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1) Every
society
face
s
econom
ic
trade
off
s
.
This
means
a.
producing
more
of one
good
means less
of an
ot
he
r
good can
be produce
d. b.
not
every
one
can have
enough
goods
and
service
s
to survive.
c. some
people
live
better than
othe
rs
do.
d. society’s out
put
cannot
be made
available
to all
.
2) Which
of the
follow
ing
state
ment
s
is
false
?
a. Tradeoffs do not apply
when
consume
r
s
purchas
e
a product
for
which
ther
e
is excess
suppl
y, such
as a stock
clearance
sale
.
b. Every individual
,
no matter how
rich
or poo
r, is faced
with
making
tradeoffs. c.
Anytime
you
have to decide
which action to
take
you are
facing a
n
economic
tradeoff.
d. Economics
is a
social
science
that
studies
the tradeoffs we
are force
d
to make
because
of scar
cit
y.
3) Which of the following
is not an example
of an economic tradeoff that a firm
has
to make?
a. whether
it should
produce more of its
product.
b. whether
it is cheaper
to produce with more machines
or with more work
er
s. c.
whether or not consumer
s
will
buy
its product
s
.
d. whether to outsour
ce
the production
of a good or service
4) How
are the fundamental
economic decisions
determined
in Cuba
?
a. Primaril
y, the
gover
nment
decides
because Cuba is a centrally
planned econom
y.
b. The
se
decisions are made by the country
’s elders
who
have had
much
experi- ence
in answering
these
questions.
c. In
dividuals,
firms
,
and the government
inte
ract
in a market
to make these economic
decisions.
d. The United
Nations
decides because Cuba is a developing
economy
.
5) Which of the following correctly
describes
the relationship
between
economic efficiency
and economic equit
y?
a. The
y
are both
auto
maticall
y
achieved
in a free
market economy. b. There
is no conflict
between the two
goals.
c. There is often
a trade-off
between the two. d.
They
always
call for opposite
outcomes.
Final
Examination
6) Which of the following statements
best
characterizes
the disagreements
be- tween
Paul
Samuelson
and Jagdish
Bhagwati
in their
debate
about
outsourc- ing?
a. Their
disagreements are grounded
in norma
tive
economic analysis
.
They dis- agree
over how to interpret
the relevant
economic statistics
.
b. Their disagreements are grounded in positive
economic analysis.
They dis- agree about the relevant economic statistics used
in the model
.
c. Their disagreements are grounded in normative
economic analysis. They dis- agree over the types
of job
s
lost
to outsourcing.
d. Their disagreements are grounded in positive economic analysis. They dis- agree about the model and the assumptions
used in the model.
7) Which of the following statements about profit
is true?
a. Profit
refers
to the reven
ue
received
from
the sale of a quantit
y
of goods.
b.
Profit
is the difference
between a firm’s revenue
and its cost
s
.
c. Profit is calculated
by multiplying
price
per unit
by the number
of units
sold
. d.
The terms
“accounting
profit”
and “economic
profit” can be used inter-
change
abl
y.
8) Which of the following is an example of an activity
undertaken
by an entre- preneur?
a. holding
a position
as the president
of a liberal
arts
college
b.
land
scape
design
for your
new
home
c. run
ning
for the president of the United States
d.
starting
your own
pet
sitting
business
9) Suppose
when the price
of laptops
fall
s,
college students
buy more laptops.
This implies
that
a. the
re
is a negative
relationship between laptop prices
and quantities
pur- chase
d
by college students.
b. the
re
is a one-to-one
relationship between laptop prices and quantities pur- chased by college students.
c. there
is a direct
relationship between laptop prices and quantities purchase
d by
college students.
d. there is a positive relationship between laptop prices and quantities pur- chased by college students.
Final Examination
Figure
1-2
10)
Refer
to Figure 1-2.
Calculate
the area
of the triangle
A. a. $6.3
million
b. $3.15
million c.
$8.4
million d. $2.1
million
11)
You explain
to your friend
Haslina
,
who runs
a catering
service called
“Meals in
a Zip,”
about an economic theory
that asserts
that consumers will pur- chase less of a product at high
er
price than they
will at lower
prices.
She contends
that the theory is incorrect
because over the past
two yea
r
s
she
has raise
d
the price of her catered
meals
and yet
has see
n
a brisk
increase
in sales
.
How would
you respond
to Haslina?
a. I
will explain to her that there are some omitted
variable
s
that have contrib- uted
to an increase in her sales such as changes
in income
.
b. Haslina
is making the mistake
of assuming
that correlation
implies causation. c.
I will explain to her that she confusing
positive economic analysis with norma-
tive economic analysis.
d. Haslina is right
;
she has evidence
to back
her claim.
