According to the authors of your text, the phrase “property rights” can be substituted
with the phrase
A) “property wrongs.”
B) “what people think they can get away with.”
C) “animal rights.”
D) “rugged individualism.”
E) “free market capitalism.”
Specialization and exchange develop under conditions of
A) massive ignorance.
B) a total conflict of interests.
C) coercion and exploitation.
D) none of the above.
A particular good is not scarce when
A) everyone is able to purchase as much of the good as they wish to purchase.
B) it is available in large enough quantities to meet everyone’s needs.
C) no one must sacrifice anything to obtain more of the good.
D) there is a surplus of the good.
Market clearing means
A) quantity demanded exceeds quantity supplied.
B) quantity demanded equals quantity supplied.
C) quantity demanded is less than quantity supplied.
D) quantity demanded and quantity supplied both equal zero.
In the economic way of thinking, the costs of a recession are predominantly
A) the costs of using money.
B) the excessive costs of advertising in the face of persistent, falling demand.
C) the costs of disappointed expectations and discoordination of plans.
D) the costs associated with high nominal interest rates.
The term externalities refers to
A) consequences of action not taken into account in making decisions.
B) social interactions associated with urban-industrial economies.
C) the superficial consequences of decisions.
D) the visible consequences of decisions.
In the economy of Euphoria, 400 people have jobs, 200 people are not working but are
searching for work, and 100 people don’t work and don’t seek work. The unemployment
rate is
A) 20 percent.
B) 25 percent.
C) 33 percent.
D) 50 percent.
E) none of the above.
The market process will likely fail to fully coordinate supply and demand if transaction
costs are
A) non-existent.
B) significant.
C) locally perverse.
D) inconsequential.
In the United States the system most generally used for assigning tasks and distributing
benefits
A) employs continuing bids and offers among individuals.
B) operates without the use of money prices.
C) presupposes shifting and uncertain property rights or “rules of the game.”
D) takes the place of the supply-and-demand process.
E) was designed by the authors of the Federal Constitution.
Suppose Amber Crombie and her husband Fitch spend $1400 this year on healthcare
and medicines for the chronic nasal congestion they suffer living next to smelly Lake
Lillypad. How does their expenditure affect GDP?
A) It doesn’t affect GDP at all.
B) GDP would decrease by $1400.
C) GDP would increase by $1400.
D) GDP would increase by $1400 only if the healthcare and medicines cured their
chronic nasal congestion; if it remains uncured, then GDP would remain unchanged.
A sunk cost has no effect on supply because it
A) applies to all suppliers.
B) can be passed on to consumers.
C) cannot be avoided by not supplying.
D) cannot be passed on to consumers.
E) did not have to be incurred in order for the good to be supplied.
According to your textbook, a “free” good is
A) a good paid for by someone else.
B) a stolen good.
C) a good given away by charities.
D) a good obtained without any sacrifice whatsoever.
According to your text, the “market economy” can best be understood as
A) an institution created by British merchants around the time of Smith’s Wealth of
Nations.
B) an extremely complex institution that emerged out of individuals specializing and
trading among each other.
C) an institution unique to America.
D) an institution that could not exist in the absence of regulation.
Efficiency is best understood as a relationship between
A) ends and means.
B) energy created and energy destroyed.
C) energy output and energy input.
D) pleasure and pain.
Which amount is not included in gross domestic product?
A) Payments to a physician for treatment of a respiratory condition caused by air
pollution
B) The purchase price of a used car bought from a friend
C) Wages of government employees
D) Wages of people who clean up toxic chemical spills
E) Wages of people who sell used cars
Which of these persons is not investing in human capital?
A) A business student studying accounting
B) A teenager who stays with a job she dislikes in order to obtain a favorable
recommendation from the employer when she leaves
C) A professional boxer lifting weights
D) A student purchasing shares of stock in a computer software manufacturer
E) An aspiring opera singer taking courses in conversational Italian
Suppose Spam is an inferior good. If the U.S. economy is growing strong, and
demanders’ incomes were to rise, which of the following would tend to occur?
A) Spam sales would increase.
