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1. From an economist's perspective, an important consideration for policies to address global warming is:

The market for recyclable inputs

The supply and demand for recycled products

The marginal cost and marginal benefit of the policies

A lawsuit that can arise from the enactment of the policies

2. When a producer cannot get all consumers of their product to pay for enjoying it, such as in the case of a fireworks display, then we'd have a demand-side market failure.

True

False

3. In a well-functioning cap-and-trade system for pollution rights, the right to pollute will go to those who can acquire the largest net benefit from using the scarce resource "clean air".

True

False

4. Which of the following does not illustrate the asymmetric information problem:

Ordinary financial investors do not know the motivations of financial advisers

Ordinary customers do not know how sanitarily the food is prepared in a restaurant

Ordinary stock-buyers do not know what will happen to the stock's price next week

Ordinary car buyers do not know the actual quality of the various cars in the dealer's lot

5. Better Business Bureaus in various cities exist partly to try to deal with inadequate buyer information about sellers.

True

False

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Insha Fatima
Insha FatimaLv10
28 Sep 2019

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Principles of Economics
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Related questions

1. If the cross price elasticity of demand between two commodities is positive, then these commodities are

Select one:

a. are complements.

b. are inferior.

c. are superior.

d. are substitutes.

Answer...?

2. Along a given indifference curve, a consumer reduces the quantity of one good in favor of more units of the other. In this situation

Select one:

a. the marginal utility of the first rises and the marginal utility of the second good falls.

b. Total utility rises.

c. Both the marginal rate of substitution falls and the marginal utility of the first rises and the marginal utility of the second good falls are correct.

d. the marginal rate of substitution falls.

Answer...?

3. Along a given indifference curve, a consumer reduces the quantity of one good in favor of more units of the other. In this situation

Select one:

a. the marginal utility of the first rises and the marginal utility of the second good falls.

b. Total utility rises.

c. Both the marginal rate of substitution falls and the marginal utility of the first rises and the marginal utility of the second good falls are correct.

d. the marginal rate of substitution falls.

Answer...?

4. Moral hazard is a barrier to financing global growth because

Select one:

a. of the differences between financing using loans, portfolio investment and foreign direct investment.

b. there is the possibility that the funds are used for riskier behavior than the lender agreed to.

c. firms sometimes have trouble determining whether they need funds or not.

d. if investors have trouble identifying high-risk firms they may be unwilling to give money to creditworthy firms.

5. Moral hazard is a barrier to financing global growth because

Answer...?

6. Which of the following statements is FALSE?

Select one:

a. Price elasticity of supply can never equal 1.

b. Time is an important consideration in determining supply elasticity.

c. A horizontal supply curve is possible.

d. A perfectly inelastic supply curve is a vertical line.

Answer...?

7. Corporations are able to raise large amounts of financial capital because

Select one:

a. of limited liability and the treatment of a corporation as an individual entity.

b. of the tax breaks corporations are given relative to partnerships or proprietorships.

c. of the elimination of the problem of separation of ownership and control.

d. of their greater ability to monitor the performance of decision makers.

Answer...?

8. The largest quota subscriber of the International Monetary Fund (IMF) is

Select one:

a. China.

b. Japan.

c. Germany.

d. the United States.

Answer...?

9. To derive the demand curve from the indifference map,

Select one:

a. vary the prices of both goods while holding income constant.

b. vary the price of one good while holding the price of the other good and income constant.

c. vary income while holding the prices constant.

d. vary the price of one good and income while holding the price of the other good constant.

Answer...?

10. As an individual consumes more of a particular commodity, the total level of utility derived from that consumption will

Select one:

a. increase at a constant rate.

b. increase at a decreasing rate.

c. remain constant.

d. increase at an increasing rate.

Answer...?

11. Which of the following is a TRUE statement about stock markets?

Select one:

a. It is always better to buy growth stocks than the older and more stable blue-chip stocks.

b. Economists can make above-average profits in the stock market because of their specialized knowledge of economics.

c. It is illegal for a friend of a corporate executive to make large profits in the stock market by using his inside information.

d. The stock market on average over time is random and totally unrelated to the performance of the economy.

Answer...?

12. Income elasticity of demand is defined as

Select one:

a. the percentage change in demand divided by the percentage change in income.

b. the percentage change in income divided by the percentage change in quantity demanded.

c. the change in quantity demanded divided by the change in market price.

d. the change in quantity demanded divided by the change in income.

Answer...?

13. The consumption possibilities curve is the

Select one:

a. budget constraint.

b. indifference curve.

c. supply curve.

d. demand curve.

