1)
Refer to the above graph. It shows a firm which buys its inputs and sells its output in
competitive markets. If the firm develops a new technology that increases labor
productivity, the equilibrium level of employment for this firm is expected to be:
A.L0
B.Zero
C.Lower than L0
D.Higher than L0
2) Below is a table showing a supply and demand schedule for health care. In the left
column is the price of health care. The middle column shows the quantity demanded
(Qd) for health care. The right column shows the quantity supplied (Qs) of health care.
(a)Assume that there is no health insurance in this market. What will be the equilibrium
price and quantity in this market?
(b)Now assume that health insurance cuts the price of health care by two-thirds for the
consumer. What will be the new price for consumers and the quantity demanded? What
will be the marginal cost and benefit for society?
(c)Draw supply and demand curves in the graph below based on the data in the table.
Make sure to label the axes and identify prices and quantities.
(1)Show the equilibrium point in a market without health insurance and label it as point
x.
(2)Show the price to the consumer and quantity consumed when health insurance
covers two-thirds the cost of health care. At this quantity, indicate the marginal cost to
society of this unit and label it point y. Also, indicate the marginal benefit to society of
this unit of health care and label it point z.
3) According to Emerson: “Want is a growing giant whom the coat of Have was never
large enough to cover.” According to economists, “Want” exceeds “Have” because:
A.people are greedy.
B.productive resources are limited.
C.human beings are inherently insecure.
D.people are irrational.
4) A positive externality or spillover benefit occurs when:
A.product differentiation increases the variety of products available to consumers.
B.the benefits associated with a product exceed those accruing to people who consume
it.
C.a firm does not bear all of the costs of producing a good or service.
D.firms earn positive economic profits.
5) What is a tradable fishing limit that gives the holder the right to harvest a given
quantity of fish during a given time period?
A.Replacement rate
B.Total allowable catch
C.Individual transferable quota
D.Government-approved fishing license
6) Confronted with the same unit cost data, a monopolistic producer will charge:
A.the same price and produce the same output as a competitive firm.
B.a higher price and produce a larger output than a competitive firm.
C.a higher price and produce a smaller output than a competitive firm.
D.a lower price and produce a smaller output than a competitive firm.
7)
Refer to the above graphs. (Assume that the pre-migration labor force in Country A is 0d
and that it is 0u in country B.) The migration of labor from low-income country B to
high-income country A will:
A.Increase domestic output in both countries
B.Decrease domestic output in both countries
C.Increase domestic output in country A and decrease domestic output in country B
D.Decrease domestic output in country A and increase domestic output in country B
8) Rising health care costs have the following implications, except:
A.Faster growth of wages to workers
B.A growing number of uninsured workers
C.Large numbers of personal bankruptcies
D.Outsourcing and off-shoring of firms’ operations
9)
Refer to the above graph of the market for low-skilled labor. Sd is the supply of domestic
resident workers, and St is the total supply of labor including undocumented workers. If
there are illegal immigrants in the market, how many legal residents will be employed?
A.15M
B.120M
C.135M
D.22M
10) In which step of the demographic transition would we expect population to grow
the fastest?
A.Step 1
B.Step 2
C.Step 3
D.There is no step that would be expected to consistently yield faster population
growth.
11) Price discrimination is:
A.always legal.
B.always illegal.
C.only illegal if it hurts consumers more than nondiscrimination.
D.only illegal if used to lessen or eliminate competition.
12) Suppose firms in a collusive oligopoly decide to establish their prices at a level that
discourages new rivals from entering the industry. This is called:
A.mutual interdependence.
B.pricing the demand curve.
C.limit pricing.
D.price leadership.
13) The diamond-water paradox arises because:
A.essential goods may be cheap while nonessential goods may be expensive.
B.the marginal utility of certain products increases, rather than diminishes.
C.essential goods are always higher priced than nonessential goods.
D.we sometimes fail to use money as a standard of value.
14)
Refer to the diagram. If the supply of loanable funds is S1 and the demand for loanable
funds is D1, the equilibrium interest rate and quantity of funds borrowed will be:
A.G and A
B.F and A
C.F and C
D.E and A
15) Production costs to an economist:
A.consist only of explicit costs.
B.reflect opportunity costs.
C.never reflect monetary outlays.
D.always reflect monetary outlays.
16) Remittances and backflows of experienced workers:
A.reduce the efficiency gains from migration.
B.reverse wage equalization that occurred with the original migration.
C.exacerbate the problem of “brain drain” from developing nations.
D.redistribute gains toward the original emigrant nation.
17) Consumers spend their incomes to get the maximum benefit or satisfaction from the
goods and services they purchase. This is a reflection of:
A.resource scarcity and the necessity of choice.
B.purposeful behavior.
C.marginal costs that exceed marginal benefits.
D.the trade-off problem that exists between competing goals.
18) In the short run, a purely competitive firm that seeks to maximize profit will
produce:
A.where the demand and the ATC curves intersect.
B.where total revenue exceeds total cost by the maximum amount.
C.that output at which economic profits are zero.
D.at any point where the total revenue and total cost curves intersect.
19) What are information problems affecting sellers? Give an example that illustrates
how these types of problems are resolved.
20) How will the market demand curve for a public good differ from the market
demand curve for a private good?
21) Why might many R&D expenditures be affordable, but not worthwhile? Are
outcomes from R&D guaranteed?
22) If demand increases and supply decreases, then both the equilibrium price and
quantity will increase. What conditions are necessary to make this statement true?
23) Explain the problem of adverse selection. Discuss ways health insurance companies
have tried to overcome this problem.
24) What two main types of managed-care organizations (or systems) have been used to
control health care costs?
25) The international flow of goods helps compensate for the international immobility
of resources. Analyze and explain.
26) Why would it be valuable for a business to know the cross elasticity of demand for
the two products it produces: peanuts and popcorn?