1) In drawing a particular budget line, money income and the prices of the two products
are fixed.
2) The marginal productivity theory of resource demand suggests that those resources
whose productivity levels are high will end up getting a higher share of the economy’s
income.
3) Dictators/proposers tend act more self-interested when playing the dictator game
versus the ultimatum game.
4) The consumer will select that point on the budget line which puts the consumer on
the highest attainable indifference curve.
5) A side benefit of international trade is that it links national interests and increases the
opportunity costs of war.
6) The percent of total employment in the U.S. that is accounted for by farms has been
declining in the last six decades or so, but the absolute number of farm employment has
actually risen slightly over those decades.
7) The substitution effect suggests that when consumers judge product quality by price,
they will substitute high-priced products for low-priced products.
8) “Behaviorists” in antitrust applications believe that a firm that dominates a market is
not necessarily behaving unfairly.
9) Heuristics generally help people make faster decisions.
10) Inclusive unions restrict the number of jobs directly by shifting the labor supply
curve to the left; exclusive unions restrict the number of jobs by imposing
above-equilibrium wage rates on the employer.
11) The basic reason why the debate between income equality versus inequality is
on-going is because there is a tradeoff between income equality and economic
efficiency.
12) One major point of disagreement between neoclassical economics and behavioral
economics is the assumption of rationality.
13) Illegal immigration helps improve the standard of living for U.S. citizens by
keeping prices lower.
14) In the long run, a firm can increase its output quantity, but it will be limited by the
size of its existing production plant.
15) Fixed exchange rates are often maintained by using all of the following except:
A.Open speculation by individual traders in foreign currency markets
B.International monetary reserves held by central banks
C.Controls on imports and exports such as tariffs and quotas
D.Domestic macroeconomic adjustments using monetary and fiscal policies
16) In one year the United States had a current account deficit of $461 billion. The
balance on the capital account was -$8 billion. What was the balance on the financial
account?
A.-$461 billion
B.+$469 billion
C.-$469 billion
D.+$453 billion
17)
Refer to the diagram. The budget line shift that moves the consumer’s equilibrium from
point A to point B suggests:
A.an increase in the demand for product X.
B.a decrease in the demand for product X.
C.no change in the demand for product X.
D.that X is an inferior good.
18) Use the following information and table to answer the next two questions. Suppose
the demand for wheat during a certain time is that shown in the table below. The
Federal government wishes to support the price of barley at $3.40 a bushel.
(a)What would the competitive market price of barley be if the output of barley were
1100 thousand bushels during that year? What action would the government take?
(b)What would the competitive market price of barley be if the output were 1025
bushels during that period of time? What action would the government take?
19) Government monetary authorities manipulate the supply of money in the economy
primarily to:
A.Ensure high profits for commercial banks
B.Provide sufficient currency to individuals and businesses to conduct their daily
business
C.Keep the dollar strong measured against the currencies of foreign nations
D.Influence the interest rate and the levels of investment, output, and prices in the
economy
20) If an economy produces its most wanted goods but uses outdated production
methods, it is:
A.achieving productive efficiency but not allocative efficiency.
B.not achieving productive efficiency.
C.achieving both productive and allocative efficiency.
D.engaged in roundabout production.
21) The more elastic a monopolistic competitor’s long-run demand curve, the:
A.greater its excess capacity.
B.higher its price relative to that of a pure competitor having the same cost curves.
C.lower its long-run profit.
D.lower its average total cost at its profit-maximizing level of output.
22) Competition in a market system denotes a condition where:
A.The diffusion of economic power limits its potential abuse
B.Any given product can be purchased at a wide range of prices
C.Contractual agreements among individual firms are restricted and avoided
D.A few large sellers are constantly jostling for market share
23) Under a system of freely flexible (floating) exchange rates, a U.S. trade deficit with
Mexico will tend to cause:
A.the U.S. government to ration pesos to U.S. importers.
B.a flow of gold from the United States to Mexico.
C.an increase in the peso price of dollars.
D.an increase in the dollar price of pesos.
24) Marginal product is:
A.the output of the least skilled worker.
B.a worker’s output multiplied by the price at which each unit can be sold.
C.the amount an additional worker adds to the firm’s total output.
D.the amount any given worker contributes to the firm’s total revenue.
25) The amount of calendar time associated with the long run:
A.is less than that associated with the immediate market period.
B.varies from industry to industry.
C.is the same for all firms.
D.is, by definition, any length of time greater than one year.
26)
Refer to the diagrams. If $4 is Firm B’s profit-maximizing price, its:
A.ATC must be $4.
B.MC must be $4.
C.MR must be $4.
D.MC must be zero.
27) Global resource demand has:
A.remained relatively constant because increases in population have been offset by
declining consumption per person.
B.declined because of technological progress.
C.remained constant because population growth and increased consumption per person
have been offset by technological progress.
D.increased because population growth and increased consumption per person have
more than offset reduced demand due to technological progress.
28) An increase in money income:
A.shifts the consumer’s budget line to the right.
B.shifts the consumer’s budget line to the left.
C.increases the slope of the budget line.
D.has no effect on the budget line.
29) If the unit price of a product is P and buyers buy a given quantity Q, then sellers
would collect total revenues equal to:
A.P x Q
B.P + Q
C.P – Q
D.Q – P
30) The long-run supply curve would be upward-sloping if:
A.Resource prices fall as industry production contracts
B.Resource prices rise as industry production contracts
C.Resource prices are not affected by changes in industry output-level
D.Resource prices are set by the government
31) Assume that a consumer purchases a combination of products A and B. The MUa is
5 and the Pa is $5. The MUb is 6 and the Pb is $6. What should this consumer do to
maximize utility?
32) Newspaper item: Due to lower grain prices, consumers can expect retail prices of
choice beef to begin dropping slightly this spring with pork becoming cheaper after
midsummer, the Agriculture Department predicted. This reflects increasing supply, the
department said. Does the statement use the term supply correctly? What effects might
this announcement have on consumer demand? Explain.
33) What are the limitations to the diversification for stability argument for trade
protection?
34) Though wages under bilateral monopoly are logically indeterminate, some wage
rate is actually established in such market situations. Explain those economic and
noneconomic factors that might be pertinent to the establishment of this wage.
35) David Ricardo, a nineteenth century economist, wrote The price of corn is not high
because a rent is paid, but a rent is paid because the price of corn is high. Explain this
statement in the context of supply and demand.
36) Explain how market failures such as the lack of property rights affect extraction of
resources by business firms.