A stable rule of law
A) invariably turns losses into profits.
B) allows people to cooperate more effectively with one another.
C) converts price searchers into price takers.
D) renders the law of comparative advantage ineffective.
Economist’s can justify supporting education through taxation on which of the
following grounds?
A) Education generates spillover benefits.
B) Low-income people could not otherwise afford education.
C) Most economists are educators.
D) Free education extends equal opportunity to all.
E) Public education is more efficient than allowing education to be provided by the
market.
According to your text, competition generally requires
A) fixed costs.
B) fixed prices.
C) fixed profits.
D) detailed government regulation.
E) none of the above.
What criticism does the textbook level against the cost-plus-markup theory of price
setting?
A) The theory does not agree with what businessmen say about price setting.
B) The theory does not account for vastly different percentage markups on different
products.
C) The theory implies firms will sometimes want to set prices below average cost per
unit.
D) The theory ignores sunk costs.
E) All of the above.
If market prices help inform individuals about the relative scarcities of goods and
services, then abolishing market prices would
A) finally allow people to overcome scarcity.
B) eliminate important information.
C) abolish the dog-eat-dog mentality of market competition.
D) tend to create permanent surpluses of most goods.
E) accomplish all of the above.
What important function does adjudication perform in the process of reducing negative
externalities?
A) It allocates the revenue from negative externalities to the people who have been
damaged.
B) It arbitrates between beneficiaries of negative externalities and the people who must
bear their costs.
C) It decides whether punitive or merely compensatory damages will be awarded.
D) It discovers who has which rights.
E) It imposes criminal penalties on the people responsible for generating negative
externalities.
Most of the money income that Americans receive annually derives from ownership of
A) interest-bearing bank accounts.
B) personal attributes.
C) political influence.
D) real estate.
E) stocks and bonds.
A merger between a firm manufacturing radios and a firm manufacturing paper
products is a
A) conglomerate merger.
B) diagonal merger.
C) horizontal merger.
D) vertical merger.
What will be the principal and most immediate effect on the supply or demand for raw
cotton grown in the United States if cotton-growing states experience rapid
industrialization?
A) Decrease in demand
B) Decrease in supply
C) Increase in demand
D) Increase in supply
What is the main rationale economists provide for assigning government the
responsibility of protecting people against foreign aggressors?
A) It would be too dangerous to allow citizens to keep and bear arms for the purpose of
forming militias to defend their communities.
B) Most people are patriotic only when the government is involved.
C) “National defense” must by necessity be nationalized.
D) People will not risk their lives unless government requires them to do so.
E) Private providers could not exclude non-payers from the benefits.
Cartels tend to break down unless they can obtain government assistance because cartel
members will typically try to
A) charge higher prices than the prices agreed upon.
B) include sunk costs in their prices.
C) lower their costs below the agreed-upon levels.
D) sell more than their quotas.
E) do all of the above.
Fill in the blank: Other things constant, the growing availability of college degrees
being offered through online programs will tend to ________ the price elasticity of
demand for more traditional college degree programs.
A) leave unchanged
B) decrease
C) increase
D) alter for the better
Taxing some citizens to provide welfare grants to other citizens has been called by some
“coercive charity.” The economist’s case for “coercive charity” assumes
A) it is efficient to transfer a dollar from a wealthy person to someone with little
income.
B) morality cannot be legislated.
C) people are basically selfish.
D) people who genuinely want the poor to be helped often do not provide any help.
E) redistributing income promotes more rapid economic growth.
Which of the following is clearly being sold below cost?
A) Commercial television programs
B) Public radio programs
C) A surprise opening act at a sold-out concert
D) Concert t-shirts sold at discount prices at the end of a band’s major world tour
E) None of the above.
In the economic way of thinking, profit and loss can be eliminated only by
A) appropriate and effective price controls.
B) careful and detailed government regulation of business.
C) a total elimination of uncertainty.
D) taxation.
E) the confiscation of private property.
Who can determine the true cost of water?
A) Nobody
B) Anybody who puts their mind to it
C) Only the most competent hydrologist
D) A good accountant
Martha quits a minimum-wage part-time job for a salaried full-time job. The BLS will
count Martha as
A) originally unemployed but now employed.
B) originally employed and continuing to be employed.
C) originally a discouraged worker but now happily employed.
D) any of the above.
Which of the following might make it inefficient for a farmer to continue growing crops
on a particular piece of farmland?
A) A fall in crop prices
B) A rise in the price developers are willing to pay for the land
C) Erosion of the top soil
D) Rezoning of the land by the county government
E) Any of the above could do it.
When event B follows event A three times in succession, but people say B following A
is “just a coincidence,” they usually mean
A) it is highly improbable B will follow A a fourth time.
B) it is more common for A to follow B.
C) B following A is only a subjective opinion.
D) there has not been sufficient observation to connect B positively with A.
E) they aren’t aware of any causal theory linking B to A.
When firms set prices by adding a fixed percentage markup to marginal costs, they are
likely
A) concerned with the rate of profit rather than its net amount.
B) earning a satisfactory rather than a maximum profit.
C) exploiting their customers.
D) poorly managed.
E) searching for the most advantageous prices to set on the basis of limited information.
Today’s Federal Reserve bank notes promise to pay the bearer
A) nothing.
B) a fixed quantity of gold.
C) a variable quantity of gold.
D) a specific interest rate.
E) a variable interest rate.
The term capital in economic theory refers to
A) any privately owned resource.
B) bonds, stocks, and similar financial assets.
C) money available for lending or spending.
D) produced goods used to produce future goods.
E) savings out of income.
DVD players have become more abundant, and cheaper, over the past few years.
Explain the decline in DVD player prices.
A) DVD manufacturers have become less interested in trying to maximize their profits.
B) The demand curve for DVDs has shifted to the left.
C) The supply curve for DVDs has shifted to the right.
D) The supply curve for DVDs has shifted to the left.
According to the textbook, income inequality statistics can be misleading because
A) they are collected by the Census Bureau, whose objectivity cannot be trusted.
B) they ignore the income mobility of individual families and households through time.
C) they do not take into account inflation.
D) they fail to be of use in policy proposals and debates.
Which combination is a clear example of “joint products”?
A) Pine paneling and cherry wood
B) Cherry wood and cherries
C) Cherries and apples
D) Apples and crackers
What explains the increase in supply and fall in price of HDTVs during from 2010 to
2015?
A) Technological innovations that reduced the cost of production
B) Fewer producers in the industry
C) A fall in demand for HDTVs as more people turned toward superior substitutes
D) None of the above.
Recession is the opposite of
A) economic growth.
B) economic decay.
C) stagflation.
D) inflation.
E) deflation.
The profits of business firms, defined as the difference between total revenue and total
cost, are not zero because
A) capitalists have a near monopoly over the means of production.
B) information is a scarce good.
C) the government defines some opportunity costs as revenue in order to increase tax
receipts.
D) there would be no investment if firms did not earn positive profits.
Is the cost of an all-volunteer army in the United States higher or lower than the cost of
a conscripted (drafted) army?
A) Higher, unless the citizens are exceptionally patriotic
B) Lower, unless the army is inefficiently managed
C) Higher to taxpayers but lower to military personnel
D) The same because the wage will move to the market-clearing level
E) We cannot say without knowing the supply of and demand for military personnel.
When countries specialize in what they do efficiently and trade, the material wealth of
nations
A) expands.
B) contracts
C) remains the same.
D) Need more information to answer this question.
With a good on each axis, the production possibilities frontier is downward-sloping,
which suggests
A) there is no limit to the amount of each good that can be produced.
B) the production of one good ultimately means sacrificing production of the other.
C) there are no opportunity costs of producing either of the goods.
D) All of the above are true.
When interest rates are artificially lowered through expansionary monetary policy,
A) longer-term investment projects appear to be more profitable.
B) production of capital goods increases.
C) the economy experiences an unsustainable boom phase.
D) the economy will likely fall into a recession in the longer run.
E) all of the above tend to occur.
Traffic congestion is an example of a negative externality because
A) motorists take into account all benefits while driving.
B) motorists take into account all costs while driving.
C) a motorist’s cost of driving spills over and affects other motorists.
D) a motorist’s benefit from driving spills over and affects other motorists.
Fill in the blanks: A price discriminating firm will tend to charge a ________ price for
the category of customer with the ________ elasticity of demand.
A) lower; lower
B) higher; lower
C) lower; higher
D) 100 percent markup; infinite
Suppose Regretta Sigh becomes the lucky winner of a $10,000,000 state lottery jackpot
after purchasing a single $1.00 lottery ticket. How does her lucky expenditure affect
current GDP?
A) GDP rises by $1.00.
B) GDP rises by $9,999,999.
C) GDP rises by $10,000,000.
D) GDP rises by $10,000,001.
E) GDP rises by the present value of the total cash prize.