There is no difference between building a theory and evaluating a theory.
a. True
b. False
An increase in the number of sellers of a good will, ceteris paribus,
__________________for that good.
a. increase equilibrium price and quantity
b. increase equilibrium price and decrease equilibrium quantity
c. decrease equilibrium price and increase equilibrium quantity
d. decrease equilibrium price and quantity
e. increase demand
Positive economics is concerned with
a. value judgments.
b. cause-effect relationships.
c. observations that cannot be proved.
d. both b and c
Unlike in the 1930’s, farmers today can insure themselves against price swings that
would impact them adversely through the futures market.
a. True
b. False
A “revaluation” occurs when
a. a nation’s currency appreciates under a flexible exchange rate system.
b. the official price of a currency is lowered.
c. a nation’s currency depreciates under a flexible exchange rate system.
d. the official price of a currency is raised.
e. none of the above
For the perfectly competitive firm, the demand curve and the marginal revenue curve
are one and the same.
a. True
b. False
If the income of U.S. citizens falls relative to the income of Japanese citizens, the dollar
will __________ in terms of the yen, and the yen will __________ in terms of the
dollar.
a. appreciate; depreciate
b. appreciate; remain unaffected
c. depreciate; appreciate
d. depreciate; remain unaffected
e. remain unaffected; appreciate
When the price of a good rises, the price is transmitting information indicating that the
good has become relatively
a. scarcer.
b. less scarce.
c. more plentiful in supply.
d. b and c
The headline in the newspaper reads “County Supervisors Debate Building New
Schools.” The headline relates closest to which economic concept?
a. goods and bads
b. utility
c. choice
d. efficiency
Which of the following is most likely to be an unintended effect of placing safety caps
on medicines?
a. It is now harder for people to open their medicine containers.
b. People leave their medicine containers open more often, which ends up making it
easier for children to get into the medicine.
c. Fewer people get sick and need medicine.
d. Medicine prices fall sharply.
Which of the following statements is false?
a. The evidence seems to show that there are only a few, if any, instances of pure
monopsony in the real world.
b. In a monopsony setting, it is possible for a minimum wage to actually increase the
number of workers hired.
c. Although in a monopsony setting it is possible for a minimum wage to actually
increase the number of workers hired, it is not possible to raise wage rates continually
and always increase employment, too.
d. The marginal factor cost for a monopsonist is less than the wage rate it pays workers.
Which of the following is not a characteristic of perfect competition?
a. buyers and sellers having no influence on price
b. there are no barriers to entry or exit
c. sellers produce and sell a heterogeneous product
d. buyers and sellers have access to all relevant information
e. none of the above
Suppose the current exchange rate between the U.S. dollar and the Mexican peso is
$0.10 = 1 peso. Furthermore, suppose the price level in Mexico rises 15 percent while
the U.S. price level remains constant. According to the purchasing power parity theory,
which of the following exchange rates comes closest to being the equilibrium exchange
rate?
a. $0.087 = 1 peso
b. $0.085 = 1 peso
c. $0.115 = 1 peso
d. $0.13 = 1 peso
Which of the following is not a method to internalize or adjust for externalities?
a. persuasion
b. assignment of property rights
c. unilateral transfers
d. voluntary agreements
Which of the following companies was part of the original Dow Jones Industrial
Average?
a. Chicago Gas Company
b. National Lead Company
c. General Motors Corp.
d. AT&T Inc.
e. a and b
If there is always a 4-for-1 tradeoff between producing good X and good Y, it follows
that the opportunity cost of X (in terms of Y) ____________________ and the PPF for
these two goods is ______________________.
a. decreases at low levels of X; a straight line
b. rises at high levels of Y; bowed-outward
c. decreases at high levels of X; bowed-outward
d. is always the same; a straight line
Implicit cost is a
a. cost that is incurred when a monetary payment is made.
b. cost incurred in the past that cannot be changed by current decisions and therefore
cannot be recovered.
c. cost that represents the value of resources used in production for which no monetary
payment is made.
d. sunk cost.
e. b and d
The demand for seats in 10 a.m. classes at the university is higher than the demand for
seats in 8 a.m. classes. The supply of seats is fixed. If the university prices classes at the
price required to achieve equilibrium at 10 a.m., there will be
a. a shortage at 8 a.m.
b. a surplus at 8 a.m.
c. equilibrium at 8 a.m.
d. disequilibrium at 8 a.m., but we cannot determine which type.
It often appears as if there are “too few” workers at the Department of Motor Vehicles
(DMV) to service all of its customers at a given point in time.Based on one of theories
discussed in the textbook, this is probably because
a. the equilibrium “price” to be served by the DMV is lower than the “price” charged
customers.
b. the equilibrium “price” to be served by the DMV is higher than the “price” charged
customers.
c. the equilibrium “price” to be served by the DMV minus the “price” charged to
customers is zero.
d. b and c
e. none of the above
If patients were allowed to sue their HMO, we would expect
a. the demand curve for health care services provided by the HMO to shift to the left
and the price of HMO-provided health care coverage to fall.
b. the supply curve for health care services provided by the HMO to shift to the left and
the price of HMO-provided health care coverage to rise.
c. the supply curve for health care services provided by the HMO to shift to the right
and the price of HMO-provided health care coverage to fall.
d. a and b
e. none of the above
Suppose candidate A is conservative and candidate B is liberal and both are currently
positioned away from the “middle ground” toward their respective ends of the political
spectrum. We would expect that as the campaign draws closer to election day,
a. candidate A will move to the right (more conservative) and candidate B will move to
the left (more liberal).
b. both candidates A and B will move to the other’s position in an attempt to capture the
other’s supporters.
c. candidate A will move closer to the middle, and candidate B will stay where he or she
is because he or she realizes that Americans are basically liberal.
d. candidate B will move closer to the middle, and candidate A will stay where he or she
is because he or she realizes that Americans are basically conservative.
e. both candidates will move toward the middle.