According to the text, a government policy of promoting competition must
A) assure small businesses they won’t fail because of below-cost pricing or other
predatory practices by larger businesses.
B) assure small businesses they won’t fail under any circumstances.
C) equate profit margins among competing suppliers.
D) maintain a process rather than some state of affairs.
E) work toward making sellers’ demand curves completely elastic.
Fill in the blanks: An increase in ________ tends to increase ________ and therefore
increase ________.
A) cost; price; supply
B) cost; demand; price
C) demand; price; cost
D) supply; cost; price
What will be the principal and most immediate effect on the supply or demand for raw
cotton grown in the United States if the demand for peanuts (which can be grown on
cotton land) increases?
A) Decrease in demand
B) Decrease in supply
C) Increase in demand
D) Increase in supply
Which of the following persons is hedging?
A) A commodity speculator who confines his purchases or sales to futures contracts
B) A commodity speculator who confines his market activity to the purchase of futures
C) A commodity speculator who confines his market activity to the sale of futures
D) A farmer who buys September corn futures when he plants corn in May
E) A farmer who sells September corn futures when he plants corn in May
Recessions are typically
A) unintended and disruptive.
B) easy to predict in advance.
C) the result of non-monetary disturbances.
D) events economists have a hard time explaining.
The narrowly-defined money supply in the U.S., called M1, does not include which of
the following?
A) Coins in circulation
B) Currency in circulation
C) Currency in the vaults of commercial banks
D) Demand deposit liabilities of commercial banks
If sellers compete against buyers, then
A) sellers would prefer to face more buyers in the market.
B) sellers would prefer to face fewer buyers in the market.
C) buyers would prefer to face fewer sellers in the market.
D) buyers would prefer to face more sellers in the market.
E) both B and C are true.
Harry and Gus fish the same lake together from the same boat. Each morning Harry
typically catches either 20 bluegills or 5 walleyes (depending on how deep he fishes)
while Gus typically catches either 20 bluegills or 2 walleyes (depending on how deep
he fishes). Other things constant, if they wish to maximize the total number of fish they
catch together tomorrow morning, regardless of species,
A) Harry should fish and Gus should row.
B) Harry should fish only for bluegills and Gus should fish only for walleyes.
C) Gus should fish only for bluegills and Harry should fish only for walleyes.
D) both Harry and Gus should fish for bluegills.
Pencils are produced in the market economy
A) only because people need pencils.
B) only because pencil production is centrally planned, from the growing of the trees
and mining of the graphite to the final stages of pencil assembly.
C) even though the final assemblers of pencils have no idea how to produce the paint,
graphite, wood, rubber, and metal ferrules.
D) by government decree.
Middlemen would serve no productive function if
A) information is scarce and transactions costs are zero.
B) information is free and transactions costs are significant.
C) information is free and transactions costs are zero.
D) people only purchased what they need, rather than what they want.
According to your textbook authors, what explains the dramatic decline in the U.S.
poverty rate since the 1960s?
A) The power of labor unions
B) Steady economic growth
C) Increases in the minimum wage
D) The growth of in-kind government transfers
E) The growth of government welfare assistance paid in money
Entrepreneurs are people who
A) accept ultimate responsibility for the projects they undertake.
B) are hired by others to manage business enterprises.
C) are hired by others to organize business enterprises.
D) own the resources used in the production process.
E) prefer a small chance for a large profit to a large chance for a small profit.
When a good becomes more scarce, and the government prevents sellers from raising
prices,
A) demanders are prevented from competing against one another to obtain the good.
B) the opportunity cost to purchasers of obtaining the good will nonetheless rise as long
as the quantity demanded is greater than the quantity supplied.
C) the quantity purchased will be greater than the quantity supplied.
D) there will be no rationing system to allocate the good among competing users.
Why would an economist say that the Ford Motor Company has never made a choice or
a decision?
A) Economists often want to deny the facts.
B) Ford doesn’t make choicesonly the U.S. automobile industry does.
C) To remind non-economists that individuals within an organization, rather than the
organization itself, make choices.
D) Economists are strange creatures who only wish impress others with outrageous or
ridiculous claims.
Which of the following is not a component of the M1 money supply?
