Refer to the graph shown, which depicts a perfectly competitive firm. To maximize
profit, the firm represented will produce:
A. 40 units of output.
B. 90 units of output.
C. 110 units of output.
D. 130 units of output.
Answer:
Suppose a perfectly competitive firm can increase its profits by reducing its output.
Then it must be the case that the firm’s:
A. marginal revenue equals its marginal cost.
B. price exceeds its marginal cost.
C. price exceeds its marginal revenue.
D. marginal cost exceeds its marginal revenue.
Answer:
Refer to the graph shown for a small country that is a price taker internationally.
Assume the foreign supply of this product is perfectly elastic at a price of $4 per unit.
Starting from a free trade equilibrium, an import quota of 2,500 would cause domestic
production to:
A. increase from 6,100 to 7,400.
B. increase from 2,400 to 3,600.
C. decrease from 4,800 to 3,600.
D. decrease from 7,400 to 6,100.
Answer:
Some children in Siliguri, India, work as professional rock breakers. The rocks they
break with a hammer are used in buildings and roads. In terms of the idea of efficiency,
having children break rocks with hammers:
A. is not efficient because modern equipment could crush stone with far less effort.
B. is technically efficient but not economically efficient because the job does not pay a
living wage.
C. is economically efficient but not technically efficient because it uses too much labor
relative to capital.
D. could be efficient given the extremely low price of labor and high price of capital.
Answer:
If an economist observed that higher hot dog prices lead to an increase in the demand
for chili, she most likely would conclude that:
A. chili and hot dogs are complements.
B. chili and hot dogs are substitutes.
C. chili and hot dogs are both inferior goods
D. chili and hot dogs are both normal goods.
Answer:
Suppose foreign shrimp prices drop by 32 percent and importers gain a 90 percent
market share. From this information, what would economists strongly suspect about this
industry?
A. Foreigners have a comparative advantage in shrimping.
B. Americans have a comparative advantage in shrimping.
C. Foreign sellers probably are colluding on price to maximize profits.
D. The large sales of foreigners indicate that they are better strategic bargainers than
Americans are.
Answer:
An increase in price and decrease in quantity are consistent with a:
A. leftward shift in demand and no shift in supply.
B. leftward shift in supply and no shift in demand.
C. rightward shift in supply and a rightward shift in demand.
Answer:
Consider the following payoff matrix facing Harry and Sally when each chooses to go
to the coffee shop listed. Harry wants to avoid Sally at the coffee shop and is not happy
when Sally ends up in the same shop he chooses. Sally would like to see Harry, and so
she is not happy when Harry ends up in a different coffee shop.
Given this payoff:
A. A has a dominant strategy but B does not.
B. B has a dominant strategy but A does not.
C. Both A and B have dominant strategies.
D. Neither A nor B has a dominant strategy.
Answer:
The price of an acre of land in rural Nevada is a few hundred dollars. The price of an
acre of land in downtown New York is many millions of dollars. How does the law of
one price explain this difference?
A. It cannot; there are unexplainable exceptions to the law of one price.
B. It suggests that in the long run price of land will be equalized regardless of location.
C. The law of one price depends on the mobility of resources, but location by its very
nature cannot be mobile.
D. The law of one price applies only to resources involved in international trade.
Answer:
McDonald’s Corporation lost a battle to keep a Singapore firm, Future Enterprises, from
selling goods under the labels MacNoodles, MacTea, and MacChocolate. In this case,
the court system in Singapore was defining:
A. globalization.
B. limited liability.
C. consumer sovereignty.
D. property rights.
Answer:
Refer to the graph shown. If the marginal cost of each weekend trip this year is $600 no
matter how many trips Rodney takes, assuming he is rational, Rodney will:
A. take three trips this year.
B. take two trips this year.
C. take one trip this year.
D. not take any trips this year.
Answer:
How wages are determined is best described by:
A. economic factors only.
B. political and social forces only.
C. economic factors, with strong influences by political and social forces.
D. government regulation only.
Answer:
ABC Co. produces only gadgets, and XYZ Co. produces both gadgets and widgets. If
ABC Co. produces gadgets at the same average total cost as XYZ Co., economies of:
A. scope are present in ABC.
B. scale are present in ABC.
C. scale are not present in XYZ.
D. scope are not present in XYZ.
Answer:
The fact that U.S. managers’ salaries are substantially greater than those of comparable
managers in Japan may be related to:
