1) The economic inefficiency in an oligopoly may be reduced by the following, except:
A.Increased competition from foreign producers
B.Limit pricing due to potential entrants
C.Economic profits used to fund technological advance
D.Aggressive advertising by rivals
2)
Refer to the diagram and assume that price decreases from $10 to $2. The coefficient of
the price elasticity of supply (midpoint formula) relating to this price change is about:
A.4 and supply is elastic.
B.1 and supply is unit elastic.
C..5 and supply is inelastic.
D..25 and supply is inelastic.
3) The majority of union members in the United States belong to unions that are:
A.affiliated with the United Workers of America (UWA).
B.affiliated with the AFL-CIO.
C.independent unions that are not affiliated with the AFL-CIO.
D.growing rapidly in membership.
4) Myopia means:
A.Far-sightedness
B.A tendency to focus on the future
C.A higher concern for the present
D.Price-sensitivity
5) What is needed to aid capital formation in developing countries?
A.More capital flight
B.More oil resources
C.More entrepreneurship
D.Higher price supports for products
6) The following table shows the projected rate of return and number of investment
projects which might be undertaken by a small firm. Each project requires an
investment of $1,000.
Refer to the above table and information. The number of investment projects this firm
would undertake will decrease from 4 to 2 if the interest rate in the loanable funds
market:
A.Increases from 10 percent to 20 percent
B.Decreases from 20 percent to 10 percent
C.Decreases from 15 percent to 10 percent
D.Increases from 15 percent to 20 percent
7) Worker migration will cause wage rates to equalize across two countries if all of the
following conditions are met except:
A.migration is motivated strictly by wage differentials.
B.neither nation restricts or interferes with migration.
C.both countries use the same currency.
D.migration has no cost.
8) Suppose that in the clothing market, production costs have fallen, but the equilibrium
price and quantity purchased have both increased. Based on this information we can
conclude that:
A.the supply of clothing has grown faster than the demand for clothing.
B.demand for clothing has grown faster than the supply of clothing.
C.the supply of and demand for clothing have grown by the same proportion.
D.there is no way to determine what has happened to supply and demand with this
information.
9) If money income increases and the prices of products A and B both increase, then the
budget line:
A.must shift to the right.
B.must shift to the left.
C.may shift either to the right or the left, or not at all.
D.will no longer be tangent to an indifference curve.
10) The Federal tax system is:
A.Proportional while state and local tax structures are largely progressive
B.Progressive while state and local tax structures are largely regressive
C.Regressive while state and local tax structures are largely proportional
D.Regressive while state and local tax structures are largely progressive
11) In the long run, the price charged by a monopolistically competitive firm seeking to
maximize profit will:
A.be less than both MC and ATC.
B.exceed ATC but equal MC.
C.exceed MC but equal ATC.
D.exceed both MC and ATC.
12)
Refer to the diagram for a pure monopolist. If the monopolist is unregulated, it will
maximize profits by charging:
A.a price above P3 and selling a quantity less than Q3.
B.price P3 and producing output Q3.
C.price P2 and producing output Q2.
D.price P1 and producing output Q1.
13) The movement of individuals and households from one income quintile to another
over time is called:
A.income averaging.
B.wealth turnover.
C.income mobility.
D.the ratchet effect.
14) In a market system, which of the following is a major benefit of making the firm’s
owners and investors exclusively shoulder the business risk?
A.Those who deeply dislike business risk will not have anything to do with the business
B.This allows firms to more easily attract labor and other suppliers of inputs
C.This reduces the business risk in the economy
D.It makes it easier for the government to monitor and manage the business risk
15) The next three questions refer to the below graph, where Sd and Dd are the
domestic supply and demand for a product. The world price of the product is $12.
(a)How much total revenue would go to domestic producers if the market were closed
to international trade compared to a market open to international trade? Explain.
(b)If the economy is open to trade, but a $3 per unit tariff were applied, what would be
the total revenue going to domestic producers, foreign producers (after-tax revenue),
and to the government? Explain.
(c)What would be the difference in revenue with a tariff of $3 per unit versus a quota of
20 units?
16) In the table below, assume a monopsonist has the marginal-revenue-product
schedule for a particular type of labor given in columns 1 and 2 and that the supply
schedule for labor is that given in columns 1 and 3.
(a)Compute the firms total labor costs at each level of employment and the marginal
labor cost of each unit of labor, and enter these figures in columns 4 and 5.
(b)How many units of labor will the firm hire? What will be the wage rate?
(c)If this firm hired labor in a competitive labor market, what would be the wage rate
and number of workers hired?
