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People who disagree vehemently about whether or not it is efficient to clear-cut forests or strip-mine for coal are basically disagreeing about A) the importance of material wealth. B) the importance of the economy. C) the proper relationship of human […]

If freezing weather in Florida destroys a large portion of the current orange crop, A) prices of Florida oranges will rise and quantity demanded will fall. B) the supply of and the demand for Florida oranges will both fall. C) […]

Let’s assume producers in Canada can make 200 units of beef or 50 units of oranges, and U.S. producers can make 50 units of beef or 200 units of oranges per time period. Therefore A) U.S. producers have a comparative […]

Complete this sentence: in a market system income is generally earned A) independently of acts of exchange and production. B) arbitrarily and randomly. C) unproductively. D) in the process of its creation. If total consumer expenditures (in dollars) for bus […]

Suppose an economist claims there are substitutes for wetlands. The person is saying A) wetlands are of no value. B) wetlands are worth less than their substitutes. C) there is a cost to maintaining a wetland. D) there is a […]

Elected government officials seem biased toward favoring A) the national interest. B) the global interest. C) well organized, special interest groups. D) policies that are in the long-run interest of economists. Suppose a pickpocket steals your $20 bill and spends […]

For which of the following goods would the price elasticity of demand ordinarily be greatest? A) Gasoline B) Mobil regular gasoline C) Petroleum products D) Transportation services E) Unleaded gasoline Positive externalities and high transaction costs make voluntary social cooperation […]

Which of the following most accurately describes what occurs during a time of inflation? A) People must work longer to live as well. B) Prices rise faster than incomes. C) The average standard of living declines. D) The cost of […]

Fill in the blank: According to your textbook, “Fiscal policy is simply ________.” A) budget policy B) monetary policy under a different name C) price policy D) wage policy E) stupid Which of the following things does not have an […]

Suppose we observe the following sequence of production and exchange: sand is used to make silicon; silicon is used to make silicon chips; silicon chips are used to make computers; computers are sold to retailers; retailers sell those computers to […]

Which of the following clearly restricts the competitive market process? A) Selling below cost B) Selling above cost C) Selling at cost D) Setting a price above marginal cost E) None of the above. The economic way of thinking views […]

Marginal revenue is A) revenue earned by increasing the margin between cost and price. B) revenue earned by purchasing stock on credit. C) revenue on which a seller is not dependent for survival. D) the additional monetary receipts that result […]

A speculator who incorrectly anticipates the future A) cannot inflict a loss on others because one person’s loss must be someone else’s gain. B) incurs a personal loss but benefits everyone else. C) inflicts a loss on others and incurs […]

Which of the following is an important difference between government and privately-owned enterprises? A) Government can distribute goods without employing discriminatory rationing criteria. B) Government can more easily use negative incentives to obtain resources. C) Government does not produce exchangeable […]

If the market clearing price of computer tablets falls from $400 to $300, and the market clearing output increases from 5 million to 7 million units, A) demand decreased and supply remained unchanged. B) supply increased and demand remained unchanged. […]

If price changes by one firm induce rival firms selling close substitutes to alter their prices, A) firms will be able to raise their prices without fear of losing sales. B) the demand curve will shift in response to a […]

Let’s assume Ben can produce 3 units of a material good (M) or 3 units of a spiritual good (S) in a day, while Cal can produce 1 M or 2 Ss in a day. Both Ben and Cal can […]

A business can be operated profitably at a loss for an indefinite period of time A) if it is unable to meet all their obligations but able to cover operating costs. B) if we neglect the social costs of discriminatory […]

Roughly what was the change in Chile’s per capita GDP between 1960 and 2011? A) 2.65% B) 26.5% C) 265% D) 2,650% Pick the true statement regarding the notion of competition as a process versus the model of perfect competition. […]

Which supports the economist’s claim that buyers don’t compete against sellers? A) Diners would rather have more restaurants to choose among. B) Music buyers prefer having access to internet music stores compared to only the local music shop in town. […]

An effective price ceiling tends to A) decrease quantity supplied. B) Increase quantity demanded. C) discoordinate the plans of buyers and sellers. D) do all of the above. The fees physicians charge patients are most closely related to the physicians’ […]

According to the authors of your text, the phrase “property rights” can be substituted with the phrase A) “property wrongs.” B) “what people think they can get away with.” C) “animal rights.” D) “rugged individualism.” E) “free market capitalism.” Specialization […]

When a government mandate sets the rental price of an apartment below the market clearing level, which of the following result? A) A shortage B) A surplus C) Scarcity D) The outcome is unknowable. When determining value added, national income […]

The deposit expansion multiplier would increase if the Fed were to A) raise the required reserve ratio. B) lower the required reserve ratio. C) raise the discount rate. D) sell bonds. The logical principle for maximization can be stated as […]

