If the average cost of producing 9 sweaters is $6.50 and the marginal cost of producing
the tenth sweater is $6.75, the average cost of producing 10 sweaters will:
A. be $6.50.
B. be more than $6.50.
C. be less than $6.50.
D. be exactly $6.75.
Answer:
The progressive Occupy movement has:
A. advocated large cuts in government redistribution programs as part of overall cuts in
government.
B. pushed for regulations reducing the amount of factory machinery that is replacing
workers.
C. reflected discontent about how income distribution is highly skewed toward the top 1
percent and 5 percent of the population.
D. argued that the income distribution would be fairer if tax rates were cut across all
income levels.
Answer:
Refer to the graph shown. The shift from SATC1 to SATC2 reflects:
A. economies of scale.
B. diseconomies of scale.
C. diminishing marginal productivity.
D. increasing marginal productivity.
Answer:
Consider the following payoff matrix facing two criminals.
Their options are to confess or not to confess. Given this information:
A. A has a dominant strategy but B does not.
B. B has a dominant strategy but A does not.
C. Both A and B have dominant strategies.
D. Neither A nor B has a dominant strategy.
Answer:
The potential for return to cooperation is greatest in:
A. zero sum games.
B. repeated games.
C. sequential games.
D. simultaneous move games.
Answer:
Refer to the graph shown. A consumer would be expected to change consumption from
point A to point B in response to:
A. an increase in the price of soda.
B. an increase in the price of chocolate bars.
C. an increase in income.
D. a decrease in the price of soda.
Answer:
When per-unit output costs fall as output increases, this is called:
A. economies of scale.
B. economies of scope.
C. learning by doing.
D. diminishing marginal returns.
Answer:
Refer to the graph shown. Which point has an elasticity less than 1?
A. A
B. B
C. C
D. D
Answer:
Which of the following would cause quantity demanded to change without changing the
demand curve?
A. A change in income
B. A change in the price of the good
C. A change in tastes and preferences
D. A change in the price of a substitute good
Answer:
The following table shows four firms, the amount each pollutes, the marginal cost for
each firm to clean up pollution, and the total cost to each firm of eliminating all
pollution.
The total discharge of these four companies is 300 tons. Assume there is no one else
who pollutes.
Refer to the table shown. If the government establishes an effluent fee of $7.00, how
much tax would firms pay to the government?
A. $660
B. $1,050
C. $1,820
D. $2,100
Answer:
A business owner makes 50 items by hand in six hours. She could have earned $10 an
hour working for someone else. If each item sells for $5 and the explicit costs total $14,
economic profit equals:
A. $0.
B. $64.
C. $176.
D. $236.
Answer:
A sporting goods store observes that as they reduce the price of squash balls from $5 to
$4, their quantity demanded rises from 200 to 220. Rounding to the nearest tenth, they
correctly compute the elasticity of demand of squash balls to be:
A. 0.1.
B. 0.4.
C. 2.3.
D. 5.
Answer:
If Japan has most-favored nation status with the United States, its exports are:
A. subject to lower U.S. tariffs than are exports from any other country.
B. subject to the same U.S. tariffs as other nations that have been granted most-favored
nation status by the United States.
C. subject to higher U.S. tariffs than exports from any other country.
D. not subject to any U.S. tariffs.
Answer:
Suppose a monopolist is at the profit-maximizing output level. If the monopolist sells
another unit of output:
A. both producer surplus and consumer surplus increase.
B. producer surplus falls but consumer surplus rises.
C. both producer surplus and consumer surplus decrease.
D. producer surplus rises but consumer surplus falls.
Answer:
According to the principle of rational choice, if there is diminishing marginal utility:
A. and the price received for supplying a good goes up, you supply less of that good.
B. and the price received for supplying a good goes up, you supply more of that good.
C. the decision producers face about how much to supply is not affected.
D. after a certain point, even if the price goes up, you don’t supply more of that good.
Answer:
The price elasticity of demand for insulin by diabetic patients is much smaller than the
price elasticity of demand for leather shoes. This is an example of how the price
elasticity of demand:
A. falls the less specifically the good is defined.
B. rises the less specifically the good is defined.
C. falls the more a good is a necessity.
D. rises the more a good is a necessity.
Answer:
At one time, sea lions were depleting the stock of steelhead trout. One idea to scare sea
lions away from the Washington coast was to launch fake killer whales, which are
predators of sea lions. The cost of making the first whale is $16,000 ($5,000 for
materials and $11,000 for the mold). The mold can be reused to make additional
whales, and so additional whales cost $5,000 each. Based on these numbers, the
production of fake killer whales exhibits:
