In the Central Utah Project, the water delivered from dams to users
a. is very well utilized, because planners allocated water to its highest valued uses and
users.
b. cannot generally be traded, so is often wastefully used in low-valued uses.
c. is often sold to water-short cities by farmers who can then enjoy a profit from the
sale.
d. is very expensive to the users who get it.
The economic way of thinking suggests that if the government imposed a $500 tax on
owners of red automobiles,
a. fewer red automobiles would be produced and sold.
b. more red automobiles would be produced and sold.
c. there would be no change in the number of red automobiles produced and sold.
d. red automobiles would cease to exist.
Which of the following is not a function of prices in a market system?
a. Prices have the crucial job of balancing supply and demand.
b. Prices send signals to buyers and sellers to help them make rational economic
decisions.
c. Prices coordinate economic activity.
d. Prices ensure an equitable distribution of goods and services among consumers.
Why have the earnings of persons with less education (and skill) fallen relative to those
with more education (and skill)?
a. more regulation of the transport industry
b. more powerful unions
c. international competition
d. all of the above
The short run is the time period during which
a. all of the firm’s costs are fixed.
b. the value of the firm’s assets starts to decay.
c. the firm can adjust all inputs freely.
d. some of the firm’s input decisions are constrained by previous commitments.
What effect does restrictive monetary policy have on short-term real interest rates?
a. Restrictive monetary policy tends to push short-term interest rates upward.
b. Restrictive monetary policy tends to push short-term interest rates downward.
c. The effect of restrictive monetary policy on short-term interest rates is unpredictable.
d. Restrictive monetary policy has no effect on short-term interest rates.
Which of the following benefits is counted as income when the official poverty rate is
calculated?
a. Medicaid benefits
b. food stamps
c. public housing benefits
d. none of the above
e. all of the above
If the dollar-yen exchange rate changes from $1 = 125 yen to $1 = 100 yen, then
a. exports to Japan will likely decrease.
b. Japanese tourists will be more likely to visit the United States.
c. U.S. businesses will be more likely to use Japanese shipping lines to transport their
products.
d. U.S. consumers will be more likely to buy Japanese-made automobiles.
Women earn less on average than men. Which of the following would be the logical
conclusion?
a. Women must be the victim of employment discrimination.
b. Women must be less productive.
c. Men must be more highly motivated and materialistic.
d. Without consideration of preferences and productivity factors, differences in
unadjusted mean earnings do not necessarily reflect employment discrimination.
Suppose the United Auto Workers’ Union succeeded in obtaining a 10 percent increase
in the wages of its workers and that the wage increase caused automobile prices to rise.
Employment in the auto industry would be most likely to decline significantly if
a. the demand for American-made automobiles was highly elastic.
b. the supply of foreign-produced automobiles was highly inelastic.
c. American consumers considered foreign automobiles a poor substitute for American
automobiles.
d. the demand for American automobiles was relatively constant and highly inelastic.
If there is employment discrimination against minorities, this will cause the
a. supply of their services to increase, and their wages to fall.
b. demand for their services to decline, and their wages to fall.
c. supply of their services to decline, and their wages to rise.
d. demand for their services to decline, and their wages to rise.
If the government wants to generate large revenues from placing a tax on the
consumption of a particular good, it should choose a good for which
a. the demand is price elastic
b. the demand is unitary elastic
c. the demand is price inelastic
d. there are many good substitutes available for the good
Which of the following statements about gross domestic product and gross national
product is true?
a. Gross domestic product includes income payments to foreigners for their work
domestically; gross national product does not.
b. Gross domestic product includes the income earned abroad by domestic citizens;
gross national product does not.
c. Gross domestic product includes exports; gross national product does not.
d. GDP and GNP are equal.
As the real interest rate in the domestic loanable funds market increases,
a. the cost of purchasing goods and services during the current period will decline.
b. the net inflow of capital from abroad will increase.
c. the inflationary premium will rise, and the money rate of interest will decline.
d. the inflationary premium will fall, and the money rate of interest will rise.
The highest valued alternative option that must be given up in order to choose an action
is called its
a. utility.
b. opportunity cost.
c. capital.
d. ceteris paribus
Which of the following about employment discrimination is true?
a. Employers who discriminate against blacks and other minorities will have lower
costs than rival firms that hire employees strictly on the basis of productivity.
b. After adjusting for factors such as education, experience, and location, the earnings
of black men are almost identical to the earnings of white men.
c. If minority and white employees in a skill category are equally productive, the profit
motive provides employers with a strong incentive to hire minority employees if they
are available at a lower wage.
d. The empirical evidence indicates that the earnings gap between whites and blacks is
entirely the result of worker preference.
