Retired persons travel by bus and automobile more frequently than do business
executives, who more commonly use air travel. An economic explanation for this would
be that
a. business executives have more time to travel.
b. it is more important for retired persons to save time.
c. business executives value their time more highly.
d. retired persons have more money than do business executives.
Which of the following is true?
a. The production possibilities curve indicates that it will be impossible to expand total
output with the passage of time.
b. As long as resources are scarce, output cannot be increased.
c. The size of the economic pie is fixed, and therefore, if one individual has more
income, others must have less.
d. Over time, the output of goods and services can be increased through human
ingenuity and discovery of better ways of doing things.
What should a profit maximizing monopolist do if she is currently producing where MC
< MR?
a. Increase output until MC = MR.
b. Decrease output until MC = MR.
c. Shut down in the long run.
d. Keep producing at this level.
e. Operate only in the short run.
If uncertainty causes commercial banks to increase their holdings of excess reserves,
other things constant, this will
a. reduce the money supply during a period of inflation and increase it during a
recession.
b. reduce the size of the deposit expansion multiplier.
c. increase the size of deposit expansion multiplier.
d. reduce the size of the deposit expansion multiplier during a period of inflation and
increase it during a recession.
A proportional tax is defined as a tax for which the
a. average tax rate rises as income increases.
b. average tax rate falls as income increases.
c. average tax rate remains constant at all levels of income.
d. dollar tax liability of those with higher income is the same as the dollar tax liability
of those with lower income.
Which one of the following would create a demand for a foreign currency and supply of
dollars in the foreign exchange market?
a. the sale of U.S. automobiles to a Mexican consumer
b. the spending by British tourists in the United States
c. the purchase of 1,000 shares of IBM stock by a Latin American investor
d. the purchase of Japanese televisions by an American distributor
DELETE
a. The monopolist undersupplies the market and charges too high a price.
b. The monopolist is a revenue maximizer not a profit maximizer.
c. A monopolist has little incentive to produce efficiently (at a low cost).
d. All of the above are true.
When people become unemployed because of a higher minimum wage, this type of
unemployment is called
a. frictional.
b. structural.
c. cyclical.
d. abnormal.
The dollar value of GDP increased approximately 4 percent during the year, but real
GDP fell 2 percent. Which of the following best explains this data?
a. The real capacity of the economy increased more rapidly than money output.
b. In the international sector, there was a balance of trade deficit of approximately 2
percent of GDP.
c. The inflation rate was approximately 6 percent during the year.
d. The general level of prices rose approximately 2 percent.
American textile manufacturers and union members have often lobbied successfully for
restrictive quotas limiting the importation of textile products. The major impact of these
quotas is
a. a permanent reduction in unemployment in the United States.
b. lower prices for American consumers and an improvement in the quality of textile
products available.
c. higher prices for American consumers, a narrower selection of products, and less
competition in the U.S. textile industry.
d. long-run profits in the U.S. textile industry that are substantially above market
equilibrium.
Which of the following is true?
a. Competitive behavior is present in the market sector but not in the public sector.
b. Because candidates for public office represent a bundle of views, there is more ability
for individuals to make their preferences count on specific issues than in the market
sector.
c. When decisions are made democratically, the economic and political power of all
individuals will be equal unlike in the market sector.
d. The reality of the aggregate consumption-aggregate payment link imposed by
scarcity is present in both the market and public sectors.
Both the crowding-out effect and new classical model indicate that
a. expansionary fiscal policy is a highly effective weapon with which to fight an
economic downturn.
b. restrictive fiscal policy is a highly effective weapon with which to control inflation
caused by excess demand.
c. there are side effects of budget deficits that will substantially, if not entirely, offset
their expansionary impact on aggregate demand.
d. fiscal policy can be used effectively to restrain inflation but it is largely ineffective as
a weapon against recession.
The difficulty in analyzing oligopolistic behavior arises from the
a. degree of government regulation of the market structure.
b. interdependent nature of oligopolistic decisions.
c. large number of firms in the industry.
d. market power of consumers.
Which of the following groups derive the highest rate of return from the taxes they pay
into the Social Security retirement system?
a. blacks
b. whites
c. Hispanics
d. married women working full-time
Figure 11-4
What happens in the economy illustrated in Figure 11-4 if government purchases
increase by the amount necessary to achieve full employment?
a. The AD curve shifts to the right, the SRAS curve shifts to the left, and long-run
equilibrium is achieved.
b. The AD curve shifts to the right, the price level increases, and long-run equilibrium is
achieved.
c. The AD curve shifts to the right, the price level increases, and unemployment
increases.
d. The AD curve shifts to the left, the price level increases, and employment decreases.
e. The SRAS curve shifts to the left, the price level decreases, and long-run equilibrium
is achieved.
The type of unemployment caused by changes in the business cycle is
a. cyclical unemployment.
b. natural unemployment.
c. frictional unemployment.
d. structural unemployment.
A large aircraft manufacturer, like Boeing, may have a cost advantage over a new
smaller manufacturer because
a. of diseconomies of scale.
b. of economies of scale.
c. of diminishing returns to a fixed factor of production.
d. the principal agent problem is generally less severe for larger firms.
