Suppose a university refunds students 75% of their tuition if they drop out before the
third week of class, 50% if they drop out between their third and fifth week, 25% if they
drop out between their sixth and eighth week, and 0% after the eighth week. Flint paid
$1,000 tuition, and is in his eleventh week of class. What’s his sunk cost?
A) $0
B) $250
C) $500
D) $750
E) $1,000
If freezing weather destroys half of the current Florida orange crop, wealth will increase
for
A) almost all Florida orange growers.
B) no Florida orange growers.
C) some Florida orange growers and all California orange growers.
D) some Florida orange growers and some California orange growers.
Which of the following is not an important difference between privately-owned
enterprises and government institutions?
A) Decision makers confront different sets of incentives.
B) Different kinds of information are available to decision makers.
C) Government has the generally acknowledged right to use coercion.
D) Self-seeking motives are less characteristic of government employees.
Someone can become an inefficient producer of a particular good by becoming an
extremely potent producer of some other good
A) if efficiency and inefficiency are not calculated in terms of opportunity costs.
B) if efficiency is measured in terms of labor hours required to produce each good.
C) if a larger output of one good entails a smaller output of the other.
D) if the demand for one of the goods declines.
If nation-states are able to extend effective control over ocean resources from 3 miles to
200 miles off their coasts, valuable marine animals are more likely to be harvested
A) at a rate consistent with their long-run preservation.
B) at a rate inconsistent with their long-run preservation.
C) too rapidly for maximum net benefit.
D) too slowly for maximum net benefit.
E) up to the point of extinction.
Land suitable for growing corn is usually suitable for growing soybeans. From the
farmer’s perspective, an increase in the price of corn will therefore tend to
A) decrease the demand for soybeans.
B) increase the demand for soybeans.
C) increase the supply (curve) of corn.
D) raise the cost of growing soybeans.
E) reduce the cost of growing soybeans.
Your textbook asserts that the federal government’s $787 billion stimulus plan, launched
in 2009,
A) failed to stimulate the economy out of the Great Recession.
B) was followed by growing unemployment.
C) stifled the corrective process of the previous cluster of errors during the housing
bubble.
D) favored well-organized interests.
E) led to all of the above.
Suppose a Chinese restaurant provides free tea and fortune cookies to its customers.
The restaurant is clearly
A) generating a negative externality.
B) generating a positive externality.
C) selling food below cost.
D) attempting to increase its total profit.
E) doing none of the above.
The Federal Trade Commission was created by Congress as an expert body to
A) help small businesses compete by offering technical advice and assistance.
B) help small businesses compete by providing low-interest start-up loans.
C) prevent insider trading.
D) promote competition by preventing trade practices held to be unfair.
E) regulate prices on spot and futures markets.
If each 10 percent increase in the price of gasoline reduces by 2 percent the quantity
purchased, the price elasticity of demand for gasoline is
A) .2.
B) 5.
C) 8.
D) 12.
E) 20.
There are very few, if any, farms within the city limits of Chicago because
A) zoning laws have always prohibited them.
B) the land under the city of Chicago is unfertile.
C) Chicago is known for its butchers and freighters, not its farmers.
D) the land is in extremely great demand for non-agricultural purposes.
According to your authors, economics
A) alone is not the only, or even the best, perspective to make sense out of the real
world.
B) can predict real-world phenomena with roughly 85-90% accuracy.
C) generates conclusions every reasonable person should accept as true.
D) is a false doctrine because individuals have been shown to act non-selfishly.
A highly profitable cartel arrangement among sellers contains the seeds of its own
disintegration because
A) a monopoly arrangement is more unstable than an oligopoly arrangement.
B) a price maintained above each cartel member’s marginal cost is an incentive to offer
secret price reductions to attract additional business.
C) monopoly agreements will, in the long run, reduce net revenue to zero.
D) net revenue for the cartel as a whole could be increased by producing at the level
where marginal revenue equals marginal cost for each cartel member.
E) the cartel members will have a strong incentive to reduce quality.
The text defines persuasion as inducing others to cooperate by
A) either threats or promises.
B) employing deception.
C) offering people additional options.
D) providing monetary payments.
E) using verbal arguments.
Every dollar added to the total reserves of the commercial banking system
A) compels the banks to reduce their loans by more than a dollar.
B) compels the banks to expand their loans by more than a dollar.
C) enables the banks to expand their loans by more than a dollar.
D) enables the banks to expand their loans by one dollar.
E) is one less dollar in the hands of the public.
Movement along a supply curve implies
A) quantity demanded changes as the price changes.
B) supply changes as the price changes.
C) suppliers’ plans change when the price changes.
D) all of the above.
If Congress conducted public hearings to decide whether subsidies should be granted to
the steel industry, taxpayers would not be well represented at the hearings because
A) no hearing room would be large enough to hold all the taxpayers who would want to
testify.
B) single taxpayers do not have a large enough stake in the issue to justify the cost of
attending the hearings.
C) taxpayers would not gain or lose, no matter how the issue was decided.
D) they are apathetic.
