In 2002 some politicians and many representatives of the steel and iron-ore mining
industries in the U.S. complained foreign steel producers were illegally “dumping” steel
and contributing to a potential unemployment problem. According to the economic way
of thinking, their argument is questionable because
A) it is not at all clear what the appropriate or correct price of steel is.
B) it is not at all clear what the appropriate or correct cost of steel is.
C) it is not at all clear that such an activity increases total unemployment in the U.S.
D) all of the above are true.
When firms accuse competitors of predatory pricing, they almost always use as
evidence
A) arbitrarily allocated joint costs.
B) the disappearance of competitors.
C) the profits of their competitors.
D) their own losses.
E) the gap between price and marginal cost.
Market systems are often referred to as “automatic” or “self-regulating” because they
function
A) effectively even when no participant in the system plans ahead.
B) effectively in the absence of any laws.
C) effectively even when the society is breaking down.
D) without an overall, comprehensive plan.
E) without the intervention of human beings.
People will tend to “internalize externalities” when
A) responsibility for the consequences of actions is more clearly assigned to the actors.
B) spillover costs and benefits become more common and widespread.
C) they calculate more carefully the marginal costs and marginal benefits of their
decisions.
D) they feel less empathy for others.
How can we determine separately the cost of producing ham hocks from the cost of
producing bacon?
A) By separately estimating the labor time it takes to butcher the hocks and the bacon
B) By separately calculating the weight of the hocks and the bacon as percentages of
total useable meat
C) By consulting the average industry costs of ham hocks and bacon
D) There is no way to determine the specific costs of joint products.
If the price of insulin is currently above the market-clearing level, then
A) there is a shortage of insulin.
B) the market for insulin is fully coordinated.
C) there is a surplus of insulin.
D) insulin is no longer a scarce good.
Since few Americans would ever be willing to pay more for a sandwich than for a pair
of jeans,
A) for most Americans clothing is more important than food.
B) for most Americans clothing is more valuable than food.
C) for most Americans clothing has more monetary value than food.
D) most Americans derive their values from the culture rather than biological
necessities.
E) most Americans have little difficulty obtaining enough to eat.
Jones is hungry, but is willing to postpone lunch as long as he can have a much larger
meal at dinner. The compensation of the larger meal at dinner time suggests that Jones
A) is a glutton.
B) acts irrationally because it is best to have three meals a day.
C) has a positive rate of time preference with regard to today’s meals.
D) does not consider lunch to be a scarce good.
Which of the following provides the clearest example of human capital?
A) Automated equipment that can be used without any accompanying human labor
B) Corporate stock owned by individuals and families rather than institutions such as
mutual funds or corporations
C) Machinery that has been designed and constructed by human beings
D) Tools that cannot be used effectively except in combination with workers
E) The ability to read
Suppose the market-clearing price of wheat is $2.50 per bushel. What would happen if
wheat farmers persuaded the government to set a legally-mandated price support of
$3.75 per bushel?
A) The demand for wheat would rise.
B) The quantity demanded of wheat would fall.
C) The supply of wheat would rise.
D) A shortage of wheat would occur.
Suppose shoppers typically pay twice as much for frozen “convenience” foods
compared to similar dinners they could prepare themselves. An economist would say
A) the purchase is inefficient because the consumer doesn’t really need to pay twice as
much for essentially the same dinner.
B) the purchase is inefficient because the frozen dinner is of even lower quality than the
homemade dinner, yet twice as expensive.
C) the purchase is efficient if the consumer feels the savings in preparation time
justifies the higher price.
D) the purchase is efficient, but the consumer is still probably behaving irrationally.
Is cutting down a tree in two hours with an ax more efficient than cutting it down in ten
minutes with a gasoline-powered chain saw?
A) No, because time is valuable.
B) Yes, because hand tools conserve nonrenewable energy resources.
C) It could be, if the person cutting down the tree places a high enough value on the
exercise.
D) There is no way to answer the question.
According to your text, which group of scientists are completely free from biases?
A) Physicists
B) Biologists
C) Economists
D) All of the above.
E) None of the above.
The problem of “free riders” arises in a society when goods
A) can’t be provided exclusively to the people who pay for them.
B) cease to be scarce.
C) produced by government are provided to everyone.
D) supplied by the private sector are paid for from tax revenue.
E) wanted by everyone are priced too low.
Which of the following strategies does your text suggest would allow a poorer nation to
“catch up” to richer nations?
A) Unionization
B) Higher minimum wages
C) Lower interest rates
D) Adoption of advanced technology
E) Minimizing imports and maximizing exports
The Bureau of Economic Analysis excludes from its calculation of GDP most of the
goods produced that are not sold in markets because
A) their production has no real costs.
B) their value is implicitly included in the prices of marketed goods.
C) there is no satisfactory way to measure their value.
D) they do not contribute to national welfare.
