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
average total cost of making five fake killer whales would be:
A. $5,000.
B. $11,000.
C. $7,200.
D. $36,000.
Answer:
The risk of dying from running a marathon is about 1 in 50,000. If people know this
risk and still choose to run marathons, economists can conclude that people:
A. are irrational.
B. place no value on their lives.
C. place a finite value on their lives.
D. have self-control problems.
Answer:
Refer to the graph shown. If this graph represents a monopoly market, the equilibrium
price and quantity will be:
A. $13.50 and 325, respectively.
B. $7 and 325, respectively.
C. $10 and 500, respectively.
D. $7 and 750, respectively.
Answer:
Economies of scope cannot exist in:
A. the presence of economies of scale.
B. the presence of diseconomies of scale.
C. firms that produce a single product.
D. firms that produce multiple products.
Answer:
The level of production that minimizes long-run average total costs is referred to as the:
A. technically efficient level of production.
B. economically efficient level of production.
C. minimum efficient level of production.
D. minimum profitable level of production.
Answer:
A model that statistically discovers a pattern in the data is called a(n) ___ model.
A. heuristic
B. traditional
C. empirical
D. butterfly effect
Answer:
If a country takes advantage of the comparative advantage of some resources over
others, its production possibility curve is likely to be:
A. flat.
B. straight.
C. bowed outward.
D. bowed inward.
Answer:
TIME magazine offers a significant discount to students who purchase a one-year
subscription. If the reason for the discount is price discrimination, we can conclude that:
A. students have a more elastic demand for magazines than does the general public.
B. students have a less elastic demand for magazines than does the general public.
C. there is no difference between a student’s elasticity of demand for magazines and any
other person’s elasticity of demand.
D. students have a perfectly inelastic demand for magazines.
Answer:
Tariffs can be thought of as indirect:
A. special taxes on domestic producers.
B. subsidies to domestic producers.
C. subsidies to foreign producers.
D. subsidies to domestic consumers.
Answer:
An increase in equilibrium price and a decrease in equilibrium quantity is most likely
the result of:
A. an increase in demand.
B. a decrease in demand.
C. an increase in supply.
D. a decrease in supply.
Answer:
In Europe, government regulations discourage consumer credit. “It’s to protect the
consumer from himself,” says Jacques Zeegers, secretary general to the Belgian
Banking Association. As far as Mr. Zeegers is concerned, the government should worry
that there is a failure caused by:
A. distributional issues.
B. rationality problems of individuals.
C. violations of inalienable rights.
D. economic efficiency.
Answer:
Economists:
A. are not concerned with the distributional effects of trade.
B. cannot measure the distributional effects of trade.
C. do not generally include the distributional effects of trade in their models.
D. disagree with laypeople that the distributional effects of trade are important.
Answer:
All of the following are examples of socioeconomic distribution of income except how
much:
A. the top 10 percent of a population gets.
B. blacks get relative to whites.
C. two-parent households get relative to single-parent households.
D. the young get relative to the old.
Answer:
In a third-party payer system:
A. total expenditures generally fall.
B. total expenditures generally rise.
C. quantity demanded generally falls.
D. quantity supplied generally falls.
Answer:
In a feudalist society, in comparison with mercantilism:
A. merchants play a more important political role than serfs.
B. tradition plays a more important role than the government.
C. government plays a large role in determining the what, how, and for whom decisions.
D. markets make the central economic decisions.
Answer:
The relative size of the bottom group of income earners has:
A. increased as some of those formerly in the middle class lost their jobs or suffered
wage reductions because of globalization.
B. shrunk as globalization has improved income-earning opportunities.
C. increased primarily because of corporate executives of bankrupt companies falling
into poverty during the last recession.
D. stayed roughly the same as the effects of globalization and immigration have
canceled each other out.
Answer:
Refer to the graphs shown. Assume the graph reflects demand in the automobile market.
Which arrow best captures the impact of increased gasoline prices on the automobile
market?
A. A
B. B
C. C
D. D
Answer:
The main reason the usefulness of Pareto optimal policies is limited as a policy guide is
that:
A. it is too subjective.
B. it is only objective, and good policy also requires a subjective element.
C. real-world changes in which no one is harmed are rare or nonexistent.
D. real-world changes in which more people are helped than are harmed are rare.
Answer:
Suppose the marginal cost of dating Perry is $30 and the marginal benefit is worth $40
to you. Following economic reasoning, you should:
A. date Perry.
B. not date Perry.
C. determine what your sunk costs are.
D. determine what your total benefits and total costs are.
Answer:
Refer to the graph shown for a small country that is a price taker internationally.
