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1) The Federal Trade Commission:
A.is empowered to hold public hearings to investigate unfair practices.
B.prohibits interlocking directorates in interstate industries.
C.regulates airline fares.
D.regulates such transportation industries as railroads and trucking.
2) A child is given $4 of pocket money to be spent on either hard candies or chocolates.
Chocolates cost 40 cents and hard candies 80 cents each. The marginal utilities derived
from each product are as shown in the following table:
Refer to the above table. If the child buys either chocolates or hard candies one piece at
a time, what will be his first two purchases?
A.A hard candy, followed by another hard candy
B.A hard candy, followed by a chocolate
C.A chocolate, followed by a hard candy
D.A chocolate, followed by another chocolate
3) Answer the next two questions on the basis of the below diagrams which show
identical marginal utility from income curves from person X and person Y.
(a)If $80,000 in income is distributed such that person X has only $20,000 to spend and
person Y has $60,000 to spend, what will be the effect on marginal utilities?
(b)If the $80,000 in income were redistributed from situation A where person X spends
$20,000 and person Y spends $60,000 to a situation B where they both spend $40,000,
what would the utility gain or loss be for persons X and Y? Answer by specifying the
areas in the graph.
4) Any activity designed to transfer income or wealth to a particular individual or firm
at society's expense is called:
A.Patent protection
B.X-inefficiency
C.Price discrimination
D.Rent-seeking
5) A firm in an oligopoly is similar to a monopoly in that:
A.Both firms do not face competition from others
B.Both firms could have significant market power and control over price
C.Both firms face very inelastic demand for their products
D.Both firms do not need to advertize
6) The market system's answer to the fundamental question "How will the system
promote progress?" is essentially:
A."Through government-funded research programs."
B."Through redistribution of income to promote greater equality."
C."Through training and retraining programs."
D."Through the profit potential that encourages development of new technology."
7) The short-run supply curve for a purely competitive industry can be found by:
A.multiplying the AVC curve of the representative firm by the number of firms in the
industry.
B.adding horizontally the AVC curves of all firms.
C.summing horizontally the segments of the MC curves lying above the AVC curve for
all firms.
D.adding horizontally the immediate market period supply curves of each firm.
8) In which market does the following take place:
(a)Wages of farm workers
(b)The price of corn
(c)Rent on a plot of farm land
(d)The price of new farm equipment
(e)The price of milk
9) Which type of goods is most adversely affected by recessions?
A.Goods for which the income elasticity coefficient is relatively low or negative.
B.Goods for which the income elasticity coefficient is relatively high and positive.
C.Goods for which the cross elasticity coefficient is positive.
D.Goods for which the cross elasticity coefficient is negative.
10) One of the consequences of the U.S. trade deficit is that:
A.domestic inflation has resulted.
B.the accumulation of American dollars in foreign hands has enabled foreign firms to
build factories in America.
C.the distribution of income in the United States has become less unequal.
D.the system of flexible exchange rates has been abandoned in favor of a new gold
standard.
11) The following statements are true in the current exchange-rate system, except:
A.Major currencies like U.S. dollar, euro, pounds, and yen operate mostly in a flexible
system responding to supply and demand forces
B.Some developing nations peg their currencies to the dollar and allow their currencies
to fluctuate with it relative to other currencies
C.Each country uses its own unique currency; for example, only the U.S. uses the U.S.
dollar as its currency
D.Some nations peg their currencies to a "basket" or group of other currencies, rather
than to a single other currency
12) The estimated fiscal burden of illegal immigrant households in the United States is:
A.$800 million per year.
B.$20 billion per year.
C.$50 billion per year.
D.$4.5 billion per year.
