microecon
. Economics deals primarily with the concept of a. scarcity. b. poverty. c. change. d. power.
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1. Which of the following would be an example of an oligopolistic market? a. the air travel industry b. the domestic wheat market c. the software industry d. electrical power for residential consumers
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11. The number of buyers in a market affects a. the market demand for a good. b. individual demand curves for a good.c. both individual demand curves and the market demand for a good.d. neither individual nor market demand.
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12. Refer to Figure 2-2. Firms are sellers in a. the goods and services market. b. the factors of production market.c. both markets. d. neither market.
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13. Refer to Figure 2-3. The economy can produce at which point or points? a. B, D, E b. A, B, D, E c. D, C d. D
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13. Refer to Figure 3-3. Fred should produce a. only tap shoes. b. only ballet slippers. c. both ballet slippers and tap shoes.d. neither ballet slippers nor tap shoes.
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13. The market demand is a. the sum of all individual demands.b. the demand for every product in an industry.c. the average quantity demanded at each price.d. difficult to determine and is generally an estimation for most markets.
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16. If a study by the AMA found that brown sugar caused weight loss while white sugar caused weight gain we would see a. an increase in demand for brown sugar and a decrease in demand for white sugar. b. no change in either demand because weight loss is not a nonprice determinant of demand.c. an increase in demand for brown sugar, but no change in the demand for white sugar. d. a decrease in the demand for white sugar, but no change in the demand for brown sugar.
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16. Using all available resources, if a farmer can produce either 85 cantaloupes or 70 watermelons, then the opportunity cost of 1 cantaloupe to the farmer would be a. .82 watermelons.b. 1.21 watermelons. c. 15 watermelons. d. There is not enough information given to answer this question.
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18. Refer to Table 3-3. The opportunity cost of 1 birdhouse for Montana is a. 1/3 basket. b. 1 basket. c. 4/3 baskets. d. 3 baskets.
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19. Which of the following is an example of a positive statement? a. Prices rise when the government prints too much money.b. If welfare payments increase, the world will be a better place.c. Inflation is more harmful to the economy than unemployment.d. The benefits to the economy of improved equity are greater than the costs of reduced
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21. The producer that can produce a product with lower opportunity cost a. has a comparative advantage in the production of that good.b. has an absolute advantage in the production of that good.c. should import that product. d. Both b and c are correct.
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21. When economists are speaking as policy advisors, they are more likely to use a. normative statements. b. positive statements. c. objective statements. d. All of the above are correct.
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23. All else constant, an increase in the number of cattle delivered to an auction to be marketed would a. represent an increase in the supply of cattle at the auction.b. represent an increase in demand for cattle at the auction.c. represent a decrease in the number of sellers at the auction.d. have no effect on the demand or supply at the auction.
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24. A duty of the Department of Labor is to a. analyze data on workers. b. design tax policy. c. enforce the nation's antitrust laws.d. advise the President.
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24. Which of the following would NOT occur if each person specializes in the good for which they have a comparative advantage? a. Each person's production possibilities frontier will shift outward.b. Total production in the economy will increase.c. Everyone can be better off with specialization and trade.d. The size of the economic pie will increase.
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25. Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. Given this, we know that a. Mike has an absolute advantage in chairs.b. Mike has a comparative advantage in tables.c. Sandy has an absolute advantage in chairs.d. Sandy has a comparative advantage in chairs.
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26. John Maynard Keynes referred to economics as an easy subject, a. at which very few excel. b. but not as easy as philosophy or the pure sciences.c. which very few can enjoy. d. which deals primarily with common sense
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27. If a surplus exists in a market we know that the actual price is a. above equilibrium price and quantity supplied is greater than quantity demanded. b. above equilibrium price and quantity demanded is greater than quantity supplied. c. below equilibrium price and quantity demanded is greater than quantity supplied. d. below equilibrium price and quantity supplied is greater than quantity demanded. Figure
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28. The 3 propositions about which most economists agree most often are (in order from first to third) a. rent control, tariffs and quotas, and floating exchange rates.b. tariffs and quotas, floating exchange rates, and fiscal policy.c. rent control, fiscal policy, and tariffs and quotas.d. fiscal policy, rent control, and floating exchange rates.
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29. Refer to Figure 4-10. Which of the four graphs represents the market for pizza delivery in a college town in September? a. A b. B c. C d. D ____
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3. Refer to Table 3-1. The Farmer has an absolute advantage in a. potatoes, and the Rancher has a comparative advantage in meat.b. meat, and the Rancher has a comparative advantage in potatoes.c. neither good, and the Rancher has a comparative advantage in potatoes.d. neither good, and the Rancher has a comparative advantage in meat.
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3. You lose your job and as a result you buy fewer mystery books. This shows that you consider mystery books to be a/an a. normal good. b. inferior good. c. luxury good. d. complementary good.
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30. Refer to Table 3-4. If the United States and Japan trade based on the principle of comparative advantage, the United States will export what product to Japan? a. cars b. both airplanes and cars c. airplanes d. The United States should buy both products from Japan.
A
31. Refer to Table 3-4. If the United States and Japan trade based on the principle of comparative advantage, the United States will export a. cars and Japan will export airplanes.b. airplanes and Japan will export cars.c. cars and Japan will export cars.d. airplanes and Japan will export airplanes.
A
34. David Ricardo, a millionaire stockbroker and economist a. opposed the Corn Laws as a member of Parliament.b. disputed Adam Smith's theory of specialization and trade in the early 1800s. c. developed the principle of comparative advantage in 1817, which has been largely disproved by modern economists.d. was an early supporter of trade restrictions.
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35. The slope of a fairly flat upward-sloping line will be a a. small positive number. b. large positive number. c. small negative number. d. large negative number.
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36. If there is a shortage of farm laborers, we would expect a. the wages of farm laborers to increase.b. the wages of farm laborers to decrease.c. the prices of farm commodities to decrease.d. a decrease in the demand for substitutes for farm labor.
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38. Refer to Table 3-5. If England and Spain trade based on the principle of comparative advantage, England will export a. bread and Spain will export cheese.b. bread and Spain will export bread.c. cheese and Spain will export cheese.d. cheese and Spain will export bread.____
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39. When a variable on an axis of a graph changes, the curve a. will not shift. b. will shift. c. may or may not change. It depends on how the variables are related.d. will shift if the variable is on the vertical axis, but not on the horizontal axis. ____
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39. Which of the following would be most likely to increase the price of a new house? a. Higher wages for carpenters, higher wood prices, increases in consumer incomes, higher apartment rents, increases in population and expectations of higher house prices in the future. b. Lower wages for carpenters, lower wood prices, increases in consumer incomes, higher apartment rents, increases in population and expectations of higher house prices in the future. c. Lower wages for carpenters, higher wood prices, decreases in consumer incomes, higher apartment rents, decreases in population and expectations of higher house prices in the future. d. Lower wages for carpenters, lower wood prices, decreases in consumer incomes, lower apartment rents, decreases in population and expectations of lower house prices in the future.
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4. When testing theories, economists a. must make do with whatever data the world gives them.b. can manipulate economic conditions easier than other scientific fields.c. can enlist the government's help to manipulate economic conditions.d. can achieve statistically valid results with much smaller sample sizes.
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5. For economists, substitutes for laboratory experiments are often a. natural experiments offered by history.b. computer-generated experiments.c. studies conducted by other disciplines such as sociologists.d. well-constructed simulations.
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5. Refer to Figure 3-2. Ben has a comparative advantage in a. cones and Jerry has a comparative advantage in ice cream.b. ice cream and Jerry has a comparative advantage in cones.c. neither good and Jerry has a comparative advantage in both goods.d. both goods and Jerry has a comparative advantage in neither good.
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6. Economists in general a. do not try to explain people's tastes, but do try to explain what happens when tastes change. b. must be able to explain people's tastes to explain what happens when tastes change. c. do not believe that people's tastes determine demand and therefore ignore the subject of tastes. d. believe that tastes and demand move in opposite directions.
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7. Suppose you like banana cream pie made with vanilla pudding. Assuming all other things are constant, you notice that the price of bananas is higher. How would your demand for vanilla pudding be affected by this? a. It would decrease. b. It would increase. c. It would be unaffected. d. There is insufficient information given to answer the question.
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8. A macroeconomist would study each of the following EXCEPT the a. impact of minimum-wage laws on employment in the fast food industry.b. effect of changes in saving rates on GDP.c. impact of monetary policy on the rate of inflation.d. effect of tax policy on the rate of economic growth.
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8. The law of demand says that when price a. rises, quantity demanded falls. b. rises, quantity demanded rises also.c. falls, quantity supplied rises. d. falls, quantity supplied falls also.
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Although the Phillips curve is controversial, most economists believe that a. society faces a tradeoff between unemployment and inflation in the short run only. b. society faces a tradeoff between unemployment and inflation in the long run only. c. no tradeoff exists between unemployment and inflation.d. society faces a continuous tradeoff between unemployment and inflation. ____
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Both households and societies face many decisions because a. resources are scarce. b. populations may increase or decrease over time.c. wages for households and therefore society fluctuate with business cycles. d. people, by nature, tend to disagree.
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Economics is the study of a. how society manages its scarce resources.b. the government's role in society.c. how a market system functions.d. how to increase production.
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For most students, the largest single cost of a college education is a. the wages given up to attend school.b. tuition, fees, and books. c. room and board. d. transportation, parking, and entertainment.
