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1) The U.S. Census Bureau estimates that more than one million illegal immigrants
enter the United States each year.
2) In order to achieve economic efficiency in market economies like the U.S., the
government must be stripped of its power to coerce.
3) U.S. exports to Japan create a supply of dollars and a demand for yen in the
foreign-exchange market.
4) The rate of unionization is substantially higher for protective service workers than
for sales workers.
5) Economists treat economic immigration as a human capital investment decision.
6) The free-rider problem refers to the local government's problem of finding funds to
subsidize public transportation.
7) Agricultural price support programs result in consumers paying lower prices for the
product.
8) A budget deficit is another name for the public debt.
9) If you receive a gift whose market price is $20, but you consider it to be worth only
$10, then:
A.there is a $10 or 50 percent value gain.
B.there may or may not be a value loss.
C.there is a $10 or 50 percent value loss.
D.you can be relatively certain the giver was a sibling or other close relative.
10) One consequence of the long-run problem faced by farms has been a:
A.rapid increase in the price of farm output.
B.massive exit of workers from agriculture to other sectors of the economy.
C.smaller average farm size.
D.reduction in U.S. exports of farm products.
11)
Refer to the diagram showing the domestic demand and supply curves for a specific
standardized product in a particular nation. If the world price for this product is $1.60,
this nation will experience a domestic:
A.shortage of 160 units, which it will meet with 160 units of imports.
B.shortage of 160 units, which will increase the domestic price to $1.60.
C.surplus of 160 units, which it will export.
D.surplus of 160 units, which will reduce the world price to $1.00.
12)
Refer to the table representing Darcy's bank account. Assuming that $1,000 was
deposited into her account at the beginning of year 1, and no further deposits or
withdrawals were made, what is the value for cell D?
A.$67.40.
B.$180.
C.$191.
D.It cannot be determined.
13) If you pay $2,640 annually on a $22,000 loan A, and pay $1,800 on a $12,000 loan
B, then the interest rate is:
A.12 percent on loan A and 18 percent on loan B
B.10 percent on loan A and 15 percent on loan B
C.12 percent on loan A and 15 percent on loan B
D.15 percent on loan A and 12 percent on loan B
14) The graph below shows the supply and demand curves for dollars in the
pound/dollar market.
Refer to the graph above. Assume that D1 and S1 are the initial demand for and supply
of dollars. Suppose that Britain's demand for dollars increases from D1 to D2. If the
British government wishes to fix the exchange rate at the initial level, one possible way
to do this is for the government to:
A.Buy and add more to its dollar reserves
B.Sell pounds in exchange for U.S. dollars
C.Encourage the British to import more U.S. products
D.Sell some of its dollar reserves
15) The so-called G-8 is one group that sometimes influences the exchange rates
between major currencies. For example, in 2000 the G-8 governments agreed to sell
U.S. dollars in order to:
A.Counter the depreciation of the euro
B.Counter the depreciation of the U.S. dollar
C.Support the appreciation of the Swiss franc
D.Support the appreciation of the Japanese yen
16) In the following question you are asked to determine, other things equal, the effects
of a given change in a determinant of demand or supply for product X upon (1) the
demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the
equilibrium quantity (Q) of X.
Refer to the given information. An increase in the price of a product that is a close
substitute for X will:
A.decrease D, increase P, and decrease Q.
B.increase D, increase P, and decrease Q.
C.increase D, increase P, and increase Q.
D.increase D, decrease P, and increase Q.
17) Which of the following will not cause the demand for product K to change?
A.A change in the price of close-substitute product J.
B.An increase in incomes of buyers of product K.
C.A change in the price of product K.
D.A change in consumer tastes for product K.
18)
Refer to the above graph of the supply and demand for agricultural products. If point 1
reflects the supply and demand for agricultural products in the U.S. in the 1950s, then
which point would best characterize long-run change in the equilibrium for agricultural
products since that time?
