1) You receive a paycheck from your employer, and your pay stub indicates that $300 was deducted to pay the FICA (Social Security/Medicare) tax. Which of the following statements is correct?
a. The $300 that you paid is not necessarily the true burden of the tax that falls on you, the employee.
b. Your employer is required by law to pay $300 to match the $300 deducted from your check.
c. This type of tax is an example of a payroll tax.
d. All of the above are correct.
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2) Economists speaking like scientists make
a. normative statements.
b. prescriptive statements.
c. claims about how the world is.
d. claims about how the world should be.
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3)
Refer to Figure 4-12. If Producer A and Producer B are the only producers in the market, then the market quantity supplied when the price is $4 is
a. 4 units.
b. 8 units.
c. 12 units.
d. 16 units.
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4)
Refer to Figure 3-5. If Hosne and Merve switch from each person dividing her time equally between the production of purses and wallets to each person spending all of her time producing the good in which she has a comparative advantage, then total production of purses will increase by
a. 2.
b. 3.
c. 5.
d. 10.
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5) Refer to Table 3-3. Which of the following combinations of toothbrushes and hairbrushes could Portugal produce in 30 minutes?
a. 1 toothbrush and 4 hairbrushes
b. 4 toothbrushes and 2 hairbrushes
c. 5 toothbrushes and 6 hairbrushes
d. 6 toothbrushes and 5 hairbrushes
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6) The production possibilities frontier provides an illustration of the principle that
a. trade can make everyone better off.
b. governments can sometimes improve market outcomes.
c. people face trade-offs.
d. people respond to incentives.
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7) The slope of a steep upward-sloping line will be a
a. small positive number.
b. large positive number.
c. small negative number.
d. large negative number.
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8) A macroeconomist – as opposed to a microeconomist – would study
a. the effects of rent control on housing in New York City.
b. the effects of foreign competition on the US auto industry.
c. the effects of borrowing by the federal government.
d. the effects of raising the gasoline tax on transit ridership.
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9) When demand is unit elastic, price elasticity of demand equals
a. 1, and total revenue and price move in the same direction.
b. 1, and total revenue and price move in opposite directions.
c. 1, and total revenue does not change when price changes.
d. 0, and total revenue does not change when price changes.
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10) The price received by sellers in a market will decrease if the government
a. increases a binding price floor in that market.
b. increases a binding price ceiling in that market.
c. decreases a tax on the good sold in that market.
d. None of the above is correct.
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11) Table 3-4
Assume that the farmer and the rancher can switch between producing meat and producing potatoes at a constant rate.
Labor Hours Needed to Make 1 Pound of Pounds Produced in 24 Hours
Meat Potatoes Meat Potatoes
Farmer 8 2 3 12
Rancher 3 6 8 4
Refer to Table 3-4. Which of the following combinations of meat and potatoes could the rancher not produce in 24 hours?
a. 2 pounds of meat and 3 pounds of potatoes.
b. 4 pounds of meat and 2 pounds of potatoes.
c. 6 pounds of meat and 1 pounds of potatoes.
d. 8 pounds of meat and 0.5 pound of potatoes.
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12)
Refer to Figure 3-9. If the production possibilities frontiers shown are each for two days of production, then which of the following combinations of bolts and nails could Uzbekistan and Azerbaijan together make in a given 2-day production period?
a. 12 bolts and 120 nails
b. 24 bolts and 96 nails
c. 38 bolts and 50 nails
d. 44 bolts and 24 nails
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13) Suppose Spencer and Kate are the only two demanders of lemonade. Each month, Spencer buys six glasses of lemonade when the price is $1.00 per glass, and he buys four glasses when the price is $1.50 per glass. Each month, Kate buys four glasses of lemonade when the price is $1.00 per glass, and she buys two glasses when the price is $1.50 per glass. Which of the following points is on the market demand curve?
Point Price Quantity
A $1.00 4
B $1.00 10
C $1.50 2
D $1.50 6
a. B only
b. B and D only
c. A and C only
d. D only
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14) Which of the following is correct? A tax burden
a. falls more heavily on the side of the market that is more elastic.
b. falls more heavily on the side of the market that is less elastic.
c. falls more heavily on the side of the market that is closest to unit elastic.
d. is distributed independently of the relative elasticities of supply and demand.
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15) Good news for farming can be bad news for farmers because the
a. supply curve for an individual farmer is usually perfectly elastic.
b. supply curve for an individual farmer is usually perfectly inelastic.
c. demand for basic foodstuffs is usually inelastic, meaning that factors that shift supply to the right decrease total revenues to sellers.
d. demand for basic foodstuffs is usually elastic, meaning that factors that shift supply to the right increase total revenues to sellers.
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16) The price elasticity of supply along a typical supply curve is
a. constant.
b. equal to zero.
c. higher at low levels of quantity supplied and lower at high levels of quantity supplied.
d. lower at low levels of quantity supplied and higher at high levels of quantity supplied.
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17) Economists sometimes give conflicting advice because
a. graduate students in economics are encouraged to argue with each other.
b. economists have different values and scientific judgment.
c. economists acting as scientists do not like to agree with economists acting as policy advisers.
d. economics is more of a belief system than a science.
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18) Which of the following causes a surplus of a good?
a. a binding price floor
b. a binding price ceiling
c. a tax on the good
d. More than one of the above is correct.
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19) Good X and good Y are substitutes. If the price of good Y increases, then the
a. demand for good X will decrease.
b. quantity demanded of good X will decrease.
c. demand for good X will increase.
d. quantity demanded of good X will increase.
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20) In the simple circular-flow diagram, who consumes the goods and services that firms produce?
a. households only
b. firms only
c. both households and firms
d. neither households nor firms
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21)
Refer to Figure 4-17. If the price is $10, then there would be a
a. shortage of 400 units, and price would rise.
b. surplus of 400 units, and price would rise.
c. shortage of 600 units, and price would rise.
d. surplus of 600 units, and price would rise.
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22) When her income increased from $10,000 to $20,000, Heather’s consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds. We can conclude that for Heather, macaroni
a. and soy-burgers are both normal goods with income elasticities equal to 1.
b. is an inferior good and soy-burgers are normal goods; both have income elasticities of 1.
c. is an inferior good with an income elasticity of -1 and soy-burgers are normal goods with an income elasticity of 1.
d. and soy-burgers are both inferior goods with income elasticities equal to -1.
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23) Table 3-1
Assume that Andia and Zardia can switch between producing wheat and producing beef at a constant rate.
Minutes Needed to Make 1
Bushel of Wheat Pound of Beef
Andia 20 12
Zardia 15 10
Refer to Table 3-1. Assume that Andia and Zardia each has 360 minutes available. If each person divides his time equally between the production of wheat and beef, then total production is
a. 10.5 bushels of wheat and 16.5 pounds of beef.
b. 21 bushels of wheat and 33 pounds of beef.
c. 35 bushels of wheat and 22 pounds of beef.
d. 42 bushels of wheat and 66 pounds of beef.
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24) When the price of hot dogs changes, the demand curve for hot dogs
a. shifts because the price of hot dogs is measured on the vertical axis of the graph.
b. shifts because the quantity demanded of hot dogs is measured on the horizontal axis of the graph.
c. does not shift because the price of hot dogs is measured on the vertical axis of the graph.
d. does not shift because the price of hot dogs is measured on the horizontal axis of the graph.
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25) One way to characterize the difference between positive statements and normative statements is as follows:
a. Positive statements tend to reflect optimism about the economy and its future, whereas normative statements tend to reflect pessimism about the economy and its future.
b. Positive statements offer descriptions of the way things are, whereas normative statements offer opinions on how things ought to be.
c. Positive statements involve advice on policy matters, whereas normative statements are supported by scientific theory and observation.
d. Economists outside of government tend to make normative statements, whereas government-employed economists tend to make positive statements.
