According to the economic way of thinking, elected government officials tend to favor
A) contractionary monetary policies.
B) contractionary fiscal policies.
C) expansionary monetary and fiscal policies.
D) monetary and fiscal policies consistent with the public interest.
Why do the sellers of some whiskeys pay for advertisements to tell people their
whiskey is extremely expensive?
A) Because the sellers either do not know or do not accept the law of demand
B) To allocate the product to people who will most appreciate it
C) To increase the demand
D) To lower the demand and keep production costs low
E) To prevent “price shock” among potential customers
The theories of economics, with surprisingly few exceptions, are extensions of which of
the following assumptions about people?
A) People will do whatever earns them the most money.
B) People will do whatever helps them to be “one up” on others.
C) People will do whatever makes them popular.
D) People will do whatever most effectively promotes the common good.
E) People will do whatever yields them the largest net benefit.
A single production possibilities frontier assumes
A) a given set of resources.
B) only one good can be produced from a given set of resources.
C) resources are free.
D) there are no opportunity costs of production.
E) all of the above.
How does the text distinguish between government and the market?
A) The government is the place around the capital city; the market is everywhere else.
B) The government is populated with publicly-spirited people; the market is populated
with selfish people.
C) The government is based on cooperation; the market is based on competition.
D) In all of the above ways.
E) In none of the above ways.
Individuals tend to trade because
A) they place different values on their property.
B) they expect to gain more than they give up.
C) they expect to increase their own wealth as a result of the trade.
D) all the above are true.
A mugger steals $25 from John Doe. What can an economist conclude?
A) Nobody gained in the “exchange.”
B) Both parties gained in the “exchange.”
C) Only the mugger’s wealth has increased.
D) Nothing, because economists study strictly voluntary exchanges.
When people reduce their rate of time preference
A) savings increase and the supply of credit decreases.
B) savings increase and the supply of credit increases.
C) savings decrease and the supply of credit increases.
D) savings decrease and the supply of credit decreases.
Only individuals choose, which means
A) only individuals exist.
B) collectives do not exist.
C) only individuals can assess the expected costs and benefits of an action.
D) all of the above.
Mergers between companies producing widely divergent goods is called a
A) conglomerate merger.
B) diagonal merger.
C) horizontal merger.
D) vertical merger.
Demand relates the amounts of a good purchased to
A) the amounts actually obtained.
B) the gross domestic product.
C) the quantity needed.
D) the sacrifices required to obtain the good.
E) the time required to produce the good.
How is a politician similar to an entrepreneur?
A) Each advances a project solely in the public interest.
B) Each advances a project only if the expected marginal benefits equal the expected
marginal costs.
C) Each advances a project only if the expected marginal benefits exceed the expected
marginal costs.
D) Each advances a project only if they impose no negative externalities.
Suppose a record company produces both swing and rhythm & blues music. An
increase in the market demand for swing music therefore tends to
A) increase the demand for rhythm & blues music.
B) increase the cost of producing rhythm & blues music.
C) decrease the cost of producing rhythm & blues music.
D) leave the cost of producing swing music unchanged.
If the market demand for oranges is relatively inelastic with respect to price, orange
consumers
A) pay no attention to price in their purchasing decisions.
B) will buy fewer oranges at any higher price and will spend less money on oranges.
C) will buy fewer oranges at any higher price but will spend more money on oranges.
D) will buy more oranges at any higher price.
E) will buy more oranges only if their incomes increase.
All possible gains from specialization and exchange would be fully exploited only
under which market structure?
A) Pure monopoly
B) Perfect competition
C) Oligopoly
D) Structures allowing for price-searching activity
E) Structures where entry is restricted
A national taco chain offers in-house customers free refills on drinks. It is
A) attempting to increase total profit.
B) selling its meals below cost.
C) selling drinks below cost.
D) engaging in predatory pricing.
E) doing all of the above.
For deflation to occur,
A) national income must decrease.
B) real GDP must decrease.
C) the price level must decrease.
D) nominal GDP must decrease.
How does time preference affect one’s willingness to invest in human capital?
A) A higher rate of time preference tends to increase human capital investment.
B) A higher rate of time preference tends to decrease human capital investment.
C) A lower rate of time preference tends to decrease human capital investment.
D) Economists have found no relationship between time preference and human capital
investment.
