In the economic way of thinking, speculation can only occur
A) in a capitalist economy.
B) in a society where time-travel is possible.
C) under uncertainty.
D) under perfect information.
E) in an underground or illegal market system.
Which statement is consistent with the economic way of thinking?
A) Individuals in the market seek to advance their own interests.
B) Individuals in the market are not only concerned with money and material goods.
C) Individuals in the market do not necessarily pursue narrow or selfish goals.
D) All of the above.
E) None of the above.
Predatory pricing, as defined in the text, is
A) common and profitable but illegal.
B) common, profitable, and legal.
C) common but both unprofitable and illegal.
D) common and legal but unprofitable.
E) rarely observed though often alleged.
Which of the following constitutes wealth?
A) A baseball card collection
B) A 2014 Ford Focus
C) An Italian-made cello
D) Money deposited in a savings account
E) All of the above, as long as people value all of the goods listed above
What is meant by the marginal tax rate?
A) The highest rate that can be extracted.
B) The lowest rate that will still meet the government’s revenue requirements.
C) The percentage of additional income that is taken by taxes.
D) The rate paid by businesses that are just barely able to survive.
As presented in the textbook, gross domestic product is the sum of annual
A) business profits (both incorporated and unincorporated) plus all tax receipts of
federal, state, and local governments.
B) consumption, saving, and investment.
C) expenditures for new final goods by consumers, investors, government.
D) total sales of all business firms.
E) wages and salaries paid or received.
Which of the following is a disadvantage of the command-and-control approach to the
problem of pollution?
A) It creates licenses to pollute.
B) It is undemocratic.
C) It only works in societies where everyone (or almost everyone) has a high degree of
environmental consciousness.
D) It usually overlooks less costly ways to achieve given goals.
E) It violates property rights.
Checking account deposits are counted in M1, but savings account deposits are not
because
A) checking deposits can be used for payment; cash in savings cannot.
B) checking deposits are a form of consumption; savings deposits are a form of
investments.
C) Trick question! Neither type is counted in M1.
D) Trick question! Both deposit types are counted in M1.
As people have more time to adjust to changes in a good’s price,
A) the demand curve will become less elastic.
B) the supply curve will become less elastic.
C) both the demand and supply curves will become less elastic.
D) both the demand and supply curves will become more elastic.
According to the textbook authors, pollution is a growing “social” problem because
A) only society, rather than individuals, pollutes.
B) pollution is inefficient.
C) pollution is economically efficient.
D) more people are beginning to question the moral and legal rights of polluters.
In the economic way of thinking, government consists of many different people
interacting on the basis of
A) fear.
B) legal guarantees.
C) prevailing property rights.
D) public interests.
Fill in the blanks: A change in ________ causes a change in ________ and therefore a
change in ________.
A) cost; demand; price
B) price; demand; supply
C) supply; price; demand
D) demand; price; cost
According to your textbook, the current war on drugs in the United States has similar
consequences to the earlier prohibition on alcohol. The similar consequences include
A) an underground supply and demand process.
B) the production of more powerful and dangerous forms of the illegal products.
C) production and distribution being controlled by people with a comparative advantage
in crime
D) All of the above.
E) None of the above.
In a typical college classroom without a seating chart, dozens of students nevertheless
occupy classroom seats with a minimum of confusion and disorder. Economics explains
the orderly process of seat selection by assuming students
A) engage in entirely random decisions, from which only divine intervention can
generate order in the classroom.
B) follow a simple, perhaps even unwritten, rule, such as “seats belong to the person
who first occupies them.”
C) know all the consequences of their actions, and thus purposefully create an orderly
classroom seating assignment even if the professor doesn’t require one.
D) trick question: economics cannot deduce any sensible scientific claims about the
behavior of college students.
From which of the following goods is it most difficult to exclude free riders?
A) Afternoon swimming lessons at the YMCA
B) The St. Patrick’s Day Parade in Boston
C) Bungy jumping at the state fair grounds
D) Grandstand seating at the Daytona 500
If elected officials prefer policy actions that make benefits available quickly while
deferring costs, they will be inclined to favor
A) an easier monetary policy to counter recession.
B) increased appropriations to provide jobs for unemployed workers.
C) a wage and price freeze to control inflation.
D) all of the above.
E) none of the above.
The market value of downtown real estate is most basically determined by the
A) assessment of the taxing authorities.
B) market value of the building already on a particular plot of land.
C) use to which it is currently being put.
D) uses to which people would like to put it if given a chance.
E) whatever it costs to convert the land to its next best use.
Suppose firms in Hong Kong can produce 40,000 plastic dolls or 80,000 squirt guns
each week, while firms in Taiwan can produce 40,000 plastic dolls or 40,000 squirt
guns each week. Therefore, when we compare the two groups:
A) the costs of production are the same in each country.
B) the people in Hong Kong are the most efficient producers of both plastic dolls and
squirt guns.
