1) In a television advertisement for AFLAC supplemental health insurance, an ice
skater says to his skating partner, “Do you want to try a triple jump?” She responds,
“Why not, I have AFLAC.” This response illustrates the:
A.principal-agent problem.
B.Coase theorem.
C.moral hazard problem.
D.free-rider problem.
2) when entering a building, sam diverts his path to go through an open door rather than
make the physical effort to open the closed door that is directly in his path. this is an
example of:
a.irrational behavior.
b.a lazy person.
c.marginal benefit-marginal cost analysis.
d.programmed learning.
3) what do economies of scale, the ownership of essential raw materials, and patents
have in common?
a.they must all be present before price discrimination can be practiced.
b.they are all barriers to entry.
c.they all help explain why a monopolist’s demand and marginal revenue curves
coincide.
d.they all help explain why the long-run average cost curve is u-shaped.
4) which one of the following statements is correct?
a.relative scarcity is no longer a central idea in economics because we are in an age of
abundance.
b.most production possibilities curves are convex to the origin.
c.the production possibilities curve shows society’s preferences for consumer goods
relative to capital goods.
d.the central concept underlying the production possibilities curve is that of limited
resources.
5) there will be a surplus of a product when:
a.price is below the equilibrium level.
b.the supply curve is downward sloping and the demand curve is upward sloping.
c.the demand and supply curves fail to intersect.
d.consumers want to buy less than producers offer for sale.
6) Use the below graph to show what happens to
total revenue when: (a) price falls from P1 to P2; (b) price rises from P3 to P2. Explain
your answer in terms of areas of total revenue gained or lost using the alphabetical
letters representing different areas on the graph. (c) Is demand elastic or inelastic? How
do you know?
7) assume product a is an input in the production of product b. in turn product b is a
complement to product c. we can expect a decrease in the price of a to:
a.increase the supply of b and increase the demand for c.
b.decrease the supply of b and increase the demand for c.
c.decrease the supply of b and decrease the demand for c.
d.increase the supply of b and decrease the demand for c.
8) which of the following most closely relates to the idea of opportunity costs?
a.tradeoffs.
b.economic growth.
c.technological change.
d.capitalism.
9) A farmer who has fixed amounts of land and capital finds that total product is 24 for
the first worker hired; 32 when two workers are hired; 37 when three are hired; and 40
when four are hired. The farmer’s product sells for $3 per unit and the wage rate is $13
per worker.
Refer to the above information. What is the farmer’s profit-maximizing output?
A.20
B.32
C.37
D.40
10) The purchase of government securities from the public by the Fed will cause:
A.commercial bank reserves to decrease.
B.the money supply to increase.
C.demand deposits to decrease.
D.the interest rate to increase.
11) determine, other things equal, the effects of a given change in a determinant of
demand or supply for product x upon (1) the demand (d) for, or supply (s) of, x, (2) the
equilibrium price (p) of x and (3) the equilibrium quantity (q) of x.
refer to the above. an increase in the tastes and preferences for x will:
a.increase s, decrease p, and increase q.
b.decrease s, decrease p, and decrease q.
c.increase d, increase p, and increase q.
d.decrease d, decrease p, and decrease q.
12) Which of the following have substantially equivalent effects on a nation’s volume of
exports and imports?
A.exchange rate appreciation and a decrease in the domestic supply of money
B.exchange rate appreciation and domestic deflation
C.exchange rate depreciation and domestic deflation
D.exchange rate depreciation and domestic inflation
13) Assume that the firm is hiring labor in a purely competitive market.
The above data reveal that:
A.the firm is selling its product in a purely competitive market.
B.the firm is selling its product in an imperfectly competitive market.
C.there is no level of output at which this firm can operate at a profit.
D.the law of diminishing returns is not applicable to this firm.
14) Jack deposits his money at Bank 1, while Maria deposits her money at Bank 2.
Balance sheets for each bank are listed below.
(a)What will the banks balance sheets look like when Jack writes a $50,000 check to
Maria and the check clears?
(b)The reserve ratio is 20%. What are each banks excess reserves after the check clears
in (a)?
(c)How many additional loans can each bank make when Jack writes Maria another
check for $100,000?
15) the location of the supply curve of a product depends on:
a.the technology used to produce it.
b.the prices of resources used in its production.
c.the number of sellers in the market.
d.all of these.
16) Suppose that interest payments are $140 per year on a $1,000 loan and $1,188 per
year on a $8,485 loan. The interest rates on the two loans are:
A.14 percent and 20 percent, respectively.
B.14 percent on both loans.
C.18.8 percent on both loans.
D.1.4 percent and 11.8 percent, respectively.
17) The Celler-Kefauver Act of 1950:
A.modified patent legislation by reducing the number of years over which a patent is
applicable.
B.prohibited any firm from acquiring the real assets of another firm where the effect
was to lessen competition.
C.declared all conglomerate mergers to be illegal.
D.prohibited any firm from buying the stock of another firm where the effect was to
lessen competition.