An effective price ceiling tends to
A) increase quantity supplied.
B) decrease quantity demanded.
C) leave quantity supplied and demanded unchanged.
D) do none of the above.
Ann Trepreneur was formerly a landlord, renting her building for $1,200 a month. She
now uses her building for her own florist shop. Pick the true statement.
A) The building costs Ann $1,200 per month.
B) Ann incurs no opportunity cost on the building.
C) Ann uses the building as a free good.
D) None of the above is true.
What is a necessary condition for sustainable economic growth?
A) Fair tax rates
B) Public transportation
C) The accumulation of additional capital
D) A general price-level deflation to ensure low prices for goods and services
Fill in the blanks: Elected government officials ________ support ________ monetary
policies.
A) always; contractionary
B) tend to; expansionary
C) always; expansionary
D) tend to; contractionary
Little Richie Lemons, a thirteen-year-old former lemonade stand owner, quit the
business and now searches for an after-school job. Is he officially unemployed?
A) No, because he was never employed in the first place.
B) No, because he is under 16 years old.
C) Yes, because he is no longer self-employed.
D) Yes, because he is looking for work.
Opportunity costs are
A) always marginal costs.
B) never marginal costs.
C) not related to marginal costs.
D) sometimes marginal costs.
E) sunk costs.
Which of the following is a “free” good?
A) Elderly health care, which is covered by Medicare
B) Health care for the poor, which is covered by Medicaid
C) Higher education in Georgia, which is paid for by lottery revenue
D) All of the above.
E) None of the above.
Which of the following sets of goods might, under the right circumstances, be
substitutes for water?
A) Milk and juice
B) Beer and wine
C) Stones and bricks
D) A, B, and C above are all potential substitutes for water.
E) A and B above are potential substitutes for water, but C (stones and bricks) can never
be substitutes for water in the real world.
When total costs are greater than total revenue,
A) fixed costs must be high.
B) a firm is suffering losses.
C) a firm should shut down immediately.
D) the firm must be producing on the elastic range of its demand curve.
GDP will clearly increase if
A) the market value of illegal exchanges increases.
B) the money supply increases.
C) the market value of final goods and services increases.
D) taxes increase.
A geologist tells the ACME Mining Company she’s certain there is a gold vein one
thousand feet below the surface of its property, but ACME still decides not to mine for
that gold. How would an economist explain their decision?
A) The owners of ACME aren’t as greedy as other mining operations.
B) The owners of ACME probably distrust the geological reports.
C) The owners of ACME feel the additional costs of mining for gold outweigh the
additional benefits.
D) The owners of ACME are ignorant of the basic principles of economics.
Pick the scarce good below with the completely inelastic demand curve.
A) Clean air
B) Clean water
C) Tropical rain forests
D) Well-maintained national-forest fisheries
E) Trick question: none of the above goods have a completely inelastic demand curve.
Suppose the market-clearing price of wheat is $2.50 per bushel. What would happen if
wheat farmers persuaded the government to set a legally-mandated price support of
$3.75 per bushel?
A) A shortage of wheat would occur.
B) The demand for wheat would fall.
C) The supply of wheat would rise.
D) The government would have to purchase any surplus wheat to maintain the price
support.
Beginning in December 2007, the Fed began cutting the federal funds rate from 4.25%
to less than 1%. During this time, it was engaged in ________ monetary policy in order
to reduce the threat of a ________ in the US economy.
A) expansionary; stagflation
B) contractionary; stagflation
C) expansionary; recession
D) contractionary; recession
If 80,000 people want tickets to the World Series at the current price, and there are only
55,000 tickets available,
A) the cost of obtaining a ticket for someone who doesn’t yet have one will be greater
than the price stamped on its face.
B) the demand for tickets is highly elastic.
C) the price is too low.
D) the quantity purchased will be greater than the quantity supplied.
According to the textbook, when claim they are using the cost-plus-markup formula,
they
A) usually choose a 10 percent markup.
B) usually choose a 50 percent markup.
C) usually choose a 100 percent markup.
D) might not be correctly describing their price-setting behavior.
Other things constant, if the population decreases and GDP remains unchanged,
A) real GDP necessarily decreases.
B) per capita GDP necessarily increases.
C) per capita GDP necessarily decreases.
D) real GDP necessarily increases.
To face scarcity means individuals
A) choose.
B) economize.
C) sacrifice some plans over others.
D) all of the above.
According to your authors, market clearing
A) is planned by all buyers.
B) is planned by all sellers.
C) is planned by all buyers and sellers.