C) the people in Taiwan produce plastic dolls with the same efficiency as Hong Kong.
D) none of the above are true.
If it costs you $60 to produce 3 widgets and $64 to produce 4 widgets, the marginal cost
to you of producing a 4th widget is
A) $62.
B) $20.
C) $18.
D) $6.
E) $4.
The time it takes for a one-dollar addition to bank reserves to work its way through the
banking system and the financial portfolios of the public and have its full impact on the
stock of money
A) is about one quarter of a year.
B) is between six and nine months.
C) is not yet known precisely because little empirical research has been done on the
question.
D) probably cannot be predicted from an examination of historical data.
The formula for the deposit expansion multiplier =
A) 1 x required reserve ratio.
B) 1 / required reserve ratio.
C) 10 x required reserve ratio.
D) 10 / required reserve ratio.
Instead of studying for his calculus exam, Dicky Cribsheets decides to cheat. In the
economic way of thinking, Dicky’s decision is
A) inefficient and wrong.
B) inefficient and desirable.
C) efficient and desirable
D) not necessarily any of the above.
Negative externalities might be reduced by letting people “work it out themselves,”
which might also be described as ________.
A) substantiation.
B) negotiation
C) remuneration
D) adjudication
E) appropriate taxation
Which of the following sets of goods might, under the right circumstances, be
substitutes for an automobile?
A) Buses, trains, planes
B) Powerboats, blimps, motorcycles
C) Motels, tents, cardboard boxes
D) Designer suits, fine wines, fancy homes
E) All of the above.
Which of the following goods might, under the right circumstances, be substitutes for
love?
A) Power
B) Wealth
C) Notoriety
D) All of the above.
E) Trick question: there are no substitutes for love.
The traditional typewriter market has collapsed over the past few decades because
people prefer personal computers. Yet, some new typewriters continue to be produced
and sold at historically low prices. How would you explain the decline in typewriter
prices?
A) Typewriter producers have become less greedy.
B) The demand curve for typewriters has shifted to the left.
C) The supply curve for typewriters has shifted to the right.
D) The supply curve for typewriters has shifted to the left.
New airplanes, which normally consume less fuel per passenger-mile, become less
efficient for commercial airlines to purchase and use as
A) average flight distances lengthen.
B) fewer non-stop flights are scheduled.
C) fuel prices fall.
D) the demand for airline travel increases.
E) the price of new airplanes falls.
According to the textbook, which of the following methods for coordinating the
supplies and demands for scarce goods tends to work best to enhance the freedom and
power of people who want the goods?
A) A lottery
B) Equal shares for all
C) First come, first served
D) Highest money bid
E) Might makes right
Suppose in Italy producers can make 10,000 dresses or 1,000 coats per day, while in
Canada producers can make 14,000 similar dresses or 2,000 similar coats per day.
Therefore
A) Canadians have a comparative advantage in coats.
B) Canadians have a comparative advantage in dresses.
C) Italians have comparative disadvantage in dresses.
D) all of the above are true.
Which conditions must be present for “perfect competition” to occur?
A) A large number of buyers and sellers, and all of them enjoy full and complete
information.
B) Sellers produce identical products.
C) There is a costless mobility of resources.
D) Everybody behaves as a price taker.
E) All of the above.
Consider the following scenario: The Kellogg’s facility buys corn and makes boxes of
cornflakes. The grocer buys the boxes and places them on the shelf. A mother then buys
a box for her family. Which of the following would be classified as a purchase of a final
good?
A) The cornflakes purchased by the mother
B) The cornflakes purchased by the grocer
C) The corn purchased by Kellogg’s
D) All of the above.
E) None of the above.
Samantha decides to withdraw $10,000 from her savings account and invest it all in the
stock market. Her total economic costs
A) equal $10,000.
B) are independent of the interest she enjoyed in her savings account.
C) are affected by the interest she enjoyed in her savings account.
D) are determined solely by the commission she is charged for the purchase of stock.
A recession shows
A) supply always equals demand.
B) supply never equals demand.
C) thousands of businesspeople have misread market signals.
D) real GDP must be lower than nominal GDP.
E) not enough households are using their credit cards.
The demand for salt is probably more inelastic at generally prevailing prices than the
demand for potatoes because
A) potatoes require salt but salt does not require potatoes.
B) salt has long been a favorite target for taxation.
C) salt is cheap relative to most users’ incomes and has few good substitutes.
D) salt will keep longer than potatoes before spoiling.
E) there is so much potential salt in the ocean.
Consider the following scenario: The Kellogg’s facility buys corn and makes boxes of
cornflakes. The grocer buys the boxes and places them on the shelf. A mother then buys
a box for her family. Which of the following would not be classified as a purchase of an
intermediate good?
A) The cornflakes purchased by the mother
B) The cornflakes purchased by the grocer
C) The corn purchased by Kellogg’s
D) All of the above.