1) Farmer Jones is producing wheat, and must accept the market price of $6.00 per
bushel. At this time, her average total costs and her marginal costs both equal $8.00 per
bushel. Her average variable costs are $5 per bushel. In order to maximize profits or
minimize losses, farmer Jones should:
A.Increase output
B.Increase selling price
C.Produce zero output and close down
D.Continue producing, but reduce output
2) “3-D printers” can reduce the cost of producing stuff because they:
A.Eliminate massive factory costs
B.Reduce transportation costs significantly
C.Make use of low-cost materials and low-energy requirements
D.Exploit huge economies of scale in production
3) The earned-income tax credit:
A.increases the personal income tax liability of low-income working families.
B.provides a cash payment to low-income working families if their tax credit exceeds
their tax liability.
C.is designed to make labor force employment less attractive.
D.was eliminated as part of welfare reform in 1996.
4)
Refer to the above graph. This pure competitive firm will not produce unless price is at
least:
A.$2
B.$5
C.$7
D.$10
5) A nation can produce two products: tanks and autos. The table below is the nation’s
production possibilities:
Refer to the above table. In moving from combination C to B, the opportunity cost of
producing 100 more autos is:
A.2 units of tanks
B.1 unit of tanks
C.850 units of autos
D.1800 units of autos
6)
Refer to the diagram above. If box E represents government, box C businesses, box D
the resource market, and box B the product market, then government purchases of
computers, office supplies, and military hardware would be illustrated by arrows:
A.5 and 6
B.7 and 8
C.9 and 10
D.10 and 11
7) The supply of product X is perfectly inelastic if the price of X rises by:
A.5 percent and quantity supplied rises by 7 percent.
B.8 percent and quantity supplied rises by 8 percent.
C.10 percent and quantity supplied stays the same.
D.7 percent and quantity supplied rises by 5 percent.
8) The economic perspective used in customer decision making at fast-food restaurants
is reflected in:
A.customers selecting the shortest line.
B.decisions for which marginal costs exceed marginal benefits.
C.all customer lines tending to be of different lengths.
D.irrational purchasing of high-fat-content food.
9) Over the past decade, U.S. per capita consumption of water:
A.and energy have both increased.
B.has increased, while per capita consumption of energy has fallen.
C.and energy have leveled off or fallen.
D.has fallen, while per capita consumption of energy has increased.
10) Assume you pay a tax of $4,000 on a taxable income of $24,000. If your taxable
income were $30,000, your tax payment would be $5,000. This suggests that the tax is:
A.progressive.
B.proportional.
C.regressive.
D.discriminatory.
11) Over the range of output where the slope of the short-run total cost curve becomes
steeper:
A.Fixed costs are increasing
B.Marginal cost is increasing
C.Marginal cost is positive, but decreasing
D.Marginal cost is lower than average variable cost
12) In the U.S. market economy, the government performs the following prominent
roles, except:
A.Provide public goods and services
B.Promote economic stability and growth
C.Set prices for most resources
D.Modifies the distribution of income
13) Neoclassical economics assumes that people have the following characteristics,
except:
A.They are stable and definite in their tastes and preferences
B.They are good at assessing future options as they are in assessing current ones
C.They are driven by their pursuit of maximum satisfaction
D.They care deeply about fairness and are often generous
14) The market system’s answer to the fundamental question “How will the goods and
services be produced?” is essentially:
A.”With as much machinery as possible.”
B.”Using the latest technology.”
C.”By exploiting labor.”
D.”In ways that minimize the cost per unit of output.”
15) Assume that a decline in consumer demand occurs in a purely competitive industry
that is initially in long-run equilibrium. We can:
A.predict that the new price will be greater than the original price.
B.predict that the new price will be less than the original price.
C.predict that the new price will be the same as the original price.
D.not compare the original and the new prices without knowing what cost conditions
exist in the industry.