National output and national income are essentially the same because
A) every purchase implies a sale.
B) every cost implies a benefit.
C) every profit implies a loss.
D) every gain implies a sacrifice.
Suppose a Chinese restaurant provides free tea to its customers. In the economic way of
thinking, the restaurant is
A) engaging in predatory pricing of its meals.
B) engaging in predatory pricing of tea.
C) selling Chinese food below cost.
D) doing all of the above.
E) almost certainly doing none of the above.
A good deal of iron ore is mined in Michigan’s Upper Peninsula. What is the
relationship between the demand for iron ore and the cost of mining operations in
Michigan?
A) Changes in the demand for iron ore are caused directly by changes in the cost of iron
mining.
B) Changes in the costs of iron mining are caused by changes in the demand for iron
ore.
C) There is no significant relationship because the demand for iron ore is determined by
many different people, while the cost of mining the ore is determined by business
executives.
D) Nobody knows.
Suppose a consumer is torn between buying a Chevy Tahoe or a Ford Expedition, each
selling for $30,000. He eventually decides on the Tahoe. What’s his opportunity cost?
A) $30,000
B) $30,000 plus taxes, tags, insurance, etc.
C) The satisfaction he would have experienced owning the Ford Expedition
D) The frustration he will face owning the Chevy Tahoe
E) B, C, and D above.
When the market clearing price of gasoline after a hurricane spikes to $6.00 but
legislators enact “anti-gouging” legislation that keeps prices at $4,
A) consumers as a whole will tend to benefit.
B) producers will have less incentive to bring gasoline to the areas where gasoline is
most highly valued.
C) government will ensure that no shortages will develop.
D) gasoline will be easier to purchase.
According to the law of demand, consumers will
A) change their production plans when the price of a good changes.
B) change their consumption plans when the price of a good changes.
C) change their demand when the price of a good changes.
D) increase their quantity demanded when the price of a good increases.
E) decrease their quantity demanded when the price of a good decreases.
Which of the following might be an intermediate good?
A) A box of Kellogg’s corn flakes
B) An iMac computer
C) A U-Haul rental vehicle
D) An economics textbook
E) Any of the above might be, depending upon who is purchasing it.
People have a demand for liquidity because
A) liquidity increases one’s options.
B) the rate of interest is positive.
C) they have confidence in their own future earning power.
D) they prefer present goods to future goods.
With price on the vertical axis and quantity on the horizontal axis, economists would
draw a fall in supply as
A) a leftward shift in the supply curve.
B) a rightward shift in the supply curve.
C) a vertical supply curve.
D) any which way we like.
Which of the following will not change the demand for movie tickets?
A) A change in the cost of babysitting services
B) A change in the incomes of moviegoers
C) A change in the price of movie tickets
D) A change in the quality of television programs
E) A change in the quality of movies
When the Bureau of labor Statistics makes seasonal adjustments in the labor force data,
what is it likely to do with the number of people in the labor force during the month of
June?
A) Lower the number each year.
B) Raise the number each year.
C) Lower the number about as often as it raises the number in the long run.
D) Multiply the number by the labor force participation rate.
A homeowner making a mortgage payment is paying
A) a sunk cost which is consequently not a genuine cost at all.
B) the cost of borrowing to purchase the house.
C) the cost of constructing the house.
D) the cost of purchasing the house.
E) the cost of retaining ownership of the house.
Congestion pricing
A) is an estimation of the price of being off of work with the flu.
B) is an attempt to internalize the external costs of driving.
C) is the raising of taxes on gasoline to support the construction of mass urban transit
systems.
D) works fine in theory but cannot work in the real world because the technology is
lacking.
Time lags occur when which of the following questions is asked?
A) Where is the economy now?
B) Where is the economy going?
C) How long will it take for a correct policy to be implemented?
D) All of the above.
E) None of the above.
Fiscal policy is
A) another term for monetary policy.
B) the implementation of import fees and restrictions to promote the domestic economy.
C) the use of the government budget to bring about desired levels of total spending.
D) the use of money to promote the sustainability of a nation’s non-renewable
resources.
Should you type your own term paper or hire a specialist to do it for you? Your
comparative advantage as a typist increases as you
A) find you have completed all your studying.
B) get laid off from your job working afternoons at the gas station.