The theory must
be false.
12)
In a production possibilities
frontier
model,
a point
inside
the frontier is
a. inefficient
.
Maximum
output is not being
obtained
from available resources
. b.
a
llocatively
efficient.
c. allocative
ly inefficient. d.
productive
ly
efficient
Final Examination
13)
A production possibilities frontier with a bowed
outward
shape
indicates
a. decreasing
opportunity
costs
as more and more of one good is produced
.
b.
constant
opportunity costs as more and more of one good is produced.
c.
the possibility
of inefficient production.
d.
increasing
opportunity costs as more and more of one good is produced.
Figure 2-3
14)
Refer to Figure 2-3.
Carlos
Vany
a
grows
tomatoes
and strawberries
on his land.
A portion
of his land is more suitable
for growing
tomatoes and the other
portion is better suited for
strawberry
cultivation.
Which of the graphs in
Figure 2-3 represent
his production possibilities frontier?
a.
Graph
A b.
Graph B c.
Graph C
d. either Graph
A or Graph B
e.
either Graph B or Graph C
Figure 2-4
Final Examination
Figure 2-4 shows
various
points on
three
different
production possibilities fron- tiers
for a nation.
15)
Refer to Figure 2-4.
A move
ment
from X to Y
a. is
the result
of advancements
in plast
ic
production technolog
y
onl
y, with no change
in food
production technology
.
b. is
the result of advancements in food production technology only
, with no change in the technology for plastic production.
c. could
occu
r
because of an influx
of immigrant
labo
r.
d. could be due
to a change in consumers’
tastes
and preferences.
Figure 2-6
German
auto producer
BMW
currently
produces
two types of automobile
s,
sports
utility
vehicles
(SUVs)
and coupes,
in its U.S.
plant.
Since
it opened
in 1994, the
company
has made several
strate
gic
production decisions. Figure 2-6 shows changes
to its production possibilities frontier in response
to some of these pro- duction
strategies.
16)
Refer to Figure 2-6.
Between
1995
and 200
3
worker
productivity
increased
so
that the total
number of vehicles produced increased as the company
added
more machinery
and workers
and changed
the layout
of its factor
y. This
is best represented
by the
a. movement from G to H in Graph B. b.
movement from L
to K in Graph C. c.
movement from J to H in Graph B. d.
movement from E to F in Graph A.
Table 2-2
George
Jack
Lawns Mowed
106
Gardens Cultivated
54
Final Examination
Table 2-2 shows the output per day
of two garden
ers,
George and Jack.
They can either devote
their time to mowing
lawns
or cultivating
gardens.
17)
Refer to Table 2-2.
What
is George’s opportunity cost of cultivating a garden?
a. two
lawns mowed
b. one and a half
lawns mowed
c. two-third
s
of a garden cultivated
d.
one-half
of a garden cultivated
Table 2-3
OneDigitalCamera
Wheat(perpound
)
China
0
hour
s
4 hours
south Korea
60 hours
3 hours
Table 2-3 shows the number of labor
hours required
to produce a digital
camera
and
a pound of wheat
in China
and South
Korea.
18)
Refer to Table 2-3. What is South Korea’s opportunity cost of producing one digital
camera?
a. 25
pounds
of wheat b.
20
pounds of wheat
c. 0.05
pounds of wheat d.
60
pounds of wheat
19)
Refer to Table 2-3. China has a comparative
advantage
in a. both
products.
b. digital
camera production. c.
wheat production.
d. neither
product.
20)
Refer to Table 2-3. If the
two countries
specialize
and trade,
who should export
digital cameras?
a. South
Korea
b. There is no basis
for trade between the two countries. c.
They should both be importing
digital cameras.
d. China
Final Examination
Figure 2-10
21)
Refer to Figure 2-10.
The segment
of the circular
flow
diagram
in the Figure shows
the flow of funds
from market F to economic agents
G. The funds rep- resent
spending
on goods and services
.
What is market F and who are eco- nomic
agents G?
a. F
= factor markets;
G = firms
b. F
= factor markets; G = household
s
c.
F = product markets; G = firms
d. F = product markets; G = households
22)
Although
it is a popular
product,
Apple
makes
little
profit from each
song
down
loaded
through
iTunes.
Why
does
Apple charge
only $0.99
to download a
song?
a. Although
Apple makes a small
amount
of profit per song,
total profit is large
because
the quantity
sold is large.
b. The low price makes it more like
ly
that consumers will buy iPods,
which are relatively
expensive.
c. Apple plans
to increase the price of downloading
songs
after
it sell
s
a large enough
number of iPods.
d. Apple cannot raise the price above
$0.99 per song because consumers can download
songs at even lower prices from Apple’s competitors.