Answer...?

14. According to the random walk theory,

Select one:

a. the probability that a stock's price will increase tomorrow is greater if it increased today.

b. the probability that a stock's price will increase tomorrow is greater if it decreased today.

c. the best forecast of tomorrow's price is today's price.

d. the best forecast of tomorrow's price is found by determining the trend for the last five trading days.

Answer...?

15. "Unit elasticity of demand can be found everywhere along a straight-line demand curve with a slope of -1." Do you agree or disagree? Explain.

Answer:

16. For which of the following would the absolute price elasticity of demand be greatest?

Select one:

a. Pepsi Cola

b. Tickets to the Super Bowl

c. Salt

d. Gasoline

Answer...?

16. The price of a hamburger is $1 and the price of a movie is $4 and the consumer has $10. A consumer has purchased 2 hamburgers and 2 movies, receiving 25 units of utility for the second hamburger and 100 units of utility for the second movie. The set of goods

Select one:

a. is not an optimum because the marginal utility per dollar spent is greater for hamburgers than for movies.

b. is not an optimum because the consumer has not spent all of his money.

c. is an optimum since the entire income is spent and total utility is minimized.

d. is an optimum since the entire income is spent and the marginal utility per dollar spent is the same for the last unit of each good.

Answer...?

17. Marginal utility

Select one:

a. is stable, but then as a person consumes more of a good or service, has a propensity to increase.

b. equals the total satisfaction from consumption of goods and services.

c. can be thought of as being the equivalent to total utility.

d. at first rises and then declines as a person consumes more of a good or service.

Answer...?

18. The nominal rate of interest is 4% and the anticipated rate of inflation is 5%. What is the real rate of interest?

Select one:

a. 1%

b. 4%

c. -1%

d. 9%

Answer...?

19. Using the above table, what is the total utility of consuming 3 bottles of soda?

Select one:

a. 115

b. 135

c. 120

d. 240

Answer...?

20. Dead capital is

Select one:

a. machinery that fails to operate properly.

b. a capital resource that depreciates rapidly.

Answer...?

21. What is the annual rate of growth of per capita real GDP if real GDP grows at a constant rate of 5 percent per year and the annual rate of population growth is 3 percent?

Select one:

a. 1.7 percent

b. 8 percent

c. 5 percent

d. 2 percent

c. machinery that requires constant maintenance.

d. any capital resource that lacks clear title of ownership.

Answer...?

1. The Houston Chronicle reported that in Houston, the average price of new homes has decreased, while at the same time, the number of new homes sold has increased. This situation could be explained by which one of the following: (draw curves before answering)

  1. An Increase in demand
  2. An Increase in supply
  3. A Decrease in demand
  4. A Decrease in supply

2. In another market, the average price of new homes fell, while at the same time, the number of new homes sold decreased. The situation would best be explained by (Draw the curves before answering)

  1. An Increase in Demand
  2. An Increase in Supply
  3. A Decrease in demand
  4. A Decrease in supply

3. A consumer is said to have achieved maximum total utility when:

  1. Purchases of Good A give the same satisfaction as purchases of Good B.
  2. Purchases of the last dollar spent on Good A give the same satisfaction as purchases of the last dollar spent on Good B.
  3. The average purchases per dollar of Good A give the same satisfaction as the average purchases per dollar of Good B.
  4. The total utility derived from Good A is the same as the marginal utility derived from Good B.

4. You are given the following information about a firm's present output position: MPP (Marginal Physical Product) of Land = 12; MPP of Labor = 16; Price of Land = $2; Price of Labor = $4. With no additional money to spend, this firm should:

5. A firm achieves the least cost in production by substituting factors until

  1. their factor prices are equal
  2. their marginal products are equal to the factor prices
  3. their marginal products are each equal to zero
  4. the ratios of their marginal product equal the ratio of their prices
  5. none of the above

6.The economy is currently on its production possibilities frontier (PPF). A politician says that it is possible to get more of everything--more infrastructure, more schools, more national defense, more spending on social programs, and so on. The politician is

  1. correct if he is assuming a rightward-shifting PPF.
  2. incorrect if he is assuming a rightward-shifting PPF.
  3. correct if he is assuming a PPF that does not change.
  4. none of the above

7. Assume your swimsuit business is at its maximum profit position, and one new change occurs: consumer incomes decrease. If swimsuits are normal goods, the equilibrium price of swimsuits will __________, and the CONSUMER surplus will ________.

