Fill in the blank: According to your text, ________ may be the most powerful force
behind economic growth.
A) minimum wages
B) unionization
C) technical innovation
D) a well-motivated bureaucracy
E) price compression
Suppose the price level increases and real GDP remains the same. Then
A) nominal GDP must decrease.
B) nominal GDP must remain unchanged.
C) nominal GDP must increase.
D) none of the above are true.
Real estate suitable for condominium development is also suitable for single-family
home development. Therefore, a rise in the price of condominiums relative to
single-family homes tends to
A) increase the opportunity cost of building new single-family homes.
B) reduce the demand for condominiums.
C) increase the demand for condominiums.
D) do none of the above.
With each 99 cent iTunes download, GDP
A) rises by 99 cents.
B) falls by 99 cents.
C) remains unchanged.
D) is impossible to measure with this sale because nothing physical has been produced.
If a middle-eastern war reduced the quantity of crude petroleum available for export to
Japan and the United States by 40%, and the U.S. government responded by imposing
price ceilings on petroleum,
A) more petroleum would be available for Japanese users.
B) the demand for crude petroleum in the U.S. would increase.
C) the demand for natural gas in the U.S. would decline.
D) the price of petroleum would rise even higher in Japan.
E) all of the above would be likely to result.
The money supply would tend to fall if the Fed
A) sells bonds.
B) buys bonds.
C) lowers the discount rate.
D) lowers reserve requirements.
Fill in the blanks: Gross domestic product measures the ________ value of ________
goods and services produced during a ________ time period.
A) inherent; market; fixed
B) final; intermediate; stable
C) intermediate; final; constant
D) market; final; given
OPEC was able to function as an extremely successful cartel in the last half of the
1970s because
A) it was an association of governments rather than of private individuals.
B) it was able to separate OPEC oil from non-OPEC oil and to engage in price
discrimination.
C) the increasing scarcity of oil produced an upward-sloping marginal revenue curve.
D) the widespread expectation of much higher future prices discouraged current
production.
E) wars in the Middle East raised the marginal cost of producing oil.
Someone who sells commodity futures is
A) hedging.
B) purchasing risk.
C) selling risk.
D) simultaneously purchasing and selling risk.
E) not necessarily doing any of the above.
Is it possible for inflation and recession to occur simultaneously in an economy?
A) No, because prices cannot rise during a recession.
B) No, because recession is caused by too little demand and inflation by too much
demand.
C) Yes, and this has happened several times in the U.S. economy since World War II.
D) Yes, but it has not occurred since the Great Depression in the 1930s.
E) Yes, but while it is logically possible it has never actually happened in any major
industrialized economy.
In the economic way of thinking, a wetland is a scarce good. Thus,
A) there is a substitute for a wetland.
B) there is no substitute for a wetland.
C) wetlands should be preserved at any cost.
D) wetlands can be preserved at no cost.
E) economists don’t like wetlands.
Suppose a university refunds students 75% of their tuition if they drop out before the
third week of class, 50% if they drop out between their third and fifth week, 25% if they
drop out between their sixth and eighth week, and 0% after the eighth week. Flint paid
$1,000 tuition, and is in his second week of class. What’s his sunk cost?
A) $0
B) $250
C) $500
D) $750
E) $1,000
The high-school dropout rate usually declines in an economic recession because
A) a decline in job opportunities lowers the opportunity cost of remaining in high
school.
B) high schools begin to offer more practical and relevant courses.
C) laws are passed to prevent teenagers from entering the labor market.
D) recessions increase the demand for education.
E) tuition and book prices usually fall in a recession.
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) Neither can gain from specialization and exchange.
B) Only Goober can gain from specialization and exchange.
C) Both can gain through exchange if Gomer specializes in W and Goober specializes
in L.
D) Both can gain through exchange if Gomer specializes in L and Goober specializes in
W.
What did President George W. Bush and Mother Teresa have in common?
A) They each pursued projects in which they were interested.
B) They each demonstrated a burning desire to directly serve the poorest of the poor.
C) They each promoted a plan to build up the American nuclear defense system.
D) They were both well-known fans of the Dallas Cowboys.
Commodity speculators persuade people to start economizing in their consumption of a
good as soon as the speculators foresee an increased future scarcity by causing
A) futures prices, expected future prices, and current prices to fall.
B) futures prices, expected future prices, and current prices to rise.
C) futures prices and expected future prices to fall and current prices to rise.
D) futures prices to rise, expected future prices to fall, and current prices to rise.
E) futures prices and expected future prices to rise and current prices to fall.
Consider the following simplified sequence of exchanges. A farmer sells wheat to a
miller, for 25 cents. The miller grinds the wheat into flour, and sells that to a baker, for
35 cents. The baker turns the flour into a loaf of bread, which she sells to a grocer for
60 cents. The grocer then sells you the loaf of bread for 85 cents. What is the total value
added?
A) 85 cents
B) $1.45
C) $1.80
D) $2.05
According to your authors, the “boom” phase of the so-called “business cycle” is
A) caused by an expansionary increase of the money supply.
B) a systematic accumulation of mistakes among businesses and households across the
economy.
C) undertaken because business planners miscalculate the expected profitability of their
new ventures.
D) ultimately followed by a recessionary “bust” as people begin to correct for the
mistakes they’ve made during the boom phase of the cycle.
E) described correctly by all of the above statements.
The central problem all individuals face is
A) greed.
B) insufficient money income.
C) scarcity of resources.
D) the desire for present enjoyment.
E) unequal wealth.
If a seller can sell 5 units at $8 each and can sell a 6th unit separately for $7 (the people
willing to pay $8 don’t learn about the reduced price), the marginal revenue from selling
the 6th unit is
A) $47.
B) $7.50.
C) $7.
D) $2.
E) none of the above.
Which of the following is most likely to occur if a price-takers’ market displaces a
price-searchers’ market?
A) Costs will be higher.
B) Efficiency will be less.
C) Net revenue will be larger.
D) Output will be larger.
E) Prices will be higher.
Which of the following statements is not compatible with the opportunity cost theory?
A) Demand plays a role in the determination of costs.
B) Labor costs depend upon the demand for labor.
C) Relative prices reflect the relative amount of human labor required to produce
goods.
D) Supply as well as demand depends upon subjective preferences.
The economic way of thinking
A) explains all social phenomena adequately.
B) explains any social phenomena more adequately than any alternative perspective.
C) is a biased perspective.
D) is as old as human society itself.
E) was invented at the end of the 19th century.
If the government drafts people into the armed forces rather than persuading them to
volunteer
A) it conceals in part the cost to its citizens of obtaining military personnel.
B) it employs a nondiscriminatory system because everyone drafted incurs the same
cost and can be paid the same wage.
C) it must pay higher wages since many people resent the draft.
D) it reduces the cost to the nation as a whole of obtaining military personnel.
E) it tends to obtain people with the lowest opportunity costs.
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) decreasing.
B) inelastic.
C) unit elastic.
D) elastic.
Regular and organic vegetables are substitutes. A rise in the price of organic vegetables,
other things constant, would tend to
A) reduce the demand for regular vegetables.
B) increase the demand for regular vegetables.
C) have no effect on the demand for regular vegetables.
D) have no effect on the quantity demanded of organic vegetables.
A typical corn farmer won’t use cost-plus-markup pricing because
A) his costs are low enough.
B) he isn’t interested in maximizing net revenue.
C) he strives for markdown pricing, not markup pricing.
D) he has no control over the market price of corn.
People debate whether or not the U.S. should allow for greater oil exploration in
Northern Alaska. According to the economic way of thinking, the debate is rooted in
A) different perceptions about the additional benefits and the additional costs of oil
exploration in Northern Alaska.
B) a complete lack of appreciation of the value of wildlife and the ecology of Northern
Alaska.
C) a complete lack of appreciation of the value of oil in world affairs.
D) politics rather than economics.
A recession shows
A) supply always equals demand.
B) supply never equals demand
C) real GDP must be lower than nominal GDP.
D) a “cluster of errors” has occurred throughout the economy.
E) not enough households are using their credit cards.
According to your text, disagreements about the relative efficiency of particular projects
are usually disagreements about
A) the best way to conserve energy.
B) the best way to conserve non-renewable resources of all kinds.
C) scientific facts or technical processes.
D) the relative value of particular goods to different people.
E) who is entitled to make money from one project or another.
A decrease in the supply of a good will cause a larger increase in its price
A) if there are many close substitutes for the good.
B) the greater the scarcity of the good.
C) the more elastic the demand for the good.
D) the more inelastic the demand for the good.
Bobby drives her car to work; Bill takes the bus. They are both behaving efficiently as
long as we assume
A) it costs the same for Bobby to drive the car as it does for Bill to take the bus.
B) both Bobby and Bill value their trips equally.
C) Bobby and Bill are traveling to different locations.
D) both Bobby and Bill voluntarily selected the forms of transportation they take to
work.
According to your authors, the prohibition on alcohol kept the ________ curve
relatively stable while the ________ curve became more ________.
A) supply; demand; elastic
B) supply; demand; inelastic
C) demand; supply; elastic
D) demand; supply; inelastic
Which organization is responsible for managing the nation’s money supply?
A) Fort Knox
B) The United States Congress
C) The United States Treasury
D) The Federal Open Market Committee
E) The American Economic Association