The deposit expansion multiplier would increase if the Fed were to
A) raise the required reserve ratio.
B) lower the required reserve ratio.
C) raise the discount rate.
D) sell bonds.
The logical principle for maximization can be stated as follows:
A) Do it if it feels good.
B) Do it if the benefit from doing it is greater than the cost of doing it.
C) Do it unless it’s illegal, immoral, or fattening.
D) Do it whenever the marginal benefit equals the marginal cost.
Percentage markups are characteristically lower in supermarkets than in convenience
stores because
A) convenience stores must charge high markups to compensate for low volume.
B) marginal revenue is greater in supermarkets than in convenience stores.
C) supermarkets are able to operate with a lower percentage return on investment.
D) supermarkets can take advantage of quantity discounts.
E) the demand curves of customers patronizing supermarkets tend to be more elastic.
When the supply (curve) of a product increases,
A) suppliers change their plans.
B) demanders change their plans.
C) the price changes.
D) all of the above occur.
E) none of the above occur.
From the banker’s perspective, dollars held as required reserves in bank vaults
A) earn a low rate of interest.
B) earn a market rate of interest.
C) are potentially profitable.
D) are like a tax.
It would have been very difficult to clean up Lake Erie some years ago without
government participation primarily because
A) environmental improvements benefit everyone and should therefore be financed
from taxes.
B) the lake is a navigable body of water.
C) the lake is officially public property.
D) the pursuit of profit will cause environmental deterioration.
E) too many people could benefit without helping to pay the cost of the cleanup.
Economic theory assumes people
A) rarely act generously.
B) consistently act selfishly.
C) make choices based on a comparison of cost and benefits.
D) are fundamentally complex. Therefore, no general theory can be deduced to make
sense out of the decisions and choices people make.
Consider the market for credit. When the demand for credit decreases while the supply
of credit remains unchanged,
A) the interest rate will decrease and the amount of credit provided in the market will
increase.
B) the interest rate will increase and the amount of credit provided in the market will
increase.
C) the interest rate will decrease and the amount of credit provided in the market will
decrease.
D) the interest rate will increase and the amount of credit provided in the market will
decrease.
Which of the following economies performed the worst between 1960 and 2011?
A) South Korea
B) India
C) Japan
D) Taiwan
If a firm can increase its sales only by lowering its price, then
A) the firm is a price searcher.
B) the firm’s marginal revenue will be less than price.
C) the demand curve for the firm’s product is negatively sloped.
D) all of the above are true.
Fill in the blanks: ________ is defined as a sustained ________ in the purchasing
power of money.
A) Inflation; fall
B) Deflation; fall
C) Inflation; rise
D) Answers B and C above are both true.
According to your authors, “wealth = material things”
A) must be rejected.
B) makes sense to economists, but not non-economists.
C) is the correct definition of wealth.
D) helps us understand the foundations of what Adam Smith called the commercial
society.
Someone who turns down an opportunity to purchase a Bible for $5 and then
immediately pays $5 to attend a movie thereby expects to obtain more satisfaction from
seeing the movie than from
A) cultivating the spiritual life.
B) deepening his religious faith.
C) owning the Bible just offered to him.
D) reading the Bible.
In the economic way of thing, speculation could be effectively abolished if society
could abolish
A) money.
B) greed.
C) profit seeking.
D) private property rights.
E) uncertainty.
Suppose corn farmers encounter a “bumper” corn crop, which results in a significant
increase in the market supply curve for corn. Increases in supply will tend to
A) decrease the price of corn.
B) increase the demand for corn.
C) increase the price of corn.
D) decrease the demand for corn.
Which of the following expands the range of opportunities available to customers?
A) The bookstore that provides comfortable chairs and couches for book browsers
B) The used car dealer who posts prices on the windshields of the cars
C) The bank that advertises it will place ten dollars into any newly-opened savings
account
D) All of the above.
E) None of the above.
Bongo plays drums in his parents’ garage after school. What can we be sure of?
A) Bongo’s drumming imposes negative externalities on others.
B) Bongo’s drumming delivers positive externalities to others.
C) Bongo expects to benefit while drumming.
D) All of the above.
“Coffee Prices Sink As Demand Falls.” The newspaper heading
A) assumes the law of demand does not hold.
B) confuses demand with quantity demanded.
C) misunderstands the role of supply in price formation.
D) reverses the actual relationship between price and demand.
E) uses the concept of demand correctly.
Suppose Maria can make 12 pizzas or 4 lasagnas every Saturday afternoon, while Gina
can make 10 pizzas or 2 lasagnas every Saturday afternoon. Which statement is true?
A) It costs Maria 1/3 of a pizza to make 1 lasagna.
B) It costs Maria 1 pizza to make 1 lasagna.
C) It costs Gina 2 pizzas to make 1 lasagna.
D) It costs Gina 5 pizzas to make 1 lasagna.
How does the economist’s measure of profit differ from the accountant’s measure?
A) Economists subtract total revenue from total cost; accountants do the opposite.
B) Economists subtract total costs from total revenue; accountants do the opposite.
C) Economists consider more sources of monetary revenue than accountants do.
D) Economists include all opportunity costs, accountants don’t.
E) There is no difference between the two measures.
Competition among sellers occurs
A) when marginal revenue equals marginal cost.
B) when price equals marginal cost.
C) when price equals marginal revenue.
D) whenever sellers try to attract customers from one another.
Why would a speculator purchase 1,000 shares of XYZ.COM stock at a price ten times
greater than its initial public offering price?
A) They expect the price to soon fall.
B) They expect to be able to sell it at a higher price.
C) They must think the company will sustain long-run profits.
D) They failed to realize the importance of economizing in their portfolio allocation.
The services produced by spouses who cook, clean, and otherwise maintain homes are
not counted in the gross domestic product because
A) services are not tangible goods.
B) there is no accepted and reliable way to measure their value.
C) they do not add to the wealth of the nation.
D) this would entail double-counting, since such spouses usually receive free room and
board.
E) while they are useful services, they do not represent productive labor.
Halibut tends to be much more expensive than cod. According to the economic way of
thinking, relatively high halibut prices can be explained by
A) using the theory of supply and demand.
B) pointing out the causeHalibut boats are often more expensive than boats used to fish
for cod.
C) acknowledging the price differential is unfair to consumers of halibut.
D) acknowledging the price differential is unfair to cod fishermen.
According to the text, in the absence of uncertainty, no one can obtain a profit from the
exclusive ownership of a scarce resource, such as a patent or a franchise, because
A) demand curves will be perfectly elastic.
B) marginal cost will equal marginal revenue.
C) profit requires active production rather than static ownership.
D) the cost of retaining ownership will rise to eliminate any profit.
E) the tax on capital gains will eliminate any profit.
Economics is the study of
A) Why people are greedy.
B) Why the government is ruining our lives.
C) Why the Dow Jones Industrial Average moves around.
D) The choices people make when confronted with scarcity.
Suppose the market-clearing interest rate on loans is 12%, but law-makers impose an
8% interest rate ceiling. The new law will tend to
A) increase the supply of loans.
B) decrease the supply of loans.
C) increase the demand for loans.
D) decrease the demand for loans.
E) do none of the above.
According to your text, which group or organization makes choices?
A) Al Qaeda
B) New York City
C) The Microsoft Corporation
D) The Iraqi Government
E) None of the above.
What is a credit card?
A) Money
B) A convenient way to borrow money
C) A bond
D) A convenient way to sell a bond
When the plans of buyers and sellers are fully coordinated
A) the market clears.
B) there is neither a shortage nor surplus of a good.
C) quantity demanded equals quantity supplied.
D) all of the above are true.
From the banker’s perspective, dollars held as required reserves in bank vaults
A) earn a low rate of interest.
B) earn no rate of interest.
C) earn a market rate of interest.
D) earn profits.
When economists say entrepreneurs have a comparative advantage in arbitrage activity,
they are saying
A) entrepreneurs are efficient at selling their products below cost.
B) entrepreneurs are efficient at selling their products at cost.
C) entrepreneurs are efficient at discovering opportunities to buy goods low and sell
them at higher prices.
D) entrepreneurs are efficient at resolving disputes of interest over titles to scarce
property rights.
Fill in the blanks: While the Economic Freedom Index demonstrates a strong ________
correlation between economic freedom and per capita GDP, the economic way of
thinking provides the ________.
A) negative; explanation
B) positive; explanation
C) negative; data
D) positive; data