Profits resulting from luck can be distinguished from profits attributable to shrewd
predictions by
A) calculating the opportunity cost of earning the profits.
B) comparing the profits with interest rates.
C) finding out whether they lead to reduced revenue or increased costs.
D) no known empirical test.
E) whether or not they were generally anticipated.
Deadweight costs in an exchange are costs
A) charged for free goods.
B) imposed by government, such as taxes or safety requirements.
C) that have no effect on either the quantity demanded or the quantity supplied.
D) that have nothing to do with the sacrifice of valuable opportunities.
E) to the buyer that are not simultaneously benefits to the seller.
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) 50 percent.
D) 66 percent.
E) none of the above.
Fill in the blank: Middlemen tend to have ________ in information production.
A) no interest
B) a comparative advantage
C) a monopoly
D) little time to engage
E) a wasteful way of engaging
A national taco chain offers in-house customers free refills on drinks. It is clearly
A) attempting to increase its total profit.
B) generating a negative externality.
C) generating a positive externality.
D) engaging in predatory pricing.
E) doing none of the above.
In chapter 1 your authors marveled at the way highway traffic is orderly and
self-regulating. In chapter 6, however, they discuss a growing problem on urban
roadwayscongestion. What’s the cause of roadway congestion?
A) Typically, road use is a scarce good with a zero price tag.
B) Not enough drivers have studied economics.
C) More and more drivers think only of themselves.
D) Population growth
Why was so much of the “boom” of the 2000s concentrated in the housing and real
estate sectors?
A) The Fed attempted to engineer an increase not only in real GDP, but in particular
further the expansion of those sectors.
B) The Community Reinvestment Act (CRA) called for banks to offer subprime loans
to at-risk customers.
C) People were encouraged to “flip” houses because the low interest and rate and easy
lending practices made it appear profitable to do so.
D) For all of the above reasons.
If a severe drought causes the harvest of corn to be 10 percent less than anticipated, it
will cause a large increase in the price of corn if
A) corn is scarce.
B) the demand for corn is highly elastic.
C) the demand for corn is highly inelastic.
D) the supply of corn is highly elastic.
E) the supply of corn is highly inelastic.
Suppose you must pay a non-refundable $200 down payment to order a new item. Pick
the true statement below.
A) The $200 represents a marginal cost before you commit to the down payment.
B) The $200 represents a sunk cost after you’ve committed to the down payment.
C) Both A and B are true.
D) Neither A nor B are true.
In order to move aggregate demand to the level consistent with full employment by
means of fiscal policy, government officials who set the budget must know
A) the current level of aggregate demand.
B) the level of aggregate demand that would be consistent with full employment.
C) the size of the budget changes required to induce the appropriate-sized changes in
aggregate demand.
D) all of the above.
Who among the following is speculating?
A) The economics department that offers its first online principles course
B) The bookstore that buys back the Math 101 textbooks without confirmation that the
department definitely plans to adopt it again next semester
C) The resident hall advisor who purchases party favors for the end-of-semester bash
D) All of the above.
E) B and C above.
If the production of soybeans is subsidized by the government,
A) the demand for soybeans will increase.
B) the farmer’s cost of producing soybeans will decrease.
C) the supply of soybeans will decrease.
D) all of the above will occur.
E) none of the above will occur.
A price searcher faces the following demand curve: At $9, $8, $7, and $6, the quantity
demanded is 10, 20, 30, and 40 units, respectively. If the firm’s marginal cost is $70 at
any level of output, it would maximize net revenues by
A) producing 10 units and charging $9.
B) producing 20 units and charging $8.
C) producing 30 units and charging $7.
D) producing 40 units and charging $6.
E) charging $70 plus markup.
After the September 11th attack on the World Trade Center, and with the emergence of
the anthrax scare, the price and the purchases of gas masks jumped dramatically in New
York City. In the economic way of thinking, which of the following occurred?
A) The supply curve for gas masks shifted to the right.
B) The supply curve for gas masks shifted to the left.
C) The demand curve for gas masks shifted to the right.
D) The demand curve for gas masks shifted to the left.
E) The demand curve for gas masks became upward-sloping.
When two companies that produce the same product merge, it is called a
A) conglomerate merger.
B) diagonal merger.
