Figure 17-13
In Figure 17-13, the world price of a baseball is $3. With free trade, how many
baseballs will the United States import?
a. 4,000
b. 6,000
c. 8,000
d. 10,000
e. 12,000
In which of the following situations is representative democracy most likely to lead to
the adoption of an inefficient government program?
a. The program provides substantial benefits to a small interest group, and the costs are
widespread among voters.
b. Both the benefits and costs of the program are widespread among voters.
c. The program is financed by a user charge that makes the individuals who benefit
from the program pay for its cost.
d. The program provides widespread benefits to all voters and imposes a significant cost
on a small interest group.
In the absence of an even-handed legal system, high transaction costs will eliminate
many potential mutually advantageous trades and the accompanying gains from
a. division of labor and specialization.
b. expansion in the size of the market.
c. economies of scale resulting from use of mass production methods.
d. all of the above.
According to the rational expectations theory,
a. on average people have very little idea of what to expect from government policy
makers.
b. people form expectations by focusing only on the private sector.
c. people do not consider likely government policies when forming expectations.
d. people form expectations, in part, by considering the probable future effects of
changes in government policy.
The most fundamental concept in economics is that
a. changes in incentives influence behavior in a predictable way–people will be less
likely to choose an option as it becomes more expensive.
b. changes in incentives generally do not influence human behavior.
c. goods that are provided by government are free for society.
d. individuals generally do not consider other alternatives when making a choice.
For a country to double its per capita income every twenty years, it would have to
sustain an annual economic growth rate equal to
a. 1.75 percent.
b. 2 percent.
c. 3.5 percent.
d. 4 percent.
If the quantity of a good supplied is highly sensitive to the price of the good, this is
illustrated by a
a. demand curve that is relatively flat (more horizontal).
b. demand curve that is relatively steep (more vertical).
c. supply curve that is relatively flat (more horizontal).
d. supply curve that is relatively steep (more vertical).
Which of the following is true?
a. More than half of medical bills are paid for directly by consumers.
b. Healthcare insurance provided by one’s employer is counted as personal income.
c. State mandated coverage of medical procedures like in-vitro fertilization, drug
rehabilitation, and acupuncture, make health insurance more affordable.
d. Regulations prevent consumers from purchasing a health insurance plan offered in
another state.
U.S. exports are
a. not included in U.S. GDP because they are consumed abroad
b. included in U.S. GDP because they are produced domestically
c. included in U.S. GDP because they represent an increase in inventories
d. included in U.S. GDP as government purchases because the government decides
what goods may be exported
e. not included in U.S. GDP because they are not subject to a tariff
A payment the government makes to either the buyer or seller, usually on a per-unit
basis, when a good or service is purchased or sold is called a
a. black market.
b. interest rate.
c. subsidy.
d. tax.
Figure 2-10
Refer to Figure 2-10. What is the opportunity cost of the movement from point A to
point C?
a. 50 baseballs
b. 100 baseballs
c. 100 bananas
d. 300 bananas
The price charged by oligopolists will
a. equal the equilibrium price in a price-takers market if the oligopolists collude.
b. equal the monopoly price if the oligopolists do not collude.
c. generally fall between the monopoly and competitive market equilibrium prices.
d. be the same whether the oligopolists cooperate with one another or not; only profit is
affected.
If the U.S. government decided to pay off the national debt by creating money, what
would be the most likely effect?
a. a substantial reduction in real GDP
b. a deflationary collapse
c. rapid inflation
d. an increase in the trade surplus
When private ownership rights are well-defined and enforced, owners of physical assets
and resources
a. have no incentive to consider the desires of others.
b. incur the opportunity cost of ignoring the wishes of others.
c. are not responsible if the use of their assets impose harm on others.
d. have little incentive to take care of their assets.
An improvement in technology would shift which of the following curve(s)?
a. aggregate demand and short-run aggregate supply
b. only the short-run aggregate supply
c. only the aggregate demand
d. short-run and long-run aggregate supply
When economists say that an activity meets the criterion for economic efficiency, they
mean
a. a majority of citizens favor the activity.
b. the benefits that result from the activity exceed the costs.
c. the number of people who gain from the activity exceeds the number on whom costs
are imposed.
d. the costs that result from the activity exceed the benefits.
When the tax structure of a nation is progressive, as real incomes increase, the tax
revenues of the government will
a. decline.
b. increase by the same proportion as the increase in real income.
c. increase by a larger proportion than the increase in real income.
d. remain unchanged unless legislative action is undertaken.
Figure 4-18
Refer to Figure 4-18. If the government imposes a price ceiling of $2.00 in this market,
the result is a
a. surplus of 30 units of the good.
b. shortage of 20 units of the good.
c. shortage of 30 units of the good.
d. shortage of 50 units of the good.
