Speculators who believe the world-wide demand for cocoa products is going to increase
enormously next year will cause
A) less cocoa to be consumed next year.
B) less cocoa to be consumed this year.
C) less cocoa to be produced next year.
D) less cocoa to be produced this year.
E) none of the above since speculation only affects price.
Does fiscal policy affect monetary policy?
A) No, because real output and income can and sometimes do move in the opposite
direction from nominal money output and income.
B) Yes, because the Fed and the Treasury naturally tend to pursue similar goals.
C) Yes, because government deficits or surpluses affect the total demand for credit.
D) Yes, because the government usually prints new money to finance deficits and retires
that money when it runs a surplus.
When competing firms set prices with attention to the prices set by their competitors,
the demand curve faced by each firm
A) becomes indeterminate.
B) becomes less elastic.
C) becomes more elastic.
D) shifts toward the northeast.
E) shifts toward the southwest.
Fill in the blanks: ________ policy attempts to manipulate ________ in the economy.
A) Monetary; price controls
B) Monetary; fiscal policy
C) Fiscal; overall spending
D) Fiscal; monetary policy
Nobody needs soda. So why do people drink it?
A) They deny the data and believe they really do need soda.
B) The expected additional benefits of another soda outweigh the additional costs.
C) There are no substitutes for soda.
D) Soda is a good for the people who consume it, and therefore they will drink it at any
price.
Economic theory assumes citizens vote
A) in total ignorance of each issue.
B) in their own interest.
C) in the public interest.
D) by systematically discounting their long-run interests.
Gross domestic product is the market value of
A) intermediate exchanges made within a country during the course of a year.
B) final goods and services produced within a country during the course of a year.
C) all monetary transactions within a country during the course of a year.
D) all the goods produced within a country during the course of a year over and above
what is required to maintain the population and the stock of capital.
E) everything produced within a country during the course of a year and lasting for at
least 12 months.
If a restaurant, as a regular policy, gives a morning newspaper to each customer who
orders a complete breakfast, the restaurant is
A) engaging in predatory pricing of breakfasts.
B) engaging in predatory pricing of newspapers.
C) selling breakfasts below cost.
D) distributing newspapers below cost.
E) almost certainly doing none of the above.
If no beautification projects were undertaken in a city except by private individuals or
firms, the city would almost surely be less beautiful than otherwise comparable cities
because
A) aesthetic standards vary so widely.
B) it is extremely difficult to induce people to pay on a voluntary basis for the pleasure
they receive from urban beautification projects.
C) people may enjoy beauty, but they are not willing to pay for it.
D) private individuals and firms generate more external costs than benefits.
Let’s assume Ben can produce 3 units of a material good (M) or 3 units of a spiritual
good (S) in a day, while Cal can produce 1 M or 2 Ss in a day. Which statement below
is true?
A) It costs Ben 1 S to produce 3 Ms.
B) It costs Ben 1 M to produce 3 Ss.
C) It costs Cal 2 Ss to produce 1 M.
D) None of the above.
Intelligent policymaking requires making trade offs, which means
A) accepting unethical but unavoidable compromises.
B) giving up what is less valuable for what is more valuable.
C) putting one’s own interests ahead of the interests of others.
D) sacrificing some people’s welfare to other people’s welfare.
E) violating someone’s rights.
The “law of demand” means that the demand for any scarce good
A) is completely elastic.
B) cannot be completely inelastic.
C) must be inelastic.
D) is only a short-run demand.
E) cannot be elastic.
If the demand for a good is determined to be “inelastic,” then the elasticity measure
A) is greater than 1.0.
B) is equal to 1.0.
C) is less than 1.0.
D) is infinite.
Other things constant, political instability in a poor nation tends to reduce
A) the money supply of the nation.
B) the rate of return required to attract foreign investment.
C) the level of foreign investment in the nation.
D) interest rates in the nation.
Which statement below is true for a price taker in the long run?
A) Net revenue can only be positive.
B) Net revenue can only be negative.
C) Net revenue can only be zero.
D) Net revenue can be positive, negative, or zero.
A financial institution that wants a 5 percent real return on its loans and contemplates a
4 percent annual inflation rate should loan at a nominal interest rate of approximately
A) minus 1 percent.
B) 1 percent.
C) 9 percent.
D) 15 percent.
E) 20 percent.
If you withdraw currency from your checking account for cash, you are
A) increasing M1, decreasing M2.
B) increasing both M1 and M2.
C) decreasing both M1 and M2.
