[Question]
107. What kind of externalities affects the levels of unemployment, inflation, or growth in the
economy as a whole?
A. Positive
B. Negative
C. Macroeconomic
D. Microeconomic
108. A public good is a good that:
A. is owned by the public.
B. when consumed by one individual, can still be consumed by others.
C. when consumed by one individual, cannot be consumed by another.
D. is available only to those people who help to pay for it.
109. Some nutritionists consider junk food or eating junk food an example of:
A. merit goods or activities.
B. demerit goods or activities.
C. positive externalities.
D. public goods.
110. Healthy food and charitable giving are examples of:
A. merit goods or activities.
B. demerit goods or activities.
C. negative externalities.
D. public goods.
111. Determining whether a good is a merit good is:
A. an objective exercise.
B. a subjective exercise.
C. best done using economic theory.
D. best left to economists.
112. When a government bans prostitutions, it may do so because it considers prostitution to be
a:
A. progressive good.
B. regressive good.
C. public good.
D. demerit good.
113. When the Sarbanes-Oxley Act that established new accounting rules was passed, analysts
suggested that the new rules would not improve protections for the investing public, but it would
result in more work for accountants. If the professors are right, these regulations are an example
of:
A. laissez faire.
B. demerit goods.
C. government failure.
D. comparative advantage.
114. Market failures:
A. can always be corrected through government action.
B. can never be corrected through government action.
C. are sometimes made worse by government failures.
D. lead to a desired allocation of resources.
115. The best example of a merit good or activity is:
A. excessive consumption of pork.
B. providing free beer to teenagers.
C. teaching baseball to boys and girls in the community.
D. exercising too much.
116. Which of the following is the best example of a demerit good?
A. Cigarettes
B. Whole-wheat bread
C. Bicycles
D. Education
117. Which of the following occur in the real world?
A. Neither market failures nor government failures
B. Government failures but not market failures
C. Market failures but not government failures
D. Both market failures and government failures
118. International market failures:
A. are more likely to be solved in the presence of a world government.
B. are less likely to be solved in the presence of a world government.
C. are equally likely to be solved in the presence or absence of a world government.
D. do not occur in the presence or absence of a world government.
119. Some argue that Sweden’s generous welfare benefits, which pay people who lose their jobs
as much as 80 percent of previous incomes for three years, has resulted in too-high
unemployment. This can be seen as an example of:
A. market failure due to unfair conditions produced by the labor market.
B. government not correcting externalities produced by the market.
C. government failure in fostering a competitive market environment.
D. globalization causing hardworking youth to emigrate.
120. Global corporations:
A. can provide many benefits to the countries in which they operate.
B. are falling in importance in today’s economy.
C. have little interest in decreasing international tensions.
D. suffer tax disadvantages that domestic corporations do not.
121. Global corporations in general are:
A. more difficult to regulate than domestic corporations.
B. as difficult to regulate as domestic corporations.
C. less difficult to regulate than domestic corporations.
D. beyond the scope of government regulation at any level.
122. The Group of Eight is an informal international institution that is comprised primarily of
the:
A. leading petroleum exporting countries.
B. leading socialist countries.
C. leading industrial democracies.
D. major developing countries.
123. Which of the following countries is not a member of The Group of Eight?
A. Germany
B. Japan
C. United States
D. China
124. A primary goal of the World Bank is to:
A. channel low-interest loans to developing countries to foster economic growth.
B. work out repayment plans for developing countries with large international debt.
C. finance private investment projects around the world.
D. negotiate trade agreements between nations.
125. A primary goal of the International Monetary Fund (IMF) is to:
A. promote economic negotiations and cooperation among industrialized countries.
B. work out repayment plans for developing countries with large international debts.
C. protect the interests of the United States abroad.
D. negotiate trade agreements between nations.
126. Which of the following organizations works with developing countries to secure low-
interest loans that foster economic growth?
A. World Trade Organization
B. World Bank
C. Group of Five
D. Group of Eight
127. Which of the following is an international financial institution concerned primarily with
monetary issues and international financial arrangements?
