In a market economy, goods are allocated to
a. all potential uses.
b. all citizens on an equal basis.
c. citizens with political power.
d. citizens with both the desire and the willingness to pay for the goods.
If the U.S. government starts to sell off its stockpile of cheese,
a. consumers will be less willing to purchase cheese.
b. the equilibrium quantity demanded will rise.
c. farmers will hoard the cheese they produce.
d. the quantity of cheese that spoils before sale will rise.
The demand curve for loanable funds is downward sloping because
a. people save more at higher interest rates.
b. more investments are profitable at low interest rates than at high interest rates.
c. future income is more valuable now at higher interest rates than at low interest rates.
d. usury laws increase the quantity of funds demanded at low interest rates but do not
affect the quantity of funds demanded at high interest rates.
An economist is told that concentration in the cement industry has increased. He can
safely conclude that
a. cement production must have fallen in the industry.
b. competition in the cement industry has decreased.
c. there are fewer cement producers than before.
d. All of the above are correct.
Where a firm generates beneficial externalities, society would be better off if
a. the firm produced a larger output level.
b. the firm reduced its output level.
c. a tax was levied on the firm equal to the dollar amount of the externalities.
d. price was reduced below marginal private cost.
Which is the correct order of importance in terms of revenue collected among the
following federal taxes?
a. (1) corporate income taxes (2) value-added taxes (3) excise taxes
b. (1) personal income taxes (2) corporate income taxes (3) sales taxes
c. (1) payroll taxes (2) personal income taxes (3) federal excise taxes
d. (1) personal income taxes (2) payroll taxes (3) corporate income taxes
The slope of an indifference curve is called the
a. bliss gradient.
b. happiness slope.
c. average transformation rate.
d. marginal rate of substitution.
The essence of the trade-off between equality and efficiency is that
a. taxes and transfers reduce incentives to earn income, thus reducing GNP.
b. people are ideologically opposed to socialistic income redistribution.
c. redistribution violates the “work ethic.”
d. people are prejudiced against blacks and women.
Along a perfectly elastic demand curve,
a. the slope is always zero.
b. the price elasticity of demand is 1.
c. consumer purchases will not respond at all to a change in price.
d. All of the above are true.
To be efficient, outputs should be produced that minimize total cost.
a. True
b. False
In economics, abstraction from reality is necessary because of the complexity of the
real world.
a. True
b. False
The supply curve for a perfectly competitive industry is obtained by
a. making an empirical study of historical data.
b. vertically summing the supply curves of firms in the industry.
c. horizontally summing the average cost curves of firms in the industry.
d. horizontally summing the supply curves of firms in the industry.
An economic model can be defined as
a. a testable claim which can be evaluated with proper data.
b. a representation of a theory or a part of a theory.
c. another word for theory.
d. a method to distinguish correlation from causation.
e. All of the above are correct.
During most of the 1990s, average hours worked per week ____, then, after 2000,
started to ____.
a. rose steadily; level off
b. remained virtually constant; drop slowly.
c. were on the upswing; fall slowly.
d. continued to decline; level off
At a given level of wheat output, one more unit of labor would produce 10 extra
bushels, and one more unit of seed would produce 30 extra bushels. A unit of labor
costs $6, and a unit of seed costs $12 The farmer should
a. produce less wheat.
b. buy only seed.
c. buy more seed and less labor.
d. buy less seed and more labor.
“Economies of scope” occur when
a. fixed costs are high and marginal costs are low.
b. a monopoly can produce for the entire market.
c. similar production techniques can be applied to several products.
d. costs are fully distributed.
When used in a professional or technical sense, the law of supply and demand refers to
a. some vague influences on economic affairs.
b. the fact that prices go up when commodities are scarce.
c. the market forces that show how prices and quantities are determined.
d. the controls that regulate the amount of scarce goods that each consumer can
purchase.
When business is profitable, corporate managers will preferplowback to other sources
of funding.
a. True
b. False
If the supply curve of a commodity is upward sloping, and the producing country
begins to export more in a pure free trade system, the domestic price of the commodity
will
a. fall.
b. rise.
c. exceed the price in foreign countries.
d. be below the price in foreign countries.
Marxists and leaders of communist economies actually often admire the market
mechanism for its
a. efficiency in allocation of resources.
b. fairness in distribution of output.
c. maximization of net benefits for consumers.
d. effectiveness in achieving high rates of growth.
If coal prices are rising faster than the rate of interest, then
a. investors should buy coal instead of bonds.
b. investors should buy bonds instead of coal.
c. coal prices should be expected to fall.
d. bond prices should be expected to rise.
From 2007 to 2008, the Federal Reserve System reduced interest rates, the price which
borrowers pay. As a result, economists expected the quantity of money demanded to
a. increase.
b. decrease.
c. not change.
d. not change, although the demand schedule itself will shift outward.