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General Economics multiple choice questions

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1. When a perfectly competitive firm is in long-run equilibrium and is allocatively efficient:
A) total revenue is at a maximum.
B) marginal cost equals marginal revenue.
C) average variable cost equals marginal cost.
D) total cost is at a minimum.

2. Resources are efficiently allocated when production occurs at that output at which:
A) P equals MR.
B) P equals AVC.
C) P exceeds MR.
D) P equals MC.

3. Resources are efficiently allocated when production occurs at that output level where price:
A) equals marginal cost.
B) equals marginal revenue.
C) is greater than marginal revenue.
D) is equal to average variable cost.

4. In a perfectly competitive industry, an optimal allocation of scarce resources occurs when:
A) P = AC.
B) P = MC.
C) MR = MC.
D) TR = TC.

5. When a perfectly competitive firm is in long-run equilibrium and is allocatively efficient:
A) total revenue is at a maximum.
B) marginal cost equals marginal revenue.
C) average variable cost equals marginal cost.
D) total cost is at a minimum.

6. A monopoly firm is different from a competitive firm:
A) there are many subs for a monopolist's product while there are no subs for a competitive firm's product
B) a monopolist's demand curve is perfectly inelastic whereas a competitive firm's demand curve is perfectly elastic
C) a monopolist can influence market price, while a competitive firm cannot
D) a competitive firm has a u-shave AC curve while a monopolist does not

7. If a monopolist increases output from 14 to 15 by lowering its price from 32 to 21, marginal revenue is:
A) $1
B) $17
C) $448
D) $465

8. if a monopolist produces beyond the quantity where MC = MR:
A) the increase in revenue is less than the increase in cost
B) total revenue is less than total cost
C) the increase in revenue exceeds the increase in cost
D) total revenue exceeds total cost

9. the price a monopolist sets is equal to:
A) marginal revenue
B) average revenue
C) average total costs
D) marginal cost

10. For a cartel to be successful in increasing economic profits for its members:
A) Entry of new firms must be blocked
B) Price must be set equal to marginal cost
C) Individual firms must be encouraged to adjust output so as to maximize
their own profits at the cartel price
D) Price must be set equal to average total cost

11. All of the following are arguments in support of protectionist legislation except
A) Supporting infant industries
B) Preserving domestic employment
C) Increasing global trade
D) Promoting National Security

12. To increase the nation's money supply, the Fed can:

A. increase the required reserve ratio.

B. decrease the discount rate.
C. increase the discount rate.
D. sell bonds.

13. Which of the following is an operating target for the Fed?

A. Sustainable growth.

B. The Federal funds rate.
C. Stable prices.
D. Stock prices.

14. If the primary purpose of a tariff is to completely eliminate foreign competition, it will be expected to:
A) Raise either a large or a small amount of revenue depending on the magnitude of the tariff imposed
B) Raise a relatively large amount of tax revenue
C) Raise an amount of revenue equal to the amount of the tariff multiplied by the volume of exports
D) Raise a relatively small amount of tax revenue.

15. Duties imposed by the U.S. government on imported Chinese frozen and canned shrimp are an example of:
A) tariffs
B) quotas
C) voluntary restrictions
D) regulatory trade restrictions

16. Germany restricts the use of nonrefillable bottles and cans. The EU argues that the rules aren't just protecting the environment; they are also protecting German beverage makers from competition. The EU sees Germany's environmentalism as:
A) a tariff
B) a quota
C) a regulatory trade restriction
D) an embargo

17. The voluntary export restraints on autos by Japan in the 1980s were:
A) prohibited under the GATT treaty
B) unlike an import quota and did not affect the quantity of cars imported
C) unlike a tariff and did not affect the price of imports
D) probably approved of by the Japanese car companies since it increased their profits

18. A voluntary restraint agreement:
A) is prohibited under the GATT treaty and has become less common recently
B) does not, unlike a quota, affect the quantity of imports
C) does not, unlike a tariff, affect the price of imports
D) raises the price of imports in the same way as a quota

19. As a country develops economically, what changes usually take place in the goods it exports?
A) there is little change because competitive advantage does not change
B) raw materials and ag products decline in importance, replace by services and manual goods
C) services and manufactured goods decline in importance, replaced by raw mat and ag products
D) exports go from being divers to being specialized in what the country finds to be its competitive advantage

20. True or False: A free trade association is a group of countries that allows free trade among its members, and, as a group, puts up common barriers against all other countries' goods.

21. True or False: The type of goods being imported has changed from primarily low-tech goods to agricultural goods.

22. World trade declined in the 1930s. Which of the following is the best explanation of that decline?
A) world income shrank, and trade restrictions increased
B) world income shrank, but there were few changes in trade restrictions
C) trade restrictions increased but there was little change in world income
D) the incomes of most nations increased, allowing them to be more self-sufficient

23. As a percentage of total imports, how have U.S. imports from China and India changed in the last 15 years?
A) they have remained roughly the same
B) they have risen
C) they have fallen
D) they rose initially and then dropped back to the original level

24. True or false: Quotas on imported automobiles cost jobs in the U.S. automobile industry but lower auto prices for domestic customers

25. True or False: the benefits of free trade tend to be highly concentrated whereas the costs are widely scattered.

26. True or False:
Most economists believe that the infant industry argument for protection, though theoretically justified, has been overused in practice.

27. On average, globalization has:
A) been insignificant
B) left Americans no better or not worse off
C) hurt Americans
D) benefited Americans

28. The balance of trade measures the:
A) difference between the value of imports and that of exports
B) share of U.S. imports coming from various regions of the world
C) share of U.S. exports going to various regions of the world
D) exchange rate needed to make imports equal exports

29. When a country runs a trade deficit, it does so by:
A) borrowing from foreign countries or selling assets to them
B) borrowing from foreign countries or buying assets from them
C) lending to foreign countries or selling assets to them
D) lending to foreign countries or buying assets from them

30. When a country runs a trade surplus, it will:
A) borrow from foreign countries or sell assets to them
B) borrow from foreign countries or buy assets from them
C) lend to foreign countries or sell assets to them
D) lend to foreign countries or buy assets from them

31. Specialization according to comparative advantage means that a country is producing the goods:
A) that it wants to consume
B) for which it has a relatively high opportunity cost
C) for which it has a relatively low opportunity cost
D) that it can produce at zero cost

32. Assume that in Canada the opportunity cost of producing 1 TV set is 2 bushels of wheat. Assume that in the United States the opportunity cost of producing 1 bushel of wheat is 2 TV sets. If these two countries specialize according to comparative advantage and then trade with each other:
A) Canada will export both TVs and wheat
B) Canada will export wheat and import TVs
C) the US will export wheat and import TVs
D) the US will export both TVs and wheat

33. A Jackson Pollock painting can cost $1.2M, whereas a poster reproduction of the same painting costs only about $15. The reason is that:
A) the total utility of JP paintings is greater than the total utility of JP posters
B) the marginal utility of JP paintings is greater than the marginal utility of JP posters
C) the opportunity cost of JP paintings is greater than the opportunity cost of JP posters
D) JP paintings have more subs than JP posters

34. Tom is maximizing utility by buying 3 packs of bubble gum and 4 packages of Skittles. Given diminishing marginal utility, if the price of skittles rises, the principle rational choice tells us that tom will by:
A) more s, raising the opportunity cost of not consuming skittles
B) fewer skittles, raising the opportunity cost of not consuming skittles
C) more s, lowering the opportunity cost of not consuming
D) fewer skittles, lowering the opportunity cost of not consuming

35. Mike is maxing utility by working 10 hr/week and studying 10 hr/week. he has only 20 hours to devote to either. if he realizes that another hour of studying will give him an A on the exam, raising the utility of another hour of studying, he will:
A) study less to raise the m util of studying more
B) work fewer hours, moving him down along his labor supply curve
C)work fewer hrs, shifting his labor sup curve left
D) subs work for studying, raising total utility

36. In choosing between two products, a rational consumer will choose the product that gives her the:
A) greatest total utility regardless of cost
B) least marginal utility per dollar
C) highest cost per additional unit of utility
D) lowest cost per additional unit of utility

37. Suppose that a haircut will give Dawn 2,000 units of util and cost her $40, while a set of acrylic nails costs $25 and gives 1,000 units of util. Dawn should:
A) choose the haircut b/c each unit of utility will cost her $.2 compared with $.25 for the nails
B) choose the nails b/c she will obtain 50 units of utility/$ vs 40 units of utility/$ for the haircut
C) be indifferent between the choices
D) choose the haircut b/c she will receive 50 units of utility/$ vs 45 units of utility/$ for nails

38. Suppose Jane has chosen a combination of 2 goods, A and B, such that MU/P of good A is 10 and the MU/P of good B is 10. To increase utility with the same amount of money, Jane should:
A) increase the number of B consumed
B) increase the number of A consumed
C) increase the number of A and B consumed
D) do nothing; she cannot increase utility with the same amount of money

39. Joe is maximizing utility by consuming 3 colas at $2 a piece and 4 hot dogs. the last cola game him 200 units of utility, and the last hot dog gave him 300 units of utility. the price of each hot dog is:
A) $3.00
B) $1.50
C) $1.00
D) $.50

40. Popeye cannot eat enough free spinach. With this information, we know that Popeye's:
A) marginal utility for spinach never falls
B) total utility for spinach is always rising
C) total utility for spinach is falling
D) marginal utility for spinach is falling

  • SubjectEconomics
  • TopicGeneral Economics
  • Difficulty LevelCollege/University
  • Answer has attachmentsNo
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