An effective price ceiling tends to
A) decrease quantity supplied.
B) Increase quantity demanded.
C) discoordinate the plans of buyers and sellers.
D) do all of the above.
The fees physicians charge patients are most closely related to the physicians’ cost of
A) acquiring a medical degree.
B) earning a target income.
C) maintaining their practice.
D) spending time with patients.
Suppose Ann can produce 8 units of a material good (M) or 4 units of a spiritual good
(S) in a day, while Ben can produce only 3 Ms or 3 Ss in a day. Which statement below
is true?
A) Ann is the low-cost producer of spiritual goods.
B) Ben is the low-cost producer of material goods.
C) Ann is the low-cost producer of material good.
D) Both A and C are true.
“Less demand causes lower prices, and lower prices cause more demand.” The above
statement shows
A) economic theory can be used to prove just about anything.
B) everything depends on everything else.
C) prices fluctuate in a free-market situation.
D) the speaker has confused himself by saying demand in the first half of the statement
when he meant quantity demanded.
E) the speaker has confused himself by saying demand in the second half of the
statement when he meant quantity demanded.
Does a 21 year old who inherited millions of dollars’ worth of corporate stock and who
never works supply anyone with productive services?
A) No, by definition.
B) Only if her wealth is invested in capital equipment that adds to economic growth.
C) Only if others are willing to pay to watch her enjoy life.
D) Yes, if she supplies the services of the resources she owns.
The demand curve illustrates
A) the amount of a good people need.
B) the amount of a good people want, regardless of price.
C) the amount of a good people plan to purchase at given prices.
D) the amount of a good people wish to have, but aren’t willing to pay for.
Typically the largest component of the narrowly-defined money stock in the United
States, known officially as M1, is
A) commercial bank reserves.
B) currency in commercial bank vaults or the hands of the public.
C) demand deposits and savings deposits in commercial banks.
D) checking account deposits.
E) gold, silver, coins, and paper currency.
If business firms do not have to generate revenues sufficient to cover their sunk costs,
does anyone have to pay for mistaken decisions?
A) No, because sunk costs are irrelevant.
B) No, because the past cannot be undone.
C) Only if they value their integrity or credit standing.
D) The entire economy ends up paying.
E) Yes. The people who committed resources to mistaken decisions pay the costs.
Producers typically face increasing marginal costs of production. Thus, their production
possibilities frontier would
A) slope upward.
B) bend inward.
C) bend outward.
D) appear as a straight line.
If people in Pottsville purchase 20 percent more pickles today than they did in
1980,even though the price of pickles has increased 40 percent since 1980, the demand
for pickles in Pottsville
A) does not obey the law of demand.
B) has changed since 1980.
C) is relatively elastic.
D) is relatively inelastic.
E) is unit elastic.
According to your authors, a recessionary “bust” is
A) an inherent part of any market economy.
B) a correction of the mistakes generated during the prior expansionary “boom.”
C) an event that can be successfully recovered through fiscal “stimulus” policies.
D) identified by a rise in real GDP.
What will be the principal and most immediate effect on the supply or demand of raw
cotton grown in the United States if a low-cost process for making cotton cloth
wrinkle-free is developed?
A) Decrease in demand
B) Decrease in supply
C) Increase in demand
D) Increase in supply
Fill in the blank: National income accountants define a(n) ________ good as something
purchased with the goal of reselling it or further processing or remanufacturing it into
another sellable good.
A) scarce
B) intermediate
C) final
D) finished
E) completed
Which sum of money most adequately represents the value someone places on the
works of Shakespeare? The sum they would be willing to pay to
A) purchase a set of Shakespeare’s complete works.
B) purchase a set of Shakespeare’s complete works if they did not already own a set.
C) purchase a set of Shakespeare’s complete works if they did not have ready access to
a set.
D) purchase a set of Shakespeare’s complete works if they had no other way to obtain
access to the complete works.
E) purchase a set of Shakespeare’s complete works if they had no other way to obtain
copies of any of them to read.
Fill in the blank: Firms in a so-called perfectly competitive market would face a(n)
________ demand curve for their product.
A) horizontal
B) upward-sloping
C) vertical
D) downward sloping
Your textbook discusses “dry” counties in the U.S. What is a dry county?
A) A county where rainfall is below the national average
B) A county that experiences no rainfall
C) A county in which it is illegal to produce, purchase and sell alcohol
D) A county in which only dry gin is consumed
If a good is scarce
A) some criteria must be established to determine who gets what.