C) horizontal merger.
D) vertical merger.
What will be the principal and most immediate effect on the supply or demand for raw
cotton grown in the United States if the price of synthetic textiles declines?
A) Decrease in demand
B) Decrease in supply
C) Increase in demand
D) Increase in supply
If the production of wheat were subsidized by government,
A) the demand for wheat would increase.
B) the supply of wheat would increase.
C) both A & B would occur.
D) none of the above would occur.
Jones and Smith are teaching assistants. Jones can grade 20 essays or 50 problem sets a
day, while Smith can grade 20 essays or 10 problem sets a day. Therefore
A) Smith sacrifices 2 graded essays for every 2 problem sets she grades.
B) Smith sacrifices 10 graded essays for every 20 problem sets she grades.
C) Jones sacrifices 2 graded essays for every 5 problem sets he grades.
D) Both Smith and Jones have a comparative advantage in grading essays.
Which of the following is probably the best example of a free good?
A) The air in your college classroom
B) A can full of garbage put out for trash collectors
C) Interstate highways
D) Free concert tickets, which were given to you by a friend
Economists find the notion of people “needing” things to be
A) supported by the law of demand.
B) considered false.
C) seriously misleading because they ignore substitutes.
D) considered tentatively true until the preponderance of the data suggests otherwise.
According to your textbook, efforts to free Sudanese slaves by buying them in the open
market actually
A) increased supply of slaves, which lowered slave prices and increased the size of the
slave market.
B) increased demand for slaves, which increased slave prices and increased the size of
the slave market.
C) decreased supply of slaves, which increased slave prices and decreased the size of
the slave market.
D) decreased demand for slaves, which decreased slave prices and decreased the size of
the slave market.
Gross domestic product can be thought of as a measure of
A) the national money supply.
B) national income.
C) national welfare.
D) the national value of all legal exchanges.
E) none of the above.
What effect would an increase in the price of pork have on the demand for beef?
A) It would decrease the demand for beef.
B) It would decrease the demand for beef only if the demand for beef is elastic.
C) It would increase the demand for beef.
D) It would increase the demand for beef only if the demand for beef is inelastic.
E) It would have no effect, because a change in price affects only the quantity
demanded, not the demand.
Price discrimination by sellers is usually observed only in situations where
A) low-price customers can easily resell to high-price customers.
B) prices are set by competing monopolies.
C) sellers are bigots.
D) sellers can effectively identify customers by their demand for the product.
According to opportunity-cost theory, if the public lost most of its interest in spectator
sports,
A) athletes would have to charge more for their services in order to survive.
B) the cost of hiring professional athletes would fall.
C) the cost of hiring professional athletes would rise.
D) the cost of hiring professional athletes would remain the same.
According to your authors, the “boom-bust” cycle is primarily caused by
A) government tax and spend policies.
B) an artificial lowering of interest rates through expansionary monetary policy.
C) waves of irrational optimism and pessimism in the business community.
D) a clash of interests among capitalists and laborers.
A local newspaper headline states “Congress Votes Against President’s Proposed Tax
Increase.” An economist would interpret the statement as
A) a sad event, because all economists favor tax cuts.
B) uninteresting, because all economists favor theories instead of reality.
C) a purely political issue not related to economics.
D) a shorthand way of saying, “More individuals in Congress voted against the tax cut
compared to the number of individuals who voted in favor of the tax cut.”
What happens to the money supply when the Fed sells government bonds?
A) The money supply tends to rise.
B) The money supply tends to fall.
C) Nothing.
D) It’s impossible to determine, because bonds aren’t money.
Information is a scarce good because
A) buyers typically know more than sellers about the products they are selling.
B) competition encourages buyers and sellers to conceal a portion of what they know.
C) its possession enables people to increase their wealth, and it cannot be acquired
without cost.
D) sellers typically know more than buyers about the products they are selling.
How does the textbook’s notion of competition as a process differ from the model of
perfect competition?
A) The process notion allows for uncertainty and incomplete information; perfect
competition doesn’t.
B) The process notion allows for price searching activity; perfect competition doesn’t.
C) The process notion allows for product differentiation; perfect competition doesn’t.
D) The process notion allows for a small number of participants; perfect competition
doesn’t.
E) For all of the above reasons.