Practice Final Exam PDF

Name: Date: Indicate the answer choice that best completes the statement or answers the question. 1. Table: Oil Pumps Quantity (barrels Oil Pump One Oil Pump Two of oil) Marginal...

Name: Date: Indicate the answer choice that best completes the statement or answers the question. 1. Table: Oil Pumps Quantity (barrels Oil Pump One Oil Pump Two of oil) Marginal Cost Marginal Cost 1 $5 $10 2 10 12 3 15 14 4 20 15 5 25 18 6 30 20 7 35 22 Suppose that we want to produce 7 barrels of oil. To minimize costs, we should produce: a. all 7 barrels of oil from Oil Pump Two. b. 3 barrels of oil from Oil Pump One and 4 barrels of oil from Oil Pump Two. c. 1 barrel of oil from Oil Pump One and 6 barrels of oil from Oil Pump Two. d. all 7 barrels of oil from Oil Pump One. 2. Figure: Marginal Costs 3 If the three firms represent total production in the industry and have achieved profit maximization, how many bushels should each firm produce if the price per bushel is $1? a. All three firms should produce 10 bushels. b. Firm A should produce 0 bushels, firm B should produce 30 bushels, and firm C should produce 0 bushels. c. Firm A should produce 10 bushels, firm B should produce 0 bushels, and firm C should produce 5 bushels. d. None of the firms should produce because the price is too low to earn a profit. Copyright Macmillan Learning. Powered by Cognero. Page 1 Name: Date: 3. Which of the following is an example of a natural monopoly? a. a natural gas supplier in a city b. a local gas station c. an airline company d. a national fast‐food chain 4. Figure: Medicare Spending L and M are candidates in an upcoming election, and an increase in Medicare spending is being debated. In this election, voters will not vote if they do not find a candidate who believes the level of Medicare spending should be close to what voters believe it should be. In this case, _____ is more likely to win the election. a. L b. M c. Neither L nor M d. L and M will each receive an equal number of votes. 5. What is the profit-maximizing condition for a monopolist? a. MR > MC b. MR = MC c. AR = MC d. AR = D 6. Which of the following solutions allows for an efficient allocation of a public good? a. widespread taxation b. government command and control policies c. donation-based funding d. advertising Copyright Macmillan Learning. Powered by Cognero. Page 2 Name: Date: 7. Economies of scale are: a. countries that specialize in selling devices for measuring weight. b. the advantages of large-scale production that reduce average cost as quantity increases. c. the advantages of small-scale production that reduce average cost as quantity decreases. d. regulations that specify a minimum firm size. 8. Adam Smith said that each individual is “led by ______ to promote an end which was no part of his intention.” a. an invincible hand b. an intrinsic hand c. a visible hand d. an invisible hand 9. A public good is: a. nonrival and nonexcludable. b. rival and nonexcludable. c. rival and excludable. d. nonrival and excludable. 10. Club goods are goods that are excludable but nonrival. a. True b. False 11. Common resources are: a. excludable and rival. b. excludable and nonrival. c. nonexcludable and rival. d. nonexcludable and nonrival. Copyright Macmillan Learning. Powered by Cognero. Page 3 Name: Date: 12. One way to take advantage of economies of scale and to avoid the market power of a natural monopoly in the short run is through: a. price control. b. privatizing the monopoly. c. breaking up the monopoly into several smaller companies. d. penalty. 13. Advertising is an efficient solution to the problem of nonexcludability and nonrivalry. a. True b. False 14. Sugar quotas: a. are not an issue in the United States despite rationally ignorant voters. b. harm U.S. sugar farmers at the benefit of the candy and soda industry. c. cost the typical family about $6 per year but provide millions of dollars of benefits to Florida sugar producers. d. lead to lower prices and increased output, and thus are opposed by the sugar industry. 15. Why have systems similar to New Zealand's individual transfer quota system NOT been able to protect all animal life that is in danger of being overexploited? a. At present the tuna fish is not the only fish in danger of being overfished. b. People in other countries do not have the backing of their governments the way that New Zealand people do. c. Property rights are difficult to establish for animals that migrate over borders. d. None of these answers is correct. 