23)
The income effect
of a price
change refers to the impact
of a change in a. the
price of a good on a consumer’s purchasing
powe
r.
b. income
on the price of a good. c.
demand
when income changes.
d. the quantity demanded
when income changes.
Final Examination
24)
The Internet
has created
a new category
in the book
selling
market,
name
l
y, the “barely
used”
book.
How does the availability
of barely used books
affect the
market for new books?
a. the demand curve
for new books shift
s
to the left
b. the
demand curve for new books shifts to the right c.
the supply
curve for new books shifts to the right
d. the supply curve for new books shifts to the left
25)
A supply schedule
a. is a table that shows the relationship between the price of a product and the quantity of the product that producers
and consumers are willing
to ex- change.
b. is a table that shows the relationship between the price of a product and the quantity of the product supplied
.
c. is a curve that shows the relationship between the price of a product and the quantity of the product supplied.
d. is the relationship between the supply of a good and the cost of producing the good.
26)
In October
2005
,
the U.S. Fish
and Wildlife
Service
banned
the importation
of beluga
cavia
r, the most
prized
of caviar
s,
from the Caspian
Sea.
What hap- pened
in the market for caviar in the U. S.?
a. The demand curve shifted
to the right.
b.
The demand curve shifted to the left.
c. The
supply curve shifted to the right. d. The
supply curve shifted to the left.
Figure 3-2
Final Examination
27)
Refer to Figure 3-2.
If the price is $25,
a. there
would be a short
age
of 200 units.
b.
there would be a surplus
of 300
units. c.
there would be a shortage of 300 units d.
there would be a surplus of 200 units.
28)
As
sume
there is a shortage in the market for digital music
players
.
Which of the following statements correctly describes this
situation
?
a. The shortage will cause
an increase in the equilibrium
price of digital music players.
b. The price of digital music players will rise
in response to the short
age;
as the price rises
the quantity demanded will increase and the quantity supplied will decrease
.
c. Some
consumers will be unable
to obtain digital
music players at the market price
and will have a
n incentive
to offer
to buy the product at a higher
price.
d. The demand for digital music players is greater
than the supply of digital music players.
29)
Select
the phrase
that correctly completed
the following statement.
“A posi- tive
change in technology caused
an increase in the supply of flat-screen
televisions
.
As a result
a. the price of flat-screen televisions
decreased
and the quantity demanded of flat-screen televisions increased.”
b. the price of flat-screen televisions decreased.
The lower price caused the supply of flat-screen televisions to decrease.
”
c. the equilibrium quantity of flat-screen televisions decreased.”
d. the price of flat-screen televisions decreased and the demand for flat-screen televisions increased.”
30)
“Because
apples
and orange
s
are substitute
s
,
an increase in the price of or- anges
will cause the demand for apples to increase.
This initial
shift in demand
for apples results
in a higher price for apples;
this higher price will cause the demand curve for apples to shift to the right.”
Which of the follow- ing
correctly comments
on this statement?
a. The statement is false because a change in the price of apples would not change
the demand for apples.
b. The statement is false because one cannot assume
that apples and oranges are
substitutes for all consumers.
c. The statement will be true,
if consumer tastes for apples and oranges do not change.
d. The statement is false because oranges are inferior
goods;
apples are normal goods.
Final Examination
31)
The demand for lobster
is lower in the spring
than in the summe
r. If the price of lobster is higher in spring than in summer
then
a. there are more substitutes for lobster in summer than there are in spring.
b.
there is a shortage of lobster in spring and a surplus of lobster in summer. c. the supply of lobster is greater in summer than in spring.
d. consumers’ tastes for lobster are greater in spring than in summer.
32)
Suppliers
will be willing to supply a product only if
a. the price received is less than the addition
al
cost of producing the product.
b.
the price is higher than the average
cost of producing the product.
c. the price received is at least
equal
to the additional cost of producing the product.
d. the price received is at least double
the additional cost of producing the prod- uct.
Table 4-3
|
HourlyWage (Dollars) |
Quantity |
QuantityofLaborDe- manded |
|||
|
$6.00 |
350,000 |
390,000 |
|||
|
6.50 |
360,000 |
380,000 |
|||
|
7.00 |
370,000 |
||||
|
7.50 |
38 | ||||
|
8.00 |
|||||
|
8.50 |
400,000 |
340,000 |
Table 4-3 shows the demand and supply schedules
for the low-skilled
labor mar- ket
in the city
of Westove
r.
33)
Refer to Table 4-3.