Isabella buys a new camera for $80. She receives consumer surplus of $35 on her
purchase if her willingness to pay is
a. $35.
b. $45.
c. $80.
d. $115.
Figure 5-4
Refer to Figure 5-4. The inefficient equilibrium price and quantity are
a. $1.90 and 38 units, respectively.
b. $1.80 and 35 units, respectively.
c. $1.60 and 42 units, respectively.
d. $1.35 and 58 units, respectively.
The basic difference between macroeconomics and microeconomics is that
a. microeconomics is concerned with aggregate markets and the entire economy, while
macroeconomics is concerned with specific individual markets.
b. macroeconomics is concerned with policy decisions, while microeconomics applies
only to theory.
c. microeconomics is concerned with individual markets and the behavior of people and
firms, while macroeconomics is concerned with aggregate markets and the entire
economy.
d. macroeconomics is concerned with positive economics, while microeconomics is
concerned with normative economics.
Fiscal policy is
a. the deliberate control of the money supply to achieve macroeconomic goals.
b. the use of the government’s regulatory powers to improve economic efficiency.
c. the operation of business enterprises by the government.
d. the use of government taxation and expenditures to achieve macroeconomic goals.
Which of the following represents a long-run adjustment?
a. the hiring of four additional cashiers by a supermarket
b. a cutback on purchases of coke and iron ore by a steel manufacturer
c. construction of a new assembly-line plant by a car manufacturer
d. the extra dose of fertilizer used by a farmer on his wheat crop
The current U.S. unemployment insurance program tends to
a. increase the incentive to switch occupations.
b. reduce the time workers stay unemployed.
c. make it more costly for unemployed workers to turn down available jobs.
d. raise the unemployment rate.
Which of the following would reduce the supply of baseball hats?
a. An increase in the demand for baseball hats.
b. A new tax imposed on the producers of baseball hats.
c. A reduction in the price of cloth used to make baseball hats.
d. All of the above.
Figure 3-19
Refer to Figure 3-19. Buyers who value this good less than price are represented by
which line segment?
a. AC.
b. CE.
c. BC.
d. CD.
The firms in a competitive price-searcher market produce goods and services that are
a. identical to one another in quality and price.
b. identical to one another in quality but not in price.
c. identical to one another in price but not in quality.
d. different from one another.
If the long-run equilibrium of an economy is disrupted by an unanticipated increase in
aggregate demand (such as might result from unexpectedly strong demand for exports
due to the rapid growth of incomes abroad),
a. the price of resources will decrease.
b. the natural rate of unemployment will decrease.
c. actual unemployment will temporarily fall below the natural rate.
d. prices will decrease.
If the base year for the GDP deflator is 2005 and the value of the deflator during 2011 is
115, this indicates that the general level of prices
a. declined by 15 percent between 2005 and 2011.
b. increased by 15 percent each year during 2005-2011.
c. was approximately 15 percent higher in 2011 than in 2005.
d. was approximately 115 percent higher in 2011 than in 2005.
A profit-maximizing firm would
a. consider opportunity costs rather than accounting costs when making decisions about
output.
b. expand current output if the revenues expected from doing so were less than the
expected costs.
c. enlarge its current plant size if present depreciation costs were less than average
variable costs.
d. increase output in the next period if accounting profits during the previous period
were positive.
Suppose a city that operates local electric and natural gas companies wants to raise
revenues by increasing its rates for electricity and natural gas. The price rise will
increase city revenues if the elasticity of demand for electricity and natural gas is
a. inelastic.
b. elastic.
c. negative.
d. equal to 1.
Because the benefits derived from an activity decline as it is expanded, it is generally
a. wise to undertake all actions that generate benefits.
b. efficient to stop well before perfection is achieved.
c. best to continue as long as it is possible to derive some additional benefits.
d. unwise to engage in activities for which the benefits decline as you do more of it.
Which of the following is a predictable impact of the Patient Protection and Affordable
Care Act ?
a. A reduction in the prices of health care services.
b. A reduction in total expenditures on health care.
c. An increase in the number of part-time employees relative to full-time workers.
d. A lower overall rate of unemployment.
The velocity of money is
a. the rate at which the price index for consumer goods rises.
b. the multiple by which an increase in government expenditures will cause output to
rise.
c. set by the Board of Governors of the Federal Reserve System.
d. the average number of times one dollar is used to buy final goods and services during
a year.