When a nuclear-powered electrical plant is permitted to dump radioactive waste at no
cost into a recreational waterway lowering the value boaters receive from the waterway,
the
a. firm’s cost of producing electricity will be higher than the community’s true
opportunity cost.
b. firm will tend to produce too little electricity from the viewpoint of economic
efficiency.
c. community generally receives an external benefit from the production of electricity.
d. firm’s cost of producing electricity will be lower than the community’s true
opportunity cost.
Which of the following is true of sub-Saharan Africa?
a. Sub-Saharan Africa has received very little foreign aid and as a result, the poverty
rate in the region is high.
b. Sub-Saharan Africa has received more foreign aid than any other region and
nonetheless the poverty rate in the region remains high.
c. The economic freedom rating of sub-Saharan African countries is high, but the
poverty rate in the region is still the highest in the world.
d. the reduction in the poverty rate in sub-Saharan Africa has been faster than for other
regions of the world during the past quarter of a century.
If Ethan thinks the last dollar spent on bowling yields more satisfaction than the last
dollar spent on hamburgers, and Ethan is a utility-maximizing consumer, he should
a. bowl less, so the marginal satisfaction from expenditures in this area will increase.
b. spend more on hamburgers, so total satisfaction from that activity will increase.
c. eliminate spending on hamburgers.
d. bowl more and spend less on hamburgers.
Use the figure to answer the following question(s).
Figure 8-8
In Figure 8-8, which output level would be most closely associated with the point where
diminishing marginal returns have begun?
a. 4
b. 5
c. 6
d. 8
During 1979-2005, the mortgage default rate
a. was less than the foreclosure rate.
b. soared to more than 5 percent during recessions but declined sharply during
economic expansions.
c. soared to more than 5 percent during expansions but declined sharply during
economic recessions.
d. was generally between 1 and 2 percent.
Government regulation is
a. subject to the same problems of lack of information and lack of incentives for
economic efficiency as centrally planned economies.
b. the only reliable way to improve environmental quality.
c. not subject to political concerns when it comes to environmental quality.
d. the most economically efficient way to reduce greenhouse gases.
The Department of Commerce sums the payments made to resources to arrive at GDP
in the form of wages, self-employment income, rents, interest, profits, indirect taxes,
and depreciation. This method of deriving GDP is called the
a. opportunity cost approach.
b. resource cost-income approach.
c. expenditure approach.
d. monetarist approach.
Which of the following must be true if average variable costs are decreasing?
a. Average fixed cost exceeds average total cost.
b. Marginal cost exceeds average variable cost.
c. Marginal cost is less than average variable cost.
d. Marginal cost is less than average total cost.
Use the figure below to answer the following question(s).
Figure 10-6
Given the aggregate demand and aggregate supply curves for the economy depicted in
Figure 10-6, the economy’s current output and price level are
a. output y1 and price level P2.
b. output y2 and price level P1.
c. output y1 and price level P3.
d. output y2 and price level P3.
The demand schedule for a good
a. indicates the relationship between the price of the good and the price of other goods.
b. indicates the quantities of the good that people will buy at various prices.
c. illustrates the quantity producers will provide at alternative prices.
d. is determined primarily by the cost of producing the good.
Which of the following events would increase producer surplus?
a. Sellers’ costs stay the same and the price of the good increases.
b. Sellers’ costs increase and the price of the good stays the same.
c. Sellers’ costs increase and the price of the good decreases.
d. All of the above are correct.
Which of the following is true?
a. The majority of millionaires received most of their wealth through an inheritance.
b. The percentage of the population that are millionaires in inflation-adjusted dollars
has been stable since the 1970s.
c. About one-third of millionaires have college degrees.
d. More than 75 percent of American millionaires have college degrees.
The short run sequence of events following an unanticipated shift to restrictive
monetary policy would be higher interest rates followed by dollar
a. depreciation, higher exports, and lower imports.
b. depreciation, lower exports, and higher imports.
c. appreciation, lower exports, and higher imports.
d. appreciation, higher exports, and lower imports.
In the short run, how will a profit-maximizing monopolist react if its marginal cost
suddenly increases? It will
a. lower price to expand revenue possibilities.
b. reduce output and raise price.
c. maintain the current price if profit is still positive.
d. increase plant size to lower marginal cost.
e. decrease plant size to lower marginal cost.
Using a production possibilities curve, a technological advance that increases the
amount of output for the same amount of inputs would be illustrated as
a. an inward shift of the curve.
b. a movement from one point to another point along the curve.
c. an outward shift of the curve.
d. a movement from a point on the curve to a point inside the curve.
When economists say the demand for a product has increased, they mean the
a. demand curve has shifted to the right.
b. price of the product has fallen, and consequently, consumers are buying more of it.
c. cost of producing the product has risen.
d. amount of the product that consumers are willing to purchase at various prices has
decreased.