If a minimum
wage
of $7.50
an hour is mandated,
what
is
the quantity of labor supplied?
Final Examination
Figure 4-7
Figure 4-7 shows the demand and supply curves
for the almond
market.
The government
believes
that the equilibrium price is too
low and tries to help
almond growers
by set
ting a
price floor
at Pf.
34)
Refer to Figure 4-7.
What is the area that represents
producer surplus after the
imposition
of the price floor?
a. B
+ E + F
b. B + C + D + E
c. A + B + E
d. B + E
35)
Which of the follow is not a result of imposing
a rent ceiling?
a. a
n
increase in the quantity demanded of apart
ment
s
b.
a reduction
in the quantity supplied of apartments
c. the marginal
benefit
of the last
apartment rented
is greater than the marginal cost
of supplying
it
d. some consumer surplus is converted
to producer surplus
36)
If your neighbor
burns
auto tires
in the yard
and you can smell
them
and can- not
see sunlight
because of the black
smoke,
you are experiencing
a. a positive external
it
y. b. a private
benefit.
c. a private cost.
d. a negative externalit
y.
Final Examination
37)
Vaccinating
people against
a communicable
disease
such as influenza
not only
reduces
the chances
that the person
vaccinated
will catch
the disease but
also
reduces the probability
that an epidemic
of the disease will occur. Which
of the following statements is true?
a. The benefits
of the influenza vaccination
outweigh
the costs.
b. Reducing
the chances that the person vaccinated will catch the disease is a private benefit while
reducing
the probability of an influenza epidemic is a social
benefit.
c. Vaccinating people against communicable diseases
yield
s
private benefits in excess
of social benefits.
d. Reducing the chances that the person vaccinated will catch the disease is a private cost while reducing the probability of an influenza epidemic is a social benefit.
38)
Which of the following conditions
holds in an economically
efficient competi- tive
market equilibrium?
a. The marginal benefit of the last unit produced and consumed
is maximized. b.
Producer
and consumer surplus are exactly
equal in size.
c. There are no positive and no negative external effects from
consumption
and production.
d. The deadweight
loss
is positive but at a minimum.
Figure 4-14
Figure 4-14 shows a market with a positive externality
.
Final Examination
39)
Refer to Figure 4-14.
The deadweight loss due to the externality is repre- sented
by the area
a. msn. b. nso. c. mso. d.
mtn.
Figure 4-15
Companies
producing toil
et
paper
bleach
the paper to make it white.
The bleach is
discharged
into
rivers
and lakes
and causes
substantial
environmental
damage. Figure
4-15 illustrates
this situation in the toilet paper market.
40)
Refer to Figure 4-15.
The efficient output is a. Q3.
b. Q1. c. Q2. d.
Q4.
41)
How has organizing
a success
ful
firm in a market economy changed over the last centur
y?
a. There has been
no change over the last century.
b. It
has become
easier
as more and more firms discover
how to do it.
c. As government intervention
has decreased,
firms now
have more freedom. d.
It
has become more difficult
to organize
an efficient and successful firm.
Final Examination
42)
What is the relationship of the owne
rs
of a corporatio
n
to the corporation?
a. The personal
assets
of the owners are part of the corporation’s assets.
b. The owners of the corporation have a separate
legal
distinction
from the cor- poration.
c. The owners of the corporation have no
separate legal distinction from the corporation.
d. None
of the above describes the relationship.
43)
When
you buy previous
ly-issue
d
share
s
of Google
stock,
this transaction
takes place
in the
a. secondary
market. b.
bond
market.
c. primary
market. d.
bear
market.
44)
You have a bond that pay
s
$60
per year
in coupon
payment
s
.
Which of the following would result in an increase in the price of your bond?
a. The price of a share of stock in the company falls
.
b. The likelihood
that the firm issuing
your bond will default
on debt
increases
. c.
Coupon
payments on newly
-issued
bonds
fall to
$50
per year.
d. Coupon payments on newly-issued bonds rise to $80
per year.
45)
In June
2007
General
Motors
(GM)
posted
a price-earn
ings
ratio of 9.84.
If the price of the stock at that time was
$36
per share,
which of the following must
have been true?
a. GM
’s earnings per share was 3.66.
b. GM’s coupon payment was $35
per year.
c. GM’s dividend
yield for the year was 26%.
d. GM’s revenues
that month were
$366
million.
46)
In 2007,
the dividend yield on General Motors (GM) stock fell
from 8.6%
to
4.4%.
Which of the following would have generated
that result?
a. The price-earnings ratio rose.
b. GM issued bonds with a coupon rate equal to 8%.
c. GM announced
a decrease in the dividend it would pay per share. d.
The closing
price of GM stock fell.
