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 beings to the natural world.
D) who should have which rights.
Brown can brew 4 gallons of stout or 3 gallons of lager every three months, or any
linear combination in between. Which statement is true?
A) Brown sacrifices 3/4 gallons of lager for every gallon of stout brewed.
B) Brown sacrifices 1 1/3 gallons of stout for every gallon of lager brewed.
C) Both of the above are true.
D) None of the above is true.
Lisa decided to give up being on the soccer team for piano lessons. Her opportunity
cost of pursuing piano lessons is
A) zero, as long as someone other than Lisa pays for the lessons.
B) zero, as long as someone other than Lisa paid for her soccer fees and equipment.
C) the satisfaction Lisa had enjoyed by being on the soccer team.
D) the satisfaction Lisa enjoys by studying the piano.
E) both A and B above.
Suppose Factory A emits 15,000 units of “Yuck” monthly, Factory B emits 30,000 units,
and Factory C emits 45,000 units. Also suppose A’s cost of reducing the emission is $1
per unit, B’s cost is $2 per unit, and C’s cost is $3 per unit. If the EPA required each
factory to pay a $2.01 tax for each unit of yuck it emits monthly, what would be the
new level of total monthly emissions, and what would be the total cost of cleanup?
A) 45,000 units; $75,000
B) 45,000 units; $90,000
C) 45,000 units; $105,000
D) 45,000 units; $120,000
In the economic way of thinking, what do entrepreneur s and bureaucrats have in
common?
A) They each advance projects solely in the public interest.
B) They each advance projects only if the expected marginal benefits exceed the
expected marginal costs.
C) They each advance projects only if the expected marginal benefits are less than the
expected marginal costs.
D) They each advance projects only if they impose no negative externalities.
Suppose in Italy producers can make 10,000 dresses or 1,000 coats per day, while in
Canada producers can make 14,000 similar dresses or 2,000 similar coats per day.
Therefore
A) only the Italians can gain through specialization and exchange.
B) only the Canadians can gain through specialization and exchange.
C) Canadians have an incentive to specialize in coats.
D) Italians have an incentive to specialize in coats.
According to your textbook, globalization tends to increase the productivity of nations
through
A) improvements in the labor skills of their citizens.
B) increasing technological knowledge.
C) improving the coordination of individual economic plans.
D) doing all of the above.
Who among the following faced an opportunity cost?
A) The fiance
B) The recently married bride
C) The cheating spouse
D) The divorcee
E) All of the above.
Suppose an economy has the following characteristics: 100 people in the
noninstitutional population; 60 people employed; 20 people not in the labor force.
What’s the unemployment rate?
A) 20 percent
B) 25 percent
C) 33 percent
D) 40 percent
E) 60 percent
According to the textbook, people add to their stock of human capital by
A) divesting of their personal assets.
B) investing in their personal skills.
C) rearranging their pension portfolios.
D) attempting to systematically reduce, rather than expand upon, their human
capabilities.
E) engaging in all the above.
Suppose all tickets to the World Series have already been sold. Will any further sales
occur if the going price rises?
A) No, and therefore a higher price will have no effect.
B) No, but a smaller quantity will be demanded.
C) Not unless more tickets are printed.
D) Yes, as some ticket-holders sell to others.
E) Yes, but the further sales will reduce the price to the original level.
In the economic way of thinking, a tax on pollutants
A) unfairly places the burden of pollution reduction on the poor.
B) is inefficient because it won’t reduce pollution to zero.
C) tries to alter relative money costs to reflect new decisions about who has which
rights.
D) cannot be labeled unfair as long as the tax revenues are used to fund public works
projects.
Which event is most likely to increase the elasticity of demand for a good?
A) A decrease in the demand for the good
B) A decrease in the price of the good
C) An increase in the demand for the good
D) Higher incomes for consumers of the good
E) The appearance on the market of excellent substitutes for the good
A surplus of peanuts implies
A) more peanuts have been produced than can be used currently.
B) peanuts are not currently scarce.
C) there is currently no demand for peanuts.
D) all of the above.
E) none of the above.
The ultimate or absolute measure of value in the opportunity cost perspective
A) does not exist.
B) is the labor embodied in goods.
C) is the money price of the goods.
D) is the nonrenewable resources consumed in producing the goods.
A large and diverse community has suffered a two-month drought. In attempting to deal
with the crisis, four identifiable groups emerge: one decides to pray, a second decides to
engage in a rain dance, a third decides to use modern meteorological principles and
“seed” the clouds, and a fourth decides to do nothing. From the standpoint of economic
theory,
A) individuals in the first and second groups are acting irrationally and inefficiently.
B) individuals in each group are acting efficiently, given their own values and
understanding of ends and means.
C) the third group is the smartest.
D) the fourth group is the most selfish.
The marginal dollar cost to a patient of visiting a doctor when the patient’s bill will be
paid entirely by insurance is
A) the same as if the patient had no insurance.
B) the value of the care not received by some other patient who couldn’t get an
appointment.
C) zero.
D) zero only if the patient does not pay the insurance premiums.
Goods, such as L.A. Lakers tickets and parking spaces around the stadium, are
sometimes consumed together. Which of the following would decrease the demand for
parking spaces around the stadium?
A) An increase in the price of Lakers tickets
B) A higher parking fee
C) A decrease in the price of Lakers tickets
D) A substantial increase in the price of local cab services
One well-established full-service stock brokerage charges $35 commissions per trade. A
new online brokerage charges $7.95 per trade. Yet, many people still elect to use the
traditional, full service broker. Why?
A) They’re fools.
B) They must not be aware of online brokers.
C) They might perceive the low commission to be a sign of low reliability.
D) They are failing to economize.
Who among the following is speculating?
A) The senior citizen who decides to get a flu shot in November
B) The Midwesterner who puts fuel-line antifreeze in the tank on news of a deep freeze
C) The college work-study student who gambles his pay at the local casino
D) All of the above.
E) None of the above.
According to the economic way of thinking, “money” is defined as
A) anything backed by gold.
B) anything backed by some other commodity.
C) anything used as a general medium of exchange.
D) anything the government declares to be legal tender.
Competition
A) cannot be eliminated unless scarcity is eliminated.
B) causes people to hope others will fail.
C) compels people to do only what is in the public interest.
D) only exists in capitalist societies.
E) only exists in societies with fiat currency.
According to the textbook, the noise of jet engines is not a negative externality for
baggage handlers
A) because it leaves no residue in the environment.
B) because the benefits are greater than the costs.
C) because they are paid to live with the noise.
D) because they wear hearing-protection devices.
E) unless it leaves them with permanent hearing loss.
There is only one supermarket in Beverly Hills, California because
A) supermarkets can’t compete effectively against residents in buying land.
B) supermarket owners are paying attention to sunk costs in their location decisions.
C) the demand for food is highly elastic in wealthy neighborhoods.
D) the demand for food is highly inelastic in wealthy neighborhoods.
E) wealthy people rarely do their own grocery shopping.
A pumped storage reservoir used regularly by an electrical utility is efficient for the
utility to operate
A) even if it takes twice as much electricity to operate as it generates.
B) only if it generates more electricity in the long run than it uses up.
C) only if it generates more electricity in the short run than it uses up.
D) only if the second law of thermodynamics ceases to hold.
E) only when the utility ignores sunk costs.
Economic theory suggests
A) social order is maintained only when people act in the public interest.
B) as a rule, people cooperate more effectively when they’re selfish compared to when
they’re generous.
C) a great deal of effective cooperation can occur in the presence of minimal generosity
and also without a great deal of government guidance and control.
D) none of the above.
Other things constant, if a person prefers to have a good sooner rather than later
A) she is acting like a child.
B) she has a negative rate of time preference.
C) she has a zero rate of time preference.
D) she has a positive rate of time preference.
Cartels display a pronounced tendency to disintegrate over time because
A) increased profits induce laziness and carelessness among cartel members.
B) nobody benefits in the long run from their operation since they merely redistribute
wealth.
C) their operation is so blatantly contrary to the public interest.
D) there are so many margins on which competition can occur.
Government is a social institution
A) in which people do not engage in competition.
B) in which the public interest, rather than private interests, guide individual behavior.
C) whose behavior is determined by individuals’ perceptions of marginal costs and
marginal benefits.
D) whose detailed actions are governed by the will of the majority.
Mergers between companies that previously existed in a supplier-buyer relationship are
called
A) conglomerate mergers.
B) diagonal mergers.
C) horizontal mergers.
D) vertical mergers.