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Henry decides to spend two hours playing golf rather than working at his job which pays $8 per hour. Henry's tradeoff is a. the $16 he could have earned working for two hours.b. nothing, because he enjoys playing golf more than working.c. the increase in skill he obtains from playing golf for those two hours.d. nothing, because he spent $16 for green fees to play golf.
A
If an externality is present in a market, economic efficiency may be enhanced by a. government intervention. b. increased competition. c. better informed market participants.d. more defined property rights.
A
In 2000 the average American had an income of about a. $34,000. b. $29,000. c. $20,000. d. $15,000.
A
Maurice receives $100 as a birthday gift. In deciding how to spend the money, he narrows his options down to four choices, Option A, Option B, Option C and Option D. Each option costs $100. Finally he decides on Option B. The opportunity cost of Option B is a. the value to him of the Option he would have chosen if Option B were not available. b. the value to him of Options A, C and D combined.c. $300. d. $100.
A
The person who referred to inflation as public enemy number one was a. Gerald Ford. b. Alan Greenspan. c. Richard Nixon. d. John F. Kennedy.
A
When policymakers make policies that change the costs and benefits that people face, they can a. alter behaviors. b. make people ignore incentives. c. create inflation. d. reduce government revenue.
A
Your professor loves her work, teaching economics. She has been offered other positions in the corporate world making 25 percent more, but has decided to stay in teaching. Her decision would not change unless the marginal a. cost of teaching increased. b. benefit of teaching increased. c. cost of teaching decreased. d. cost of a corporate job increased.
A
n the short run, the Phillips curve illustrates a. the tradeoff between inflation and unemployment.b. the tradeoff between equity and efficiency.c. labor productivity in an economy.d. the level of government intervention in a market economy.
A
1. By scientific method we mean a. the use of modern electronic testing equipment to understand the world.b. the dispassionate development and testing of theories about how the world works. c. the use of controlled experiments in understanding the way the world works. d. finding evidence to support preconceived theories about how the world works.
B
10. According to a simple circular-flow diagram, households and firms interact in a. only one type of market. b. two types of markets. c. three types of markets. d. Households and firms do not interact.
B
11. Refer to Table 3-2. Helen has a comparative advantage in a. dresses and Carolyn has a comparative advantage in quilts.b. quilts and Carolyn has a comparative advantage in dresses.c. neither good and Carolyn has a comparative advantage in both goods. d. both goods and Carolyn has a comparative advantage in neither good.
B
12. If the number of buyers in the market decreases, the a. demand in the market will increase.b. demand in the market will decrease.c. supply in the market will increase.d. supply in the market will decrease.____
B
15. Suppose that Carolyn receives a pay increase. We would expect a. Carolyn's demand for normal goods to remain unchanged.b. Carolyn's demand for inferior goods to decrease.c. Carolyn's demand for luxury goods to decrease.d. Carolyn's demand for normal goods to decrease.
B
16. Ralph Nader's book Unsafe at Any Speed caused Congress to require a. safety glass in all new cars. b. seat belts in all new cars. c. air bags in all new cars. d. stricter drunk driving laws in all states.
B
17. The downward-sloping demand curve reflects which of the following? a. Price is positively related to quantity supplied.b. There is an inverse relationship between price and quantity demanded.c. There is a direct relationship between price and quantity demanded.d. When the price falls, buyers willingly buy less.
B
19. If cigarettes and marijuana had been found to be substitutes, a tax placed on cigarettes would a. decrease the demand for marijuana.b. increase the demand for marijuana.c. decrease the quantity demanded of marijuana.d. increase the quantity demanded of marijuana.
B
2. Refer to Table 3-1. The Farmer has an absolute advantage in a. meat, and the Rancher has an absolute advantage in potatoes.b. potatoes, and the Rancher has an absolute advantage in meat.c. meat, and the Rancher has an absolute advantage in meat.d. neither good, and the Rancher has an absolute advantage in both goods.
B
20. For teens, a 10 percent increase in the price of cigarettes leads to a a. 6 percent drop in teenage smoking.b. 12 percent drop in teenage smoking.c. 18 percent drop in teenage smoking.d. 24 percent drop in teenage smoking.
B
20. The country that has a comparative advantage in a product a. should import that product. b. should export that product. c. would be better off keeping the product for domestic use since it is relatively inexpensive to produce. d. None of the above are correct. ____
B
21. If the price of a good is low a. firms would increase profit by increasing output.b. quantity supplied could be zero.c. the supply curve for the good will shift to the left.d. firms should raise the price of the product.____
B
22. Economists in which department help enforce antitrust laws? a. Department of Laborb. Department of Justice c. Department of Treasury d. Department of Commerce
B
23. Tax policy is designed by the a. Council of Economic Advisers.b. Department of Treasury. c. Department of Labor. d. Department of Justice.
B
25. In the early 19th century, the Russian government sent doctors to southern Russian villages to provide assistance during a cholera epidemic. The villagers noticed that wherever doctors appeared, people died. Therefore, many doctors were chased away from villages, and some were even killed. This reaction to the correlation between doctors and deaths is most likely a problem of a. omitted variables. b. reverse causality. c. government propaganda. d. medical incompetence.
B
27. Refer to Figure 3-4. If Barney and Betty both specialize in the good in which they have a comparative advantage, total production of bread will be a. 7 and total production of pies will be 15.b. 20 and total production of pies will be 14.c. 27 and total production of pies will be 29.d. 40 and total production of pies will be 22.
B
3. Because it is difficult for economists to use experiments to generate data, they generally must a. do without data. b. use whatever data the world gives them.c. select a committee of economists to make up data for all economists to use. d. use hypothetical, computer-generated data.
B
31. Which of the following will definitely cause equilibrium quantity to fall? a. demand increases and supply decreasesb. demand and supply both decreasec. demand decreases and supply increasesd. demand and supply both increase
B
33. A tax placed on imported goods is called a. a quota. b. a tariff. c. an import. d. an export.
B
33. Refer to Figure 2-9. The curves shown are a. supply curves. b. demand curves. c. preference curves. d. income-consumption curves.
B
33. Suppose that demand increases AND supply decreases. What would happen in the market for the good? a. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. b. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous. c. Both equilibrium price and quantity would increase.d. Both equilibrium price and quantity would decrease.____
B
37. Which of the following would unambiguously cause a decrease in the equilibrium price of cotton shirts? a. an increase in the price of wool shirts and a decrease in the price of raw cotton b. a decrease in the price of wool shirts and a decrease in the price of raw cotton c. an increase in the price of wool shirts and an increase in the price of raw cotton d. a decrease in the price of wool shirts and an increase in the price of raw cotton ____
B
39. Suppose that a worker in Radioland can produce either 4 radios or 1 television per year, and a worker in Teeveeland can produce either 2 radios or 4 televisions per year. Each nation has 100 workers. Also suppose that each country completely specializes in producing the good for which it has a comparative advantage. If Radioland trades 100 radios to Teeveeland in exchange for 100 televisions each year, then each country's maximum consumption of new radios and televisions per year will be a. 300 televisions and 100 radios in Radioland and 300 radios and 100 televisions in Teeveeland. b. 300 televisions and 100 radios in Teeveeland and 300 radios and 100 televisions in Radioland. c. 100 televisions and 200 radios in Radioland and 100 radios and 200 televisions in Teeveeland. d. 400 televisions and 100 radios in Teeveeland and 400 radios and 100 televisions in Radioland. ____
B
4. An example of an inferior good might be a. neckties. b. Ramen noodles. c. cloth napkins. d. cut flowers.
B
5. Two goods are substitutes if a decrease in the price of one good a. increases the demand for the other good.b. reduces the demand for the other good.c. reduces the quantity demanded of the other good.d. increases the quantity demanded of the other good.
B
6. Refer to Figure 3-2. Ben has an absolute advantage in a. ice cream and Jerry has an absolute advantage in cones.b. cones and Jerry has an absolute advantage in ice cream.c. neither good and Jerry has an absolute advantage in both goods.d. both goods and Jerry has an absolute advantage in neither good.
B
6. When studying the effects of public policy changes, economists a. often falsify results if the desired effect is not reached.b. may make different assumptions for the long run and the short run.c. attempt to consider only the direct effects and not indirect effects.d. can immediately change policies if they are ineffective.
B
7. Refer to Figure 3-2. Ben has a comparative advantage in a. ice cream and Jerry has an absolute advantage in both goods.b. cones and Jerry has an absolute advantage in ice cream.c. ice cream and Jerry has an absolute advantage in neither good.d. ice cream and Jerry has an absolute advantage in cones.
B
8. Refer to Figure 3-2. Ben and Jerry were currently both producing at point A on their production possibilities frontier and then Ben decided he would be willing to trade 4 pounds of cones to get 2 pounds of ice cream from Jerry. If both decided to specialize in what they had a comparative advantage in and trade, the gains from trade would be a. 1 pound of cones for Ben and 1 pound of ice cream for Jerry.b. 1 pound of ice cream for Ben and 1 pound of cones for Jerry.c. 2 pounds of ice cream for Ben and 2 pounds of cones for Jerry.d. 2 pounds of ice cream for Ben and 1 pound of cones for Jerry.