A price support on milk is not in the interest of milk drinkers, so why do elected public officials successfully implement milk price supports? A) Milk price supports are in the public interest. B) A small number of households (dairy […]

The owner of a scenic waterfall is trying to decide whether to rent the site to a manufacturing firm as an industrial power source or to rent it to a recreational association, which would turn the site into a park […]

Roughly what was the Democratic Republic of Congo’s per capita GDP in 2011? A) $110 B) $1,100 C) $11,000 D) $110,000 Cooperation among different people can occur A) even if most people know nothing about one another. B) only if […]

National output and national income are essentially the same because A) every purchase implies a sale. B) every cost implies a benefit. C) every profit implies a loss. D) every gain implies a sacrifice. Suppose a Chinese restaurant provides free […]

Let’s assume Ben can produce 3 units of a material good (M) or 3 units of a spiritual good (S) in a day, while Cal can produce 1 M or 2 Ss in a day. Which statement below is true? […]

When does a price searcher’s marginal revenue curve lie below its demand curve? A) At all times, since this is the definition of a price searcher B) When it cannot confine price reductions to the new sales it’s trying to […]

Fill in the blank: ________ leads to speculation. A) Love B) Uncertainty C) Greed D) Money E) Sin At the moment, the Federal Reserve keeps the discount rate above the fed funds rate. In so doing, they are A) discouraging […]

The usefulness of money in commercial societies comes from the fact that A) money is backed by gold. B) most people will change their behavior at least a little in response to money incentives. C) most people will do anything […]

Rationing when goods have suddenly become more scarce, by asking people to make sacrifices voluntarily for the sake of others, discriminates against people who are A) considerate. B) poor. C) unethical. D) unwilling to sacrifice. E) wealthy. iTunes offers samples […]

If a legal ceiling price causes the quantity of a good demanded to be greater than the quantity supplied A) competition among both buyers and sellers is prevented. B) competition among buyers is prevented. C) competition among sellers is prevented. […]

Pick the best answer using the economic way of thinking. If information is a scarce good, then ignorance might be A) a sin. B) stupid. C) bliss. D) rational. E) inefficient. According to your textbook, the notion of price “gouging” […]

In the economic way of thinking, speculation can only occur A) in a capitalist economy. B) in a society where time-travel is possible. C) under uncertainty. D) under perfect information. E) in an underground or illegal market system. Which statement […]

Higher relative wages for labor tends to A) increase the supply of labor. B) decrease the demand for labor. C) encourage firms to find substitutes, such as automation. D) accomplish all of the above. If the price of sandals is […]

What is the error in the following argument? “An increased sales tax on gasoline won’t reduce consumption, because while the higher price will at first reduce demand, the reduced demand will eventually bring the price back down again, and consumption […]

Suppose a university refunds students 75% of their tuition if they drop out before the third week of class, 50% if they drop out between their third and fifth week, 25% if they drop out between their sixth and eighth […]

An effective price ceiling tends to A) increase quantity supplied. B) decrease quantity demanded. C) leave quantity supplied and demanded unchanged. D) do none of the above. Ann Trepreneur was formerly a landlord, renting her building for $1,200 a month. […]

Typically, in towns and villages across the Midwest, bowling alleys are one-story buildings. In Manhattan, one is more likely to bowl in alleys found in multi-story high rises. Why? A) Because Midwesterners live on flat lands, they think flat and […]

Competition would probably be abolished if society could find a way to abolish A) inequality. B) scarcity. C) money. D) economists. Suppose it costs a farmer $1.00 to produce 1 unit of corn, $2.10 to produce 2 units of corn, […]

We do not have reliable information on the time lags between expansionary fiscal and monetary policy actions and their effect on production and prices because A) Congress has reduced the funds available to the Bureau of Economic Analysis. B) economists […]

Chapter 15 suggests that the Community Reinvestment Act (CRA) provides an example of A) bad intentions and bad unintended consequences. B) good intentions and bad unintended consequences. C) bad intentions and good unintended consequences. D) good intentions and good unintended […]

A fish hatchery raises brook trout and rainbow trout. An increase in the market price of brook trout therefore tends to A) reduce the demand for brook trout. B) increase the hatchery’s cost of raising rainbow trout. C) increase the […]

A stable rule of law A) invariably turns losses into profits. B) allows people to cooperate more effectively with one another. C) converts price searchers into price takers. D) renders the law of comparative advantage ineffective. Economist’s can justify supporting […]

The Skinned Knee Corporation can produce either 300 skateboards each week or 500 snowboards each week. What is their opportunity cost of producing 300 skateboards each week? A) 300 skateboards B) 200 snowboards C) 500 snowboards D) 800 snowboards If […]

If one really believes that price spikes known as “price gouging” are due to a surge in greed among suppliers, then A) they haven’t quite mastered the economic way of thinking. B) their comfort in knowing that thousands if not […]

