing marginal utility?
A.The more pizza Joe eats, the more he enjoys an additional slice
B.The more pizza Joe eats, the less he enjoys an additional slice
C.Joe’s marginal utility from eating pizza becomes positive after eating three slices
D.Joe’s marginal utility from eating pizza reaches a maximum when total utility is zero
10) A reduction in the redistribution of income:
A.Lowers the poverty rate for people
B.Raises people’s standard of living
C.Results in more income inequality
D.Results in less income inequality
11)
In the above graph, the difference between points d and e indicate that at $50M of R&D
spending, the:
A.Marginal cost is greater than the marginal benefit, thus R&D spending should be
reduced
B.Marginal cost is less than the marginal benefit, thus R&D spending should be
reduced
C.Marginal cost is greater than the marginal benefit, thus R&D spending should be
increased
D.Marginal cost is less than the marginal benefit, thus R&D spending should be
increased
12) If the supply of labor in a purely competitive labor market increases, then the
product:
A.Supply curve for a single employer will shift to the right
B.Supply curve for a single employer will shift to the left
C.Demand curve for a single employer will shift to the right
D.Demand curve for a single employer will shift to the left
13) Two major virtues of the market system are that it:
A.allocates resources efficiently and allows economic freedom.
B.results in an equitable personal distribution of income and always maintains full
employment.
C.results in price level stability and a fair personal distribution of income.
D.eliminates discrimination and minimizes environmental pollution.
14) Jane quit her job at IBM where she earned $50,000 a year. She cashed in $50,000 in
corporate bonds that earned 10% interest annually to buy a mini-bus. Jane has decided
to buy the mini-bus and set up a commuter service between Lincoln and Omaha. There
are 1000 people who will pay $400 a year each for the commuter service; $280 from
each person goes for gas, maintenance, insurance, and depreciation. She estimates that
her entrepreneurial skills would have typically yielded a normal profit of $5,000 in
another business.
(a)Complete the following questions: (1) What are Janes total revenues? (2) What are
Janes explicit costs? (3) What is her accounting profit?
(b)List the important implicit costs that Jane has not included.
(c)What is Janes pure economic profit (loss)?
15) Which of the following types of firms are least likely to have their MC, AVC, and
ATC curves affected by fluctuations in gasoline prices?
A.Firms like UPS that use a fleet of gasoline-powered vehicles.
B.Taxi cab and limousine companies.
C.Companies that operate bus tours to popular vacation destinations.
D.Firms like iTunes that distribute their products over the internet.
16) Per capita income in the United States in 2010 was about:
A.$25,300 per person
B.$36,300 per person
C.$47,300 per person
D.$59,300 per person
17) If the output of product X is such that marginal benefit equals marginal cost:
A.the correct amount of resources is being allocated to X’s production.
B.the value of producing X exceeds the value of producing alternative products with the
available resources.
C.there can be a net gain to society by allocating either more or less resources to
producing X.
D.resources are overallocated to the production of X.
18) A purely competitive firm can be identified by the fact that:
A.There are other firms in the industry producing similar products
B.It is making only normal profits in the short run
C.Its average revenue equals its marginal revenue
D.It experiences diminishing marginal returns
19) A rising standard of living will:
A.necessarily reduce the population by reducing the birthrate.
B.increase the birthrate.
C.reduce the birthrate, but population may continue to grow if the death rate falls more
quickly.
D.reduce the birthrate initially but will increase the birthrate significantly at higher
levels of income as people can afford to have more children.
20) The Ajax Manufacturing Company is selling in a purely competitive market. Its
output is 100 units, which sell at $4 each. At this level of output total cost is $600, total
fixed cost is $100, and marginal cost is $4. The firm should:
A.reduce output to about 80 units.
B.expand its production.
C.continue to produce 100 units.
D.produce zero units of output.
21) If government levies a tax or fee on hunting licenses and uses the resulting revenue
for wildlife stocking programs, this would be an example of:
A.A progressive tax
B.A regressive tax
C.The ability-to-pay principle of taxation
D.The benefits-received principle of taxation
22) Evaluate the validity of the argument that a new industry in a nation needs
protection from foreign competition if it is to prosper.
23) What are net benefits and how do they relate to natural resource economics?
24) Why is there a difference in the strength of demand for labor?
25) Give a brief description of the law of diminishing marginal utility and use it to
explain the downward slope of the demand curve.
26) How can the utility-maximizing rule be used to explain the substitution and income
effect?
27) Discuss prospect theory. Give two examples of prospect theory.
28) Why is land reform of significant concern for developing countries and what
restricts its implementation?
29) Describe the economic reasons why businesses use offshoring.
30) Explain the difference between the immediate market period, the short run, and the
long run as they relate to price elasticity of supply.