Fill in the blank: ________ is another term for a decline in real GDP is
A) Deflation.
B) Inflation
C) Economic growth
D) Recession
E) Unemployment
Let’s assume producers in Canada can make 200 units of beef or 50 units of oranges,
and U.S. producers can make 50 units of beef or 200 units of oranges per time period.
Which country faces the lowest opportunity cost of producing oranges?
A) The U.S.
B) Canada
C) Both countries
D) Neither country
Attempts to fine-tune the economy through counter-cyclical monetary policy
A) demonstrated their effectiveness in the 1930s.
B) demonstrated their effectiveness during World War II.
C) demonstrated their effectiveness between 1945 and 1960.
D) have not yet demonstrated their effectiveness.
Adam Smith used the term commercial society to refer to a society in which
A) business interests control the political system.
B) everyone identifies value with price.
C) everyone lives by exchanging.
D) increased income is everyone’s principal life goal.
E) people behave without regard for the interests of others.
Many predict there will be permanent, growing shortages of oil by the year 2025. The
prognosticators are assuming
A) oil prices will fall.
B) oil prices will not adjust appropriately to coordinate the market.
C) oil prices will rise.
D) greed will ruin the supply and demand process in the world oil market.
Labor unions benefit their members by
A) distributing income more equally among workers.
B) helping them compete more effectively against employers.
C) increasing the number of job opportunities available for employees.
D) preventing or controlling competition among workers.
E) promoting the trade they represent to assure an adequate supply of skilled workers.
Which of the following is not an effective technique for alleviating scarcity?
A) Developing additional resources
B) Reducing prices
C) Reducing wants
D) Substituting intelligently among available goods
Suppose the price level is unchanged and real GDP decreases. Then
A) nominal GDP must decrease.
B) nominal GDP must remain unchanged.
C) nominal GDP must increase.
D) none of the above are true.
When demand for a product increases,
A) suppliers change their plans.
B) demanders change their plans.
C) the price changes.
D) all of the above occur.
E) none of the above occur.
Which of the following economic activities is ignored in GDP accounts?
A) The market value of medical services
B) The market value of educational services
C) The market value of illegal drugs
D) The market value of prescription drugs
E) The market value of the services associated with used-car dealers
Fill in the blanks: ________ marginal costs of production would tend to ________ a
good’s ________.
A) Higher; increase; supply curve
B) Lower; increase; supply curve
C) Lower; decrease; supply curve
D) lower; increase; demand curve
George was assigned to read a chapter in economics tonight, but he has a math exam
tomorrow. He chooses to study for the math exam and postpone his economics studies
until after the exam. What is the opportunity cost of George’s decision?
A) The lower math grade he would have received had he not studied for the math exam
B) The economics knowledge he sacrificed by not reading the assigned chapter
C) Both A and B above
D) Without information regarding the price of the textbook and the value to George of
the math exam, George’s opportunity cost cannot be determined.
Fill in the blanks: The percentage of American families with incomes below the poverty
line was ________ in 1960 and ________ in 2010.
A) 10.1%; 10.7%
B) 8.7%; 13.9%
C) 18.1%; 11.8%
D) 26.8%; 48.3%
Suppose the government establishes a price support for soybeans. The new government
program will tend to
A) decrease the output of soybeans.
B) increase the quantity demanded of soybeans.
C) decrease the demand for soybeans.
D) increase a farmer’s opportunity cost of producing other commodities (such as corn),
which could be grown on the same land used to grow soybeans.
E) do none of the above.
Which of the following best exemplifies a deadweight cost?
A) Eating something in a restaurant you don’t really want because you have already
paid for it.
B) Paying for something in a restaurant but not eating it.
C) Refusing dessert in a restaurant although it is included in the price of the meal.
D) Tipping the waiter even though he gave slow, surly, and inattentive service.
E) Waiting twenty minutes for a table to become available in a restaurant.
Economic theory can predict or explain behavior
A) in the private but not in the public or government sector of society.
B) most successfully in areas where behavior is largely guided by foresight and
planning.
C) only when behavior aims at maximizing net monetary revenue.
D) when people behave selfishly rather than in the public interest.
When economists study the interactions of different people, the focus of their studies is
on
A) inequality of wealth.
B) many different individual plans that must be coordinated.
C) not enough jobs for everyone who wants one.
D) people’s excessive attachment to their own interests.
E) too many dollars chasing too few goods.
