51. Compared to a tariff, an import quota, which restricts imports to the same amount as the tariff, will leave the country as a whole:

Worse off than a comparable tariff.
Not as bad off as a comparable tariff.
About the same as a comparable tariff.
Any of the above can be true.

52. Any combination of products inside the production possibility frontier is:

Allocatively inefficient
Consumer inefficient
Productively inefficient
None of the given option.

53. : In the long run, which of the following is considered a variable cost?

Expenditures for wages.
Expenditures for raw materials.
Expenditures for capital machinery and equipment.
All of the given options.
54. Two firms, each producing different goods, can achieve a greater output than one firm producing both goods with the same inputs. We can conclude that the production process involves:
http://virtualstudysolutions.blogspot.com
: Diseconomies of scope.
Economies of scale.
Decreasing returns to scale.
Increasing returns to scale.

55. The change in the quantity demanded of a good resulting from a change in relative price with the level of satisfaction held constant is called the ______________ effect.

Select correct option:
Giffen
Real price
Income
Substitution

56. If a competitive firm's marginal cost always increases with output, then at the profit maximizing output level, producer surplus is:

Select correct option:
Zero because marginal costs equal marginal revenue.
Zero because price equals marginal costs.
Positive because price exceeds average variable costs.
Positive because price exceeds average total costs.

57. The concept of a risk premium applies to a person that is:

Select correct option:
Risk averse.
Risk neutral.
Risk loving.
All of the given options.

58. Governments may successfully intervene in competitive markets in order to achieve economic efficiency:

Select correct option:
At no time; competitive markets are always efficient without government intervention.
In cases of positive externalities only.
In cases of negative externalities only.
In cases of both positive and negative externalities. http://virtualstudysolutions.blogspot.com 12

59. What happens in a perfectly competitive industry when economic profit is greater than zero?

Select correct option:
Existing firms may get larger.
New firms may enter the industry.
Firms may move along their LRAC curves to new outputs.
All of the given options.

60. Which of the following is NOT true about price floors?

Select correct option:
Consumer surplus is always lower than it would be in the competitive equilibrium.
Producer surplus could be lower, higher, or the same as it would be in competitive equilibrium.
Producer surplus could be negative as the result of a price floor.
Producers will often respond to a price floor by cutting production to the point at which price equals marginal cost.

61. Indifference curves that are convex to the origin reflect:

Select correct option:
An increasing marginal rate of substitution.
A decreasing marginal rate of substitution.
A constant marginal rate of substitution.
A marginal rate of substitution that first decreases, then increases.

62. Which of the following statements is true regarding the differences between economic and accounting costs?

Select correct option:
Accounting costs include all implicit and explicit costs.
Economic costs include implied costs only.
Accountants consider only implicit costs when calculating costs.
Accounting costs include only explicit costs. http://virtualstudysolutions.blogspot.com 13

63. Rabia and Samina are shopping for new cars (one each). Rabia expects to pay $15,000 with 1/5 probability and $20,000 with 4/5 probability. Samina expects to pay $12,000 with 1/4 probability and $20,000 with 3/4 probability. Refer to the above scenario, Rabia's expected expense for his car is:

Select correct option:
$20,000.
$19,000.
$18,000.
$17,500.

64. A decreasing-cost industry has a downward-sloping:

Select correct option:
Long-run marginal cost curve.
Short-run average cost curve.
Short-run marginal cost curve.
Long-run industry supply curve.

65. Producer surplus is measured as the:

Select correct option:
Area under the demand curve above market price.
Entire area under the supply curve.
Area under the demand curve above the supply curve.
Area above the supply curve up to the market price.

66. In a constant-cost industry, an increase in demand will be followed by:

Select correct option:
No increase in supply.
An increase in supply that will not change price from the higher level that occurs after the demand shift.
An increase in supply that will bring price down to the level it was before the demand shift.
An increase in supply that will bring price down below the level it was before the demand shift.http://virtualstudysolutions.blogspot.com 14

67. The "perfect information" assumption of perfect competition includes all of the following except one. Which one?

Select correct option:
Consumers know their preferences.
Consumers know their income levels.
Consumers know the prices available.
Consumers can anticipate price changes.

