1) In a purely competitive labor market, a profit-maximizing firm will hire labor up to
the point where the marginal resource cost equals the wage rate.
2) Tying agreements are contracts by which retailers agree to charge the prices that
manufacturers set on branded goods.
3) In moving northeasterly from the origin, we encounter indifference curves that
reflect higher and higher levels of total utility.
4) The closer the Lorenz curve is to the diagonal, the greater is the degree of income
inequality.
5) Eligibility for social insurance programs is largely on the basis of need and “means
tests”.
6) The Americans with Disabilities Act of 1990 is an example of industrial regulation.
7) Productive efficiency refers to a condition where marginal cost is equal to marginal
revenue in the long run.
8) A market that achieves productive efficiency is producing the quantity of goods most
desired by society.
9) Right-to-work laws in some states prohibit the closed-shop and agency-shop union
setups.
10) The price of harvesting a renewable resource does not affect when or how much of
a renewable resource will be harvested.
11) Different rents on land reflect differences in the marginal revenue product of land.
12) The expectations of speculators in the United States that the exchange rate for the
euro will fall in the future will increase the supply of euros in the foreign exchange
market and decrease the exchange rate for the euros.
13) A and B are substitute goods, but A and C are complementary goods. If the costs of
producing A decreases, then the demand for:
A.Both B and C will decrease
B.Both B and C will increase
C.B will increase and the demand for C will decrease
D.B will decrease and the demand for C will increase
14) Understanding the water and diamond paradox is valuable because it explains why:
A.Diamonds have many substitutes
B.Water is more important than diamonds
C.The prices of products are not necessarily measures of the products’ usefulness
D.Consumer spending on diamonds has increased while spending on water has
decreased
15) Political corruption occurs whenever:
A.logrolling is used to secure votes for controversial legislation.
B.government officials use unlawful misdirection of governmental resources for their
own personal gain.
C.special interest groups contribute to elected officials, who in turn support legislation
that benefits the special interest group.
D.there is pork barrel politics involved.
16) The equality-efficiency trade-off suggests that:
A.welfare programs stimulate incentives to work.
B.inefficiencies result when incentives to produce are reduced.
C.noncash transfers are superior to cash transfers.
D.economic growth is the best means of reducing poverty.
17) Approximately how many millions of Americans do not have health insurance
(prior to gaining coverage through the Patient Protection and Affordable Care Act)?
A.27
B.49
C.58
D.63
18) If the number of firms in a monopolistically competitive industry increases and the
degree of product differentiation diminishes:
A.the likelihood of realizing economic profits in the long run would be enhanced.
B.individual firms would now be operating at outputs where their average total costs
would be higher.
C.the industry would more closely approximate pure competition.
D.the likelihood of collusive pricing would increase.
19) Eric tries to eat more healthfully by eliminating cookies, donuts, and similar snacks
from his diet. Every day at work, however, co-workers bring in these treats and Eric
succumbs to temptation. Which of the following concepts would behavioral economists
use to explain Eric’s self-control problem?
A.Time inconsistency.
B.Availability heuristic.
C.Self-serving bias.
D.System 2 processes dominating decision making.
20)
One effect of immigration is to:
A.Decrease a nation’s total output and productive capacity
B.Make capital resources less scarce relative to labor
C.Decrease economic efficiency on a worldwide basis
D.Increase the wage bill in a nation experiencing immigration if the demand for labor is
elastic
21) Answer the question based on the following payoff matrix for a duopoly in which
the numbers indicate the profit from either opening a coffee shop in a small town or not
opening the coffee shop.
Refer to the above table. If the firms are playing a sequential game, then
A.there is first mover advantage.
B.the firm with the first move will choose not to open a coffee shop.
C.the firm with the first move will choose to open a coffee shop.
D.both firms will choose not to open a coffee shop, regardless of which firm chooses
first.
22) If Nation A requires more resources to produce each bale of cloth than Nation B
does, then we say that:
A.Nation A has the absolute advantage over Nation B in producing cloth
B.Nation B has the absolute advantage over Nation A in producing cloth
C.Nation A has the comparative advantage over Nation B in producing cloth
D.Nation B has the comparative advantage over Nation A in producing cloth
23) An increase in the income of country A relative to the income of country B will
usually lead to an increase in country:
A.A’s exports to country B
B.B’s imports from country A
C.A’s demand for the currency of country B
D.B’s demand for the currency of country A
24) Which of the following would best explain why regulatory capture is a problem?
A.The regulations implemented tend to reduce the profitability of the regulated industry
and reduce global competitiveness.
B.Regulatory capture unduly increases the size and power of government, increasing
costs for taxpayers.
C.Individuals implementing the regulations lack expertise about the industry and
therefore make poor regulatory choices.
D.The regulations implemented serve the private interests of the regulated industry,
rather than addressing social interests such as consumer safety and environmental
protection.
25) How is total government spending defined? What is its size in the economy?
26) What is a price floor and what are its economic effects?
27) What are the consequences of price discrimination for the producer, the consumer,
and for society?
28) Describe how a firms revenues and profits are increased through product
innovation. What three other points should be noted about these results?
29) Given the following information on the tax paid for different levels of taxable
income, fill in the average and the marginal tax rates for each income level. Also
explain how to calculate the average tax rate and the marginal tax rate. Is this tax
progressive?
30) What is the euro? What was the goal in creating the euro?
31) Explain how a market for human organs would affect the supply curve and
equilibrium price and quantity.
32) The table below contains the international balance-of-payments data for the United
States in a past year. All figures are in billions. Compute with the appropriate sign (+ or
-) and enter in the table the six missing items. What was the condition of the balance of
payments in the United States?
33) As long as politicians know what voters want, government will deliver allocative
and productive efficiency. Evaluate.
34)