Who was the author of the following prediction: in the absence of a system for
enforcing order in society, life will be “solitary, poor, nasty, brutish, and short”?
A) Thomas Hobbes
B) John Maynard Keynes
C) Thomas Kuhn
D) Jean-Jacques Rousseau
E) Adam Smith
From the economic point of view, why might a sophomore in college spend a great deal
of time getting to know an attractive classmate rather than getting to know the issues
behind the president’s deficit-reduction policies?
A) She is selfish.
B) She considers it a more productive use of her time.
C) She obviously has no interest in politics.
D) The federal budget deficit cannot possibly affect her life.
Suppose, with a given supply and demand curve, the market for guitars would clear at
$500, but the current price of guitars is $700. Given the above information,
A) there is a shortage of guitars.
B) there is a surplus of guitars.
C) the market for guitars is fully coordinated.
D) the quantity of guitars supplied equals the quantity demanded.
According to your authors, the “Great Recession” that began in 2008 is evidence of
A) an unstable free market system.
B) rampant greed among entrepreneurs.
C) a cluster or accumulation of errors.
D) antagonistic interests among the propertied and nonpropertied classes.
E) all of the above.
What effect will an increased demand for housing in the suburbs of a major city have on
the cost of vegetable farming in the suburbs?
A) No effect, since one cannot grow vegetables on land on which housing has been
constructed.
B) The cost will decline because only very fertile land will now be used for growing
vegetables.
C) The cost will rise because it will become more expensive to grow vegetables.
D) The cost won’t change, because there has been no change in physical conditions.
E) We cannot predict unless we know what has happened to the demand for vegetables.
In the economic way of thinking,
A) inflation is better than deflation.
B) deflation is better than inflation.
C) deflation is better than disinflation.
D) inflation, deflation, and disinflation make it more difficult for people to cooperate
with one another.
Complementary goods are goods people consume together, such as peanut butter and
jelly. If the price of peanut butter falls, we predict
A) the demand for peanut butter would increase.
B) the demand for jelly would increase.
C) the demand for peanut butter would decrease.
D) the demand for jelly would decrease.
What factor, more than anything else, tends to make people wealthy?
A) Time
B) Money
C) Productive knowledge
D) Control over non-renewable resources
E) The ability to day-trade internet-related stocks
The federal government budget has generally been in a deficit for the past several
decades because
A) budget deficits promote full employment.
B) every year during those decades was a recession year in which expansionary fiscal
policy was called for.
C) military expenditures were increased steadily throughout those decades.
D) political pressure on Congress to increase taxes and to balance the budget were less
effective than political pressure to increase expenditures.
Macintosh and IBM computers are considered substitute goods. Other things constant,
if IBM lowered its price, compared to the Mac, then
A) the demand for IBM computers would increase.
B) the demand for Mac computers would increase.
C) the quantity demanded for IBM computers would increase.
D) all of the above would occur.
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. How many people are unemployed?
A) 0
B) 20,000
C) 60,000
D) 80,000
E) None of the above.
Why does inflation cause problems in a society?
A) It gives people an incentive to hold money rather than spend it and provide income
for others.
B) It makes everything more expensive in real terms.
C) People aren’t able to anticipate it accurately.
D) The cost of living rises for almost everyone in an inflation.
E) For all of the above reasons.
Economists generally assume
A) individuals act strictly in the public interest.
B) individuals are never concerned with the interests of other people.
C) individuals rarely promote the projects in which they are interested.
D) none of the above.
According to the economic way of thinking, government officials tend to vote on
legislation that
A) concentrates benefits on a well-organized group.
B) disperses costs throughout a great number of politically unorganized people.
C) generates short-term benefits and postpones the costs.
D) does all of the above.
E) does none of the above.
“Demand deposits” in commercial banks are
A) assets of both the non-bank public and the banks.
B) assets of the depositors and liabilities of the banks.
C) liabilities of the non-bank public and of the banks.
D) liabilities of the non-bank public and assets of the banks.
Which if the following is a key difference between profit-oriented institutions (such as
small businesses) and non-profit institutions (such as governments, hospitals, or
schools)? Profit-oriented institutions
A) are usually competitive rather than cooperative.
B) have a recognized residual claimant.
C) pursue private interests rather than the public interest.
D) rely on monetary incentives to secure the cooperation required for their functioning.
E) work through market processes.
What factor probably contributes most to economic growth?
A) Money
B) Political influence
C) Foreign aid and investment
D) The exploitation of poor countries by rich countries
E) Productive knowledge