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1) The concept of parity has provided a rationale for government price supports for
farm products.
2) The U.S. breakfast cereal industry is an example of differentiated oligopoly.
3) When a consumer is maximizing total utility, he or she cannot increase total utility by
reallocating expenditures among different products.
4) For an individual firm in pure competition, the firm's average revenue and marginal
revenue at any output level are both equal to the product's price.
5) Monopolistic competition provides the benefit of product variety but at the cost of
productive inefficiency.
6) Proposed ergonomics regulations are an example of industrial regulation (rather than
social regulation).
7) The budget line shows all the combinations of two products which the consumer can
buy, given money income and product prices.
8) People will have to exchange their currency for another only when they do exporting
or importing.
9) In the long run for a purely competitive market, firms will earn only normal profits.
10) A profit-maximizing firm employs resources to the point where:
A.MRC = MP.
B.resource price equals product price.
C.MRP = MRC.
D.MP = product price.
11) According to economists Krueger and Perri:
A.despite the fact that income inequality has increased in recent decades, consumption
inequality has remained relatively constant.
B.increases in income inequality over recent decades understate the growth in
consumption inequality.
C.both income and consumption inequality have increased at approximately the same
rate over recent decades.
D.both income and consumption are more equally distributed than they were 30 years
ago.
12) Answer the question based on the following data.
Refer to the above data. Over which price range is the demand unit-elastic?
A.$18-$16
B.$16-$14
C.$14-$12
D.$12-$10
13) Because neoclassical economists assume that people are rational decision makers,
they:
A.are able to make better predictions about economic behaviors and outcomes.
B.ignore the mental processes by which these decisions are made.
C.believe that people never make suboptimal decisions.
D.believe it is best to limit the number of options people have available.
14) 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 level of total utility will the utility-maximizing consumer
realize?
A.96 utils.
B.108 utils.
C.72 utils.
D.142 utils.
15) Assume that a 4 percent increase in income across the economy produces an 8
percent increase in the quantity demanded of good X. The coefficient of income
elasticity of demand is:
A.negative and therefore X is an inferior good.
B.negative and therefore X is a normal good.
C.positive and therefore X is an inferior good.
D.positive and therefore X is a normal good.
16) In 2010, the United States had about ___ percent of the world's population and
produced about ___ percent of the world output.
A.20; 30
B.3.5; 41
C.10; 32
D.4.5; 23
17) Which fishery has the greatest market value in terms of its catch?
A.Blue crab
B.Pacific cod
C.Pacific halibut
D.Walleye pollock
18) Suppose the price of local cable TV service increased from $16.20 to $19.80 and as
a result the number of cable subscribers decreased from 224,000 to 176,000. Along this
portion of the demand curve, price elasticity of demand is:
A.0.8
B.1.2
C.1.6
D.8.0
19) Which of the following is a consequence of rent controls established to keep
housing affordable for the poor?
A.Less rental housing is available as prospective landlords find it unprofitable to rent at
restricted prices.
B.The quality of rental housing declines as landlords lack the funds and incentive to
maintain properties.
C.Apartment buildings are torn down in favor of office buildings, shopping malls, and
other buildings where rents are not controlled.
D.All of these are consequences of rent controls.
20)
Refer to the above graph of a representative firm in monopolistic competition. If curve
(2) represents ATC and line (3) represents demand, then we can conclude that the
industry:
A.Has positive economic profits
B.Is in long-run equilibrium
C.Will contract in the long run
D.Is not maximizing profits
21) One would expect that collusion among oligopolistic producers would be easiest to
achieve in which of the following cases?
A.A rather large number of firms producing a differentiated product.
B.A very small number of firms producing a differentiated product.
C.A rather large number of firms producing a homogeneous product.
D.A very small number of firms producing a homogeneous product.
22) Suppose your friend is debating whether to go to a movie or study for her
economics exam. She decides to go to the movie and wake up two hours earlier to study
for the exam. Using time inconsistency, explain to your friend the decision may not be
the best.
23) What are unfunded liabilities? Give an example.
24) What is the price leadership model of oligopoly pricing and what are its tactics?
25) Give an example of a vertical supply curve and the relationship between price and
quantity.
26) Explain the two stabilization policies politicians use to smooth business cycles.
27) What is the difference between income and wealth? How can wealth contribute to
income inequality?
28) What is the difference between nominal and real wages?
29) What is the price elasticity of supply? How is it measured?
30) How does the PPACA cover those individuals without health insurance and the
poor?
31) The owner of a health club asks you for advice about whether the company should
raise or lower the price of its membership this year based on the following information:
last year the club raised the price of its membership by 5% and the number of members
paying the same fee fell by 7%.
