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1) Which of the following best explains why most basic scientific research in the United
States is financed by the government?
A.Basic scientific research takes a long time to become commercially viable.
B.Basic scientific research rarely results in commercially viable discoveries.
C.Federal law limits basic scientific research because of potential national security
threats.
D.Private firms collectively spend far less on all types of R&D than the federal
government.
2) The graph depicts a monopolistically competitive firm.
Refer to the above graph. In the short run, this monopolistically competitive firm will
set price at:
A.$55 and produce 45 units of output
B.$65 and produce 35 units of output
C.$50 and produce 35 units of output
D.$52 and produce 50 units of output
3) Other things being equal, a labor union will find it harder to obtain a wage increase
for its members the:
A.Less elastic is the demand for the product labor produces
B.Easier it is to substitute other resources for labor
C.Greater the amount of unionization in the industry
D.Less elastic is the demand for labor
4) Given the products and conditions below, indicate how the events affect the demand,
supply, equilibrium price and quantity of the goods.
(a)Videotapes. The price of DVDs and DVD players decreases. New technology makes
videotapes easier to produce. The shift in demand is greater than shift in supply.
(b)Roses. The Valentines Day season has just begun for the floral industry. A new
pesticide decreases the number of flowers affected by pests. The shift in supply is
greater than the shift in demand.
(c)Tomatoes. FDA publicly announces that eating tomatoes and tomato-based products
can significantly reduce ones risk of developing cancer. An unexpected freeze late in
the tomato season destroys a significant portion of this years crop. The shift in supply is
greater than shift in demand.
(d)Healthcare. Highly publicized malpractice cases decrease consumer confidence in
healthcare providers. Malpractice insurance premiums paid by doctors increase. The
shift in demand is greater than shift in supply.
5) The largest source of tax revenue for the U.S. federal government is:
A.personal income taxes.
B.property taxes.
C.corporate income taxes.
D.sales and excise taxes.
6) A government using fiscal policy in an attempt to stimulate the economy would do
which of the following?
A.Raise taxes.
B.Raise interest rates.
C.Lower interest rates.
D.Raise government spending.
7)
Refer to the above figure. If box A represents households, B the product market, and C
businesses, and if flow (3) represents revenues, then flow (1) would represent:
A.Costs
B.Money income
C.Consumption expenditures
D.Resources
8) Major criticisms against the Patient Protection and Affordable Care Act (PPACA)
include the following arguments, except:
A.It would lead to greater inefficiencies in health care, and overconsumption might
even increase
B.It is very costly, and the revenue sources cited in the Act would not be sufficient to
cover future expenses
C.It still does not cover everyone in the nation, and there will still be significant
numbers of Americans left uninsured
D.It might be the first step towards a socialized health insurance system where market
forces will have no role in rationing health care
9) "Under central planning, some group has to decide how to get the necessary inputs
produced in the right amounts and delivered to the right places at the right time. This is
a nearly impossible task without markets and profits." This quotation best identifies the:
A.incentive problem under central planning.
B.coordination problem under central planning.
C.self-sufficiency dilemma under communism.
D.resource overcommitment problem under communism.
10) Economists contend that most economic decisions are:
A.random.
B.chaotic.
C.spontaneous.
D.purposeful.
11) According to behavioral economists, the human brain:
A.makes most decisions based on careful calculation of benefits and costs.
B.uses evolutionary-developed heuristics to make many decisions.
C.only develops heuristics for decision making after the same decision has been made
multiple times using a rational framework of comparing benefits and costs.
D.employs heuristics in decision making that are slow but generally error-free.
12) Government programs, such as Social Security, food stamps, AFDC, SSI, Medicare,
and Medicaid, that guarantee particular levels of transfer payments to all who fit the
programs' criteria are called:
A.Public assistance programs
B.Social insurance programs
C.Benefit-reduction programs
D.Entitlement programs
