Suppose the Utopian economy has the following characteristics: 100,000 people in the
noninstitutional population; 80,000 people employed; 20,000 people not in the labor
force. What’s the unemployment rate?
A) -20 percent
B) 0 percent
C) 25 percent
D) 60 percent
E) 80 percent
Consider the following simplified sequence of exchanges. A logger sells an oak tree to a
sawmill owner for $60. The sawmill mills it, and sells the boards to a woodworker for
$80. The woodworker makes an oak bookcase out of the boards, and sells it to a retailer
for $300. The retailer then sells you the bookcase for $500. As a result, GDP increases
by
A) $200.
B) $300.
C) $440.
D) $500.
E) $940.
The property rights of commissioners appointed to the Food and Drug Administration
encourage them to
A) call for additional testing of a new drug even when a delay in approval is liable to
cost more lives than additional testing is likely to save.
B) make decisions in the interest of drug manufacturers.
C) make decisions in the interest of physicians and patients.
D) rush new drugs onto the market before they have been adequately tested.
E) work shorter hours and take longer vacations than employees in the food and drug
industries.
In one northern town, the snowmobilers enjoy snow while non-snowmobilers hate it.
When the town gets two feet of fresh snow, which group is made wealthier?
A) Non-snowmobilers
B) Snowmobilers
C) Everybody
D) Nobody
The costs affecting decisions to supply are always
A) accounting costs.
B) marginal costs.
C) past costs.
D) per unit costs.
E) non-taxable costs.
What is the most likely effect of legislated rent controls on the rental vacancy rate in an
area adopting such controls?
A) The vacancy rate will not change because rent controls don’t change the demand
(curve) for housing.
B) The vacancy rate will rise because owners will be less eager to have tenants in their
buildings.
C) The vacancy rate will fall because rent controls create a shortage situation.
D) The vacancy rate will become wholly arbitrary and unpredictable because allocation
decisions will have to be made by political rather than economic criteria.
Which statement most adequately describes the productivity of trade relative to the
productivity of agriculture and manufacturing?
A) Trade is essential in an economy once agriculture and manufacturing have
developed, even though it is not productive.
B) Trade is less productive than agriculture or manufacturing.
C) The wordproductive must be applied to agriculture or manufacturing in the same
way it is applied to trade.
D) Trade is productive only insofar as it distributes newly produced agricultural or
manufactured goods.
E) Trade is rarely productive because it almost never increases the quantity of goods in
the economy.
Which of the following is the most essential prerequisite for successful conduct of the
“game” of urban traffic?
A) An advance plan to coordinate the moves of participants
B) Drivers who care as much about other people’s interests as their own
C) Extensive information on other drivers’ destinations and objectives
D) General consensus on and following of traffic rules
The marginal cost to a grocer of selling avocados, which would have to be thrown away
if they are not sold immediately, is approximately
A) the overhead cost per avocado sold.
B) the price of replacing the inventory.
C) their wholesale purchase price.
D) zero.
The Fed is
A) shielded from political pressure.
B) officially independent from the federal government.
C) staffed by Congressmen who are biased toward monetary expansion.
D) responsible for minting coins and collecting taxes.
The supply of any good is likely to be inelastic when
A) consumers have few good substitutes for it.
B) it is a manufactured good rather than an agricultural good.
C) it can be produced at low cost.
D) there are very many producers of the good.
E) very little time elapses between the change in price and the change in quantity
supplied.
Which groups tend to have greater difficulties finding employment as a result of the
minimum wage?
A) Minorities
B) Teens
C) Those with little work experience
D) All of the above.
Chelsea buys bottled water from the vending machine for $1.00. As long as the
transaction was voluntary,
A) Chelsea values the water more than $1.00.
B) the vendor values the water less than $1.00.
C) the vendor’s wealth has increased.
D) Chelsea’s wealth has increased.
E) All of the above.
Which of the following individuals will the Bureau of Labor Statistics not count as
unemployed?
A) Those who are not eligible for unemployment compensation because they have not
worked in covered employment.
B) Those who have turned down job offers comparable to the most recent one they
held.
C) Those who have used up their unemployment compensation benefits.
D) Those who live in a household where at least one other person is employed full time.
E) None of the above prevents an individual from being counted as unemployed.
The prisoners’ dilemma is a tool of social analysis, and it shows why
A) individuals sometimes behave in ways inconsistent with their own best interest.
B) judges sometimes hand down sentences heavier or lighter than the law recommends.
C) people who break the law and are caught are behaving irrationally.
D) people who break the law and are caught are behaving rationally.
E) societies sometimes produce situations no member of the society wants.
The Audubon Society currently allows three oil companies to extract natural gas on its
Rainey Wildlife Sanctuary because
A) natural gas is more valuable than wildlife conservation.
B) oil interests actually own the Audubon Society.
C) the government required the leasing of natural gas rights under its power of eminent
domain.
D) the sanctuary must, by law, be used to promote the public interest.
E) the sanctuary is the private property of the Audubon Society.
