1) The interest-rate cost-of-funds curve is perfectly elastic because firms can borrow as
much or as little as they want at market interest rates.
2) Mutually-cancelling advertising by oligopolistic firms tend to improve economic
efficiency in the industry.
3) The use of price-support programs in agriculture has hastened the exodus of
resources from agriculture.
4) A change in the relative prices for two goods can be shown as a parallel shift in a
consumer’s budget line.
5) Because families can afford to have more children, population growth is greater in
the IACs than in the DVCs.
6)
There was a big spike in legal immigration into the U.S. in 1989-1991, resulting from an
amnesty program through which many formerly illegal immigrants became legal residents.
7) Anticompetitive mergers are illegal under provisions of the Clayton Act (as
amended).
8) Assume that there are four consumers A, B, C, and D, and the prices that each of
them is willing to pay for a glass of lemonade is, respectively, $1.50, $1.20, $1.00, and
$0.90. If the actual price of lemonade is $1.00 per glass, then consumer surplus in this
market will be $0.70.
9) Modernizing economies that have declining birthrates may still experience
population growth because of rapidly declining death rates.
10) Consumer surplus is the reason why sometimes a shopper regrets having bought a
particular item.
11) Plant sizes get larger as you move from ATC-1 to ATC-4.
Refer to the above table. Which plant size would produce at least cost for the
3000-4000 level of output?
A.1
B.2
C.3
D.4
12)
Refer to the data. The value for Y is:
A.25
B.30
C.40
D.45
13)
Refer to the diagram where xy is the relevant budget line and I1, I2, and I3 are
indifference curves. At point K:
A.MUx = MUy.
B.MRS = Px/Py.
C.MRS = Py/Px.
D.Px exceeds Py.
14) Many economists believe that the key to breaking the vicious circle of poverty is to:
A.Cut down the mortality rates in poor nations
B.Reduce the birth rates in poor nations
C.Increase the mobility of labor and migration
D.Increase the rate of capital accumulation in poor nations
15)
Refer to the diagram, where Sd and Dd are the domestic supply and demand for a
product and Pc is the world price of that product. If the economy is opened to free trade,
the price and quantity sold of this product would be:
A.Pc and v.
B.Pa and z.
C.Pt and y.
D.Pc and z.
16) Suppose that an economy is producing on its production possibilities curve but is
not producing quantities of each good where the marginal benefit equals the marginal
cost for each good. This economy:
A.should not change its production because it cannot improve its allocation by shifting
resources.
B.can improve its allocation by lowering the unemployment rate.
C.can improve its allocation by producing more of one good and less of the other.
D.can improve its allocation by producing more of both goods.
17) Which pitfall to sound economic reasoning is illustrated when a person comments
that “capitalists focus only on profits and don’t care about their workers”?
A.Abstraction
B.Biases
C.The fallacy of composition
D.Confusing correlation and causation
18) The legal protection for publishers of books, computer software, movies, videos,
and musical compositions from having their works used or copied by others without
their permission is a:
A.Patent
B.Copyright
C.Brand name
D.Trademark
19) At the beginning of the year, one developing country (DVC) has a real income per
capita of $800. In a developed country (IAC), the real income per capita is $30,000.
Both countries experience a 4 percent growth rate for the year. At the end of the year,
the absolute income gap between these two countries will have increased from $29,200
to:
A.$30,368
B.$31,200
C.$30,120
D.$32,032
20) Because heuristics appear to be hardwired into the brain, the consequences include
the following, except:
A.It is sometimes difficult for people to correct detrimental behaviors or routines
B.People may be vulnerable to others who understand their hardwired tendencies
C.Heuristics make people consistently behave in a rational manner
D.People may make behavioral changes if they’re exposed to a situation where a
heuristic kicks in and starts driving their decision
21) One of the potential negative side-effects of pay in the form of sales commissions
is:
A.a greater incentive for salespeople to engage in unethical or fraudulent sales practices
that may eventually cause legal problems for the firm.
B.increased volatility of sales revenue for the firm.
C.the potential that pay levels may get so high that they will increase a firm’s marginal
wage cost more than its marginal revenue product.
D.an increased likelihood of shirking by workers.
22) The moral hazard problem arises primarily because of:
A.Individual bargaining
B.Negative externalities
C.Asymmetric information
D.Poorly defined property rights
23) Landowners will not receive any rent so long as:
A.there is any tax on land.
B.the supply and demand curves for land intersect.
C.the supply curve of land is perfectly inelastic.
D.the supply curve lies entirely to the right of the demand curve.
24) Answer the question on the basis of the following marginal utility data for products
X and Y. Assume that the prices of X and Y are $4 and $2 respectively and that the
consumer’s income is $18.
Refer to the data. What quantities of X and Y should be purchased to maximize utility?
A.2 of X and 1 of Y
B.4 of X and 5 of Y
C.2 of X and 5 of Y
D.2 of X and 6 of Y
25) Explain the relationship between the current account and the capital account in the
balance of payments.
26) What arguments are made in support of social regulation?
27) How can the United States compete successfully with relatively low-wage nations
such as India and China?
28) Is saying that there is growing income inequality just another way of saying that the
rich are getting richer, and the poor are getting poorer? Explain your answer.
29) Describe the size of government employment as a percentage of the labor force.
What are three major types of government employment at the state and local levels and
at the Federal level?
30) What are the major provisions of the Freedom to Farm Act of 1996?
31) What is one alternative to the PPACA that has been proposed?
32) What are the two main problems that have caused the demise of the command
systems?
33) On occasion the government has approved the merging of certain smaller firms in
oligopolistic industries (such as steel and automobiles) on the grounds that the net result
would strengthen competition. Do you think that this is sound policy? Justify your
answer.