B) its price is above the market-clearing level.
C) its price is below the market-clearing level.
D) the quantity demanded is greater than the quantity supplied.
E) the supply is less than the demand.
Someone who knows nothing about the relative quality of a $2 toothbrush and a $7
toothbrush, both available for sale, but chooses to buy the more expensive one, is
probably
A) displaying an inelastic demand for toothbrushes.
B) judging quality by price.
C) violating the law of demand.
D) wealthy enough not to care about prices.
The price paid by a tenant to rent an apartment most closely reflects the cost to the
A) landlord of constructing (or purchasing), maintaining, and operating the apartment.
B) landlord of not renting to someone else.
C) society of the opportunities thereby forgone.
D) tenant of finding an alternative place to live.
From which of the following goods is it most difficult to exclude free riders?
A) A symphony orchestra concert
B) An interstate highway
C) An outdoor fireworks display
D) Postal service
Fill in the blank: By 2011, U.S. GDP was approximately ________ times greater than it
had been in 1820, while GDP in India was approximately ________ times greater than
it had been in 1820.
A) 50; 40
B) 775; 10
C) 200; 85
D) 315; 700
E) 5; 10
How does the textbook distinguish between coercion and persuasion? Coercion induces
cooperation by
A) making only a majority better off, persuasion by making everyone better off.
B) making nearly everyone better off, persuasion by making only a few people better
off.
C) threatening to reduce people’s options, persuasion by promising to increase their
options.
D) using force, persuasion by using rational argument.
When technology advances, supply
A) increases, which is represented by a leftward shift in the supply curve.
B) increases, which is represented by a rightward shift in the supply curve.
C) decreases, which is represented by a rightward shift in the supply curve.
D) decreases, which is represented by a leftward shift in the supply curve.
E) remains the same; only quantity supplied changes.
Which would be an example of a price ceiling?
A) rent controls.
B) a legally-specified maximum interest rate on student loans.
C) government-mandated lower prices and fees charged by physicians.
D) all of the above.
E) none of the above.
Fill in the blank: Producers will compare ________ benefits to ________ costs when
considering how much output to produce.
A) average; additional
B) additional; additional
C) additional; average
D) average; average
If automobile commuters are asked in a survey whether their city needs additional
freeways, the answers will reveal
A) almost nothing about the demand for freeways.
B) only one portion of the demand for freeways.
C) the demand for freeways but from a biased group.
D) the demand for freeways but not its elasticity.
E) the demand for freeways without regard to the need for them.
Consider the following simplified sequence of exchanges. A logger sells an oak tree to a
sawmill owner for $60. The sawmill mills it, and sells the boards to a woodworker for
$80. The woodworker makes an oak bookcase out of the boards, and sells it to a retailer
for $300. The retailer then sells you the bookcase for $250. As a result, GDP increases
by
A) $50.
B) $250.
C) $550
D) $690.
E) none of the above.
When law-makers impose ceilings on the amount of annual interest charged by lenders,
their actions have the effect of
A) excluding certain borrowers from the legally regulated credit market.
B) expanding retail sales.
C) increasing the number of loans made.
D) lowering interest rates for most borrowers.
E) redistributing income from creditors to debtors.
The textbook presents the movement of rush-hour traffic as an example of social
A) chaos.
B) competition.
C) conflict.
D) confusion.
E) cooperation.
Recall from Chapter 5: interest rates in the free market (without artificial lowering by
the Fed) are largely determined by
A) Congress.
B) arbitrary bank lending practices.
C) household saving and consumption preferences.
D) tax revenues and lobbying demands.
What will be the principal and most immediate effect on the supply or demand of raw
cotton grown in the United States if beef demand rises and ranchers are induced to
reduce their flocks of sheep (for wool) in order to grow more cattle?
A) Decrease in demand.
B) Decrease in supply.
C) Increase in demand.
D) Increase in supply
Other things constant, which of the following would tend to increase the demand for
Disney World vacations?
A) A rise in the price of Hawaiian vacations (a substitute for Disney World)
B) A rise in income, if Disney World vacationing is a normal good
C) A fall in the price of air travel (a complementary good)
D) New information that Disney World will raise its prices once the summer season is
over
E) All of the above.
The more successful a seller is in inducing buyers to pay the maximum price they
would be willing to pay rather than do without the good, the
A) closer will the seller’s marginal revenue curve come to the demand curve.
B) greater will be the demand for the good.
C) more elastic will be the demand for the good.
D) more inelastic will be the demand for the good.