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
difficult because they
A) are also obstacles to the effective working of democratically controlled
governments.
B) can be eliminated by government.
C) can best be reduced by abandoning persuasion and voluntary cooperation.
D) make government intervention necessary.
E) make it easier for cartels to operate effectively.
Fill in the blank: The Players Union went on strike against the NBA during the
1998-1999 season, canceling games for weeks. Other things constant, the strike and
subsequent cancellation of games would tend to ________ the price elasticity of
demand for hockey tickets during the same period the NBA games were canceled.
A) worsen
B) preserve
C) increase
D) decrease
Were the price of gasoline to permanently increase by 10% overnight and stay there for
the foreseeable future. Other things constant,
A) the demand for gasoline would fall immediately.
B) the quantity demanded for gasoline would fall immediately.
C) the quantity demanded for gasoline would fall more dramatically over time
D) the quantity demanded for gasoline would remain unchanged, because cars can only
be run on gasoline.
An asset becomes more liquid and hence more money-like
A) as its value relative to other goods approaches zero.
B) as its value relative to other goods becomes more uncertain and unpredictable.
C) as the cost of exchanging it for other goods approaches zero.
D) when it is demanded for its own intrinsic value.
A farmer who sells September corn futures at the time he plants his corn in May is
A) competing against speculators, who profit from price fluctuations.
B) increasing his risk from price fluctuations.
C) reducing his risk from price fluctuations.
D) reducing or increasing his risk from price fluctuations, depending on what
subsequently happens to the price of corn.
A cartel arrangement is likely to be successful for its members only if it can
A) assign sales to specific members.
B) keep new firms from entering the industry.
C) prevent firms not in the cartel from marketing close substitutes.
D) do all of the above.
Pick the false statement.
A) It is possible for economic profit to be equal to accounting profit.
B) It is possible for economic profit to be greater than accounting profit.
C) It is possible for economic profit to be less than accounting profit.
D) Economic profit can only occur under conditions of uncertainty.
Suppose the Fed buys $1 billion worth of bonds and the required reserve ratio is 5%. In
theoretical limit, the money supply could
A) decrease by $5 billion.
B) increase by $5 billion.
C) increase by $20 billion.
D) decrease by $20 billion.
Speculators believing cocoa prices are going to be higher next year will
A) buy cocoa futures, cause the expected future price of cocoa to fall, and induce some
additional cocoa to be stored for future consumption.
B) buy cocoa futures, cause the expected future price of cocoa to rise, and induce some
additional cocoa to be stored for future consumption.
C) sell cocoa futures, cause the expected future price of cocoa to fall, and induce some
additional cocoa to be stored for future consumption.
D) sell cocoa futures, cause the expected future price of cocoa to rise, and induce some
additional cocoa to be stored for future consumption.
E) sell cocoa futures, cause the expected future price of cocoa to fall, and induce greater
current consumption of cocoa.
The concept of “opportunity cost” helps us explain the choices of
A) consumers only.
B) producers only.
C) greedy people only.
D) politicians only.
E) any individual.
Marginal revenue is less than price for
A) all price searchers.
B) all price takers.
C) price searchers who can’t restrict price reductions to the new purchases they want to
attract.
D) sellers who face inelastic demand curves.
Sellers are sure the demand for their product is relatively inelastic at the price currently
being charged
A) could increase their net revenue by raising the price.
B) could increase their total revenue by lowering the price.
C) would decrease their net revenue if they raised the price.
D) would decrease their total revenue if they raised the price.
With price on the vertical axis and quantity on the horizontal axis, economists would
draw an increase in supply as
A) a leftward shift in the supply curve.
B) a rightward shift in the supply curve.
C) a vertical supply curve.
D) any which way we like.
How do your authors explain the vast differences between the growth rates of the
United States and India?
A) The tremendous degree of central planning in the United States
B) Exploitation of the poorer nation by the richer nation
C) The problems of central planning in India
D) The lack of central planning in India
E) The strength of the union movement in the United States
From the price-setter’s point of view, the appropriate cost of a good is
A) the inventory cost.
B) the marginal cost.
C) the sunk cost.
D) the wholesale cost.
From the economic point of view, “joint costs” are problematic because
A) they can only be determined in markets for illicit drugs.
B) there is no way to correctly allocate joint costs.
C) they can be measured only by the most sophisticated accounting techniques.
D) there is no way to discuss the concept meaningfully.
Which of the following expenditures would be included when we measure GDP?
A) Expenditures on illegal drugs
B) Expenditures on illegal weapons
C) Expenditures on medical services associated with drugs and crime
D) All of the above.
E) None of the above.
An increase in the level of government price supports for wheat will not make wheat
farming more profitable because
A) by definition government actions cannot affect profits.
B) it raises the cost of growing wheat as well as the revenue.
C) profit is the consequence of certainty and government policies are inherently
uncertain.
D) the demand for wheat is inelastic.
E) wheat farmers are price takers, not price searchers.
If quantity demanded increases at all possible prices, demand has
A) increased.
B) decreased
C) remained the same; only quantity demanded has changed.
D) remained the same; however, the curve has become more steep.
An economically backward nation has the best chance of enjoying relatively high rates
of economic growth if it
A) turns toward central economic planning.
B) adopts advanced technologies.
C) raises its minimum wages and government pension programs.
D) limits imports as much as possible.
Gomer can make either 200 gallons of corn liquor (L) or 200 gallons of strawberry wine
(W) every six months. Goober can make only 100 gallons of corn liquor (L) or 50
gallons of strawberry wine (W) every six months. Which statement below is true?
A) Gomer produces W more efficiently than Goober.
B) Gomer produces L less efficiently than Goober.
C) Goober produces L more efficiently than Gomer.
D) All of the above are true.
Who among the following exercises a right to pollute?
A) A cigarette smoker
B) An automobile driver
C) An owner of a coal-fired electrical utility
D) A user of household sprays
E) All of the above.
Since most people would be willing to pay far more for a cup of diamonds than for a
cup of water,
A) diamonds provide more satisfaction to most people than water provides.
B) most people are irrational when it comes to prestige or status goods.
C) most people wrongly think they value diamonds more highly than water.
D) people’s choices and preferences are often inconsistent.
E) very few people are ever in danger of dying of thirst.
Who still has to economize?
A) The senior citizen who receives a 10% discount at the local coffee shop
B) The day-after-Christmas shopper who enjoys sales of up to 70% on holiday
merchandise
C) Bill Gates
D) All of the above.
E) None of the above.
There is no opportunity cost of obtaining
A) a free good.
B) a scarce good.
C) any good a person acquires, as long as they value it highly enough.
D) any good a person acquires, as long a they think it is worth the effort.
If the demand for a good is determined to be “unit elastic,” then the elasticity measure
A) is greater than 1.0.
B) is equal to 1.0.
C) is less than 1.0.
D) is infinite.
A corn-chip maker who buys September corn futures in May at the time she signs a
contract with Safeway to deliver 1000 cases of corn chips each month for the next year
is
A) competing against speculators, who profit from price fluctuations.
B) increasing her risk from price fluctuations.
C) reducing her risk from price fluctuations.
D) reducing or increasing her risk from price fluctuations, depending on what
subsequently happens to the price of corn.
Technical efficiency
A) ignores the values of the chooser.
B) is a necessary precondition for the attainment of economic efficiency.
C) is always attained if economic efficiency is achieved.
D) is attained whenever the ratio of physical output to physical input is greater than
unity.
E) is easier to achieve than economic efficiency.
Which combination of monetary and fiscal policies might policymakers elect to ward
off a potential recession?
A) Fed sale of bonds combined with increased government spending
B) Fed sale of bonds combined with decreased government spending
C) Fed purchase of bonds combined with increased government spending
D) Fed purchase of bonds combined with decreased government spending
The text uses traffic congestion as an example of
A) a surplus of automobiles.
B) a negative externality.
C) a good priced above equilibrium.
D) an engineering rather than an economic problem.
If the government offers to pay wheat farmers $1 for every bushel of wheat they market
next year, in addition to the market price, the price of wheat will be
A) higher than it would otherwise have been.
B) lower than it would otherwise have been.
C) one dollar.
D) the same as it would otherwise have been although wheat farmers will be better off.
Which consequence is least likely to follow from an increase in the price of gasoline?
A) Decreased demand for automobile tires
B) Decreased demand for gasoline
C) Increased demand for airline tickets
D) Increased demand for fuel-efficient cars
E) Increased demand for public transportation