The usefulness of money in commercial societies comes from the fact that
A) money is backed by gold.
B) most people will change their behavior at least a little in response to money
incentives.
C) most people will do anything at all for money.
D) most people would rather spend money than save it.
E) the quantity of money can easily be expanded or contracted.
Did Mother Teresa create negative externalities when she helped the poor of Calcutta?
A) Yes, if her activities unintentionally imposed costs on others, such as upsetting
people who don’t believe in charity for the poor.
B) No, because she strove only to do good, not bad.
C) No, because her activities were accomplished in a state of grace.
D) No, because her activities were altruistic.
E) B, C, D, are all correct.
To say that an individual displays a positive rate of time preference mean
A) She prefers to have more time rather than less time in her day.
B) She prefers to have less time rather than more time in her day.
C) She prefers goods sooner rather than later in the future.
D) She prefers goods later rather than earlier in the future.
People who come to fear that their wealth is going to be confiscated will acquire a
relatively greater incentive to invest in
A) agricultural land.
B) human capital.
C) machinery and physical equipment.
D) urban real estate.
Could an increase in the demand for compact cars give an American automobile
producer a comparative advantage in their production?
A) No, because comparative advantage depends entirely on productive capabilities.
B) No, because changes in demand can only affect the price of compact cars.
C) Yes, but only if it leads to a change in the techniques of production.
D) Yes, by making compact-car production more profitable.
Of the following, which determines the price a price searcher will be able to charge?
A) The costs of capital
B) The costs of labor
C) Advertising costs
D) Demand
E) A, B, and C above.
A general medium of exchange tends to
A) reduce transaction costs.
B) make bartering more effective.
C) reduce the incentive to specialize and pursue one’s comparative advantage.
D) accomplish all of the above.
E) accomplish none of the above.
The members of a society can assign tasks according to ability and distribute benefits in
accordance with need only
A) if the government controls the economy.
B) if they have a workable procedure for assessing abilities and needs.
C) in a socialist or, more likely, a communist society.
D) when there are enough of them to assure competent performance of all necessary
tasks.
E) when they are committed to equity as well as efficiency.
Using the economic way of thinking, what do a pencil, stick of gum, and balloon have
in common?
A) Each is produced by a single person.
B) Each is produced by a small number of people.
C) Given the state of modern technology and high-speed processing, each can soon be
produced without any human intervention at all.
D) The production of any one of the goods mentioned above requires the voluntary
cooperation of millions of producers and traders.
A “normal good” is defined as any good in which
A) a rise in its price will reduce quantity demanded.
B) a fall in its price will increase quantity demanded.
C) a rise in income will reduce overall demand.
D) a fall in income will reduce overall demand.
Who ends up paying when sunk costs are incurred as a result of erroneous forecasting?
A) No one pays them because they are sunk.
B) The consumer, because they eventually show up as higher prices.
C) The government, since they fall evenly on the entire community.
D) The taxpayer, because they produce a decline in assessed valuations.
E) Whoever invested in the unsuccessful project.
It is difficult for competent authorities to agree on the best definition of the money
stock because money is composed primarily of the liquid liabilities of financial
institutions
A) and liquidity implies the absence of certainty.
B) of which there are many different kinds whose relative liquidity is continually
changing.
C) on which we simply have no reliable data.
D) whose solvency is highly questionable.
Marginal revenue for a price taker is
A) equal to price.
B) less than price.
C) more than price.
D) unrelated to price.
The supply curve of a good is highly elastic when
A) additional resources can be attracted into its production by the prospect of a slightly
higher reward.
B) its marginal supply cost is highly sensitive to changes in demand.
C) marginal cost is very low.
D) marginal cost rises steeply as the quantity supplied increases.
E) the demand for the good is greater than the supply.
Using the economic way of thinking, which of the statements listed below best answers
the following question: Why do professional athletes tend to make more money than
professional poets?
A) Americans love sports and hate poetry.
B) Poets are less greedy and materialistic than athletes.
C) More people are willing to pay $50 per ticket to see an athletic competition than they
are to listen to a poet.
D) The supply of poets is too low.
You get bit by your neighbor’s dog, and incur $200 in emergency medical expenses.
What happens to GDP?
A) It increases by $200.
B) It decreases by $200.
C) It remains unchanged.
