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Part A True or False




Part A True or False;1. Barriers to entry can sometimes be overcome if the potential reward;is great enough.;2. Globalization reduces competition by allowing greater specialization;and division of labor.;3. Government intervention may create more problems than it is;designed to solve.;4. The positive contribution of politics in the determination of economic;policy is that it takes market failures and failures of market outcomes;into account when formulating policy.;5. The U.S. has a trade deficit when the value of goods and services we;import exceeds the value of goods and services we export.;6. Domestic producers prefer quotas to tariffs because quotas raise the;price of imports while tariffs do not.;7. If a program requires people to pay a price that reflects the cost of an;externality associated with their actions for which previously they did not;pay, it will be in their best interest to change their behavior.;8. Settlement of the antitrust case against AT&T resulted in lower rates;for local telephone service and higher rates for long-distance calls.;Page 1;9. If government's goal is to alter people's behavior through taxation;then taxing goods with relatively elastic demand and supply would be;most effective.;10. The law of one price means that prices will eventually be the same;in all countries and eventually countries will not have a reason to trade.;11. The central element of the oligopoly model is that each firm;produces a differentiated product.;12. The deadweight loss associated with monopolies is not the only;social cost of monopolies.;13. A perfectly competitive market is one in which many firms produce;many different varieties of the same product.;14. Governments establish the laws that regulate the interaction;between businesses and households but do not serve as actors in the;economy themselves.;15. Positive economics is concerned with justifying a particular;distribution of income.;Page 2;16. The supply of labor is generally considered to be downward sloping;because the opportunity cost of leisure decreases as wages increase.;17. When per-unit costs increase as output increases, there are;economies of scale in production.;18. The law of diminishing marginal productivity implies that identical;increases in all inputs will eventually result in smaller increments to total;output.;19. Steve has two choices for classes. Each are 3 credits and meet;three hours each week. If Steve chooses to take a modern dance class;instead of an economics class, it must be that for Steve the opportunity;cost of taking a modern dance class exceeds the opportunity cost of;taking an economics class.;20. The cross-price elasticity of demand is the percentage change in;price divided by the percentage change in price of another good.;21. An increase in the number of Americans taking vacations in Mexico;would be expected to increase the value of the peso.;22. According to the law of demand, only the price of a good influences;the amount people will choose to purchase.;END OF TRUE/FALSE SECTION.;PLEASE CONTINUE TO THE MULTIPLE CHOICE SECTION.;REMEMBER TO RECORD ALL ANSWERS IN THE ANSWER SHEET;ON THE LAST PAGE OF THIS EXAM.;Page 3;Part B Multiple Choice;1. In the real world, most markets contain;a. Many firms, none of which have any price-setting power;b. One firm which sets price;c. Many firms with differentiated products or a few interdependent firms;d. Many firms with unique products that have no close substitutes;2. One way in which firms protect their monopoly is;a. Raising prices;b. Producing items that can be easily copied;c. Convincing consumers that their brand is superior;d. Taking advantage of short-run profits;3. A Pareto optimal policy improves;a. the welfare of Pareto.;b. the welfare of more people than it hurts.;c. the welfare of at least 50 percent of the population.;d. everyone's welfare.;4. In order to use cost/benefit analysis to decide whether or not to;attend college, a prospective student must take into account all of he;following except the;a. income which will have to be forgone during the years when the;student is attending classes rather than working.;b. difference between expected lifetime earnings with a college degree;and expected lifetime earnings without a college degree.;c. basic entertainment expenses during the time spent in college that;the student would have spent even if not attending college.;d. additional expenses incurred while attending college, such as tuition;and books.;Page 4;5. Critics of advertising sometimes argue that the overall effect of;advertising is to make people believe that possessing lots of material;goods is the only way to happiness. These critics also believe that;this is a misleading view of happiness. Hence, these critics;a. worry that consumers' choices have positive externalities.;b. worry that consumers' choices have negative externalities.;c. believe that distributional issues are the main problem with any;economy.;d. reject the ideal that all is well if the economy produces what people;demand.;6. Countries can expect to gain from international trade as long as they;a. keep production diversified.;b. specialize according to their comparative advantage.;c. produce only those goods for which they have a relatively high;opportunity cost.;d. use trade restrictions to reduce competition for domestic producers.;7. A nation's comparative advantage in the production of an item is;determined by;a. which country has already specialized in the production of the item.;b. the total and marginal costs of producing the item.;c. the opportunity cost of producing the item relative to a trading;partner's opportunity cost.;d. wage rates and other input costs.;8. The best example of a positive externality is;a. roller coaster rides.;b. pollution.;c. alcoholic beverages.;d. education.;Page 5;9. Which of the following are most likely to be in violation of the;Sherman and Clayton Antitrust Acts?;a. Conglomerate mergers.;b. Horizontal mergers.;c. Vertical mergers.;d. Diagonal mergers.;10. If price is increased by a law due to the government intervention;from a market equilibrium value of $5 to a higher value of $6;a. both producer surplus and consumer surplus will increase.;b. consumer surplus will decrease and there will be some lost surplus.;c. producer surplus will decrease and there will be some lost surplus.;d. there will be lost surplus as both producer surplus and consumer;surplus decrease.;11. When you produce cars, it is enormously expensive to produce one;car, but then the costs per car decrease as more are produced. This;would be an example of;a. increasing marginal opportunity costs.;b. decreasing marginal opportunity costs.;c. constant marginal opportunity costs.;d. none of the above.;12. If a monopolistically competitive firm is earning economic profits in;the short-run, then;a. these profits will persist in the long-run because of the firm's limited;monopoly power.;b. these profits will be eliminated in the long-run as new firms enter the;industry.;c. its output will increase in the long-run.;d. price will be driven down to minimum average total cost in the longrun.;Page 6;13. A significant difference between monopoly and perfect competition;is that;a. free entry and exit is possible in a monopolized industry but;impossible in a competitive industry.;b. competitive firms control market supply but monopolies do not.;c. the monopolist's demand curve is the industry demand curve while;the competitive firm's demand curve is perfectly elastic.;d. profits are driven to zero in a monopolized industry but may be;positive in a competitive industry.;14. In a perfectly competitive market;a. firms sell a differentiated product where one firm's output can be;distinguished from another firm's output.;b. there are so many firms selling output in the market that no one;individual firm has the ability to control the market price.;c. economic profits can be earned in the long run.;d. there are very strong barriers to entry that can prevent potential;competitors from entering the market.;15. Businesses fail because;a. they follow the principle of consumer sovereignty too closely.;b. the invisible hand determines that they are not producing something;that is socially valuable.;c. they earn excessive profits.;d. entrepreneurship is present.;16. The price of food relative to other goods has;a. fallen, making it easier to live on less income.;b. fallen, making it harder to live on less income because other goods;cost so much.;c. increased, making it harder to live on less income.;d. increased, making it easier to live on less income because other;goods cost less.;Page 7;17. If the government simultaneously increases marginal income tax;rates and unemployment compensation, then the;a. incentive to work will increase.;b. incentive to work will diminish.;c. incentive to work will not change.;d. effect on the incentive to work cannot be predicted.;18. The long-run average cost curve is typically;a. downward-sloping at first but then upward-sloping.;b. upward-sloping at first but then downward-sloping.;c. always downward-sloping.;d. always upward-sloping.;19. Robert withdrew $100,000 from an account that paid 10 percent;annual interest and used the funds to purchase real estate. After one;year he sold the property for $120,000. The accounting profit on this;deal was;a. $120,000.;b. $100,000.;c. $20,000.;d. $10,000.;20. The use of expensive cars and yachts as more than just;transportation, but to impress others, is an example of what;economists call;a. conspicuous consumption.;b. focal point equilibrium.;c. bounded rationality.;d. rules of thumb.;Page 8;21. A marketing student observes that when the price of ice cream rises;by 10%, the quantity of ice cream a supplier is willing to sells rises by;5%. The student correctly concludes that the elasticity of supply for;ice cream is;a. 0.2.;b. 0.5.;c. 2.0.;d. 5.0.;22. An increase in price and decrease in quantity are consistent with a;a. leftward shift in demand and no shift in supply.;b. leftward shift in supply and no shift in demand.;c. rightward shift in supply and a rightward shift in demand.;d. leftward shift of supply and rightward shift in demand.;23. The demand for housing increased substantially between 1999 and;2004 because low interest rates increased the number of people who;could afford homes. The model of supply and demand leads to the;prediction that low interest rates cause;a. an increase in housing prices, especially in cities with plenty of room;for expansion.;b. an increase in housing prices, especially in cities with limited land.;c. a decrease in housing prices, especially in cities with plenty of room;for expansion.;d. a decrease in housing prices, especially in cities with limited land.;END OF MULTIPLE CHOICE SECTION.;END OF FINAL EXAM.;REMEMBER TO RECORD ALL ANSWERS IN THE ANSWER SHEET;ON THE NEXT PAGE OF THIS EXAM.;Page 9;Week 5 Individual Assignment - Due Day 7 (Monday);Student Name;Week 5 Final ANSWER SHEET;1;2;3;4;5;6;7;8;9;10;11;12;13;14;15;16;17;18;19;20;21;22;23;Part A T or F;(Do not spell out True or;False. Use T or F only);T;T;T;T;T;F;T;F;T;T;F;F;F;F;F;F;F;T;F;F;T;T;NA;Page 10;Part B Multiple Choice;(A, B, C, D. Do not use periods).;C (C);C (D);B (D);C (D);D (D);B (B);C (C);D (D);B (A);D (?);D (B);B (B);C (C);B (B);B (B);C (?);B (C);A (A);C (C);A (A);B (B);B (?);B (C)


Paper#31505 | Written in 18-Jul-2015

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