Econ 221 Final USC

Which of the following choices best illustrates the concept of Adam Smith's "invisible hand"? A. A Vietnamese farmer grows rice; an exporter ships it to the United States, and a grocer in New York sells it to a customer. B. A fishery's stock of fish becomes depleted due to overfishing as boats from around the world converge. C. A government regulates a firm to clean up the pollutants the firm has released as part of its production process. D. An apartment building that provides much-needed housing is built on the site of the only playground for children in that town.

A Vietnamese farmer grows rice; an exporter ships it to the United States, and a grocer in New York sells it to a customer.

There are 100 consumers, each of whom values a concert ticket at a unique whole number dollar amount between $1 and $100. One customer is willing to pay $1, a second is willing to pay $2, a third is willing to pay $3, and so on. An unlimited number of concert tickets are on sale for $15 each. What is the total consumer surplus in this market? A. $3,612.50 B. $4,250.00 C. $4,887.50 D. $5,000.00

A. $3,612.50

If the price of oil increases from $80 to $90 per barrel, the quantity supplied increases from 100 to 105 million barrels per day. What is the price elasticity of supply using the midpoint method? A. 0.41 B. 0.22 C. 0.15 D. 0.05

A. 0.41

The elasticity of demand for a good is -0.75. A 4 percent increase in price will cause a: A. 3 percent decrease in quantity demanded. B. 5.33 percent increase in quantity demanded. C. 5.33 percent decrease in quantity demanded. D. 0.19 percent decrease in quantity demanded.

A. 3 percent decrease in quantity demanded.

Which of the following statements is TRUE? A. Consumer surplus is the difference between the maximum price a consumer is willing to pay for a good or service and its market price. B. Bill is willing to pay $10 for a pound of clay. If he buys a pound of clay at a market price per pound of $5, his consumer surplus is $2. C. Total consumer surplus is represented graphically by the area beneath the demand curve. D. Total consumer surplus is represented graphically by the area above the demand curve.

A. Consumer surplus is the difference between the maximum price a consumer is willing to pay for a good or service and its market price.

David sells his car, which he considers worthless, to Cameron for $200. Which of the following statements is true? A. David and Cameron must have different preferences for the car. B. This trade did not create value because Cameron is buying a car that David considers worthless. C. Cameron is the only one made better off by the trade. D. David is made better off by the trade, but Cameron is made worse off.

A. David and Cameron must have different preferences for the car.

Suppose France can produce four phones or three computers with one unit of labor, and Sweden can produce one phone or two computers with one unit of labor. If France can trade only with Sweden, then the theory of comparative advantage suggests that: A. France should specialize in producing phones and import computers from Sweden. B. France should specialize in producing computers and import phones from Sweden. C. France should produce both phones and computers, and import nothing from Sweden. D. France should import both phones and computers from Sweden.

A. France should specialize in producing phones and import computers from Sweden.

Rising oil prices during the 1970s shifted flower production from California to Kenya. Which of the following answers explains this shift? A. Markets are linked to one another. B. Rising oil prices decreased greenhouse heating costs in California, making it cheaper to grow flowers in warmer climates. C. The Kenyan flower industry is run by the California flower growers. D. No transportation costs exist for flowers.

A. Markets are linked to one another

Why do supply curves tend to be more elastic over time? A. Sellers have time to adjust and increase production. B. Consumers have time to look for substitutes for the good. C. Consumers have time to reduce their consumption of the good. D. All of the answers are correct.

A. Sellers have time to adjust and increase production.

A grocery store is running a "buy-one-get-another-at-one-half-off" promotion on a dozen doughnuts. So the first dozen is $6 and the second would be $3. A person would buy the second dozen if their marginal benefit from the second dozen doughnuts is: A. greater than $3 B. greater than $6 C. greater than $9 D. less than $3

A. greater than $3

The demand curve for physician office visits is quite inelastic; therefore: A. a large increase in price causes quantity demanded to decrease by very little. B. a large decrease in price causes quantity demanded to decrease by a lot. C. a small increase in price causes quantity demanded to decrease by a lot. D. a small decrease in price causes quantity demanded to decrease by very little

A. a large increase in price causes quantity demanded to decrease by very little.

If demand is inelastic, a price ________ causes ________ in total revenue. A. decrease; a decrease B. decrease; an increase C. increase; a decrease D. increase; no change.