  1. increase, increase
  2. decrease, decrease
  3. increase, decrease
  4. decrease, increase

8. Firms that shuts-down in the short-run still must pay:

  1. Marginal cost
  2. Variable cost
  3. Fixed cost
  4. Total cost

9. The term externalities refer to:

  1. Black-market economic activity.
  2. The impact on markets of imported goods.
  3. The costs and benefits of a market activity borne by a third party.
  4. The inequitable distribution of income.

10. If full external costs are not internalized, firms will tend to allocate more of society's scarce resources to produce than is societally warranted, and if full external benefits are not internalized, firms will allocate less of society's resources to produce than is societally justified. True/False.

11. Joe was very careful about smoking in his home until he bought a fire insurance policy. After buying the policy, he became careless. His attitude is: "I'm insured. What do I care if this place burns down; I'll just collect the money". Joe's attitude is an example of ______________.

12. Megatrust Bank had historically scrutinized loans very carefully and extended them, only to persons whom they considered very creditworthy. They made relatively few loans. However, after the government provided guarantees to sub-prime loans, Megatrust relaxed its standards and increased its loan volume. (And its default rate as well.) This is an example of _______________.

13. In the short-run, if a perfectly competitive firm finds itself operating at a loss, it will

  1. Reduce the size of its plant to lower fixed costs.
  2. Raise the price of its product.
  3. Shut down.
  4. Continue to operate as long as it covers its variable cost.

14. If income today is more equally distributed than it was in 1960, a Lorenz Curve depicting today's distribution would be

  1. More bowed and to the left of the 1960's curve.
  2. More bowed and to the right of the 1960's curve.
  3. Less bowed and to the left of the 1960' curve.
  4. Less bowed and to the right of the 1960's curve.

15. Which of the following statements is true?

  1. As output increases, the average fixed cost becomes smaller and smaller.
  2. Average fixed cost does not change as output increases.
  3. The marginal cost curve intersects the average fixed cost curve at its minimum point.
  4. When marginal cost is greater than average fixed cost, average fixed cost increases.
  5.  

16. A firm in any of the market structures we have studied will maximize its profit (or minimizes its loss) when its

  1. Average costs are at a minimum
  2. Marginal revenue and marginal cost are the same.
  3. Marginal revenue is less than marginal cost.
  4. Marginal revenue is zero.

17. If the demand for a good increase, when the price of other good increases, these goods are

  1. Capital goods
  2. Substitute goods
  3. Complementary goods
  4. Luxury goods

18. Which of the following pairs of products are complementary goods?

  1. mobile phones and laptops
  2. pens and pencils
  3. sugar and artificial sweeteners
  4. radios and television
  5. toothbrushes and toothpaste

19. The amount of a good that is given up to produce another good is:

  1. Scarcity
  2. Specialization
  3. Opportunity cost
  4. Trade
  5. Efficiency

20. The most important characteristic of the equilibrium price is that it:

  1. Guarantees that producers earn a profit.
  2. Increases the quantity demanded.
  3. Clears the market.
  4. Decreases the quantity supplied.

21. Rank the following market structures based on the number of participating firms: From the fewest number of firms to the most number of firms:

  1. Oligopoly
  2. Perfect Competition
  3. Monopoly
  4. Monopolistic Competition

22. If firms in a monopolistically competitive market are earning economic profits which of the following scenarios would best reflect the change facing incumbent firms as the market adjusts to its new equilibrium?

  1. an increase in demand
  2. a decrease in demand
  3. a downward shift in their marginal cost curve
  4. an upward shift in their marginal cost curve


23. If labor in Mexico is less productive than labor in the United States in all areas of production, 

  1. neither nation can benefit from trade
  2. Mexico can benefit from trade but the United States cannot
  3. Mexico will not have a comparative advantage in any good
  4. both nations can benefit from trade

24. Which of the following statements is false?

  1. The typical monopolistically competitive firm could reduce its average total cost if it produced more output.
  2. Monopolistically competitive firms advertise to increase the elasticity of the demand curve they face.
  3. Expensive advertising might help consumers if it is a signal that the product is good.
  4. Brand names acquired at great cost might help consumers by assuring quality.

25. Suppose the state of Wyoming passes a law that increases the tax on cigarettes. As a result, smokers who live in Wyoming start purchasing their cigs in surrounding states. Which of the following principles does this best illustrate:

  1. people respond to incentives
  2. rational people think at the margin
  3. a trademark can make everyone better off
  4. markets are usually a good way to organize economic activity

1. Suppose that there is a tax of $1 per unit, and the elasticity of supply is 3 and the elasticity of demand is 2 (in absolute value). How much of the $1 tax is paid by sellers?