Suppose Acme County Bank and Trust has $1 million in total deposits and the required
reserve ratio is 8%. How many dollars must the bank keep in its vaults or on deposit at
a Federal Reserve Bank?
A) 0
B) $80,000
C) $920,000
D) $1,000,000
E) None of the aboveit’s the bank’s own choice.
GDP accounts systematically ignore
A) non-market production.
B) illegal and underground production.
C) barter trades.
D) the market value of services provided by illegal aliens.
E) all of the above.
If recessions are in large part the consequence of coordination failures,
A) government must direct or control private spending to reduce instability.
B) stability cannot be achieved without the use of discretionary fiscal policy.
C) stability cannot be achieved without the use of discretionary monetary policy.
D) the economy is unlikely to respond smoothly and predictably to shifts in government
policy.
Why would a chain store sell some items, such as soda pop, below cost?
A) They are not interested always in maximizing profit.
B) They feel people need soda pop more than the other items in the store.
C) Pricing some items “below cost” might be an efficient strategy to maximize the
store’s total profit.
D) Because most firms can only enjoy profits by consistently selling all their items
below cost.
According to your textbook, which procedure is the general rule to follow in order to
maximize net revenue?
A) Always choose a 25 percent markup if demand is inelastic.
B) Always choose a 25 percent markup if demand is elastic.
C) Always choose a markup between 50 and 100 percent (inclusively) if demand in
inelastic.
D) Always choose no more than a 10 percent markup if demand is perfectly elastic.
E) None of the above.
Which group below will generally have a more difficult time finding employment if a
nation’s minimum wage were increased?
A) Those with more work experience
B) Those who are among the younger job seekers
C) Those who form the majority race in the population
D) All of the above.
Which of the following clearly restricts competition?
A) A government policy restricting entry into the market
B) A government policy that reduces tariffs on foreign imports
C) A business sets price below cost.
D) A business sets price above cost.
E) Any business pricing scheme that successfully draws customers away from its rivals
“Your college didn’t choose to admit you as a student.” Your textbook authors make
such a statement in order to
A) offend you.
B) confuse you.
C) remind you that beggars can’t be choosers.
D) emphasize that choices are made by particular individuals, even if they are in the
name of organizations.
Rent controls carry long-run unintended consequences, such as
A) a fairer price for people who can’t afford market-determined rents.
B) improved quality of apartment units.
C) fewer apartment units as landlords seek substitute uses of their property.
D) an increase in rental price competition among landlords.
Suppose the market-clearing wage for pizza delivery workers is $7.00 per hour, but a
$10.00 per hour minimum wage is enacted. Other things constant, the higher minimum
wage tends to
A) increase the supply of pizza delivery workers.
B) decrease the quantity demanded of pizza delivery workers.
C) create a shortage of pizza delivery workers.
D) accomplish all of the above.
E) accomplish none of the above.
Pick the true statement.
A) It is possible for economic profit to be greater than accounting profit.
B) Accounting profit includes both the implicit and explicit costs of production.
C) Accounting profit is always greater than economic profit.
D) None of the above is a true statement.
When auto workers go on strike at many of the “Big 3” plants around the United States,
the supply of American automobiles
A) increases, which is represented by a leftward shift in the supply curve.
B) increases, which is represented by a rightward shift in the supply curve.
C) decreases, which is represented by a rightward shift in the supply curve.
D) decreases, which is represented by a leftward shift in the supply curve.
E) remains the same; only quantity supplied changes.
What does the term “conditionality” mean in respect to the policies of the International
Monetary Fund (IMF)?
A) The IMF will grant loans to any country that seeks them.
B) The IMF will cut off loans to a country unless it meets certain specified policy goals
regarding budget deficits, inflation, and other macroeconomic concerns.
C) The IMF will work with a country only if country destroys its own fiat money and
instead adopts the euro.
D) The IMF will assist any foreign country that supports the military policies of the
U.S. and Great Britain.
If the NCAA prohibits colleges and universities from offering more than room, board,
and tuition to outstanding high school football and basketball players, the recruitment
practices of athletic departments will
A) adhere more closely to high ethical standards.
B) become constantly more complex and costly.
C) make the athletes better off in the long run.
D) make the athletes better off in the short run.
E) shift to favoring academic ability over athletic ability.