Final

Question 1

Which of the following arise as benefits from trade?
I. economies of scale
II. cost reduction from mass production
III. the division of knowledge

Answer 1

I, II, and III

Question 2

According to the theory of comparative advantage, a country should specialize in producing a good that involves:

Answer 2

a lower opportunity cost than that of other countries.

Question 3

Which of the following is NOT a source of monopoly power?

Answer 3

marketing

Question 4

Inflation can be defined as:

Answer 4

the increase in the general level of prices in an economy.

Question 5

An increase in demand and a decrease in supply occur in a market. What happens to the equilibrium price and quantity?

Answer 5

The equilibrium price increases; the change in the equilibrium quantity is ambiguous.

Question 6

Why do you think researchers sometimes find a positive relationship between the unemployment rate and college enrollment rates?

Answer 6

The opportunity cost of attending college falls during recessions, leading to higher college enrollment rates.

Question 7

If a steel manufacturer does NOT bear the entire cost of the sulfur dioxide it emits, it will:

Answer 7

emit a higher level of sulfur dioxide than is socially efficient.

Question 8

Pharmaceuticals with high fixed costs can benefit with the practice of price discrimination because

Answer 8

extra profit from customers paying low prices allows pharmaceuticals to cover part of the fixed costs

Question 9

According to the elimination principle:

Answer 9

resources are always moving toward an increase in consumer welfare.

Question 10

Most economists believe that an increase in the supply of money results in:

Answer 10

higher inflation in the long run.

Question 11

If the income elasticity of demand of a good is negative, we can conclude that the good is:

Answer 11

an inferior good.

Question 12

Assuming the same cost structure, a competitive market produces ________ output at ________ prices than a monopoly market.

Answer 12

more; lower

Question 13

If the quantity demanded for a hand-carved pineapple is 2 at a price of $16, and the quantity demanded will increase to 3 if the seller lowers the price to $14, what is the seller’s marginal revenue from selling 3 units of pineapple?

Answer 13

10

Question 14

The proposition that, private parties with clearly defined property rights and low transaction costs can resolve externalities problems on their own is called the:

Answer 14

Coase theorem.

Question 15

In cases where a cartel controls access to a key production input, firms in the cartel:

Answer 15

have less incentive to cheat for fear that they will be cut off from the key input

Question 16

Although trade increases productivity, it decreases society’s collective knowledge because each person specializes in a very limited number of things.

Answer 16

False

Question 17

The quantity demanded of a good or service is the amount that:

Answer 17

consumers are willing and able to buy at a given price

Question 18

The best way to help the poor afford housing is by:

Answer 18

issuing housing vouchers.

Question 19

Which of the following is a reason why the demand curve for an item would be more elastic?

Answer 19

The item has many very good substitutes.

Question 20

Which of the following laws makes cartel behavior illegal?

Answer 20

Sherman Antitrust Act of 1890

Question 21

The National Basketball Association is a:

Answer 21

buyer’s cartel.

Question 22

A Nash equilibrium in game theory is defined as a situation in which:

Answer 22

no player has an incentive to change his or her strategy unilaterally.

Question 23

Why is the long-run supply curve of rent controlled apartments typically more elastic than the short-run supply curve?

Answer 23

In the long run, fewer new apartments are built, and older apartments are torn down or turned into condominiums.