68. A Giffen good:

Select correct option:
Is always the same as an inferior good.
Is the special subset of inferior goods in which the substitution effect dominates the income effect.
Is the special subset of inferior goods in which the income effect dominates the substitution effect.
Must have a downward sloping demand curve

69. The object of diversification is:

Select correct option:
To reduce risk and fluctuations in income.
To reduce risk, but not to reduce fluctuations in income.
To reduce fluctuations in income, but not to reduce risk.
Neither to reduce risk, nor to reduce fluctuations in income.

70. A price support may be pictured by:

Select correct option:
Shifting the demand curve to the right by the amount of the government purchase.
Shifting the demand curve to the left by the amount of the government purchase.
Shifting the supply curve to the right by the amount of the government purchase.
Shifting the supply curve to the left by the amount of the government purchase.

71. Ali and Sarah decide to go into business together as economic consultants. Ali believes they have a 50-50 chance of earning $200,000 a year, and that if they don't, they'll earn $0. Sarah believes they have a 75% chance of earning $100,000 and a 25% chance of earning $10,000. Refer to the scenario, the probabilities discussed in the information above are:

Select correct option: http://virtualstudysolutions.blogspot.com 15
Objective because they are single numbers rather than ranges.
Objective because they have been explicitly articulated by the individuals involved.
Subjective because the event hasn't happened yet.
Subjective because they are estimates made by individuals based upon personal judgment or experience.

72. The law of diminishing returns refers to diminishing:

Select correct option:
Total returns.
Marginal returns.
Average returns.
All of the given options.

73. The marginal rate of technical substitution is equal to the:

Select correct option:
Slope of the total product curve.
Change in output minus the change in labor.
Change in output divided by the change in labor.
Ratio of the marginal products of the inputs.

74. Boeing Corporation and Airbus Industries are the only two producers of long-range commercial aircraft. This market is not perfectly competitive because:

Select correct option:
Each company has annual sales over $10 billion.
Each company can significantly affect prices.
Airbus cannot sell aircraft to the United States government.
All of the given options.

75. In a short run production process, the marginal cost is rising and the average total cost is falling as output is increased. Thus, marginal cost is:

Select correct option:
Below average total cost.
Above average total cost.
Between the average variable and average total cost curves.
Below average fixed cost.

76. In the short run, a perfectly competitive profit maximizing firm that has not shut down:

Select correct option:
Is operating on the downward-sloping portion of its AVC curve.
Is operating at the minimum of its AVC curve. http://virtualstudysolutions.blogspot.com 16
Is operating on the upward-sloping portion of its AVC curve.
Is not operating on its AVC curve.

77. When the federal government installs a price support program that requires the government to purchase all of a good not bought in the private economy at the support price, changes in producer surplus:

Select correct option:
Are negative.
Are positive, but more than offset by the cost to consumers and the government.
Are positive, and not offset by the cost to consumers and the government.
None of the given options.

78. Rabia and Samina are shopping for new cars (one each). Rabia expects to pay $15,000 with 1/5 probability and $20,000 with 4/5 probability. Samina expects to pay $12,000 with 1/4 probability and $20,000 with 3/4 probability. Refer to the above scenario, Rabia's expected expense for his car is:

Select correct option:
$20,000.
$19,000.
$18,000.
$17,500.

79. Marginal utility measures:

Select correct option:
The slope of the indifference curve.
The additional satisfaction from consuming one more unit of a good.
The slope of the budget line.
The marginal rate of substitution.

80. The endpoints (horizontal and vertical intercepts) of the budget line:

Select correct option:
Measure its slope.
Measure the rate at which one good can be substituted for another.
Measure the rate at which a consumer is willing to trade one good for another.
Represent the quantity of each good that could be purchased if all of the budget were allocated to that good.

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