B
Between 1929 and 1933, the U.S. economy went from a situation of full employment to one of 25 percent unemployment. What do you assume happened to prices? a. Prices were unaffected. b. Prices fell as the economy experienced deflation.c. Prices rose as the economy experienced inflation.d. It is impossible to guess what happened to prices from the information given.
B
During the 1990s, the United Kingdom experienced low levels of inflation while Turkey experienced high levels of inflation. The difference can best be explained by the fact that a. the United Kingdom is more industrialized than Turkey.b. the United Kingdom printed money at a slower rate than Turkey.c. workers in the United Kingdom are more productive than workers in Turkey. d. there were more cases of market failure in Turkey than in the United Kingdom.
B
Refer to Table 4-2. The equilibrium price and quantity would be a. $4.40. b. $6.30. c. $8.30. d. $10.35.
B
The opportunity cost of an item is a. the number of hours needed to earn money to buy it.b. what you give up to get that item.c. usually less than the dollar value of the item.d. the dollar value of the item.
B
Which of the following is most likely to generate an externality? a. Teachers at a local high school have pizza delivered every Friday for lunch. b. A young man from a small town attends medical school to become a doctor. c. A newlywed couple buys a TV for their family room.d. John buys a tractor to mow his newly purchased 5-acre lot.
B
Which of the following is the most correct statement about the relationship between inflation and unemployment? a. In the short run, reducing inflation is associated with falling unemployment. b. In the short run, reducing inflation is associated with rising unemployment. c. In the long run, reducing inflation is associated with falling unemployment. d. In the long run, reducing inflation is associated with rising unemployment.
B
0. Refer to Table 3-2. Helen and Carolyn both could benefit by Helen specializing in a. dresses and Carolyn specializing in quilts.b. neither good and Carolyn specializing in both goods.c. quilts and Carolyn specializing in dresses.d. both goods and Carolyn specializing in neither good.
C
1. People who provide you with goods and services a. are acting out of generosity. b. are acting because they like you.c. do so because they get something in return.d. are required to do so by government.
C
10. When referring to the variables price and quantity demanded, price a. and quantity demanded are independent of each other.b. is the dependent variable and quantity demanded is the independent variable. c. is the independent variable and quantity demanded is the dependent variable. d. and quantity demanded are both dependent variables, since both depend on the actions of buyers and sellers.
C
14. Refer to Figure 3-3. Ginger has an absolute advantage in a. tap shoes and Fred has a comparative advantage in ballet slippers.b. both goods and Fred has a comparative advantage in neither good.c. ballet slippers and Fred has a comparative advantage in tap shoes.d. neither good and Fred has a comparative advantage in both goods.
C
15. Refer to Figure 2-7. Which of the following would most likely have caused the production possibilities frontier to shift outward from A to B? a. an increase in resources necessary to produce capital goodsb. an improvement in the technology of producing consumer goodsc. an increase in the overall level of technology in the economyd. an increase in unemployment____
C
15. Refer to Figure 3-3. Ginger should specialize in a. tap shoes and Fred should specialize in ballet slippers.b. both goods and Fred should specialize in neither good.c. ballet slippers and Fred should specialize in tap shoes.d. neither good and Fred should specialize in both goods.
C
2. A good is considered either a normal good or an inferior good based on a. the quality of the good. b. the price of the good. c. personal preference toward the good.d. the amount of a person's income.
C
2. The use of theory and observation is more difficult in economics than in sciences such as physics due to the difficulty in a. evaluating an economic experiment.b. devising an economic experiment.c. actually performing an experiment in an economic system.d. All of the above are correct.
C
22. The term which means whatever must be given up to obtain an item is a. efficiency. b. externality. c. opportunity cost. d. market failure.
C
23. Absolute advantage is found by a. comparing opportunity costs. b. calculating the dollar cost of production.c. comparing the productivity of one nation to that of another.d. first determining which country has a comparative advantage.
C
25. Refer to Figure 4-8. In this market, equilibrium price and quantity would be a. $14.70. b. $12.40. c. $10.50. d. $8.50.
C
30. A coordinate system is used to a. show the flow of income and products in an economic system.b. organize labor and other resources in the production process.c. allow economists to show two variables on a single graph.d. teach economists how to draw graphs consistently.Figure
C
31. Refer to Figure 2-9. The graph shown is known as a a. time series. b. bar graph. c. scatterplot. d. pie chart. ____
C
32. Refer to Figure 2-9. What would you say about the relationship between coffee and hours without sleep? a. The less coffee a person drinks per day, the more time he can go without sleep. b. There is no relationship between how much coffee per day a person drinks and how long they can go without sleep. c. The more coffee a person drinks per day, the longer he can go without sleep. d. The relationship between cups of coffee per day and time without sleep is too unpredictable to consider. ____
C
32. Refer to Table 3-4. If Japan and the United States trade based on the principle of comparative advantage, a. all individuals in both countries will gain.b. car producers in Japan and airplane producers in the United States will gain. c. some individuals within each society will be made worse off.d. one country will be better off and the other country will be worse off.