Fill in the blank: According to your text, ________ may be the most powerful force behind economic growth. A) minimum wages B) unionization C) technical innovation D) a well-motivated bureaucracy E) price compression Suppose the price level increases and real […]

Suppose the Utopian economy has the following characteristics: 100,000 people in the noninstitutional population; 80,000 people employed; 20,000 people not in the labor force. What’s the unemployment rate? A) -20 percent B) 0 percent C) 25 percent D) 60 percent […]

Which one of the following twentieth-century nations eliminated the problem of scarcity? A) Socialist Cuba B) Socialist China C) Fascist Italy D) The United States of America E) None of the above. Henry David Thoreau faced a choice: Stay in […]

The number of dollars that the commercial banking system can add to the money supply for each dollar of new reserves created by the Fed A) cannot legally be greater than 8 nor less than 2. B) is governed largely […]

According to the economic way of thinking, elected government officials tend to favor A) contractionary monetary policies. B) contractionary fiscal policies. C) expansionary monetary and fiscal policies. D) monetary and fiscal policies consistent with the public interest. Why do the […]

In 2002 some politicians and many representatives of the steel and iron-ore mining industries in the U.S. complained foreign steel producers were illegally “dumping” steel and contributing to a potential unemployment problem. According to the economic way of thinking, their […]

Fill in the blank: ________ is another term for a decline in real GDP is A) Deflation. B) Inflation C) Economic growth D) Recession E) Unemployment Let’s assume producers in Canada can make 200 units of beef or 50 units […]

According to the text, a government policy of promoting competition must A) assure small businesses they won’t fail because of below-cost pricing or other predatory practices by larger businesses. B) assure small businesses they won’t fail under any circumstances. C) […]

California voters and legislators frequently debate about the true cost of water in the course of trying to establish state policy to govern the use of water. The issue is confusing because A) all water is ultimately a free gift […]

Suppose an economy has the following characteristics: 100 people in the noninstitutional population; 60 people employed; 20 people not in the labor force. How many people are unemployed? A) 20 B) 40 C) 60 D) 80 E) 100 According to […]

When the price of a good increases, A) supply increases. B) quantity supplied increases. C) supply decreases. D) quantity supplied decreases. A fully licensed driver, Clarity Dence just drove her car to an “Earth Day” rally. By doing so, she […]

Profits resulting from luck can be distinguished from profits attributable to shrewd predictions by A) calculating the opportunity cost of earning the profits. B) comparing the profits with interest rates. C) finding out whether they lead to reduced revenue or […]

The real rate of interest is A) the rate of inflation minus the nominal rate of interest. B) the nominal rate of interest minus the risk premium. C) the nominal rate of interest minus the rate of inflation. D) the […]

Copyright © 2014 Pearson Education, Inc. The Economic Way of Thinking, 13e (Heyne) Chapter 1 The Economic Way of Thinking 1) Fill in the blank: Economics is the study of ________ and its ________. A) greed; desirable consequences B) choice; […]

Copyright © 2014 Pearson Education, Inc. The Economic Way of Thinking, 13e (Heyne) Chapter 10 Externalities and Conflicting Rights 1) Economists use the term externalities to refer to A) consequences people ignore in their decision making. B) any cost associated […]

Copyright © 2014 Pearson Education, Inc. 60) If the local airport decides to pay monetary compensation to the people on whom the airport’s operation has imposed costs, it should compensate the people who A) currently live nearby. B) currently live […]

Copyright © 2014 Pearson Education, Inc. The Economic Way of Thinking, 13e (Heyne) Chapter 11 Markets and Government 1) Which of the following is a clear difference between the market system and government? A) Collective welfare controls government policy; the […]

Copyright © 2014 Pearson Education, Inc. The Economic Way of Thinking, 13e (Heyne) Chapter 12 The Distribution of Income 1) Your textbook argues that the phrase “the distribution of income” is misleading because A) income is not created in a […]

Copyright © 2014 Pearson Education, Inc. The Economic Way of Thinking, 13e (Heyne) Chapter 13 Measuring the Overall Performance of Economic Systems 1) Gross domestic product is the market value of A) intermediate exchanges made within a country during the […]

Copyright © 2014 Pearson Education, Inc. 89) For deflation to occur, A) national income must decrease. B) real GDP must decrease. C) the price level must decrease. D) nominal GDP must decrease. Answer: C 90) In the economic way of […]

Copyright © 2014 Pearson Education, Inc. The Economic Way of Thinking, 13e (Heyne) Chapter 14 Money 1) The most important function of money is to A) allow for positive interest rates. B) enable people to measure their own personal worth. […]

Copyright © 2014 Pearson Education, Inc. 66) Roughly what is the required reserve ratio within the U.S. banking system? A) Less than 10 percent. B) 15% C) 25% D) 50% E) 90% Answer: A 67) From the banker’s perspective, dollars […]