A. decrease; a decrease

Increases in farm productivity have lowered the prices of many agricultural products. Farm revenues decreased, which implies that the: A. demand for many agricultural products is inelastic. B. costs of production increased. C. demand for many agricultural products is elastic. D. costs of production stayed the same.

A. demand for many agricultural products is inelastic.

Booms and busts refer to the: A. fluctuations in economic activity over time. B. theory of the second best. C. decreases in a nation's output growth over time. D. monetary inflation and deflation caused by the central bank.

A. fluctuations in economic activity over time.

Since the demand for illegal drugs is quite inelastic, an increase in the price of illegal drugs: A. increases seller revenues. B. decreases seller revenues. C. does not affect seller revenues. D. put an end to the use of illegal drugs.

A. increases seller revenues.

In the market for Good X—a necessity good without any good substitutes—the workers and capital in the industry can easily find work producing other goods. The burden of the tax is likely to fall: A. more heavily on buyers, given that demand is more inelastic than supply. B. evenly between buyers and sellers. C. more heavily on sellers, given that supply is more inelastic than demand. D. more heavily on buyers, given that demand is more elastic than supply.

A. more heavily on buyers, given that demand is more inelastic than supply.

The quantity of DVDs that people plan to buy this month will increase when: A. movie theater ticket prices increase. B. the price of movies for download decreases. C. the price of DVD players increases. D. cable television prices decrease.

A. movie theater ticket prices increase.

Markets have the advantage over central planning as the method of resource allocation because: A. resources travel to their highest-value uses. B. resources are allocated equally across all uses. C. resources are distributed to those goods that have a larger number of substitutes. D. central planners have never been shown to correctly identify high-value uses of products.

A. resources travel to their highest-value uses.

Millions of producers working across the world cooperate to ensure that many more millions of consumers can have the goods and services they desire. These producers do not know each other and are not coordinated by a central agency. Their actions are directed simply by: A. self-interest. B. robotic technology. C. their governments. D. computer technology.

A. self-interest.

The demand curve: A. shows how much buyers are willing and able to buy at different prices. B. is the amount that buyers are willing and able to buy at a particular price. C. shows how much sellers are willing and able to sell at different prices. D. is the amount that sellers are willing and able to sell at a particular price.

A. shows how much buyers are willing and able to buy at different prices.

When a price ceiling is in effect: A. some mutually beneficial trades between buyers and sellers do not occur. B. no mutually beneficial trades between buyers and sellers occur. C. all mutually beneficial trades between buyers and sellers occur. D. it is impossible to say if any, some, or all beneficial trades between buyers or sellers fail to occur.

A. some mutually beneficial trades between buyers and sellers do not occur.

Gun buyback programs will be less effective if the: A. supply of guns is more elastic. B. supply of guns is more inelastic. C. demand for guns is more elastic. D. demand for guns is more inelastic.

A. supply of guns is more elastic.

The production possibilities frontier shows: A. the combinations of outputs a country can produce given its resources and productivity. B. the combinations of inputs that a country has given its outputs and productivity. C. the combinations of outputs and resources that a country possesses given its productivity. D. the maximum level of a country's productivity given its resources and outputs.

A. the combinations of outputs a country can produce given its resources and productivity.

The better Martha Stewart is at running her business: A. the higher her opportunity cost of ironing her own shirts. B. the lower her opportunity cost of ironing her own shirts. C. the more it makes sense for her to iron her own shirts, because she will have more time. D. the more it makes sense for her to spend her time away from her business.

A. the higher her opportunity cost of ironing her own shirts.

Whether a buyer or a seller pays more of a commodity tax depends on: A. their relative price elasticities. B. the decisions made by Congress. C. whether the demand curve is negatively or positively sloped. D. whether the supply curve is negatively or positively sloped

A. their relative price elasticities.

Suppose a famous baseball player, Alex Rodriguez, hires a high school student to paint his house. Which of the following is most likely TRUE? A.The opportunity cost of painting a house is higher for Alex Rodriguez than for the high school student. B. The opportunity cost of painting a house is lower for Alex Rodriguez than for the high school student. C. The opportunity cost of painting a house is the same for Alex Rodriguez as for the high school student. D. The opportunity cost of painting a house is zero for Alex Rodriguez and is negative for the high school student.

A.The opportunity cost of painting a house is higher for Alex Rodriguez than for the high school student.

Suppose that there is a tax of $1 per unit, and the elasticity of supply is 3 and the elasticity of demand is 2 (in absolute value). How much of the $1 tax is paid by sellers? A. $0.60 B. $0.40 C. $0.75 D. $0.67

B. $0.40

Name Willingness to pay for 1 lb of bananas Jill $2.00 Joe 1.25 Jane 0.75 James 0.25 The table shows four individuals' maximum willingness to pay for one pound of bananas. If the market price of bananas is $0.50/lb, what is the total consumer surplus in the market? A. $4.00 B. $2.50 C. $2.75 D. $4.25

B. $2.50

If Major League Baseball ticket prices rise by 15 percent, the number of tickets sold falls by 5 percent. The elasticity of demand is: A. -3. B. -1/3. C. -7.5. D. -0.75.

B. -1/3.

If the price of Good X rises from $4 to $5, and the quantity demanded of it falls from 200 units to 180 units, the absolute value of the price elasticity of demand is: A. 2.1. B. 0.47. C. 1.4. D. 0.4.

B. 0.47.

Suppose that a hurricane hits both North Carolina and South Carolina. North Carolina has severe price-gouging laws in place while South Carolina has none. Both states have a shortage of ice. Which state will recover from its ice shortage more quickly? A. North Carolina will recover more quickly because prices can adjust to make businesses willing to invest in ice production. B. South Carolina will recover more quickly because prices can adjust to make businesses willing to invest in ice production. C. North Carolina will recover more quickly because the anti-gouging laws create incentives to invest in ice production. D. South Carolina will recover more quickly because the anti-gouging laws create incentives to invest in ice production.

B. South Carolina will recover more quickly because prices can adjust to make businesses willing to invest in ice production.

One iPhone One iPod Canadian labor units 3 4 United States labor units 2 2 (Table: iPhone and iPod Production) According to the table on iPhone and iPod production, which of the following is TRUE? A. Canada has an absolute advantage in producing both iPhones and iPods. B. The United States has an absolute advantage in producing both iPhones and iPods. C. Canada has an absolute advantage in producing iPhones, and the United States has an absolute advantage in producing iPods. D. The United States has an absolute advantage in producing iPhones, and Canada has an absolute advantage in producing iPods.

B. The United States has an absolute advantage in producing both iPhones and iPods.

The text states: "The great economic problem is to arrange our limited resources to satisfy as many of our wants as possible." How does a market achieve this goal? A. It chooses central planners who are experts at identifying the best uses of resources. B. The forces of demand and supply use prices as a signaling device that directs resources to their highest-value uses. C. It ensures that prices provide an even signal by making sure prices across all markets are equal. D. It offers resource-based futures contracts.

B. The forces of demand and supply use prices as a signaling device that directs resources to their highest-value uses.

Which of the following statements is correct? A. When demand is more inelastic than supply, sellers pay more of the tax. B. When demand is more elastic than supply, sellers pay more of the tax. C. When supply is more inelastic than demand, buyers pay more of the tax. D. When supply is more elastic than demand, sellers pay more of the tax.

B. When demand is more elastic than supply, sellers pay more of the tax.

Which of the following would cause the demand for hot dog buns to increase? A. a fall in the price of hot dog buns B. a fall in the price of hot dogs C. a rise in the price of hot dogs D. a rise in the price of hot dog buns

B. a fall in the price of hot dogs

A price floor is: A. a maximum price allowed by law. B. a minimum price allowed by law. C. able to produce an efficient outcome. D. a tool used to increase government revenues.

B. a minimum price allowed by law.

he ability of one producer to produce one good or service using fewer inputs than another producer is: A. comparative advantage. B. absolute advantage. C. opportunity cost. D. competition.

B. absolute advantage.

One benefit of trade is that it: A. increases the division of knowledge because trade makes people more self-sufficient, producing more of what they consume. B. allows for increased specialization and mass-production techniques that lower per unit costs of production. C. lowers productivity, leading to greater domestic employment. D. decreases economies of scale, making production more efficient.

B. allows for increased specialization and mass-production techniques that lower per unit costs of production

Increasing prices act as a signal to: A. politicians that price gouging is occurring. B. suppliers to increase the quantity supplied in those markets. C. consumers that the good is overvalued. D. speculators that the opportunity cost of the good is falling

B. suppliers to increase the quantity supplied in those markets.

If people suddenly expect that a severe drought will reduce the supply of grain, the price of grain futures will be: a. high and then bid lower. B. bid higher. C. low and bid even lower. D. bid lower.

B. bid higher.

A legal maximum price at which a good can be sold is a price: A. stabilization. B. ceiling. C. support. D. floor.

B. ceiling.

Specialization and trade can _____ the per-unit cost of production because _____ . A. decrease; it allows for more small-scale production. B. decrease; it creates economies of scale associated with large-scale production C. increase; it requires more expensive, specialized equipment D. increase; more expensive labor is needed.

B. decrease; it creates economies of scale associated with large-scale production

Price controls cause resources to be misallocated by: A. distorting the signals of suppliers' willingness to supply and eliminating the incentives for demanders to pay. B. distorting the signals of demanders' willingness to pay and eliminating the incentives for suppliers to supply. C. distorting the incentives for suppliers to supply and eliminating the signals of demanders' willingness to pay. D. distorting the incentives for demanders to pay and eliminating the signals of suppliers' willingness to supply

B. distorting the signals of demanders' willingness to pay and eliminating the incentives for suppliers to supply.

A given tax will impose a greater deadweight loss when: A. both supply and demand are inelastic. B. supply is inelastic and demand is elastic. C. supply is elastic and demand is inelastic. D. both supply and demand are elastic.

B. supply is inelastic and demand is elastic.

Both ethanol and sugar are made from sugar cane and ethanol can be used as a substitute for oil. As the price of oil increases, Brazilians shift sugar cane from sugar production to ethanol production, thereby: a. increasing the price of ethanol. B. increasing the price of sugar. C. increasing the price of both ethanol and sugar. D. decreasing the price of both ethanol and sugar.

B. increasing the price of sugar.

Quantity demanded: A. shows how much buyers are willing and able to buy at different prices. B. is the amount that buyers are willing and able to buy at a particular price. C. shows how much sellers are willing and able to sell at different prices. D. is the amount that sellers are willing and able to sell at a particular price.

B. is the amount that buyers are willing and able to buy at a particular price.

New housing takes some time to build, so rent control creates larger shortages in the: A. long run than in the short run because short-run supply is more elastic. B. long run than in the short run because long-run supply is more elastic. C. short run than in the long run because short-run supply is more elastic. D. short run than in the long run because long-run supply is more elastic.

B. long run than in the short run because long-run supply is more elastic.

According to the theory of comparative advantage, the reason wages are lower in China than in the United States is: A. the higher cost of living in the United States. B. lower productivity in China. C. the lower opportunity cost to work in China. D. more trade restrictions in the United States.

B. lower productivity in China.

A decrease in the demand for a good sold in Market A: A. will affect only Market A. B. might affect other markets, even those halfway across the world. C. will not affect Market A, but it will affect nearby markets. D. might affect distant markets, but it will not affect Market A.

B. might affect other markets, even those halfway across the world.

A policymaker wants to reduce inflation. In order to make an intelligent decision about how to do so, the policymaker: A. should use a simple rule: once inflation is gone, it will always be gone. B. needs to know the causes of inflation, for example, the government's printing of too much money. C. should find out if people are really better off as a result of the inflation. D. should realize that inflation can be reduced without any costs.

B. needs to know the causes of inflation, for example, the government's printing of too much money.

If the supply of a product is inelastic, a large price increase will: A. not have an effect on the quantity supplied. B. only bring about a small increase in quantity supplied. C. cause the supply curve to increase by a nontrivial amount. D. cause a modest decrease in supply.

B. only bring about a small increase in quantity supplied.

Division of knowledge refers to: A. dividing tasks into different subtasks and having one person perform all these subtasks. B. people learning different tasks in which they specialize. C. assigning one person to learn all the different ways to perform the same task. D. limiting what each person knows about another person.

B. people learning different tasks in which they specialize.

Globalization is: A. pushed through by politicians while citizens are reacting to disasters and upheavals. B. the advance of human cooperation across national boundaries. C. the advance of human conflict across national boundaries. D. supported only by greedy corporations.

B. the advance of human cooperation across national boundaries.

The demand curve for Froot Loops breakfast cereal is very elastic because: A. most breakfast cereals are considered a luxury good. B. there are many good substitutes for Froot Loops. C. the demand curve is negatively sloped. D. it is one of the most advertised cereals in the world.

B. there are many good substitutes for Froot Loops.

After a hurricane knocks out power to thousands of households, the price of electric generators increases threefold. According to economists: A. this is a vivid example of market and class exploitation by capitalists. B. this discourages the use of electric generators in low-value uses, making them more readily available for high-value uses. C. the rising price will give an incentive for firms to ship fewer electric generators to the disaster area. D. the increase in demand for electric generators should technically cause the price to fall after a hurricane.

B. this discourages the use of electric generators in low-value uses, making them more readily available for high-value uses.

The main incentive for business activity is: A. government subsidies. B. technological advancement. C. profit. D. employment.

profit.

Susan quits her administrative job, which pays $40,000 a year, to finish her four-year college degree. Her annual college expenses are $8,000 for tuition, $900 for books, and $2,500 for food. The opportunity cost of attending college for the year is: A. $11,400. B. $8,900. C. $48,900. D. $51,400.

C. $48,900.

Minimum willingness to sell Country a single barrel of oil Country A $32.00 Country B 16.00 Country C 17.25 Country D 56.99 Refer to the table. What is the total amount of producer surplus (per barrel of oil) earned by all four producers if the market price per barrel of oil is $51? A. $65.25 B. $81.76 C. $87.75 D. $93.74

C. $87.75

The elasticity of demand for oil is about 0.5, and the elasticity of supply is about 0.3. If the Arctic National Wildlife Refuge (ANWR) were drilled and the world supply of oil increased by 3 percent, what is the estimated percent change in the world price of oil? A. -1.25 percent B. -2.50 percent C. -3.75 percent D. Unknown

C. -3.75 percent

If the price of cocoa rises by 20 percent, the quantity supplied of cocoa rises by 4 percent. What is the elasticity of supply? A. 5 B. 2 C. 0.2 D. 0.008

C. 0.2

Uni-Trax Publishers allows its sales team to buy and sell shares that pay out $1 only if the sales in the future fall within a certain range. Suppose that, currently, shares for sales between 1,000 textbooks and 2,000 textbooks are selling for 10 cents each. Shares for sales between 2,000 and 3,000 textbooks are selling for 30 cents each. Shares for sales between 3,000 and 4,000 textbooks are selling for 40 cents each. Based on this information, what is the probability of Uni-Trax Publishers selling between 2,000 and 4,000 textbooks? A. 10% B. 40% C. 70% D. 30%

C. 70%

Why do many consumers and politicians advocate for price controls? A. Price controls are the only way for the poor to obtain certain goods when prices rise. B. Most consumers and politicians do not advocate for price controls, because they understand their negative consequences. C. Price controls appear to be a straightforward response to the problem of price increases. D. The gains in consumer surplus typically outweigh the loss in producer profits.

C. Price controls appear to be a straightforward response to the problem of price increases.

Which of the following statements is TRUE? A. Trade makes workers in high productivity countries less productive. B. Trade causes workers in low-wage countries to receive an even lower wage. C. Specialization and trade raise wages in both countries that are party to the trade. D. Specialization and trade raise productivity but not wages.

C. Specialization and trade raise wages in both countries that are party to the trade.

Which of the following is a reason why the demand curve for an item would be more elastic? A. The item is a necessity. B. People's incomes are very high relative to the cost of the item. C. The item has many very good substitutes. D. The cost of the item forms a very small part of consumers' budgets.

C. The item has many very good substitutes.

What are the institutions that help foster the appropriate incentives for economic growth? A. regulated labor and credit markets; and unions B. communal property rights and absence of a profit-loss system C. a dependable legal system, property rights, and competitive and open markets D. production and export quotas; and supply and demand

C. a dependable legal system, property rights, and competitive and open markets

The average starting salary of economics majors is just behind that of: A. political science majors. B. marketing majors. C. chemical and nuclear engineering majors. D. education majors.

