Because income differs so much by type of job, some economists argue that a new class
distinction has emerged between:
A. union and nonunion workers.
B. workers and capitalists.
C. professionals and nonprofessionals.
D. salaried workers and the self-employed.
Answer:
Americans buying Japanese cars:
A. demand U.S. dollars and supply Japanese yen.
B. demand U.S. dollars and demand Japanese yen.
C. supply U.S. dollars and demand Japanese yen.
D. supply both U.S. dollars and Japanese yen.
Answer:
Refer to the graph shown. If market price decreases from $7.00 per unit to $6.00 per
unit, a profit-maximizing perfectly competitive firm will:
A. increase output from 650 to 750.
B. decrease output from 850 to 750.
C. continue to produce 850 units.
D. produce 850 units of output.
Answer:
When a government bans prostitutions, it may do so because it considers prostitution to
be a:
A. progressive good.
B. regressive good.
C. public good.
D. demerit good.
Answer:
The drug maker Wyeth produces the hormone-therapy drug Premarin, which is derived
from the urine of pregnant mares. Not even Wyeth knows exactly what chemicals are in
it, and the method of making the drug is a trade secret. For almost 15 years, Barr
Laboratories has been trying to make a pill that is close enough to Premarin to be
approved by the U.S. Food and Drug Administration as an “equivalent” drug. This story
illustrates the importance of:
A. declining long-run cost curves as a way of preserving monopoly.
B. declining demand curves as an essential ingredient in keeping monopoly.
C. barriers to entry in keeping a monopoly position.
D. economies of scope in cementing a monopoly position.
Answer:
The explanation for the law of demand involves:
A. suppliers’ ability to substitute inputs.
B. consumers’ ability to substitute different goods.
C. the government’s ability to set prices.
D. the market’s ability to equate supply and demand.
Answer:
The ability to organize and meet an objective, such as meeting regulatory and financial
requirements to start and run a business, is known as:
A. business sovereignty.
B. consumer sovereignty.
C. democratic capitalism.
D. entrepreneurship.
Answer:
Every four years during presidential campaigns, the issue of whether the United States
should replace the electoral college method of determining the winner of the presidency
arises. Which of the following statements about this debate is the best example of a
statement in positive economics?
A. A candidate could lose the popular vote and win the electoral vote.
B. Because the present system works, we should keep it.
C. Any system that does not weigh votes equally is unfair.
D. We should abandon the electoral college because only the popular vote represents
true democracy.
Answer:
For a monopolistic competitor:
A. P = ATC in long-run equilibrium.
B. P > ATC in long-run equilibrium.
C. P = MR in long-run equilibrium.
D. P = MC in long-run equilibrium.
Answer:
Strategic bargaining:
A. always produces freer trade.
B. always increases a country’s gains from trade.
C. may reduce trade if it is unsuccessful.
D. always reduces a country’s gains from trade.
Answer:
An economist builds a model by beginning with certain self-evident principles and then
derives the implications of that model. What approach is this economist taking?
A. Inductive
B. Deductive
C. Apophatic
D. Experimental
Answer:
Positive economics seeks to:
A. determine the most appropriate economic goals for society.
B. determine what government economic policies are best.
C. objectively explain how the economy functions.
D. objectively explain how societies value different economic outcomes.
Answer:
A common economically unfounded fear held by laypeople is that:
A. globalization will result in the United States losing most jobs because wages are so
much higher in the United States.
B. globalization will result in dramatically higher prices because most services will be
outsourced.
C. the United States has a comparative advantage in the production of all goods.
D. a U.S. trade surplus will result in a dramatically lower dollar.
Answer:
Refer to the graph below.
As you move from point A to point B:
A. production efficiency is increased because we have more of good X.
B. production efficiency is decreased because we have less of good Y.
C. production efficiency is decreased because we are no longer on the production
possibility curve.
D. the change in efficiency is unclear.
Answer:
Which of the following statements correctly summarizes a difference between the
layperson’s and the economist’s views of the net benefits of trade?
A. Economists often argue that the gains from trade in the form of low consumer prices
tend to be widespread and not easily recognizable while the costs in jobs lost tend to be
concentrated and readily identifiable.
B. Economists often argue that most U.S. jobs are at risk of outsourcing while
laypeople intuitively recognize that inherent in comparative advantage is that each
country has a comparative advantage in the production of some good.
C. Economists focus on trade in manufactured goods while laypeople also focus on
trade involving the services of people who manage the trade.
D. Economists most often argue that the costs of trade outweigh the benefits while
laypeople often argue that the benefits of trade outweigh the costs.