D) not affecting M1 or M2.
E) increasing M1 but not affecting M2.
“Total revenue minus total cost” is
A) an incorrect definition of profit.
B) the correct definition of profit.
C) the economist’s definition of profit.
D) the government’s definition of profit.
E) the most common definition of profit.
According to the Economic Freedom Index,
A) countries with the lowest economic freedom enjoyed the highest per capita GDP.
B) countries with the highest economic freedom enjoyed the lowest per capita GDP.
C) countries with the highest economic freedom enjoyed the highest per capita GDP.
D) there is no relationship between economic freedom and per capita GDP.
Security personnel are an important input into the production of major concerts, such as
Lady Gaga, and Jay Z & Kanye West. If wages for security personnel rise, then we
would expect
A) the supply of major concerts to be unaffected.
B) the supply of major concerts to decrease.
C) the supply of major concerts to increase.
D) the demand for major concerts to increase.
Suppose milk and chocolate syrup are complements (mixed together they make
chocolate milk). If the price of milk increased by exactly 25%, the economic way of
thinking suggests
A) the demand for milk would decrease.
B) the demand for chocolate syrup would decrease.
C) the demand for milk would decrease by exactly 25%.
D) the demand for chocolate syrup would decrease by exactly 25%.
According to your text, when a surplus exists,
A) buyers compete with buyers.
B) buyers compete with sellers.
C) sellers compete with sellers.
D) nobody has to compete because scarcity has been eliminated.
You and your roommate must divide the cooking and cleaning duties. Which of the
following will contribute toward giving you a comparative advantage in cleaning?
A) You develop a contagious disease.
B) Your roommate develops an allergy to dust.
C) Your roommate takes a course in cooking.
D) All of the above.
E) None of the above.
Competition is best characterized as
A) a fully regulated set of market activities.
B) a fair and just set of outcomes.
C) a process of bids and offers.
D) a necessary evil.
What is the basic criticism that economic theory levels against the movement to base
wages on the “comparable worth” of jobs?
A) Markets, not employers, set wage rates for different jobs.
B) There are no jobs that are inherently more suitable for women than for men.
C) There is no way to compare the satisfactions that different people derive from a job.
D) Wage rates determine the worth of workers to an employer by determining the
number that will be hired.
E) Wage rates will be set by supply and demand and cannot be changed by anything
government does.
According to the text, the cost-plus-markup procedure
A) is the only sensible way to set prices.
B) is a sure-fire way to ruin a business.
C) is a general rule of thumb for price searchers.
D) can be practiced only by price takers.
In the model of perfect competition,
A) all firms earn zero economic profit in the long run.
B) all firms use the lowest-cost technologies.
C) all firms take the prevailing market price as given.
D) all participants fully exhaust any potential gains from trade.
E) all of the above occur.
If the GDP deflator rises from one year to the next, we know that
A) economic growth has occurred.
B) everyone in the economy is at least slightly worse off.
C) real GDP has declined.
D) the amount of double-counting in GDP has increased.
E) the average money price of the goods included in GDP has risen.
When profits are the result of pure luck, they can be distinguished from profits
attributable to correct predictions by
A) asking the people who profited.
B) finding out whether the profits were earned through effort.
C) no known empirical criteria.
D) whether or not they were generally anticipated.
You want to purchase two umbrellas. The price is $40 per umbrella, 2 for $60, 3 for
$75. What will be the marginal cost to you of buying a third umbrella?
A) $75
B) $25
C) $20
D) $15
E) $10
The cost-plus-markup theory of price setting
A) explains most prices but not all.
B) explains why firms can’t raise their prices until their costs rise.
C) explains why percentage markups are so similar from firm to firm and industry to
industry.
D) does all of the above.
E) does none of the above.
A successful cartel must divide the market among its members to prevent members’
A) marginal cost from exceeding their individual marginal revenues.
B) output from decreasing.
C) prices from rising above the cartel price.
D) selling costs from rising.
The immediate, direct effect of someone’s cashing a check at a commercial bank is
A) a decrease in the stock of money (M1).
B) an increase in the stock of money (M1).
C) no change in the stock of money.
D) unknown until the check casher spends the currency withdrawn from the bank.
If Congress authorized the President to lower tax rates or to initiate spending projects
when aggregate demand was inadequate, which consequence could be predicted most
confidently?
A) Aggregate spending would be more stable over time.
B) Recessions would be less severe.
C) Recessions would occur less frequently.
D) The political power of the President would increase.
E) We would experience a lower rate of inflation.