A) Cash in circulation
B) Gold owned by the federal authorities
C) Deposits in checking accounts
D) Any issued traveler’s checks
Real GDP is
A) nominal GDP minus everything used to produce GDP.
B) nominal GDP minus services.
C) nominal GDP plus capital goods production.
D) nominal GDP valued at base-year prices.
E) the material component of ideal GDP.
A higher expected price tomorrow will tend to
A) shift today’s demand curve to the left.
B) shift today’s demand curve to the right.
C) have no effect on today’s demand curve.
D) have no effect on tomorrow’s demand curve.
According to chapter 1 in your textbook, while economic theory offers a biased
perspective on social phenomena,
A) it deserves our confidence, but only when it is confined to the monetary or financial
sector of society.
B) it is useless to anyone who rejects the free market system.
C) it is nonetheless worth learning.
D) it is superior to all the other social sciences.
From the apartment landlord’s perspective, what might be a substitute use of his rental
property?
A) A parking lot
B) An office complex
C) A condominium
D) Any of the above.
E) Definitely none of the above.
A draft system, whether in professional sports or the military, enables the people who
are hiring to avoid paying their employees
A) a living wage.
B) the true value of their labor.
C) what others are willing to pay them.
D) what they want to be paid.
A physician who laid off her nurse and receptionist and performed their tasks herself
would probably
A) decrease her accounting profit but increase her economic profit.
B) decrease her profit from the economist’s point of view even if she increased her
accounting profit.
C) increase both her accounting and economic profit if her practice was a busy one.
D) wind up with lower labor costs unless the layoff greatly increased the demand for
her professional services.
E) work more efficiently in order to get everything done.
If the U.S. Postal Service raised its first-class postage rate by 10 percent and found (to
its surprise) total receipts from first-class mail service subsequently increased by 10
percent, the demand for first-class mail service would be
A) completely elastic.
B) completely inelastic.
C) greater than anticipated.
D) unit elastic.
E) upward sloping.
According to your textbook, globalization
A) does not necessarily destroy local identity.
B) makes economic systems work perfectly.
C) eventually turns all economic losses into profits.
D) makes “outsourcing” impossible to achieve.
Foreign aid to a poor country might
A) improve its long run economic growth prospects.
B) interfere with its domestic affairs.
C) be allocated to useless projects and thereby reduce its growth rate.
D) be used to keep its ruling party in power rather than spur economic growth.
E) do any of the above.
In economics as well as in social relations in general, clear and concise information
A) eliminates the need for cooperation.
B) guarantees effective cooperation.
C) makes cooperation easier to achieve.
D) makes cooperation more difficult to achieve.
When the price of Gatorade is $2 per bottle, the quantity demanded is 500 bottles per at
the local grocer. When the price falls to $1 per bottle, the quantity demanded increases
to 1000. Given this information, the demand for Gatorade is
A) inelastic.
B) elastic.
C) unit elastic.
D) perfectly elastic.
Roughly what percentage of money income was earned by the lowest 20% of income
earners in the U.S. in 2010?
A) 0.8%
B) 3.8%
C) 6.8%
D) 9.8%
If textbook prices rise by 5% this year, and textbook purchases fall by 5% this year,
then the price elasticity of demand is:
A) .05.
B) .10.
C) .55.
D) .95.
E) 1.0.
If a price ceiling on coffee is set below the market-clearing price, then
A) the quantity of coffee demanded will decrease.
B) the quantity of coffee supplied will increase.
C) the quantity demanded for coffee will increase.
D) all of the above will occur.
E) none of the above will occur.
For Adam Smith, commercial society is characterized by
A) private property rights.
B) specialization in production.
C) voluntary exchange.
D) all of the above.
According to your textbook, critics of “globalization” often fail to understand that
A) money makes the world go round.
B) voluntary trade is mutually beneficial.
C) economics applies only to capitalist economic systems.
D) greed is better than love.
The central problem of every economic system is to
A) to transform mere wants into genuine needs.
B) get people to cooperate effectively in using what is available to provide what is
wanted.
C) get people to see that what is available is all that is necessary.
D) increase the number of jobs available.
E) redistribute income fairly.