Answer:
Refer to the graph shown. At a price of $0.90 per dozen:
A. there is a shortage of 2,000 dozen eggs per week.
B. there is a surplus of 2,000 dozen eggs per week.
C. quantity demanded is just equal to quantity supplied.
D. there is a shortage of 1,000 dozen eggs per week.
Answer:
In most developed countries, the class system:
A. is the same as in underdeveloped countries.
B. has been completely eliminated.
C. is a pyramid with the largest group being the lower class.
D. is diamond-shaped with the largest group being the middle class.
Answer:
Game theory:
A. is the best model for perfect competition.
B. replaces the standard supply/demand model.
C. is the best model for monopoly.
D. complements the standard supply/demand model.
Answer:
Suppose that a negative externality creates $1 billion worth of costs to third parties. The
government attacks the problem with regulations that cut the cost of the externality to
$500 million but cost business and consumers $1.5 billion. This situation illustrates the
idea that:
A. regulations are an effective way to curb externalities.
B. externalities can never be corrected.
C. correcting market failure can result in government failure.
D. getting rid of externalities requires a great deal of necessary sacrifice for all of us.
Answer:
Which of the following is not an example of government’s role as a referee?
A. Equal opportunity and labor laws that restrict businesses’ freedom to hire and fire
whomever they want.
B. Regulations governing safety in the workplace, wages, overtime, and hours of work
C. Laws prohibiting businesses from meeting to fix prices
D. Laws that require states and the federal government to balance their budgets
Answer:
Refer to the following table.
If the price of one Weight Watcher’s frozen dinner is $2 and the price of one dozen jelly
doughnuts is $3, which of the following would Kent, a utility maximizing consumer,
buy with his $6?
A. Three frozen dinners.
B. Two frozen dinners.
C. One frozen dinner and one dozen jelly doughnuts.
D. Two dozen jelly doughnuts.
Answer:
Which of the following is not held constant as you move along the demand curve?
A. The price of that good
B. The price of other goods
C. The incomes of consumers
D. The preferences of consumers for the good
Answer:
TV crime shows illustrate the prisoner’s dilemma when:
A. the judge ponders the sentence for the crimes.
B. the prisoners go to prison for the first time.
C. the police interview suspects in the same room.
D. the police interview suspects in different rooms.
Answer:
Public choice economists believe that:
A. incentives encourage government to achieve its goal in the least-cost manner.
B. incentives encourage government to provide a policy that its voting constituency
likes.
C. government is not subject to the laws of supply and demand.
D. government does not weigh the costs and benefits of various programs.
Answer:
Refer to the graph shown. If this monopolist charges a price of $8 for its product, it:
A. maximizes profit.
B. incurs losses.
C. earns zero economic profits.
D. can increase profits by increasing output.
Answer:
When people make decisions in which they only mimic what they think other people
are doing, they are engaging in:
A. purposeful behavior.
B. enlightened self-interest.
C. herding.
D. mutual interdependence.
Answer:
If there is a direct relationship between two variables, the graph relating those two
variables will be:
A. upward-sloping.
B. downward-sloping.
C. vertical.
D. horizontal.
Answer:
The most important difference between domestic governments and international
organizations is that:
A. international organizations are more effective since membership is voluntary.
B. domestic governments are more effective since national self-interest is not
constrained by international obligations.
C. international organizations are less effective since they have no means of forcing
members to comply.
D. domestic governments are less effective because they are more concerned about
international public opinion.
Answer:
Refer to the graphs shown. The consequences of improved technology combined with
an increase in the number of consumers can best be illustrated by:
A. a.
B. b.
C. c.
D. d.
Answer:
The U.S. Postal Service printed 150,000 sheets of a stamp depicting Bill Pickett, but
recalled them when the USPS realized the image on the stamp was Bill’s brother, Ben
instead. They were unable to recall 183 sheets that had already been sold. The effect of
this recall was to:
A. drastically reduce the demand for the stamps, causing their equilibrium price to fall.
B. have no effect on either supply of or demand for the Bill Pickett stamps because
there is no market for them.
C. drastically reduce the supply of the Bill Pickett stamps, causing their equilibrium
price to rise.
D. drastically reduce the supply of the Bill Pickett stamps, causing their equilibrium
price to fall.
Answer:
The United States has limits on Chinese textile imports. Such limits are an example of:
A. a tariff.
B. a quota.
C. a regulatory trade restriction.
D. an embargo.
Answer:
The demand for labor is a derived demand because:
A. many workers are self-employed.
B. the income workers earn adds to the demand for output.
C. the demand for output comes from the demand for labor.
D. the demand for labor comes from the demand for output.
Answer:
Refer to the graph shown. There is a negative externality associated with the production
of the good depicted. The socially efficient level of output is:
A. either greater than or less than Q0, depending on the elasticities of supply and
demand.
B. less than Q0.
C. equal to Q0.
D. greater than Q0.
Answer: