1) An increase in demand accompanied by an increase in supply will increase the
equilibrium quantity, but the effect on equilibrium price will be indeterminate.
2) Present value is the amount to which some current amount of money will grow as
interest compounds over time.
3) If prices received by farmers decline and prices paid by farmers increase, the parity
ratio will decline.
4) “Good economics” is about marginal costs and marginal benefits of specific projects;
“good politics” is more about clear benefits and hidden costs.
5) The labor supply curve facing a purely competitive firm is perfectly inelastic.
6) The World Trade Organization is comprised of 28 European nations and dedicated to
abolishing trade barriers and integrating their economies.
7) The following is cost information for the Creamy Crisp Donut Company:
Entrepreneur’s potential earnings as a salaried worker = $50,000
Annual lease on building = $22,000
Annual revenue from operations = $380,000
Payments to workers = $120,000
Utilities (electricity, water, disposal) costs = $8,000
Value of entrepreneur’s talent in the next best entrepreneurial activity = $80,000
Entrepreneur’s forgone interest on personal funds used to finance the business = $6,000
Refer to the data. Creamy Crisp’s economic profit is:
A.$150,000.
B.$80,000.
C.$230,000.
D.$94,000.
8)
Immigrant entrepreneurs have founded what portion of semiconductor,
computer/communication, and software companies in the U.S.?
A.5% – 10%
B.10% – 20%
C.20% – 25%
D.25% – 35%
9) With a fixed level of farm production, a given shift in demand for a crop will cause a:
A.Small price-change if demand is quite inelastic
B.More dramatic price-change if demand is quite elastic
C.More dramatic price-change if demand is quite inelastic
D.Similar amount of price-change regardless of whether demand is elastic or not
10) If there is a decrease in demand for a product in a purely competitive industry, it
results in an industry contraction that will end when the product price is:
A.Greater than its marginal cost
B.Equal to its marginal cost
C.Less than its marginal cost
D.Greater than its average cost
11) If a firm’s demand for labor is elastic, a union-negotiated wage increase will:
A.necessarily be inflationary.
B.cause the firm’s total payroll to increase.
C.cause the firm’s total payroll to decline.
D.cause a shortage of labor.
12)
Which of the diagrams illustrates the effect of a governmental subsidy on the market for
AIDS research?
A.A only.
B.B only.
C.C only.
D.D only.
13) Pay-for-performance systems seek to deal with the:
A.Unemployment problem
B.Monitoring problem
C.Discouraged worker problem
D.Principal-agent problem
14) The income and substitution effects account for:
A.the upward-sloping supply curve.
B.the downward-sloping demand curve.
C.movements along a given supply curve.
D.shifts in the demand curve.
15) According to behavioral economists, precommitments:
A.help people overcome their self-control problems caused by time inconsistency.
B.do not fundamentally alter decisions because they do not change the benefits or costs
of a particular action.
C.end up being more costly as people regularly violate them and incur penalties.
D.overcome cognitive biases introduced by brain System 2.
16) The kinked-demand curve model helps to explain price rigidity because:
A.there is a gap in the marginal revenue curve within which changes in marginal cost
will not affect output or price.
B.demand is inelastic above and elastic below the going price.
C.the model assumes firms are engaging in some form of collusion.
D.the associated marginal revenue curve is perfectly elastic at the going price.
17) Which of the following product-groups is a leading export of the United States?
A.Home appliances
B.Metals
C.Agricultural products
D.Computers
18) A profit-maximizing firm should not undertake an R&D project for which the:
A.expected rate of return exceeds its interest-rate cost of funds.
B.interest-rate cost of funds exceeds the expected rate of return.
C.expected returns are in the distant future.
D.the expected returns, though potentially very large, are uncertain.
19) According to proponents of human capital theory, education:
A.Increases a worker’s productivity
B.Identifies more productive workers for employers, but does not directly increase
productivity
C.Should result in all workers with college degrees earning more than all workers who
hold only high school diplomas
D.Is an investment with primarily higher returns and lower risks than those available
through investments in physical or financial capital
20) Which statement best characterizes the long-run decline in the agricultural industry?
A.The growth in the demand for farm products has exceeded the growth in the supply
of such products, causing rising farm product prices and falling farm income
B.The growth in the supply of farm products has exceeded the growth in the demand
for such products, causing falling farm product prices and falling farm income
C.The supply of farm products has increased while the demand for such products has
decreased, causing falling farm product prices and falling farm income
D.The demand for farm products has increased while the supply of such products has
decreased, causing rising farm product prices and rising farm income
21) Which one of the following would increase income inequality as measured by
official Census data and the quintile distribution?
A.A doubling of Social Security retirement benefits.
B.The elimination of the SNAP program.
C.The elimination of the TANF program.
D.Reduced divorce rates.
22) A nation’s balance of trade on goods is equal to its exports of goods less its imports
of:
A.Goods
B.Capital
C.Financial assets
D.Official reserves
23) Which of the following best describes the “invisible hand” concept?
A.Ample regulation of business by the government will maximize the public’s best
interests
B.The market system works best when resources are free to move from one use to
another
C.The problem of scarcity can best be overcome in a system of mixed capitalism
D.Self-interest in a market system will automatically promote the public interest as well
24) The Patient Protection and Affordable Care Act (PPACA) will set up so-called
insurance exchanges where consumers can compare various insurance policies that
meet certain government-set standards.
25)
Refer to the above graph. It shows the supply curve for a product before tax (S0) and
after an excise tax is imposed (S1). If 500 units of the product are sold after the tax is
imposed, the amount of tax revenue going to the government is:
A.$125
B.$250
C.$375
D.$500
26) Why does the short-run marginal-cost curve eventually increase for the typical
firm?
27) Firms in the market for soccer balls are selling in a purely competitive market. A
firm in the soccer ball market has an output of 5,000 balls, which it sells for $10 each.
At the output level of 5,000 the average variable cost is $6.00, the average total cost is
$7.50, and the marginal cost is $10.00. What would you expect the firm to do in the
short run? The market in the long run?
28) What are two strategies that entrepreneurs use to earn more than the normal profit?
Will these strategies earn economic profits that normally persist over time? Explain.
29) Describe how rent-seeking behavior works.
30) Both Economist Flores and Economist Jenkins have been monitoring the cucumber
market and have noted that the equilibrium price of cucumbers and quantity of
cucumbers sold have risen over the last year. Flores and Jenkins, however, disagree
about why this change has occurred. Flores holds that both supply and demand have
increased and that the shift in demand has been greater than the shift in supply. Jenkins,
however, argues that while demand has increased, supply has decreased and the shift in
supply is greater than the shift in demand. Which economist offers the most feasible
theory of why the equilibrium price and quantity of cucumbers have risen?
31) What factors explain the high level of level of productivity in the United States?
32) State the predictions about world population growth offered by demographers and
explain the basis on which they are made.