Residents of Leon County have developed a strong liking for barbeque pork
sandwiches. Residents of Bay County buy the same amount of barbeque pork
sandwiches but believe beef sandwiches are just about as good. From this, we can infer
that
a. residents of Leon County will not care what the price of barbeque pork sandwiches
is.
b. compared to residents of Leon County, residents of Bay County will have a smaller
price elasticity of demand for barbeque pork sandwiches.
c. compared to residents of Leon County, residents of Bay County will have a larger
price elasticity of demand for barbeque pork sandwiches.
d. residents of Leon County will increase their purchases by a larger amount for beef
sandwiches than residents of Bay County in response to a “50 cents off” sale on beef
sandwiches.
Which of the following would be most likely to cause an appreciation of the dollar
relative to foreign currencies?
a. higher domestic interest rates
b. a reduction in the rate of inflation abroad
c. a shift to a more expansionary monetary policy
d. rapid growth of income in the United States
At the long-run equilibrium level of output, the monopolist’s marginal cost will
a. exceed price.
b. equal price.
c. be less than price.
d. be less than marginal revenue.
When the economy is operating at an output rate below its full-employment level, the
a. actual level of unemployment will exceed the natural rate of unemployment.
b. current rate of output will tend to persist into the future.
c. strong demand for resources will cause resource prices to rise.
d. actual unemployment rate will be less than the natural rate of unemployment.
If there is an unanticipated decrease in aggregate demand, which of the following is
most likely to occur?
a. an increase in the price level
b. a reduction in employment
c. an increase in the growth rate of real GDP
d. an increase in consumption
A currency board is an entity that
a. issues a currency with a floating value relative to a widely accepted currency.
b. promises to continue to redeem the issued currency at the prevailing market rate.
c. controls the domestic supply of money by buying and selling bonds and other liquid
assets.
d. provides 100% backing for all currency issued.
The Endangered Species Act
a. weakened the property rights of landowners.
b. encourages landowners to find new ways to provide habitat for listed species.
c. provides compensation to landowners affected by the law.
d. has not benefited any of the species protected under the act.
If a lender expects inflation to be 5 percent, and after a loan is made, actual inflation is
10 percent, which of the following will be true?
a. The lender will receive a lower real interest rate than he expected.
b. The loan will be repaid with dollars that are worth more than the lender expected.
c. The nominal rate of interest can be expected to fall in the future.
d. The lender will gain at the expense of the borrower.
Authoritarian political regimes
a. never produce sound economic institutions, due to corruption.
b. have produced movement toward sound economic institutions in Chile, South Korea
and several other nations.
c. will generally produce sound economic institutions and policies.
d. are necessary for the emergence of sound institutions, but not for their continued
operation.
Which of the following would lead to an increase in the demand for fast food in
Chicago?
a. An increase in Chicago’s population
b. A decrease in average consumer income in Chicago.
c. A front page newspaper article in Chicago stating that fast food is very bad for your
health.
d. A decrease in the average price charged by sit-down restaurants.
If the firms in a competitive price-searcher market are earning zero economic profit,
this indicates that the
a. market is not in long-run equilibrium.
b. firms are earning the normal rate of return.
c. firms are performing worse than the firms in other markets.
d. firms are performing better than firms in other markets.
The production possibilities curve illustrates the basic principle that
a. an economy’s capacity to produce is unrelated to its population.
b. if all the resources of an economy are being used efficiently, more of one good can be
produced only if more of another good is produced.
c. an economy will automatically move toward a point at which all of its resources are
being used inefficiently.
d. if all the resources of an economy are being used efficiently, more of one good can be
produced only if less of another good is produced.
The U.S. Postal Service has a monopoly on the delivery of first-class mail due to
a. economies of scale.
b. a lack of initiative on the part of competing firms.
c. legal barriers limiting entry.
d. control over an essential resource.
Which of the following was a contributing factor to the housing boom and bust and the
financial crisis of 2008?
a. An increase in the share of loans to sub-prime borrowers.
b. An increase in the share of loans extended to borrowers making only a small down
payment.
c. An increase in adjustable-rate mortgages (ARMs) as a share of the total.
d. All of the above.
Persons who die before age 65 or soon thereafter, receive little or nothing from their
Social Security payroll tax payments. Which of the following groups is harmed the
most by this attribute of the Social Security retirement system?
a. High-income workers.
b. Hispanics.
c. Heavy cigarette smokers.
d. College graduates.
If government officials break a natural monopoly up into several smaller firms, then
a. competition will force firms to attain economic profits rather than accounting profits.
b. competition will force firms to produce surplus output, which drives up price.
c. the average costs of production will increase.
d. the average costs of production will decrease.
Opening trade between two nations would
a. shift their production possibilities curves outward.
b. shift their production possibilities curves inward.
c. leave the production possibilities unchanged and increase their consumption
possibilities.
d. leave the production possibilities unchanged and decreased their consumption
possibilities.
If the consumption of a good by one individual does not change the amount of the good
available to others, the good is considered to be
a. durable.
b. nonrival-in-consumption.
c. a common good.
d. a natural resource.