Feedback — Midterm

You submitted this quiz on Thu 28 Feb 2013 11:05 AM PST. You got a score of 40.00 out of 49.00.

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Question 1

Markets emerge when

participants have different desires.

participants strive to improve their welfare.

mutually advantageous interaction among participants is possible.

all of the above.

Question 2

Economics is the study of

how to eliminate scarcity.

how to make money.

how to allocate limited resources among competing wants.

all of the above.

Question 3

Which of the following is NOT true about property rights?

Conflict over resource use, or the potential for conflict, can be alleviated by the development of property rights.

Property rights extend the range of trades.

Property rights help make clear the relationship between the public and private sectors of the economy.

Property rights encourage waste in the use of resources because they allow people to destroy resources.

Question 4

Consider this table when answering this question. Which of the following statements is true?

Fred has a comparative advantage in the production of coconuts.

Fred has an absolute advantage in the production in both goods.

Harry has an absolute advantage in the production of both goods.

Harry has a comparative advantage in the production of coconuts.

Question 5

Consider this table when answering this question. The cost of producing one:

coconut to Harry is one and two-thirds papayas.

papaya to Fred is three coconuts.

coconut to Fred three papayas.

papaya to Harry five coconuts.

Question 6

Consider this table when answering this question. A mutually beneficial exchange rate between coconuts (C) and papayas (P) between Fred and Harry would be:

1P = 2C

1P = 5C

1P = 3C

1P = 4C

Question 7

A “tragedy of the commons” occurs when there is

“rivalry” in the use of a resources and property rights are assigned.

“underuse” of a resource and property rights are assigned.

“rivalry” in the use of the resource and property rights are NOT assigned.

“underuse of a resource and property rights are NOT assigned.

Question 8

The “tragedy of the anticommons”

refers to the improved use of common-access resources after private property rights have been assigned to the common-access resource.

can help explain the existence of pollution or the over-fishing of the seas.

refers to the overuse of common access resources.

occurs from multiple owners of property (decision) rights and can help explain the under use of common-access resources after private property rights have been assigned to the common-access resource.

Question 9

What forms of competition are important in constraining executive/manager decision making?

competition in product markets

competition for control of firms

competition in resource markets

all of the above

Question 10

In searching for firms to takeover, entrepreneurs should

seek out firms that are mismanaged, to one extent or another, but have the prospect of being re-engineered and redirected toward greater profits.

pass on firms that are grossly mismanaged.

seek optimum firms with optimum organizational, financial, and incentive structures.

seek out firms that are operating with maximum efficiency because those firms will be underpriced.

recognize that money can be made only from profitable firms, not problem firms.

Question 11

If a firm’s long-term profit stream rises, its current market value will tend to

decrease.

remain the same.

increase.

(don’t know; not enough information to say).

Question 12

If the price of a good remains constant, but the risk cost associated with consuming or using the good rises, the quantity consumed will

increase.

decrease.

remain the same.

(don’t know; not enough information to say).

all of the above

Question 13

Maslow’s Hierarchy of goods is subject to dispute by economists because it

was developed from a limited number of survey participants who may or may not have been representative of the population.

could be applicable only to the period in which the survey was undertaken.

does not consider the prices of the various categories of goods at the time of the survey.

all of the above.

Question 14

If a rational person has so allocated his income between only two goods in existence (A and B) such that MUa/Pa > MUb/Pb, then the person will

buy less of both A and B.

do nothing.

buy more B and less of A.

buy more of A and B.

buy more of A and less of B.

Question 15

A prisoner’s dilemma is a circumstance in which

a. all parties have the right incentives to do what is right for the group even without the benefits of communication among the parties.

b. all parties have incentives to take the noncooperative option when not allowed to communicate.

c. each party has an incentive to do what is best for himself or herself, regardless of what everyone else does.

d. only actual caught prisoners have self-destructive incentives.

e. both b and c

Question 16

Assume normal-shaped supply and demand curves in a competitive market. If the price of a substitute good (A) goes down, the equilibrium quantity of the other substitute good (B) will

(don’t know; not enough information to say).

remain the same.

decrease.

increase.

Question 17

Assuming a competitive labor market, an increase in the opportunity cost of workers will cause the equilibrium market quantity of labor hired to

remain the same.

increase.

(don’t know; not enough information to say).

decrease.

Question 18

In a competitive labor market, the addition of a fringe benefit that is valuable to workers will cause the supply of labor curve to

decrease.

remain the same.

increase.

(don’t know; not enough information to say).

Question 19

A federal minimum wage imposed above the equilibrium market wage for the covered group can be expected to

initially decrease the quantity of labor demanded.

initially increase the quantity of labor supplied.

initially lead to a surplus of labor.

all of the above.

Question 20

After all market (short-term and long-term) adjustments, a federal minimum wage imposed above the equilibrium market wage for the covered group can be expected to

a. make workers worse off on balance.

b. make employers worse off on balance.

c. make workers better off while making employers worse off.

d. make workers and employers better off.

e. both a and b.

Question 21

When workers are initially underpaid and then later overpaid,

the reward for increased performance on the job can go up from what it would be if workers were paid exactly their market value.

mandatory retirement makes sense to terminate the length of time workers are overpaid.

the outlawing of mandatory retirement can cause an increase in workers’ initial starting salary and decrease the extent of the initial underpayment.

the extent of the overpayment later in workers’ careers can be expected to fall.

all of the above.

Question 22

The law of demand states there is

a direct relationship between the price of a good and the quantity supplied

an inverse relationship between the price and the quantity supplied

a direct relationship between the price of a good and the quantity demanded

an inverse relationship between the price and the quantity demanded

Question 23

Which of the following will most likely shift the demand curve for a given good (A) to the left?

An expected increase in the future price of the good (A).

An increase in the number of buyers of the good (A).

An increase in the price of a complementary good (B).

An increase in consumers’ incomes and the good (A) is a “normal” good.

Question 24

If there is a decrease in price of good A, which is a compliment for good B, then the demand for good B will

Increase.

decrease.

remain the same.

Don’t know (not enough information to specify one of the other options)

Question 25

In the graph shown, if the price is $16, the resulting:

surplus will lead to a rise in price.

shortage will lead to a rise in price.

surplus will lead to a fall in price.

shortage will lead to a fall in price.

Question 26

In the graph shown, if the price is $8, the resulting:

surplus will lead to a rise in price.

shortage will lead to a rise in price.

shortage will lead to a fall in price.

surplus will lead to a fall in price.

Question 27

If there is an increase in productivity of producing good A at the same time there is an increase in consumers’ taste for the good, then the price of the good in the market will

remains the same.

don’t know (not enough information to specify one of the other options)

increase.

decrease.

Question 28

Queues in competitive markets can be explained by which of the following arguments:

a. Queues are observed in markets because firms make mistakes in stocking goods.

b. Queues enable firms to lower their costs and prices by more than queues raise the opportunity costs incurred by customers standing in line.

c. Both answers a and b above are correct.

d. Answer a above is correct, but answer b is wrong.

Question 29

When a subsidy is granted to domestic producers of a good that has to compete with an imported good, what happens to the price of the imported good that competes with domestic producers?

Remains the same.

Increase.

Don’t know (not enough information to specify one of the other options).

Decrease.

Question 30

When a subsidy is given to domestic producers of a good that must compete with imports of the good, what will happen to the price of the good in foreign markets?

Increase.

Don’t know (not enough information to specify one of the other options).

Remains the same.

Decrease.

Question 31

Which of the following statements is true concerning overpayment of workers?

A person who quickly fails at a high salary can end up doing far worse than the person who begins his or her career by succeeding at a more modest salary.

Firms may “overpay” their workers laer in their careers because they have “underpaid” their workers early in their careers.

Initial “underpayment” of employees may be acceptable to workers if “overpayment” is likely in the future.

All of the above.

Question 32

Being able to make “credible commitments” can be important to firms because such an ability

a. can lower the starting wages of workers.

b. can raise worker productivity over their careers.

c. Both a and b

d. Neither a nor b.

Question 33

If the discount rate to compute present values rises, what can be expected to happen to the stock prices of firms who can reasonably expect a stream of profits into the future?

Remains the same.

Don’t know (not enough information to say).

Decreases.

Increases.

Question 34

Opportunity cost

is the value of the next best alternative foregone in making a choice.

never exists if there are alternatives.

never applies to government or public policy.

is irrelevant to rational choice.

Question 35

A rational person will

follow the Maslow hierarchy of wants.

never make mistakes choices.

choose alternatives for which the expected present value is greater than the expected value of the costs.

always choose those options, the future value of which is greater than the current costs.

Question 36

Assume that studying economics and French are your only two activities. If you become more efficient in learning economics but your efficiency in learning French remains constant, then your ability to learn more French

decreases.

remains the same.

don’t know (not enough information to say).

increases.

Question 37

Suppose the poor are given an income grant of a certain amount, say, $5,000, when they earn zero income. Suppose also that as the poor’s earned income rises, their income grant from the government declines to zero at some given break-even earned income level. If the income grant at zero earned income is held constant but the break-even earned income level (at which the subsidy is reduced to zero) is raised to some higher dollar figure, then the implicit marginal tax rate the poor face will

decrease.

don’t know (not enough information to say).

increase.

remain the same.

Question 38

If the opportunity cost of studying goes down (all other relevant factors remain constant), then the rational student will

Hold study time the same

Increase study time

Decrease study time

Don’t know (rational students’ behavior can’t be predicted)

Question 39

The economic theory of groups predicts that small groups are likely to be more prevalent and successful in achieving their goals than large groups because

large groups will have members with diverse interests.

large groups are hard for leaders to direct and control.

the free-rider problem is less likely to occur in small groups than in large groups

all of the above.

Question 40

Under the economic theory of groups, as the size of the group increases, monitoring costs that must be incurred to achieve group objectives can be expected to

don’t know (not enough information to say).

decrease.

increase.

remain the same.

Question 41

If the market is competitive, the supply curve for a good has a positive slope, and an excise tax is imposed on producers,

the excise tax does not increase the price of the good.

the excise taxes is paid partially by consumers and partially by producers.

the excise tax is paid totally by consumers.

the excise taxes is paid totally by producers.

Question 42

If an excise tax is imposed on a good in a competitive market, the after-tax price received by the producer will

remain the same.

increase.

don’t know (not enough information to say).

decrease.

Question 43

Consider two goods, A and B, that are substitutes in consumption and are produced under competitive market conditions. Suppose that an excise tax is imposed on good A but not good B. The equilibrium price of good B can be expected

increase.

don’t know (not enough information to say).

decrease.

remain the same.

Question 44

Consider a rent control on apartments that effectively lowers the rent of units below market-clearing levels. In the long run (when the landlords have time to change the non-rent attributes of rental apartments), we would expect landlords to

reduce the quality of their apartment units.

build more apartment units.

keep the quality of their apartment units the same.

improve the quality of their apartment units.

Question 45

Consider a minimum wage that is imposed above the market equilibrium wage rate. Consider also the consequences of the minimum-wage law after employers have had a chance to adjust the non-wage components of the labor contract, implicit or explicit. In the long run, we would expect the non-money forms of labor compensation to

fall.

remain the same.

don’t know (not enough information to say. )

rise.

Question 46

When workers value employer arranged health insurance at more that its cost,

they will seek union representation as the only way to get the health insurance.

they will ask for higher wages and salaries.

they will volunteer for overtime.

they will accept lower wages and salaries than when health insurance is not available.

Question 47

If Europeans increase their preference for American goods, the euro value of the dollar will

remain the same.

increase.

decrease.

Don’t know (not enough information to say).

Question 48

When firms are allowed to impose external costs on others in competitive markets, the price in a competitive market will be

lower than it should be.

higher than it should be.

at the efficient output level.

none of the above.

Question 49

Which of the following methods can be used to solve the problem of pollution?

Impose an excise tax on the production of the good that causes pollution.

Provide a subsidy to producers to produce some other non-polluting goods.

Require producers to have “rights to pollute” in order to pollute, limit the number of pollution rights, and then allow producers to buy and sell pollution rights.

All of the above.

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