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 commodities or services.
D) Government provides services at a lower opportunity cost.
E) Government tends to pay close attention to the varying preferences of the people.
We all use the services of speculators as information in reaching our own economic
decisions
A) because speculators are aggressive about marketing the information they produce.
B) because we all use prices, which are set by bids and offers based on predictions of
the future.
C) if we buy or sell commodities through an organized exchange.
D) if we play the stock market.
Cooperation among people in an urban, industrialized society
A) becomes more difficult as transaction costs increase.
B) is dependent upon people having a detailed, specific knowledge of the wants and
abilities of others.
C) is impossible once the number increases beyond a few thousand.
D) requires coordination by central-planning committees.
E) will not occur unless most people approve of the goals and values of others.
The jet noise assaulting the ears of a baggage handler is not an externality or spillover
cost if
A) baggage handlers are required by law to wear hearing protectors.
B) baggage handlers are required by their employers to wear hearing protectors.
C) baggage handlers freely choose to wear hearing protectors.
D) baggage handlers find the pay sufficiently attractive to stay with their jobs.
E) the noise does no permanent damage to their hearing.
The size of a corporation, as measured by stockholders’ equity, depends primarily upon
A) current net revenue.
B) people’s expectations of future earnings.
C) the amount of capital invested in the corporation.
D) total sales (in dollar terms).
If the coefficient of elasticity is 25,
A) demand is 25%.
B) demand is about to change for the better.
C) demand is very elastic.
D) demand is very inelastic.
E) the law of demand hardly applies.
Why does a new hardcover Stephen King novel have a higher price than the paperback
edition?
A) It costs more to produce.
B) The elasticity of demand differs.
C) The publisher is more greedy when marketing the hardcover edition.
D) The publisher is a price searcher on the hardcover editions and a price taker on the
paperback editions.
Suppose the price of skateboards were to fall. Other things constant, what is the least
likely to occur?
A) More skateboards will be purchased.
B) The demand for skateboards will increase.
C) More helmets will be purchased.
D) The demand for helmets will increase.
Use the economic way of thinking to complete the following statement: An
entrepreneur who owns his own building
A) enjoys the building as a free good.
B) sacrifices rental income he could have been earned on the building.
C) enjoys lower costs than other entrepreneurs who choose to rent buildings from
others.
D) enjoys larger economic profits compared to other entrepreneurs who choose to rent
buildings from others.
Land suitable for growing wheat can also be used to farm dairy cattle. Therefore, from
the farmer’s perspective, an increase in the price of wheat tends to
A) reduce the demand for wheat.
B) increase the demand for dairy cattle.
C) decrease the cost of farming dairy cattle.
D) increase the cost of farming dairy cattle.
A college bookstore offers both new and used Physics 101 textbooks. Vicki pays $120
for a new copy, Darrel pays $85 for a used copy. Who made an economically efficient
choice?
A) Vicki
B) Darrel
C) Both Vicki and Darrel
D) Neither one of themthey could have found a better deal on the Internet.
The price elasticity of demand for a good tends
A) not to vary over time because people adjust to changed circumstances.
B) to be greater over the long run than over a short period of time.
C) to be less over the long run than over a short period of time.
D) to rise when the demand increases.
E) toward unity in the long run.
Money is
A) anything backed by credit cards.
B) any durable good.
C) anything declared by law to be a general medium of exchange.
D) anything people use as a general medium of exchange.
Something is a normal good if
A) the demand for it decreases when its price rises.
B) the demand for it decreases when its price falls.
C) the demand for it increases when income rises.
D) the demand for it increases when income falls.
Does the gross domestic product account measure the market value ofall goods and
services?
A) No, because that would include double-counting.
B) Yes, because the data is readily available.
C) Yes, except for illegally exchanged goods and services.
D) Yes, otherwise the gross domestic product accounting system is not a reliable
indicator of economic activity.
Which of the following would be consistent with the notion of a competitive market
process, but would be inconsistent with the notion of perfect competition?
A) Cost-plus-markup pricing
B) Freedom of entry
C) Price taking behavior
D) Large numbers of buyers and sellers
E) All of the above.
The concept of private property is
A) a legal absolute.
B) a matter of degree.
C) a moral absolute.
D) an invention of economists.
If you withdraw currency from your bank savings account, you are
A) increasing M1, decreasing M2.
B) increasing both M1 and M2.
C) decreasing both M1 and M2.
D) not affecting M1 or M2.
E) increasing M1 but not affecting M2.
Which Fed policy would be part of an expansionary monetary policy?
A) Buying government bonds.
B) Raising the discount rate.
C) Both of the above.
D) None of the above.
Rank the following goods from least to most elastic: gasoline, Unocal gasoline,
gasoline at Murph’s Unocal Station.
A) Gasoline, Unocal gasoline, gasoline at Murph’s Unocal Station
B) Gasoline, gasoline at Murph’s Unocal Station, Unocal gasoline
C) Gasoline at Murph’s Unocal Station, Unocal gasoline, gasoline
D) Unocal gasoline, gasoline at Murph’s Unocal Station, gasoline
E) Unocal gasoline, gasoline, gasoline at Murph’s Unocal Station
The effective coordination of social behavior through voluntary exchange depends
significantly upon
A) clearly defined property rights.
B) such civic virtues as courtesy and tolerance.
C) well-established and generally accepted rules regarding behavior.
D) all of the above.
“Lady Gaga concert sells out. 60,000 tickets sold.” What can an economist conclude
from the above headline?
A) There is a surplus of tickets.
B) The market clears.
C) The quantity supplied is 60,000.
D) The quantity demanded is at least 60,000.
E) Both C and D above.
In the economic way of thinking, money is
A) the root of all evil.
B) what makes the world go round.
C) a general medium of exchange.
D) an institution, which tends to increase transaction costs.
E) the source of scarcity in commercial society.
If Robinson makes 40 purses or 5 wallets per week, and Chamberlin makes 16 purses or
2 wallets per week, then
A) Robinson produces purses more efficiently than Chamberlin.
B) Robinson produces wallets more efficiently than Chamberlin.
C) Chamberlin produces purses more efficiently than Robinson.
D) Chamberlin produces wallets more efficiently than Robinson.
E) none of the above is true.
Suppose an economy has the following characteristics: 100 people in the
noninstitutional population; 40 people employed; 50 people not in the labor force. How
many people are in the economy’s labor force?
A) 40
B) 50
C) 90
D) 100
The economic way of thinking should be thought of as
A) a hypothesis.
B) a parable.
C) a set of conclusions.
D) an approach.
E) a statistical procedure.
The monthly mortgage payments made by a homeowner are
A) always sunk costs because the costs of constructing the house lie entirely in the past.
B) marginal costs if the house is new but sunk costs if it was purchased from a previous
owner.
C) marginal costs of continuing to own and occupy the house.
D) not marginal costs because the house will continue to exist whether or not the
payments are made.
E) sunk costs only if all the bills for earlier construction work have been fully paid.
When summer hurricanes pass through the Gulf of Mexico and force oil drillers to
evacuate their rigs,
A) the supply of oil increases, which therefore increases price.
B) the supply of oil increases, which therefore decreases price.
C) the supply of oil decreases, which therefore increases price.
D) the supply of oil decreases, which therefore decreases price.
If the market clearing price of computer tablets falls from $400 to $300, and the market
clearing output decreases from 5 million to 4 million units,
A) demand decreased and supply remained unchanged.
B) supply increased and demand remained unchanged.
C) demand increased and supply remained unchanged.
D) supply decreased and demand remained unchanged.
GDP is a measure of
A) the total happiness of the nation.
B) the total material well-being of a nation.
C) the total expenditures on newly-produced final goods and services.
D) the difference between the total market value and the total cost of final goods and
services.
Consider the following situation. Tuition at State University is $10,000 per year. Each
of the students listed below paid their own tuition bills. Who among them incurred the
greatest sunk cost?
A) The student who received a two-year associate’s degree
B) The student who took five years to complete the bachelor’s degree
C) The student who took ten years to complete the bachelor’s, master’s, and Ph.D.
degrees
D) The student who dropped out during their first semester
E) The student who dropped out after their third year
If ranchers in Texas fear a sharp drop in cattle prices next year, they will probably
A) bring less cattle to market this year.
B) bring more cattle to market this year.
C) keep supply unchanged now and bring more cattle to market next year.
D) keep supply unchanged now and bring less cattle to market next year.
E) do none of the above.
Which is essential to economic growth, whether in Latin America, sub-Saharan Africa,
Asia, Europe, or North America?
A) Limits on the use of non-renewable resources
B) International aid
C) The rule of law
D) An effective system of trade tariffs and quotas
E) The evolution of a single world currency
Objects in and of themselves have no costs. Lunches are an object, so they presumably
have no cost. Yet we often hear economists say, “There is no such thing as a free lunch.”
Are economists being inconsistent?
A) It is impossible to tell.
B) Yes, if the statement implies lunch actually has a cost.
C) No, if the statement implies the decision to offer lunches free of charge entails the
sacrifice of scarce resources, which could have served other useful purposes.
D) Both B and C are true.