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1) In a market system, a firm's employees are typically shielded from business risk by:
A.Profit-sharing agreements
B.Wage contracts
C.The Social Security program
D.Paid vacation leaves
2) Draw a graph of the short-run cost curves for a purely competitive firm that shows a
short-run supply curve for the individual firm. Identify the shutdown point, the
break-even point, the profit-maximizing point, and the levels of output associated with
those points.
3) The principle that under some circumstances majority voting fails to make consistent
choices reflecting the community's underlying preference is best demonstrated by the:
A.paradox of voting.
B.concept of logrolling.
C.median-voter model.
D.Coase theorem.
4) Which of the following statements is correct?
A.Limited access to the health care system is a major cause of rising health care costs.
B.Rising health care costs are a major cause of limited access to the health care system.
C.Rising health care costs have forced employers to raise real wages above labor
productivity.
D.The tax subsidy that government provides for health care causes health care to be
underconsumed.
5) Complete the following table, where L is the units of labor, TPL is the total product
of labor, MPL is the marginal product of labor, P is product price, TR is total revenue,
and MRPL is the marginal revenue product of labor.
(a)In what type of market is the firm selling its product? How do you know?
(b)Why does the MRP schedule decrease as labor increases?
(c)Complete the following table.
6) You are the sales manager for a software company and have been informed that the
price elasticity of demand for your most popular software is less than 1. To increase
total revenues from that product, you should:
A.Increase the price of the software
B.Decrease the price of the software
C.Hold the price of the software constant
D.Increase the supply of the software
7) If two inputs are complementary and employed in fixed proportions, an increase in
the price of one input will:
A.Decrease the demand for the other input
B.Increase the demand for the other input
C.Increase the quantity demanded for the other input
D.Have no effect on the demand for the other input
8) Which of the following gave the Federal Trade Commission responsibility to protect
the public against false and misleading advertising?
A.Celler-Kefauver Act of 1950
B.Wheeler-Lea Act of 1938
C.Clayton Act of 1914
D.Sherman Act of 1890
9) Which of the following would likely reduce income inequality?
A.A reduction in the number of high school dropouts.
B.A reduction in social security benefits.
C.Greater inequality in the distribution of wealth.
D.More stringent requirements to obtain occupational licenses.
10) The major reason that presidents of major corporations receive an average salary of
over $1 million a year while police officers receive an average salary of about $56,000
a year can best be explained by:
A.Discrimination
B.Lack of job information
C.Compensating differences
D.Noncompeting labor groups
11) Given the availability of the Medicaid program, why are so many poor people
uninsured?
A.Because only a fixed percentage of the population can participate in Medicaid at any
time.
B.Because many poor people earn enough that they do not qualify for Medicaid.
C.Because nonincome requirements screen many poor people from the program.
D.Because only native-born Americans are eligible for the program.
12) The World Bank:
A.is also known as the International Monetary Fund (IMF).
B.lends money to developing nations for basic infrastructure projects such as dams,
irrigation, health and sanitation, communications, and transportation.
C.is an affiliate of the World Trade Organization (WTO).
D.provides subsidies to private firms so they can improve their wages and working
conditions.
13) The graphs below illustrate the market for a product on which an excise tax has
been imposed by government.
Refer to the above graph. How much of the excise tax per unit is shouldered by the
buyers?
A.$3
B.$5
C.$6
D.$8
14)
Suppose the total revenue curve is derived from a particular linear demand curve. That
demand curve must be:
A.inelastic for price declines that increase quantity demanded from 2 units to 3 units.
B.elastic for price declines that increase quantity demanded from 5 units to 6 units.
C.inelastic for price increases that reduce quantity demanded from 4 units to 3 units.
D.elastic for price increases that reduce quantity demanded from 4 units to 3 units.
15) Which theory of regulation assumes that the industry wants to be regulated, in order
to reduce competition and achieve cartel-like conditions?
A.Public interest theory
B.Legal cartel theory
C.Price fixing theory
D.Public ownership theory
16) "Because the outputs of many industries are the inputs to other industries, the
failure of any single industry to fulfill the output quantities specified in the central plan
caused a chain reaction of adverse repercussions on production." This quotation best
identifies the:
A.incentive problem under central planning.
B.self-sufficiency dilemma under communism.
C.resource overcommitment problem under communism.
D.coordination problem under central planning.
17) An important economic problem associated with pure monopoly is that, at the
profit-maximizing outputs, resources are:
A.overallocated because price exceeds marginal cost.
B.overallocated because marginal cost exceeds price.
C.underallocated because price exceeds marginal cost.
D.underallocated because marginal cost exceeds price.