Assume the foreign supply of this product is perfectly elastic at a price of $4 per unit.
Starting from a free trade equilibrium, a tariff in the amount of $2 per unit would be
expected to cause domestic consumption to:
A. increase from 2,400 to 7,400.
B. increase from 2,400 to 3,600.
C. decrease from 4,800 to 3,600.
D. decrease from 7,400 to 6,100.
Answer:
Refer to the graph shown. If the government set the selling price equal to the marginal
cost, the firm in the graph would be:
A. making economic profits.
B. making normal profits.
C. sustaining losses and eventually would go out of business.
D. making zero economic profits.
Answer:
Bertrand de Jouvenel’s views on income distribution and fairness can best be described
by the statement:
A. The lesser individuals’ duty should be to work for the well-being of the brightest
individuals.
B. A high level of income inequality is necessary to sustain the arts, beauty, education,
and civilization.
C. Society’s goal should be to maximize the welfare of the least well-off, but some
inequality is necessary to meet this goal.
D. Property rights should be equally distributed, and the market should determine the
distribution of income.
Answer:
By definition, inalienable rights:
A. belong to individuals, and so they can sell them or give them away.
B. would never be violated in a free market environment.
C. cannot be sold or given away.
D. do not exist.
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 ach. Based on these numbers, the total
cost of making two fake killer whales would be:
A. $10,000.
B. $11,000.
C. $16,000.
D. $21,000.
Answer:
To resolve the problem of the effect of conspicuous consumption goods on society’s
welfare, an economist most likely would make the suggestion that:
A. conspicuous consumption goods should be taxed.
B. conspicuous consumption goods should be subsidized.
C. conspicuous consumption goods should be regulated.
D. nothing should be done because laissez faire is the best policy.
Answer:
If a perfectly competitive industry is in long-run equilibrium, the price of the product
equals minimum:
A. marginal cost.
B. average total cost.
C. average variable cost.
D. fixed cost.
Answer:
According to the law of diminishing marginal utility:
A. total utility is always falling.
B. total utility is always rising.
C. after some point, total utility falls.
D. after some point, the rate of change in total utility declines.
Answer:
If the United States were to impose 100 percent tariffs on imports of Chinese shrimp,
what would most economists conclude?
A. This decision can be justified by using the infant-industry argument.
B. This decision can be justified by using the national defense argument.
C. This policy is a way to keep foreign producers from being exploited by Americans.
D. This decision is not justified in terms of economic well-being but may make sense
for political reasons.
Answer:
Refer to the graph shown. If this monopolist were forced to set price equal to marginal
cost, in the long run it probably would:
A. charge a price of $2.
B. charge a price of $3.
C. charge a price of $12.00.
D. stop producing.
Answer:
The number of workers in unions has been:
A. increasing throughout U.S. history.
B. decreasing throughout U.S. history.
C. decreasing since the 1980s.
D. increasing since the 1980s.
Answer:
This production possibility table illustrates:
A. increasing marginal opportunity cost.
B. decreasing marginal opportunity cost.
C. constant marginal opportunity cost.
D. zero opportunity cost.
Answer:
A company switches from a medical plan that covered all medical costs to a medical
plan with a high deductible, making employees responsible for the first $1,500 of
healthcare costs. Other things the same, a higher deductible is expected to:
A. reduce both medical claims and hospital admissions.
B. increase both medical claims and hospital admissions.
C. reduce medical claims and increase hospital admissions.
D. increase medical claims and reduce hospital admissions.
Answer:
Refer to the graph shown. A firm can produce the same amount of output at points:
A. A and B.
B. E and C.
C. B and C.
D. A and C.
Answer:
Refer to the graph shown, which shows the demand and supply for a new vaccine
against the common cold. Once vaccinated, a person cannot catch a cold or give a cold
to someone else. The socially efficient level of output is:
A. less than Q0.
B. greater than or less than Q0 depending on the income elasticity of demand and the
effectiveness of the vaccine.
C. greater than Q0.
D. equal to Q0.
Answer: