Relying on experiments and statistical analysis of real-world observations is the
premise behind:
A. heuristic economics.
B. traditional economics.
C. modern economics.
D. Keynesian economics.
Answer:
The central characteristic of oligopolistic industries is:
A. interdependent pricing decisions.
B. flexible prices.
C. price competition.
D. few or no economies of scale.
Answer:
Most games in real life:
A. require intuition, common sense, and calculations.
B. require a mixed strategy.
C. require a rollback strategy.
D. have a best solution.
Answer:
A perfectly competitive firm will be profitable if price at the profit-maximizing quantity
is above:
A. MC.
B. AVC.
C. ATC.
D. AFC.
Answer:
Given that there are significant economies of scale involved in making flat screen
television sets, the cost of manufacturing a flat screen television set most likely will:
A. rise as the industry matures.
B. fall as the industry matures.
C. remain the same as the industry matures.
D. rise whether the industry matures or not.
Answer:
A purpose of advertising is to make the:
A. demand for one’s product less inelastic.
B. demand for one’s product more inelastic.
C. supply for one’s product less elastic.
D. market closer to perfectly competitive.
Answer:
Shadow prices are designed to take into account:
A. the underground economy.
B. government intervention.
C. social and moral pressures.
D. market forces.
Answer:
Refer to the graph shown. At an output of a, the monopolist should:
A. not change output since profits are maximized.
B. reduce output to increase profits.
C. increase output to increase profits.
D. increase price to increase profits.
Answer:
The derived demand curve for labor shows the:
A. minimum amount of labor, measured in labor hours, that a firm requires at various
wages.
B. minimum amount of labor, measured in dollar value, that a firm requires at various
wages.
C. maximum amount of labor, measured in dollar value, that a firm will hire at various
wages.
D. maximum amount of labor, measured in labor hours, that a firm will hire at various
wages.
Answer:
Using the indifference curve model, a demand for X curve is derived by allowing:
A. the price of Y to change and holding the price of X and income constant.
B. income to change and holding the price of X and the price of Y constant.
C. the price of X to change and holding the price of Y and income constant.
D. the price of X and the price of Y to change and holding income constant.
Answer:
Government failure is likely to occur for all of the following reasons except:
A. special interest groups might lobby government to the detriment of the public good.
B. individuals have better information about a situation that affects them than does
government.
C. intervention in markets is always simpler than it initially seems.
D. the bureaucratic nature of government intervention does not allow fine-tuning.
Answer:
Refer to the graph shown. Within which section(s) of the production function is
marginal product decreasing?
A. A
B. B
C. A and B
D. B and C
Answer:
eBay.com dominates the online auction business because sellers want to go where the
buyers are and buyers want to go where the sellers are. Bigger is thus better. Hence,
eBay.com illustrates the concept of:
A. public goods.
B. nonrival goods.
C. economies of scope.
D. network externality.
Answer:
Refer to the following table. At this level of consumption of goods A and B, the
consumer:
A. is maximizing satisfaction for the given expenditure.
B. could increase total satisfaction for a given expenditure by increasing the
consumption of A and decreasing that of B.
C. could increase total satisfaction for a given expenditure by increasing the
consumption of B and decreasing that of A.
D. should consume only A.
Answer:
If the average utility of good A is 15 and the average utility of good B is 25, you should:
A. consume more of good A and less of good B.
B. consume more of good B and less of good A.
C. keep consuming the current amounts of both good A and good B.
D. realize that you don’t have enough information to answer the question.
Answer:
Refer to the graph shown. Between points C and D, marginal utility is:
A. decreasing, and so total utility is falling.
B. positive, and so total utility is increasing.
C. positive, and so total utility is falling.
D. decreasing, and so total utility is at its maximum.
Answer:
Cuba is known for its tobacco products. Which of the following results would we
expect to see from the long-standing U.S. embargo on Cuba?
A. Transshipment of Cuban cigars to the United States occurring through other nations
B. Cigar producers in Cuba being better off since their product is scarcer in the United
States and therefore commands a higher price
C. Cuba’s economy gaining because its own citizens enjoy less expensive tobacco
D. The U.S. government benefiting from tariff revenue on Cuban tobacco products
Answer:
Folgers and Maxwell House coffees tend to be much more price-elastic than Starbucks
brand coffee. As a result, we can conclude that:
A. when Starbucks raises prices, it causes sales of Folgers and Maxwell House to rise a
lot.
B. when Starbucks raises prices, it causes sales of Folgers and Maxwell House to fall by
a lot.
C. when the price of Folgers or Maxwell House coffee rises, consumers buy only
slightly less.
D. when the price of Folgers or Maxwell House coffee rises, consumers buy a lot less.
If a good is price-elastic, it means that the percent change in quantity demanded
exceeds the percent change in price that causes the change (i.e., that PED > 1). We
cannot say anything about the relationship between Starbucks and other coffee prices if
we do not know the cross-price elasticity.
Answer:
If milk and cookies are complements and the price of cookies falls, we would expect to
see:
A. an increase in the demand for milk.
B. a decrease in the demand for milk.
C. an increase in the quantity demanded for milk but no change in demand.
D. a decrease in the quantity demanded for milk but no change in demand.
Answer:
If the minimum that the Smith family would be willing to sell their house for is
$185,000, but they in fact sell it for $210,000, they will receive:
A. producer surplus in the amount of $210,000.
B. producer surplus in the amount of $25,000.
C. consumer surplus in the amount of $210,000.
D. consumer surplus in the amount of $25,000.
Answer:
Suppose the federal government passes laws that require banks to disclose the
advantages of having their customers use automatic bill paying (an example of a
RECAP policy). This would be an example of a:
A. push.
B. nudge.
C. shadow price.
D. flawed assumption.
Answer:
An increase in the Federal minimum wage to $7.25 per hour from $6.25 per hour,
assuming that $7.25 is an effective price floor and that all other things remain constant,
will:
A. reduce the number of unemployed.
B. increase the number of unemployed.
C. shift the supply of labor to the right.
D. shift the demand of labor to the right.
Answer:
Refer to the graph shown. Within which section(s) of the production function is
marginal product increasing?
A. A
B. B
C. C
D. A and B
Answer:
One reason mainstream economists see the world differently than do noneconomists is
that economists tend to stress the importance:
A. that incentives have on choices.
B. of fairness.
C. of power and how it leads to exploitation.
D. of the limited competence of individuals to know what is good for themselves.
Answer:
Suppose a radar-activated braking system that can help prevent crashes is an option on a
new car. It costs $600 and reduces the chance of dying in an auto accident by 1/700.
The implicit value placed on life by a person who does not have the system installed is
therefore:
A. exactly $600.
B. less than $420,000.
C. at least $420,000.
D. at least $432,000.
Answer:
Which curve shown below represents the market supply given the following individual
supply tables?
A. A
B. B
C. C
D. D
Answer:
The use of the phrase “other things constant” in supply and demand analysis indicates
that:
A. an equilibrium price has been reached.
B. an equilibrium quantity has been reached.
C. we are considering changes in just one factor.
D. we are considering all the changes which might take place in actual markets.
Answer:
Output per worker is also called:
A. marginal product.
B. average product.
C. total product.
D. variable product.
Answer:
Kuo S. Huang estimates that with every 15 percent increase in income, the quantity of
turkey purchased declines by 1.8 percent. From this information one would conclude
that turkey is:
A. a luxury.
B. a necessity.
C. an inferior good.
D. a normal good.
Answer:
The opportunity cost concept takes into account:
A. only shadow prices.
B. only money prices.
C. both money and shadow prices.
D. neither money prices nor shadow prices.
Answer:
The best-selling mystery To the Nines by Janet Evanovich was sold in hardback for
$25.95 when it was released. One year later, the publisher issued a softcover edition for
$7.99. If the marginal cost of printing a softcover book is not much less than the
marginal cost of printing a hardback, the pricing difference:
A. cannot be explained by economic theory.
B. is probably due to price discrimination in which the seller charges a higher price to
consumers with a more elastic demand.
C. is probably due to price discrimination in which the seller charges a higher price to
consumers with less elastic demand.
D. must be due to a difference in fixed costs.
Answer:
In California, the price elasticity for vanity license plates is .5 and their price is $29.
California is:
A. maximizing revenue since elasticity is less than 1 and revenue will increase after a
price increase when demand is inelastic.
B. not maximizing revenue since elasticity is less than 1 and revenue will increase after
a price increase when demand is inelastic.
C. maximizing revenue since elasticity is less than 1 and revenue will decrease after a
price increase when demand is inelastic.
D. not maximizing revenue since elasticity is less than 1 and revenue will decrease after
a price increase when demand is inelastic.
Answer: