When the price of a good increases,
A) supply increases.
B) quantity supplied increases.
C) supply decreases.
D) quantity supplied decreases.
A fully licensed driver, Clarity Dence just drove her car to an “Earth Day” rally. By
doing so, she exercises
A) her right to drive beyond the speed limit.
B) her right to threaten and steal.
C) her right to pollute.
D) her right to park wherever she sees fit.
E) none of the above.
“Dad said he’d pay for my education whether I go to State or to Ivy College. So I chose
Ivy College, even though it’ll cost him $15,000 more in tuition each year!” Pick the
correct statement:
A) Her opportunity cost is $15,000 each year.
B) Her opportunity cost is the satisfaction she would have experienced at State.
C) Whether she realizes it or not, her opportunity cost is infinite, just like her dad’s love
is infinite.
D) She has no opportunity cost, because her dad will pay for her education.
As a result of losing his job, Uncle Roy dropped his cable TV service and instead
bought a new iPod. For Uncle Roy,
A) cable is an inferior good and the iPod is a normal good.
B) cable is a normal good and the iPod is an inferior good.
C) both cable and the iPod are normal goods.
D) both cable and the iPod are inferior goods.
E) cable and the iPod are complementary goods.
Fill in the blanks: ________ is defined as a sustained ________ in the price level.
A) Inflation; fall
B) Deflation; fall
C) Deflation; rise
D) Answers A and C above are both true.
If a seller can sell 5 units at $8 each but can sell 6 units only by lowering the price to $7
(and must sell all units at the same price), the marginal revenue from selling the 6th unit
is
A) $42.
B) $7.50.
C) $7.
D) $2.
E) none of the above.
From the economic point of view, why might a retired couple spend four hours a day on
the golf course when they could have spent their time becoming better informed about
their elected representative in Congress?
A) They are going to die soon so it really doesn’t matter.
B) They must love golf and hate politics.
C) The congressperson must have wronged them.
D) They consider golfing a more productive use of their time.
From the perspective of economic theory, property rights are
A) human rights.
B) just as important as human rights.
C) less important than human rights.
D) more important than human rights.
E) usually in conflict with human rights.
If the quantity demanded changes proportionately the same as price, demand is said to
be
A) vertical.
B) elastic.
C) unit elastic
D) inelastic.
A cartel is
A) a chain of retail stores.
B) a consent decree prohibiting specific anti-competitive practices.
C) an automatic mark-up policy frequently used by retail establishments.
D) an organization of sellers or buyers aiming to control competition.
Do people’s incomes result from the choices they make?
A) Yes, and from no constraints whatsoever.
B) Yes, but from among a limited set of options.
C) No, because obviously no one would choose to be poor.
D) No, because others often will not let people have what they choose.
Joe Doakes is running for reelection. Economic theory predicts he has a strong
incentive to
A) heavily discount the value of all future costs of his policies.
B) try to provide as many benefits to his constituents as possible prior to the next
election day.
C) do both A and B above.
D) do none of the above.
In the economy of Pandemonia, 500 people have jobs, 500 people are not working but
are searching for work, and 1500 people don’t work and don’t seek work. The
unemployment rate is
A) 10 percent.
B) 40 percent.
C) 55 percent.
D) 66 percent.
E) none of the above.
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
Suppose the federal government makes it mandatory for employers to provide health
insurance to all employees. Assuming the new mandate applies to homebuilders, the
A) demand for construction workers is likely to increase.
B) supply of new homes is likely to increase.
C) supply of new homes is likely to decrease.
D) supply of new homes will remain the same; businesses will simply “pass” the higher
costs on to consumers.
In the economic way of thinking, information is a scarce economic good because
A) people need more information.
B) modern-day capitalism turned information into a tradable commodity.
C) it is valuable, and there are opportunity costs to get it.
D) a political conspiracy limits its production to keep citizens uninformed.
“Opportunity cost” is
A) any lost opportunity.
B) the next-best opportunity one sacrifices when making a choice.