C) improve your skills as a typist.
D) encounter any of the above changes in your situation.
Is the following quote correct? “Here’s the law of demand in a nutshell. The lower the
price, the higher the quantity demanded, other things constant.”
A) Yes, it is totally correct.
B) No. It would be correct if it didn’t say “other things constant.”
C) No, because it confuses demand and quantity demanded.
D) No, because the law of demand does not apply to nutshells.
Rank the following goods from least to most elastic: high octane unleaded gasoline,
unleaded gasoline, gasoline.
A) High octane unleaded gasoline, unleaded gasoline, gasoline
B) High octane unleaded gasoline, gasoline, unleaded gasoline
C) Unleaded gasoline, high octane unleaded gasoline, gasoline
D) Gasoline, unleaded gasoline, high octane unleaded gasoline
E) None of the above.
According to your textbook, a scientist of any kind
A) works with some assumptions and biases.
B) never confront tradeoffs.
C) offer only the best evidence to support his or her theory.
D) be the best candidate for the Nobel Prize in Economics.
Socialism seeks to abolish the market-price system. In the economic way of thinking,
socialism would therefore
A) generate tremendous economic growth.
B) overcome scarcity.
C) lead to a greater coordination among peoples’ production and consumption plans.
D) allow everybody the opportunity to seek their comparative advantage.
E) accomplish none of the above.
According to the Law of Comparative Advantage,
A) production should be based on who can produce a product lowest opportunity cost.
B) production should be based on who can produce more of a good.
C) production should take into account strategic interests, such as national security.
D) production should be for the people instead of for profit.
Economic growth is supported by
A) the rule of law.
B) competent and honest government officials.
C) an educated populace.
D) openness to international trade and investment.
E) all of the above.
Suppose early one Friday morning the economics club buys 200 donuts at 25 cents
each, and plans to sell all of them later in day on campus for 50 cents each. Only 60
donuts are sold at 50 cents, however, and by early afternoon the club is seen trying to
unload the remaining donuts for 10 cents each. What is the correct price of one of
donut?
A) 10 cents
B) 25 cents
C) 50 cents
D) Stated this way, the question is meaningless.
Which of the following is not one of the obstacles mentioned in the text to a successful
system of price discrimination? Inability to
A) evade legal restrictions on discrimination.
B) identify differences in demand among customers.
C) prevent customers from reselling the product.
D) prevent resentment from arising among the people who pay more.
A reduced demand for lawyers’ services to prosecute damage suits
A) lowers the cost of hiring a lawyer to draw up a will.
B) raises the cost of hiring a lawyer to draw up a will.
C) raises the demand for lawyers’ services in drawing up wills.
D) will not affect the cost of hiring a lawyer to draw up a will though it could affect
lawyers’ fees.
Someone who wants to rent an urban lot in order to grow vegetables should expect the
rental cost to reflect the
A) expenses incurred in developing the lot.
B) fact that land is a free gift of nature.
C) property taxes paid on the lot.
D) value of the lot to other people who would also like to use it.
Property rights are useful in predicting behavior when we define ownership of a
resource as
A) a moral claim to a particular resource.
B) legal title to the resource.
C) physical possession of the resource.
D) the ability to appropriate the benefits from use of a resource.
Minimum-price laws designed to preserve competition
A) offer the certainty of lower prices in order to eliminate the possibility of higher
prices.
B) offer the certainty of higher prices in order to eliminate the possibility of higher
prices.
C) offer the possibility of higher prices in order to eliminate the certainty of higher
prices.
D) offer the sellers more competition among themselves.
The common habit of viewing middlemen as unproductive bandits on the highway of
free trade assumes
A) transaction costs are zero.
B) information is a free good.
C) voluntary exchange is not mutually beneficial.
D) all of the above.
E) none of the above.
What is the historical relationship in the United States between the unemployment rate
and recessions?
A) The relationship depends on whether or not the price level is also changing.
B) The unemployment rate rises during a recession and turns negative during the
subsequent recovery.
C) The unemployment rate rises shortly before a recession begins and declines shortly
before it ends.
D) The unemployment rate rises soon after a recession has begun and starts to decline
sometime after the recovery has started.
E) There is no regular or systematic link that can be discerned from the data.