1) Nonrenewable natural resources are fixed in supply (actually or virtually).
2) The reason why the long-run supply curve for a purely competitive industry may be
upward-sloping is because of diminishing marginal returns.
3) The Coase Theorem suggests that the government does not have to be involved at all
in resolving a market failure due to externalities.
4) The creation of an adequate infrastructure in a nation is primarily the responsibility
of the public sector.
5) Because employer payments for health insurance are not subject to income or payroll
taxes, government in effect provides a subsidy to health care.
6) If the government runs a smaller budget deficit, then the public debt will decrease.
7)
Refer to the diagram. If this represents a typical firm in the industry and the firm is
producing at the profit-maximizing level of output in the short run, then in the long run
we would expect economic profits in this market to rise.
8) The richest 20% of the world’s population receives more than 80% of the world’s
income while the poorest 20% receives less than 2% of the world’s income.
9) When demand is price-elastic, an increase in price will lead to increased total
consumer spending for the product.
10)
Other things equal, larger wage differences between nations tend to increase the flow of
immigration toward the country with higher wage opportunities.
11) Purposeful behavior implies that everyone will make identical choices.
12)
Refer to the diagram. If the firm produced D units of output at price G, it would earn a
normal profit.
13) Economists prefer free trade to tariffs, and prefer tariffs to import quotas.
14)
Refer to the data. Suppose quantity demanded increased by 12 units at each price,
changing the equilibrium price in a direction and an amount for you to determine. Over
that price range, supply is:
A.perfectly elastic.
B.perfectly inelastic.
C.elastic.
D.inelastic.
15) Which of the following is true for a purely competitive firm in short-run
equilibrium?
A.The firm is making only normal profits
B.The firm’s marginal cost is greater than its marginal revenue
C.The firm’s marginal revenue is equal to its marginal cost
D.A decrease in output would lead to a rise in profits
16) Employer-provided private health insurance:
A.is unique to the United States and not typically found in other countries.
B.is the most common form of health care provision in industrialized countries.
C.substantially reduces the cost of health care provision relative to national health
insurance schemes.
D.provides a small percentage of health care spending in the United States.
17) Answer the question on the basis of the following cost data:
Refer to the data. The total cost of four units of output is:
A.$260.
B.$77.50.
C.$310.
D.$215.
18) As a result of the 2007-2009 recession:
A.declining imports created a trade surplus for the United States.
B.the U.S. trade deficit grew significantly.
C.declining imports reduced the size of the U.S. trade deficit.
D.roughly equivalent declines in both exports and imports left the U.S. trade balance
unchanged.
19)
Who tends to be generally very much against labor migration?
A.The migrant workers
B.The labor unions in the country of origin
C.The firms in the destination country
D.The labor unions in the destination country
20) Supporters of setting a cap on medical malpractice (or “pain and suffering”) awards
argue the following, except:
A.The caps will reduce medical malpractice premiums
B.They will help reduce health care costs
C.Patients should receive full compensation for losses, but should not be made wealthy
solely from the awards
D.The cap will improve the overall quality of the health care system
21) Under what circumstances would government loan guarantees be socially
beneficial?
A.When the guarantees socialize losses and privatize gains.
B.When the guarantees stimulate production of goods generating significant spillover
costs.
C.When the guarantees promote production of goods otherwise underproduced by the
private sector.
D.When the guarantees increase company profits.
22) Which of the following is not an implication of hardwired heuristics?
A.Getting people to make positive behavioral changes is about putting them in
situations where heuristics kick in and lead them to the desired outcome.
B.Getting people to make better decisions is simply a matter of providing more
information and more options.
C.People who know and understand hardwired tendencies of others can take advantage
of situations.
D.Even when confronted with irrefutable information that a behavior is detrimental,
people still may not change what they’re doing.
23) A consumer is maximizing her utility with a particular money income when:
A.the total utility derived from each product consumed is the same.
B.MUa/Pa = MUb/Pb = MUc/Pc = . . . = MUn/Pn.
C.MUa = MUb = MUc = . . . = MUn.
D.Pa = Pb = Pc = . . . = Pn.
24) If total utility is increasing, then marginal utility:
A.Must be declining
B.Must be increasing
C.Must be increasing at an increasing rate
D.May either be increasing or decreasing, but it must be greater than zero
25) Answer the question based on the following payoff matrix for a duopoly in which
the numbers indicate the profit from following either an international strategy or a
national strategy.
Refer to the above table. When this game reaches a Nash equilibrium, the payoffs will
be
A.$3M for both firms.
B.$17M for both firms.
C.$15 for firm A and $5 for firm B.
D.$5 for firm A and $15 for firm B.
26) Answer the question on the basis of the following cost data:
Refer to the data. The marginal cost of the fifth unit of output is:
A.$3.
B.$62.
C.$80.
D.$78.
27) A consumer is in equilibrium and is spending income in such a way that the
marginal utility of product X is 40 units and that of Y is 16 units. If the unit price of X
is $5, then the price of Y must be:
A.$1 per unit
B.$2 per unit
C.$3 per unit
D.$4 per unit
28) If total utility has reached a maximum level, and assuming that diminishing
marginal utility already applies, then what will happen as the consumer consumes
additional units of the product?
A.Marginal utility of the additional units will be greater than zero
B.Total utility will turn negative
C.Marginal utility of the additional units will turn negative
D.Total utility will increase at a diminishing rate
29) Illegal immigration positively contributes to the U.S. standard of living by
reducing:
A.the fiscal burdens of state and local governments.
B.the average wages of domestic-born workers.
C.crime rates.
D.prices of goods and services produced with illegal immigrant labor.
30) In monopolistically competitive markets, resources are:
A.overallocated because long-run equilibrium occurs where price exceeds marginal
cost.
B.underallocated because long-run equilibrium occurs where price exceeds marginal
cost.
C.overallocated because long-run equilibrium occurs where marginal cost exceeds
price.
D.underallocated because long-run equilibrium occurs where marginal cost exceeds
price.
31) Explain how changes in incomes, population, and lifestyles contribute to increasing
health care costs.
32) Explain and evaluate the validity of the military self-sufficiency argument for trade
protection.
33) Competition is the mechanism that brings order out of potential chaos in a
price-directed economy. Explain.
34) In the long run, what would happen if the demand for agricultural products
suddenly became elastic? Explain.
35) What are network effects? How do they contribute to economies of scale?
36) What is the fast-second strategy? What are the risks to a dominant firm from using
such a strategy?
37) The Metropolitan Transit System recently announced a 50% increase in the price of
a transit ticket. The administrators said that they needed an increase in revenue to cover
their rising costs. Explain the economic rationale for this decision.
38) Why are banks using more automatic teller machines (ATMs) and employing fewer
human tellers? What economic principle is illustrated about resource markets by this
example?