D) is planned by economists and government agencies.
E) is an unintended consequence of people pursuing their own plans.
Predatory pricing occurs when a firm sells
A) above cost to any customers who have no good alternative.
B) above cost to low-income customers who have no good alternative.
C) at whatever prices the market will bear.
D) below cost in order to eliminate competitors.
E) only to customers who agree to rebate a portion of the price.
If skilled and unskilled labor are substitutes, then an increased minimum wage would
tend to
A) reduce the demand for both unskilled and skilled workers.
B) reduce the quantity demanded of unskilled workers and increase the demand for
skilled workers.
C) reduce the demand for unskilled workers and increase the quantity demanded of
unskilled workers.
D) reduce the quantity demanded for both unskilled and skilled workers.
Direct controls imposing identical emission limits on all polluters are
A) efficient if emissions can be accurately monitored, which is seldom possible.
B) equitable because all polluters bear equal costs.
C) likely to require a great deal of high-cost pollution reduction.
D) more efficient and equitable than a system of fines because fines matter less to large
than to small polluters.
Fill in the blanks: ________ attempts to reduce negative externalities by ________.
A) Negotiation; discovering who has which rights
B) Negotiation; creating new rights
C) Legislation; creating new rights
D) Legislation; discovering who has which rights
Court decisions aiming to resolve disputes by determining who in fact possesses
contested legal rights
A) prevent any change from occurring.
B) prevent undesirable changes from occurring.
C) promote cooperation by clarifying and stabilizing expectations.
D) substitute legal criteria for economic criteria and thereby create windfall profits and
losses.
E) substitute public-welfare criteria for private-interest criteria.
Alexis de Tocqueville observed in his Democracy in America: “There is no country in
which everything can be provided for by the laws, or in which political institutions can
prove a substitute for
A) common sense and morality.”
B) economic development.”
C) police and prisons.”
D) supply and demand.”
E) the private pursuit of private interests.”
Popular criticism of determining who gets what by means of money prices increases in
periods of inflation because
A) inflation hits poor people the hardest.
B) people mistakenly assume an increase in money prices makes them worse off.
C) the wealthy will eventually acquire everything if inflation continues long enough.
D) there is no one who benefits from rising prices.
Competition exists among sellers only if they
A) all set price equal to marginal cost.
B) are price takers.
C) are so numerous that no one of them can affect the price by restricting output.
D) receive no special privileges from government.
E) struggle to satisfy potential buyers.
According to economic theory, a politician will accept an invitation for another photo
opportunity as long as
A) she is paid well.
B) he can be sure he will look handsome in the picture.
C) the marginal benefit exceeds the marginal cost.
D) there are no costs involved.
According to your textbook, the benefits of civilization are heavily dependent on
A) accurate numerical estimates by government officials of available resources and of
basic consumption requirements.
B) agreement among the members of society on the best means for achieving their
goals.
C) agreement among the members of society on the goals to be pursued.
D) government planning for long-run economic growth.
E) the ability to induce other people to cooperate.
The effective operation of the U.S. economic system depends upon
A) high profits.
B) low profits.
C) stable profits.
D) the expectation of profits.
How does the text distinguish between coercion and persuasion?
A) Coercion uses force; persuasion uses reasoning.
B) Coercion uses violence; persuasion is peaceful.
C) Coercion cannot make everyone better off, but persuasion can.
D) Coercion is evil, and persuasion is good.
E) Coercion induces cooperation by threatening to reduce options, persuasion by
promising to expand options.
Suppose the quantity of oranges demanded is less than the quantity supplied. Then
A) the market still clears, because consumers can buy all the oranges they wish at the
prevailing market price.
B) the market still clears, because producers can sell all the oranges they wish at the
prevailing market price.
C) the market clears, but is not fully coordinated.
D) oranges are no longer scarce goods.
E) none of the above is true.
Which might be an example of a positive externality?
A) Loud hip-hop music
B) A dog gets loose from its master
C) A lost wallet filled with twenty-dollar bills
D) The rumbling of a Harley Davidson Low Rider motorcycle
E) Any of the above, as long as they unintentionally benefit others
Private and state universities are substitutes. Which of the following would tend to
increase the demand for state universities?
A) A fall in private university tuition
B) An increase in private university tuition
C) An increase in interest rates on student loans (a complementary good)
D) Higher dorm fees at state universities
Property rights are social facts because
A) they are created and enforced by government.
B) they are widely distributed throughout society.
C) they depend upon other people’s acceptance of corresponding obligations.
D) they must be held in common to be effective.