D) It depends upon whether you or the dog owner pays the medical bill.
Income accrues to people who supply productive services, which means services that
A) add to the monetary income of the society.
B) are in demand.
C) contribute to social welfare.
D) result in tangible or durable products.
E) supply basic wants.
From the economic point of view, what’s worse, profit or loss?
A) Profit
B) Loss
C) They are equally bad.
D) The question is meaningless as stated.
A rise in the rate of people’s time preference in general tends to
A) increase interest rates.
B) decrease interest rates.
C) have no effect on interest rates.
D) have no effect at all in the market for credit.
Rent controls unintentionally create
A) scarcity of rental units.
B) surpluses of rental units.
C) shortages of rental units.
D) market-clearing outcomes in the apartment rental market.
Other things constant, which person is willing to save more?
A) One that has a higher rate of time preference
B) One that has a lower rate of time preference
C) One that has no rate of time preference
D) One that has no consideration about the value of goods now and in the future
Why are suburban stores more likely than downtown stores to provide free parking for
their customers?
A) Fewer people drive their cars to downtown stores than to suburban stores.
B) Suburban people are more addicted to the automobile than are inner-city residents.
C) The cost of using land is higher in the downtown area.
D) There is not much land available in the downtown area.
Negative externalities might be reduced by creating new rights, which we would
describe as ________.
A) adjudication
B) remuneration
C) legislation
D) substantiation
E) reparation
If the demand for a good were completely inelastic,
A) the good is a basic necessity.
B) the good is a luxury.
C) there are no substitutes for the good.
D) there had been a long period of time for people to adjust their behavior.
E) people who own the good currently do not want to give it up except at much higher
prices.
According to your text, many people don’t understand how economic systems work
because they
A) are too lazy to study them.
B) don’t think economic systems matter greatly.
C) tend to look at them when they are not performing adequately.
D) prefer to believe what they read or hear in the media.
E) have not been trained in the scientific way of thinking.
Positive externalities are created by people when they
A) add to the net real income of society.
B) are altruistic or concerned for the welfare of others.
C) benefit others without intending to do so.
D) increase the general welfare.
E) promote the happiness of others.
If the Fed were to attempt to increase the money supply, it would most likely do so
A) by manipulating the discount rate.
B) by manipulating the required reserve ratio.
C) by altering the amount of gold held in Fort Knox.
D) by engaging in open market operations.
Government certification of the weights and measures used in business can be justified
because
A) no business operated for profit would have any interest in weighing and measuring
accurately.
B) people cannot be trusted.
C) government officials, unlike private parties selling for profit, have no incentive to
cheat.
D) it reduces total transaction costs below what they would be if all individual buyers or
sellers had to check for themselves.
Someone who earns her living rolling out pizza dough
A) is inefficiently employed if she could shift to another occupation and produce more
than the person she replaces.
B) is inefficiently employed if someone else could roll out more dough in less time.
C) thinks she has a comparative advantage in rolling out pizza dough.
D) All of the above are true.
If the demand for a good is extremely inelastic, a large increase in the cost of supplying
it will
A) raise its price substantially and increase the total dollars spent to purchase it.
B) raise its price substantially but decrease the total dollars spent to purchase it.
C) raise its price very little and decrease the total dollars spent to purchase it.
D) raise its price very little but increase the total dollars spent to purchase it.
If the market clearing price of computer tablets rises from $400 to $600, and the market
clearing output decreases from 5 million to 4 million units,
A) demand decreased and supply remained unchanged.
B) supply increased and demand remained unchanged.
C) demand increased and supply remained unchanged.
D) supply decreased and demand remained unchanged.
Every society must follow some kinds of criteria to determine who gets what. Examples
of such criteria include
A) age.
B) gender.
C) height.
D) willingness to pay.
E) all of the above.
Suppose a credit union strives for a 3% real return on its loans to members, and expects
a 2% inflation rate. What nominal rate of interest should it charge its members?
A) 0%
B) 1%
C) 3%
D) 6%
There is no completely satisfactory way to define the money supply in the United States
because
A) data on the money supply are always approximate and only available after a time lag
of several months.
B) much of it is held by the public and so cannot be monitored by the Fed.
C) the Federal Reserve uses a number of different definitions.
D) the liquidity of any asset is a matter of degree.