The Skinned Knee Corporation can produce either 300 skateboards each week or 500
snowboards each week. What is their opportunity cost of producing 300 skateboards
each week?
A) 300 skateboards
B) 200 snowboards
C) 500 snowboards
D) 800 snowboards
If an economist were to consult for a major Fortune 500 company, and he reached the
conclusion the firm was making zero economic profit,
A) the firm’s accounting profit would be greater than zero.
B) the firm should go out of business immediately.
C) the firm’s accounting profits would be lower.
D) the economist’s numbers were probably wrong because economic profit can never be
zero.
According to your textbook, pollution is a major social and political concern because
A) it is inefficient.
B) it is always immoral.
C) people disagree about rights, which are extremely difficult to resolve.
D) the environment is on the verge of ecological catastrophe.
Government assistance to farmers, which seeks to maintain a target price by buying
surplus output, results in
A) higher prices and less food for consumers.
B) higher prices and more food for consumers.
C) lower prices and less food for consumers.
D) lower prices and more food for consumers.
Which of the following would be included in the total costs of production when an
entrepreneur tries to compute her economic profit?
A) Foregone wages
B) Foregone interest
C) Foregone rent
D) All of the above.
E) None of the above.
Under a system of rent controls, landlords are more likely to
A) discriminate against middle aged tenants.
B) discriminate against students.
C) discriminate against wealthy tenants.
D) experience high vacancy rates.
E) maintain apartments in better condition.
If the Slamdunkers can sell 5000 season tickets for $100 and 6000 season tickets only
by lowering the price (for all purchasers) to $80, our best estimate of the marginal
revenue from sale of the 550th season ticket is
A) $100.
B) $90.
C) $80.
D) -$20.
Government licensing of occupations or trades
A) has usually been established over the objections of sellers in the licensed industry.
B) is often controlled by firms in the licensed industry to prevent competition.
C) is prohibited by the U.S. Constitution.
D) usually protects the public against poor quality products.
E) will not reduce competition if it merely imposes higher costs on prospective entrants
into the industry.
A tax on firms for polluting will be most effective in reducing pollution at low cost if
the tax
A) is levied on a one-time, lump-sum basis.
B) per unit of pollutant is constant.
C) per unit of pollutant is lower for low polluting firms.
D) per unit of pollutant is proportioned to profits or ability to pay.
Fact: Churches and charities work hard to acquire more money to advance their
projects. They happily accept money because
A) they are clearly selfish and materialistic.
B) the transaction costs of donating money are generally lower than the costs of
donating other goods and services.
C) they tend to see money as the root of all evil, and by collecting it they can more
effectively destroy it and change the system for the better.
D) none of the above.
The use of money adds to wealth because it tends to increase people’s
A) options.
B) risks.
C) costs.
D) expenditures.
E) elasticity of demand.
Economists believe a volunteer military is likely to
A) cost more than a conscripted military.
B) cost taxpayers more than a conscripted military would.
C) impose higher costs on military personnel than does a conscripted military.
D) increase the percentage of incompetent people in the armed forces.
If the demand for a good is determined to be “elastic,” then the elasticity measure
A) is greater than 1.0.
B) is equal to 1.0.
C) is less than 1.0.
D) is infinite.
If airports decide to compensate people who suffer from airplane noise because their
homes are under the runway approaches, to whom should they offer monetary
payments? The people who
A) actually live in affected residences.
B) are bothered by the noise but themselves never travel on commercial airlines.
C) both own affected residences and live in them.
D) either own affected residences or live in them.
E) own affected residences whether or not they live in them.
The merger of two daily New York City newspapers would be an example of a
A) conglomerate merger.
B) diagonal merger.
C) horizontal merger.
D) vertical merger.
Credit cards are included in
A) the M1 money supply.
B) the M2 money supply.
C) all of the above.
D) none of the above.
Gomer can make either 200 gallons of corn liquor (L) or 200 gallons of strawberry wine
(W) every six months. Goober can make only 100 gallons of corn liquor (L) or 50
gallons of strawberry wine (W) every six months. Which statement below is true?
A) Gomer produces L more efficiently than Goober.
B) Gomer producers W more efficiently than Goober.
C) Goober produces W more efficiently than Gomer.
D) Both A and B is true.
Consider baseball games and ballpark hotdogs. A significant increase in the price of
baseball game tickets would tend to
A) increase the demand for ballpark hotdogs.
B) decrease the demand for baseball game tickets.
C) decrease the demand for ballpark hotdogs.
D) increase the demand for baseball game tickets.
When local governments ignore all other considerations and award cable TV franchises
to the firms that offer the highest money bids, they
A) discriminate against the poor.
