If one really believes that price spikes known as “price gouging” are due to a surge in
greed among suppliers, then
A) they haven’t quite mastered the economic way of thinking.
B) their comfort in knowing that thousands if not millions of others agree with them is
not sufficient economic evidence to conclude that their claim is correct.
C) their claim implies that significant price decreases are due to a sudden reduction in
greed among suppliers.
D) all of the above are true.
Suppose Ann can produce 8 units of a material good (M) or 4 units of a spiritual good
(S) in a day, while Ben can produce only 3 Ms or 3 Ss in a day. Which statement below
is true?
A) Ben has a comparative advantage in spiritual goods.
B) Ann has a comparative advantage in spiritual goods.
C) Ben has a comparative advantage in material goods.
D) Ann has a comparative advantage in both spiritual and material goods.
Effective cooperation among the members of a commercial society is more likely when
A) economic decisions are placed in the hands of democratically-elected committees.
B) everyone’s income is approximately the same.
C) people produce for use rather than for profit.
D) prices do not change in response to temporary changes in circumstances.
E) property rights are clearly defined.
A savings and loan strives for a 6% real return on its loans and estimates a 7% annual
rate of inflation. It should therefore charge its borrowers a nominal interest rate of
A) 13%.
B) 7%.
C) 6%.
D) 1.17%.
E) 1%.
Legislation setting high minimum wage rates benefits
A) many people receiving wages far above the minimum by reducing competition from
unskilled workers.
B) no group in the economy, but is nonetheless widely supported out of ignorance.
C) only people who were previously receiving less than the legal minimum.
D) primarily teenagers and unskilled workers.
E) the whole economy by pushing up average income.
It is not uncommon for business professors to make a statement such as the following:
“While economists are happy in their never-never land of economic theory, we business
professors seriously study facts of the real world.” According to your textbook, the
statement is
A) generally true.
B) misleading; even business professors rely upon theories to discriminate among and
make sense out of the facts they choose to study.
C) confused, because in actuality it is the business professors who are trapped in the
never-never land of theory, while the economists seriously study real-world facts
without using theories.
D) false, because economics and business are one and the same discipline.
If an economist claims there are substitutes for fossil fuels, she is really saying
A) fossil fuels don’t have to be economized.
B) fossil fuels aren’t scarce goods.
C) fossil fuels aren’t important.
D) fossil fuels are used, and maintained, only at a cost.
E) economists don’t care for fossil fuels.
A large increase in the legal minimum wage is most likely to benefit
A) teenagers.
B) unemployed workers.
C) unionized workers.
D) unskilled workers.
E) none of the above because price-fixing hurts everyone.
The authors of the textbook would not want to say you were “littering” when you toss
your peanut shells under your seat at a major league baseball game because
A) peanut shells are biodegradable.
B) someone is going to clean up after you.
C) the games are played outside.
D) the stadium is public property and public property is no one’s property.
E) the people in charge of putting on the game don’t mind at all.
Adjudication, as discussed in the text, is a process for settling disagreements by
supporting and enforcing which rights?
A) Rights based on an original act of mixing human labor with previously unowned
resources
B) The most ancient rights, whether or not they have been enforced
C) The most widely and confidently accepted rights
D) The rights of the majority
Pick the producer who would come closest to operating in a perfectly competitive
environment.
A) An automobile manufacturer
B) A public utility
C) A pig farmer
D) A crack cocaine manufacturer
E) A movie theater
People are most likely to make their opinions on a potential piece of legislation known
to their representatives when
A) the legislation matters greatly to them, whether or not it affects their private
interests.
B) the legislation will affect their private interests substantially.
C) they believe their actions will make enough difference to justify the effort.
D) they can do so at low cost to themselves.
The “Superbowl Effect” mentioned in your textbook is considered a fallacy or a mistake
in reasoning because it’s wrong to believe
A) one event always causes another to happen if it comes before the other.
B) if you gain, I must lose.
C) the whole must always be equal to the sum of its parts.
D) what is true in one society will always be true in all societies.
E) whatever goes up must come down again.
Total expenditures for new final goods equals total output of new final goods in the
income and product accounts
A) because no one will produce what cannot be sold.
B) because prices will rise or fall to clear the market.
C) because unsold goods are assumed to be purchased by the firms that produced them.
D) only at equilibrium.
E) when all goods are sold in the year they are produced.