Final Examination
47)
Which of the following is an example of an implicit
cost a firm might
incur?
a. taxes
owed to the state and federal
governments b.
the out-of-pocket
expense
to hire
resources
c. the revenue a firm generates
in using its resources
d. the rental value
of the office
space
the company owns
and uses for itself
48)
What is shown
on a firm’s income statement?
a. profit
s
b. revenues c.
costs
d. All
of these are shown on a firm’s income statement.
49)
In addition to requiring
that CEO
’s personally
certify
the accuracy
of financial
statements,
the Sarbanes-Oxley
Act
of
2002
also requires
that
a. corporations
issue financial statements monthly
rather
than quarterl
y.
b. firms
raise funds for expansion
through the sale of bonds only, not stocks. c.
auditors
disclose
any potential
conflicts
of interest.
d. CEOs
conduct
audits of
their corporations themselves
.
50)
Suppose your marginal utility from consuming
a third slice
of cake
is zero
, then
your total utility from consuming cake is
a. increasing. b.
negative.
c. decreasing. d.
maximized.
51)
When the price of summer tank
tops falls and you buy more them because they
are relatively less expensive,
this is called
a. the elasticity
effect.
b. the deadweight loss effect. c.
the income effect.
d. the substitution
effect.
52)
Most
film
processing
companies
have a policy
of printing
every picture
on a roll
of film and allowing
customer
s
to request
a refund for
pictures
that were not
clearly
developed.
The companies do this know
ing
that most customers
do
not ask
for refunds.
This is an example of consumers
a. not
taking non-monetary
opportunity costs into account.
Final Examination
b. not making themselves aware
of the policy regarding
refunds. c.
failing
to ignore
sunk
costs.
d. being overly
optimistic
about their future
behavio
r.
53)
If demand is perfect
ly
price elastic,
the absolute
value of the price elasticity of
demand is
a. less
than one. b.
more
than one. c.
infinit
y.
d. equal to the absolute value of the slope
of the demand curve.
54)
If the market for a product is broadly
defined,
then
a. there are many
substitutes for the product and the demand for the product is relatively
elastic.
b. the good has many complements.
c. there are few
substitutes for the product and the demand for the product is relatively inelastic
.
d. the expenditure
on the good is likely to make up a large share of one’s bud- get.
Figure 6-2
55)
Refer to Figure 6-2.
The inelastic segment of the demand curve a. lies
above the midpoint
of the curve.
b. is coincident
with the horizontal
axis.
c.
lies below
the midpoint of the curve. d.
is coincident with the vertical
axis.
Final Examination
Table 6-3
Price
perpound
(Dollars)
QuantityDemandedofcheese
(pounds)
$16
3
4
5
56)
Refer to Table 6-3.
Over
what range of prices is the demand price elastic?
a. over
the entire range
of prices b.
between
$8 and $16
c. between $12
and $16 d.
between $2 and $8
57)
When a firm changes its price,
the change in total revenue
a. depends
on the value
of the price elasticity of demand and the direction
of the price change.
b. is zero.
c. is negative. d.
is positive.
58)
A characteristic
of the long
run is
a. there are both fixed
and variable inputs
b. plant
capacity
cannot be increased or decreased. c.
all inputs can be varied.
d. there are fixed inputs.
Final Examination
59)
Academic
book publishers
hire editors,
designers,
and production and mar- keting managers
who help prepare
books for publication.
Because these em- ployees
work on several books simultaneousl
y, the number of people the company hires
will not go up and down with the quantity of books the com- pany
publishes
during
any particular
year. The salaries
and benefits of people in
these job categories
will be included
in
a. marginal
cost and total cost but not fixed cost. b.
fixed
cost but not variable cost and total cost.
c. fixed cost and marginal cost but not variable cost. d.
fixed cost and total cost but not variable cost.
60)
If another
worker adds
9 units of output to a group
of workers who had an average
product of 7 units then the average product of labor
a. will
increase. b.
will
decrease.
c. will remain
the same
.
d. cannot
be determined from the inform
ation
given.
Table 7-1
Numberofworkers
Mushroom
sperday(pounds)
Table 7-1 shows the technology of production at the Matsuko
’s Mushroom Farm for
the month of
May
2007.
Final Examination
61)
Refer to Table 7-1.
Diminishing
returns
set in when the worker is hired.
a. 2nd b. 3rd c.
4th
d. None of the above;
the production function
displays
increasing marginal returns.
62)
If production displays economies
of scale,
the long run average cost curve is a. upward
sloping.
b. above
the short run average total cost curve. c.
below the long run marginal cost curve.
d. downward-sloping.
