Suppose an economy has the following characteristics: 100 people in the
noninstitutional population; 60 people employed; 20 people not in the labor force. How
many people are unemployed?
A) 20
B) 40
C) 60
D) 80
E) 100
According to opportunity-cost theory, people will find themselves increasingly “short of
time” when
A) their demand curves become less elastic.
B) their demand curves become more elastic.
C) their income declines.
D) they become wealthier.
E) they lose valuable opportunities.
The prediction by the American Medical Association of a shortage of physicians by the
year 2020 assumes
A) physicians’ fees will not rise to a market clearing level.
B) physicians’ services will be free goods.
C) physicians’ services will no longer be scarce.
D) physicians will be willing to work for less income.
In the economic way of thinking, the demand for clean air is
A) nonexistent.
B) independent of price or cost.
C) completely inelastic.
D) all of the above.
E) none of the above.
Suppose a price searcher faces the following demand curve: At $100, $90, $80, $70,
and $60, the quantity demanded is 1, 2, 3, 4, and 5 units respectively. Which statement
below is true?
A) Total revenue is $100.
B) Total revenue is $190 when 2 units are sold.
C) Total revenue is $400 when 5 units are sold.
D) Marginal revenue is $80 when the price is $90.
Suppose it costs a farmer $1.00 to produce 1 unit of corn, $2.10 to produce 2 units of
corn, and $3.30 to produce 3 units of corn. What’s the average cost of producing 2 units
of corn?
A) $1.00
B) $1.05
C) $1.10
D) $2.00
E) $2.10
Sensible buyers or sellers will want to continue acquiring information
A) as long as the additional information extends their choices.
B) as long as the anticipated additional benefit exceeds the additional cost of doing so.
C) as long as they can be assured of acquiring correct information.
D) indefinitely, because more information is better than less.
Suppose the market clearing price for apples falls from $3.00 to $2.00 per pound, and
the overall market clearing output increases from 1 million to 2 million pounds. How
can we explain the fall in price and increase in market output?
A) Supply decreased and demand remained unchanged.
B) Supply remained unchanged and demand decreased.
C) Demand increased and supply remained unchanged.
D) Demand remained unchanged and supply increased.
In economic theory, transaction costs refer to
A) fees charged by brokers, traders, or other agents rather than by principals.
B) costs attributable to the operations of middlemen.
C) costs of arranging and carrying out voluntary exchanges.
D) costs of obtaining customers or of marketing a product.
E) costs not borne by the persons creating them.
Are checkable deposits really money?
A) No, because they are only commercial bank liabilities, not government liabilities.
B) No, because they are ultimately only entries in the balance sheets of commercial
banks.
C) Yes, because they can be converted on demand into currency or coin.
D) Yes, because they can be used to make purchases and pay debts.
Suppose, compared to last year, the price of beer has increased 4%, the price of jeans
has increased 7%, and the price of video rentals has decreased 1%. On the basis of this
data, what can an economist conclude about the rate of inflation in the overall
economy?
A) Nothing.
B) The inflation rate is 4%.
C) The inflation rate is 7%.
D) The inflation rate is 10%.
E) The inflation rate is 11%.
The number of job seekers in any sector of the economy ordinarily exceeds, by at least
a small amount, the number of jobs available. Thus, employers
A) could increase their net revenue by lowering wages.
B) could increase their net revenue by raising wages.
C) do not pay close attention to marginal cost and marginal revenue in setting wages.
D) face the threat of unionization.
E) want employees to value their current jobs significantly more highly than they value
alternative jobs.
When the price of a good decreases,
A) supply increases.
B) supply decreases.
C) quantity supplied increases.
D) quantity supplied decreases.
Suppose Marquette Bank and Trust has $10 million in total deposits and the required
reserve ratio is 7%. How many dollars can the bank use to seek profit opportunities?
A) $9.3 million
B) $7 million
C) $930,000
D) $700,000
E) 0. Banks cannot seek profits.
Which of the following is most likely to be observed in a community where legal
ceilings are imposed on residential rents?
A) Landlords will do a better job of property maintenance.
B) People moving into the community will have difficulty locating residential space to
rent.
C) Poor people will be able to find adequate housing.
D) Tenants will reduce their use of housing space.
E) The people most in need of housing will be able to obtain the space they want.
Based on opportunity cost, where would one expect to have the most difficulty finding
a teenager to baby-sit?
A) A high-income area with lots of teenagers
B) A low-income area with lots of teenagers
C) A middle-income area with lots of teenagers
D) Any income area because teenagers no longer like babysitting
Little Dicky Lemons operates a lemonade stand. Yesterday he sold 10 cups when he
charged $1.00 per cup. Today he lowered his price to 80 cents, and sold 14 cups. What’s
the price elasticity of demand?
