ECONOMICS QUESTIONS
[1] Economies of scale throughout the range of market demand give natural monopolies
[A] downward-sloping long-run average cost curves
[B] upward-sloping long-run average cost curves
[2] A natural monopoly, such as the local telephone company, is characterized by
[A] a lack of government regulation
[B] low fixed costs and diseconomies of scale
[C] economies of scale
[3] In order to ensure allocative efficiency on the part of a natural monopoly, regulators would set price equal to marginal cost.
[A] True
[B] False
[4] The rail system in Metropolis is a natural monopoly. If the government regulates the system by setting the fare equal to marginal cost, which of the following will be true?
[A] Price and output will be higher than if the monopoly were unregulated.
[B] Price and output will be lower than if the monopoly were unregulated.
[C] Price will be lower and output higher than if the monopoly were unregulated.
[5] If a regulator sets the price equal to the natural monopolist's marginal cost,
[A] the monopoly will experience a loss
[B] the monopoly will earn a profit
[6] If a voter expects to have little effect on government choices, that voter's behavior will reflect
[A] rational ignorance
[B] a cyclical majority
[C] rent seeking
[7] Because information and the time required to acquire and digest it are scarce,
[A] consumers concentrate on private choices rather than on public choices
[B] consumers concentrate on public choices rather than on private choices
[8] One result of voters' rational ignorance is that
[A] special interests often dominate legislation
[B] majority rules
[9] Many eligible voters do not vote, and many who do vote don't read the biographies of candidates before they vote. These are examples of
[A] the median-voter model
[B] rational ignorance
[10] Rationality implies that in order to get what they want, people will spend the most time and effort
[A] making private market decisions
[B] getting politically involved
[11] Special-interest legislation is legislation where there are always both widespread costs and benefits.
[A] True
[B] False
[12] Special-interest legislation usually
[A] has widespread benefits and costs
[B] has concentrated benefits and costs
[13] In determining comparative advantage, cost is measured in terms of
[A] gold only
[B] opportunities forgone
[14] Suppose that workers in Transylvania can produce only two goods -- yo-yos or sweatsocks. The Transylvanian currency is the daler. In what unit is the opportunity cost of yo-yos measured?
[A] dalers
[B] dalers per yo-yo
[C] sweatsocks
[15] For each watch Denmark produces, it gives up the opportunity to make 50 pounds of cheese. Germany can produce one watch for every 100 pounds of cheese it produces. Which of the following is true with regard to opportunity costs in the two countries?
[A] The opportunity cost of producing watches is higher in Denmark.
[B] The opportunity cost of producing cheese is higher in Denmark.
[C] The opportunity cost of producing cheese is identical in both countries.
[16] For each watch Denmark produces, it gives up the opportunity to make 50 pounds of cheese. Germany can produce one watch for every 100 pounds of cheese it produces. Which of the following is true with regard to opportunity costs in the two countries?
[A] The opportunity cost of producing watches is lower in Denmark.
[B] The opportunity cost of producing cheese is lower in Denmark.
[17] For each watch Denmark produces, it gives up the opportunity to make 50 pounds of cheese. Germany can produce one watch for every 100 pounds of cheese it produces. Which of the following is true concerning comparative advantage between the two countries?
[A] Germany has the comparative advantage in watches.
[B] Denmark has the comparative advantage in watches.
[18] For each watch Denmark produces, it gives up the opportunity to make 50 pounds of cheese. Germany can produce one watch for every 100 pounds of cheese it produces. Which of the following is true concerning production possibilities curves in both countries?
[A] The slopes of the countries' production possibilities frontiers cannot be determined unless the number of workers in each country is known.
[B] On a graph with cheese on the vertical axis, the slope of Germany's production possibilities frontier is steeper than Denmark's.
[19] In New Zealand one worker can produce 40 walking sticks or 10 boomerangs each hour. What is the opportunity cost of producing one walking stick?
[A] 40 boomerangs
[B] 1/4 of a boomerang
[20] U.S. consumers would be better off if they bought only U.S.-produced goods.
[A] True
[B] False
[21] Whenever the opportunity costs of goods are significantly different in different countries, there are gains from specialization and trade.
[A] True
[B] False
[22] International trade is most likely to occur whenever
[A] one of the trading nations is self-sufficient
[B] each of the trading nations gains from trade
[23] The market demand curve for a public good
[A] is the horizontal sum of all individual demand curves
[B] is the vertical sum of all individual demand curves.
[24] The median-voter model attempts to explain
[A] why law partners can seldom agree on the division of costs
[B] why, in a democracy, the preferences of the typical voter often will dominate other choices
[C] why democracies can evolve into dictatorships
[25] In a direct, majority-rule vote,
[A] all voters get what they want
[B] only the median voter is completely satisfied
[C] only the median voter is dissatisfied