Which supports the economist’s claim that buyers don’t compete against sellers?
A) Diners would rather have more restaurants to choose among.
B) Music buyers prefer having access to internet music stores compared to only the
local music shop in town.
C) Car buyers prefer several dealerships in the region compared to only one.
D) Homebuyers prefer a larger selection of homes to a smaller one.
E) All of the above.
Jack trades his basketball for Jim’s baseball glove. This simple trade is
A) unproductive, because nothing new has been produced.
B) productive, because Jack and Jim expect to be better off by trading.
C) costless, because no money was involved in the deal.
D) a cost to the manufacturer because neither Jack nor Jim bought a new ball or glove.
E) not good for the overall economy, for reasons A and D above.
Suppose the nominal interest rate is 1% and the rate of inflation is 3%. The real interest
rate is therefore
A) -2%.
B) 2%.
C) 4%.
D) 5%.
For many years the United States was able to retain a system for drafting young men
into the armed forces because
A) the public feared the menace of Communism.
B) patriotism had declined and so volunteers were not available.
C) young men were not willing to risk their lives.
D) many people adversely affected found it more to their advantage to use some
personal escape route than to attack the system directly.
Fill in the blank: When a chooser asks herself “Is it worth it?,” she is trying to evaluate
the ________ of a particular project or plan of action.
A) technical efficiency
B) objective efficiency
C) economic efficiency
D) engineering efficiency
Which of the following is included in the M1 money supply?
A) Bonds
B) Credit cards
C) Gold
D) Deposits in checking accounts
E) All of the above.
Large and long-continued increases in the demand for electricity will tend to result in
A) a higher cost of generating electricity.
B) a higher price for electricity but no increase in the cost of generating it.
C) a reduction in the quantity of electricity demanded as a consequence of higher
prices.
D) an increase in the quantity of electricity demanded and hence a decrease in its price.
What’s another term for “positive externality”?
A) Negative externality
B) Spillover cost
C) Spillover benefit
D) The “pay-as-you-go” principle
Somebody steals silverware from the dinner table at a nice restaurant. You question
them and they justify their behavior by saying, “The restaurant management knows
customers steal”they raise the price of their meals and drinks to cover the additional
costs of stolen items. Since they pass on the higher costs to all of us who haven’t stolen,
I think it is only fair I finally get my share of the silverware.” The economist would
view the above statement as:
A) incorrect, because even though people stole silverware, it doesn’t make it any more
profitable to raise prices.
B) correct, because what’s fair is fair.
C) correct, because economics champions such selfish behavior.
D) an ethical problem, and it has nothing to do with economics.
Does the experience of World War II demonstrate that government budget deficits and
surpluses can be used to stabilize aggregate demand?
A) No, because the deficits run during the 1930s did not end the recession.
B) No, because the fact that deficits or surpluses can alter aggregate demand does not
prove they can stabilize it.
C) Yes, because nominal GDP increased by more than the amount of the deficit in each
wartime year.
D) Yes, because World War II demonstrated the multiplier effect of deficits.
The Federal Reserve uses open market operations rather than changes in legal reserve
requirements as its principal tool of monetary management because changes in legal
reserve requirements
A) can be easily evaded by commercial banks.
B) must secure Congressional approval.
C) would be excessively powerful and disruptive.
D) would be less profitable for the Federal Reserve Banks.
If the government keeps the price of bread low through subsidies, and farmers
consequently buy bread to feed to their pigs, we can infer that
A) pigs are more valuable than people.
B) pork is more valuable than people.
C) the farmers find it efficient to feed bread to pigs.
D) the market system is not working.
E) waste is occurring because marginal benefit is less than marginal cost.
The concept of demand as used in economic theory expresses the relationship between
the quantity of a good people will want to purchase and
A) the price of complementary goods.
B) the price of that good.
C) the supply of substitute goods.
D) the supply of that good.
E) their welfare overall.
In the economic way of thinking, private property rights provide people with
A) rules of the game.
B) dependable information.
C) incentives.
D) none of the above.
E) all of the above.
How many people does it take to make an ordinary no. 2 pencil?
A) One person
B) Between one and five people
C) Less than one hundred people
D) Millions of people
Costs that are incurred when people engage in a trade
A) are a waste of resources because they do not create benefits of equal or greater
value.
B) can be eliminated by substituting government regulation for voluntary exchange.
C) reduce the amount of exchange that occurs.
D) rise as the number of middlemen increases.
Typically, the more time suppliers have to adjust to changing market conditions,
A) the more elastic the supply curve.
B) the more elastic the demand curve.
C) the less elastic the supply curve.
D) the less elastic the demand curve.
