Suppose the U.S. government encouraged new medical school graduates to take over
existing practices from doctors wishing to retire by paying both the new and retiring
doctors $100,000. These doctors would be exemplifying the economic idea that
A) people are rational.
B) people respond to economic incentives.
C) optimal decisions are made at the margin.
D) equity is more important than efficiency.
If you burn your trash in the back yard in spite of regulations against it, then you are
A) acting economically irrationally and creating a social cost.
B) avoiding the private costs associated with disposing your trash some other way and
creating a social cost.
C) acting rationally and creating a positive externality.
D) saving landfill space and creating a social benefit.
What is the difference between an “increase in demand” and an “increase in quantity
demanded”?
A) There is no difference between the two terms; they both refer to a shift of the
demand curve.
B) An “increase in demand” is represented by a rightward shift of the demand curve
while an “increase in quantity demanded” is represented by a movement along a given
demand curve.
C) There is no difference between the two terms; they both refer to a movement
downward along a given demand curve.
D) An “increase in demand” is represented by a movement along a given demand curve,
while an “increase in quantity demanded” is represented by a rightward shift of the
demand curve.
Which of the following would cause the equilibrium price of apple juice to decrease
and the equilibrium quantity of apple juice to increase?
A) a decrease in the price of apples
B) an increase in the price of apples
C) an increase in the price of orange juice, a substitute for apple juice
D) a decrease in the price of granola bars, a complement for apple juice
What is the largest component of spending in the United States?
A) consumption spending
B) investment spending
C) government spending
D) net investment spending
In the United States in 2012, the percentage of people without some form of private
health insurance was about
A) 17%.
B) 29%.
C) 36%.
D) 83%.
We say that the economy is at full employment if the unemployment rate is equal to
A) zero.
B) the natural rate of unemployment.
C) the amount of cyclical unemployment.
D) the sum of frictional and cyclical unemployment.
E) the sum of structural and cyclical unemployment.
Buying at a low price in one market and reselling at a higher price in another market
will
A) not generate any profit because of transportation costs.
B) not generate any profit because of transactions costs.
C) eventually eliminate all of the price differences.
D) eventually eliminate most, but not necessarily all, of the price differences.
Between 1950 and 2009, the average length of recessions in the United States was
A) 11 months.
B) two years.
C) three months.
D) eighteen months.
In the short run, a profit-maximizing firm’s decision to produce should be guided by
whether
A) it makes a profit.
B) its marginal profit is maximized.
C) its total revenue exceeds its fixed cost.
D) its total revenue covers its variable cost.
In order to be binding, a price ceiling
A) must lie above the free market equilibrium price.
B) must lie below the free market equilibrium price.
C) must coincide with the free market equilibrium price.
D) must be high enough for firms to earn a profit.
The demand for all carbonated beverages is likely to be ________ the demand for Dr.
Pepper.
A) more elastic than
B) perfectly elastic compared to
C) less elastic than
D) perfectly inelastic compared to
Which of the following statements is used to justify protectionism?
A) Free trade leads to higher prices for imported goods.
B) Free trade increases employment by protecting domestic firms.
C) A country should not rely on other countries for goods that are critical to its national
defense.
D) Trade restrictions are not necessary to protect new firms since they can gain
experience and become more productive without protection.
Marginal utility is
A) the change in total utility divided by the price of the last unit of a good or service
consumed.
B) the change in total utility a person receives from consuming an additional unit of a
good or service.
C) the utility from consuming a given quantity of a good or service.
D) the decrease in total utility from consuming more and more units of a good or
service.
Owners of a corporation share in the profits of the firm
A) by selling any bonds or stocks owned and realizing a capital gain.
B) through coupon payments on that firm’s bonds.
C) through dividend payments on shares of that firm’s stock.
D) by raising the interest rate on bonds.
Disinflation refers to
A) a decrease in the price level.
B) a rapid increase in the price level.
C) a reduction in the rate of inflation.
D) an increase in the rate of inflation.
Assume there is a surplus in the market for hybrid automobiles. Which of the following
statements correctly describes this situation?
A) The supply of hybrid automobiles is greater than the demand for hybrid automobiles.
B) Some consumers will be unable to obtain hybrid automobiles at the market price and
will have an incentive to offer to buy the product at a higher price.
C) The price of hybrid automobiles will fall in response to the surplus; as the price falls
the quantity demanded will increase and the quantity supplied will decrease.
D) the surplus will cause an increase in the equilibrium price of hybrid automobiles.
Table 2-11
Table 2-11 shows the number of labor hours required to produce a motorcycle and a
guitar in Ireland and Scotland.
What is Scotland’s opportunity cost of producing one guitar?
A) 0.25 motorcycle
B) 4 motorcycles
C) 12 motorcycles
D) 16 motorcycles
A financial asset is considered a security if
A) the owner of the security receives dividends and realizes a capital gain when the
asset is sold.
B) it can be sold in a secondary market.
C) its value increases after it is sold in a primary market.
D) its value is secure; that is, the owner will not suffer a financial loss when the asset is
sold.
Studies by the U.S. Census Bureau have shown that
A) families remain below the poverty line for an average of five years.
B) there is significant income mobility in the U.S. over time.
C) income mobility in the U.S. is minimal.
D) over half the people below the poverty line never move out of poverty.