Several national fast-food chains offer “kids’ meals” with free giveaway toys, something
many independent, local establishments cannot afford to do. The national chains are
A) engaging in predatory pricing.
B) selling meals below cost.
C) distributing toys below cost.
D) engaging in anti-competitive behavior because the independents cannot afford to
give away toys.
E) almost certainly doing none of the above.
Which combination is a clear example of “joint products”?
A) Steel and cars
B) Cars and tires
C) Tires and air
D) All of the above.
E) None of the above.
Which is an example of a negative externality?
A) A tornado
B) A hurricane
C) A flood
D) All of the above.
E) None of the above.
Open market operations refers to the Fed’s
A) manipulation of the required reserve ratio.
B) purchase and sale of government bonds.
C) manipulation of the discount rate.
D) use of all of the above techniques.
How does the contribution to national output of a wheat farmer get counted in the gross
domestic product if the Bureau of Economic Analysis measures only the value of final
goods such as loaves of bread?
A) Agricultural production is not part of GDP.
B) It is counted separately by the Department of Internal Revenue.
C) It is included in the cost of materials purchased by those who sell loaves of bread.
D) It is not counted, which results in an underestimation of GDP.
E) Wheat is also a final good because it is more ultimate than bread.
An increase in the supply (curve) of a good implies a larger quantity of the good will
now be supplied
A) at the same price.
B) even if the price falls substantially.
C) only if the price rises.
D) whenever the demand decreases.
If there are 200 physicians per 100,000 population in the United States generally, but
over 500 per 100,000 population in San Francisco,
A) physicians are not scarce in San Francisco.
B) physicians particularly enjoy living and working in San Francisco, for financial and
other reasons.
C) residents of San Francisco necessarily need more medical services than the average
American.
D) there is a shortage of patients in San Francisco.
E) there is a surplus of physicians in San Francisco.
Gross domestic product does not measure
A) the sum of the value added by producers at each stage of the production process.
B) the total income received by producers for the services they supply.
C) the total purchases of newly-produced final goods.
D) the total welfare of the noninstitutional population.
Suppose the nominal interest rate is 5% and the rate of inflation is 5%. The real interest
rate is therefore
A) 0%.
B) 1%.
C) 5%.
D) 6%.
When a government mandate sets the rental price of an apartment below the market
clearing level, which of the following result?
A) More apartments are rented.
B) Landlords attempt to make up for the lower rental income by charging more for
security deposits and cleaning fees.
C) Landlords discriminate less.
D) Landlords address their tenant’s requests in a more prompt manner.
Strictly speaking, which has a cost?
A) A decision
B) A cup
C) A cup of diamonds
D) A gallon of water
E) Checking accounts that charge fees for deposits below $100
What can economists conclude if they observe an increase in real GDP?
A) The price level must have fallen.
B) The real output of final goods and services must have risen.
C) National welfare must have risen.
D) Nominal GDP must have risen.
E) All of the above.
Who, among the following, is least likely to practice cost-plus-markup pricing?
A) Dolly J. Dalrymple, a Wisconsin dairy farmer
B) The Wisconsin Cheeses-R-Us factory
C) The Cheese-of-the-Month Club
D) Trick question: all are equally likely to use cost-plus-markup pricing.
The Kwakiutl Indians of the Northwest used Hudson Bay blankets as a general medium
of exchange. In the economic way of thinking, their blankets were therefore used
A) irrationally.
B) as goods in and of themselves.
C) without regard to their value.
D) as money.
Your textbook argues that in a market system income is earned and “distributed”
A) in the process of its creation.
B) as a result of the supply and demand for productive services.
C) in ways that might not be considered “fair” in all cases.
D) in all of the above ways.
Other things constant, if tuition at a private university rises from $40,000 to $45,000
and revenue for the university decreases, the demand for the good must be
A) increasing.
B) inelastic.
C) unit elastic.
D) elastic.
The textbook defines a “well-organized” market as a market in which
A) all information available to sellers and buyers is also available to other parties to
exchange transactions.
B) bids and offers of buyers and sellers are brought together to establish a single price
over a wide area.
C) the government regulates maximum and minimum prices.
D) the terms of exchange between buyers and sellers are controlled by a professional
marketing association.
The production possibilities frontier is used by economists to depict
A) the strictly financial costs of production.
B) the opportunity costs of production.
C) the strictly financial benefits of production.
D) the opportunity benefits of production.