1) “economics is concerned with how individuals, institutions, and society make
optimal choices under conditions of scarcity.” this statement is:
a.positive, but incorrect.
b.positive and correct.
c.normative, but incorrect.
d.normative and correct.
2) In the long run:
A.attempts to “fine tune” the economy cause the rate of unemployment to accelerate.
B.there is no inflation-unemployment tradeoff.
C.there is an inflation-unemployment tradeoff and the terms of that tradeoff have
worsened in recent years.
D.there is an inflation-unemployment tradeoff, but the terms of that tradeoff have
improved in recent years.
3) the ajax manufacturing company is selling in a purely competitive market. its output
is 100 units which sell at $4 each. at this level of output total cost is $600, total fixed
cost is $100, and marginal cost is $4. the firm should:
a.reduce output to about 80 units.
b.expand its production.
c.continue to produce 100 units.
d.produce zero units of output.
4) Housing subsidies for low-income households:
A.represent a cash transfer.
B.are a part of the U.S. social insurance programs.
C.represent a noncash transfer.
D.conflict with the leaky-bucket analogy.
5) with respect to the pure monopolist’s demand curve it can be said that:
a.the stronger the barriers to entry, the more elastic is the monopolist’s demand curve.
b.price exceeds marginal revenue at all outputs greater than 1.
c.demand is perfectly inelastic.
d.marginal revenue equals price at all outputs.
6) the historical reallocation of labor from agriculture to manufacturing in the united
states has:
a.been inflationary.
b.had no effect on the average productivity of labor.
c.increased the average productivity of labor.
d.reduced the average productivity of labor.
7) in the short run:
a.tvc will increase for a time at a diminishing rate, but then beyond some point will
increase at an increasing rate.
b.tvc will increase for a time at an increasing rate, but then beyond some point will
increase at a diminishing rate.
c.tvc will increase by the same absolute amount for each additional unit of output
produced.
d.one cannot generalize concerning the behavior of tvc as output increases.
8) If a firm is selling in an imperfectly competitive product market, then:
A.average product will be less than marginal product for any number of workers hired.
B.the marginal products of successive workers must be sold at lower prices.
C.the marginal products of successive workers can be sold at higher prices.
D.the marginal products of successive workers can be sold at a constant price.
9) as defined in national income accounting, investment includes:
a.business expenditures on machinery and equipment.
b.all consumption.
c.imports, but not exports.
d.all nonfood items.
10) an example of a public good is:
a.a movie theater.
b.a freight train.
c.the war on terrorism.
d.disneyland.
11) Those who contend that oligopolists are less likely than more competitive firms to
engage in R&D say that:
A.Oligopolists have little incentive to introduce costly new technology and produce
new products when they currently are earning large economic profit using existing
technology and selling existing products.
B.the undistributed profits of oligopolists give them a source of readily available,
relatively low cost funds for financing R & D.
C.entry barriers enable oligopolists to sustain the profits they gain from innovation.
D.the large size of oligopolists’ R&D departments allow them to use very specialized,
expensive R&D equipment and employ teams of specialized researchers.
12) under which of the following circumstances would we observe the greatest increase
in real income?
a.nominal income falls by 2 percent, and the price level falls by 10 percent.
b.nominal income rises by 8 percent, and the price level rises by 4 percent.
c.nominal income rises by 12 percent, and the price level rises by 15 percent.
d.nominal income falls by 4 percent, and the price level rises by 6 percent.
13) A rising standard of living will:
A.necessarily reduce the population by reducing the birthrate.
B.increase the birthrate.
C.reduce the birthrate, but population may continue to grow if the death rate falls more
quickly.
D.reduce the birthrate initially, but will increase the birthrate significantly at higher
levels of income as people can afford to have more children.
14)
The Federal Reserve System regulates the money supply primarily by:
A.controlling the production of coins at the United States mint.
B.altering the reserve requirements of commercial banks and thereby the ability of
banks to make loans.
C.altering the reserves of commercial banks, largely through sales and purchases of
government bonds.
D.restricting the issuance of Federal Reserve Notes because paper money is the largest
portion of the money supply.
15) Government can promote workplace safety by:
A.breaking up concentrations of monopoly power.
B.reducing monopsony power.
C.promoting the use of recycled inputs.
D.providing workers information about workplace hazards.
16) Which of the following factors is not relevant in explaining the persistence of wage
differentials?
A.labor immobilities
B.compensating differences
C.free public education
D.noncompeting groups
17) the law of diminishing returns describes the:
a.relationship between total costs and total revenues.
b.profit-maximizing position of a firm.
c.relationship between resource inputs and product outputs in the short run.
d.relationship between resource inputs and product outputs in the long run.
18) in the short run a purely competitive seller will shut down if:
a.it cannot produce at an economic profit.
b.price is less than average variable cost at all outputs.
c.price is less than average fixed cost at all outputs.
d.there is no point at which marginal revenue and marginal cost are equal.
19) diseconomies of scale arise primarily because:
a.the short-run average total cost curve rises when marginal product is increasing.
b.of the difficulties involved in managing and coordinating a large business enterprise.
c.firms must be large both absolutely and relative to the market to employ the most
efficient productive techniques available.
d.beyond some point marginal product declines as additional units of a variable
resource (labor) are added to a fixed resource (capital).
20) according to behavioral economists, older workers tend to save more for retirement
than younger workers because:
a.older workers have less faith that the social security will be able to pay out promised
benefits.
b.older workers experience greater diminishing marginal utility from saving additional
dollars.
c.younger workers like to consume a greater variety of goods than older workers.
d.even though younger workers know it is important to save for retirement, they feel
less of a sense of urgency.