If a legal ceiling price causes the quantity of a good demanded to be greater than the
quantity supplied
A) competition among both buyers and sellers is prevented.
B) competition among buyers is prevented.
C) competition among sellers is prevented.
D) competition among buyers will raise the nonmonetary costs of obtaining the good.
According to your text, with the exception of South Africa, the record of economic
growth in sub-Saharan Africa
A) is tragic.
B) mirrors that of most of the Latin American countries.
C) is about the same as South Korea.
D) is respectable, but not fantastic.
When the price of a good decreases,
A) demand increases.
B) quantity demanded increases.
C) demand decreases.
D) quantity demanded decreases.
Exactly what is a “sunk cost”?
A) A decision somebody regrets having made
B) A mistaken choice
C) Unrecoverable costs
D) A cost that haunts you for the rest of your life
In the economic way of thinking,
A) suppliers compete against other suppliers.
B) demanders compete against other demanders.
C) suppliers cooperate with demanders.
D) all of the above are true.
Something will be rare but not scarce if very little of it exists and
A) its price is high enough that only a few wish to purchase it.
B) its price is high enough that no one can afford it.
C) no one wants any.
D) the quantity supplied is greater than the quantity demanded.
If political unrest abroad substantially reduces the supply of copper to the United States,
the price of copper will rise by a larger amount
A) the more elastic the demand for copper.
B) the more inelastic the demand for copper.
C) the more elastic the supply of copper.
D) the more inelastic the supply of copper.
A legal ceiling set below the market-clearing interest rate would tend to
A) create a surplus of loans.
B) create a shortage of loans.
C) increase the demand for loans.
D) decrease the supply of loans.
E) do none of the above.
Why do few avocados rot, even though in some seasons of the year far more avocados
are harvested than in other seasons of the year?
A) Consumers realize it would be inefficient to let avocados rot.
B) Growers vary their advertising efforts with the season of the year.
C) Prices fluctuate sharply as supplies increase or decrease.
D) The taste for avocados varies proportionately to the supply.
Technological efficiency, defined in terms of completely objective relationships,
A) has no useful meaning.
B) influences the decisions of engineers but not of business executives.
C) influences the decisions of engineers but not of economists.
D) is more important in the long run than in the short run, where profitability tends to
dominate decisions.
A twelve pack of soda sells for $3.50. At a $3.50 price, you plan to purchase two twelve
packs. Therefore,
A) your quantity demanded is two twelve packs.
B) your demand is two twelve packs.
C) you need two twelve packs.
D) you love soda.
When we hear on the news, “The Fed has lowered interest rates today,” the Fed has
most likely
A) raised the discount rate.
B) lowered the required reserve ratio.
C) raised the federal funds rate.
D) purchased government bonds.
An increase in nominal gross domestic product necessarily entails an increase in
A) both real output and the price level.
B) either real output or the price level (or both).
C) real output and employment.
D) the price level and employment.
What is required for a positive externality to occur?
A) The full benefits of an action aren’t taken into account.
B) The intention or plan to directly help other people
C) A concern for social welfare
D) Courtesy and honesty
E) All the above.
A great deal of damage is done to the environment in the urban U.S. because
A) a system based on private property cannot provide for a common environment.
B) few people understand the economics of pollution.
C) many and perhaps most people assign little or no value to a pleasant environment.
D) the environment is treated as everyone’s property and therefore as no one’s property.
E) the United States has no central planning.
If Croatian firms can make 600 pitchforks or 100 hammers in a week and Slovenian
firms can make 200 pitchforks or 200 hammers in a week, then
A) Croatia has a comparative advantage in hammers.
B) Slovenia has a comparative advantage in hammers.
C) Slovenia has a comparative advantage in pitchforks.
D) Slovenia has a comparative advantage in neither hammers nor pitchforks.
Fact: People use water for many different purposes, from drinking and cleaning to
filling pools, balloons, and squirt guns. Economists acknowledge the multiple uses of
water when they point out that
A) everybody needs water.
B) water is a good with many alternative uses at the margin.
C) the demand for water is completely inelasticconsumers are totally insensitive to
changes in the price of water.
D) nothing but water can be used to serve all the purposes water serves.
