If the market clearing price of computer tablets falls from $400 to $300, and the market
clearing output increases from 5 million to 7 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.
Suppose a 25% off sale on post-holiday merchandise creates a 50% increase in
post-holiday sales. The price elasticity of demand is:
A) 2.0.
B) .75.
C) .50.
D) .25.
E) none of the above.
Suppose Maria can make 12 pizzas or 4 lasagnas every Saturday afternoon, while Gina
can make 10 pizzas or 2 lasagnas every Saturday afternoon. Which statement is true?
A) Maria is the most efficient producer of both pizza and lasagna.
B) Gina is the least efficient producer of both pizza and lasagna.
C) It costs Maria 3 pizzas to produce 1 lasagna.
D) It costs Gina 5 lasagnas to produce 1 pizza.
E) All of the above are true.
In economics, the main difference between market and government stems from
differences in
A) attitude.
B) prevailing property rights.
C) competition and cooperation.
D) men and women.
E) the majority and the minority.
A truly voluntary exchange
A) has nothing to do with values, only with things.
B) is always an exchange of equal values.
C) is not an exchange of equal values.
D) is usually an exchange of equal values.
Which of the following is not a component of the M2 money supply?
A) Cash in circulation
B) Gold owned by the federal authorities
C) Deposits in checking accounts
D) Any issued traveler’s checks
E) All of the above.
How would economists interpret the following facts? Fact: Over the past two decades
the relative price of new textbooks has risen dramatically. Another fact: Record
numbers of new textbooks have been purchased by students over the past two decades.
A) The law of demand has been violated.
B) The law of supply has been violated.
C) The supply and demand process in new textbooks hasn’t worked correctly.
D) The demand for textbooks has increased.
E) The facts aren’t true.
People who attend college for four years in order to equip themselves to earn higher
incomes in later life are
A) discounting the future at a higher rate than do people who don’t attend college.
B) giving up future satisfaction for the sake of current satisfaction.
C) ignoring the fact that future income has less value than current income.
D) investing in human capital.
E) revealing a high rate of time preference.
Maxine and Deborah both got hair extensions, costing each of them $300. Maxine’s hair
was done perfectly. She enjoyed the new look. The job on Deborah’s hair was all
botched up. The hairdresser apologized for her mistake, took the extensions out, and
refunded all of Deborah’s money. Which of the following, in dollar terms, is true?
A) Deborah did not incur a sunk cost.
B) Maxine did not incur a sunk cost.
C) Both Maxine and Deborah each incurred a $300 sunk cost.
D) Only the hairdresser incurred a sunk cost.
Fill in the blanks: A system of universal medical insurance would tend to ________ the
________ for medical services.
A) increase; elasticity of demand
B) decrease; elasticity of demand
C) decrease; quantity demanded
D) decrease; non-monetary payments
Will a large increase in the demand for a good cause a large increase in its price?
A) No; an increased demand is associated with lower prices.
B) Not if the demand for the good is highly elastic.
C) Not if the demand for the good is highly inelastic.
D) Not if the supply of the good is highly elastic.
E) Not if the supply of the good is highly inelastic.
Which of the following is an important difference between police protection and food
and explains why one is commonly provided by government while the other is not?
A) Food can easily be withheld from people who don’t pay for it.
B) Food is not a traditional concern of government.
C) Food is too vital to be entrusted to government.
D) Food producers form a powerful political lobby.
E) Food provided through government would be inefficient.
Money prices are an extremely effective device for promoting social cooperation
because
A) most people want money more than they want anything else.
B) people are basically selfish.
C) scarcity can be eliminated through appropriate changes in money prices.
D) they don’t change rapidly when circumstances change.
E) they help to clarify the options available to people.
If you travel through the western United States in the summer, you are much more
likely to encounter a shortage of camping spaces than a shortage of motel rooms
because
A) camping sites are usually less expensive than motel rooms.
B) motels are more often privately owned.
C) the government has not provided as many camping spaces as the public wants.
D) there are more motel rooms than camping spaces.
E) vacationers in the summer display a greater demand for outdoor than for indoor
sleeping sites.
Commercial society provides incentives to specialize by
A) following one’s comparative disadvantage.
B) pursuing one’s comparative advantage.
C) producing somewhere outside the production possibilities frontier.
D) producing a narrowly defined good without an interest in the wealth it generates to
the producer.
Hardcover books usually cost much more to purchase than do otherwise identical
paperback editions of the same book because
A) hardcover books typically last longer.
