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1) In Germany, one worker can produce either one cuckoo clock or one beer mug. In
Taiwan, one worker can produce either two cuckoo clocks or three beer mugs. Who has
the comparative advantage in each good?
A.Taiwan in both goods
B.Taiwan in clocks and Germany in mugs
C.Germany in clocks and Taiwan in mugs
D.Germany in both goods
2) The less elastic a monopolistic competitor's long-run demand curve, the:
A.greater its excess capacity.
B.lower its price relative to that of a pure competitor having the same cost curves.
C.higher its long-run economic profit.
D.lower its average total cost at its equilibrium level of output.
3) A consumer's demand curve for a product is downsloping because:
A.total utility falls below marginal utility as more of a product is consumed.
B.marginal utility diminishes as more of a product is consumed.
C.time becomes less valuable as more of a product is consumed.
D.the income and substitution effects precisely offset each other.
4)
Refer to the above graph. The shift of the budget line from AB to CD is consistent with:
A.A decrease in money income
B.A decrease in the prices of both Goods 1 and 2
C.An increase in the prices of both Goods 1 and 2
D.A decrease in the price of Good 1, and an increase in the price of Good 2
5) If two goods are complements:
A.they are consumed independently.
B.an increase in the price of one will increase the demand for the other.
C.a decrease in the price of one will increase the demand for the other.
D.they are necessarily inferior goods.
6) The question is based on the following table that provides information on the
production of a product that requires one variable input.
Refer to the above table. There are negative marginal returns when the:
A.Fifth unit of input is added
B.Sixth unit of input is added
C.Seventh unit of input is added
D.Ninth unit of input is added
7) Many countries remain poor because they currently are poor. This statement
summarizes the:
A.infrastructure problem.
B.vicious circle of poverty.
C.demographic transition problem.
D.problem of capital flight.
8) Clear-cut mutual interdependence with respect to the price-output policies exists in:
A.pure monopoly.
B.oligopoly.
C.monopolistic competition.
D.pure competition.
9) Increases in product prices shift the consumer's:
A.budget line to the right.
B.budget line to the left.
C.indifference curves to the left.
D.indifference curves to the right.
10) The agricultural price support program in the United States has resulted in:
A.Declining average farm income
B.Surpluses of price-supported farm commodities
C.Shortages of price-supported farm commodities
D.A gradual migration of people from farms to cities
11) Which statement is not correct?
A.The real cost of producing X is the amounts of products Y, Z, etc., which might have
been produced with the resources devoted to X
B.Diseconomies of scale arise primarily from the difficulties in managing and
coordinating a large-scale business enterprise
C.The law of diminishing returns accounts for the fact that the long-run average total
cost curve is U-shaped
D.Average fixed costs diminish so long as output increases
12) Assume a firm faces these costs: total cost of capital = $4,000; price paid for labor =
$20 per labor unit; and price paid for raw materials = $8 per raw-material unit.
Refer to the above information. A firm improves its production process so that it can
produce 3,000 units of output by combining its fixed capital with 100 units of labor and
500 units of raw materials. What are the total cost and average cost of producing the
3,000 units of output?
A.TC = $4,000; ATC = $2.00
B.TC = $8,000; ATC = $3.00
C.TC = $10,000; ATC = $3.33
D.TC = $15,000; ATC = $6.00
13) Which of the following is a valid counter-argument to the call for higher tariffs to
save U.S. jobs?
A.U.S. firms and workers must be protected from the cheaper labor in nations where
wages are low
B.All nations cannot simultaneously succeed in restricting imports while maintaining
exports
C.Reducing tariffs will benefit all consumers and domestic producers
D.The need to protect U.S. workers from the unemployment is not a concern in
international economics
14)
Refer to the four graphs above. In which graph would the indicated shifts cause
equilibrium quantity to definitely rise, but the effect on price is indeterminate?
A.Graph A
B.Graph B
C.Graph C
D.Graph D
15) A production possibilities curve illustrates:
A.scarcity.
B.market prices.
C.consumer preferences.
D.the distribution of income.
16) An industry is producing at the least-cost rate of production when:
A.Marginal cost is greater than average total cost
B.Marginal revenue is greater than price
C.Price and the minimum average cost are equal
D.Price and marginal revenue are equal
17) 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 figure for net transfers indicates that the United States:
A.Received a net public and private transfer of $22 billion from the rest of the world
B.Sent a net public and private transfer of $22 billion in remittances to the rest of the
world
C.Sent a net private transfer of $22 billion to the rest of the world
D.Received a net private transfer of $22 billion from the rest of the world
18) As a proportion of domestic output, taxes in the United States:
A.are lower than in most other industrially advanced countries.
B.are higher than in most other industrially advanced countries.
C.are approximately the same as in most other industrially advanced countries.
D.doubled in the 1990s.
19) To maintain returns from research and development, firms:
A.Sponsor start-ups
B.Keep trade secrets
C.Use a fast-second strategy
D.Advocate creative destruction
20) The following is a total-product schedule for a resource. Assume that the quantities
of other resources the firm employs remain constant.
Refer to the above table. If the firm's product sells for a constant $2 and the price of the
resource is a constant $16, the firm will employ how many units of the resource?
A.5
B.4
C.3
D.2