Copyright © 2014 Pearson Education, Inc. The Economic Way of Thinking, 13e (Heyne) Chapter 15 Economic Performance and Real-World Politics 1) Recall from Chapter 5: Other things constant, when households lower their time preferences, and demonstrate a willingness to postpone […]

Copyright © 2014 Pearson Education, Inc. The Economic Way of Thinking, 13e (Heyne) Chapter 16 The Wealth of Nations: Globalization and Economic Growth 1) Fill in the blank: By 2011, GDP in the United States was approximately ________ times greater […]

Copyright © 2014 Pearson Education, Inc. The Economic Way of Thinking, 13e (Heyne) Chapter 2 Efficiency, Exchange, and Comparative Advantage 1) In the economic way of thinking, the identification of wealth with material objects A) is at the foundation of […]

Copyright © 2014 Pearson Education, Inc. 103) When countries specialize in what they do efficiently and trade, the material wealth of nations A) expands. B) contracts C) remains the same. D) Need more information to answer this question. Answer: A […]

Copyright © 2014 Pearson Education, Inc. The Economic Way of Thinking, 13e (Heyne) Chapter 3 Substitutes Everywhere: The Concept of Demand 1) The textbook cautions against speaking of “the people” as wanting a particular good A) because it is not […]

Copyright © 2014 Pearson Education, Inc. 99) Could an increase in urban bus fares eventually lead to an increase in the demand for bus service? A) It could not do so, though it could lead to a reduction in the […]

Copyright © 2014 Pearson Education, Inc. The Economic Way of Thinking, 13e (Heyne) Chapter 4 Cost and Choice: The Concept of Supply 1) The economizing process (choosing from among alternatives to maximize benefits) A) applies only to consumers. B) applies […]

Copyright © 2014 Pearson Education, Inc. 83) If you pay $35 for a sticker that entitles you to park on campus for 35 weeks of the academic year, the marginal dollar cost to you of parking your car on campus […]

Copyright © 2014 Pearson Education, Inc. The Economic Way of Thinking, 13e (Heyne) Chapter 5 Supply and Demand: A Process of Coordination 1) According to your text, the central economic task for a society is A) to eliminate scarcity. B) […]

Copyright © 2014 Pearson Education, Inc. 95) What will be the principal and most immediate effect on the supply or demand for raw cotton grown in the United States if an extensive, efficient cotton-growing industry in Africa develops? A) Decrease […]

Copyright © 2014 Pearson Education, Inc. The Economic Way of Thinking, 13e (Heyne) Chapter 6 Unintended Consequences: More Applications of Supply and Demand 1) According to your textbook, the notion of price “gouging” is problematic because A) the higher prices […]

Copyright © 2014 Pearson Education, Inc. 75) Suppose the market-clearing price of wheat is $2.50 per bushel. What would happen if wheat farmers persuaded the government to set a legally-mandated price support of $3.75 per bushel? A) The quantity demanded […]

Copyright © 2014 Pearson Education, Inc. The Economic Way of Thinking, 13e (Heyne) Chapter 7 Profit and Loss 1) “Total revenue minus total cost” is A) an incorrect definition of profit. B) the correct definition of profit. C) the economist’s […]

Copyright © 2014 Pearson Education, Inc. 61) From the perspective of economic theory, property rights are A) human rights. B) just as important as human rights. C) less important than human rights. D) more important than human rights. E) usually […]

Copyright © 2014 Pearson Education, Inc. The Economic Way of Thinking, 13e (Heyne) Chapter 8 Price Searching 1) The cost-plus-markup theory of price setting A) explains why firms can’t raise their prices until their costs rise. B) explains why percentage […]

Copyright © 2014 Pearson Education, Inc. The Economic Way of Thinking, 13e (Heyne) Chapter 9 Competition and Government Policy 1) Which conditions must be present for “perfect competition” to occur? A) A large number of buyers and sellers, and all […]

Copyright © 2014 Pearson Education, Inc. 70) Predatory pricing, as defined in the text, is A) common and profitable but illegal. B) common, profitable, and legal. C) common but both unprofitable and illegal. D) common and legal but unprofitable. E) […]

Suppose the United Automobile Workers union agrees to accept lower wages for members if the automobile manufacturers lower their prices to buyers. Will the UAW’s measures usually result in a larger number of cars being sold and hence more jobs […]

Speculators who believe the world-wide demand for cocoa products is going to increase enormously next year will cause A) less cocoa to be consumed next year. B) less cocoa to be consumed this year. C) less cocoa to be produced […]

Suppose the market-clearing price of wheat is $2.50 per bushel. What would happen if wheat farmers persuaded the government to set a legally-mandated price support of $3.75 per bushel? A) The quantity demanded of wheat would fall. B) The quantity […]