Reducing prices below cost in order to eliminate competitors (with the intention of later
raising prices to recoup all losses) is
A) an empirical impossibility in a free society.
B) called induced competition.
C) called predatory price cutting.
D) increasingly common in the American economy.
Pick the true statement below:
A) All scarce goods are normal goods.
B) All scarce goods are inferior goods.
C) A normal goods is a scarce good.
D) An inferior good is a bad.
The goal of a gold standard is to
A) return money back to its natural state.
B) shift wealth from the middle class to the rich.
C) reduce uncertainty by limiting the power of the Federal Reserve to increase the
amount of money in circulation.
D) conserve on natural resources, such as pulpwood, used to make paper money.
Cooperation in an economy characterized by extensive specialization requires
A) a rapid exchange of accurate information.
B) flexible government controls.
C) high unemployment to stem inflation.
D) highly trained economists to “fine-tune” the economy.
E) price controls.
Which of the following is least likely to increase the demand for airline tickets?
A) A Department of Energy order closing gasoline stations on weekends.
B) A Department of Energy order restricting gasoline sales on odd and even-numbered
days of the month to cars with odd or even final digits in the license number
C) A fall in the price of airline tickets
D) A rise in the price of gasoline
E) An excellent record of airline safety
When interest rates are free from central bank manipulation, and fall due to an increase
in household savings, this
A) provides an incentive for government to create a budget surplus.
B) sends a “green light” signal for businesses to increase investment.
C) has little impact on the macroeconomy.
D) creates a “cluster of errors” and an inevitable recession.
George Herman (Babe) Ruth was a superb baseball player, both an excellent pitcher and
a record-breaking batter. Other members of the New York Yankee team, who were not
as competent pitchers as Ruth, nonetheless had a comparative advantage over Ruth in
pitching because
A) Ruth was such a competent batter.
B) the owners of the Yankees were more interested in monetary profits than in winning
baseball games.
C) the price system failed to provide adequate information and incentive.
D) they were allowed to pitch more often and practice increased their productivity.
E) too many players preferred batting to pitching.
Consider the market for credit. When the supply of credit increases while the demand
for credit remains unchanged,
A) the interest rate will decrease and the amount of credit provided in the market will
increase.
B) the interest rate will increase and the amount of credit provided in the market will
increase.
C) the interest rate will decrease and the amount of credit provided in the market will
decrease.
D) the interest rate will increase and the amount of credit provided in the market will
decrease.
Transaction costs are
A) all unnecessary and wasteful costs.
B) any nonmonetary costs associated with a transaction.
C) not real costs because they make no positive contribution to economic transactions.
D) the costs of arranging agreements between demanders and suppliers.
E) the opposite of opportunity costs.
Any combination of two goods that lies within the production possibilities frontier
A) is currently impossible to produce.
B) is currently possible to produce.
C) represents a more efficient combination of output than anything lying beyond the
frontier.
D) represents a more efficient combination of output than anything lying on the frontier.
The demand curve illustrates
A) the amount of a good consumers need to buy at given prices.
B) the corresponding supply of a good at given prices.
C) the opportunity cost associated with producing a scarce good.
D) the amount of a good consumers plan to buy at given prices.
Which of the following is necessary for a market to be deemed “perfectly competitive”?
A) All firms are price searchers.
B) All participants enjoy full and complete information.
C) Sellers produce of different quality, durability, and desirability.
D) All of the above are necessary.
E) None of the above are necessary.
The people of the Island of Yap used stones as a general medium of exchange.
Therefore,
A) their economic system was based upon barter.
B) their stones served as money.
C) they had no price system, because prices can’t be measured with stones.
D) inflation was impossible.
Freeways in large cities tend to be congested during rush hours to the point where offer
little or no advantage over non-freeway routes because
A) drivers generally ignore marginal benefits and costs.
B) drivers usually ignore marginal benefits and costs during rush hours.
C) no monetary fee is charged for the use of freeways during rush hours.
D) not enough freeways have been constructed due to special interests’ control of the
government.
E) people need to get to work and the demand for freeway travel is consequently
inelastic during rush hours.
The first step toward reducing negative externalities or maintaining them within
acceptable bounds, according to the argument of the textbook, is
A) constructing an exhaustive list of all negative externalities.
B) creating a central planning authority for negative externalities.
C) cultivating such civic virtues as courtesy and tolerance.
D) halting population growth.
E) prohibiting activities whose costs are greater than their benefits.
Price discrimination by sellers usually results in
A) coercing people into buying goods they don’t want to purchase.
B) coercing people into paying higher prices than they want to pay.
C) less total but more net revenue for the seller.
D) new and additional opportunities for some buyers.
Approximately what percentage of the world population experiences scarcity?
A) 33%
B) 50%
C) 66%
D) 100%
According to economic theory, the political process tends to
A) benefit every participant equally.
B) harm every participant equally.
C) concentrate benefits in the hands of special interest groups and disperse the costs
throughout the uninformed voters.
D) support public projects that clearly pass a strict benefit-cost analysis.