1) If a public good provides social benefits that are greater than its costs, then majority
of voters would always vote in favor of producing the good.
2) The nation that has a comparative advantage in a particular product will be the only
world exporter of that product.
3) The distribution of household income in the United States becomes more unequal
after taxes and transfer payments are taken into account.
4) The MRP of labor curve is the firm’s labor demand curve.
5) The federal government in 2006 enacted limits on “pain and suffering” awards on
medical malpractice lawsuits against physicians.
6) An increase in the price of a product normally enables a consumer to reach a higher
indifference curve.
7) An example of direct foreign investment is:
A.a U.S. bank granting a loan to a Guatemalan firm.
B.General Motors building an auto production facility in China.
C.a U.S. government foreign aid grant to Bangladesh.
D.the purchase of debt issued by the Panamanian government.
8) The study of how people (or firms) behave in strategic situations is called:
A.cost-benefit analysis.
B.recursive analysis.
C.normative economics.
D.game theory.
9) Infrastructure is best illustrated by:
A.Business equipment and factories
B.Agricultural machinery and tools
C.Financial institutions
D.Roads and bridges
10) The demand for most products varies directly with changes in consumer incomes.
Such products are known as:
A.complementary goods.
B.competitive goods.
C.inferior goods.
D.normal goods.
11) If oligopolistic firms facing similar cost and demand conditions successfully
collude, price and output results in this industry will be most accurately predicted by
which of the following models?
A.The kinked demand curve model of oligopoly
B.The price-leadership model of oligopoly
C.The pure monopoly model
D.The monopolistic competition model
12) Elephant populations have:
A.expanded everywhere because of state control of elephant populations.
B.declined in countries where they are owned by local villages, and expanded where
they are owned by the state.
C.expanded in countries where they are owned by local villages, and declined where
they are owned by the state.
D.declined everywhere, regardless of whether property rights over elephants are
recognized.
13)
Refer to the diagram. If labor is the only variable input, the marginal product of labor is
at a:
A.maximum at point a.
B.minimum at point a.
C.maximum at point b.
D.minimum at point b.
14) If a purely competitive firm is producing where price exceeds marginal cost, then:
A.the firm will fail to maximize profit, but resources will be efficiently allocated.
B.the firm will fail to maximize profit and resources will be overallocated to the
product.
C.the firm will fail to maximize profit and resources will be underallocated to the
product.
D.resources will be underallocated to the product, but the firm will maximize profit.
15) In many large U.S. cities, taxicab companies operate as near monopolies because
of:
A.Patents
B.Licenses
C.Economies of scale
D.Strategic pricing
16) One major consequence of the overconfidence effect is that:
A.Some people cannot correct a personal trait that might be causing them to fail in
many ventures
B.Someone could persist in pursuing a failed policy despite overwhelming evidence of
the failure
C.Bad decisions can be made because people will act without pausing to see whether
their intuition is correct or not
D.Some people may wrongly believe in their forecasting ability to predict future
outcomes of risky investments
17) A statement of coercion by one firm is:
A.An empty threat if it is believed by the other firm
B.A credible threat if it is not believed by the other firm
C.Always a credible threat whether or not it is believed by the other firm
D.A credible threat if it is believed by the other firm
18) Expanding per capita incomes in the United States have resulted in a(n):
A.More-than-proportionate increase in the demand for agricultural products
B.Proportionate increase in the demand for agricultural products
C.Less-than-proportionate increase in the demand for agricultural products
D.Absolute decline in the amount of agricultural products consumed
19) In the table below are the supply and demand schedules for Malaysian ringgits.
(a)What will be the rate of exchange for the Malaysian ringgit and for the U.S. dollar?
(b)What happens if the U.S. and Malaysian governments fix or peg the price of a ringgit
at $0.50?
20)
Refer to the figure. Suppose the graphs represent the demand for use of a local golf
course for which there is no significant competition (it has a local monopoly); P denotes
the price of a round of golf; Q is the quantity of rounds ‘sold” each day. If the left graph
represents the demand during weekdays and the right graph the weekend demand, then
over the course of a full seven-day week this price-discriminating, profit-maximizing
golf course should sell a total of:
A.300 rounds.
B.740 rounds.
C.900 rounds.
D.1,200 rounds.
21) Answer the question on the basis of the following 2012 balance of payments data (+
and -) for the hypothetical nation of Zabella. All figures are in billions of dollars.
Refer to the given data. Zabella’s balance on financial account shows a:
A.deficit of $10 billion.
B.surplus of $5 billion.
C.deficit of $28 billion.
D.surplus of $13 billion.
22) Assume a state government levies a 5% sales tax on all consumption expenditures.
Consumption expenditures at six income levels are shown in the table below. Compute
the sales tax paid and the average tax rate at these incomes in the table.
What type of tax is the sales tax in this case? Why?
23) Explain the statement: Clean air and water have become increasingly scarce and
valuable resources because they have been treated in the past as if they were free and
unlimited in supply. What methods might be used to internalize spillover costs?
24) What are the two major parts of the Medicare program?
25) Give two examples of price fixing in the news.
26) What is productive efficiency and how does it differ from allocative efficiency?
27) What economic functions do rent, interest, and profit payments perform? How
effective are they in performing these functions?