B) Spam demand would decrease.
C) The price of Spam would increase.
D) Both A and C above.
E) Both B and C above.
The deposit expansion multiplier would decrease if the Fed were to
A) raise the required reserve ratio.
B) lower the required reserve ratio.
C) lower the discount rate.
D) buy bonds.
Does the proprietor of a grocery store who owns the building in which his business is
located have lower costs than a grocery store proprietor who must pay rent for the
building in which his store is located?
A) No, because no two businesses will be exactly the same.
B) No, because the owner-proprietor loses the rent he could otherwise have been paid.
C) Yes, because he can afford to set lower percentage markups.
D) Yes, if the cost saving is not offset by higher expenses in other areas.
The assertion that income accrues to people as a consequence of interactions among
suppliers and demanders
A) amounts to an endorsement of the existing system.
B) amounts to an endorsement of the pattern of income distribution.
C) ignores the fact that the interactions are often unfair.
D) offers a way of approaching the issue of income distribution.
Suppose firms in Hong Kong can produce 40,000 plastic dolls or 80,000 squirt guns
each week, while firms in Taiwan can produce 40,000 plastic dolls or 40,000 squirt
guns each week. Therefore
A) People in Hong Kong sacrifice two dolls for every squirt gun produced.
B) People in Taiwan sacrifice two dolls for every squirt gun produced.
C) People in Hong Kong sacrifice 2 squirt guns for every doll produced.
D) none of the above are true.
If the local airport decides to pay monetary compensation to the people on whom the
airport’s operation has imposed costs, it should compensate the people who
A) currently live nearby.
B) currently live nearby and are also tenants.
C) currently live nearby and also own the residences in which they live.
D) owned nearby residences when the airport was built.
E) owned nearby residences when the airport was built and who have not been able to
sell their residences since the construction of the airport.
Pick the true statement, regarding the notion of competition as a process versus the
model of perfect competition.
A) The process notion allows for full and complete information; perfect competition
doesn’t.
B) The process notion allows for price taking activity; perfect competition doesn’t.
C) The process notion allows for identical products; perfect competition doesn’t.
D) The process notion allows for a small number of participants; perfect competition
doesn’t.
E) All of the above are true.
Failing to be fully informed may be efficient if information
A) is free.
B) is scarce.
C) is subject to increasing returns.
D) has no opportunity cost of production.
Economic theory predicts
A) balanced budgets are impossible to achieve through a democratic political process.
B) budget surpluses are impossible to achieve through a democratic political process.
C) budget deficits are likely to occur through a democratic political process.
D) the absolute size of the budget will be systematically reduced in the long run through
democratic political processes.
Suppose a terrorist group bombs a federal building, causing $ 1 million in expenditures
on new construction and healthcare for the victims. The new expenditures
A) would be subtracted from the gross domestic product account.
B) would be added to the gross domestic product account.
C) would be added to the gross domestic product account and subtracted from the
national income account.
D) would impact GDP in none of the above ways.
Fill in the blank: By 2011, GDP in the United States was approximately ________
times greater than it had been in 1820.
A) 100
B) 225
C) 550
D) 775
E) 900
Which aggregate measure is used to determine whether or not a country is experiencing
a recession?
A) Nominal GDP
B) Nominal interest rate
C) Real GDP
D) Real interest rate
E) Gross business inventory investment
Suppose Factory A emits 15,000 units of “Yuck” monthly, Factory B emits 30,000 units,
and Factory C emits 45,000 units. Also suppose A’s cost of reducing the emission is $1
per unit, B’s cost is $2 per unit, and C’s cost is $3 per unit. If the EPA prohibits any
factory from emitting more than 15,000 units of yuck per month, what would be the
total cleanup cost?
A) $15,000
B) $40,000
C) $45,000
D) $90,000
E) $120,000
Comparable worth aims at
A) increasing the earnings of the least-skilled workers in the labor force.
B) raising the relative wages paid in jobs traditionally dominated by women.
C) reducing the relative income shares going to property owners.
D) securing equal wages for people performing identical jobs.
E) securing equal wages for people performing identical jobs and performing equally
well.