1) The endowment effect describes when people value a good more when they own it
than when they don’t.
2) Neoclassical theory suggests that to the extent impulse buying occurs, it is infrequent
and does not affect the ability of economic models to predict behavior.
3) If choice A wins over choice B in a majority vote, while choice B wins over choice C
in a majority vote, then we can conclude that choice A would win over choice C.
4) The provision of health insurance leads to a deadweight loss due to an
over-allocation of resources to health care.
5) Labor market discrimination occurs when equivalent labor resources are paid or
treated differently even though their productive contributions are equal.
6) The process by which new firms and new products destroy existing dominant firms
and their products is called creative destruction.
7) The following are government activities that are involved in public finance, except:
A.Providing public goods and services such as national defense and education
B.Running government-owned enterprises such as hospitals, utilities, and lotteries
C.Redistributing income through various taxes and income-transfer payments
D.Regulating the activities of firms in the financial sector of the economy
8) Which of the following might be expected to increase union membership?
A.Increased labor force participation by women and young people.
B.Decreased imports of manufactured goods.
C.Increased substitution of capital for labor in the production process.
D.Continued growth of service-related industries.
9) A headline reads “Lumber Prices Up Sharply.” In a competitive market, this situation
would lead to a(n):
A.Increase in the price and quantity of new homes
B.Decrease in the price and quantity of new homes
C.Increase in the price of new homes and decrease in quantity
D.Decrease in the price of new homes and increase in quantity
10) If the several oligopolistic firms that comprise an industry behave collusively, the
resulting price and output will most likely resemble those of:
A.bilateral monopoly.
B.pure monopoly.
C.monopolistic competition.
D.pure competition.
11) The marginal utility of the last unit of apples consumed is 12 and the marginal
utility of the last unit of bananas consumed is 8. What set of prices for apples and
bananas, respectively, would be consistent with consumer equilibrium?
A.$4 and $6
B.$6 and $4
C.$8 and $12
D.$16 and $9
12) Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1
million in a specific year. If the firm sold 4,000 units of its output at $300 per unit, its
accounting profits were:
A.$100,000 and its economic profits were zero.
B.$200,000 and its economic profits were zero.
C.$100,000 and its economic profits were $100,000.
D.zero and its economic loss was $200,000.
13) Marginal product:
A.diminishes at all levels of production.
B.may initially increase, then diminish, but never become negative.
C.may initially increase, then diminish, and ultimately become negative.
D.is always less than average product.
14) The elasticity of resource demand will be greater the:
A.smaller the portion of the product’s total costs accounted for by the resource.
B.less the elasticity of demand for the product it is producing.
C.easier it is to substitute other resources in production.
D.less the elasticity of resource supply.
15) Assume that the only variable resource used to produce output is labor.
Refer to the above table. When the firm hires four units of labor, the average product of
labor is:
A.5 units of output
B.7.50 units of output
C.8.50 units of output
D.30 units of output
16)
Refer to the above table. The marginal cost of producing the sixth unit of output is:
A.$10
B.$16.33
C.$25
D.$98
17) Assume that a consumer has a given budget or income of $12, and that she can buy
only two goods, apples or bananas. The price of an apple is $1.50 and the price of a
banana is $0.75.
Refer to the information given above. For this consumer, the opportunity cost of buying
one more apple is:
A.0.5 of a banana
B.0.8 of a banana
C.1 banana
D.2 bananas
18) A firm’s marginal benefit from its R&D expenditures is the:
A.Total amount spent on its R&D activities
B.Expected profit from the last dollar spent on R&D
C.Employment generated by the largest R&D project
D.Resources bought for all of its R&D activities
19) The table below shows the supply and demand schedules for the European euro.
Refer to the table above. Under a flexible exchange rate system, what will be the rate of
exchange for one euro?
A.$0.80
B.$0.90
C.$1.00
D.$1.10
20)
Refer to the diagram where curves (a) through (e) are for five different countries. Of the
countries listed below, income is most unequally distributed in country:
A.a.
B.b.
C.c.
D.d.
21) List the three major human resource problems in developing nations.
22) List six basic determinants of market supply.
23) Why is there no total revenue test for elasticity of supply?
24) What are the major barriers to entry that explain the existence of monopoly?
25) Job discrimination may actually result from rational decision making on the part of
firms and not because of prejudice. Explain this statement.
26) In a market system entrepreneurs or the managers they hire must deal with risk.
Discuss the incentives of these individuals when dealing with risk, relative to those of a
central planner in a command economy.
27) List the various causes of income inequality in the United States.
28) Doggy Treats is selling dog treats in a purely competitive market. Its output is 800
treats, which it sells for $10 a treat. At the 800-treat level of output, the marginal cost is
$11, the average variable cost is $9.00, and the average variable cost is $8.00. Should
the firm increase output, decrease output, or not produce? Why? How should the firm
determine that optimal level of output?