GDP is used by economists to measure
A) the market value of final goods and services produced over a particular time period.
B) the overall well-being of society enjoyed over a particular time period.
C) the overall efficiency of the macro economy over a particular time period.
D) the economic strength of the nation.
What is the relationship between government and coercion?
A) Government achieves its objectives exclusively through coercion.
B) Government aims at minimizing the use of coercion in society.
C) Government is generally granted the exclusive right to coerce adults.
D) Only governments use coercion.
Current offers to purchase or sell scarce goods take account of the wants of future
generations
A) if government intervenes to give the future a current voice.
B) if people are able to predict future prices.
C) only if people are concerned for the welfare of others yet unborn.
D) only rarely because people are predominantly selfish.
Legal restrictions on competition, such as the grant of patent privileges to inventors,
A) destroy property rights.
B) expand property rights.
C) both destroy and expand property rights.
D) neither destroy nor expand property rights because patents are granted by the U.S.
Constitution.
A business firm should refuse to sell any item for which it cannot obtain a price at least
as large as what
A) it cost the firm to produce the particular item.
B) it costs the firm on average to produce the item.
C) it would cost the firm to produce another item identical to the item being sold.
D) the item will be worth to the firm if not sold.
The demand for goods reflects people’s values
A) and so does the supply of goods.
B) but the supply of goods rests on objective realities rather than values.
C) insofar as they are material values.
D) insofar as they can be satisfied by spending money.
E) insofar as the demand is completely inelastic.
Which of the following statements is true?
A) If higher water prices encourage a landlord to place bricks in the water tanks of his
toilets to reduce water usage, then for him bricks are substitutes for water.
B) If higher gasoline prices encourage a potential vacationer to stay at home and read a
good book by the fire, rather than drive through the country, then for her firewood is a
substitute for gasoline.
C) Both A and B are true.
D) None of the above are true.
Arbitrage means seeking profit by
A) buying high and selling low.
B) buying low and selling high.
C) either of the above.
D) neither of the above.
Suppose a Chinese restaurant routinely provides free fortune cookies to its customers.
The economic way of thinking suggests the restaurant is
A) engaging in predatory pricing of its meals.
B) attempting to increase its total profit.
C) selling Chinese food below cost.
D) doing all of the above.
E) almost certainly doing none of the above.
Determining who receives scarce goods by the criterion of willingness to pay tends to
enhance the freedom and power of people who want the goods because
A) it enables everyone to obtain at least a little of everything.
B) it facilitates choice by everyone on the basis of their own specific situation.
C) it gives everyone an equal chance.
D) it makes sure the people who obtain scarce goods are the people who most deserve
them.
E) it puts genuine need ahead of politics.
Fill in the blanks: The ________ the proportion of one’s budget spent on a good, the
________ the elasticity of demand.
A) greater; lower
B) greater; greater
C) lower; greater
D) lower; more responsive
The operation of supply and demand should be thought of as a process
A) for establishing consumer sovereignty.
B) for increasing individual liberty.
C) for maximizing social welfare.
D) for maximizing total output.
E) of mutual accommodation.
There’s not a single golf course in downtown Chicago because
A) it would be physically impossible to produce.
B) it would ruin the hustle and bustle of the city.
C) the opportunity cost of creating such a course is too low.
D) the demand for land for non-golf uses is high enough to discourage such an
investment.
E) all of the above are true.
Past expenses are irrelevant to supply decisions, because
A) expenses incurred in the past never affect the opportunities available in the present.
B) it is essential to avoid bankruptcy.
C) no one remembers the past.
D) supply decisions depend on opportunities that will have to be forgone, not
opportunities already forgone.
The basic rule for maximizing net revenue is: Charge a price, or set of prices, so that
A) expected marginal revenue equals expected marginal cost.
B) expected marginal revenue exceeds expected marginal cost.
C) expected marginal revenue is equal to or less than expected marginal cost.
D) marginal revenue turns out in practice to be equal to or less than marginal cost.
E) marginal revenue turns out in practice to be greater than marginal cost.
Fill in the Blanks: When a hard frost hits orange groves in Florida, the supply of orange
juice ________ and price ________.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases