Let’s assume Ben can produce 3 units of a material good (M) or 3 units of a spiritual
good (S) in a day, while Cal can produce 1 M or 2 Ss in a day. Which statement below
is true?
A) It costs Cal 1/2 M to produce 1 S.
B) It costs Cal 2 Ss to produce 1 M.
C) It costs Ben 1 S to produce 1 M.
D) All of the above are true.
The opportunity costs of land is largely determined by
A) need.
B) real estate agents.
C) demand.
D) government.
Which of the following would be inconsistent with the notion of a competitive market
process and the notion of perfect competition?
A) Price searching behavior
B) Predatory pricing
C) Advertising
D) Licenses and other legal restrictions on entry
E) Hostile takeovers
Which of the statements below best expresses the relationship between the cost of a
medical education and the fees charged by physicians?
A) The greater the average cost of a medical education, the higher will be the fees
physicians charge.
B) The greater the cost of a physician’s education in both money and effort, the higher
will be the fees they can legitimately set for their services.
C) The greater the cost to physicians of a medical education in both money and effort,
the higher will be the fees they will charge in order to recover the costs they incurred.
D) The greater the expected cost of a medical education, the fewer physicians there will
be and the higher their fees will be.
A necessary condition for “perfect competition” is
A) price searchers.
B) price takers.
C) legal restrictions on entry into the market.
D) a small number of huge firms.
E) widespread and long-run economic profits.
If a business firm operates indefinitely without covering any of its sunk costs, what
happens to the firm’s sunk costs?
A) Nothing happens to them; they have ceased to exist.
B) They are distributed across the whole economy.
C) They continue unpaid for as long as the firm fails to make a profit large enough to
cover them.
D) They reduce the wealth of the investors who risked their wealth to make mistaken
decisions possible.
Which is the most likely reason why more students continue on to graduate school
when the economy is in bad shape and job prospects are poor?
A) They finally see the value of continuing their education.
B) They are pressured by parents to stay in school a few more years.
C) Their opportunity cost of attending college has fallen.
D) They are irrational in this case, as they will have to take on more debt to finance the
graduate degree.
“30 people camp on the sidewalk in 10 degree weather for Phish reunion concert
tickets, sold only at the door.” In the economic way of thinking, the people camping out
are
A) competing against other Phish fans for concert tickets.
B) taking what they believe is an efficient strategy for acquiring a scarce good.
C) planning to cooperate with the sellers of the concert tickets.
D) doing all the above.
For social cooperation to be promoted, an effective system of property rights will be
one in which people
A) behave cautiously and considerately because their rights are not clear.
B) enjoy most rights in common with all other members of the society.
C) know exactly what their rights are and don’t expect them to change significantly.
D) know their rights are always dependent upon continuing majority approval.
E) realize the rules of the game can change at any moment.
Does a person who works in a brothel sell productive services?
A) Yes, if the service is demanded.
B) Yes, but only in states where brothels are legal.
C) No, because the service is immoral.
D) No, because the service does not help the overall economy.
From the economic point of view, profit is
A) a four-letter word.
B) the same as loss.
C) the result of uncertainty.
D) a sign of economic injustice.
E) none of the above.
U.S. dollar bills
A) are backed by gold.
B) are backed by silver.
C) are backed by platinum.
D) are backed by uranium.
E) are not backed by any precious metal.
Suppose an economy has the following characteristics: 100 people in the
noninstitutional population; 40 people employed; 50 people not in the labor force. How
many people are unemployed?
A) 100
B) 90
C) 50
D) 40
E) 10
The word oligopoly means
A) elastic demand.
B) few sellers.
C) independent action.
D) interdependent selling.
E) predatory pricing.
If one is producing well within a production possibilities frontier, they are
A) using resources to the best of their ability.
B) using resources at the lowest opportunity cost.
C) using resources in an inefficient way.
D) using resources in a way that maximizes their comparative advantage.
Suppose Ann can produce 8 units of a material good (M) or 4 units of a spiritual good
(S) in a day, while Ben can produce only 3 Ms or 3 Ss in a day. Which statement below
is true?
A) Ben is the inefficient producer of material goods.
B) Ben is the inefficient producer of spiritual goods.
C) Ann is the efficient producer of spiritual goods.
D) All of the above are true.
A reduction of the discount rate by the Federal Reserve Banks has the direct effect of
A) making it less costly for commercial banks to borrow from the Fed.