16. Monopolistic competition is a market that has: a. many sellers, free entry, and product differentiation. b. few sellers, free entry, and product differentiation. c. many sellers, high barriers to entry, and product differentiation. d. many sellers, free entry, and identical products. Copyright Macmillan Learning. Powered by Cognero. Page 4 Name: Date: 17. As a result of U.S. quotas on sugar imports, all of the following are true EXCEPT: a. the United States pays 50% to 100% more than the world price for sugar. b. the gains to American producers are greater than the losses to American consumers. c. foreign sugar producers—mostly in poor countries—suffer. d. a small group of domestic sugar producers benefit. 18. The elimination principle, a general feature of competitive markets, tells us that: a. below-normal profits may be permanent. b. above-normal profits may be permanent. c. above-normal profits are temporary. d. above-normal profits result in firms exiting the industry. 19. Which of the following theories works to explain which voters will get their way in a democratic election? a. the theory of rational ignorance b. the median voter theorem c. the special interests theory d. the political business cycle theory 20. The United States has a comparative advantage in: a. goods produced by unskilled workers. b. goods produced by skilled workers. c. all goods. d. no goods. 21. Assuming the same cost structure, a competitive market produces _____ output at _____ prices than a monopoly market. a. less; lower b. more; lower c. less; higher d. more; higher Copyright Macmillan Learning. Powered by Cognero. Page 5 Name: Date: 22. Rational ignorance is important to understand because: I. if voters are not informed about politics, they are unlikely to make good voting decisions. II. voters who are rationally ignorant will make decisions based on low-quality, unreliable, or incorrect information. III. voters who are rationally ignorant are more likely to vote. IV. political decisions may be made based on the information known by those who have a vested interest in the decision. a. I and II only b. I, II, and III only c. I, II, and IV only d. II and IV only 23. When a single firm can supply the entire market at lower cost than two or more firms, we say that the industry is: a. profit maximizing. b. a natural monopoly. c. a bilateral monopoly. d. a natural competitor. 24. In a perfectly competitive market, each firm sells at: a. the same price. b. a unique price. c. one of two price levels. d. one of several price levels. Copyright Macmillan Learning. Powered by Cognero. Page 6 Name: Date: 25. Figure: Foreign Trade 1 What quantity would be imported? a. 600 units b. 1,400 units c. 1,000 units d. 800 units 26. Deadweight loss is present in both competitive and monopoly markets. a. True b. False 27. Which of the following is an example of a forced rider? a. a Canadian-American who pays taxes that help maintain the U.S. army in case of a Canadian invasion b. someone without children who recently had to start paying a community fee for the maintenance of a new playground c. a city resident who pays a city tax for weekly trash removal service d. someone who dislikes the noise coming from a privately owned park and pays taxes to maintain public parks Copyright Macmillan Learning. Powered by Cognero. Page 7 Name: Date: 28. Private goods: I. are excludable. II. can be priced. III. are rival. a. I only b. II only c. I and III only d. I, II, and III 29. One source of monopoly power is a patent granted by government. a. True b. False 30. If consumers observe a lot of advertising for a product, they can infer that the producer: a. expects the product to be successful. b. thinks the product is of poor quality. c. does not want his brand name associated with that product. d. needs to rely on misinformation to get people to try the product. 31. A university sorority asks for donations to pay for a surprise birthday party. One member does not donate but attends the party anyway. This member is a: a. free rider. b. forced rider. c. consumer of a public good. d. consumer of a private good. 32. Monopolists are people, too. This means that: a. gains to monopolists count just as much as losses to consumers. b. gains to monopolists don't count as much as losses to consumers. c. it's good when monopolists suffer, because they are evil. d. monopolists are corporations, not people. Copyright Macmillan Learning. Powered by Cognero. Page 8 Name: Date: 33. Protectionism refers to government policies that: a. restrict imports of foreign products. b. give foreign producers tax credits in an effort to increase their exports. c. stimulate trade between countries and increase domestic producers’ profit. d. restrict the output of domestic producers to keep their prices high. 34. Figure: Economic Freedom and Living Standards Based on the data in this chart, the country with the lowest level of economic freedom is: a. Angola. b. Venezuela. c. Hong Kong. d. Haiti. Copyright Macmillan Learning. Powered by Cognero. Page 9 Name: Date: 35. Figure: Median Voter 2 What tax level could Jack Johnson support to ensure a victory in the election? a. 5% b. 6% c. 7% d. 8% 36. An example of a monopolistically competitive industry is: a. produce. b. white T-shirts. c. sodas. d. sugar. 37. Which of the following would NOT be considered an example of a public good? a. asteroid deflection b. national defense c. mosquito control d. public roads 38. An issue that generates substantial benefits to a small group of individuals while imposing a small cost on many others is called a: a. nonissue. b. special interest issue. c. popular issue. d. minority issue. Copyright Macmillan Learning. Powered by Cognero. Page 10 Name: Date: 39. Special interest groups have a large incentive to be _____ about legislation that benefits them directly, whereas voters tend to be _____ regarding these issues. a. rationally informed; irrationally informed b. rationally ignorant; irrationally ignorant c. rationally informed; rationally ignorant d. irrationally informed; rationally ignorant 40. In the 1990s, fast-food restaurants refused to make special orders—there was no way to “hold the tomatoes.” When Burger King branded itself as the place where you could “have it your way” and allowed special orders, it enjoyed an advantage over other fast-food restaurants. Until other firms copied it, what was Burger King's position? a. monopolistically competitive b. cartelized c. perfectly competitive d. monopolized 41. Both domestic production and consumption increase because of tariffs. a. True b. False 42. One way to achieve political success is to: a. concentrate costs and diffuse benefits. b. concentrate benefits and costs. c. concentrate benefits and diffuse costs. d. diffuse costs and benefits. Copyright Macmillan Learning. Powered by Cognero. Page 11 Name: Date: 43. Figure: Tariffs In the domestic market with international trade and a $20 tariff, domestic production after the tariff is imposed increases by: a. 650 units. b. 300 units. c. 350 units. d. 250 units. 44. The environment is an example of a: a. private good. b. public good. c. common resource. d. club good. 45. Government ownership of the press and of radio: a. increases the quality of government. b. decreases the quality of government. c. increases the degree of economic freedom. d. decreases social corruption. Copyright Macmillan Learning. Powered by Cognero. Page 12 Name: Date: 46. A tariff on washing machines will _____ in the United States. a. increase jobs b. decrease jobs c. increase jobs in the production of washing machines, but decrease jobs in other areas d. decrease jobs in the production of washing machines, but decrease jobs in other areas 47. Figure: Shirts If a tariff raised the world price to $4 a shirt, how much deadweight loss would it create? a. $5,000,000 b. $10,000,000 c. $120,000,000 d. $200,000,000 48. In the case of broadcast, antenna television, the _____ problem is partly overcome through the use of advertising. a. free-rider b. revenue stream c. liquidity d. accessibility Copyright Macmillan Learning. Powered by Cognero. Page 13 Name: Date: 49. Figure: Foreign Trade 1 What quantity would be traded in a free trade environment? a. 600 units b. 1,400 units c. 1,000 units d. 800 units 50. Firms with differentiated products are more likely to advertise. a. True b. False 51. The U.S. government restricting the quantity of sugar imports into the country is an example of a(n): a. trade quota. b. embargo. c. trade settlement. d. market hanger. 52. Voters are myopic, so they most likely focus on economic conditions over a president's entire term. a. True b. False Copyright Macmillan Learning. Powered by Cognero. Page 14 Name: Date: 53. Figure: Trade In the domestic market with no international trade, the wasted resources from domestic production are: a. area B. b. area C. c. area D. d. area E. 54. Persuasive advertising: a. is informative. b. is wasteful. c. can create market power for firms by brand differentiation. d. has been shown to do little to increase sales. 