The resource market involves transactions dealing with
a. natural resources and financial services.
b. the borrowing and lending of financial capital.
c. the buying and selling of final goods and services.
d. labor services, natural resources, and physical capital.
When private ownership rights are well-defined and enforced, owners
a. can ignore the wishes of others, without bearing the cost.
b. have little incentive to take care of things.
c. can do anything they want with their property.
d. can be held accountable for damage to others through misuse of their property.
Which of the following was true of the actions of the Federal Reserve in response to the
recession of 2008?
a. The Fed shifted toward a highly restrictive monetary policy in 2008, which was a
major cause of the recession.
b. The Fed continued to focus only on price stability and therefore it expanded the
money supply at a slow and steady rate throughout the recession.
c. The Fed introduced several new procedures for the conduct of monetary policy and it
increased the monetary base rapidly as the recession worsened.
d. The Fed continued to purchase and sell only U.S. Treasury bonds when conducting
open market operations to control the money supply.
Creative destruction refers to the process where
a. new products and methods of production are continuously replacing old ones
b. producing more of one good causes you to produce less of another
c. everybody involved is made worse off
d. new ways to destroy buildings are employed
Private property rights involve
a. the right to exclusive use of the property.
b. legal protection against those who would seek to use or abuse the property without
the owner’s permission.
c. the right to transfer, sell, exchange, or mortgage the property.
d. all of the above.
An unanticipated decline in the demand for legal services will
a. increase both the wages of lawyers and the rate of return they can expect to derive
from their legal education.
b. lead to a shortage in the market for legal services.
c. reduce the wages of lawyers but not the quantity of legal services supplied.
d. reduce the wages of lawyers and the rate of return on a legal education..
Ceteris paribus, a decrease in the U.S. price level will cause
a. an increase in U.S. exports.
b. an increase in U.S. imports.
c. the aggregate demand curve to shift to the right.
d. the aggregate demand curve to shift to the left.
Long-run equilibrium in the goods and services market requires that
a. aggregate supply equals aggregate demand and that decision makers correctly
anticipate the level of prices.
b. the unemployment rate is zero.
c. prices are neither increasing nor decreasing.
d. aggregate supply be larger than aggregate demand.
Graphically, the area that represents the difference between the market price and the
minimum price required to induce suppliers to produce a good is called
a. consumer surplus.
b. producer surplus.
c. marginal cost.
d. triangular arbitrage.
Which of the following indicates the primary mechanism by which the money supply
expands?
a. The U.S. Treasury prints additional currency.
b. The Fed purchases additional bonds, which increases the reserves available to the
banking system.
c. The public decides to hold more currency rather than checking deposits.
d. The U.S. government purchases additional gold.
When the market for a good is in equilibrium,
a. consumer surplus will equal producer surplus.
b. the total value created for consumers will equal the total cost of production for
business firms.
c. all units valued more highly than the opportunity cost of production will be supplied.
d. all units that have value will be produced, regardless of their cost of production.
The Latin phrase “ceteris paribus” means
a. that one event causes another.
b. that one event is associated with, but not caused by, another.
c. that other potential causes are assumed to remain constant.
d. the way things should be.
If the demand for a good is relatively elastic, this means that consumer purchases of the
good are
a. not very sensitive to the price of the good.
b. highly sensitive to the price of the good.
c. unrelated to the price of the good.
d. unaffected by changes in the income level of consumers.
Under the adaptive expectations hypothesis, which of the following is the effect of a
shift to a more expansionary monetary policy?
a. In the short run, the real rate of output will be unaffected, but in the long run, it will
increase.
b. In the short run, the real rate of output will increase, but in the long run, it will be
unchanged.
c. There will be a permanent increase in the real rate of output, but the inflation rate will
also be a little higher.
d. In the short run, the impact on the real rate of output is uncertain, but in the long run,
output will increase.
When the federal government owns parks that are funded by tax dollars,
a. park managers receive full information about visitor desires and make decisions
accordingly.
b. the same incentive structure exists for public park managers as private park
managers.
c. park managers devote much time and effort to satisfying political desires instead of
visitor desires.
d. park managers will be less likely to mismanage the park.
When regulations interfere with exchange and limit entry into various businesses and
occupations, they will
a. help a country achieve more rapid economic growth.
b. promote more efficient use of investment capital by entrepreneurs.
c. retard economic progress.
d. increase the profits of business firms.
Since the demand for a narrowly defined product class (Fords, for example) is more
elastic than the demand for a broadly defined product class (all automobiles), a union
will be better able to raise the wages of its members without causing a reduction in their
employment when
a. it can organize an entire industry, rather than just selective firms within the industry.
b. it concentrates its organizational efforts on a single firm, ignoring the rest of the
industry.
c. the demand for the product is highly elastic.
d. there are many good substitutes for union labor.
Use the table below to choose the correct answer. The table is a schedule of the supply
and demand for ground hamburger meat (both given in thousands of pounds per
month).
The equilibrium market price of ground hamburger meat would be
a. $1 per pound.
b. $2 per pound.
c. $2.50 per pound.
d. $3 per pound.
Which of the following is true of entrepreneurship?
a. Entrepreneurial discovery is an important source of economic growth and higher
living standards.
b. The role of the entrepreneur is not very important and that is why it is generally not
included in economic models.
c. The role of entrepreneurial discovery could be easily integrated into economic
models, but nonetheless economists choose not to do so.
d. Economic models are able to capture fully the important role of the entrepreneur in
the market process.
When a firm is earning economic profit, this indicates the firm is
a. increasing the value of the resources that it is using.
b. reducing the value of the resources that it is using.
c. supplying the market with a low quality product.
d. creating less value for consumers than another firm that is currently earning losses.
Which of the following assets can a commercial bank count as reserves?
a. its holdings of U.S. Treasury bills
b. its vault cash and deposits with the Fed
c. its outstanding loans
d. the savings accounts of its depositors
Use the figure below to answer the following question(s).
Figure 6-1
Figure 6-1 illustrates the four possibilities of the distribution of costs and benefits
among voters for a government project. Programs that give subsidies to a small group
of producers at general taxpayer expense would be considered
a. type A projects, and the government would be likely to undertake these projects if
they were efficient and to reject them if they were inefficient.
b. type B projects, and the government would be likely to undertake many of these
projects even when they were counterproductive (inefficient).
c. type C projects, and the government would be likely to fail to undertake many of
these projects even when they were productive (efficient).
d. type D projects, and the government would be likely to undertake these projects if
they were efficient and to reject them if they were inefficient.
The value (purchasing power) of each unit of money
a. is largely independent of the money supply.
b. tends to increase as the money supply expands.
c. increases as prices rise.
d. tends to decline as the money supply expands in relation to the availability of goods
and services.
Which of the following best explains why the rate of unemployment is highest among
individuals aged 16 through 19?
a. Teenagers do not have the skills necessary to find jobs.
b. Teenagers change jobs more frequently than do older individuals.
c. Teenagers have a higher labor force participation rate than other age groups.
d. Most teenagers are in school and, for this reason, are not holding jobs.
Which of the following would help to avert a healthcare crisis?
a. requiring employers to pick up 100 percent of the healthcare costs for their
employees
b. discouraging medical savings accounts since these provide additional funds for
medical care, and therefore, they are likely to drive up medical prices
c. discouraging the purchase of health insurance plans with small co-payments
d. structural changes that would increase the competitiveness of the health insurance
and medical services markets
Which of the following is most consistent with economizing behavior?
a. If you derive the same satisfaction from eating pizza and eating ice cream, it makes
no difference which one of the two you choose.
b. Before voting, you should invest the time and energy to become fully informed on all
of the issues and candidates.
c. It never makes sense to hire someone to do something for you that you could do
yourself.
d. If you get the same satisfaction from a chicken sandwich and a salad, you should
purchase the one that costs the least.
Figure 4-25
Refer to Figure 4-25. The tax causes a reduction in consumer surplus that is represented
by area
a. A.
b. B + C.
c. D + E.
d. F.
Figure 3-22
Refer to Figure 3-22. Which of the four graphs illustrates an increase in quantity
supplied?
a. A
b. B
c. C
d. D
Which of the following would encourage consumers to economize on their use of
healthcare and producers to provide it more efficiently?
a. a reduction in out-of-pocket healthcare expenditures
b. government subsidies that encourage people to purchase health insurance policies
with first-dollar coverage and small co-payments
c. Medicare reform that at least partially substituted defined benefits (funds that could
be used to pay for healthcare or the purchase of insurance) for the present cost
reimbursement system
d. all of the above
Which one of the following reduces the likelihood that real-world fiscal policy will
promote economic stability?
a. Policy planners do not know whether a tax cut is expansionary or restrictive.
b. Policy makers need to know what economic conditions will be like 6 to 18 months
into the future, and this is extremely difficult to forecast accurately.
c. Policy planners are reluctant to implement expansionary fiscal policy even during a
serious recession.
d. Public choice theory suggests that elected political officials will generally favor
restrictive fiscal policy.
Farmer Ted owned a worn-out piece of farmland for growing cotton, which he had been
unable to rent for years. Suddenly he was getting offers from cotton farmers to lease his
land. What is the most likely explanation of this?
a. The price of cotton went down.
b. The physical productivity of the land went up.
c. Taxes on the land went up.
d. The price of cotton went up.
In economics, a free rider is the term used for a person who
a. receives the benefit of a good without contributing to its costs of production.
b. purchases an item during a “buy one, get one free” sale.
c. lives in a town in which the city provides free bus service.
d. pays for exactly what they receive.