Competition would probably be abolished if society could find a way to abolish
A) inequality.
B) scarcity.
C) money.
D) economists.
Suppose it costs a farmer $1.00 to produce 1 unit of corn, $2.10 to produce 2 units of
corn, and $3.30 to produce 3 units of corn. What’s the average cost of producing 3 units
of corn?
A) $1.00
B) $1.10
C) $2.10
D) $3.30
In the economy of Iota, 9 people have jobs, 1 person is not working but is searching for
work, and 10 people don’t work and don’t seek work. The unemployment rate is
A) 10 percent.
B) 25 percent.
C) 33 percent.
D) 50 percent.
E) none of the above.
Making bread at home would be more efficient than making it in commercial bakeries
A) for people who place a sufficiently high value on home baked bread.
B) if the ingredients used to make bread increased sufficiently in price.
C) if the price of bread made in commercial bakeries did not reflect the efficiency of
bakeries.
D) if there were no labor costs in home baked bread.
Economic theory assumes people make decisions by weighing additions to cost against
additions to benefit, which can best be described as
A) additivism.
B) capitalism.
C) marginalism.
D) opportunism.
E) rationalism.
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) 1 dress costs 7 coats in Italy.
B) 1 dress costs 10 coats in Italy.
C) 1 coat costs 7 dresses in Canada.
D) 1 coat costs 10 dresses in Canada.
According to the law of demand,
A) everything has its price.
B) human wants are insatiable.
C) people will do anything to obtain goods they want.
D) there are no free goods.
E) there is a negative relationship between the amount of anything people will purchase
and the sacrifice that must make to obtain it.
In the economic way of thinking, individuals make “choices” only when they
A) follow their narrow, selfish interests.
B) enjoy perfect and complete information about the consequences of their actions.
C) act responsibly.
D) pursue one project while sacrificing another.
E) have mastered the lessons of economic theory.
People who consent to bear costs for the benefit of others whom they do not know
personally usually do so
A) because they are concerned about the welfare of society.
B) because they have been offered some benefit as an inducement.
C) only when they are compelled by force.
D) without calculating the costs to themselves.
Suppose you find $1000 in your attic and decide to deposit it all into your local bank,
which must hold 20% as required reserves. The deposit expansion multiplier suggests
that this $1,000 “injection” of new money will most likely
A) increase the money supply by a little more than $1,000.
B) increase the money supply by a little less than $1,000.
C) increase the money supply by only $1,000.
D) increase the money supply by $5,000.
Other things constant, the demand for an inferior good will decrease (the demand curve
will shift left) if
A) the price of a complementary good decreases.
B) the price of a substitute good increases.
C) income increases.
D) income decreases.
Which is an example of expansionary fiscal policy?
A) An increase in tax rates
B) An increase in government spending
C) An increase in the discount rate
D) An increase in the federal funds rate
E) All of the above.
The federal law prohibiting mergers when the merger reduces competition substantially
is the
A) Clayton Act.
B) Miller-Tydings Act.
C) Robinson-Patman Act.
D) Sherman Act.
E) Taft-Hartley Act.
A judicial system for resolving disputes creates benefits even for people who never use
it because
A) people are compelled to obey court decisions whether they want to or not.
B) judicial decisions generate uniform rules, which everyone can count on.
C) silence gives consent.
D) the social contract entitles everyone to share in the benefits from goods produced by
government.
Complaints about predatory pricing usually originate with
A) competitors.
B) consumers.
C) economists.
D) government regulators.
E) suppliers.
In the economy of Grippe, 40 people have jobs, 10 people are not working but are
searching for work, and 100 people don’t work and don’t seek work. The unemployment
rate is
A) 14 percent.
B) 15 percent
C) 20 percent.
D) 25 percent.
E) none of the above.
Can nominal GDP decrease when the price level remains the same?
A) No, it is not possible.
B) Yes, but only if real GDP decreases.
C) Yes, but only if real GDP increases.
