“Letting the data speak” in economics refers to:
A. using a layperson’s terms in publications to explain your findings.
B. collecting and analyzing data with econometric tools.
C. focusing only on the heuristic model.
D. using only deductive reasoning.
Answer:
When public choice economists look at labor markets, they:
A. capture the same aspects of reality that are captured by other economists.
B. focus on the tensions among social classes and generally see exploitation of workers
by capitalists.
C. generally see supply and demand forces leading to equilibrium.
D. see individuals lobbying politicians to protect their monopolies.
Answer:
The equilibrium solution for the following payoff matrix is:
A. -1, -1.
B. 5, 0.
C. 2, 2.
D. 10, 1.
Answer:
A sequential game is one where:
A. players act together to achieve a common goal.
B. players take turns making moves and/or decisions.
C. players make their moves and/or decisions at the same time.
D. there is never a winner if players act rationally.
Answer:
The demand curve for a monopolist differs from the demand curve faced by a
competitive firm because the demand curve for:
A. a competitive firm lies above its marginal revenue curve.
B. a competitive firm is inelastic.
C. a monopolist is the market demand curve.
D. a monopolist lies below its marginal revenue curve.
Answer:
Long-run competitive equilibrium requires:
A. average costs to be zero for all firms in the industry.
B. price to be zero for all firms in the industry.
C. economic profits to be zero for all firms in the industry.
D. accounting profits to be zero for all firms in the industry.
Answer:
When a U.S. company establishes a call center in India that answers its customer
service calls, the United States is
A. outsourcing, a form of importing services.
B. outsourcing, a form of exporting services.
C. insourcing, a form of importing services.
D. insourcing, a form of exporting services.
Answer:
Governments that impose sin taxes on goods they believe are harmful to the consumer
may not take into account deadweight loss because:
A. producer surplus increases when sin taxes are instituted.
B. the demand curves reflects individuals’ desire but not their ability to purchase.
C. the consumer surplus that is lost may not reflect the consumer’s welfare.
D. individuals are self-interest-seeking rational beings.
Answer:
The short-run average total cost curve is generally assumed to be:
A. U-shaped.
B. horizontal.
C. upward-sloping.
D. downward-sloping.
Answer:
Refer to the graph shown. When the market is in equilibrium, producer surplus is equal
to:
A. 500.
B. 1,000.
C. 1,500.
D. 2,000.
Answer:
Suppose average movie attendance is 250 million when prices are $7 a ticket and 200
million when prices are $9 a ticket. Other things being equal, the data imply that the
elasticity of demand for movie tickets is:
A. elastic, so the increase in price caused total revenue to rise.
B. elastic, so the increase in price caused total revenue to fall.
C. inelastic, so the increase in price caused total revenue to rise.
D. inelastic, so the increase in price caused total revenue to fall.
Answer:
In the early days of the Internet, selling and buying from other individuals were
dangerous because one never knew if the person on the other side of the transaction was
honest. eBay.com became successful because it lessened that problem with its feedback
rating system that let buyers and sellers develop a reputation. eBay.com’s innovation is
an example of overcoming:
A. the free rider effect.
B. negative externalities.
C. positive externalities.
D. an information problem.
Answer:
Given that diesel cars get much better gas mileage than the typical car, an increase in
the price of gasoline would be expected to:
A. increase the demand for diesel cars.
B. decrease the demand for gasoline.
C. decrease the demand for diesel cars.
D. increase the demand for gasoline.
Answer:
Combining the idea of freedom from constraint with well-intentioned guidance leads to:
A. purposeful behavior.
B. incentive compatibility problems.
C. libertarian paternalism.
D. market failure.
Answer:
Refer to the graph shown. This set of cost curves is:
A. correct.
B. wrong because the ATC should be below the AVC.
C. wrong because the marginal cost curve should go through the minimum points of the
AVC and ATC curves.
D. wrong because the marginal cost curve should not intersect the average total cost
curve.