Deciding how to make the best use of limited resources to satisfy virtually unlimited
wants is known in economics as
a. economizing behavior.
b. the fallacy of composition.
c. ceteris paribus.
d. the fallacy that good intentions do not guarantee the desired outcome.
Which of the following is most clearly consistent with the basic postulate of economics
regarding the reaction of people to a change in incentives.
a. Farmers produce fewer bushels of wheat in response to an increase in the price of
wheat.
b. People will buy more milk at a price of $2 per gallon than at $1 per gallon.
c. People will buy less gas if the price of gas increases by $.20 per gallon.
d. People will consume more beef if the price increases from $1 to $2 per pound.
When politicians support policies that benefit small interest groups, such as farmers, at
the expense of unorganized, widely dispersed groups, for example, taxpayers or
consumers, this is a reflection of the
a. tragedy of interest.
b. special-interest effect.
c. unorganized interest effect.
d. shortsightedness effect.
The poverty threshold income level is
a. an absolute amount that applies to all families equally (i.e., $20,000 household
earnings for 2010).
b. variable with respect to family size and composition.
c. adjusted once each decade, with the census numbers.
d. all of the above.
Use the figure below to answer the following question(s).
Figure 4-4
Given the demand and supply conditions shown in Figure 4-4, if the government
imposes a price ceiling of a, which of the following would be true?
a. Consumers would want to buy r units.
b. Consumers would want to buy s units.
c. Producers would wish to sell s units.
d. Producers would wish to sell r units.
Figure 17-5
Refer to Figure 17-5. With free trade, this country will
a. import 40 baskets.
b. import 70 baskets.
c. export 35 baskets.
d. export 65 baskets.
Why is it important to use real rather than nominal GDP figures when making
comparisons of output across time periods?
a. The real GDP figures are a better measure of changes in the general level of prices.
b. The real figures will reflect changes in the quantity of output and not changes in the
general level of prices.
c. The real figures will reflect changes in the general level of prices as well as changes
in the quantity of output.
d. The real GDP figures adjust for changes in the level of employment.
Have market forces failed in keeping healthcare costs under control?
a. Yes; in most high-income countries healthcare is a socialized industry and costs have
been kept low.
b. Yes; the government has allowed market forces to determine costs, yet healthcare
spending continues to rise rapidly.
c. No; government regulations have undermined the operation of markets and created
perverse incentives that have led to rising prices and soaring healthcare expenditures.
d. No; market forces have been allowed to determine costs and those costs have
remained low relative to the consumer price index.
When employment discrimination results from the personal prejudices of employers,
economic theory suggests that
a. employers who discriminate will have lower production costs.
b. the wages of employees who are discriminated against will rise.
c. employers who discriminate will have the same production costs as those who do not
discriminate.
d. employers who discriminate will have lower profits.
Given the current structure of health-care finance, which of the following is most likely
to occur when the baby boom generation begins to retire and the elderly population
increases rapidly during the years following 2010?
a. The demand for health-care services will decrease.
b. The prices of health-care services will grow less rapidly than has been the case
during the last three decades.
c. The real (adjusted for inflation) expenditures on Medicare and the taxes to finance
the program will tend to decline.
d. The health-care inflation and spending growth of recent decades will continue or
even accelerate.
The current Social Security system works to the disadvantage of blacks primarily
because the
a. average annual earnings of blacks are generally lower than other groups.
b. average life expectancy of blacks is generally less than other groups.
c. Social Security tax rates imposed on blacks are higher than those imposed on other
groups.
d. Social Security benefit formula is disadvantageous to blacks.
Use the production possibilities data below for Honduras and Nicaragua to answer the
following question(s).
Table 2-2
Refer to Table 2-2. Which of the following is correct?
a. Honduras has the comparative advantage in both goods.
b. Nicaragua has the comparative advantage in oranges.
c. Honduras has the comparative advantage in oranges.
d. It would be impossible for Honduras and Nicaragua to gain from trade.
Higher levels of carbon dioxide may have led, over the past century, to approximately a
a. 1 degree (F) warming of the earth.
b. 10 degree (F) warming of the earth.
c. 1 degree (F) cooling of the earth.
d. 10 degree (F) cooling of the earth.
Which of the following statements about exchange is true?
a. If everyone starts off with the same quantities of each good, it would be impossible to
realize gains from trade.
b. Exchange tends to move each good toward those individuals who value the good
more highly.
c. Exchange always results in one party being made better off and the other being made
worse off.
d. For trade to occur, everyone must start off with the same value of the good that is
traded.
An individual who possesses a specialized skill that is difficult to execute will
a. necessarily receive wages considerably higher than those who lack this skill.
b. receive a wage determined by the number of other persons possessing this skill.
c. receive a high wage only when this skill is in great demand relative to its supply.
d. receive a wage rate that is lower than similarly productive individuals who lack this
skill.
Pork-barrel legislation typically bundles the pet projects of several special interest
groups. Such legislation
a. is frequently enacted, even though the overall benefits to society are less than the
overall costs to society.
b. seldom benefits special interest groups.
c. usually, if successful, helps the majority of taxpayers.
d. seldom passes because social benefits are far smaller than social costs.