1) The legal cartel theory indicates that, in any industry where market demand and the
long-run average total cost curve intersect close to the latter’s minimum, government
regulation is mandatory and desirable.
2) One basic argument for redistributing income to achieve more equality rests on the
idea of maximizing the society’s total utility when there is diminishing marginal utility
from income.
3) The production possibilities curve shows various combinations of two products that
an economy can produce when achieving full employment.
4) Changes in the average age of the U.S. population over the past decade have
decreased the demand for health care.
5) Indifference curves are linear and budget lines are convex to the origin.
6) Money functions as a medium of exchange by eliminating the need for a coincidence
of wants.
7) A debt crisis refers to how much government spending exceeds tax revenues in a
given year.
8) A moral hazard problem arises in the health care market because health insurance
encourages people to overconsume health care.
9) If the percentage change in quantity demanded is less than the percentage change in
price, then demand is said to be elastic.
10) The equilibrium world price of a product equates the quantities of exports supplied
and imports demanded.
11) In recent decades, health care expenditures in the U.S. have been rising in absolute
terms, but falling as a percentage of GDP.
12) A monopolist will avoid setting a price in the elastic segment of the demand curve
and prefer to set the price in the inelastic segment.
13) The problem of limited and bundled choices explains why many voters cannot fully
express their political preferences.
14) The crowding model of occupational segregation shows how white males earn
higher incomes at the expense of women and minorities who are restricted to a limited
number of occupations.
15) The marginal revenue product curve for an input is downsloping because of the law
of diminishing returns.
16) A profit-maximizing firm in the short run will expand output:
A.Until marginal cost begins to rise
B.Until total revenue equals total cost
C.Until marginal cost equals average variable cost
D.As long as marginal revenue is greater than marginal cost
17)
Refer to the above graph. If the demand increased, then:
A.Price and quantity would both increase
B.Price and quantity would both decrease
C.Price would stay the same and total revenues of sellers would stay the same
D.Price would stay the same and total revenues of sellers would increase
18) In the table below are the demand and supply schedules for rum in thousands of
liters in a state.
(a)What is the equilibrium price and quantity before a tax is imposed?
(b)If state government now imposes an excise tax of $1.00 per liter of rum, what is the
after-tax supply schedule?
(c)What is the equilibrium price of rum after the tax is imposed? How much of the
$1.00 is borne by the buyer and how much by the seller?
19) In which of these continuums of degrees of competition (highest to lowest) is
oligopoly properly placed?
A.Pure competition, oligopoly, pure monopoly, monopolistic competition.
B.Oligopoly, pure competition, monopolistic competition, pure monopoly.
C.Monopolistic competition, pure competition, pure monopoly, oligopoly.
D.Pure competition, monopolistic competition, oligopoly, pure monopoly.
20) Which of the following is a normative economic statement?
A.The poverty rate hit a new high last year and income distribution also worsened
B.Health care accounts for roughly a third of total spending in the economy
C.The government needs to revamp the Social Security program to make it sustainable
D.Retail sales are expected to continue on their downward trend in the next three
quarters
21) Economic growth in the DVCs might increase if IACs:
A.reduce their tariffs and import quotas.
B.encourage more immigration of high-skilled DVC workers.
C.outlaw direct private investment abroad by IAC corporations.
D.discourage capital flight to the DVCs.
22) If a firm’s revenues just cover all its opportunity costs, then:
A.Normal profit is zero
B.Economic profit is zero
C.Total revenues equal its explicit costs
D.Total revenues equal its implicit costs
23)
Refer to the diagram. Suppose the budget line shifts so that the consumer’s equilibrium
changes from point A to point B. This means that the:
A.price of Y has increased.
B.price of Y has decreased.
C.price of X has increased.
D.consumer’s money income has increased.
24) An important similarity between a monopolistically competitive firm and a purely
competitive firm is that:
A.both face perfectly elastic demand schedules.
B.economic profit tends toward zero for both.
C.both realize productive efficiency.
D.both realize allocative efficiency.
25) Census data indicate that, as of 2011, the top fifth of all households receive about
________ times as much income as the bottom fifth.
A.sixteen
B.twelve
C.eight
D.three
26) A basic assumption in comparing the production possibilities curves of two nations
is that those possibilities curves reflect differences in:
A.Consumer tastes and preferences
B.Resource availability and technological capabilities
C.The nations’ incomes and income distribution
D.Unemployment and inflation rates
27) What will the elasticity of resource demand be if unit wages rise by 8 percent and
the number of employed workers falls by 5 percent?
A.0.63
B.1.61
C.2.90
D.4.00
28) What is the difference between total utility and marginal utility?
29) Explain and evaluate this statement: Because there is no sure definition of the limits
to progression, no firm basis of its reasonable use, and no protection against its
unconscionable abuse, those who uphold the system as a revenue device are playing
into the hands of the group that would use progressive taxation as the means of
destroying private capitalism and ushering in the collectivist state.
30) Evaluate this statement: If the economic profit is zero, a business will shut down.
31) In what way are entrepreneurs residual claimants?
32) What have been the principal effects of the persistent trade deficits?
33) What economic conditions are necessary to achieve allocative efficiency under pure
competition?
34) How would a purely competitive industry adjust and restore allocative efficiency
when there is an increase in the demand for a product?
35) Use a supply and demand diagram to show how health insurance causes an
overallocation of resources to health care.