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Which of these is one of the four principles of individual choice?
A) Resources are usually renewable.
B) The real cost of something is impossible to measure.
C) People take advantage of opportunities to make themselves better off only if there is
no risk involved.
D) Resources are scarce.
(Table: Coffee and Salmon Production Possibilities II) Look at the table Coffee and
Salmon Production Possibilities II. This table shows the maximum amounts of coffee
and salmon, both measured in pounds, that Brazil and Alaska can produce if they just
produce one good. Brazil has an absolute advantage in producing:
A) coffee only.
B) salmon only.
C) both coffee and salmon.
D) neither coffee nor salmon.
Figure: The Demand Curve
Consider the market for strawberries. Which of the following statements most likely
applies to the strawberry market?
A) The income elasticity of demand for strawberries is negative.
B) The price elasticity of supply of strawberries is greater in the short run than in the
long run.
C) The price elasticity of demand for strawberries is lower in the long run than in the
short run.
D) The cross-price elasticity of demand for strawberries with respect to the price of
raspberries is positive.
The process observed when an economy's production possibility frontier shifts outward
is:
A) comparative advantage.
B) economic growth.
C) full employment.
D) specialization.
Economists are generally in support of:
A) government restrictions on trade.
B) free international trade.
C) tariffs to restrict trade.
D) subsidizing exports.
One day, Martha wakes up and in frustration yells, "Decisions, decisions, decisions!
Why do I have to make decisions about everything?" Martha's frustrations stem from
the fact that:
A) like all economic beings, she faces constraints and cannot have everything she
wants.
B) she doesn't realize she can have everything she wants.
C) she is the only one who faces constraints in life.
D) she really doesn't want anything.
Figure: The Production Possibilities for Two Countries
(Figure: The Production Possibilities for Two Countries) Look at the figure The
Production Possibilities for Two Countries. Indonesia has an absolute advantage in
producing:
A) radios.
B) tires.
C) both radios and tires.
D) neither radios nor tires.
(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social
benefit and cost of various amounts of pollution from a coal mine. At the efficient
quantity of pollution the marginal social cost of pollution is _____ the marginal social
benefit of pollution.
A) greater than
B) equal to
C) less than
D) unrelated to
Table: Pumpkin Market
(Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for
pumpkins. Their willingness to pay for each pumpkin is shown in the table Pumpkin
Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also
shown. The equilibrium price for pumpkins is:
A) $12.
B) $10.
C) $8.
D) $6.
Tonya's budget constraint for gasoline (G) and clothes (C) each month can be expressed
with the equation G = 100 " 2C. If the price of clothing is $10, which of the following
consumption bundles is NOT feasible for Tonya?
A) 50 units of clothing and 100 units of gasoline
B) 50 units of clothing and 0 units of gasoline
C) 0 units of clothing and 100 units of gasoline
D) 10 units of clothing and 5 units of gasoline
(Table: Tutoring) Look at the table Tutoring. Sigmund faces:
A) increasing marginal benefit.
B) decreasing marginal benefit.
C) increasing marginal cost.
D) constant marginal cost.
(Table: The Demand for Chocolate-Covered Peanuts) Look at the table The Demand for
Chocolate-Covered Peanuts. Barbara demands 20 bags of chocolate-covered peanuts
when the price of each bag is:
A) $0.90.
B) $0.80.
C) $0.70.
D) $0.60.
According to the marginal productivity theory of income distribution, every factor of
production is paid _____ the equilibrium value of its _____ product.
A) just; marginal
B) more than; marginal
C) less than; marginal
D) just; average
(Table: Bongos and Frisbees) Look at the table Bongos and Frisbees. Bill and Mickey
make bongos and Frisbees. Who has the comparative advantage in producing Frisbees?
A) Bill
B) Mickey
C) both
D) neither
OPEC is a(n) _____ cartel that includes _____ national governments.
A) illegal; 12
B) legal; 12
C) illegal; 11
D) legal; 8
Solutions to moral hazard include:
A) offering salespeople in stores a straight salary rather than a commission on sales.
B) setting up many stores and restaurants that are part of a national chain as franchises,
with the owner undertaking quite a lot of risk.
C) allowing property owners to overinsure their buildings.
D) diversification.
Figure: The Demand for e-Books
(Figure: The Demand for e-Books) Look at the figure The Demand for e-Books. The
demand schedule _____ when the price increases from $4 to $6 _____ when it
increases from $6 to $8.
A) is less elastic; than
B) is more elastic; than
C) has the same elasticity;; as
D) is unit-elastic; and
In economics, the short run is defined as:
A) less than 1 year.
B) less than 6 months.
C) the period in which some inputs are considered to be fixed in quantity.
D) the period in which some inputs are fixed, but it cannot exceed 1 year.
(Table: Total Cost Data) Look at the table Total Cost Data. What is the total variable
cost for this bicycle firm when the firm produces 5 bicycles?
A) $50
B) $240
C) $60
D) $190
If two variables are positively related:
A) as one goes up in value, the other must go up in value, too.
B) as one goes up in value, the other must go down in value.
C) there is always a trade-off between the two.
D) one variable is always the reciprocal of the other.
Given uncertainty, individuals attempt to maximize their:
A) adverse selection.
B) expected utility.
C) risk aversion.
D) consumption.
Abdul spends all of his income on food (F) and shelter (S). His budget line is given by
the equation 5F + 20S = 100. Which of the following consumption bundles is part of his
consumption possibilities?
A) 8 units of F and 3 units of S
B) 14 units of F and 2 units of S
C) 0 units of F and 6 units of S
D) 20 units of F and 15 units of S
The larger the output, the more variable input required to produce additional units.
Called the _____ effect, this leads to a ______ average _____ cost.
A) spreading; lower; fixed
B) spreading; higher; fixed
C) diminishing returns; lower; variable
D) diminishing returns; higher; variable
If all of the opportunities to make someone better off (without making someone else
worse off) have been exploited, an economy is:
A) equitable.
B) inefficient.
C) marginally optimal.
D) efficient.
Figure: The Optimal Choice of CDs and Movies
(Figure: The Optimal Choice of CDs and Movies) Look at the figure The Optimal
Choice of CDs and Movies. Nina likes to spend her income on new CDs (CD) and
tickets to see movies (M). The graph shows Nina's budget line and the optimal
consumption bundle E. What is the price of movies in terms of CDs at point E?
A) 0.33
B) 1.33
C) MUCD / MUM
D) PCD / PM
After a great holiday season when it opened its doors for business regularly at 6 A.M., a
local retail store decides to continue to open at 6 A.M., even though many customers
plan on arriving later to do their shopping. Such a plan by the retail store is:
A) efficient, since it worked previously.
B) inefficient, since most customers will revert to their normal shopping behavior after
the holidays are over.
C) efficient, since it means that workers do not have to change their hours.
D) most likely to lead to lower operating costs for the store.
During the past 25 years the degree of income inequality in the United States has been
rising. Which of the following is NOT a possible reason for this phenomenon?
A) technological progress that has increased the demand for high-skilled workers
relative to the demand for low-skilled workers
B) increased imports of labor-intensive products
C) increased immigration
D) higher divorce rates
Which of the following is sold in the product market?
A) footballs
B) labor
C) physical capital
D) human capital
The World Trade Organization:
A) oversees trade agreements.
B) is an example of a trade agreement.
C) includes all nations.
D) was established before World War II.