C
32. Suppose that demand decreases AND supply decreases. What would you expect to occur in the market for the good? a. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous. b. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. c. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. d. Both equilibrium price and equilibrium quantity would increase.
C
34. Refer to Figure 2-10. The movement from point A to point B is a a. shift of the curve. b. change in preferences. c. movement along the curve. d. All of the above are correct. ____
C
36. Refer to Table 3-5. The opportunity cost of 1 unit of cheese in England is a. 4 breads. b. 2 breads. c. 1/2 bread. d. 1/4 bread.
C
37. Refer to Table 3-5. If England and Spain trade based on the principle of comparative advantage, Spain will export which product to England? a. bread b. both bread and cheese c. cheese d. Spain cannot benefit from trade with Spain.
C
4. To find the market demand for a product, individual demand curves are summed a. vertically. b. diagonally. c. horizontally. d. and then averaged.
C
4. Which of the following would result in an increase in equilibrium price and an ambiguous change in equilibrium quantity? a. an increase in supply and demandb. an increase in supply and a decrease in demandc. a decrease in supply and an increase in demandd. a decrease in supply and demand
C
40. During the last few decades in the United States, health officials have argued that eating too much beef might be harmful to human health. As a result, there has been a significant decrease in the amount of beef produced. Which of the following best explains the decrease in production? a. Beef producers, concerned about the health of their customers, decided to produce relatively less beef. b. Government officials, concerned about consumer health, ordered beef producers to produce relatively less beef. c. Individual consumers, concerned about their own health, decreased their demand for beef, which lowered the relative price of beef, making it less attractive to produce. d. Anti-beef protesters have made it difficult for both buyers and sellers of beef to meet in the marketplace.
C
40. The single most important purpose of your textbook is to teach you a. about the effects of the government's economic policies.b. the language of economics. c. the economist's way of thinking.d. how to make money.
C
7. The foundation stones from which economic models are built are a. economic policies. b. the legal system. c. assumptions. d. statistical forecasts.
C
9. The two loops in the circular-flow diagram represent the flow of a. goods and the flow of services. b. dollars and the flow of financial assets.c. inputs and outputs and the flow of dollars.d. capital goods and the flow of consumer goods.
C
9. Which of the following demonstrates the law of demand? a. Jon buys more pretzels at $1.50 each since he got a $1 raise at work.b. Melissa buys fewer muffins at $0.75 each than at $1 each.c. Dave buys more donuts at $0.25 each than at $0.50 each.d. Kendra buys fewer Snickers at $0.60 each since the price of Milky Ways fell to $0.50 each.
C
A furniture maker currently produces 100 tables per week and sells them for a profit. She is considering expanding her operation in order to make more tables. Should she expand? a. Yes, because making tables is profitable.b. No, because she may not be able to sell the additional tables.c. It depends on the marginal cost of producing more tables and the marginal revenue she will earn from selling more tables.d. It depends on the average cost of producing more tables and the average revenue she will earn from selling more tables.
C
Benefits from trade would NOT include a. the ability to specialize. b. a greater variety of goods and services becoming available.c. less competition. d. lower prices.
C
Guns and butter are used to represent the classic societal tradeoff between spending on a. durable and nondurable goods. b. imports and exports. c. national defense and consumer goods.d. law enforcement and agriculture.
C
In economics, the cost of something is a. the dollar amount of obtaining it.b. always measured in units of time given up to get it.c. what you give up to get it. d. usually higher than people think it will be.
C
In the United States, incomes have historically grown a. about 10 percent per year. b. about 5 percent per year. c. about 2 percent per year. d. about 0.5 percent per year.
C
Refer to Figure 2-3. The economy CANNOT produce at which point or points? a. A b. C c. A, C d. A, C, D,
C
Refer to Figure 3-3. Ginger has a comparative advantage in a. tap shoes and Fred has a comparative advantage in ballet slippers.b. both goods and Fred has a comparative advantage in neither good.c. ballet slippers and Fred has a comparative advantage in tap shoes.d. neither good and Fred has a comparative advantage in both goods.
C
Refer to Table 3-2. The opportunity cost of 1 dress for Carolyn is a. 5 quilts. b. 1 quilt. c. 1/5 quilt. d. 4 quilts.
C
Refer to Table 3-3. The opportunity cost of 1 basket for Montana is a. 1/3 birdhouse. b. 1 birdhouse. c. 3 birdhouses. d. 4 birdhouses.
C
The invisible hand works to promote general well-being in the economy primarily through a. government intervention. b. the political process. c. self interest. d. altruism.