If consumer purchases of a good are highly sensitive to the price of the good,
economists say the demand for the good is relatively
a. inelastic.
b. elastic.
c. robust.
d. inverse.
Full employment is the rate of employment that results when
a. all labor resources of an economy are employed.
b. there is efficient use of the labor force, with allowance made for normal
unemployment due to dynamic changes and the structural conditions of the economy.
c. cyclical unemployment is between 4 and 5 percent of the labor force.
d. everybody who wants a job can find one.
Which of the following has tended to increase the competitiveness of markets in the
United States during the last couple of decades?
a. increases in transport costs
b. development of the Internet
c. decreased competition from imports
d. more government regulation of product quality
If a foreign supplier sells a good in another country at a cheaper price than it sells the
good in its home market, the
a. foreign supplier will gain a monopoly in the foreign market.
b. consumers in the receiving country will be harmed by the dumping of the good into
its domestic market.
c. consumers in the receiving country can gain from buying the foreign-produced good
if it is cheaper than the cost of producing the good domestically.
d. usual implications of the law of comparative advantage with trade restrictions do not
hold in this case, particularly if the low-cost supplier is subsidized by a foreign
government.
The relationship between average and marginal variables can be stated as follows: if the
marginal is greater than the average,
a. the average is increasing.
b. the average is decreasing.
c. the marginal is increasing.
d. the marginal is decreasing.
e. the total is decreasing.
Economic profit provides both human and physical capital decision makers with an
incentive to
a. exploit workers.
b. reject investments yielding an uncertain return.
c. discover and develop beneficial and productive investment opportunities.
d. do both b and c.
Figure 3-4
Figure 3-4 shows conditions in the market for beef. A reduction in the price of the grain
used to feed cattle results in
a. the supply curve for beef shifting to the left resulting in higher beef prices and a
lower quantity sold.
b. the supply curve for beef shifting to the right resulting in lower beef prices and a
higher quantity sold.
c. the demand curve for beef shifting to the left resulting in lower beef prices and a
lower quantity sold.
d. the demand curve for beef shifting to the right resulting in higher beef prices and a
higher quantity sold.
Use the table below to choose the correct answer.
Table 7-1
Given the information in Table 7-1, the GDP equals
a. $1,140.
b. $1,330.
c. $1,650.
d. $2,670.
Healthcare price controls will lead to
a. more innovative healthcare treatments.
b. waiting lines and lengthy delays for treatment.
c. higher quality healthcare services.
d. an increase in the supply of healthcare services.
Suppose you can type a paper in two hours or mow the lawn in four hours, while it
takes your friend Gabriela eight hours to type a paper or two hours to mow the lawn.
Which of the following is true?
a. You have a comparative advantage in typing.
b. You have a comparative advantage in mowing the lawn.
c. You and Gabriela could save time if you mowed her lawn while she typed your paper.
d. You and Gabriela cannot gain from specialization and trade.
When a price floor is imposed above the equilibrium price of a commodity,
a. quantity demanded will be greater than quantity supplied for the good.
b. the quantity demanded by consumers will be greater than at the equilibrium price.
c. a shortage of the good will develop.
d. a surplus of the good will develop.
Use the table below to choose the correct answer. The table is a schedule of the supply
and demand for coffee (both given in thousands of pounds per month).
The equilibrium market price of coffee would be
a. $6 per pound.
b. $8 per pound.
c. $10 per pound.
d. $12 per pound.
Which of the following statements about monopoly is most accurate?
a. The monopolist has no incentive to produce efficiently.
b. Regardless of what is produced, the monopolist will use too many resources.
c. A monopolist has no incentive to keep costs down.
d. The monopolist “understocks” the market and charges too high a price.
When the residents of a nation are free to trade with foreigners, domestic producers will
be able to
a. export more goods for which they are a high-cost supplier.
b. supply a larger quantity of goods they can produce at a relatively low cost.
c. charge higher prices then would otherwise be the case.
d. survive in the marketplace even if they do not produce efficiently.
Other things constant, a decrease in nominal GDP will generally
a. increase the demand for money.
b. decrease the demand for money.
c. increase the nominal interest rate.
d. decrease the money supply.
Which of the following is true?
a. The growth of third-party payments during the last several decades has helped control
inflation in the health-care sector.
b. Public policy encourages Americans to purchase low deductible/low co-payment
health insurance coverage through their employers.
c. Low deductible health insurance coverage encourages health-care consumers to
search for the best prices.
d. The 2.9 percent Medicare payroll tax is sufficient to cover the cost of the promised
future health-care services to senior citizens.