Pick the best answer using the economic way of thinking. If information is a scarce
good, then ignorance might be
A) a sin.
B) stupid.
C) bliss.
D) rational.
E) inefficient.
According to your textbook, the notion of price “gouging” is problematic because
A) the higher prices are normally the result of decreases in supply and increases in
demand.
B) economists believe higher prices are always better than lower prices.
C) economists want businesses to make high profits.
D) None of the above.
Inflation can be defined as
A) a sustained rise in real output.
B) a sustained rise in nominal wages.
C) a sustained rise in the price level.
D) a sustained rise in the purchasing power of money.
A seller who continues to earn the same gross revenue from sales whether she raises or
lowers her prices faces a demand curve that
A) contradicts the law of demand.
B) is completely elastic.
C) is completely inelastic.
D) is unit elastic.
E) is vertical.
The economic way of thinking assumes
A) people act selfishly.
B) people act altruistically.
C) people act to promote the projects in which they are interested.
D) people do not act at all; they merely react to the environment around them.
A grower of commercial Christmas trees can raise blue spruce and Douglas fir.
Therefore, an increase in the expected market price of Douglas firs tends to
A) reduce the planting of Douglas firs.
B) reduce the planting of blue spruce trees.
C) increase the cost of planting Douglas firs.
D) do none of the above.
What is the antithesis of the rule of law?
A) Arbitrary governance
B) Governance according to the will of whoever is in charge
C) Both of the above.
D) None of the above.
What would not lead to an overall decrease in demand for air travel in the U.S.?
A) The fear of future terrorist attacks
B) News of lengthy security delays at airports
C) An expected decrease in airfares
D) A substantial increase in bus and passenger train fares
“My son is a smart entrepreneur. Rather than borrow money from others, he used his
own savings to start his music business, and thereby avoided paying interest on loans.”
An economist would respond by saying
A) “both you and your son are complete idiots.”
B) “it’s always good to avoid borrowing and paying interest.”
C) “nobody can avoid paying interest, not even your clever son.”
D) “your son might have avoided paying interest, but he also avoided earning interest.”
Which of the following clearly restricts the competitive market process?
A) Price searching behavior
B) Price taking behavior
C) Predatory pricing
D) Cost-plus-markup pricing
E) None of the above.
Many middle-to-older-aged men now claim they “need” Viagra (the male impotency
wonder drug) for an enjoyable sex life. The economic way of thinking predicts
A) more men would be likely to claim they need Viagra if the price per pill were much
lower (say two cents each) compared to the current price.
B) fewer men would be likely to claim they need Viagra if the price per pill were much
higher (say, two hundred dollars each) compared to the current price.
C) other things constant, more prescriptions would be written if the price of Viagra falls
significantly.
D) other things constant, fewer prescriptions would be written if the price of Viagra
rises significantly.
E) all of the above are true.
People who buy futures on the commodity market are
A) agreeing to accept a specified quantity in the future at whatever price prevails then.
B) agreeing to pay a price agreed upon now for future delivery of a commodity.
C) buying now and promising to deliver the commodity in the future.
D) said to be “on the spot market.”
If, by law, we suppress free market prices to determine who gets what,
A) other criteria will come into play to ration scarce goods.
B) scarcity will be reduced or eliminated.
C) shortages will be reduced or eliminated.
D) there will be no alternative way to make the quantity demanded conform to the
quantity supplied.
Which of the following is not a usual consequence of inflation?
A) Income is redistributed among people.
B) People are misled into supposing that their earnings have risen substantially.
C) People believe that rising prices have made them worse off.
D) The cost of living goes up for everyone.
E) The value of money falls.
The economic way of thinking assumes
A) women act differently than men.
B) Christians act differently than non-Christians.
C) athletes act differently than non-athletes.
D) all people act on the basis of the plans and projects they are interested in.
A sensible buyer will want to acquire additional information before committing herself
as long as the expected value of the information she is gathering
A) is greater than the anticipated value of the purchase.
B) is greater than the expected cost of acquiring it.
C) will enable her to avoid all mistakes.
D) will enable her to avoid possible mistakes she will subsequently regret having made.
The problems that inflation creates are caused almost entirely by
A) corporations.
B) greed.
C) price searchers.
D) uncertainty.
E) unions.
According to your authors, what caused the unsustainable housing bubble followed by
the Great Recession?
A) Unprecedented greed
B) The Fed’s lowering of interest rates during the early 2000s
C) Deregulation in the financial and investment banking markets
D) All of the above.
E) None of the above.
Competitive offers to buy and sell resources establish money prices, which reflect
relative scarcities
A) in all economic systems.
B) in any economic system where efficiency is important.
C) only when there are no sunk costs to be recovered.
D) when resources are privately owned.
A system of laws and courts generates positive externalities because
A) only governments are capable of creating such systems.
B) people cannot choose whether or not to obey the law.
C) people who disobey the law benefit from the existence and enforcement of rules
applicable to all.
D) such a system could not exist without the approval of a majority.
Economic growth entails an increase in the rate of production of
A) material goods.
B) services.
C) the money supply.
D) wealth.
According to your textbook authors, the belief that economizing implies greedy
behavior is
A) common but mistaken.
B) uncommon but true.
C) both common and true.
D) neither common nor true.
Accountants define profit as “total revenue minus total cost,”
A) and so do economists.
B) but economists define profit as net revenue minus total cost.
C) but economists define profit as net cost minus total revenue.
D) but economists define profit as total cost minus total revenue.
E) but economists have long abandoned the concept of profit.
Price elasticity of demand is defined as
A) the change in price divided by the change in quantity demanded.
B) the change in quantity demanded divided by the change in price.
C) the percentage change in price divided by the percentage change in quantity
demanded.
D) the percentage change in quantity demanded divided by the percentage change in
price.
E) the quantity demanded divided by the price.
Which of the following allows an economist to conclude that the welfare or happiness
of society as a whole is clearly increasing?
A) A decrease in nominal GDP
B) A decrease in real GDP
C) An increase in nominal GDP
D) An increase in real GDP
E) None of the above.
Let’s assume producers in Canada can make 200 units of beef or 50 units of oranges,
and U.S. producers can make 50 units of beef or 200 units of oranges per time period.
Which country faces the lowest opportunity cost of producing beef?
A) The U.S.
B) Canada
C) Both countries
D) Neither country
Suppose Factory A emits 15,000 units of “Yuck” monthly, Factory B emits 30,000 units,
and Factory C emits 45,000 units. Also suppose A’s cost of reducing the emission is $1
per unit, B’s cost is $2 per unit, and C’s cost is $3 per unit. If the EPA orders each
factory to reduce its emissions by half, what would be the total cleanup cost?
A) $45,000
B) $67,500
C) $105,000
D) $122,500
E) $127,000
Suppose Dunkin’ Donuts buys coffee beans from a wholesaler for $1. They package the
beans up and sell them as their own “Dunkin’ Donut” beans for $10 at their store. How
much value is added to the economy?
A) $10
B) $11
C) $13
D) $15
Ethiopia provides a counterexample to the claim
A) central economic planning doesn’t work well.
B) nations are poor because they are subject to exploitation by nations with superior
military power.
C) a nation can move to the ranks of the wealthiest in the world with few natural
resources.
D) the rule of law is necessary for economic growth.
This month Jones bought $10 of fresh hops for making home-brewed lager. In principle,
what happens to GDP?
A) Nothing, because it involves the production of homemade beer.
B) Nothing, because the hops are an intermediate good.
C) GDP increases by $10.
D) GDP increases by $10 as long as Jones is satisfied with the final product.