A. diminishing marginal product.
B. constant returns to scale.
C. increasing returns to scale.
D. decreasing returns to scale.
Answer:
Firms that discriminate are:
A. always less profitable than firms that do not.
B. always more profitable than firms that do not.
C. sometimes more profitable than firms that do not.
D. irrational.
Answer:
The economist Steven Landsburg claims that with a death penalty, each execution
deters about eight murders, resulting in a benefit to society of approximately $56
million. He argues that computer hackers do far more damage to society with their
worms and viruses. He argues that computer hackers should be executed as well. From
a purely economic perspective, the death penalty for computer hackers is:
A. reasonable based on cost/benefit analysis, but society must also take into account
social, political, and religious factors.
B. never reasonable because it is not possible to place a dollar value on a human life.
C. never reasonable because no one has died from computer hacking.
D. the least efficient way to deter crime.
Answer:
Government regulation of working conditions is an example of:
A. government as referee.
B. government as owner.
C. government as actor.
D. government as dictator.
Answer:
Firms base decisions on the decisions of other firms in the market in:
A. a monopolistic industry.
B. an oligopolistic industry.
C. a monopolistically competitive industry.
D. a perfectly competitive industry.
Answer:
If the input needed by an industry has a perfectly inelastic supply, the long-run market
supply curve for the perfectly competitive industry will be:
A. horizontal.
B. vertical.
C. upward-sloping.
D. downward-sloping.
Answer:
A Big Mac meal costs $3.00 and gives you an additional 5 units of utility; a meal at the
Four Seasons Hotel costs $27.00 and gives you an additional 45 units of utility. Based
only on the information you have, using the theory of rational choice, you most likely
would:
A. choose to eat the Big Mac meal.
B. choose to eat at the Four Seasons Hotel.
C. be indifferent between eating the Big Mac and eating at the Four Seasons Hotel.
D. decide that eating at the Four Season’s Hotel is preferable because though the
marginal utilities of both meals are the same, the total utility is greater in the case of the
meal at the Four Seasons Hotel.
Answer:
The assumptions that form the basis of any economic model are referred to as:
A. theorems.
B. precepts.
C. building blocks.
D. norms.
Answer:
Refer to the following graph.
An indifference curve with a constant marginal rate of substitution is shown by:
A. A.
B. B.
C. C.
D. D.
Answer:
The price mechanism is:
A. also known as the invisible hand.
B. the most efficient coordinating mechanism.
C. part of the political process.
D. the only possible outcome of economic forces.
Answer:
According to the law of diminishing marginal utility, after some point:
A. the more we buy of something, the more it costs.
B. the more we consume of something, the less each additional unit adds to our
satisfaction.
C. people should spend all of their income on one good.
D. the more we consume of something, the smaller the total satisfaction received from
that good.
Answer:
The law of diminishing marginal productivity implies that the marginal product of a
variable input:
A. never declines.
B. always declines.
C. eventually declines.
D. is constant.
Answer:
Opponents of government intervention in the economy argue that externalities:
A. do not create problems for the model.
B. are themselves the inevitable result of government policies.
C. should be corrected with regulations rather than subsidies.
D. may not be effectively corrected by the government.
Answer:
Consider the following demand table and the graph.
Which of the demand curves best reflects the demand table?
A. A
B. B
C. C
D. D
Answer:
The Gini coefficient for Algeria is 0.35. How would this number be shown on a Lorenz
curve?
A. It cannot be shown; the Lorenz curve and the Gini coefficient are alternative ways of
measuring inequality.
B. The area between the Lorenz curve and the line of equality is 35 percent of the total
area under the line of equality.
C. The area between the Lorenz curve and the x-axis is 35 percent of the total area
below the line of equality.
D. The length of the Lorenz curve is 35 percent longer than the line of equality.
Answer:
The focal point phenomenon:
A. explains why productivity levels differ across countries.
B. explains why production tends to take place in a few select countries rather than
being evenly distributed across countries.
C. argues that transportation costs make it unprofitable to locate production in other
countries.
D. argues that trade barriers force countries to locate production in other countries.
Answer:
Which of the following would not be considered a problem with Luddite reasoning?
A. Historically, the demand for labor has actually increased as technology has
increased.
B. Labor is necessary for building and maintaining machines, and so increased demand
for machines increases the demand for labor.
C. New technology tends to raise total output, leading to an increase in the demand for
labor.
D. New technology frequently causes some specialized labor skills to become obsolete.
Answer: