1.Which of the following is an example of scarcity?
a.If you choose to play video games, you will not have
as much time for exercise.
b.If a city u$es an acre of land to build a park, there will
be less land for houses.
c.If I decide to buy a new car, I may not have enough
money to,’go away on vacation this year.
d.All of the above are examples of scarcity.
•
2A variable is a measure of
a.something that always has the same value
b.something that can take on different values
c.factors that occur with high degrees of uncertainty
d.the degree to which something varies over time
3.Microeconomics is best described as the study of.
a.the choices made by individual households, firms and
governments
b.inflation, unemployment, gross national product and
the nation’s economy as a whole
c.how markets interact in the aggregate economy
d.marginal changes in the economy
4.The opportunity cost of going to college.
a.is zero if your parents pay your tuition
b.is equal to the cost of tuition, room and board, and
other expenses
c.includes wages you lose by going to school instead of
working
d.is the same for all students at a particular school who
pay full tuition
5.The period of time over which one or more factors of pro¬
duction is fixed is the .
a.long run
b.period of marginal costs
c.short run
d.None of the above
6.Suppose that you lend $1,000 to a friend and he or she
pays you back one year later. What is the actual cost of
&nbs p;lending the money?
.
a.There is no cost.
b.The real interest rate that would have been earned on
the money
c. The nominal interest rate that would have been earned
&nbs p;on the money
d.The implicit cost of the money
7.In modern economies, individuals in markets make most of
the decisions about.
a.what to produce
b.how to produce
c.for whom to produce
d.All of the above
8.A has a comparative advantage over B in producing a good
if.
a.A can produce more of the good than B can in a given
time period
b.A has a lower opportunity cost of producing the good
than does B
c.A has to trade off more than B does to produce the
good
d.A has a higher opportunity cost of producing the good
than does B
9.Which of the following is NOT an example of a free trade
&nbs p; agreement?
a.GATT
b.EU
c.APEC
d.OPEC
10.A demand curve is defined as the relationship between
.
‘-
a.the price of a good and the quantity of that good that
consumers are willing to buy
,b.the price of a good and the quantity of that good that
producers are willing to sell
c.the income of consumers and the quantity of a good
that consumes are willing to buy
d.the income of consumers and the quantity of a good
that producers are willing to sell
11.Becky demands more raisins as her income increases. From
this, we Can conclude that.
a.raisins are an inferior good
b.raisins are a complementary good
c.raisins are a normal good
d.raisins are a substitute good
12.Flour is used to produce bread. If the price of flour increas¬
es, . (
a.the demand for bread increases
b.the demand for bread decreases
c.the supply of bread increases
d.the supply of bread decreases
13.A good synonym for elasticity would be.
a.change
b.demand
c.responsiveness
d.stickiness
14.The cross elasticity of demand measures.
a.the relationship between the demand of one good and
the supply of another
b.the relationship between the demand of one good and
the price of another
c.the relationship between the demand and supply of
one good at the intersection of the curves
d.the elasticity of demand at the intersection of the sup¬
ply and demand curves
15.Suppose that in a month the price of a cup of coffee
increases from $1 to $1.50. At the same time, the quantity
of cups of coffee demanded decreases from 200 to 190. The
price elasticity of demand for cups of coffee (calculated
using the midpoint formula) is approximately.
J()
a.0.13
-b.0.5
c.7.8
d.20
1 6.Consumer Surplus refers tO.
a.• C the cost of producing a unit of the product
b.the maximum that a consumer is willing to pay for the product
c. the difference between the price charged for the prod¬
uct and the cost of producing that product
d. the difference between the maximum that a consumer
is willing to pay for a product and the price that is paid
for the product
1 7.A maximum price leads to a quantity tradedthe
equilibrium quantity, (
a AT
b.above
c.below
d.either “a” or “c”
1 8.The famous economist who coined the metaphor “the invis¬
&nbs p;ible hand” is.
a.Mickey Kantor
b.Alan Greenspan
c.Milton Friedman
d.Adam Smith
19.Katie’s demand curve for ice cream cones.
.
a.assumes that the only variables that change are the
price of ice cream cones and the quantity of ice cream
cones demanded by Katie
b.shows the quantity of ice cream cones Katie consumes
as her preference for ice cream changes
c.makes no;assumptions about Katie’s preference for ice
cream cones
d.assumes that the only variable that changes is Katie’s
income:
20.The budget line shows the set of all possible combinations
.
a.that yield the same level of utility to the consumer
b.that maximize a consumer’s utility
c.that can be purchased, given the consumer’s income
and the price of the goods
d.that are equilibrium points
21.Suppose that a consumer is maximizing her utility, then the
consumer’s income increases. What will happen?
a.The consumer will end up on a lower indifference
curve than before.
b.The consumer will end up on the same indifference
curve as before.
c.The consumer will end up on a higher indifference
curve than before.
d.The consumer’s budget line will shift to the left.
22.Joe runs a restaurant. He pays his employees $200,000 per
year. His ingredients cost him $50,000 per year. Prior to
running his restaurant, Joe was a lawyer earning $150,000
per year. What would economists say is Joe’s cost of run¬
ning the restaurant?
a.$150,000
b.$200,000
c.$250,000
d.$400,000
23.Average total cost equals
a.total fixed cost plus total variable cost
b.average fixed cost minus average variable cost
c.average fixed cost plus average variable cost
d.total cost minus average cost
24.The effect of spreading out the fixed costs outweighing the
effect of diminishing returns is illustrated by the
average COSt curve.
a.long-run, decreasing
b.long-run, increasing
c.short-run, decreasing
d.‘C short-run, increasing
Double heck 24
25.Firms in a perfectly competitive market
a.sell a differentiated product
b.sell homogeneous products, like wheat or corn
c.usually have large advertising budgets
d.try to attract customers away from their competitors
26.If a firm has already paid for something, we call it
&nbs p;Aa fixed cost
&nbs p;Ba spent cost
&nbs p;Ca sunk cost
&nbs p;Da lost cost
&nbs p;
27.You notice that the price of butter rises and then falls. The
best explanation for this is that. (
a.demand for butter increased causing price to rise
iwhich attracted other firms to enter the market causing
supply to increase which caused the price to go back down
b.demand fOr butter decreased causing price to fall
which attracted other firms to enter the market causing
supply to increase which caused the price to go back
up
c.demand for butter decreased causing price to fall
which induced other firms to exit the market causing
•supply to decrease which caused the price to go back
up
d.demand for butter decreased causing price to fall
which attracted other firms to enter the market causing
supply to decrease which caused the price to go back
up
28.In order to receive a patent in the United States an inventor
must
a.prove a product is useful and novel
b.provide a working model of the product
c.pay a one-time fee
d.do all of the above
29.In the long run, the main reason that a monopolist can earn
positive economic profits while a perfectly competitive firm
Cannot is .
a.monopolists enjoy greater economies of scale
b.there are no barriers to entry in a perfectly competitive
market
c.the monopolist faces an inelastic demand for its prod¬
uct
d.perfectly competitive firms face greater opportunity
costs
30.Suppose that it would cost a firm $9 million to develop a
new drug. In the absence of a patent, other firms will be
able to copy and bring to market a generic equivalent of the
drug in three years. In each of these three years, the firm
would earn monopoly profits of $4 million. A patent will
-*generate monopoly status for the firm for twenty years. If
the government knew this information ahead of time, which
of the following is most correct?
a.The government should grant a patent to the firm,
because the firm would not produce the drug at all
without a patent. ‘-
b.The government should grant a patent to the firm,
because it does not have the resources to determine,
/con a case-by-case basis, exactly which inventions tr merit award of the patent.
c.The government should grant a patent to the firm,
because the firm is entitled to make large profits for all
the work it put into research and development of the
drug.
d.The government should not grant a patent to the firm,
because the firm would earn sufficient profits to devel¬
op the drug without the patent.
Check number 30
31.An entrepreneur is a person who.
a.only hires workers
b.works as an employee in a risky business
c.undertakes a risk to start a business
d.a person who buys stock in a new company
32.Under monopolistic competition
a.firm profits are higher in the long run than in the short
run
b.average costs of production are the same in the short
run as they are in the long run
c.economic profit is zero in the long run
d.price equals marginal cost
33.A benefit to consumers of monopolistically competitive
markets is that.
a.consumers only have to choose from one product
b.consumers have a variety of products from which to
jchoose
c.goods are sold at the lowest possible average cost of
production
d.price is equal to marginal cost in equilibrium
34.The four-firm concentration ratio measures the.
a.percentage of market output produced by the four
-Clargest firms
b.the elasticity of demand of the four largest firms in an
industry
c.the average cost of the four largest firms in an industry
d.number of firms in an industry
35.Price fixing is an arrangement whereby firms agree to
a.not change price even if market conditions dictate a
change
b.set price equal to marginal cost
c.set price equal to average total cost
d.coordinate their pricing decisions
36.A contestable market is one where.
a.there are infinitely many firms
b.entry necessarily occurs
c.there is the legitimate threat of entry
d.firms can maintain the monopoly price
37.The government allows firms to engage in price discrimina
tion Unless the practice. (
a.allows the firm to earn positive economic profits
b.reduces consumer surplus
c.drives rival firms out of business
d.increases prices to consumers
38.Which of the following is NOT true about advertising?
a.Advertising can make profits in an industry increase.
b.Advertising can make profits in an industry decrease.
jc.Advertising can create the illusion that there are differ-
ences between products when there are none.
d.All of the above are true.
39.In which of the following cases did the government break
.Up a monopoly? (
a. Staples/Office Depot
b. Interstate Bakeries and Continental Bakery, ^
c. Xidex
d. Standard Oil
40.In which of the following cases did the government success-
fully block a merger?
a.Staples/Office Depot
b.Interstate Bakeries and Continental Bakery
c.AT&T
d.Standard Oil
Check number 40 – chapter 7
41 .An example Of a public good is
a.national defense
b.a hamburger
c.a laundromat
d.a personal computer
42.The idea that voters tell the government what to do
a.is the basic idea of democracy
b.is the basis for a command economy
c.always leads to efficient economic outcomes
dall of the above
44.As a consequence of global warming we can expect
a.total rainfall to increase
b.crops to grow faster
ic.the polar ice caps to melt
d.all of the above to occur
45.People who apply for loans know more about their ability
to repay the loan than the lenders do. This is an example of
.
;
a.asymmetric information
b.public information
c.a negative externality
d.a community rating
46.Moral hazard occurs when a person’s behavior changes in a
Way that. )
a.is immoral
b.is dangerous
c.increases the likelihood of a bad outcome for someone
else
d.causes negative externalities
47.The short-run labor demand curve is.
a.more elastic than the long-run labor demand curve
b.less elastic than the long-run labor demand curve
c.might be more or less elastic than the long-run labor
demand curve
d.perfectly elastic (horizontal)
48.Occupational licensingthe cost of entering an
occupation andthe price of goods produced by the licensed occupation
a.increases; increases
b.decreases; increases
c.increases; decreases
d.decreases; decreases
49 .Which of the following groups has a poverty rate below the average for the United States?
a.College graduates
b.Two-parent households
c.Over 65
d.All of the above
50.Why is the current method of funding the Social Security system considered to be in crisis?
a.Medical costs have risen very rapidly, and these
increases are predicted to continue.
b.The ratio of the working age to the retiree population is falling.
c.A sluggish asset market means that future Social
Security payments are likely to be lower than expected
d.Both “a” and “b” are correct.
Please double check