1) If a firm increases all of its inputs by 10 percent and its output increases by 15
percent, then:
A.it is encountering diseconomies of scale.
B.it is encountering economies of scale.
C.the law of diminishing returns is taking hold.
D.the firm’s long-run ATC curve will be rising.
2) Which of the following shows the net difference between how much Americans
forgave in debts owed to them by foreigners compared with how much foreigners
forgave debts owed to them by Americans?
A.Current account
B.Capital account
C.Financial account
D.Net transfers
3) Suppose a firm is in a range of production where it is experiencing economies of
scale. Knowing this, we can predict that:
A.the long-run average total cost curve is upsloping.
B.a 10 percent increase in all inputs will increase output by less than 10 percent.
C.a 10 percent increase in all inputs will increase output by more than 10 percent.
D.the firm is encountering problems of managerial bureaucracy because of its size.
4) All of the following factors lead to overconsumption of health care, except:
A.The practice of defensive medicine
B.Health insurance that pays most of the health care costs
C.Government tax subsidy on employer-financed health insurance
D.Rising incomes resulting from economic growth
5) The so-called collective action problem refers to the:
A.Problems faced by organizers in setting up a labor union
B.Challenges faced by business when they have to deal with a labor union
C.Inability of the government to discern the true preferences of everyone in society
D.Greater difficulty in organizing and motivating large groups than small ones
6) Microeconomics:
A.is the basis for the “after this, therefore because of this” fallacy.
B.is not concerned with details, but only with the overall big picture of the economy.
C.is concerned with individual economic units and specific markets.
D.describes the aggregate flows of output and income.
7)
Refer to the above production possibilities curves. Curve (a) is the current curve for the
economy. Focusing on curve (a), point N suggests that the economy currently produces:
A.More goods for the future than at point P
B.Less goods for the future than at point P
C.Less goods for the present than at point P
D.A combination of output that is less than its potential
8) In the music industry, cassette tapes were replaced by compact discs, which in turn
are replaced by the iPod and MP3 technology. This process would be an example of:
A.The inverted-U theory
B.Creative destruction
C.Diminishing marginal utility
D.The law of diminishing returns
9) Chuck Grim has a price elasticity of demand for beer of 1.2. Suppose that the price
of beer is increased by 10 percent. What will happen to the total amount Chuck spends
on beer?
A.It will not change
B.It will decrease
C.It will increase
D.It is impossible to tell
10) Demographers refer to this as the “demographic transition”: The reduction in death
rates brought about by rising standards of living “causes a temporary population
explosion because parents – initially unaware that such a revolutionary change in death
rates has taken place – for a while keep having six or more children…to ensure that at
least two will survive to adulthood.” For which major industrialized country could this
statement be used to explain its current population trend?
A.United States
B.Japan
C.India
D.China
11) The government of a DVC may force the economy to save by deliberately causing
inflation. This policy is undesirable because inflation may:
A.distort investment away from productive facilities and toward luxury housing and
precious metals.
B.increase voluntary saving because the value of money is depreciating.
C.contribute to a balance of trade surplus.
D.entail all of these problems.
12) Which of the following is considered a potential solution to some regulatory
capture?
A.Bringing industry experts into the regulatory process.
B.Creating a standard set of regulations for all industries.
C.Deregulation of the industry.
D.Government subsidies for firms in the industry.
13) Which of the following is correct?
A.Money is a resource, but real capital is not.
B.Real capital is a resource, but money is not.
C.Neither money nor real capital is a resource.
D.Both money and real capital are resources.
14) Based on annual before-tax incomes data, about how many percent of U.S.
households had annual incomes of $100,000 or more in 2011?
A.5 percent
B.10 percent
C.20 percent
D.33 percent
15) Answer the question on the basis of the following information is for public good. Pa
and Pb represent the prices that citizens (a) and (b), the only two people in this nation,
are willing to pay for additional units of a quantity (Qc) of the public good. Qs
represents the quantity of the public good supplied by government at each of the
collective prices.
Refer to the above information. If only 1 unit of this public good is produced, then the
marginal benefit is:
A.$3 and the marginal cost is $9
B.$4 and the marginal cost is $7
C.$6 and the marginal cost is $3
D.$9 and the marginal cost is $3
16) Assume that a change in government policy results in greater production of both
consumer goods and investment goods. We can conclude that:
A.the economy was not employing all of its resources before the policy change.
B.the economy’s production possibilities curve has been shifted to the left as a result of
the policy decision.
C.this economy’s production possibilities curve is convex (bowed inward) to the origin.
D.the law of increasing opportunity costs does not apply in this society.
17) Answer the question on the basis of the following information. The demand for
commodity X is represented by the equation P = 100 – 2Q and supply by the equation P
= 10 + 4Q.
Refer to the given information. If demand changed from P = 100 – 2Q to P = 130 – Q,
the new equilibrium quantity is:
A.15
B.20
C.24
D.32
18) Because the federal government typically provides disaster relief to farmers, many
farmers do not buy crop insurance even through it is federally subsidized. This
illustrates:
A.the adverse selection problem.
B.the moral hazard problem.
C.the special interest effect.
D.logrolling.
19) Incomes of U.S. farmers are adversely affected by:
A.Very good harvests on farms abroad
B.Economic expansion abroad
C.Less protectionist farm policies abroad
D.Higher prices of farm products