An inverse relationship occurs between two variables when as one goes:
A. up the other goes up.
B. up the other goes down.
C. up the other does not change.
D. down the other goes down.
Answer:
Refer to the following graph.
This set of cost curves is:
A. correct.
B. wrong because the average total cost and the marginal cost curves are reversed.
C. wrong because the average fixed cost curve is drawn incorrectly.
D. wrong because the average fixed cost curve is shown to be below the average
variable cost.
Answer:
When the number of Alaskan fishermen increased, salmon prices fell to record lows.
This could be shown graphically by a shift in:
A. the demand curve right.
B. the supply curve left.
C. the demand curve left.
D. the supply curve right.
Answer:
Suppose quantity demanded is 2,000 when price is $10 and 3,000 when price is $5. If a
monopolist who was initially charging a price of $10 discovers a way to
price-discriminate, it will be able to increase revenue from $20,000 to:
A. $25,000 by charging consumers with less elastic demands only $5 and keeping the
price for consumers with more elastic demands at $10.
B. $35,000 by charging consumers with less elastic demands only $5 and keeping the
price for consumers with more elastic demands at $10.
C. $25,000 by charging consumers with more elastic demands only $5 and keeping the
price for consumers with less elastic demands at $10.
D. $35,000 by charging consumers with more elastic demands only $5 and keeping the
price for consumers with less elastic demands at $10.
Answer:
Under oligopoly:
A. there are many sellers in the industry.
B. there are only a few sellers in the industry.
C. the demand for each firm’s output is perfectly elastic.
D. there are no barriers to entry.
Answer:
Can outcomes that are not Pareto optimal be considered better than outcomes that are
Pareto optimal?
A. No; Pareto optimal is defined as the best possible outcome.
B. Yes, if the non-Pareto optimal outcome is more efficient than the Pareto optimal
outcome.
C. Yes, if the distribution of wealth in the Pareto optimal outcome is considered
undesirable.
D. Yes, if there are too many market failures in the Pareto optimal outcome.
Answer:
Cigarette taxes cause deadweight loss because:
A. they are regressive.
B. they are progressive.
C. they change people’s behavior.
D. they yield no revenue.
Answer:
Refer to the graph shown of average costs for a typical firm. If this industry consisted of
one firm producing 1,000 units and one firm producing 500 units:
A. the larger firm probably would be forced out through price competition.
B. the larger firm would earn higher profit than the smaller firm, but they could both
survive indefinitely.
C. the smaller firm probably would be forced out through price competition.
D. there is no way to predict which firm would have a competitive advantage.
Answer:
Given the equations for demand and supply: Qd = 48 – 4P and Qs = 4P – 16,
respectively, the quantity demanded equals the quantity supplied at a price of:
A. $4.
B. $8.
C. $12.
D. $16.
Answer:
Under monopolistic competition, there are:
A. few barriers to entry.
B. only a small number of sellers in the market.
C. significant barriers to entry.
D. only a few buyers in the market.
Answer:
Basic research is more likely to be funded by the federal than by state and local
government because basic research:
A. is usually conducted by oligopoly, the market structure that is most conducive to
preliminary research.
B. has negative externalities that are passed on to those who live outside the state.
C. is largely a public good; benefits flow to the whole world, not just the state.
D. has information problems that cause adverse selection.
Answer:
Differences in empirical estimates are:
A. rare in economics.
B. the norm in economics.
C. due to imprecise measuring devices.
D. due to error in the models of behavior.
Answer:
Countries that exported a lot of gas or oil would see their exchange rates go up as a
result. This in turn could make their manufacturing exports uncompetitive and possibly
slow economic growth. This situation can be described as the:
A. renewable curse.
B. depreciation curse.
C. resource curse.
D. common curse.
Answer:
Basing decisions on marginal cost and marginal benefit means that people should:
A. take no chances.
B. make only Pareto optimal choices.
C. weigh the costs and benefits and make the choice that provides the highest net
benefit.
D. weigh the costs and benefits and make the choice that provides the highest net cost.
Answer:
Refer to the table shown that depicts a third-party payer market. What is the cost of this
program to the third-party if a $2 co-pay is established?
A. $0
B. $150
C. $600
D. $1,200
Answer:
Which of the following topics is best categorized as a macroeconomic issue?
A. The choices a student makes in selecting college courses
B. The decision by Apple to produce fewer Macintosh computers
C. The effect of a drought on the price of corn
D. The effect of an increase in federal spending on the unemployment rate
Answer:
The upward-sloping portion of the long-run average total cost curve is caused by:
A. indivisible setup costs.
B. diseconomies of scale.
C. the absence of fixed inputs.
D. the presence of fixed inputs.
Answer:
Refer to the graph shown. At which point is elasticity 1?
A. A
B. B
C. C
D. D
Answer:
If the United States’ price level is below the world price level, all of the following
would be successful in raising the world price (supply) level except:
A. the dollar appreciating.
B. the U.S. gaining a comparative advantage.
C. wages in the U.S. falling.
D. the value of U.S. assets falling.
Answer:
Refer to the graph shown. As a result of a tariff T imposed on speedboats, the price
domestic consumers pay for speedboats probably will likely be:
A. P1.
B. P2.
C. P3.
D. P4.
Answer:
Threats to put tariffs on a nation in an attempt to get that nation to reduce its restrictions
on trade are called:
A. strategic trade policies.
B. trade adjustment assistance programs.
C. learning by doing.
D. inertia and cachet.
Answer:
Welfare capitalism is an economic system in which:
A. markets operate without government regulation.
B. government owns all of the means of production.
C. markets operate, but government regulates markets significantly.
D. laissez-faire operates unimpeded.
Answer:
Refer to the table that presents Mike and Janet’s demand for apples by the peck. If they
are the only two in the market, a market demand curve derived from this data would
show quantity demanded is:
A. 22 at price = $1 and 18 at price = $2.
B. 21 at price = $1 and 17 at price = $2.
C. 28 at price = $1 and 21 at price = $2.
D. 21 at price = $1 and 28 at price = $2.
Answer:
The study of individual choice is a focus in:
A. microeconomics.
B. macroeconomics.
C. normative economics.
D. Ricardian economics.
Answer:
At very high levels of output, total cost tends to:
A. increase at a constant rate.
B. increase at a decreasing rate.
C. increase at an increasing rate.
D. decrease at an increasing rate.
Answer:
The marginal cost curve intersects the:
A. total cost curve at its minimum point.
B. variable cost curve at its minimum point.
C. average variable cost curve at its minimum point.
D. average fixed cost curve at its minimum point.
Answer:
Which of the following market structures does not have predictable price and output
decisions at which the firms will arrive rationally?
A. Oligopoly.
B. Monopolistic competition.
C. Perfect competition.
D. Monopoly.
Answer:
Refer to the graphs shown. An increase in quantity demanded is best shown by which
arrow?
A. A
B. B
C. C
D. D
Answer:
The following table lists the utility that Steve receives from consuming oranges at $0.50
apiece. What is the marginal utility of increasing consumption from two to three
oranges?
A. 3
B. 6
C. 5
D. 12
Answer:
When an economy achieves economic efficiency, it:
A. is below a Pareto optimal position.
B. is at a Pareto optimal position.
C. is beyond a Pareto optimal position.
D. may or may not be at a Pareto optimal position.
Answer:
During the Industrial Revolution:
A. feudal lords lost their power to artisans.
B. mercantilists lost their power to capitalists.
C. artisans lost their power to mercantilists.
D. capitalists lost their power to mercantilists.
Answer: