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1) Economic profits are usually larger than accounting profits.
2) The interest-rate cost-of-funds curve is perfectly elastic because expected rates of
return on R&D are constant.
3) There is a consensus among economists that the amount of resources allocated to the
health care industry is optimal.
4) Renewable natural resources can never be exhausted.
5) With constant costs in production, specialization tends to proceed to
complete-specialization; but with increasing costs, specialization will not be complete.
6) Domestic farm subsidies improve world trade and contribute to greater efficiency in
the international allocation of agricultural resources.
7) A firm doubles the quantity of all resources it employs and, as a result, output
doubles. Which of the following is correct?
A.There are increasing returns to scale
B.The long-run average total cost curve is flat
C.The law of diminishing returns is proven wrong
D.The example is for the short run rather than the long run
8)
Refer to the diagram. If society is currently producing the combination of bicycles and
computers shown by point D, the production of 2 more units of bicycles:
A.cannot be achieved because resources are fully employed.
B.will cost 1 unit of computers.
C.will cost 2 units of computers.
D.will cause some resources to become unemployed.
9) Commercially-run forestry companies that have secure property rights over their
trees:
A.Harvest them as soon as possible, and replant them when they are harvested
B.Harvest them as soon as possible, and do not replant them when they are harvested
C.Do not harvest them as soon as possible, and do replant them when they are harvested
D.Do not harvest them as soon as possible, and do not replant them when they are
harvested
10) Public choice economists:
A.analyze the incidence of taxes.
B.are also known as Keynesian economists.
C.use the tools of economics to analyze decision making, politics, and elections in the
public sector.
D.are, by definition, economists employed by federal, state, and local governments.
11) A single-price pure monopoly is economically inefficient:
A.only because it produces beyond the point of minimum average total cost.
B.only because it produces short of the point of minimum average total cost.
C.because it produces short of minimum average total cost and price is greater than
marginal cost.
D.because it produces beyond minimum average total cost and marginal cost is greater
than price.
12) Which of the following policies has succeeded in reducing fishery catch sizes?
A.Limiting the length of the catch season.
B.Limiting the number of boats allowed in a given area.
C.Limiting catch size (TAC).
D.All of these.
13) Assuming a firm is selling its output in a purely competitive market, its resource
demand curve can be determined by:
A.multiplying total product by product price.
B.multiplying marginal product by product price.
C.dividing total revenue by marginal product.
D.comparing marginal product with various possible input prices.
14) A firm encountering economies of scale over some range of output will have a:
A.Rising long-run average cost curve
B.Falling long-run average cost curve
C.Constant long-run average cost curve
D.Rising, then falling, then rising long-run average cost curve
15) It may be misleading to label a trade deficit as unfavorable or adverse because:
A.the multiplier does not apply to a trade deficit.
B.a trade deficit increases a nation's aggregate output and employment.
C.a nation's consumers benefit from a trade deficit during the period it occurs.
D.a trade deficit precludes inflation.
16) Suppose that a pure monopolist can sell 4 units of output at $2 per unit and 5 units
at $1.75 per unit. The monopolist will produce and sell the fifth unit if its marginal cost
is:
A.$1 or less.
B.$.75 or less.
C.$1.75 or less.
D.$2 or less.
17) "Redistributing income in order to have a more equal distribution in the United
States would result in a higher level of total consumer satisfaction." This statement is
based on the concept that:
A.Income inequality is unfair
B.Income inequality is undemocratic
C.Income equality stimulates efficiency
D.Incomes are subject to diminishing marginal utility
18) The gains to monopolists from exercising market power:
A.exceed the losses to consumers in monopoly markets, resulting in a net gain to
society.
B.equal the losses to consumers in monopoly markets, resulting in no net change for
society.
C.are less than the losses to consumers in monopoly markets, resulting in a net loss to
society.
D.create smaller deadweight losses than occur in purely competitive industries.
19)
Refer to the diagram, representing Slippery Slope Oil Company. What is the user cost
of extracting a barrel of oil this year?
A.$20.
B.$40.
C.$50.
D.$70.
20) If a purely competitive constant-cost industry is realizing economic profits, we can
expect industry supply to:
A.increase, output to increase, price to decrease, and profits to decrease.
B.increase, output to increase, price to increase, and profits to decrease.
C.decrease, output to decrease, price to increase, and profits to increase.
D.increase, output to decrease, price to decrease, and profits to decrease.
21) Explain the meaning of the marginal rate of substitution.
22) What is a Lorenz curve? How is it constructed?
23) Why is marginal revenue less than price for every level of output except the first?
24) A college student paid $50 at the bookstore for a textbook that she uses for a
semester. She could sell it back to the bookstore for $40 but decides to keep it. Another
student sees the textbook and asks if he could buy it for use next semester. She agrees to
sell him the book, but only if he pays $60 for it. Describe how the endowment effect
can explain this situation.
25) Explain how monopolistically competitive producers try to improve on the
condition of just breaking even in the long run. Is this improvement a benefit for
consumers?
26) Discuss the implications hardwired heuristics have on our decision making.
27) Describe the short-run situation in U.S. agriculture. What are its causes?