If the Fed purchases government bonds, it
A) decreases bank reserves and the supply of money.
B) decreases bank reserves but increases the supply of money.
C) increases bank reserves and the supply of money.
D) increases bank reserves but decreases the supply of money.
What helps to explain the remarkable 7.3% growth rate in South Korea between 1960
and 2011?
A) The education of South Korean women
B) A radical reduction in foreign imports and a maximization of South Korean exports
C) Huge foreign aid from the World Bank
D) All of the above.
E) None of the above.
How does the social problem of positive externalities differ from the problem created
by negative externalities?
A) Positive externalities can create free-rider problems; negative externalities do not.
B) Positive externalities are created by altruistic people; negative externalities are not.
C) Negative externalities can create free-rider problems; positive externalities do not.
D) Negative externalities are created by selfish people; positive externalities are not.
E) Trick question: neither positive nor negative externalities create a social problem.
Roughly how many times has the U.S. experienced a budget surplus since 1960?
A) 0
B) 5
C) 10
D) 20
E) 30
According to the 1974 Constitution of the former Yugoslavia, nobody in Yugoslavia
owns resources. Being a socialist country, the constitution claimed resources were
owned by “society” as a whole. According to the economic way of thinking,
A) their economic problem would be solved.
B) resources would finally be used efficiently, because the profit motive would be
destroyed.
C) people would use Yugoslavia’s resources wastefully because they themselves
wouldn’t have to pay the opportunity cost.
D) the central planners would know how to calculate the true values and costs of
resource use.
Alcohol prohibition in the United States
A) abolished the production of liquor.
B) abolished the consumption of liquor.
C) abolished the distribution of liquor.
D) accomplished all of the above.
E) accomplished none of the above.
Fill in the blanks: If you are informed copper prices will fall in the next few months,
you should ________ copper futures. But if that information becomes common
knowledge, others will do the same thing, and the price of copper futures will
________.
A) buy; rise
B) sell; rise
C) buy; fall
D) sell; fall
Professional football players receive, on average, higher wages than professional soccer
players in the United States because
A) football is a more dangerous sport.
B) professional football teams can draw huge crowds and charge high prices for tickets.
C) professional football teams use a draft system.
D) the soccer season is longer and so players will be unemployed for a smaller portion
of the year.
Which good most likely has the lowest elasticity of demand?
A) Macintosh computers
B) Toothpicks
C) Chemotherapy treatment
D) Sirloin steaks
E) VCR players
A price searcher faces the following demand function: At $7, 6, 5, 4, and $3, the
quantity demanded is 300, 400, 500, 600, and 700 units respectively. If the firm’s
marginal cost is $100 at any level of output, it would maximize net revenues by
A) producing 400 units and charging $6.
B) producing 500 units and charging $5.
C) producing 600 units and charging $4.
D) producing 700 units and charging $3.]
The ability of the federal government to regulate the distribution of income among
families and individuals is
A) enormous, as shown by the redistribution that has occurred from the rich to the poor
since World War II.
B) largely limited to what can be accomplished through revisions in the rules of the
game.
C) unlimited because government is sovereign.
D) virtually unlimited because few people would be willing to emigrate merely in order
to escape taxation.
Roughly what is the required reserve ratio within the U.S. banking system?
A) Less than 10 percent.
B) 15%
C) 25%
D) 50%
E) 90%
While you and your roommate are eating your nightly Hamburger Helper meal, your
roommate says “I’ll never eat Hamburger Helper again once I graduate and start making
some real money!” In your roommate’s eyes, Hamburger Helper is currently
A) a normal good.
B) an inferior good.
C) a bad.
D) a waste of his money.
The 1920s was a period of alcohol prohibition in the United States. During the 1920s,
A) the purchase and sale of alcohol was illegal.
B) people coordinated their alcohol production and consumption activities in illegal,
underground markets.
C) the supply of alcohol became quite inelastic.
D) all of the above were true.
E) none of the above were true.
The purpose of the “draft” developed by owners’ associations in many professional
sports is to
A) assure all players at least a minimum salary.
B) control competition among owners for the services of players.
C) control competition among players.
D) control competition between players and owners.
E) keep all teams at roughly equal competitive levels.
We observe a shortage in real life when we see
A) nonmoney costs of acquiring a good increasing.
B) people unable to purchase as much as their situation requires.
C) prices falling.
D) the amount purchased is less than the amount supplied.
A purchase of government bonds from the public by the Federal Reserve Banks
A) adds to the money stock.
B) has the effect of pulling wealth and therefore money out of the private sector.
C) increases the money stock directly and simultaneously increases commercial bank
reserves.
D) puts additional reserves into the commercial banking system.
E) reduces the wealth of the public.