E) this would be inappropriate for an exchange economy.
Car A gets 12 miles per gallon. Car B gets 30 miles per gallon. Which is the most
economically efficient car?
A) Car A
B) Car B
C) They are equal in their economic efficiency.
D) It is impossible to determine without more information.
Suppose hamburgers and hotdogs are substitute goods. Other things constant, a rise in
the price of hotdogs would tend to
A) decrease the demand for hotdogs.
B) decrease the demand for hamburgers.
C) increase the demand for hotdogs.
D) increase the demand for hamburgers.
E) do any of the above, because nobody needs hotdogs or hamburgers.
Which of the following is a form of capital for most economics professors?
A) Chalk
B) Paper
C) Calculators
D) All of the above
E) None of the above is capital, since economists define capital as liquid assets.
Financial panics characterized by depositor “runs” and consequent bank failures have
not occurred in the United States since the 1930s primarily because
A) commercial banks now hold larger reserves.
B) the Federal Deposit Insurance Corporation has reduced the fears of depositors.
C) we have abandoned the gold standard.
D) we have had no major recessions since the 1930s.
Which combination of monetary and fiscal policies might policymakers elect to ward
off potential inflation?
A) Fed sale of bonds combined with increased government spending
B) Fed sale of bonds combined with decreased government spending
C) Fed purchase of bonds combined with increased government spending
D) Fed purchase of bonds combined with decreased government spending
If gold miners expect the price of gold to be 100% higher one year from now, they will
probably
A) decrease the supply of gold they bring to market now.
B) increase the supply of gold they bring to market now.
C) increase the quantity supplied of gold, but supply will remain unchanged.
D) do none of the above.
How does increasing wealth raise the cost of doing everything? By
A) bidding up the prices of labor-saving devices.
B) increasing the time required to earn and manage the wealth.
C) increasing the value of available alternatives.
D) raising the cost of hiring servants.
E) raising the rate of inflation.
Your textbook uses supply and demand curves together to illustrate
A) the level of output needed by individuals.
B) the level of output needed by society.
C) how economists are necessary to make markets to work effectively.
D) how market prices play a key role in coordinating the plans of sellers and buyers.
E) all of the above.
Is it more efficient for a group of musicians to perform a show “unplugged” (with
acoustic instruments) or with state-of-the-art electric instruments?
A) Unplugged is more efficient because the instruments are considerably less expensive
to operate.
B) It depends on what the musicians are trying to accomplish.
C) The use of electric instruments is more efficient because acoustic instruments have
become more expensive in recent years.
D) It depends exclusively on the relative ratios of energy output to energy input in each
instrument class.
Suppose a tornado ravages a city, causing 5 million dollars in expenditures on new
construction and healthcare for the victims. Those new expenditures
A) would be added to the gross domestic product account.
B) would be subtracted from the gross domestic product account.
C) would be added to the gross domestic product account and subtracted from the
national income account.
D) would impact GDP in none of the above ways.
Recessions in the U.S. economy show up in economic data as periods of
A) declining prices.
B) rising interest rates.
C) slower growth or actual decline in nominal GDP.
D) slower growth or actual decline in real GDP.
According to your text, the central economic task for a society is
A) to eliminate scarcity.
B) to assure every household gets what it needs.
C) to secure cooperation among people in using what is available to obtain what is
wanted.
D) to train enough economists to ensure supplies of goods and services will
successfully continue to meet demands for goods and services in the future.
Which statement is consistent with the economic way of thinking?
A) Politicians seek to advance their own interests.
B) Politicians are not only concerned with money and material goods.
C) Politicians do not necessarily pursue narrow or selfish goals.
D) All of the above.
E) None of the above.
Suppose Acme County Bank and Trust has $1 million in total deposits and the required
reserve ratio is 5%. How many dollars is Acme bank allowed to use to seek profits?
A) 0
B) $50,000
C) $500,000
D) $950,000
E) Trick question: banks aren’t allowed to seek profit.
The economic point of view assumes central bankers, bureaucrats, elected politicians,
and tax collectors
A) are immoral.
B) act selfishly.
C) respond to incentives.
D) act in the national interest.
If the price of cappuccino on campus falls from $5 to $3 and the quantity demanded
increases from 15 to 20, then the price elasticity of demand is approximately
A) 0.47, which mean cappuccino is inelastic.
B) 0.57, which means cappuccino is inelastic.
C) 1.75, which means cappuccino is elastic.
D) 2.25, which means cappuccino is elastic.
According to the 1974 Constitution of the former Yugoslavia, nobody in Yugoslavia
owns resources. Being a socialist country, the constitution claimed resources were
owned by “society” as a whole. If the constitution were fully enforced, resources would
tend to be
A) used for the common good.
B) used without greed and materialistic interests.
C) free from the constraints of scarcity.
D) underpriced.