Answer:
If Americans suddenly wanted European products because they were deemed more
fashionable, the:
A. demand curve for the euro would shift right.
B. demand curve for the euro would shift left.
C. supply curve for the euro would shift right.
D. supply curve for the euro would shift left.
Answer:
Assume that the T-shirt industry is perfectly competitive. If the industry is in long-run
equilibrium when the market price of T-shirts is $10:
A. minimum long-run average total cost is less than $10.
B. marginal cost exceeds $10.
C. minimum long-run average total cost is $10.
D. minimum average variable cost equals marginal cost.
Answer:
Normative economics seeks to:
A. determine the most appropriate economic goals for a society.
B. determine how government policies affect the economy.
C. objectively explain how the economy functions.
D. objectively explain economic problems such as inflation and unemployment.
Answer:
Goods A and B cost $1 each. The total utility one could get from consuming one unit of
good A is 30. The total utility one could get from consuming two units of good B is 60.
Based on rational choice one:
A. should consume more of good A.
B. should consume more of good B.
C. should be indifferent between consuming goods A and B.
D. would not be able to decide what to do because there is not enough information.
Answer:
If a machine cost $50,000 initially and is expected to last for 20 years but is worth
$60,000 after one year because it is in short supply, an accountant most likely would
say that:
A. the machine’s cost for each of its 20 years of existence is $2,500.
B. the machine’s cost for each of its 20 years of existence is $3,000.
C. during the first year the machine had no cost; it provided a revenue to the firm.
D. the value of the machine will continue to increase 20 percent per year for the next 20
years.
Answer:
Refer to the table shown. Botswana’s opportunity cost of producing nickel (in terms of
gold) is:
A. 3/5.
B. 5/3.
C. 60.
D. 100.
Answer:
Which of the following statements is a correct interpretation of some economists’
views?
A. When the incomes of the poor are increased, the poor purchase more goods and
services, and this causes lower profits.
B. When the government gives income to the head of a household, other members of
the household remain in need.
C. When the rich do well, the total pie is increased so much that the benefits that trickle
down to the poor are greater than the proceeds they would get from redistribution.
D. When the rich do well, the total pie is decreased, so that the poor are worse off than
they were before.
Answer:
Profit is:
A. the same as cost.
B. the same as revenue.
C. what is left over from total revenue after all of the appropriate costs have been
subtracted.
D. what is left over from total cost after all of the appropriate revenues have been
subtracted.
Answer:
In the absence of economies of scale, advertising:
A. is not used by monopolistic competitors.
B. cannot influence demand.
C. increases the average total cost of producing a given amount of output.
D. is used by perfectly competitive firms.
Answer:
Refer to the graph shown of average costs for a typical firm. The lowest per-unit costs
for the industry could be achieved if:
A. one firm produced 333 units of output.
B. two firms each produced 500 units of output.
C. one firm produced 1,000 units of output.
D. three firms each produced 333 units of output.
Answer:
When it is impossible to carry out a controlled experiment, economists often turn to a:
A. natural experiment.
B. precommitment strategy.
C. self-confirming equilibrium.
D. purposeful behavior.
Answer:
Refer to the table shown. Marginal cost:
A. never increases.
B. decreases and then increases.
C. increases and then decreases.
D. never decreases.
Answer:
As long as marginal cost is below marginal revenue, a perfectly competitive firm
should:
A. increase production.
B. hold production constant.
C. decrease production.
D. reconsider past production decisions.
Answer:
The marginal income tax rate is:
A. always less than the average tax rate.
B. always equal to the average tax rate.
C. the tax rate applied to all income.
D. the tax rate applied to an additional dollar of income.
Answer:
The demand curve for a firm in perfect competition is equal to its:
A. marginal cost curve.
B. marginal revenue curve.
C. average total cost curve.
D. average fixed cost curve.
Answer:
International market failures:
A. are more likely to be solved in the presence of a world government.
B. are less likely to be solved in the presence of a world government.
C. are equally likely to be solved in the presence or absence of a world government.
D. do not occur in the presence or absence of a world government.
Answer: