All production involves an opportunity cost because
a. to produce costs money
b. costs of production are sky rocketing
c. to produce more of one thing, we must produce more of everything
d. to produce more of one thing, we must produce less of something else
e. when an individual obtains more of a good, he may not be fully satisfied
Society as a whole faces opportunity costs because
a. there is not enough money to go around
b. politicians are greedy
c. workers shirk their responsibilities and management is unable to compensate for this
d. resources are abundant
e. resources are scarce
The Federal Deposit Insurance Corporation helps to reduce the number of bank failures
because
a. of its rule that individuals cannot make a run on a bank
b. it promises to reimburse up to $10,000 of lost deposits in an account
c. depositors will be secure in the fact that their deposits are protected
d. it pays attention to the changes in the economy
e. it is a soothing agent for individuals who have accounts over $100,000
If the exchange rate (dollars per unit of foreign currency) has increased, we say there
has been a(n)
a. appreciation of the foreign currency
b. depreciation of the foreign currency
c. revaluation of the foreign currency
d. devaluation of the foreign currency
e. fixing of the foreign currency
Due to a scarcity of resources,
a. governments should decide what should be produced
b. the government must decide how to allocate available resources
c. some members of each society must live in poverty
d. every society must choose among competing uses of available resources
e. resource availability exceeds the possible uses for available resources
Crowding out refers to a(n)
a. decrease in the amount of goods produced after too many goods have crowded onto
the market
b. business tactic used to steal a competitor’s customers
c. increase in one sector’s spending caused by an increase in another sector’s spending
d. decrease in the price level after too many goods have crowded onto the market
e. decline in one sector’s spending caused by an increase in another sector’s spending
Which of the following statements is most accurate?
a. Most of the variation in consumption spending can be explained by changes in the
interest rate.
b. Most of the variation in consumption spending can be explained by changes in
disposable income.
c. Most of the variation in consumption spending can be explained by changes in
wealth.
d. Most of the variation in consumption spending can be explained by changes in debt.
e. There is no single factor that explains much of the variation in consumption
spending.
Which of the following would best encourage investment in human capital?
a. Higher marginal tax rates on labor income
b. Higher interest rates
c. Expansion of college loan programs
d. A decrease in the wage gap between high school and college-educated workers
e. A reduction in life expectancy that encourages earlier retirement
In the short run, the price level will rise whenever there is an economy-wide decrease in
unit costs.
In the short run, a contractionary fiscal policy would cause
a. the AD curve to shift to the right
b. equilibrium real GDP to decrease and the price level to increase
c. the AS curve to shift left
d. the economy to slide along the AD curve
e. equilibrium GDP and the price level to fall
If we read that the CPI had value of 120 in 2005, we would know that
a. the typical market basket in 2005 was 20 percent more expensive than in the previous
year
b. the typical market basket in 2005 was 120 percent more expensive than in the base
year
c. the typical market basket in the base year was 120 percent more expensive than in
2005
d. the typical market basket in 2005 was 20 percent more expensive than in the base
year
e. the cost of a loaf of bread is higher now than it has been during the past ten years
Most economists agree that the size of the bias in the CPI is at least
a. 0.1 percent
b. 0.5 percent
c. 1 percent
d. 1.5 percent
e. 2 percent
Which of the following is a government purchase?
a. The income tax
b. The property tax
c. Social Security benefits paid to a retired government worker
d. Food stamps
e. The salary of a federal judge.
In a competitive market, excess demand for a good exists whenever
a. the current price is below the equilibrium price
b. resources are scarce
c. the quantity supplied at the current price exceeds the quantity demanded
d. sellers are subject to the constraints imposed by input prices and technology
e. the current price is above the equilibrium price
A professional basketball players’ union negotiates a contract that dramatically
increases all players’ salaries. How would this influence the opportunity cost for a
player who was considering giving up basketball to pursue a career in broadcasting?
a. It would not affect the opportunity cost of playing basketball or of broadcasting.
b. It would increase the opportunity cost of continuing to play professional basketball.
c. It would cause the production possibilities frontier to become convex.
d. It would increase the opportunity cost of becoming a broadcaster.
e. It should have no bearing on the player’s decision from an economic standpoint.