A.2
B.4
C.7
D.8
19) When Lucian starts his new job, he is given the option to contribute to his
retirement fund, which the company will match up to 5 percent of his base salary.
Lucian knows he can afford to contribute to his retirement fund; he only needs to file a
form to activate the contributions and matching. According to prospect theory, if Lucian
is typical in his behavior, we would expect him to:
A.take full advantage of the matching contribution because that would maximize his
financial well-being.
B.not file the form to start the contribution and match.
C.negotiate with his boss for a higher match in order to increase his returns.
D.only start contributions if the retirement portfolio is heavily weighted in high-return
assets.
20) Consumer surplus:
A.is the difference between the maximum prices consumers are willing to pay for a
product and the lower equilibrium price.
B.the difference between the maximum prices consumers are willing to pay for a
product and the minimum prices producers are willing to accept.
C.the difference between the minimum prices producers are willing to accept for a
product and the higher equilibrium price.
D.rises as equilibrium price rises.
21) Which of the following is not one of the five fundamental questions?
A.What prices will be charged for goods and services?
B.Who will get the goods and services?
C.What goods and services will be produced?
D.How will the system promote progress?
22) One special feature about health-care services is that society regards them as:
A.Private goods
B.An entitlement
C.Something to be rationed by price and ability to pay
D.Normal goods
23) If there was initially a shortage in the market for a product, then:
A.Sellers will drive the price down
B.Sellers will drive the price up
C.Buyers will drive the price down
D.Buyers will drive the price up
24) The market system does not produce public goods because:
A.there is no need or demand for such goods.
B.private firms cannot stop consumers who are unwilling to pay for such goods from
benefiting from them.
C.public enterprises can produce such goods at lower cost than can private enterprises.
D.their production seriously distorts the distribution of income.
25) Acreage allotment programs were designed to:
A.reduce the supply of agricultural products.
B.make the demand for farm products more price elastic.
C.bolster the demand for agricultural commodities.
D.accelerate the movement of human resources out of farming.
26)
Refer to the diagram in which the downsloping lines are budget lines and I1, I2, and I3
comprise an indifference map. The combinations of products M and N indicated by
points 1, 2, and 5 are such that:
A.point 2 yields more utility than either 1 or 5.
B.points 1 and 5 yield more utility than point 2.
C.points 1, 2, and 5 yield equal amounts of utility.
D.the levels of utility associated with these three points cannot be compared.
27) The following table contains hypothetical data for the U.S. balance of payments in a
year. Answer the following question on the basis of these data. All figures are in billions
of dollars.
U.S. goods exports +$390
U.S. goods imports -498
U.S. service exports +133
U.S. service imports -107
Net investment income +12
Net transfers -22
Capital account -5
Foreign purchases of U.S. assets +156
U.S. purchases of foreign assets -59
Refer to the table above. The data indicate that there was a trade:
A.Deficit in goods and also a trade deficit in services
B.Surplus in goods and also a trade surplus in services
C.Deficit in goods and a trade surplus in services
D.Surplus in goods and a trade deficit in services
28) Explain how economists determine whether a government program should be
reduced or eliminated.
29)
30) Debbie was earning $100,000 a year working as a scientist for a drug company. She
decided to start her own business that conducted drug trials. She estimates this
entrepreneurial talent or forgone entrepreneurial income to be $10,000 a year. She used
$500,000 in savings that earned 5 percent interest annually to finance the new business.
In the first year, the firm earned revenue of $1,500,000. The costs for rent, supplies, and
employees salaries were $1,100,000. What was the accounting profit for the new
business? What was the economic profit (or loss)? Explain your calculations for both
questions.
31) Give examples of two substitute goods and two complementary goods. In each case
explain why the goods are substitutes or complements.
32) (Consider This) List two secondary effects from the increased price of corn as part
of the promotion of ethanol.
33) Why are indifference curves downsloping?