A. an increase in the demand for CEOs.
B. an increase in the supply of CEOs.
C. the comparatively greater competitive markets in Japan.
D. the greater number of public goods provided in the United States.
Answer:
Dorm rooms usually are not allocated by markets. Allocating dorm rooms is:
A. not an economic problem.
B. an economic problem.
C. not affected by economic forces.
D. determined by prices.
Answer:
If demand is highly inelastic and supply shifts to the left:
A. neither price nor quantity will rise much.
B. price will hardly rise at all; quantity will decline significantly.
C. price probably will rise significantly, as will quantity.
D. price will rise significantly; quantity hardly changes at all.
Answer:
A professor’s students are not getting good grades because of lack of studying. A
behavioral economist would say that one reason the students are not studying is that:
A. they prefer to hang out with friends and watch television and therefore are making
an optimal choice.
B. the professor is not forcing the students to study for the tests.
C. the cost of studying (not being with friends) would have to be paid now, whereas the
benefit (better grades) comes later.
D. we live in a society in which grades in college are not important.
Answer:
The difference between an L3C and other types of businesses is that:
A. L3Cs are chartered by the government and all profits are retained by the
government.
B. L3Cs do not pursue profit, but instead seek social goals.
C. L3Cs explicitly take on a social mission as well as profit-seeking.
D. L3Cs cannot accept government funding of any kind.
Answer:
Which of the following statements is correct?
A. Neither stocks nor bonds are financial assets.
B. Stocks are financial assets but bonds are not.
C. Bonds are financial assets but stocks are not.
D. Both stocks and bonds are financial assets.
Answer:
You bought one share of McDonald’s stock for $10, one share of Coca-Cola for $15,
and one share of Pepto-Bismol for $20. Currently, each stock is priced at $15.
Assuming that there are no tax issues and that you cannot predict the future price of any
of the stocks, if you needed $15, which stock would you sell?
A. McDonalds
B. Coca-Cola
C. Pepto-Bismol
D. Any one of them
Answer:
Refer to the graph shown. If the market price is P2, the firm will produce:
A. Q2 and incur a loss.
B. Q3 and earn a profit.
C. Q3 and break even.
D. Q4 and incur a loss.
Answer:
Refer to the graph shown depicting a monopolistically competitive firm. The average
total cost curve is represented by curve:
A. A.
B. B.
C. C.
D. D.
Answer:
If the law of diminishing marginal productivity holds true, eventually both the marginal
cost curve and the average cost curve must begin to be:
A. vertical lines.
B. downward-sloping.
C. upward-sloping.
D. horizontal lines.
Answer:
Marginal revenue is equal to:
A. total revenue divided by its output.
B. marginal cost.
C. the change in total revenue associated with a change in quantity.
D. the change in total profits associated with a change in quantity.
Answer:
If MC = Q/15 represents marginal cost for a monopolist and market demand is given by
Qd = 500 – 10P, the monopolist maximizes profit by setting price equal to:
A. $12.50.
B. $20.00.
C. $31.25.
D. $50.00.
Answer:
A higher tax rate could result in lower tax revenues if:
A. attempts to avoid or evade taxes increase.
B. individuals switch from leisure to labor.
C. fewer people qualify for government assistance.
D. the tax has no incentive effects.
Answer:
Refer to the graph shown of average costs for a firm. This firm exhibits:
A. economies of scale.
B. diseconomies of scale.
C. profits.
D. X-inefficiency.
Answer:
Refer to the graph shown. The loss of surplus to consumers resulting from monopoly is:
A. 11.25.
B. 20.
C. 31.25
D. 42.5.
Answer:
Refer to the graph shown. A quantity restriction of QR will:
A. reduce quantity supplied to Q2.
B. reduce quantity supplied to QR.
C. have no effect on quantity supplied.
D. create excess demand represented by Q2 – QR.
Answer:
What do economists mean when they say there is “market failure”?
A. Business has introduced a product that consumers did not want.
B. Free markets have led to excessive profits.
C. Markets have surpluses or shortages so that government rationing is necessary.
D. Free markets yield results that economists do not consider socially optimal.
Answer:
Given the graph shown, the quantity that would be associated with the price of $4 in a
supply table would be:
A. 2.
B. 4.
C. 6.
D. 8.
Answer:
The demand for a good is inelastic. Which of the following would be the most likely
explanation for this?
A. The good is narrowly defined.
B. The good is broadly defined.
C. The good costs a large portion of one’s total income.
D. The time interval considered is long.
Answer: