Question 1

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 2

Why is market definition important for economic decision making?

Accepted Answer

A)  A firm is interested in knowing its actual and potential competitors. 
B)  A firm will define its market in order to maximize revenue. 
C)  Government regulators are interested in knowing the effect of mergers and acquisitions on competition and prices in a particular market. 
D)  both A and C 
E)  both A and B 
A)  A firm is interested in knowing its actual and potential competitors. 
B)  A firm will define its market in order to maximize revenue. 
C)  Government regulators are interested in knowing the effect of mergers and acquisitions on competition and prices in a particular market. 
D)  both A and C 
E)  both A and B

Question 3

Use the following statements to answer this question: I. Political candidates need to know the geographical extent of the market for TV commercials in determining how to reach the target number of eligible voters with the smallest possible expenditure.
II) The geographical extent of the market for gasoline in Texas will determine whether an oil company drills for oil there.

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 4

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.

Question 5

The basic premise behind worker trade-offs in a market economy is that:

Accepted Answer

A)  firms decide how much workers must work and workers decide how much leisure to have. 
B)  workers don't decide how much leisure to have. The amount of leisure depends on the number of hours they must work, which is determined by the firm. 
C)  workers decide how to allocate their time between work and leisure. 
D)  the trade-off between work and leisure is determined by factors other than what workers or firms would determine to be optimal. 
A)  firms decide how much workers must work and workers decide how much leisure to have. 
B)  workers don't decide how much leisure to have. The amount of leisure depends on the number of hours they must work, which is determined by the firm. 
C)  workers decide how to allocate their time between work and leisure. 
D)  the trade-off between work and leisure is determined by factors other than what workers or firms would determine to be optimal.

Question 6

Which of the following markets are competitive enough to be treated as perfectly competitive?

Accepted Answer

A)  Agricultural markets 
B)  Copper 
C)  The U.S. airline industry 
D)  Coal, iron, tin and lumber 
E)  all of the above 
A)  Agricultural markets 
B)  Copper 
C)  The U.S. airline industry 
D)  Coal, iron, tin and lumber 
E)  all of the above

Question 7

Firms face trade-offs in production, including decisions related to:

Accepted Answer

A)  which products to produce. 
B)  how much of a particular product to produce. 
C)  the best way to produce a given amount of output. 
D)  all of the above 
A)  which products to produce. 
B)  how much of a particular product to produce. 
C)  the best way to produce a given amount of output. 
D)  all of the above

Question 8

The nominal price of a 1990 laptop was $3,500 and the CPI that year was 130.7. The nominal price of a laptop in 2010 was $600 and the CPI that year was 218.1. What is the real price of a 2010 laptop in terms of 1990 dollars? By what percent has the real price of laptops changed?

Accepted Answer

130.7($600)/218.1 =

Question 9

________ questions have to do with explanation and prediction; ________ questions have to do with what ought to be.

Accepted Answer

A)  Positive; negative. 
B)  Negative; normative. 
C)  Affirmative; positive. 
D)  Positive; normative. 
E)  Econometric; theoretical. 
A)  Positive; negative. 
B)  Negative; normative. 
C)  Affirmative; positive. 
D)  Positive; normative. 
E)  Econometric; theoretical.

Question 10

The "constant dollar" price is:

Accepted Answer

A)  the real price of a good. 
B)  the nominal price of a good adjusted for inflation. 
C)  the "current dollar" price adjusted for inflation. 
D)  all of the above 
E)  none of the above 
A)  the real price of a good. 
B)  the nominal price of a good adjusted for inflation. 
C)  the "current dollar" price adjusted for inflation. 
D)  all of the above 
E)  none of the above

Question 11

Which of the following goods is NOT a likely component of the Consumer Price Index?

Accepted Answer

A)  Hamburger 
B)  87 octane gasoline 
C)  Structural steel beams 
D)  Movie tickets 
A)  Hamburger 
B)  87 octane gasoline 
C)  Structural steel beams 
D)  Movie tickets

Question 12

A valid and useful theory of gold prices:

Accepted Answer

A)  helps to explain and predict the movements of gold prices over time. 
B)  very likely relies on complex assumptions. 
C)  very likely includes as many details as possible about gold prices. 
D)  all of the above 
A)  helps to explain and predict the movements of gold prices over time. 
B)  very likely relies on complex assumptions. 
C)  very likely includes as many details as possible about gold prices. 
D)  all of the above

Question 13

Which of the following is a positive statement?

Accepted Answer

A)  Intermediate microeconomics should be required of all economics majors in order to build a solid foundation in economic theory. 
B)  The minimum wage should not be increased because this action would increase unemployment. 
C)  Smoking should be restricted on all airline flights. 
D)  All automobile passengers should be required to wear seatbelts in order to protect them against injury. 
E)  none of the above 
A)  Intermediate microeconomics should be required of all economics majors in order to build a solid foundation in economic theory. 
B)  The minimum wage should not be increased because this action would increase unemployment. 
C)  Smoking should be restricted on all airline flights. 
D)  All automobile passengers should be required to wear seatbelts in order to protect them against injury. 
E)  none of the above

Question 14

An investor can acquire shares of stock in Acme Corporation either by purchasing shares on the stock market or by purchasing a bond that is convertible into shares of Acme stock. After careful study, the investor discovers that she can profit by purchasing the bond, converting it to shares of stock, and selling the stock. This practice is called:

Accepted Answer

A)  selling short. 
B)  arbitrage. 
C)  profiteering. 
D)  dumping. 
E)  none of the above 
A)  selling short. 
B)  arbitrage. 
C)  profiteering. 
D)  dumping. 
E)  none of the above

Question 15

The "core" inflation rate is typically defined as the change in consumer prices for all goods included in the CPI basket except energy and food products. Suppose the overall inflation rate based on the CPI was 4 percent for the past year, and energy and food prices did not change during the year. Is the core inflation rate for the past year higher or lower than 4 percent?