63)
When a firm’s long-run
average cost curve is horizontal for a range of output, then
in that range production displays
a. constant
average fixed costs. b.
increasing
returns to scale.
c. constant returns to scale.
d. decreasing returns to scale.
64)
The price of a selle
r
’s product in perfect competition
is determined by a. the
individual seller.
b. a few of the sellers.
c. the average consumer.
d. market demand and market supply.
65)
All of the following can be used to compute
profit per unit except a. price
minus
average total cost.
b. total profit divided
by quantity.
c. average revenue minus average total cost d.
marginal
profit minus marginal cost.
66)
Val Alvarado,
an accountant,
quit his $80,000-a-year
job and bought
an existing
laundr
y
from its previous owner. The lease
had five
years
remaining and
required a monthly payment of $4,000.
Val’s explicit
costs are $3,000 per
month more
than his revenue.
Should
Val continue
operating
his busi- ness?
Final Examination
a. If
Val’s marginal revenue is greater than or equal to his marginal cost,
then he should
stay
in business.
b. Val should continue to run the laundry until
his lease runs out.
c. Val’s explicit cost exceeds
his total revenue. He should shut
down his laundry. d. cannot be determined without
knowing his revenue
67)
A perfectly
competitive
market is in long-run equilibrium.
At present there are
100 identical
firms each producing 5,000
units of output.
The prevailing market
price is $20.
Assume
that each firm faces increasing marginal cost. Now
suppose
there is a sudden
increase in demand for the industry
’s product which
causes the price of the good to rise to $24.
Which of the following describes
the effect of this increase in demand on a typical
firm in the indus- try?
a. In
the short run the typical firm increases its output and makes an above normal
profit.
b. In the short run the typical firm’s output remains
the same but because of the higher
price its profit increases.
c. In the short run the typical firm increases its output but its total cost also rises.
Hence,
the effect on the firm’s profit cannot be determined without more
information.
d. In the short run the typical firm increases its output but its total cost also rises,
resulting
in no change in profit.
68)
Which of the following describes a situation in which every good or service is produced up to the point where
the last unit provides
a marginal benefit to consumers
equal to the marginal cost of producing it?
a. profit maximization
b. productive efficiency c.
allocative efficiency d.
marginal efficiency
69)
According
to Craig
Johnson,
president of retail
consulting
group Customer Growth
Partners
“Wal-Mart
’s foray
into organic
s
should help to bring
down prices
for consumers.”
Which of the following statements supports
Mr. John- son
’s argument?
a. Wal-Mart has a reputation
for deliberately
lowering
prices to force its competi- tors
out of the market.
b. Wal-Mart is large enough that it can successfully
pressure the
U.S. Depart- ment
of Agriculture
to force organic food farmer
s
to lower
their prices.
Final Examination
c. By
expanding
the organic market, Wal-Mart would bring in economies of scale that
would, when
added to a competitive market, drive
down prices.
d. Wal-Mart’s core
customer base
is the low-income
consumer. Therefore,
to compete
for this customer group organic food farmers will be compelled
to lower prices.
70)
Which of following is the best example of a monopoly
if we use a broad definition
of monopoly?
a. Cheap
Gas,
one of two gasoline
stations
in a large rural
community b.
Spuds
Mckenzie,
a wealthy
potato
farmer in Idaho
c. Zippie
Rentals,
a sports car rental service
in downtown
Boston d.
Santos
Tacos,
the only taqueria
in the small town of Santosville
71)
Microsoft
thought
that the initial Xbox
was sufficient
ly
different from PS2
that
it could charge
a significantly
higher price for the Xbox than Sony
could charge for PS2.
Which of the following statements is implied
by Microsoft’s product positioning?
a. Microsoft
recognized
that the PS2
was a substitute for the Xbox but believed
that
the Microsoft name would be sufficient to draw
customers away
from the PS2 and that customers would be willing to pay a premium
for Microsoft’s product.
b. Microsoft believed that the PS2 would soon
be phase
d
out by Sony’s PS3; therefore,
it could charge a high price for the Xbox because it had no close substitutes.
c. Microsoft believed that the PS2 was a distant
substitute for the Xbox and therefore
the demand curve for Xbox would be elastic. Charging
a higher price would
enable
it to increase its profits.
d. Microsoft believed that it had differentiated
the Xbox sufficiently
to insulate it
from competition.
Consequentl
y, it would be able to charge a higher price and
increase its profits.
72)
Because a monopoly’s demand curve is the same as the market demand curve for its product,
a. the monopoly’s average total cost always falls as it increases its output. b.
the monopoly is a price taker.
c. the monopoly must lower its price to sell more of its product. d.
the monopoly’s marginal revenue equals
its price.
