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 living increases.
E) The purchasing power of money falls.
Suppose consumers view the George Foreman Grill and the Weber charcoal grill as
close substitutes. Other things constant, a fall in the price of the George Foreman Grill
would tend to
A) increase the demand for the Weber grill.
B) increase the demand for the George Foreman Grill.
C) decrease the demand for the Weber grill.
D) decrease the demand for the George Foreman Grill.
The statement that “water is a necessity” is misleading because
A) it does not distinguish fresh water from salt water.
B) it fails to specify for whom water is a necessity.
C) it incorrectly assumes people use water only or primarily for drinking.
D) water is a necessity only in desert environments.
E) water is extremely abundant.
Suppose Robert deposits $100 of cash into a checking account at a commercial bank.
His actions will
A) decrease M1 by $10,000.
B) increase M1 by $10,000.
C) produce no change in M1, but M1 will decrease in the future because the bank has
excess reserves.
D) produce no change in M1, but M1 will increase because the bank has excess
reserves.
According to your text, economic theory developed to answer which question?
A) Why does man have the will to power?
B) Can we create a government strong enough to tie its own hands?
C) How are countless individuals led to do “the right thing” without ever caring about
doing good?
D) Is greed good?
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.
Producers in which nation have an incentive to specialize in beef production?
A) The U.S.
B) Canada
C) Both of the above have an incentive to specialize in beef production.
D) Neither of the above have an incentive to specialize in beef production.
Another term for negative externalities is
A) bad vibrations.
B) non-marginal costs.
C) spillover costs.
D) sunk costs.
E) surplus product.
Which of the following explains the increase in income inequality since 1980?
A) A widening gap between the wages of skilled and extensively-educated workers and
the wages of those with fewer skills and less education
B) A rise in the number of single-parent families at low income levels and a rise in
two-parent two-earner families at higher income levels
C) An increase in the supply of less-skilled workers combined with an increase in
demand for more highly-skilled workers
D) All of the above.
If land suitable for growing corn is also suitable for growing soybeans, and soybeans
were found to prevent cancer,
A) the demand for corn would decrease.
B) there would be no effect on the cost of growing corn.
C) the supply (curve) of soybeans would increase.
D) the cost of growing corn would rise.
E) the cost of growing corn would fall.
For an inferior good, a decrease in demand is caused by
A) a rise in income.
B) a fall in income.
C) a rise in price.
D) a fall in price.
Who among the following provides a productive service?
A) The owner of a profitable cigarette vending machine business whose machines are
found at bars and bowling alleys
B) A well-paid researcher for a cigarette manufacturer who is willing to lie about the
facts
C) A hard-working lawyer representing a class-action lawsuit on behalf of smokers now
suffering from lung cancer
D) All of the above.
E) None of the above.
Do policies that alter the distribution of income also entail a change in property rights?
A) It is impossible to tell because of the uncertainty such policies create.
B) Not if they are confined to changing relative prices.
C) Not if they redistribute income without confiscating anyone’s wealth.
D) They do so necessarily.
When we apply economic analysis to democracies, it is reasonable to expect
government policies to be serving
A) many extremely partial or special interests.
B) the interests of business generally.
C) the interests of consumers.
D) the interests of the majority.
E) the interests of the people who most highly value the results of government actions.
The analysis of Chapter 15 argues that the painfully slow recovery following the Great
Recession, in which the accumulation of mistakes during the housing bubble are not
being fully corrected, is explained by
A) the Fed’s continued attempt to keep interest rates low and “help” the housing sector
recover.
B) the negative consequences of deficit policies that attempt to “stimulate” the
economy.
C) both of the above reasons.
D) neither of the above reasons.
Suppose people had been paying $10 for a pizza at Little Weezer’s. If their demand
increases to the point where they will now pay $15 for the same pizza, then
A) the marginal cost of making pizzas would tend to increase.
B) the quantity supplied of pizzas would tend to increase.
C) both A and B are true.
D) none of the above are true.
Goldsmiths who issued receipts for the customer deposits of gold or silver coins were
probably the originators of
A) money.
B) paper money.
C) seignorage.
D) Federal Reserve notes.
Land can be used to grow commercial Christmas trees or pulpwood. Which is the more
“economically efficient” use of the land?
A) Raising commercial Christmas trees
B) Raising pulpwood
C) Raising a mixed combination of commercial Christmas trees and pulpwood
D) It depends in part on the relative prices of Christmas trees and pulpwood.
The value of the U.S. dollar bill is determined by
A) the quantity of gold in Fort Knox.
B) the quantity of gold in the Federal Reserve.
C) the quantity of gold in circulation.
D) the gold futures market.
E) none of the above.
Fill in the blank: Producers will compare ________ benefits to ________ costs when
considering how much output to produce.
A) marginal; sunk
B) sunk; marginal
C) marginal; marginal
D) sunk; sunk
Which among the following is an example of “economizing” behavior?
A) A ski resort owner who is deciding whether or not to remain in operation during a
season with abnormally low snowfall
B) The board of directors of a major bank who are considering opening new branches in
a neighboring state
C) The planning committee of a conservative church parish, which is considering the
reintroduction of the Post-Tridentine, Latin-language mass
D) A family comparing the costs of a vacation in the mountains to the cost of a vacation
at the beach
E) All of the above.
To describe recessions as a “cluster of errors” in the economy means
A) markets never clear, even in the best of times.
B) something has caused people to systematically misread the signals provided by the
market process.
C) the laws of supply and demand have failed to work.
D) monopolies force people out of work.
Economic theory assumes elected representatives in government vote
A) in the public interest.
B) without any interest.
C) in their own interest.
D) in complete harmony with the interests of the majority of citizen-voters.
According to your text, who among the following have a comparative advantage in
providing information that reduce transaction costs?
A) The consumer
B) The bureaucrat
C) The middleman
D) The career politician
Fill in the blanks: Comparatively speaking, buildings are more likely to be physically
________ in regions where land prices are relatively ________.
A) taller; low
B) shorter; high
C) taller; high
D) shorter; stable
What effect does the televising of the Super Bowl have on the cost to the National
Football League of giving someone a ticket to the game?
A) It has no effect because all the costs of playing the game are sunk costs.
B) It has no effect on the cost because the demand doesn’t affect cost.
C) It lowers the cost because fewer people will want to buy tickets.
D) It raises the cost because fewer people will want to buy tickets.
The process of supply and demand
A) guarantees shortages or surpluses will never exist.
B) guarantees the greatest amount of social happiness.
C) ensures that people will be able to obtain all that they need.
D) generates useful information regarding the relative scarcities of goods and services.
E) accomplishes all of the above.
Strictly speaking, which entity below makes decisions?
A) The House
B) The Senate
C) Congress
D) All of the above.
E) None of the above.
In the economic way of thinking, capital contributes to
A) the exploitation of labor.
B) wealth.
C) greed.
D) macroeconomic inefficiency.
E) none of the above.
Hurricane victims in the United States are likely to receive emergency relief aid and
embark upon reconstruction more rapidly than similar victims in India because
A) U.S. victims typically need the resources more than the victims in India.
B) the U.S. economy has a more clearly defined set of property rights compared to the
Indian economy.
C) people in the U.S. are typically more charitable than people in India.
D) the global economy is too dependent on the U.S. to let it falter.
The supply curve illustrates
A) the amount of a good producers plan to sell at given prices.
B) the amount of a good producers need to sell at given prices.
C) the corresponding demand for a good at given prices.
D) the sunk costs associated with producing a scarce good.
The principal way in which inflation imposes costs upon the members of a society is by
A) destroying the incentive to consume.
B) increasing the cost of planning correctly.
C) lowering wages relative to prices.
D) making goods more scarce.
E) raising the percentage of the population below the official poverty line.
According to the authors of your text, a politician’s interest in getting reelected
A) expands the politician’s time horizon.
B) leads the politician to concentrate on policies capable of generating short-run
benefits.
C) further encourages the politician to conform more to acting in the public interest.
D) is based chiefly on selfish interest.
No firm’s total revenue could exceed its total opportunity costs if
A) all firms were price takers.
B) prices always cleared the market.
C) quantity demanded of every good equaled the quantity supplied.
D) the future were completely predictable.
E) there were no legal restrictions on entry into any industry.
Suppose the price of home heating oil is unchanged, yet we observe people purchasing
20% more than a year ago. Then
A) the demand for home heating oil has increased.
B) the demand for home heating oil has decreased.
C) the demand for home heating oil has remained unchangedonly quantity demanded
changed.
D) the law of demand has been proven false.