Accepted Answer

A)  Higher 
B)  Lower 
C)  They are the same. 
D)  We do not have enough information to answer this question. 
A)  Higher 
B)  Lower 
C)  They are the same. 
D)  We do not have enough information to answer this question.

Question 16

What does it mean when the CPI is higher this year than last?

Accepted Answer

A)  The rate of inflation has increased. 
B)  There has been inflation since last year. 
C)  Real prices have increased. 
D)  Real prices have decreased. 
A)  The rate of inflation has increased. 
B)  There has been inflation since last year. 
C)  Real prices have increased. 
D)  Real prices have decreased.

Question 17

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 18

From Example 1.2 in the textbook, Pindyck and Rubinfeld distinguish between the mass market and dealer market for bicycles. Although there are many dealers in the U.S. and only a few mass merchandisers, we should expect the dealer market to be somewhat less competitive than the mass market. Why?

Accepted Answer

A)  Due to their differences in quality and performance, dealer bicycles are not close substitutes. 
B)  The geographic extent of the market for dealer bicycles is typically small, so the individual sellers do not have many local competitors. 
C)  Dealers are small sellers and have little control over bicycle prices. 
D)  A and B are correct. 
E)  B and C are correct. 
A)  Due to their differences in quality and performance, dealer bicycles are not close substitutes. 
B)  The geographic extent of the market for dealer bicycles is typically small, so the individual sellers do not have many local competitors. 
C)  Dealers are small sellers and have little control over bicycle prices. 
D)  A and B are correct. 
E)  B and C are correct.

Question 19

Use the following two statements to answer this question: I. A market is a collection of buyers and sellers that, through actual or potential interactions, determine the price for a product or set of products.
II) An industry is a collection of markets for similar or closely related products.

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 20

Suppose the nominal price of gasoline was $0.90 per gallon in 1987. To convert this value to the real price of 1987 gasoline in 2017 dollars, we should:

Accepted Answer

A)  multiply by the 1987 CPI and divide by the 2017 CPI. 
B)  multiply by the 2017 CPI and divide by the 1987 CPI. 
C)  not do anything because this is the real price in 2017 dollars. 
D)  none of the above 
A)  multiply by the 1987 CPI and divide by the 2017 CPI. 
B)  multiply by the 2017 CPI and divide by the 1987 CPI. 
C)  not do anything because this is the real price in 2017 dollars. 
D)  none of the above

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

Why is market definition important for economic decision making?

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 basic premise behind worker trade-offs in a market economy is that:

Which of the following markets are competitive enough to be treated as perfectly competitive?

Firms face trade-offs in production, including decisions related to:

The nominal price of a 1990 laptop was $3,500 and the CPI that year was 130.7. The nominal price of a laptop in 2010 was $600 and the CPI that year was 218.1. What is the real price of a 2010 laptop in terms of 1990 dollars? By what percent has the real price of laptops changed?

questions have to do with explanation and prediction; questions have to do with what ought to be.

The "constant dollar" price is:

Which of the following goods is NOT a likely component of the Consumer Price Index?

A valid and useful theory of gold prices:

Which of the following is a positive statement?

What does it mean when the CPI is higher this year than last?

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?

From Example 1.2 in the textbook, Pindyck and Rubinfeld distinguish between the mass market and dealer market for bicycles. Although there are many dealers in the U.S. and only a few mass merchandisers, we should expect the dealer market to be somewhat less competitive than the mass market. Why?

Use the following two statements to answer this question: I. A market is a collection of buyers and sellers that, through actual or potential interactions, determine the price for a product or set of products. II) An industry is a collection of markets for similar or closely related products.

Suppose the nominal price of gasoline was $0.90 per gallon in 1987. To convert this value to the real price of 1987 gasoline in 2017 dollars, we should:

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

Behavioral Economics

Filters

Exam 1: Preliminaries

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

Why is market definition important for economic decision making?

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 basic premise behind worker trade-offs in a market economy is that:

Which of the following markets are competitive enough to be treated as perfectly competitive?

Firms face trade-offs in production, including decisions related to:

The nominal price of a 1990 laptop was $3,500 and the CPI that year was 130.7. The nominal price of a laptop in 2010 was $600 and the CPI that year was 218.1. What is the real price of a 2010 laptop in terms of 1990 dollars? By what percent has the real price of laptops changed?

________ questions have to do with explanation and prediction; ________ questions have to do with what ought to be.

The "constant dollar" price is:

Which of the following goods is NOT a likely component of the Consumer Price Index?

A valid and useful theory of gold prices:

Which of the following is a positive statement?

What does it mean when the CPI is higher this year than last?

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?

From Example 1.2 in the textbook, Pindyck and Rubinfeld distinguish between the mass market and dealer market for bicycles. Although there are many dealers in the U.S. and only a few mass merchandisers, we should expect the dealer market to be somewhat less competitive than the mass market. Why?

Use the following two statements to answer this question: I. A market is a collection of buyers and sellers that, through actual or potential interactions, determine the price for a product or set of products. II) An industry is a collection of markets for similar or closely related products.

Suppose the nominal price of gasoline was $0.90 per gallon in 1987. To convert this value to the real price of 1987 gasoline in 2017 dollars, we should:

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

Behavioral Economics

Filters

questions have to do with explanation and prediction; questions have to do with what ought to be.