A) .50
B) 1.0
C) 2.0
D) 4.0
E) 8.0
Nominal GDP is
A) real GDP plus an expected inflationary premium.
B) real GDP multiplied by the implicit GDP deflator.
C) real GDP minus the implicit GDP deflator.
D) real GDP minus total tax revenues.
E) none of the above.
Suppose a cancer patient decides to forsake weekly chemotherapy treatments in order to
spend more meaningful, loving time with her friends and family. In cases where
patients refuse treatment,
A) there are indeed substitute for chemotherapy, such as time with family.
B) the patient is behaving irrationally.
C) the patient doesn’t know what is in her long-run best interest.
D) the patient fails to see that chemotherapy is a better substitute than time with the
family.
If you decide to go to a movie on a Friday night rather than write a letter to your
grandmother, you
A) are willing to deprive your grandmother of a letter simply in order to enjoy a movie.
B) place more value on the movie than on your grandmother.
C) would rather have fun than fulfill your responsibilities to your relatives.
D) none of the above.
Complete this statement. Sellers compete against other sellers and
A) sellers compete against buyers.
B) sellers cooperate with buyers.
C) buyers cooperate with other buyers.
D) both A and C are true.
What is the relationship between scarcity and shortage, as economists use the terms?
A) Scarcity and shortage cannot exist simultaneously.
B) Shortages are the basic cause of scarcity.
C) Scarcity creates shortages in the long run.
D) Scarcity is relative while shortages are absolute.
E) Scarcity is unavoidable but shortages are not.
Lu Thier is an accomplished violin and viola maker. He can make either 6 violins or 6
violas each year, or a combination such as 3 violins and 3 violas. Which statement
below is true?
A) The opportunity cost of producing 1 viola is 6 violins.
B) The opportunity cost of producing 1 viola is 3 violins.
C) The opportunity cost of producing 1 viola is 1 violin.
D) George has a comparative advantage in violin production.
The percentage markups which sellers use
A) are based on their estimates or guesses about marginal cost and marginal revenue for
particular goods.
B) are between 10 and 15 percent.
C) are the same on all products of a single firm.
D) differ between products but are the same on average for all firms.
According to your textbook authors, laws restricting competitors
A) restrict competition.
B) reduce greed.
C) promote economic fairness.
D) improve the alternatives available to customers.
Suppose a student is attending your college on an athletic scholarship, and doesn’t pay a
penny for tuition. According to the economic way of thinking, the student’s cost of
attending college is
A) zero.
B) bore completely by the college’s athletic fund.
C) positive, because the student sacrificed some other opportunity to attend your
college.
D) positive, because the student still needs food and housing.
E) negative, because nobody really gains by trying to combine athletics with higher
education.
Members of the Federal Reserve Board of Governors can set monetary policy in
relative independence of political pressures because
A) monetary policy is too complex to be understood by the general public.
B) their authority derives from the Constitution rather than popular election.
C) they are not allowed to belong to any political party.
D) they hold their positions for fourteen-year terms.
If price discrimination enables sellers to increase net revenues, why don’t all sellers try
it? Because
A) some sellers can’t manipulate their price.
B) some sellers can’t control resentment.
C) some sellers can’t prevent low-price buyers reselling to high-price buyers.
D) of all the above reasons.
According to economic theory, the democratic political processes tend to produce
A) unstable aggregate demand policies with a bias toward expansion.
B) unstable aggregate demand policies with a bias toward contraction.
C) stable aggregate demand policies, but only if economists are elected to office.
D) stable aggregate demand policies that are in the best interests of the nation as a
whole.
E) economic policies that harm everybody.
Economists use the term externalities to refer to
A) consequences people ignore in their decision making.
B) any cost associated with an action.
C) foreign imports or exports.
D) the behavior in which people actually engage as distinct from their alleged reasons
for acting as they do.
E) the outside directors of a corporation as distinct from corporate directors who are
also managers.
According to your text, there are substitutes for any scarce good,
A) but some demand curves are vertical.
B) but the elasticity of demand for most goods is zero.
C) but the law of demand only holds for inexpensive goods.
D) but it often takes time for consumers to seek out useful substitutes.
A reduction in the price charged for luncheon specials by a downtown cafeteria will
A) affect the demand (curve) for that cafeteria’s luncheons if its competitors react.
B) have no effect on the demand for lunch at other downtown restaurants.
C) increase the cafeteria’s gross revenue from lunch business.
D) increase the cafeteria’s net revenue from lunch business if the demand is elastic.
E) increase the cafeteria’s net revenue from lunch business if the demand is inelastic.
The costs affecting decisions to supply goods and services are always
A) average costs.
B) costs not yet incurred.
C) sunk costs.
D) total costs.
E) unavoidable costs.