55. Trade makes people better off through specialization. a. True b. False 56. Competitive firms want to enter industries in which: a. P = MC. b. P < AC. c. P > AC. d. P < MC. Copyright Macmillan Learning. Powered by Cognero. Page 15 Name: Date: 57. The median voter theorem states that: a. the median voter tends to be the most informed voter. b. candidates whose policies reflect the preferences of the median voter are more likely to win an election. c. political success depends on candidates taking positions that are either to the right or to the left of the political center. d. politicians choose policies that, on average, generate more benefits than costs for the average voter. 58. During the COVID-19 pandemic, many workers lost their jobs. Amy, for example, lost her job as a pharmaceutical salesperson. After 5 months of unemployment, she spent $6,000 on a class that taught her the skills she would need to sell medical devices. Today Amy makes 25% more than she did in pharmaceutical sales and enjoys her new job much more than her old job. Which of the following concepts best illustrates this scenario? a. Trade restrictions result in loss of jobs. b. Trade reallocates jobs across industries. c. Trade results in a misallocation of resources. d. Unemployment is a bad thing. 59. MOST voters will tend to be concerned with: a. most issues, since most issues have some impact, however slight, on each citizen. b. most issues, since information on most issues can be obtained at a low cost. c. only a few special issues (those that have the most impact on the voters' personal welfare). d. the views of a particular political candidate on all issues. 60. A free rider is someone who receives the benefit of a good and avoids paying for it. a. True b. False 61. Special interest groups tend to be able to influence legislation that is beneficial to them because: a. voters have an incentive to oppose the legislation. b. the costs for voters opposing the legislation are higher than the benefits. c. special interest groups have rational ignorance. d. special interest groups have an incentive to educate voters. Copyright Macmillan Learning. Powered by Cognero. Page 16 Name: Date: 62. If a firm has revenues of $125, explicit costs of $25, and implicit costs of $50, then its economic profit is: a. $0. b. $50. c. $100. d. $500. 63. President Nixon increased his popularity just before the 1972 election by: a. lowering income taxes before the election. b. lowering taxes after the election. c. increasing Social Security benefits. d. removing all price controls from the markets. 64. A profit-maximizing monopolist's total profit can be found by calculating: a. MR – MC. b. TR – TC. c. AR – AC. d. MC – MR. 65. If a firm has revenues of $200, explicit costs of $100, and implicit costs of $100, then its economic profit is: a. $0. b. $50. c. $100. d. $500. 66. A monopoly can be defined as a single firm in a given market. a. True b. False 67. A monopolist maximizes profits where marginal revenue equals marginal cost. a. True b. False Copyright Macmillan Learning. Powered by Cognero. Page 17 Name: Date: 68. Enacting a tariff on a good for which the world supply is relatively inelastic and the local demand is relatively elastic results in: a. a small deadweight loss and relatively larger tax revenues. b. only a large deadweight loss. c. a large deadweight loss and relatively smaller tax revenues. d. relatively smaller tax revenues and no deadweight loss. 69. Persuasive advertising: a. is informative. b. is wasteful. c. can create market power for firms through brand differentiation. d. has been shown to do little to increase sales. 70. Figure: Costs of Tariffs In the figure representing the market for leather, what price would consumers pay for leather in the absence of a tariff or other import restrictions? a. a price less than $50 b. $50 c. a price somewhere between $50 and $100 d. $100 Copyright Macmillan Learning. Powered by Cognero. Page 18 Name: Date: 71. If a firm has revenues of $100, explicit costs of $50, and implicit costs of $50, its economic profit is: a. $0. b. $50. c. $100. d. $500. 72. There are three voters and two representatives in a democracy. Voter 1 supports government spending of $51. Voter 2 supports government spending of $52. Voter 3 supports government spending of $56. According to the median voter theorem, politicians will converge upon a spending bill of: a. $51. b. $52. c. $53. d. $56. 73. Figure: Tariffs In the domestic market with international trade and a $20 tariff, domestic consumption after the tariff is imposed decreases by: a. 650 units. b. 300 units. c. 350 units. d. 250 units. Copyright Macmillan Learning. Powered by Cognero. Page 19 Name: Date: 74. Inflation tends to _____ during an election year and _____ after the election is over. a. increase; increase more b. decrease; increase c. decrease; decrease more d. increase; decrease 75. There is a strong correlation between economic freedom and: a. personal freedom. b. religious freedom. c. living standards. d. economic instability. 76. Which of the following statements is TRUE? a. Monopolies are always inefficient because they create higher prices for consumers. b. Monopolies create incentives for additional research and development. c. Monopolies decrease consumer surplus but increase total surplus in an economy. d. Consumers typically lose less than producers gain in monopoly markets. 77. If one person's use of a good prevents another person's ability to use it, then the good is: a. rival. b. nonrival. c. normal. d. excludable. 78. Many individuals refer to education as a public good. How is education NOT a public good? a. Its acquisition is rival. b. Its acquisition is excludable. c. Its acquisition is both rival and excludable. d. Its acquisition is usually rival and rarely excludable. Copyright Macmillan Learning. Powered by Cognero. Page 20 Name: Date: 79. Street lights are an example of a good that is: a. nonexcludable and nonrival. b. nonexcludable and rival. c. excludable and nonrival. d. excludable and rival. 80. The elimination principle suggests that: a. entry eliminates above-normal profits and exit eliminates below-normal profits. b. shortages are eliminated by price increases. c. surpluses are eliminated by price decreases. d. excess profits are hard to eliminate. 81. Advertising is a way for club goods to be given away free. a. True b. False 82. Eliminating tariffs on imported sugar would: a. cause resources in the sugar industry to be allocated to inferior uses. b. allow U.S. producers to sell more sugar. c. cause resources to be reallocated from sugar production to higher-valued uses. d. harm domestic consumers. 83. Which of the following statements is TRUE regarding profit maximization in competitive markets? I. When all firms pursue profits, none of them achieve profits. II. When all firms pursue profits, only the most innovative will achieve profits. III. Production is divided in such a way that total costs of production are minimized. a. I only b. II only c. I and III only d. II and III only 84. Products can be differentiated along any dimension that people care about, such as taste, style, features, or location. a. True b. False Copyright Macmillan Learning. Powered by Cognero. Page 21 Name: Date: 85. A natural monopoly occurs when: a. the product is sold in its natural state (such as water or diamonds). b. there are economies of scale over the relevant range of output. c. the firm is characterized by a rising marginal cost curve. d. production requires the use of free natural resources, such as water or air. 86. Figure: A Tariff on Imports Suppose the government intervenes with a $2 tariff; the total cost of the tariff for the citizens in that country is: a. $350 million. b. $400 million. c. $550 million. d. $700 million. Copyright Macmillan Learning. Powered by Cognero. Page 22 Name: Date: 87. Figure: Monopoly Profits 2 What is the monopolist's profit? a. $315 b. $280 c. $630 d. $245 88. Which one of the following statements is CORRECT? a. Patents are one way of preventing a monopoly. b. If pharmaceutical patents are enforced, the number of new drugs will decrease. c. Monopoly profit encourages firms to research and develop new drugs. d. Competition creates incentives for the invention of new drugs. Copyright Macmillan Learning. Powered by Cognero. Page 23 Name: Date: 89. Table: ABC and XYZ Q MC of ABC Co. MC of XYZ, Inc. 0 -- -- 1 $5 $4 2 10 8 3 20 12 4 25 16 5 30 20 6 35 24 7 40 30 8 45 35 What price should the firms in this table charge to produce 12 units of total output? a. $45 b. $20 c. $30 d. $24 Copyright Macmillan Learning. Powered by Cognero. Page 24 Name: Date: Answer Key 1. b 2. b 3. a 4. b 5. b 6. d 7. b 8. d 9. a 10. a 11. c 12. a 13. a 14. c 15. c 16. a 17. b 18. c 19. b 20. b 21. b 22. c 23. b 24. a 25. a Copyright Macmillan Learning. Powered by Cognero. Page 25 Name: Date: 26. b 27. b 28. d 29. a 30. a 31. a 32. a 33. a 34. a 35. b 36. c 37. d 38. b 39. c 40. a 41. b 42. c 43. b 44. c 45. b 46. c 47. a 48. a 49. b 50. a 51. a Copyright Macmillan Learning. Powered by Cognero. Page 26 Name: Date: 52. b 53. a 54. c 55. a 56. c 57. b 58. b 59. c 60. a 61. b 62. b 63. c 64. b 65. a 66. a 67. a 68. a 69. c 70. b 71. a 72. b 73. d 74. b 75. c 76. b 77. a Copyright Macmillan Learning. Powered by Cognero. Page 27 Name: Date: 78. c 79. a 80. a 81. a 82. c 83. c 84. a 85. b 86. a 87. c 88. c 89. c Copyright Macmillan Learning. Powered by Cognero. Page 28