B) encourage corruption.
C) introduce delay into the system but increase its efficiency.
D) reduce the likelihood of illegal bribes.
E) increase the likelihood the winning firm will be incompetent.
Suppose early Friday morning the economics club buys 200 donuts at 25 cents each,
and plans to sell all of them later in the day on campus for 50 cents each. Only 60
donuts are sold at 50 cents, however, and by early afternoon the club is seen trying to
unload the remaining donuts for 10 cents each. What can we conclude?
A) The club was clearly engaging in predatory pricing of donuts.
B) The club was clearly selling below cost.
C) The club clearly misjudged the demand for donuts.
D) All of the above are true.
Unions first became powerful in the United States in industries dominated by
A) government.
B) highly profitable firms.
C) large firms.
D) small firms.
In light of higher gas prices, Skip Miles asks himself if it’s worth keeping his 10
cylinder Chevy Suburban. His concern is ultimately about
A) engineering efficiency.
B) economic efficiency.
C) technical efficiency.
D) environmental efficiency.
National income accountants measure the value of final goods and services with
A) market prices.
B) fair prices.
C) objective values.
D) best-guess estimates as to what things are really worth.
If competing price searchers adjust their own prices on the basis of a close monitoring
of their rival’s prices,
A) all prices will tend to be the same, which proves prices are not competitive.
B) all prices will tend to be the same, which proves sellers are not competing on price.
C) each price searcher’s demand curve will be indeterminate.
D) prices will fluctuate regularly.
E) prices will rise when costs increase but will not fall when costs decrease.
What the economist calls externalities create social problems
A) because opportunity costs are low when people live close to one another.
B) only when the externalities are negative spillovers.
C) partly because people have a limited ability to empathize.
D) when people know about all the consequences of their behavior.
According to your textbook, changes in supply and demand reflect changes in
A) society’s overall welfare.
B) the plans that buyers and sellers are making.
C) the overall efficiency of the market.
D) government policy.
E) None of the above.
A price searcher faces the following demand function: At $7, 6, 5, 4, and $3, the
quantity demanded is 300, 400, 500, 600, and 700 units respectively. Which statement
below is true?
A) Total revenue is $11,500.
B) Marginal revenue is $300 when the price is $5.
C) Marginal revenue is $100 when the price is $5.
D) Marginal revenue is $2100 when the price is $3.
Recall from Chapter 5: Other things constant, when households lower their time
preferences, and demonstrate a willingness to postpone some present consumption for
future consumption,
A) their savings increase.
B) their savings decrease.
C) the budget deficit increases.
D) the budget deficit decreases.
If Croatian firms can make 600 pitchforks or 100 hammers in a week and Slovenian
firms can make 200 pitchforks or 200 hammers in a week, then
A) 1 pitchfork costs 3 hammers in Croatia.
B) 1 pitchfork costs 6 hammers in Croatia.
C) 1 pitchfork costs 2 hammers in Slovenia.
D) 1 pitchfork costs 1 hammer in Slovenia.
People who reject all theories because they prefer to rely on experience
A) actually rely on unrecognized theories.
B) don’t know any theories and are trying to cover up their ignorance.
C) tend to accomplish more but also to make more mistakes.
D) tend to make fewer mistakes but also to accomplish less.
E) value science more than theory.
When the Fed buys bonds on a mass scale
A) bonds go to the Fed, and dollars go into the banking system, so the money supply
tends to rise.
B) bonds go to the Fed, and dollars exit the banking system, so the money supply tends
to fall.
C) banks have more bonds and fewer dollars, so the money supply tends to fall.
D) banks have more bonds and fewer dollars, so the money supply tends to rise.
For any new deposits into the banking system, the deposit expansion multiplier
provides
A) no useful information regarding the potential expansion of the nation’s money
supply.
B) an exact prediction of the expansion of the nation’s money supply.
C) a theoretical limit on the potential expansion of the nation’s money supply.
D) an argument that deposits don’t effect the nation’s money supply at all.
Requiring commercial banks to hold reserves equal to some fraction of their deposit
liabilities
A) acts as a constraint on bank lending.
B) is an alternative for banks that choose not to use the gold standard.
C) is without significance since banks are not required to meet their liabilities on
demand by depositors.
D) prevents runs on banks by depositors who fear that the banks may not have assets
equal to their liabilities.
E) really has no effect on the monetary system today.
A primary goal of the Fed, if it sought after monetary equilibrium, is to
A) keep interest rates stable.
B) keep jobs plentiful.
C) keep the quantity supplied of money equal to the quantity demanded.
D) get the national debt paid off in a timely manner.
E) keep the M1 money supply is tied to the amount of gold reserves held in Fort Knox.