1)
Refer to the diagram for a nondiscriminating monopolist. If the government regulates
the monopolist so that it charges the “fair return” price, the monopolist will produce
output N.
2) In dealing with market failures, the government always bases its decisions on
economic analysis of marginal cost and marginal benefit.
3) The operation of the “invisible hand” means the pursuit of private interests promotes
social interests in pure competition.
4) A progressive tax takes relatively more from the rich than it does from the poor.
5) Unfunded liabilities are one consequence of the preference for “clear benefits, hidden
costs” by politicians.
6) An increase in the real income of a consumer is one result from an increase in the
price of a product that the consumer is buying.
7) The wants of consumers are expressed in the product market with “dollar votes.”
8) From the economic point of view, discrimination:
A.No longer exists in the U.S. economy
B.Results in an actual domestic output that is below potential domestic output
C.Provides incentives for minority groups to work harder at their jobs
D.Results in an actual output that is no different from potential domestic output,
provided resources are fully employed
9) The so-called Tax Freedom Day of each year recognizes the day that:
A.The Federal government requires taxpayers to submit their taxes to the Internal
Revenue Service
B.Charitable contributions were made legal under the tax codes of the United States
government
C.The U.S. Supreme Court ruled that double taxation of income was illegal for
corporations and businesses
D.The average worker had earned enough income to pay his or her share of government
spending for that year
10) Joseph Schumpeter viewed capitalism as a process of “creative destruction”
because:
A.Profitable firms are bought out by larger firms
B.Capitalism would create wealth, but government would destroy it
C.The creation of new products would destroy the market for existing products
D.Invention is a creative process, but most ideas are destroyed when entrepreneurs
develop and market products
11) Which of the following statements best illustrates the concept of derived demand?
A.As income goes up, the demand for farm products will increase by a smaller relative
amount.
B.A decline in the price of margarine will reduce the demand for butter.
C.A decline in the demand for shoes will cause the demand for leather to decline.
D.When the price of gasoline goes up, the demand for motor oil will decline.
12)
Refer to the diagram. Total utility:
A.increases so long as additional units of Y are purchased.
B.becomes negative at 4 units.
C.increases at a diminishing rate, reaches a maximum, and then declines.
D.is maximized at 2 units.
13)
Refer to the labor market diagrams. The tactics of inclusive unionism are shown in
Figure(s):
A.5 only
B.3 only
C.4 and 5
D.1 and 2
14) The next three questions refer to the below graph, where Sd and Dd are the
domestic supply and demand for a product. The world price of the product is $6.
(a)How much total revenue would go to domestic producers if the market were closed
to international trade compared to a market open to international trade? Explain.
(b)If the economy is open to trade, but a $2 per unit tariff were applied, what would be
the total revenue going to domestic producers, foreign producers (after-tax revenue),
and to the government? Explain.
(c)What would be the difference in revenue with a tariff of $2 per unit versus a quota of
80 units?
15)
Refer to the diagram. Economists would argue that health care should be provided to
patients in:
A.some amount less than Q1
B.amount Q1
C.some amount between Q1 and Q2
D.amount Q2
16) In columns 1 and 2 in the following table is a demand schedule for agricultural
product A.
(a)What is the characteristic of elasticity in the price range given?
(b)By how much would the income of producers change if the amount of A produced
should increase from 1200 to 1400 bushels?
(c)If the amount of A produced were 1400 bushels and the demand for A decreased
from that shown in columns 1 and 2 to that shown in columns 1 and 3, what would
happen to the income of farmers?
(d)Assume that the government supports a price of $3.60, that the demand for A is that
shown in columns 1 and 2, and that farmers grow 1440 bushels of A. What will be the
total income of farmers at the support price? How much of this income will come from
consumers and how much from government?
17) A positive statement is concerned primarily with:
A.some goal that is desirable to society.
B.what should be.
C.what is.
D.the formulation of economic policy.
18) A consumer will buy a new product rather than an existing product:
A.when the MU/P of the new product is less than the MU/P of the existing product.
B.when the substitution of the new product for the old product increases the consumer’s
total utility.
C.only if the new product has a lower price than the existing product.
D.only if the MU of the new product exceeds the MU of the existing product.
19) The supply of loanable funds is an upward-sloping curve because the:
A.Higher the interest rate, the more households consume, and the more households save
B.Higher the interest rate, the less households consume, and the more households save
C.Lower the interest rate, the more households consume, and the more households save
D.Lower the interest rate, the less households consume, and the more households save
20) Other things equal, the voluntary relocation of employable migrants from
low-paying nations to high-paying nations will:
A.increase business or capitalist incomes in the low-paying nations.
B.reduce real output in the world.
C.increase business or capitalist incomes in the high-paying nations.
D.reduce wage rates in the low-paying nations.
21) Answer the question on the basis of the following five data sets wherein it is
assumed that the variable shown on the left is the independent variable and the one on
the right is the dependent variable. Assume in graphing these data that the independent
variable is shown on the horizontal axis and the dependent variable on the vertical axis.
Refer to the data sets. For which data set(s) is the vertical intercept zero?
A.Data set 4.
B.Data set 5.
C.Data sets 2 and 3.
D.Data set 1.
22) The period since the Industrial Revolution has been extraordinary because despite
unprecedented:
A.Population growth, there has been a substantial increase in the standard of living in
industrialized nations
B.Population growth, there has been a substantial decrease in the productivity in
industrialized nations
C.Declines in economic efficiency, there has been a rise in the standard of living in
industrialized nations
D.Declines in economic efficiency, there has been a rise in population growth in
industrialized nations
23) The U.S. price support program, which guaranteed prices for currently grown crops:
A.ended with the passage of the Freedom to Farm Act of 1996.
B.began with the Grain Planting Act of 1914.
C.remains the core of U.S. farm policy.
D.was restored in full and expanded by the Food, Conservation, and Energy Act of
2008.
24) What is the managed float?
25) Explain the principal-agent problem for representative democracy.
26) A pure monopolist sells output for $4.00 per unit at the current level of production.
At this level of output, the marginal cost is $3.00, average variable costs are $3.75, and
average total costs are $4.25. The marginal revenue is $3.00. What is the short-run
condition for the monopolist and what output changes would you recommend?
27) Trade deficits are a mixed blessing. Interpret and elaborate.
28) Identity the major sources of funding for health care and the relative percentages.