C
When the government attempts to cut the economic pie into more equal slices, a. it is easier to cut the pie, and therefore the economy can produce a larger pie. b. the government can more easily allocate the pie to those most in need.c. the pie gets smaller, and there will be less pie for everyone.d. the economy will spend too much time cutting and loses the ability to produce enough pie for everyone.
C
Which of the following would NOT be true in a world without scarcity? a. There would be no need for the science of economics.b. Everyone would have all the goods and services they wanted.c. There would have to be an infinite supply of every resource.d. There would be opportunity costs.
C
n the former Soviet Union, producers were paid for meeting output targets, not for selling products. Under those circumstances, what were the economic incentives for producers? a. to produce good quality products so that society benefits from the resources used b. to conserve on costs, so as to maintain efficiency in the economyc. to produce enough to meet the output target, without regard for quality or costd. to produce those products that society desires most
C
11. In the simple circular-flow diagram, markets consist of a. the market for goods and services, the financial market, and the market for the factors of production. b. factors of production and the financial market.c. the market for goods and services and the financial market.d. the market for goods and services and the market for factors of production.
D
16. The field of economics is traditionally divided into two broad subfields, a. national economics and international economics.b. consumer economics and producer economics.c. private sector economics and public sector economics.d. microeconomics and macroeconomics.____
D
17. A microeconomist might study each of the following EXCEPT a. the effects of rent control on housing in New York City.b. how a college student makes financial decisions.c. how tariffs on shoes affects the shoe industry.d. the effect on the economy when unemployment rates change.
D
18. Refer to Figure 4-2. The movement from D to D1 could be caused by a. an increase in price. b. a decrease in the price of a complement.c. an increase in technology. d. a decrease in the price of a substitute.____
D
19. Comparative advantage is based on a. capital costs. b. labor costs. c. dollar price. d. opportunity costs.
D
20. Economists from the Treasury Department provide a. the annual Economic Report of the President.b. Congress with the annual budget.c. enforcement of the U. S. Antitrust laws.d. advice on tax policy to the President.
D
22. An increase in the price of oranges would lead to a. an increased supply of oranges.b. a reduction in the prices of inputs used in orange production.c. an increased demand for oranges.d. a movement up the supply curve for oranges.
D
24. At the equilibrium price, a. buyers have an incentive to buy more.b. it is possible for there to be a shortage.c. firms have an incentive to increase production.d. everyone in the market has been satisfied.
D
26. Refer to Figure 3-4. The opportunity cost of 1 pie for Betty is a. 1/4 loaf of bread.b. 3/4 loaf of bread.c. 1 loaf of bread. d. 4/3 loaves of bread.
D
27. George Bernard Shaw, among others, has criticized economists because a. they have too much influence with government decisions.b. many ideas are too theoretical and therefore do not work in "real life".c. they tend to speak a different language, causing most people to not understand them. d. they seem to give conflicting advice to policymakers
D
28. Refer to Figure 4-10. Which of the four graphs represents the market for peanut butter after a major hurricane hits the peanut-growing south? a. A b. B c. C d. D ____
D
28. Refer to Table 3-4. The opportunity cost of 1 car for the United States is a. 4 airplanes. b. 3 airplanes. c. 1/3 airplane. d. 1/4 airplane. ____
D
29. Refer to Table 3-4. Japan has an absolute advantage in a. both goods and the United States has a comparative advantage in cars.b. both goods and the United States has a comparative advantage in neither good. c. cars and the United States has a comparative advantage in airplanes.d. airplanes and the United States has a comparative advantage in cars.
D
29. Tariffs and quotas are a. policies that restrict trade. b. are implemented to increase trade efficiency.c. opposed by almost all economists.d. Both a and c are correct. e. Both a and b are correct. ____
D
30. An early frost in the vineyards of Napa Valley would cause a. an increase in the demand for wine, increasing price.b. an increase in the supply of wine, decreasing price.c. a decrease in the demand for wine, decreasing price.d. a decrease in the supply of wine, increasing price.____
D
35. If Karl Malone (1997 NBA MVP) is a better basketball player and truck driver than Gregory Mankiw (the author of your economics text), which of the following is true? a. Karl Malone will have a lower opportunity cost of playing basketball and truck driving than will Gregory Mankiw. b. Karl Malone would be better off playing basketball and driving his own truck. c. Karl Malone will probably have a comparative advantage in both goods.d. Karl Malone and Gregory Mankiw may benefit from trade.
D
35. When supply and demand both increase, equilibrium a. price will increase. b. price will decrease. c. quantity may increase, decrease, or remain unchanged.d. price may increase, decrease, or remain unchanged.
D
36. Which of the following statements about slope is NOT correct? a. Slope explains how much one variable responds to changes in another variable. b. Slope can be computed by delta x/delta y.c. Slope is positive if the 2 variables are moving in the same direction.d. Slope does not change if the line is linear.
D
37. Which of the following is NOT a problem associated with graphing in economics? a. omitted variablesb. holding everything else constantc. reverse causality d. the ability to show a relationship between 2 variables____
D
38. Music compact discs are normal goods. What will happen to the equilibrium price and quantity of music compact discs if musicians accept lower royalties, compact disc players become cheaper, more firms start producing music compact discs and music lovers experience an increase in income? a. Price will fall and the effect on quantity is ambiguous.b. Price will rise and the effect on quantity is ambiguous.c. Quantity will fall and the effect on price is ambiguous.d. Quantity will rise and the effect on price is ambiguous.____
D
38. When a relevant variable that is not named on either axis changes, a. there will be a movement along the curve.b. the curve may or may not change. It depends on how the variables are related. c. the curve will be unaffected since only the variables on the axis affect the curve. d. the curve will shift. ____
D
4. Refer to Figure 3-2. For Ben the opportunity cost of 1 pound of cones is a. 2 pounds of ice cream. b. 1/2 pound of ice cream. c. 4 pounds of ice cream. d. 1/4 pound of ice cream.
D
40. Suppose that a worker in Boatland can produce either 5 units of wheat or 25 units of fish per year, and a worker in Farmland can produce either 25 units of wheat or 5 units of fish per year. There are 10 workers in each country. Political pressure from the fish lobby in Farmland and the wheat lobby in Boatland has prevented trade between the two countries on the grounds that cheap imports would kill the fish industry in Farmland and the wheat industry in Boatland. As a result, Boatland produces and consumes 25 units of wheat and 125 units of fish per year while Farmland produces and consumes 125 units of wheat and 25 units of fish per year. If the political pressure were overcome and trade were to occur, each country would completely specialize in the product for which it has a comparative advantage. If trade were to occur, by how much would the combined output of the two countries increase? a. 25 wheat and 25 fish. b. 50 wheat and 50 fish. c. 75 wheat and 75 fish. d. 100 wheat and 100 fish.
D
8. Factors of production are a. the mathematical calculations firms make to determine production.b. weather and social and political conditions that affect production.c. the physical relationships between economic inputs and outputs.d. inputs into the production process.
D
A marginal change is illustrated by which of the following? a. Nancy retires and takes a part-time job. She was working 40 hours per week and now works 10 hours per week. b. State University has announced that due to state budget deficits, tuition must rise by 25% next year. c. Ryan moved to a new apartment and now pays 40% more rent than before. d. Arizona, which usually receives 10 inches of rain per year, received 11 inches last year.
D
Adam Smith argued that in a market system, when people act in their own self-interest, they typically a. help only themselves. b. harm others. c. help others, but not as much as they would have if they were not self-interested. d. help others even more than when they seek to help others.
D
Almost all variation in living standards is attributable to differences in countries' a. population growth rates. b. endowments of natural resources.c. national government budgets. d. productivity.
D
Economists study all of the following EXCEPT a. how people make decisions. b. how people interact with one another.c. the forces and trends that affect the economy as a whole.d. how societies change over time.
D
Economists use the word equity to describe a situation in which a. each member of society has the same income. b. society is getting the most it can from its scarce resources.c. those in society who have the least will receive the most.d. the benefits of society's resources are distributed fairly among society's members.
D
If a copper refinery does NOT bear the entire cost of the smoke it emits, it will a. not emit any smoke so as to avoid the entire cost of the smoke.b. emit lower levels of smoke. c. emit an acceptable level of smoke.d. emit too much smoke.
D
If a sawmill creates too much air pollution, a. interference by the government will surely make the matter worse.b. a sense of social responsibility will cause the owners of the mill to reduce pollution. c. the government can raise economic well-being by providing health care to those affected by the pollution. d. the government can raise economic well-being through environmental regulation.
D
In a market economy, economic activity is guided by a. the government. b. corporations. c. central planners. d. prices.
D
Inflation causes a. incomes to fall. b. productivity to increase. c. the government to lower taxes. d. the value of money to fall.
D
Which of the following is NOT true? a. In the presence of a market failure, government action might not improve on the market outcome because sometimes public policies simply reward the politically powerful. b. In the presence of a market failure, government action might not improve on the market outcome because some leaders are not fully informed about the effects of their actions. c. In the presence of a market failure, government action can sometimes improve on the market outcome. d. In the presence of a market failure, government action will always improve on the market outcome.
D
Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations? a. There is no such thing as a free lunch.b. People buy more when prices are low than when prices are high.c. No matter how much people earn, they tend to spend more than they earn. d. Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.
D
Which product would be considered scarce? a. Nike shoes b. Monet paintings c. 1-carat diamondsd. All of the above are correct.
D
