Question 1

To evaluate the potential impact of introducing the hybrid Prius auto into the U.S. market, Toyota Motor Corporation would use:

Accepted Answer

A)  positive economic analysis. 
B)  normative economic analysis. 
C)  negative economic analysis. 
D)  forensic analysis. 
A)  positive economic analysis. 
B)  normative economic analysis. 
C)  negative economic analysis. 
D)  forensic analysis. A

Question 2

We can approximate the real return on an investment by subtracting the inflation rate from the nominal return on the investment. For example, an investment that returns 10% per year while inflation is 4% per year has a real (inflation adjusted) return of approximately 6%. Which of the following outcomes is NOT possible?

Accepted Answer

A)  Nominal and real returns are positive 
B)  Nominal return is positive, real return is negative 
C)  Nominal return is negative, real return is positive 
D)  all of these outcomes are possible 
A)  Nominal and real returns are positive 
B)  Nominal return is positive, real return is negative 
C)  Nominal return is negative, real return is positive 
D)  all of these outcomes are possible D

Question 3

Which of the following assertions, if proven true in a court of law, would help Archer-Daniels-Midland, a maker of corn syrup, in its attempt to acquire another corn syrup producer, the Clinton Corn Processing Company?

Accepted Answer

A)  Archer-Daniels-Midland is a dominant producer of corn syrup. 
B)  There are no good substitutes for corn syrup for any of its major uses. 
C)  Archer-Daniels-Midland and the Clinton Corn Processing Company together hold only a small share of the market for sweeteners including corn syrup and sugar. 
D)  Archer-Daniels-Midland produces many other different agricultural products, in addition to corn syrup. 
A)  Archer-Daniels-Midland is a dominant producer of corn syrup. 
B)  There are no good substitutes for corn syrup for any of its major uses. 
C)  Archer-Daniels-Midland and the Clinton Corn Processing Company together hold only a small share of the market for sweeteners including corn syrup and sugar. 
D)  Archer-Daniels-Midland produces many other different agricultural products, in addition to corn syrup. C

Question 4

The Clean Air Act is designed to restrict automobile emissions and reduce the external costs of air pollution. The economic analysis used to develop the Clean Air Act was:

Accepted Answer

A)  normative. 
B)  positive. 
C)  macroeconomic. 
D)  none of the above 
A)  normative. 
B)  positive. 
C)  macroeconomic. 
D)  none of the above

Question 5

Use the following two statements to answer this question:
I. Economic theories are developed to explain observed phenomena by deducing from a set of basic rules and assumptions.
II. Economic theories use value judgments to determine which people ought to pay more taxes.

Accepted Answer

A)  Both I and II are true. 
B)  I is true, and II is false. 
C)  I is false, and II is true. 
D)  Both I and II are false. 
A)  Both I and II are true. 
B)  I is true, and II is false. 
C)  I is false, and II is true. 
D)  Both I and II are false.

Question 6

Which of the following is a positive statement?

Accepted Answer

A)  The President of the United States ought to be elected by a direct vote of the American people rather than the Electoral College. 
B)  A fundamental assumption of the economic theory of consumer behavior is that consumers always prefer having more of any good to having less of it. 
C)  Because many adults cannot afford to go to college, tax credits for tuition should be introduced. 
D)  all of the above 
E)  none of the above 
A)  The President of the United States ought to be elected by a direct vote of the American people rather than the Electoral College. 
B)  A fundamental assumption of the economic theory of consumer behavior is that consumers always prefer having more of any good to having less of it. 
C)  Because many adults cannot afford to go to college, tax credits for tuition should be introduced. 
D)  all of the above 
E)  none of the above

Question 7

Which of the following is a normative statement?

Accepted Answer

A)  The taxes paid by the poor should be reduced in order to improve the income distribution in the U.S. 
B)  State governments should not subsidize corporations by training welfare recipients. 
C)  Presidential candidates should not be given funds from the federal government to run campaigns. 
D)  The sea otter should not be allowed to spread into Southern California coastal waters, because it will reduce the value of fisheries. 
E)  all of the above 
A)  The taxes paid by the poor should be reduced in order to improve the income distribution in the U.S. 
B)  State governments should not subsidize corporations by training welfare recipients. 
C)  Presidential candidates should not be given funds from the federal government to run campaigns. 
D)  The sea otter should not be allowed to spread into Southern California coastal waters, because it will reduce the value of fisheries. 
E)  all of the above

Question 8

Please use the following statements to answer this question:
I. The process of testing and revising theories is central to the development of economics as a science.
II. Theory is imperfect and may not adequately describe economic behavior in some cases.

Accepted Answer

A)  I and II are true. 
B)  I is true and II is false. 
C)  I is false and II is true. 
D)  I and II are false. 
A)  I and II are true. 
B)  I is true and II is false. 
C)  I is false and II is true. 
D)  I and II are false.

Question 9

A Rolling Stones song goes: "You can't always get what you want." This echoes an important theme from microeconomics. Which of the following statements is the best example of this theme?

Accepted Answer

A)  Consumers must make the best purchasing decisions they can, given their limited incomes. 
B)  Workers do not have as much leisure as they would like, given their wages and working conditions. 
C)  Workers in planned economies, such as North Korea, do not have much choice over jobs. 
D)  Firms in market economies have limited financial resources. 
A)  Consumers must make the best purchasing decisions they can, given their limited incomes. 
B)  Workers do not have as much leisure as they would like, given their wages and working conditions. 
C)  Workers in planned economies, such as North Korea, do not have much choice over jobs. 
D)  Firms in market economies have limited financial resources.

Question 10

Arbitraging price differences between two markets is generally not possible if:

Accepted Answer

A)  there are positive costs of transporting the products from one market to the other. 
B)  the transportation costs are larger than the difference in prices. 
C)  the government has prohibited exchange between the two markets. 
D)  A and C above 
E)  B and C above 
A)  there are positive costs of transporting the products from one market to the other. 
B)  the transportation costs are larger than the difference in prices. 
C)  the government has prohibited exchange between the two markets. 
D)  A and C above 
E)  B and C above

Question 11

Boeing Corporation and Airbus Industries are the only two producers of long-range commercial aircraft. This market is not perfectly competitive because:

Accepted Answer

A)  each company has annual sales over $10 billion. 
B)  each company can significantly affect prices. 
C)  Airbus receives subsidies from the European Union. 
D)  Airbus cannot sell aircraft to the United States government. 
E)  all of the above 
A)  each company has annual sales over $10 billion. 
B)  each company can significantly affect prices. 
C)  Airbus receives subsidies from the European Union. 
D)  Airbus cannot sell aircraft to the United States government. 
E)  all of the above

Question 12

Suppose the minimum wage was $0.25 per hour in 1938 and the CPI in that year was 11.5. If the CPI in 1990 was 130.7, what is the real value of the 1938 minimum wage in terms of 1990 dollars? The real value of the 1990 minimum wage in terms of 1990 dollars is $4.25. Has the real value of the minimum wage declined since 1938?

Accepted Answer

W(1938) = 130.7($0.25)/11.5 =

Question 13

Which of the following statements is NOT true?

Accepted Answer

A)  The trade-offs facing consumers and producers are based on prices. 
B)  All prices are determined by market interactions between buyers and sellers. 
C)  Prices serve an important role in microeconomics. 
D)  Only A and B above false. 
E)  Only B and C above are false. 
A)  The trade-offs facing consumers and producers are based on prices. 
B)  All prices are determined by market interactions between buyers and sellers. 
C)  Prices serve an important role in microeconomics. 
D)  Only A and B above false. 
E)  Only B and C above are false.

Question 14

Although there are many reasons why a market can be non-competitive, the principal economic difference between a competitive and a non-competitive market is:

Accepted Answer

A)  the number of firms in the market. 
B)  the extent to which any firm can influence the price of the product. 
C)  the size of the firms in the market. 
D)  the annual sales made by the largest firms in the market. 
E)  the presence of government intervention. 
A)  the number of firms in the market. 
B)  the extent to which any firm can influence the price of the product. 
C)  the size of the firms in the market. 
D)  the annual sales made by the largest firms in the market. 
E)  the presence of government intervention.

Question 15

Since last year, the price of gold has risen from $1100 to $1420. What annual inflation rate would leave the real price of gold unchanged over the last twelve months?

Accepted Answer

A)  Approximately 29% 
B)  40% 
C)  Approximately 71% 
D)  320% 
E)  none of the above 
A)  Approximately 29% 
B)  40% 
C)  Approximately 71% 
D)  320% 
E)  none of the above

Question 16

Suppose you are in charge of product pricing and marketing strategy for a pharmaceutical company. You will have greater ability to independently set prices for your product if:

Accepted Answer

A)  there are no close substitutes for your product. 
B)  there are lots of other firms selling closely related products in your market. 
C)  your market is perfectly competitive. 
D)  none of the above 
A)  there are no close substitutes for your product. 
B)  there are lots of other firms selling closely related products in your market. 
C)  your market is perfectly competitive. 
D)  none of the above

Question 17

For each city across the U.S., economists construct a price index for a similar basket of goods. In Los Angeles the index is 127.3 and the index for Dallas is 94.8. If you have been offered $137,000 for a job in Los Angeles and $117,000 for a similar job in Dallas, which job affords you the highest purchasing power of the bundle of goods in the price index? Use the Los Angeles value as the base.

Accepted Answer

Real value[Dallas] = 127.3($11

Question 18

Which of the following statements about markets and industries is TRUE?

Accepted Answer

A)  A market includes buyers but not sellers. 
B)  A market includes sellers but not buyers. 
C)  An industry includes buyers but not sellers. 
D)  An industry includes sellers but not buyers. 
A)  A market includes buyers but not sellers. 
B)  A market includes sellers but not buyers. 
C)  An industry includes buyers but not sellers. 
D)  An industry includes sellers but not buyers.

Question 19

Before their merger, XM and Sirius were competing sellers in the U.S. satellite radio market. The U.S. Department of Justice allowed the merger even though it created a single seller in the market. Why might we expect this merger to have limited impact on U.S. consumers?

Accepted Answer

A)  There are many close substitutes for satellite radio service (e.g., free AM-FM radio, internet radio) 
B)  The merged firm is likely to act on behalf of its customers and keep its prices and profits low 
C)  U.S. consumers are known to have perfectly inelastic demand for satellite radio (i.e., they are unresponsive to price changes) 
D)  all of the above are correct 
A)  There are many close substitutes for satellite radio service (e.g., free AM-FM radio, internet radio) 
B)  The merged firm is likely to act on behalf of its customers and keep its prices and profits low 
C)  U.S. consumers are known to have perfectly inelastic demand for satellite radio (i.e., they are unresponsive to price changes) 
D)  all of the above are correct

Question 20

The trade-offs facing workers include all of the following EXCEPT:

Accepted Answer

A)  decision to work or remain outside the workforce. 
B)  decision to work or seek additional education. 
C)  decision to work for a large corporation or a small firm. 
D)  decision to allocate their time between work and leisure. 
E)  All of the above are trade-offs facing workers. 
A)  decision to work or remain outside the workforce. 
B)  decision to work or seek additional education. 
C)  decision to work for a large corporation or a small firm. 
D)  decision to allocate their time between work and leisure. 
E)  All of the above are trade-offs facing workers.

To evaluate the potential impact of introducing the hybrid Prius auto into the U.S. market, Toyota Motor Corporation would use:

Which of the following assertions, if proven true in a court of law, would help Archer-Daniels-Midland, a maker of corn syrup, in its attempt to acquire another corn syrup producer, the Clinton Corn Processing Company?

The Clean Air Act is designed to restrict automobile emissions and reduce the external costs of air pollution. The economic analysis used to develop the Clean Air Act was:

Use the following two statements to answer this question: I. Economic theories are developed to explain observed phenomena by deducing from a set of basic rules and assumptions. II. Economic theories use value judgments to determine which people ought to pay more taxes.

Which of the following is a positive statement?

Which of the following is a normative statement?

Please use the following statements to answer this question: I. The process of testing and revising theories is central to the development of economics as a science. II. Theory is imperfect and may not adequately describe economic behavior in some cases.