Figure 9-1
Figure 9-1 above shows the demand and cost curves facing a monopolist
.
Final Examination Figure 9-1 Figure 9-1 above shows the demand and cost curves facing a monopolist.
73)
Refer to Figure 9-1.
If the firm’s average total cost curve is ATC2
the firm will
a. make
a profit. b.
break
even.
c. suffer a
loss.
d. face competition.
74)
Which of the following statements applies
to a monopolist but not to a per- fectly
competitive firm at its profit-maximizing
output?
a. Price
equals marginal cost.
b. Marginal
revenue is less than price.
c. Marginal revenue equals marginal cost. d. Average revenue equals average cost.
75)
Natural
monopolies
in the United States are generally
regulated
by a. the Department
of Commerce.
b. the Department of Justice.
c. local
or state regulatory
commissions. d.
the Federal
Trade Commission.
Final Examination
76)
A major
difference between monopolistic
competition and perfect competi- tion
is that
a. there are barriers
to entry
in monopolistic competition.
There are no barriers to
entry in perfectly competitive markets.
b. monopolistically
competitive firms
sell differentiated products.
Perfectly
competitive
firms sell identical products.
c. government regulation
restricts
the ability of monopolistically competitive firms to change their prices.
Perfectly competitive firms face no price regula- tion.
d. the market demand curve in a monopolistically competitive market slopes downward.
The market demand curve in a perfectly competitive market is horizontal.
77)
Which of the following firms does not operate
in a monopolistically competi- tive market?
a. supermarkets
b. automobile producers
c. makers
of women
’s clothing d.
video
store
s
Table 10-3
| Price(Dollars) |
TotalRev- enue (Dollars) |
TotalVariable Cost (Dollars) |
TotalCost (Dollars) |
|
|
$22 |
$0 | $50 | ||
| 20 | 16 | 66 | ||
| 19 | 31 | 81 | ||
| 18 | 95 | |||
| 17 | 68 | 59 |
109 |
|
| 80 | 75 |
125 |
||
| 15 | 90 | 93 |
143 |
|
| 98 | 11 |
162 |
||
| 13 |
104 |
140 |
190 |
|
|
108 |
180 |
230 |
||
|
110 |
280 |
Final Examination
Table 10-3 shows the firm’s demand and cost schedules for a firm in monopolistic competition.
78)
Refer to Table 10-3.
What is the best course
of action for
the firm in the short run?
a. It
should shut down.
b. It should increase its sales by lowering its price.
c. It should stay in business because it covers
some of its fixed cost.
d. It should not cut
its price but it should increase its sales by advertising.
79)
At the peak
of its success in the mid-1980s
to the early 1990s,
Apple Com- puter
had a 15 percent
share of the personal computer
market.
In 2007
Apple’s share of the growing personal computer market was estimate
d
at 6 percent.
Which of the following best accounts
for this decline
in market share?
a. The entry of rivals
eliminated
Apple’s product differentiation.
b. Apple was not able to keep
up with technological
advancements in the per- sonal
computer market.
c. The entry of rivals revealed
that Apple was producing sub-standard
comput- ers.
d. Rivals
engage
d
in predatory
pricing
but Apple was not willing to engage in a price war.
80)
If the painting
firms in a city sign a contract
outlining
a pricing plan,
they are involved
in
a. price competition.
b. a legal form of business contract in the United States. c.
price regulation.
d. collusion.
81)
An example of business fixed investment
spending is a. a
purchase of a computer by an accounting firm.
b. $200
million of unsold
cars
at a car dealership.
c. a purchase of a bond by General Electric
Corporation. d.
a purchase of a home by a household.
Final Examination
Scenario
11-1
CANOES-R-US
makes canoe
s.
It buys
the shell
of the canoe from another firm for
$300
and uses its labor and intermediate
goods to make the canoe.
It sells
the finished
canoe to a retail canoe store for
$800.
The retail canoe store then sells the
canoe to a consumer for
$1,200.
82)
Refer to Scenario 11-1.
The value added of CANOES-R-US for each canoe equals
|
$400. |
|
|
$500. |
|
83)
Refer to Scenario 11-1. The value of each canoe in gross
domestic
product equals
84)
Gross
domestic product understates
the total production of final
goods and services because of the omission
of
a. exports
.
b. the underground
economy. c. intermediate
goods.
d. inflation
.
Table 11-15
National Income
$1000 billion
Retained earnings not paid as divi- dends
$50 billion
Transfer payments
$40 billion
Interest on government bonds
$20 billion
Personal Taxes
$30 billion
The components
of national
income for
an economy are listed
in Table 11-15.
