Suppose the market-clearing price of wheat is $2.50 per bushel. What would happen if
wheat farmers persuaded the government to set a legally-mandated price support of
$3.75 per bushel?
A) The quantity demanded of wheat would fall.
B) The quantity supplied of wheat would rise.
C) A surplus of wheat would occur.
D) All of the above.
Fill in the blank. A(n) ________ market requires perfect and complete information
among all participants.
A) monopolized
B) oligopolized
C) perfectly competitive
D) effective
A doubling of the current minimum legal wage is likely to confer the most benefit and
impose the least harm on members of which group listed below?
A) Employers who own small businesses
B) Highly skilled workers
C) Shareholders of large corporations
D) Teenagers
E) Unskilled workers
A grocery shopper considers “eliminating” the middleman. What might she do?
A) Raise her own cows, slaughter them, and butcher her own meat.
B) Grow her own wheat, mill it into flour, and bake her own bread.
C) Build her own fishing boat and begin halibut fishing.
D) All of the above.
During crisis periods, such as major snowstorms, the prices of basic goods, such as
bread and milk rise. The price increases are clear evidence of
A) price gouging.
B) government regulation.
C) the market making it possible for the people who place the highest monetary value
on bread and milk get bread and milk.
D) corruption.
Attempts to fine-tune the economy through shifts in fiscal and monetary policy
A) cannot alter the level of unemployment but may change the price level.
B) may not do any good but certainly do no harm.
C) produce greater stability, but only at the cost of an ever-increasing national debt.
D) will increase rather than reduce instability if the policy makers lack adequate
information.
Which of the following is the most important advantage of using money rather than
relying exclusively on barter?
A) The use of money encourages people to diversify and learn to do more things for
themselves.
B) The use of money encourages people who want to exchange to become more closely
acquainted.
C) The use of money lowers the cost of locating people with whom to exchange.
D) The use of money reduces opportunities for fraud and theft.
E) The use of money reduces selfishness because money in itself has no value.
When determining her accounting profit, an entrepreneur would include
A) her foregone wages.
B) her foregone interest.
C) her foregone rent.
D) all of the above.
E) none of the above.
In 2009 Al Gore won the Nobel Peace Prize and was awarded $1.4 million. He donated
it to his Alliance for Climate Protection. From the economic point of view his charitable
project suggests
A) Gore himself no longer faced scarcity because he was in a position to give so much
of his money away.
B) the Alliance at least temporarily overcame scarcity because they enjoyed free
resources.
C) it was chosen over other uses of his money, and therefore even Gore had to
economize.
D) it was a ploy to gain more media attention after his Vice Presidency.
Why, in the U.S., do professional soccer players command a far lower salary than
professional baseball players?
A) Soccer is in much less demand.
B) Soccer costs less to manage and perform compared to baseball.
C) Soccer has yet to mature.
D) The baseball players prefer lobbied to keep soccer salaries low.
Professor I.M. Dismal returns to campus in the fall to find that the bookstore is charging
10% more for the new economics textbooks he ordered this year compared to last year.
On the basis of this information, and using the economic way of thinking, what can
Professor Dismal clearly conclude?
A) The economy has experienced a 10% inflation over the year.
B) The economy has experienced a 10% deflation over the year.
C) The economy has experienced a disinflation over the year.
D) The economy has experienced a steady price level over the year.
E) The bookstore is charging 10% more for the new textbooks he ordered this year
compared to last year.
In order to discover anything about causal relationships in economics we must first
have
A) all the relevant data.
B) quantified data or statistics.
C) scientific evidence.
D) some kind of theory of how things fit together.
E) the courage and civility to eliminate all biases and preconceptions from our thinking.
Suppose Ed Sike, whom you’ve met in chapter 8, loses one of his $10 bills. What
directly happens to GDP?
A) It increases by ten dollars.
B) It decreases by ten dollars.
C) It decreases by more than ten dollars due to an unavoidable multiplier process.
D) It remains unchanged.
A man who thinks he would save money by driving to work rather than taking the bus,
but who nonetheless elects to take the bus because driving in rush-hour traffic frightens
him, is
A) behaving inefficiently.
B) choosing what is for him the most efficient way to commute.
C) rejecting economic efficiency for personal reasons.
D) wasting scarce resources.
Your text suggests the Fed
A) is a slave to Congress.
B) is totally free from political pressure.
C) probably cannot pursue monetary policies that completely contradict the federal
government’s fiscal policies.
D) is a hoax and a shame that ought to be abolished.
During the 1980s both the relative price and the purchases of BMWs increased
dramatically. In the economic way of thinking,
A) the supply curve of BMWs shifted to the right.
B) the demand curve for BMWs shifted to the right.
C) the supply curve of BMWs shifted to the left.
D) the demand curve for BMWs shifted to the left.
Fill in the blank: Wealth, in the economic way of thinking, is ________.
A) whatever people value
B) owned financial assets
C) impossible to study scientifically
D) indefinable
E) any material thing
A fall in the rate of people’s time preference in general tends to
A) increase interest rates.
B) decrease interest rates.
C) have no effect on interest rates.
D) have no effect at all in the market for credit.
Which of the following metaphors best expresses the scientific nature of economic
theory?
A) like a wool sweater, economic theory warms the heart of the economist.
B) like a pair of eyeglasses, economic theory allows one to more clearly see and
discriminate among the countless facts he or she faces.
C) like a gun, economic theory shoots holes through every other rival theory.
D) like a bank, economic theory is concerned with only one thing: the accumulation of
money.
As opposed to GDP, GNP tries to measure
A) the happiness of a nation.
B) the value of all intermediate goods produced in a nation.
C) the economic performance of a nation’s citizens regardless of where they happen to
be producing.
D) the economic performance of a country’s economy regardless of the nationality of
the producers.
Drivers who enter an expressway during the rush hour create negative externalities
whenever they
A) could have taken another route.
B) drive under the speed limit.
C) fail to yield as they merge.
D) have no other passengers in their vehicles.
E) inadvertently slow down all the drivers behind them.
The critical factor in maintaining the value of the dollar is
A) confidence the supply of dollars will be limited.
B) government budget deficits.
C) government budget surpluses.
D) the U.S. balance of international payments.
E) vigorous economic competition.
Agreements among competing sellers to maintain a certain minimum price or to divide
up the market in a particular way
A) are evidence of a cooperative rather than competitive spirit in business.
B) are illegal under federal law where it is applicable.
C) benefit business firms and their customers, but at the expense of employees.
D) increase the number of job opportunities in the economy.
Marginal costs are the costs relevant to a decision because they
A) are the costs that will be affected by the decision.
B) the cost of producing one more unit of output.
C) total cost divided by units of output.
D) total cost minus sunk costs.
“We offer the best deal in town. If somebody charges a lower price, bring in their ad and
we’ll beat it!” From the economic point of view, the firm promising to match its
competitor’s low prices is attempting to
A) lie.
B) cheat.
C) learn more about the market.
D) do nothing more than bait and switch their customers.
In the economic way of thinking, “outsourcing” is another application of
A) the entrepreneurial attempt to buy low, and sell high.
B) voluntary exchange.
C) the coordination of plans across different regions.
D) the discovery of people’s comparative advantage.
E) all of the above.
A surplus is said to exist when, at prevailing prices,
A) demand is greater than supply.
B) quantity supplied is greater than quantity demanded.
C) scarcity is eliminated.
D) supply and demand are in harmonic equilibrium.
The economic way of thinking suggests competition and cooperation are
A) incompatible.
B) mutually destructive.
C) present in any society.
D) only present in a capitalist market economy.
An example of a horizontal merger would be a merger between firms
A) approximately the same size.
B) growing at approximately the same rate.
C) located in the same geographic area.
D) selling approximately the same products.
E) supplying one another with inputs.
Which one of the following is not an accurate description of the activities in which
labor unions engage?
A) Control competition among workers for jobs.
B) Encourage consumers to purchase union-made products exclusively.
C) Enforce seniority criteria when employers are contemplating layoffs.
D) Help workers compete against corporate employers.
E) Protect workers against arbitrary treatment by management.
Which of the following is a significant barrier to reducing the damage people do to one
another’s environment?
A) Low negotiation costs among people
B) Property rights clearly assigned to specific persons
C) Scarcity of public or common property relative to private property
D) All of them.
E) None of them.
Why would an economist claim that “oil comes out of our minds”?
A) She wants to sound silly.
B) She wants to tell lies.
C) She wants to remind us that the recognition of useful resources is a product of our
mental abilities.
D) She wants to sound like a really big and important theorist and could not care less
about the facts of the real world.
A bank seeks a 4% real return on its loans and predicts a 4% annual rate of inflation. It
should therefore charge a nominal interest rate of
A) 0%.
B) 1%.
C) 4%.
D) 8%.
E) 12%.
Which statement below is true for a price searcher?
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.
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) Ben can produce spiritual goods more efficiently than Cal.
B) Cal can produce material goods more efficiently than Ben.
C) Ben can produce material goods more efficiently than Cal.
D) Ben can produce both material and spiritual goods more efficiently than Cal.