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26) Congressman Dearmark justified spending $3 million on a new entertainment complex in his district because it will create 450 new jobs for his residents. As a student of economics, you know that
a. this is a case of the broken window fallacy.
b. this is a great use of taxpayer dollars.
c. this policy diverts money from spending somewhere else in the economy.
d. Both a and c are correct.
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27) In a certain economy, toys and greeting cards are produced, and the economy currently operates on its production possibilities frontier. Which of the following events would allow the economy to produce more toys and more greeting cards, relative to the quantities of those goods that are being produced now?
a. The economy experiences economic growth.
b. There is a technological advance in the toy industry, but the greeting card industry experiences no such advance.
c. There is a technological advance in the greeting card industry, but the toy industry experiences no such advance.
d. All of the above are correct.
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28) To promote good economic outcomes, policymakers should strive to enact policies that
a. enhance productivity.
b. enhance individuals’ market power.
c. result in a rapidly-growing quantity of money.
d. All of the above are correct.
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29) If the demand for apples is elastic, then an increase in the price of apples will
a. increase total revenue of apple sellers.
b. decrease total revenue of apple sellers.
c. not change total revenue of apple sellers.
d. There is not enough information to answer this question.
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30) Which of the following transactions does not take place in the markets for factors of production in the circular-flow diagram?
a. a landowner leases land to a farmer
b. a farmer hires a teenager to help with harvest
c. a construction company rents trucks for its business
d. a woman buys corn for dinner
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31) The decisions of firms and households are guided by prices and self-interest in a
a. command economy.
b. centrally-planned economy.
c. market economy.
d. All of the above are correct.
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32) Sometimes economists disagree because their scientific judgments differ. Which of the following instances best reflects this source of disagreement?
a. One economist believes income tax cuts are unfair to those with low incomes; another economist believes income tax cuts are not unfair to those with low incomes.
b. One economist believes unemployment causes more human suffering than does inflation; another economist believes inflation causes more human suffering than does unemployment.
c. One economist believes the policies of the Democratic party offer the best hope for America’s future; another economist believes the policies of the Republican party offer the best hope for America’s future.
d. One economist believes increases in the minimum wage increase unemployment; another economist believes increases in the minimum wage do not increase unemployment.
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33)
Refer to Figure 5-16. If, holding the supply curve fixed, there were an increase in demand that caused the equilibrium price to increase from $6 to $8, then sellers total revenue would
a. increase.
b. decrease.
c. remain unchanged.
d. The effect on total revenue cannot be determined from the given information.
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34) A construction company has built 30 houses so far this year at a total cost to the company of $7.5 million. If the company builds a 31st house, its total cost will increase to $7.76 million. Which of the following statements is correct?
a. For the first 30 houses, the average cost per house was $250,000.
b. The marginal cost of the 31st house, if it is built, will be $260,000.
c. If the company can experience a marginal benefit of $275,000 by building the 31st house, then the company should build it.
d. All of the above are correct.
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35) An economys production of two goods is efficient if
a. all members of society consume equal portions of the goods.
b. the goods are produced using only some of societys available resources.
c. it is impossible to produce more of one good without producing less of the other.
d. the opportunity cost of producing more of one good is zero.
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36) If a price ceiling of $2 per gallon is imposed on gasoline, and the market equilibrium price is $1.50, then the price ceiling is a binding constraint on the market.
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37) Productivity is defined as the quantity of goods and services produced from each unit of labor input.
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38) A decrease in the price of a complement will shift the demand curve for a good to the left.
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39) The production possibilities frontier shows the trade-offs that the producer faces but does not identify the choice the producer will make.
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40) An economic model can accurately explain how the economy is organized because it is designed to include, to the extent possible, all features of the real world.
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41) The trade-off between the production of one good and the production of another good can change over time because of technological advances.
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