1) Central planning often suffers from a coordination problem and an incentive
problem.
2) Given demand, the more inelastic the supply of a product, the larger the portion of an
excise tax that is borne by producers.
3) Behavioral economics observes that people generally do not act according to their
self-interest.
4) We would expect the cross-elasticity of demand between popcorn and potato chips to
be negative.
5) Each point on a single indifference curve reflects the same level of total utility for a
consumer.
6) Other things equal, the shorter the loan period and the larger the loan size, the higher
is the interest rate charged by the lender.
7) When the price of a product falls, the income effect induces the consumer to
purchase more of it while the substitution effect prompts her to buy less.
8) Monetary and fiscal policies are tools that the government can use to try to stabilize
the economy.
9) The short run is a period of time during which all costs are fixed costs.
10) Tariffs create larger gains to domestic producers than losses to domestic consumers.
11) A fishery is a stock of fish or other marine animal thought of as a logically distinct
group, and usually identified by its location and species.
12) The government receives all of the benefits associated with the production of a
public good.
13) R&D activities by government and universities have not been an important factor in
fostering technological advance.
14) Whenever a product is put on special sale at a discounted price, total revenue from
the product increases. This indicates that the coefficient of elasticity for the product is
greater than 1.
15)
Refer to the graph above, showing the long-run supply and demand curves in a purely
competitive market. The curves suggest that in this industry, the dollars’ worth of other
products that have to be sacrificed in order to produce each unit of the output of this
industry is:
A.Constant
B.Increasing
C.Decreasing
D.Not indicated in the graph
16) Assume that U.S. and European governments adopt a system of flexible exchange
rates, and the figure below shows the market for euros.
Refer to the graph above. If currency traders think the European economy will
experience a recession and the U.S. economy will not, then this event will most likely
cause the:
A.Euro to appreciate
B.Euro to depreciate
C.U.S. dollar to depreciate
D.The supply of euros to decrease
17) As it relates to R&D, the imitation problem is that:
A.patents, copyrights, and trademarks hinder imitation and thus limit economically
desirable diffusion.
B.brand names create entry barriers for would-be competitors.
C.diffusion of innovation occurs more slowly than is desirable from society’s
perspective.
D.a firm’s rivals may be able to copy its new product or process innovation, reducing
the original firm’s return on R&D.
18)
Refer to the diagram. An industrial union could maximize employment by negotiating a
wage rate of:
A.W4
B.W3
C.W2
D.W1
19) The equilibrium exchange rate between two currencies is determined by the supply
and demand in the:
A.Traded goods markets
B.Stock exchange markets
C.Foreign exchange markets
D.Money markets
20) Profit-maximizing extraction companies will attempt to:
A.extract resources as quickly as possible.
B.delay extraction as long as possible.
C.find rates of extraction that maximize the flow of profits over time.
D.extract resources at a constant rate every year to minimize price fluctuations.
21) Chris is preparing for a comprehensive course exam by reading a textbook with
chapters of equal length and difficulty. The number of chapters she can comprehend and
master when studying is: (1) hour one: 1.5 chapters; (2) hour two: 2.0 chapters; (3) hour
three: 1.5 chapters; (4) hour four: 1 chapter; (5) hour five: 0 chapters. Diminishing
marginal returns to studying sets in for Chris after hour:
A.One
B.Two
C.Four
D.Five
22)
Refer to the diagram. If society is currently producing 9 units of bicycles and 4 units of
computers and it now decides to increase computer output to 6, the cost:
A.will be 4 units of bicycles.
B.will be 2 units of bicycles.
C.will be zero because unemployed resources are available.
D.of doing so cannot be determined from the information given.
23) More than 80 percent of the world’s income is earned by what percentage of the
world’s population?
A.5 percent
B.10 percent
C.20 percent
D.40 percent
24) Use the following demand schedule and possible supply schedules, A-D, to answer
the question.
Refer to the above schedules. Suppose that price influences the availability of the
economic resource, and the equilibrium price is $2. Which resource supply schedule
would apply in this case?
A.A
B.B
C.C
D.D
25)
Given the indifference curve and budget line above, which of the following must be
true at point A?
A.MUA/PA< MUB/PB
B.MUA/PA> MUB/PB
C.MUA/PA = MUB/PB
D.PA/PB = MUB/MUA
26) In the Microsoft antitrust case the final settlement with the U.S. government in
2002 involved:
A.A business remedy of firing the top executives
B.A social remedy of donating software to non-profit organizations
C.A structural remedy of splitting of units of the company
D.A behavioral remedy prohibiting certain business practices
27)
Refer to the diagram for a monopolistically competitive firm. If more firms were to
enter the industry and product differentiation were to weaken, then:
A.resource misallocation would become more severe.
B.the demand curve would become more elastic.
C.equilibrium output would decline and equilibrium price would rise.
D.equilibrium output would decline and equilibrium price would fall.
28) While eating at Alex’s “Pizza by the Slice” restaurant, Kara experiences diminishing
marginal utility. She gained 10 units of satisfaction from her first slice of pizza
consumed and would only receive 5 units of satisfaction from consuming a second
slice, at the same price. Based on this information we can conclude that:
A.Alex may have to lower the price to convince Kara to buy a second slice.
B.Kara will not eat a second slice, even if it is given to her at no charge.
C.Kara will definitely want to buy a second slice of pizza.
D.even if Kara buys a second slice, she will not buy a third slice.
29)
Refer to the above graphs. Minimum efficient scale occurs at:
A.Q1
B.Q2
C.Q3
D.Q4
30) Why is a balance-of-payments deficit not necessarily good or bad if it occurs in one
given year, but potentially very harmful if maintained over a number of years?
31) Fill in the following table for a product in a purely competitive market. The market
price for the good is $32. Use the total revenue-total cost approach to evaluate at what
quantity the firm can maximize its profits.
32) Give three different examples of rent-seeking behavior.
33) What is the imitation problem resulting from technological advance? How might a
dominant firm respond to the threat from product innovation by a smaller firm?
34) Explain how the price elasticity of supply is related to the prices of antiques and
gold.
35) Explain the paradox of voting that is illustrated in the table below in choices
between the same expenditure on three different public goods. The numbers under each
name indicate the voting preferences (first, second, or third choice) of each of the three
citizens in the society.
36) Explain the reasoning behind why employment could increase for domestic-born
workers if immigrant workers become complementary resources rather than substitute
resources.
37) Explain why the demand for food is inelastic in terms of the substitution effect and
diminishing returns.
38) How does a fixed exchange rate system work? How can a nation maintain its fixed
exchange rate?