1) When new firms enter a purely competitive industry, the market supply curve will
shift to the left.
2) Land reform (or the reform of land ownership) is a relatively minor institutional
obstacle to economic growth in many developing countries.
3) Income from inherited wealth and property resources provides strong support for the
marginal productivity theory of income distribution.
4) The prominence of employer-provided health insurance in the U.S. is one major
cause of the overconsumption and rapidly rising costs of health care in the country.
5) A “fast-second strategy” refers to a situation where small competitors of a dominant
firm will wait for the dominant firm to innovate, and then quickly imitate the dominant
firm’s innovations.
6) In most cases, a monopolist practicing price discrimination will end up earning less
economic profits than a non-discriminating monopolist.
7) A rational consumer will cease purchasing a product at that quantity where marginal
utility begins to diminish.
8) Special interest groups result from people with strong preferences on a particular
issue banding together to let policymakers know their preferences.
9) Professions that require its practitioners to pass a licensure exam, like accountants
and doctors, exemplify the exclusive union model of how a labor union raises wage
rates.
10) Which of the following statements best describes a protective tariff?
A.An excise tax that is usually applied to products which are not produced domestically
in order to raise revenues for government
B.An excise tax that is designed to put foreign producers at a competitive disadvantage
in selling in domestic markets
C.A specification of the maximum amount of a product that may be imported in any
period of time which is often used to protect domestic producers of a product
D.Such activities as restricting the issuance of licenses for imported products or setting
unreasonable standards for quality or safety in order to restrict imports and protect
domestic markets
11)
Refer to the above graphs. A short-run equilibrium that would produce profits for a
monopolistically competitive firm would be represented by graph:
A.A
B.B
C.C
D.D
12) A major prediction of the kinked demand curve model is:
A.Price stability in oligopolies
B.Price instability in oligopolies
C.Stability of production costs in oligopolies
D.Instability of costs in oligopolies
13) Assume that in a monopolistically competitive industry, firms are earning economic
profit. This situation will:
A.Reduce the excess capacity in the industry as firms expand production
B.Attract other firms to enter the industry, causing the existing firms’ profits to shrink
C.Cause firms to standardize their product to limit the degree of competition
D.Make the industry allocatively efficient as each firm seeks to maintain its profits
14) The vertical distance between the horizontal axis and any point on a
nondiscriminating monopolist’s demand curve measures:
A.the quantity demanded.
B.product price and marginal revenue.
C.total revenue.
D.product price and average revenue.
15) Antitrust authorities are least likely to take action against:
A.conglomerate mergers.
B.horizontal mergers.
C.interlocking directorates.
D.price-fixing.
16) The price elasticity of demand for widgets is 0.80. Assuming no change in the
demand curve for widgets, a 16 percent increase in sales implies a:
A.1 percent reduction in price.
B.12 percent reduction in price.
C.40 percent reduction in price.
D.20 percent reduction in price.
17) Many members of Congress who represent urban low-income areas vote in favor of
farm subsidies. In return, many representatives of agricultural areas support programs
such as food stamps, which provide benefits for the urban poor. This situation would be
an example of:
A.Confusing symptoms with causes
B.Misguided subsidies
C.Rent-seeking behavior
D.Political logrolling
18) A nation can increase its production possibilities by:
A.Shifting resources to produce more consumer goods and less investment goods
B.Shifting resources from private goods to public goods
C.Improving labor productivity
D.Eliminating unemployment
19) Economists Chamberlain and Prante of the Tax Foundation note that if the U.S.
population in 2004 were grouped into quintiles by income:
A.Only the top income quintile paid more in taxes than the benefits they received from
government spending
B.The top two income quintiles paid more in taxes than the benefits they received from
government spending
C.The top three income quintiles paid more in taxes than the benefits they received
from government spending
D.Only the bottom income quintile paid less in taxes than the benefits they received
from government spending
20) When a monopolistically competitive firm is in long-run equilibrium:
A.P = MC = ATC
B.MR = MC and minimum ATC > P
C.MR > MC and P = minimum ATC
D.MR = MC and P > minimum ATC
21) If the minimum wage is set too high, in some labor markets we can expect to see:
A.a shortage of labor.
B.an increase in on-the-job training.
C.a surplus of labor.
D.a decline in wage costs.
22) The Law of Supply suggests that the price-elasticity of supply is:
A.Positive
B.Negative
C.Always greater than 1
D.Always less than 1
23) The following table shows the short-run total cost data for a firm.
All of the following statements are correct, except that the firm has:
A.Economies of scale
B.Fixed costs of $80
C.Constant marginal cost
D.An average fixed cost of $20 at 4 units of output
24)
Refer to the diagram. The firm will shut down at any price less than:
A.P1
B.P2
C.P3
D.P4
25) The president of a toy company asks you for advice about whether the company
should cut the price of its best-selling doll this year based on the following information:
last year the company cut the price of its best-selling doll by 10% and the total revenues
from doll sales increased by 10%.
26) Explain the logic behind the demographic transition view.
27) Adam Smith in his 1776 book the Wealth of Nations describes the concept of an
invisible hand. Explain what he means by an invisible hand.
28) What are the two major problems facing the health care system?
29) Explain and give examples of invention. What does government do to protect it?
30) What are some extensions to the simplified model of the loanable funds market?