E) they know only money buys votes.
When a commercial bank lends $1000 to a customer, and the loan proceeds are spent by
the customer, the legal reserves of the banking system
A) decline by $1000.
B) do not change unless the loan proceeds are withdrawn in currency.
C) rise by $1000.
D) rise by more than $1000 because spending increases nominal GDP.
High money prices for scarce goods
A) are one among many possible causes of their scarcity.
B) are the basic cause of their scarcity.
C) are the effect of their scarcity.
D) have nothing to do with their scarcity, because almost all goods are scarce.
Interest is not the price of money, which can be seen when interest rates rise rapidly in
an economy where
A) barter exchange displaces money exchange.
B) people lose interest in money.
C) the demand for money increases rapidly.
D) the supply of money increases rapidly.
Fill in the blank: Your authors claim ________ has been the rule rather than the
exception through almost all of human history.
A) price stability
B) poverty
C) disinflation
D) wealth
Compared to the free-market outcome, if the production of wheat were subsidized by
the government,
A) the supply of wheat would increase.
B) the quantity supplied of wheat would increase.
C) the quantity demanded of wheat would increase.
D) all of the above would occur.
E) none of the above would occur.
Amber Crombie is a stay-at-home mom while her husband Fitch works two jobs. What
can we clearly conclude?
A) Amber Crombie is unemployed.
B) Fitch is employed.
C) Amber Crombie is exploited.
D) Fitch is exploited.
E) All of the above are true.
The economic way of thinking would approach the question “Is this industry
competitive?” by
A) counting the number of firms in the industry.
B) comparing the ratio of prices to costs across the industry.
C) assessing the freedom of entry into the industry.
D) evaluating the actual structure of the industry to the competitive standards
articulated in antitrust legislation.
In the United States the assignment of tasks and distribution of benefits
A) is determined by business firms.
B) is determined democratically.
C) is negotiated among potential buyers and potential sellers.
D) leaves all parties free to do as they prefer.
E) rests upon the principle of consumer sovereignty.
Clarity Dence pays $375 for a used acoustic guitar from the local music instrument
dealer. The dealer himself purchased it for $150. In principle, how would this exchange
affect GDP?
A) Nothing happens to GDP, because the guitar is a used good.
B) GDP increases by $150.
C) GDP increases by $225.
D) GDP increases by $375.
E) GDP increases by $525.
An outward rotation of the production possibilities frontier occurs when
A) traders specialize in and exchange the products of their comparative advantage.
B) one trader steals from the other.
C) traders produce goods at exactly the same levels of opportunity cost.
D) one trader begins to produce both goods at a higher level of opportunity cost
compared to the other.
Drawing conclusions from international comparisons of GDP are difficult to assess
because
A) GDP is understated in poorer countries because much of the work that people do is
not provided in markets.
B) GDP cannot be adequately evaluated as a measure of people’s welfare or well-being.
C) without adjusting for purchasing power parity, GDP comparisons might very well be
meaningless.
D) all the above reasons hold true.
The analysis in Chapter 15 implies that the housing bubble of the last decade would
likely have been avoided if
A) the Fed had pursued a monetary equilibrium policy as opposed to cheap interest rate
policies.
B) people weren’t as greedy as they were during the beginning and middle of the
bubble.
C) price controls were established to keep home prices from rising as high as they did.
D) markets were better regulated.
Other things constant, a lowering of interest rates on used car loans would tend to
A) reduce the demand for used car loans.
B) increase the demand for used car loans.
C) increase the supply of used car loans.
D) reduce the supply of used car loans.
E) do none of the above.
What is a necessary condition for sustainable economic growth?
A) Low cost systems of transportation and communication
B) Careful economic planning
C) Very high interest rates that encourage household saving
D) Government monitoring and manipulation of aggregate investment
E) All of the above.
The Williams’ household uses natural gas heat, the Reynolds’ use a wood stove. Whose
household heating system is most efficient?
A) Without more information, the question is meaningless.
B) Williams’
C) Reynolds’
D) It depends only on the BTU’s (the amount of heat produced) per unit of heat-source
input.
Harry and Gus fish the same lake together from the same boat. Each morning Harry
typically catches either 20 bluegills or 5 walleyes (depending on how deep he fishes)
while Gus typically catches either 20 bluegills or 2 walleyes (depending on how deep
he fishes). Which statement below is true?
A) Harry is the more efficient catcher of bluegills.
B) Gus is the more efficient catcher of bluegills.
C) Harry is the more efficient catcher of walleyes.
D) Both B and C are true.
The economic way of thinking asserts, as a universal claim, that
A) politicians are immoral.
B) voters are immoral.
C) morals don’t matter in politics.
D) all of the above are true.
E) none of the above are true.
Which combination of monetary and fiscal policies might policymakers elect to ward
off potential inflation?
A) Fed purchase of bonds combined with tax rate increases
B) Fed purchase of bonds combined with tax rate decreases
C) Fed sale of bonds combined with tax rate increases
D) Fed sale of bonds combined with tax rate decreases