1) The demographic transition view of population growth argues that, on average (and
as perceived by parents), the marginal:
A.benefits of extra children are larger in IACs than in DVCs.
B.costs of extra children are lower in IACs than in DVCs.
C.costs of extra children are larger in IACs than in DVCs.
D.benefits of extra children are the same in DVCs and IACs.
2) According to prospect theory, what strategy will firms typically employ with regard
to pricing and packaging of their goods, when faced with rising production costs?
A.Firms will increase both package sizes and prices but will increase prices more to
communicate to consumers that the product has greater value.
B.Firms will reduce package sizes but keep prices the same, thus increasing the per unit
price of the good.
C.Firms will keep package sizes the same but lower prices and attempt to cover the
higher costs with greater revenue.
D.According to prospect theory, the choice of strategy doesn’t matter, as consumers are
generally able to recognize price increases regardless of what form they take.
3) Approximately what percent of the world’s income is received by the poorest
one-fifth of the world’s population?
A.2
B.5
C.7
D.10
4) If the price of a good increases, then in the market for the type of labor needed to
produce this good:
A.Employment will decrease
B.The labor supply will increase
C.The marginal product (MP) of labor will increase
D.The marginal revenue product (MRP) of labor will increase
5) Individual transferable quotas are limited in their effectiveness because:
A.they are only enforceable within 200 miles of a nation’s shores.
B.government, rather than the market, sets their price.
C.they encourage wasteful spending by fishers in ITQ areas.
D.they are not tradable.
6) Technological advance improves allocative efficiency by:
A.enhancing monopoly power.
B.reducing income inequality.
C.giving society a more-preferred mix of goods and services.
D.encouraging saving.
7) Answer the question on the basis of the following table that shows the total costs and
total benefits facing a city of five different potential baseball stadiums of increasing
size. All figures are in millions of dollars.
Refer to the table. The marginal cost and marginal benefit of stadium B (relative to A)
are:
A.$20 million and $50 million, respectively.
B.$100 million and $200 million, respectively.
C.$30 million and $50 million, respectively.
D.$20 million and $60 million, respectively.
8)
Refer to the profits-payoff table for a duopoly. If initially firm X’s price was $6 and Y’s
price was $5:
A.X would find it profitable to cut price, provided Y also cut price.
B.Y would find it profitable to cut price, provided X also cut price.
C.Y would find it profitable to raise price by $1, provided X would also raise price by
$1.
D.both firms would profit by simultaneously lowering their prices by $1.
9) One basic problem faced by central planners, but hardly present in a market system,
has to do with:
A.Determining the production goals or targets in a factory
B.Having limited resources and trying to match them with unlimited wants
C.Coordinating production in various industries so that bottlenecks do not develop
D.Providing financial resources for increasing the real flows of products in the
economy
10)
Refer to the diagram showing the domestic demand and supply curves for a specific
standardized product in a particular nation. If the world price of this product is $1, this
nation will:
A.export all of the product.
B.import all of the product.
C.import some of the product and produce some of the product domestically.
D.neither export nor import the product.
11) Which of the following statements is correct?
A.The Social Security Act requires all employers to insure their workers against
industrial accidents and diseases
B.An increase in the degree of income inequality means that the income level of the
poor is falling while the income level of the rich is rising
C.Over 90 percent of the workers in the United States are currently covered by Social
Security
D.About one-fifth of our population is now classified as living in poverty
12) The following table shows cost data for a firm that is selling in a purely competitive
market.
Refer to the above table. If the product price is $290, the per-unit economic profit at the
profit-maximizing output is:
A.$0
B.$76
C.$119
D.$152
13) Which one of the following expressions best states the idea of opportunity cost?
A.”A penny saved is a penny earned.”
B.”He who hesitates is lost.”
C.”There is no such thing as a free lunch.”
D.”All that glitters is not gold.”
14) Answer the question on the basis of the following demand and cost data for a
specific firm.
Refer to the above data. Suppose that entry of firms into the industry changes this firm’s
demand schedule from columns 1 and 3 to columns 2 and 3. Maximum economic profit
will:
A.Decrease to $25
B.Decrease to $35
C.Decrease to $70
D.Decrease to zero
15) Assume that a consumer purchases a combination of products. Product A is an old
and reliable product. Product B is a new and appealing product. The MUa/Pa = 40 and
MUb/Pb = 45. To maximize utility without spending more money, the consumer should:
A.Purchase less of A and more of B
B.Purchase more of A and less of B
C.Purchase more of both A and B
D.Make no change in A and B
16) The pure rate of interest in economic models is best approximated by the:
A.1-month Treasury bills
B.Prime interest rate
C.Federal funds rate
D.20-year Treasury bond rate
17) On a per unit basis, economic profit can be determined as the difference between:
A.marginal revenue and product price.
B.product price and average total cost.
C.marginal revenue and marginal cost.
D.average fixed cost and product price.
18) The table below shows the marginal utility schedules for old product X and new
product Y for a hypothetical consumer. The price of X is $4 and the price of good Y is
$2. The income of the consumer is $20.
(a)If the consumer can only buy old product X, how much will the consumer buy and
what will be the total utility per dollar spent?
(b)If the consumer buys both old product X and new product Y, how much will the
consumer buy of each to maximize utility?
(c)If the consumer purchases the utility-maximizing combination of old product X and
new product Y, total utility will be ___________.
(d)The consumer was originally limited to purchasing old product X but now can also
purchase new product Y. What is the increase in total utility from the original situation
when the consumer purchases the utility-maximizing combination of both X and Y?
19) Answer the question on the basis of the following demand schedule:
Refer to the data. The price elasticity of demand is unity:
A.throughout the entire price range because the slope of the demand curve is constant.
B.in the $4-$3 price range only.
C.over the entire $3-$1 price range.
D.over the entire $6-$4 price range.
20) Suppose that corn prices rise significantly. If farmers expect the price of corn to
continue rising relative to other crops, then we would expect:
A.the supply of ethanol, a corn-based product, to increase.
B.consumer demand for wheat to fall.
C.the supply to increase as farmers plant more corn.
D.the supply to fall as farmers plant more of other crops.
21) In the table below are the marginal product data for resource Y. Assume that the
quantities of other resources employed by the firm remain constant. Compute the total
product (output) of the firm for each of the seven quantities of resource Y employed and
enter these figures in the table. Assume that the firm sells its output in an imperfectly
competitive market and that the prices at which it can sell its product are those given in
the table. Compute and enter in the table total revenue and the marginal revenue
product for each of the seven units of resource Y.
How many units of resource Y would the firm employ at each of the following resource
prices?
22) Interpret this statement: If diminishing returns did not occur, the world could be fed
out of a flower pot.
23) Compare the factors that explain the elasticity of resource and product demand.
24) Suppose the U.S. Congress is considering passing an excise tax that would increase
the price of a pack of cigarettes by $1.00. What would be the likely effect of this change
on the demand and supply of cigarettes? What is likely to happen to cigarette prices and
the quantity consumed if the tax bill is enacted?
25) What is the shape of the expected-rate-of-return curve as presented in this chapter?
Why does it have this shape?
26) How does consumer choice differ from consumer sovereignty in a market system?
27) How have states worked to overcome the temptation of increased government
spending and decreased taxation?