The owner of a scenic waterfall is trying to decide whether to rent the site to a
manufacturing firm as an industrial power source or to rent it to a recreational
association, which would turn the site into a park and campground. Which of the
following statements is true?
A) An increase in the price of fossil fuels will increase the cost of renting it to the
recreation association.
B) Social welfare is maximized when the owner rents to the higher bidder.
C) The cost to the owner of renting to one or the other depends entirely upon the
owner’s preferences between economic growth and recreational facilities.
D) The owner can choose without regard to cost because the site is a free natural
resource.
E) The owner can choose without regard to cost insofar as the waterfall is privately
owned.
Which of the following documents established “rules of the game”?
A) The Book of Exodus
B) The Scrabble Players Dictionary
C) The Bylaws of the AFL-CIO
D) The Constitution of South Africa
E) All of the above.
The term for the Fed’s day-to-day technique for controlling the stock of money is called
A) discounting operations.
B) interest-rate operations.
C) liquidity operations.
D) open heart operations.
E) none of the above.
Fill in the blank: Your textbook authors wrote, “A law that restricts competitors
________ competition.”
A) preserves
B) restricts
C) promotes
D) repairs
When Exxon Mobil reports record profits of more than $10 billion per quarter, we know
A) other oil companies must be struggling.
B) consumers must be paying high prices at the pump.
C) consumers must have lost $10 billion in surplus.
D) all of the above.
E) none of the above follow from the information given.
Urban traffic moves as effectively as it does because
A) all drivers have the same attitudes regarding courtesy, safety, and speed.
B) drivers are usually concentrating intently on their own narrow goals.
C) insurance does not cover all the costs of an accident.
D) drivers take other drivers’ specific goals and interests into account.
E) police are able to enforce the city’s traffic plan.
Which of the following is most important for the successful functioning of any
economy?
A) Clearly understood and generally accepted rules.
B) Common and reasonably specific goals for people to pursue.
C) Greed.
D) Low taxes relative to income.
E) Sufficient purchasing power to buy all of an economy’s goods and services.
According to opportunity-cost theory, the cost to an airline of letting its employees fly
at no charge
A) depends upon the alternatives available to the employees.
B) is greater around the Christmas holidays.
C) is zero.
D) will depend upon the value employees place upon travel.
When its marginal cost increases, a firm aiming at maximizing net revenue
A) can always raise its price, but only by the amount of the cost increase.
B) can often raise its price by more than the cost increase.
C) can raise its price, but always by less than the cost increase.
D) may not be able to raise its price at all.
Which of the following would be most likely to cause an increase in the demand for
gold?
A) A decrease in the price of gold
B) The expectation of a future decrease in the price of gold
C) An increase in the price of gold
D) The expectation of a future increase in the price of gold
E) An increase in the supply of gold
Are there many good substitutes for water?
A) No, because living creatures die without water.
B) No, even though there are many substitute ways to obtain water.
C) Yes, because water is recycled by nature.
D) Yes, because water is used for so many different and trivial purposes.
E) Yes, because water may be found in many forms other than its pure form.
The federal courts are increasingly willing to tolerate resale price maintenance
agreements between manufacturers and retailers
A) when they are necessary to prevent predatory pricing.
B) when they enable small businesses to survive more profitably.
C) when they provide retailers with incentive to supply customer services desired by
manufacturers.
D) whenever both parties voluntarily agree on them.
E) whenever they are necessary to cover sunk costs.
In the economic way of thinking, money
A) allows people to behave completely morally.
B) allows people to behave completely competitively.
C) allows people to make goods exchanges without concern for the true costs of their
actions.
D) allows people to make a wide range of negotiations.
In the economy of Confoundia, 500 people have jobs, 1000 people are not working but
are searching for work, and 2000 people don’t work and don’t seek work. The
unemployment rate is
A) 25 percent.
B) 33 percent.
C) 40 percent.
D) 50 percent.
E) 66 percent.
For a normal good, a decrease in demand is caused by
A) a rise in income.
B) a fall in income.
C) a rise in price.
D) a fall in price.
Adjudication reduces problems created by negative externalities by
A) assigning liability to the party most able to pay (the deep pocket).
B) balancing marginal social benefits against marginal social costs.
C) discovering who has what rights.
D) making more accurate private benefit-cost analyses.
E) measuring externalities more precisely.
Which statement below is true for a price searcher?
A) Marginal revenue can only be positive.
B) Marginal revenue can only be negative.
C) Marginal revenue can only be zero.
D) Marginal revenue can be positive, negative, or zero.
If movie theaters began collecting more gross income from ticket sales after lowering
ticket prices, we would know
A) movie patrons were not behaving consistently with the law of demand.
B) movie quality must have increased.
C) the demand for movie tickets was elastic.
D) the demand for movie tickets was inelastic.
E) the supply of movies had increased.
When economists use the terms “supply” and “demand,” they are referring to
A) the roles economists must take to improve the economy.
B) the plans and ongoing negotiations among individual traders in the market process.
C) the ways people meet their needs in society.
D) the supply of money and the demand for money.
E) the supply of laws and the demand for laws in a well-governed society.
Economists define “shortage” as
A) quantity demanded exceeds quantity supplied.
B) quantity demanded equals quantity supplied.
C) quantity supplied exceeds quantity demanded.
D) a situation whereby the prevailing price is higher than the market-clearing price.
What will be the principal and most immediate effect on the supply or demand for raw
cotton grown in the United States if the price of fertilizer used in cotton production
increases?
A) Decrease in demand
B) Decrease in supply
C) Increase in demand
D) Increase in supply