A Rolling Stones song goes: "You can't always get what you want." This echoes an important theme from microeconomics. Which of the following statements is the best example of this theme?

Arbitraging price differences between two markets is generally not possible if:

Boeing Corporation and Airbus Industries are the only two producers of long-range commercial aircraft. This market is not perfectly competitive because:

Which of the following statements is NOT true?

Although there are many reasons why a market can be non-competitive, the principal economic difference between a competitive and a non-competitive market is:

Since last year, the price of gold has risen from $1100 to $1420. What annual inflation rate would leave the real price of gold unchanged over the last twelve months?

Suppose you are in charge of product pricing and marketing strategy for a pharmaceutical company. You will have greater ability to independently set prices for your product if:

Which of the following statements about markets and industries is TRUE?

Before their merger, XM and Sirius were competing sellers in the U.S. satellite radio market. The U.S. Department of Justice allowed the merger even though it created a single seller in the market. Why might we expect this merger to have limited impact on U.S. consumers?

The trade-offs facing workers include all of the following EXCEPT:

The Basics of Supply and Demand

Consumer Behavior

Individual and Market Demand

Uncertainty and Consumer Behavior

Production

The Cost of Production

Profit Maximization and Competitive Supply

The Analysis of Competitive Markets

Market Power: Monopoly and Monopsony

Pricing With Market Power

Monopolistic Competition and Oligopoly

Game Theory and Competitive Strategy

Markets for Factor Inputs

Investment, Time, and Capital Markets

General Equilibrium and Economic Efficiency

Markets With Asymmetric Information

Externalities and Public Goods

Filters

Exam 1: Preliminaries

To evaluate the potential impact of introducing the hybrid Prius auto into the U.S. market, Toyota Motor Corporation would use:

Which of the following assertions, if proven true in a court of law, would help Archer-Daniels-Midland, a maker of corn syrup, in its attempt to acquire another corn syrup producer, the Clinton Corn Processing Company?

The Clean Air Act is designed to restrict automobile emissions and reduce the external costs of air pollution. The economic analysis used to develop the Clean Air Act was:

Use the following two statements to answer this question: I. Economic theories are developed to explain observed phenomena by deducing from a set of basic rules and assumptions. II. Economic theories use value judgments to determine which people ought to pay more taxes.

Which of the following is a positive statement?

Which of the following is a normative statement?

Please use the following statements to answer this question: I. The process of testing and revising theories is central to the development of economics as a science. II. Theory is imperfect and may not adequately describe economic behavior in some cases.

A Rolling Stones song goes: "You can't always get what you want." This echoes an important theme from microeconomics. Which of the following statements is the best example of this theme?

Arbitraging price differences between two markets is generally not possible if:

Boeing Corporation and Airbus Industries are the only two producers of long-range commercial aircraft. This market is not perfectly competitive because:

Which of the following statements is NOT true?

Although there are many reasons why a market can be non-competitive, the principal economic difference between a competitive and a non-competitive market is:

Since last year, the price of gold has risen from $1100 to $1420. What annual inflation rate would leave the real price of gold unchanged over the last twelve months?

Suppose you are in charge of product pricing and marketing strategy for a pharmaceutical company. You will have greater ability to independently set prices for your product if:

Which of the following statements about markets and industries is TRUE?

Before their merger, XM and Sirius were competing sellers in the U.S. satellite radio market. The U.S. Department of Justice allowed the merger even though it created a single seller in the market. Why might we expect this merger to have limited impact on U.S. consumers?

The trade-offs facing workers include all of the following EXCEPT:

The Basics of Supply and Demand

Consumer Behavior

Individual and Market Demand

Uncertainty and Consumer Behavior

Production

The Cost of Production

Profit Maximization and Competitive Supply

The Analysis of Competitive Markets

Market Power: Monopoly and Monopsony

Pricing With Market Power

Monopolistic Competition and Oligopoly

Game Theory and Competitive Strategy

Markets for Factor Inputs

Investment, Time, and Capital Markets

General Equilibrium and Economic Efficiency

Markets With Asymmetric Information

Externalities and Public Goods

Filters