B) the demand for hardcover books is typically less elastic than the demand for
paperback books at the same price.
C) the marginal cost of producing hardcover books typically rises as output increases.
D) the marginal cost of producing paperback books typically falls as output increases.
E) the mergers in the book-publishing industry have encouraged price discrimination.
What will be the principal and most immediate effect on the supply or demand for raw
cotton grown in the United States if an extensive, efficient cotton-growing industry in
Africa develops?
A) Decrease in demand
B) Decrease in supply
C) Increase in demand
D) Increase in supply
The amount of unemployment that policymakers should not worry about because it
constitutes no social problem is
A) 2 percent of the labor force.
B) 4 percent of the labor force.
C) not any single amount that can be clearly measured.
D) the amount that can exist without causing a recession.
E) the amount that is due to people’s choices among available alternatives.
The principal reason we no longer see huge herds of bison (popularly known as
“buffalo”) on the American prairies is because
A) the bison has been declared an endangered species.
B) the bison have not been declared an endangered species.
C) the bison were slaughtered in the 19th century in a wasteful manner.
D) the bison were slaughtered in the 19th century in response to financial incentives.
E) the people who own prairie land usually don’t want bison on their property.
Traditional bank notes promised to pay the bearer a specific quantity of
A) cigarettes.
B) consumer goods and services.
C) metallic money.
D) durable goods.
E) interest.
The textbook asserts that banks create money themselves. How?
A) Banks have their own printing presses, which is permitted by the Fed.
B) Banks are allowed to reach well into their required reserves as long as they can
demonstrate that it would be profitable to do so.
C) Banks, when lending out their excess reserves, unleash a process that can increase
the money supply through the deposit expansion multiplier.
D) For all of the above reasons.
Consumers are often somewhat insensitive to changes in the price of table salt because
A) the proportion of their budget spent on salt is very low.
B) there are a considerable number of good substitutes for salt, in their opinion.
C) they are not used to changes in the price of salt.
D) salt is a necessity for a complete dining experience.
E) all of the above reasons.
Generally speaking, resources are used more wastefully and carelessly when
A) users obtain the resources through the market process.
B) users do not have to pay the opportunity cost for using resources.
C) users use resources to only advance the projects they are interested in.
D) users privately own resources.
What best determines the price a price taker will charge?
A) Demand
B) Revenue
C) Cost
D) Reputation
When people say, “government officials act on the basis of the property rights which
they perceive,” they mean
A) government officials are inherently conservative.
B) government officials do not have to be concerned about information being scarce.
C) government officials make decisions based on the expected consequences to
themselves.
D) government officials will ordinarily not confiscate property without due process of
law.
Economists distinguish a “normal” good from an “inferior” good by focusing on
A) how a change in income effects the demand for that good.
B) the good’s quality.
C) the good’s durability.
D) the good’s desirability.
E) all of the above.
According to economists, national defense can be supported through taxation because
A) national security generates no benefits for which any one would be willing to pay.
B) people are insufficiently patriotic.
C) taxation makes everyone pay in proportion to the benefits they receive.
D) the people who refuse to pay the cost cannot easily be excluded from the benefits.
E) we must choose between coercion through taxation and coercion through a draft.
Which of the following is a necessary feature of the notion of the market as a
competitive process and the model of perfect competition?
A) Freedom of entry
B) Price taking behavior
C) Perfect and complete information
D) All firms produce identical products.
E) All of the above.
In national income accounting, a “final good” is
A) a finished product.
B) something purchased with the goal of further resale.
C) something purchased by an ultimate user in the household, business, or government
sector.
D) something that is impossible to determine.
The high price of agricultural land is basically
A) the cause of high food prices.
B) the result of high food prices.
C) unrelated to food prices because processing costs dominate food prices.
D) unrelated to food prices because there is no opportunity cost of producing land.
Guiseppe Vibrato was so sick of his job that he quit, and now spends his days at the
tavern, saying he never wants to work again. Guiseppe is
A) a discouraged worker.
B) a discouraged drinker.
C) unemployed.
D) neither employed nor unemployed.
Why do landlords tend to discriminate against a person’s race, religion, or age more
when rent controls are imposed?
A) Landlords are naturally racist and bigoted.
B) Only minority groups will take an interest in apartments with controlled rents.
C) Economists will encourage landlords to discriminate.
D) Rent controls lower the personal costs of discriminatory behavior among landlords.
E) For all of the above reasons.