D) Yes, but only if real GDP remains the same as well.
Suppose most consumers who eat hotdogs also use mustard, a complementary good. If
the price of hotdogs rises, which is most likely to happen?
A) The demand curve for mustard will shift right.
B) The demand curve for hotdogs will shift right.
C) The demand curve for mustard will shift left.
D) The demand for hotdogs will fall.
Jones can brew 10 gallons of lager or 5 gallons of stout every three months, or any
linear combination in between. Which statement below is true?
A) It costs Jones 5 gallons of stout for every 10 gallons of lager brewed.
B) It costs Jones 1 gallon of stout for every 2 gallons of lager brewed.
C) It costs Jones 1/2 gallon of stout for every 1 gallon of lager brewed.
D) All of the above are true.
An opportunity cost is
A) an opportunity lost.
B) only the explicit costs of an action.
C) only the costs a person can consciously articulate at the moment of deciding.
D) none of the above.
The “real” interest rate charged on a loan is the
A) prime rate.
B) prime rate plus the risk premium.
C) the rate charged minus the costs of supplying credit.
D) the rate charged minus the expected rate of inflation.
Pick the producer who would come closest to operating in a perfectly competitive
environment.
A) Grim, the mortician
B) Green, the barley farmer
C) Gristle, the butcher
D) Grippe, the doctor
How does the text distinguish between the market and government?
A) The market is based on competition; the government is based on cooperation.
B) The market is based on prices; the government is based on policies.
C) The market is based on individualism; the government is based on socialism.
D) In all of the above ways.
E) In none of the above ways.
According to your text, when people talk about “the economy”, they probably have in
mind
A) the stock market.
B) commercial society in general.
C) the marriage market.
D) black markets.
Suppose a ski resort decides to sell its lift tickets “below cost” all season long, charging
$20 per day as opposed to $30 per day. In principle, how would each ticket sale affect
GDP?
A) GDP would fall by $10.
B) GDP would rise by $10.
C) GDP would rise by $20.
D) GDP would rise by $30 after the appropriate cost-price adjustment has been made.
Price ceilings in the U.S. on retail gasoline sales in the 1970s caused
A) massive and prolonged shortages.
B) increased advertising of gasoline.
C) longer hours of operation at most service stations.
D) poor people to be assured of an adequate supply of gasoline.
To maximize net revenue, a price searcher should
A) set total revenue equal to total cost.
B) set marginal revenue equal to marginal cost.
C) set net revenue equal to zero.
D) reduce output if marginal costs are increasing.
Suppose Marquette Bank and Trust has $10 million in total deposits and the required
reserve ratio is 7%. How many dollars must the bank keep in its vaults or on deposit at
a Federal Reserve Bank?
A) $9.3 million
B) $7 million
C) $930,000
D) $700,000
E) None of the aboveit’s the bank’s own choice.
Fill in the blanks: One is ________ likely to invest in human capital the ________ the
person’s rate of time preference.
A) most; higher
B) less; lower
C) more; lower
D) least; lower
Economic theory assumes elected and appointed government officials
A) place their personal or private welfare ahead of the public interest.
B) place the public interest ahead of any personal or private interests of their own.
C) are free to pursue the public interest because they aren’t constrained by competition.
D) respond to the anticipated costs and benefits to themselves of decisions
contemplated.
According to the economic way of thinking, it is efficient to support a system of law
and order through taxation because
A) we need law and order.
B) law and order are not free goods.
C) law and order create significant spillover benefits.
D) citizens ultimately despise law and order.
If monetary equilibrium were to occur
A) inflation would not occur.
B) deflation would not occur.
C) the price level would be stable.
D) all of the above would be true.
E) none of the above would be true.
In a centrally planned economy, the concept of marginal cost
A) is important if planners want to achieve their objectives at the lowest possible cost.
B) is irrelevant because resources can be obtained by government decree.
C) is irrelevant because socialist firms do not have to earn profits.
D) is irrelevant if industries can be subsidized.