C) equal to the ratio between an opportunity gained and an opportunity sacrificed.
D) measured only by monetary payments for a scarce good or service.
Fill in the blank: Rent controls tend to ________ discrimination among landlords.
A) increase nonprice
B) increase price
C) decrease nonprice
D) eliminate
If the quantity of gasoline supplied currently exceeds the quantity demanded,
A) there is a surplus of gasoline.
B) gasoline is no longer a scarce good.
C) the price of gasoline would tend to remain unchanged.
D) all of the above are true.
E) none of the above is true.
The primary function of the reserve requirements imposed by the Fed upon commercial
banks is to
A) assure that Federal Reserve Banks will receive deposits with which they can
purchase income-earning assets.
B) enable the government to borrow in emergencies.
C) protect the liquidity of the banking and monetary system.
D) protect the solvency of the commercial banking system.
E) serve as a control lever for central banking authorities.
The term human capital refers to
A) labor from which surplus value has been extracted.
B) labor services whose rate of remuneration is set by employers.
C) machinery that is complementary to rather than competitive with labor services.
D) the valuable abilities people have acquired.
E) wealth in the possession of households rather than business or government.
Which explains why supply curves slope upward to the right?
A) Sunk costs
B) Decreasing average costs
C) Increasing marginal costs
D) Multiple per-unit costs
The effective use of coercion in a society ultimately depends upon
A) fear.
B) free enterprise.
C) police enforcement.
D) voluntary cooperation.
Suppose Stan transfers $1,000 from his savings account into his checking account.
What are the effects on M1 and M2 money supply?
A) M1 increases; M2 remains the same.
B) M1 decreases; M2 increases.
C) Both M1 and M2 increase.
D) Both M1 and M2 decrease.
E) Both M1 and M2 remain the same.
A free rider in economic theory is someone who does not contribute toward covering
the cost of goods which he desires because he
A) has a comparative advantage in defraying the cost of other goods.
B) knows his paying or not paying will make no difference in their availability to him.
C) regards all such costs as deadweight costs.
D) regards all such costs as transaction costs.
Suppose the nominal interest rate is 2% and the real interest rate is -3%. We can deduce
that the rate of inflation is
A) 0%.
B) 2%.
C) 3%.
D) 5%.
Government actions to compel more competition in an industry
A) always entail costs, which must be compared to any gains created by the policy.
B) always have the effect of lowering prices to consumers.
C) cannot benefit anyone if they result in greater inefficiency.
D) will result in lower prices but cannot bring about a larger output.
E) will not succeed because competition, like morality, cannot be legislated.
If Barbecue Bob has a right to own and use his backyard barbecue, then Barbecue Bob
also enjoys
A) a right to pollute.
B) a right to steal.
C) a right to free charcoal.
D) a right to clean air.
If the Fed were to lower the required reserve ratio,
A) excess reserves would decrease.
B) excess reserves would increase.
C) there would be no effect on the level of excess reserves.
D) there would tend to be no effect on the nation’s money supply.
National output and national income are the same because
A) one seller’s profit is another seller’s loss.
B) one seller’s profit is another buyer’s loss.
C) the sale of goods and services generates income for the sellers.
D) the sale of goods and services generates tax revenues for the government.
Consider the following simplified sequence of exchanges. A logger sells an oak tree to a
sawmill owner for $60. The sawmill mills it, and sells the boards to a woodworker for
$80. The woodworker makes an oak bookcase out of the boards, and sells it to a retailer
for $300. The retailer then sells you the bookcase for $500. What is the total value
added?
A) $200
B) $300
C) $440
D) $500
E) $940
Business executives who think the demand for their product is very elastic at the current
price are assuming
A) the demand will become less elastic at a higher price.
B) they will be able to sell more units at a higher price.
C) they will sell fewer units but receive more dollars in sales revenue at a higher price.
D) they will sell more units and receive more dollars in sales revenue at a lower price.
E) they will sell more units but receive fewer dollars in sales revenue at a lower price.