Final Examination
85)
Refer to Table 11-15.
What is the level
of personal disposable
income for this economy?
A) $1,140
billion B)
$1,010 billion C)
$990
billion
D) $860
billion
86)
An advantage of the establishment
survey
over the household survey of the labor
market is that the establishment survey
a. provides an estimate of the number of persons
unemployed
. b.
includes
the number of self-employed
persons.
c. includes persons employed at newly opened firms.
d. is based
on actual payrolls,
rather than on unverified
answers.
87)
Full
employment
is not considered
to be zero unemployment
,
because a. people
do not find
jobs
instantaneousl
y.
b. some cyclical
unemployment always exists.
c. there are not enough jobs for everyone
who want
s
one. d.
some people do not want a job.
88)
If the minimum wage is set above the market wage, a. unemployment
will rise.
b. highly
skilled workers will have a harder
time finding
jobs.
c. the quantity of labor supplied will be less than the quantity of labor demand- ed.
d. all of the above are correct.
89)
A measure
of the average prices of goods and services in the economy is also known
as
a. the cost of living. b. the
market basket. c.
the inflation rate. d. the
price level.
90)
Your grandfather
tells
you that he earned
$5,000/year
in his first
job in
1947.
You earn $35,000/year
in your first job in 2007.
You know that aver- age
prices have risen
steadily
since
1947. You earn
a. less than 7 times
as much as your grandfather in terms of real
income.
b. more
than 7 times as much as your grandfather in terms of real income.
c. less than 7 times as much as your grandfather in terms of nominal
income. d.
7
times as much as your grandfather in terms of real income.
Final Examination
Table 13-1
Year
RealGDP
(Billionof2000dolla
rs)
$8,700
2003
8,875
2004
9,000
9,280
91)
Refer to Table 13-1.
Calculate the growth
rate of real GDP from 2004 to
2005.
92)
Human
capital
refers to which of the following?
a. manufactured
goods that are used to produce other goods and services
b. the quantity of goods and services that can be produced by one
worker or by one hour of work
c. the accumulated
knowledge
and skills
workers acquire
from education
and training
or from their life experiences
d. physical
equipment
that is made by human
laborers,
not machines
93)
Which of the following would contribute
to a sustained
high rate of economic growth
in the long run in an economy?
a. growth
in capital per hour accompanied
by technological change
b. a shift of workers in the economy from the agricultural
sector
to the nonagri- cultural
sector
c. increases in labor force
participation
rates as workers who are out of the labor force pursue
rising
wages
d. an influx of immigrant labor into an economy without any accompanying
tech- nological
change
94)
The effect of a recession
on a company like Boeing
Aircraft
is such that a. sales
decline more sharply
for Boeing as compared
to other firms.
b. the decline in sales is more short lived
as compared to other firms.
c. there is no difference in the impact of the recession on its profits as
com- pared
to other firms.
d. profits fall
less sharply as compared to other firms.
95)
As an economy begins
to emerge
from a recessionary
phase of the business cycle,
Final Examination
a. unemployment continues
to rise. b.
inflation begins to fall.
c. unemployment falls immediatel
y. d. investment
begins to fall.
96)
Last
week,
six
Swedish
kronor
could purchase one U.S. dollar
. This week, it takes
eight Swedish kronor to purchase one U.S. dollar. This change in the value of the dollar will exports from the U.S. to Sweden
and
U.S. aggregate
demand.
a. increase;
decrease b.
decrease; decrease c.
decrease; increase d.
increase; increase
97)
If technological change occurs
in the economy,
a. we
will move down along
the long-run aggregate supply curve. b.
the long-run aggregate supply curve will shift to the right.
c. we will move up along the long-run aggregate supply curve. d. the long-run aggregate supply curve will shift to the left.
98)
Why does the short-run
aggregate supply curve shift to the left in the long run,
following an increase in aggregate demand?
a. Workers and firms adjust their
expectations
of wages and prices upward and they
push
for higher wages and prices.
b. Workers and firms adjust their expectations of wages and prices upward and they accept
lower wages and prices.
c. Workers and firms adjust their expectations of wages and prices downward and
they accept lower wages and prices.
d. Workers and firms adjust their expectations of wages and prices downward and they push for higher wages and prices.
99)
When the price of oil rises unexpected
l
y, the equilibrium price level
and the unemployment rate in the short run.
a. rises;
falls b.
falls;
rises c.
rises; rises d.
falls; falls
100)
After
an unexpected increase in the price of oil,
the long-run adjustment
the price level and the unemployment rate as they return to
their original
levels.
a. decreases
;
increases b.
increases; increases c.
increases; decreases d.
decreases; decreases