A. International Monetary Fund
B. European Union
C. Group of Five
D. Group of Eight
128. Japan, Germany, France, Britain, and the United States meet to try to coordinate their
economic policies. This informal association is called:
A. the WTO.
B. the Group of Five.
C. the IMF.
D. the OECD.
129. The most important difference between domestic governments and international
organizations is that:
A. international organizations are more effective since membership is voluntary.
B. domestic governments are more effective since national self-interest is not constrained by
international obligations.
C. international organizations are less effective since they have no means of forcing members to
comply.
D. domestic governments are less effective because they are more concerned about international
public opinion.
130. In feudalism, serfdom was maintained primarily through:
A. market forces.
B. tradition.
C. supply and demand.
D. economic forces.
131. In 11th century Europe, the central economic decisions were made by:
A. the nation-state.
B. tradition and the lord of the manor.
C. the church.
D. central governments.
132. Mercantilism was a system in which all of the following were true except:
A. political rather than social forces controlled the central economic decisions.
B. economic rather than social forces controlled the central economic decisions.
C. governments encouraged growth by supporting trading activities.
D. governments limited growth by protecting monopolies.
133. The difference between mercantilism and feudalism is that under mercantilism:
A. merchants played a more important political role than kings.
B. the invisible hand played a more important role than the government.
C. nation-states ruled by kings who coordinated the economic activity emerged.
D. economic rather than social and political forces made the central economic decisions.
134. The difference between capitalism and mercantilism is that under capitalism:
A. craft guilds rather than merchants own capital.
B. the invisible hand is more important than the government.
C. industrialists’ views are represented by craft guild organizations.
D. the state plays a more active role in coordinating economic activity.
135. The two economic groups competing for power during the transition from mercantilism to
capitalism were:
A. craft guilds and industrialists.
B. serfs and craft guilds.
C. craft guilds and the lords of the manor.
D. merchants and the lords of the manor.
136. Adam Smith advocated laissez-faire because he believed it was in the interest of:
A. capitalists, whom he regarded as the most dynamic and progressive element in society.
B. the proletariat, who would receive higher wages.
C. the government, which would profit from higher taxes.
D. society as a whole.
137. The Marxist critique of capitalism was based on the notion that:
A. a capitalist system ignored traditional class roles.
B. efficient allocation of resources was not a worthwhile goal.
C. the proletariat class exploited the capitalist class, which created all the value inherent in
goods.
D. the capitalist class exploited the proletariat class, which created all the value inherent in
goods.
138. Which of the following was a Marxist prediction?
A. Production would move from large to ever-smaller factories
B. Standards of living would increase because of improved productivity and technological
advance
C. There would be significant differentiation between workers and owners of factories
D. The use of business power would increase competition
139. Which of the following was one of Marx’s predictions?
A. Capitalism would evolve into feudalism
B. Competition among capitalists would benefit workers
C. Firms would become larger and larger
D. Capitalism in its pure form was benevolent
140. Welfare capitalism is an economic system in which:
A. markets operate without government regulation.
B. government owns all of the means of production.
C. markets operate, but government regulates markets significantly.
D. laissez-faire operates unimpeded.
141. Socialism in theory is an economic system in which:
A. government sees to it that people work for the common good until they could be relied upon
to do that on their own.
B. the invisible hand insures that individual decisions are made for the common good.
C. government owns the means of production, but individual self-interest determines how
production is organized.
D. individuals are able to act in the best interest of everyone without direction from government
or the invisible hand.
142. Socialists saw state socialism as:
A. the final stage of socialism.
B. a preliminary state leading to capitalism.
C. a transition stage to pure socialism.
D. a state following pure socialism.
143. Since the late 1980s:
A. the Soviet socialist economic and political structure has spread to other nations.
B. the Soviet socialist economic and political structure has fallen apart.
C. the Soviet Union installed Soviet-dominated governments in a number of Eastern European
countries.
D. socialism has gained popularity among the governments of Eastern Europe.
144. The Soviet socialist economy fell apart primarily because:
A. it was based on barter rather than monetary exchange.
B. individuals are not motivated by self interest.
C. workers lacked incentives to work and production was inefficient.
D. markets failed to develop.