B) making it more costly for the Treasury to finance deficits.
C) increasing commercial bank reserves.
D) increasing the stock of money.
E) doing all of the above.
If gasoline prices rise by 20% and quantity demanded falls by 5%, then the price
elasticity of demand for gasoline is:
A) inelastic.
B) elastic.
C) unit elastic.
D) perfectly inelastic.
Since most people prefer more money to less, the desire for more money
A) makes it difficult to induce people to cooperate.
B) makes it difficult to induce people to sacrifice for the larger public good.
C) makes social order highly unstable and unpredictable.
D) can induce useful changes in behavior.
E) implies people are living in a capitalist society.
GDP accounting ignores
A) all non-market forms of production.
B) illegal (black market) production.
C) economic value added.
D) all of the above.
Other things constant, a higher price for corn tends to increase
A) the supply of corn.
B) the quantity supplied of corn.
C) the demand for corn.
D) the quantity demanded for corn.
In the economic way of thinking, traffic congestion is a sign of
A) a surplus of people.
B) a surplus of automobiles.
C) a shortage of buses.
D) a negative externality.
Fill in the blank: Rebecca goes to the hairdresser more often now that her salary has
increased. For Rebecca, the hairdresser’s service is probably ________.
A) a normal good
B) an inferior good
C) a free good
D) a bad
Suppose the market clearing rate for apartments in Yazoo City, Mississippi is $400 per
month, but a rent control is set at $600 per month. Which of the following would tend
to occur in the community?
A) A shortage of apartments
B) An increase in the quantity demanded for apartments
C) Both of the above.
D) Neither of the above.
Suppose scientists discover that eating soybeans prevents cancer and heart disease.
Other things constant,
A) demand for soybeans will increase and soybean prices will fall.
B) the price of soybeans will increase and demand will fall.
C) demand and prices of soybeans will increase.
D) the quantity demanded of soybeans will change, but demand will remain the same.
Under the right circumstances, what resource could be used in the production of
gasoline?
A) Rosary beads
B) A telephone operator
C) Olive oil
D) Computers
E) All of the above.
If bank depositors in the U.S. suddenly decided to withdraw in currency everything in
their checking accounts, commercial banks would
A) be better off because their legally required reserves would decline.
B) be unable to meet their demands and would become insolvent.
C) borrow the required Federal Reserve notes to meet the requests for currency.
D) give them the currency held in their vaults as backing for the checking accounts.
E) refuse to honor their requests for 30 days.
Which of the following resources is not essential in the production of a typical cheese
pizza?
A) Dough
B) Sauce
C) Heat
D) Fodder for cows
E) Trick question: all of the above are essential.
Gomer can make either 200 gallons of corn liquor (L) or 200 gallons of strawberry wine
(W) every six months. Goober can make only 100 gallons of corn liquor (L) or 50
gallons of strawberry wine (W) every six months. Which statement below is true?
A) Goober has a comparative advantage only in W.
B) Goober has a comparative advantage in both L and W.
C) Gomer has a comparative advantage only in W.
D) Gomer has a comparative advantage in both L and W.
E) None of the above.
The economic way of thinking assumes a politician ignores
A) the costs of her actions.
B) the benefits of her actions.
C) her own interests after taking the oath of office.
D) all of the above.
E) none of the above.
What would be the most likely effect on the price of tickets for the Rose Bowl football
game if a wealthy alumnus agreed to pay all the travel and lodging expenses of the
visiting players?
A) No effect.
B) The price would fall.
C) The price would rise.
D) We have no basis for predicting because college football is a non-profit enterprise.
The prediction of permanent, growing shortages of fresh drinking water by the year
2050 assumes
A) water prices will increase.
B) water prices will decrease.
C) water prices will not adjust appropriately to coordinate the market.
D) nobody will be able to collect water from rain and snowstorms.
The question, “What is really more efficient?” could usefully be translated into the
question:
A) “What is the best long-term solution?”
B) “What will best promote social welfare?”
C) “What will produce the most economic value?”
D) “Who should have the right to decide?”
E) “What will produce the most rapid rate of economic growth?”
Redbox rents DVDs. Other things constant, which of the following would likely
increase the demand for their DVDs?
A) A rise in the cost of going to the movies
B) A fall in the price of DVD players
C) A fall in the price of Redbox DVD movie rentals
D) Both A and B