$0.60

$0.40

$0.75

$0.67

2. In Market X, the external benefit of consumption is $5. In Market Y, the external cost of consumption is $10. Efficiency in both markets could be achieved by:

a tax of $5 in Market X and a subsidy of $10 in Market Y.

subsidizing both markets.

taxing Market Y and subsidizing Market X.

taxing both markets.

3.Economic theory suggests that a natural monopoly should be:

eliminated whenever it arises.

regulated to take advantage of economies of scale.

left alone to operate with excess capacity.

taken over by the government.

4.When the size of the production is the most efficient:

total cost is at the minimum.

average cost is at the minimum.

marginal cost is at the minimum.

fixed cost is at the minimum.

5.A firm should exit the industry if which of the following conditions apply?

TR > TC

P < AC

Lifetime expected profit is positive.

Prices are low now but expected to rise.

6.Figure: Costs

Reference: Ref 11-6

(Figure: Costs) Use the figure. At a price of $20, the firm earns profit of:

$75.

$300.

$225.

$0, because P = MC at P = $20.

7.When external benefits are present, the market price is ________, however when external costs are present, the market price is ________.

too low; too high

equal to the efficient price; too low

too high; too low

equal to the efficient price; too high

8.Which of the following statements is TRUE?

I. The EPA's tradeable allowances program for sulfur dioxide establishes property rights to pollute and helps reduce transaction costs by distributing allowances, maintaining databases, and monitoring emissions.

II. One criticism of tradeable allowances is that they prohibit non-businesses and environmental groups from purchasing the allowances.

III. The tradeable allowances for sulfur dioxide have performed poorly because electricity output has increased, causing a rise in sulfur dioxide levels.

I only

II and III only

I, II, and III

III only

9.Price floors make it illegal to compete for more customers by lowering prices, so firms compete by offering customers:

various options.

more quantity.

more discount.

higher quality.

10.Figure: Government Price Controls

Reference: Ref 8-3

(Figure: Government Price Controls) Refer to the figure. If the government sets the price ceiling at $31, there will be:

a shortage of 15 units.

a surplus of 15 units.

a supply of 20 units.

no effect on the market.

11.In which of these instances does price function as a signal in the market?

Suppliers invest more in exploration when the price of oil increases.

Consumers complain of price gouging as the price of oil skyrockets.

Government imposes price controls on the skyrocketing price of oil.

All of the answers are correct.

12.Ethanol and sugar are both made from sugar cane, and ethanol can be used as substitute fuel for oil. Increasing oil prices cause the demand for ethanol to increase. This will cause the ______ sugar to ______ and its price to ______.

demand for; decrease; decrease

supply of; increase; increase

supply of; decrease; increase

demand for; increase; increase

13.Why do cotton growers spend billions of dollars to dam rivers and transport water hundreds of miles to grow cotton in California deserts?

Cotton growers in California don't pay payroll taxes.

The water used to grow California cotton is highly subsidized by the government.

Cotton growers in California are mostly operated as nonprofit enterprises.

The water used to grow California cotton is high in mineral contents, making for a bigger cotton yield.

14.Suppose that the equilibrium price in the market is $10. If the current market price is $7.50:

the equilibrium price will fall to $7.50.

competition among buyers will increase the current price.

the current price will fall below $7.50 as sellers compete for market share.

There is not enough information provided to answer the question.

15.Which of the following would increase the demand for beef?

lower pork prices

higher consumer income

higher prices of feed grains used to feed beef cattle

an increase in the price of beef

16.A change in quantity supplied is reflected by a movement along the same supply curve while a change in supply refers to a shift in the entire supply curve.

True

False

17.Table: Production in the United States and Germany

Labor units required to produce:

One Clock

One Sofa

United States

2

5

Germany

3

9

Reference: Ref 2-8

(Table: Production in the United States and Germany) According to the table, the opportunity cost of producing one sofa in the United States is _________, and the opportunity cost of producing one sofa in Germany is _______.

two clocks; three clocks

10 clocks; 27 clocks

0.4 clocks; 0.33 clocks

2.5 clocks; three clocks

18.Mark values his drum set at $800 and Ella values her guitar at $1,000. Suppose that Mark trades his drum set for Ella's guitar.

This trade makes Ella worse off by $200.

This trade makes Mark better off by $200.

Mark must value Ella's guitar for at least $1,000, and Ella must value Mark's drum set for at least $800.

This trade creates value by moving the guitar and drum set to people who value them more.

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