The present value of a given payment will be lower
a. if the payment comes sooner than expected
b. the lower the prevailing interest rate
c. the further in the future the payment is to be received
d. the sooner the payment is to be received
e. if the payment is made in cash
Which of the following is not likely to cause a change in the supply of wheat?
a. a government subsidy to farmers who do not grow wheat
b. an increase in the price of soybeans
c. a decrease in the price of fertilizer
d. a fall in the price of wheat
e. producers expect product prices to rise
Because information and the time required to acquire and digest it are scarce,
a. consumers concentrate on private choices rather than on public choices
b. consumers concentrate on public choices rather than on private choices
c. it is irrational for consumers to remain ignorant of the costs and benefits of
government proposals
d. consumers have greater incentive to gather and act upon information about public
choices than to gather and act upon information about their private choices
e. an individual voter has more incentive to examine the performance records of
candidates for public office
A Medicaid experiment in California showed that a nominal fee of $1 charged for
doctors’ visits
a. caused beneficiaries to stop going to doctors altogether
b. significantly reduced benefits to those covered by Medicaid without reducing the cost
of the program to taxpayers
c. reduced the cost of the program to taxpayers without creating a substantial burden for
recipients
d. increased the number of doctors’ visits per month by beneficiaries
e. drastically reduced consumer surplus in that market
Empirical studies of production suggest that the long-run average cost curve
a. is U-shaped
b. has an inverted L shape
c. is L-shaped
d. is horizontal
e. shows diminishing marginal returns
International reserves include all except one of the following. Which is the exception?
a. gold
b. dollars
c. yen
d. Special Drawing Rights
e. oil
When externalities are present, market prices do not reflect all the social costs or
benefits of the activity.
a. True
b. False
The difference between income and consumption is
a. rent
b. profit
c. saving
d. opportunity cost
e. roundabout consumption
Which of the following is an in-kind transfer payment?
a. Medicaid
b. Social Security
c. workers’ compensation
d. unemployment insurance
e. Temporary Assistance to Needy Families
Exhibit 6-11
If Ken is originally at point a in Exhibit 6-11 and then moves to point b due to a
reduction in the price of neckties, his expenditure
a. increases from $20 to $25, increasing both consumer surplus and total utility
b. increases from $20 to $25, decreasing both consumer surplus and total utility
c. stays at $20, leaving both consumer surplus and total utility unchanged
d. stays at $20, but both consumer surplus and total utility increase
e. decreases as price falls, increasing both consumer and surplus and total utility
When agricultural production increases, the total amount paid for agricultural products
tends to
a. increase because demand is price elastic
b. decrease because demand is price elastic
c. increase because demand is price inelastic
d. decrease because demand is price inelastic
e. remain constant because demand is price inelastic
The income and substitution effects of a change in the wage rate
a. always work in the same direction
b. always work in opposite directions
c. work in opposite directions only if the change is a decrease
d. work in the same direction only if the change is an increase
e. work in the same direction only if the change is a decrease
Exhibit 7-5
In Exhibit 7-5, what is fixed cost at 20 units of output?
a. $0
b. $10
c. $40
d. it is impossible to calculate fixed cost unless we know the daily wage
e. it is impossible to calculate fixed cost unless we know variable cost at Q = 15
The fact that since 1990 the number of movie screens in the United States has grown
faster than the number of theaters illustrates the benefits of
a. economies of scale
b. constant long-run average cost
c. diseconomies of scale
d. increasing long-run average cost
e. a U-shaped marginal cost curve
The relationship between average and marginal variables can be stated as follows: if the
marginal is greater than the average,
a. the average is increasing
b. the average is decreasing
c. the marginal is increasing
d. the marginal is decreasing
e. the total is decreasing
Implicit cost involves a direct cash payment for the use of a resource.
a. True
b. False
Exhibit 1-5
In Exhibit 1-5, curve A has a __________ slope that is __________ at every point.
a. positive; constant
b. positive; changing
c. negative; constant
d. negative; changing
e. changing; constant
Which of the following is the best example of the ownership of the resource called
labor
a. John Smith’s ownership of 10 shares of a manufacturer of farm tractors
b. Pogo O”Reilly’s ownership of 10 shares of a natural gas extraction company
c. Helen Restock’s ownership of a $10,000 savings bond
d. Abe Hawthorne’s college degree in marketing
e. Ann Stump’s creative, risk-taking personality
The basis of the benefits of specialization is
a. comparative advantage
b. absolute advantage
c. size of country
d. identical production costs between two countries
e. self-sufficiency
Because people’s wants are unlimited but resources are scarce,
a. only the rich get everything they want
b. choices must be made
c. there will be more services produced than goods
d. people search for spiritual fulfillment rather than material fulfillment
e. poor people never get anything they want
Suppose the exchange rate is such that 1 U.S. dollar equals 1 euro in New York and 0.9
euros in Paris. An arbitrageur would sell euros
a. in New York and buy U.S. dollars in Paris
b. in Paris and buy U.S. dollars in New York
c. in New York while buying them in Paris
d. in Paris while buying them in New York
e. at the same price in both cities
Division of labor allows people to do tasks for which they have greater natural ability.
a. True
b. False
“Which of the following is the best definition of economics?
a. An investigation of the quantities and prices of the various goods produced by the
nations of the world.
b. A study of why inflation and unemployment periodically plague the U.S. economy.
c. An analysis of how individuals and societies deal with the problem of scarcity.
d. An examination of the role that money plays in the economy.
e. A study of how goods and services are distributed throughout the world.
The more elastic is the supply, the less of a tax is paid by consumers
a. True
b. False
Which of the following will cause the demand curve for a good to shift to the left?
a. an increase in the price of the good
b. a decrease in the price of the good
c. a decrease in the price of a complementary good
d. an expectation of a future price decline
e. an increase in the price of a substitute good
Which of the four types of decision makers in the U.S. economy plays the largest role?
a. U.S. firms and government because they produce the products that households
consume
b. U.S. households because they supply goods to the product markets and are
demanders in resource markets
c. foreign households, firms, and governments because they greatly outnumber those of
the United States
d. U.S. firms and government because they create employment for domestic households
and produce goods and services
e. U.S. households, as buyers in product markets and sellers in resource markets
In order to increase society’s well-being, a process that produces a positive externality
might be
a. taxed to discourage production
b. subsidized to encourage production
c. taxed to encourage production
d. subsidized to discourage production
e. provided without government intervention
A U-shaped curve has a positive slope everywhere.
a. True
b. False
Which of the following statements about income and education in the United States is
correct?
a. There is no relationship between income and education.
b. At every age, average earnings are higher for those with more education.
c. Average earnings are higher for those with more education, but only if they are over
the age of 60.
d. Average earnings are higher for those with more education, but only if they are under
the age of 60.
e. Income levels peak at a younger age for those with college educations than they do
for those with only elementary educations.
The opportunity cost of an activity
a. depends on the individual’s subjective values and opinions
b. is the same for everyone
c. must be calculated and known before undertaking that activity
d. is irrelevant to decision making
e. is not related to time