C. chemical and nuclear engineering majors.

Imagine that millions of refugees move out of country A and into country X. This would cause the demand for housing in country A to _____ and the demand for housing in country X to _____. A. increase; decrease B. increase; increase C. decrease; increase D. decrease; decrease

C. decrease; increase

As the price of lead falls (a key input in the production of automobile batteries), the costs of producing batteries decreases, shifting the supply curve of batteries: A. down and to the left. B. up and to the right. C. down and to the right. D. up and to the left.

C. down and to the right.

Under a binding price ceiling, one expects the quality of a good to: A. rise. B. remain the same. C. fall. D. change in an indeterminate direction.

C. fall.

Jeff agrees to buy 40,000 pounds of frozen pork bellies for delivery one year from now; upon delivery he will pay $32,400. This transaction is called a: A. prediction settlement. B. timing indenture. C. futures contract. D. hog agreement.

C. futures contract.

Sugar cane can be used to produce sugar as well as the fuel ethanol for automobiles. Falling oil prices will cause a(n) ________ in the supply of sugar, resulting in ______ candy prices. A. decrease; lower B. decrease; higher C. increase; lower D. increase; higher

C. increase; lower

A market in which buyers and sellers trade shares of stock, where the share prices reflect the probability of some future event is called a: A. probability market. B. wizard exchange. C. prediction market. D. rational expectations exchange.

C. prediction market.

The difference between the market price and the minimum price at which a seller is willing to sell a certain quantity of a good is: A. producer shortage. B. consumer shortage. C. producer surplus. D. consumer surplus.

C. producer surplus.

Futures markets are often good predictors of what will happen to the price of goods in the future because: A. speculators typically have better information than consumers. B. the markets are more complete. C. speculators have an incentive to "get it right" because their own money is on the line. D. the markets are highly regulated.

C. speculators have an incentive to "get it right" because their own money is on the line.

The price paid by buyers minus the price paid by sellers equals: A. the tax only if it is imposed on sellers. B. the tax only if it is imposed on buyers. C. the tax whether it is imposed on buyers or on sellers. D. the subsidy whether it is given to buyers or to sellers.

C. the tax whether it is imposed on buyers or on sellers.

The Zimbabwean government printed money as fast as it could for years. As a result: A. prices fell rapidly in Zimbabwe. B. the Zimbabwean economy grew rapidly. C. Zimbabwe experienced mild inflation. D. Zimbabwe experienced inflation at a rate of billions of percent per month.

D. Zimbabwe experienced inflation at a rate of billions of percent per month.

Firms are willing and able to sell 100 guitars per day at a price of $250 per guitar. What price will firms require to sell 100 guitars per day if there is a tax of $15 per guitar? A. $235 B. $250 C. between $235 and $250 D. $265

D. $265

Without taxes, the market price per bag of apples is $5. With a $2 tax per bag of apples, buyers now pay $5.75 per bag. What is the final price per bag of apples received by sellers? A. $5.00 B. $7.75 C. $3.00 D. $3.75

D. $3.75

If the demand for a good is estimated to be _____, then firms producing the good will experience an increase in total revenue if prices fall. A. .05 B. .75 C. 1 D. 2.5

D. 2.5

Which of the following explains why local supply tends to be more elastic than global supply? A. As price increases in a certain locale, it is often costly to transport more goods to that particular area, and hence supply is more elastic. B. Local suppliers are small in relation to the global market. C. The statement is false; local supply tends to be less elastic than global supply. D. As price increases in a certain locale, goods can be brought in from other areas, which is not possible on a global scale.

D. As price increases in a certain locale, goods can be brought in from other areas, which is not possible on a global scale.

Two countries that specialize where they have a comparative advantage and then trade with each other will experience increases in: I. wages in both countries. II. total output in both countries. III. living standards in both countries. A. I and II only B. II and III only C. II only D. I, II, and III

D. I, II, and III

What is thinking on the margin? A. Making decisions that are of noneconomic importance. B. Making choices that are based on historical precedents. C. Making choices that ignore the marginal benefits, but not the marginal costs, of some activity. D. Making choices by comparing the additional benefits and additional costs from doing a little bit more of some activity.

D. Making choices by comparing the additional benefits and additional costs from doing a little bit more of some activity.

Which of the following explains why economic booms and busts cannot be avoided? A. The effects of fiscal and monetary policies will never be completely understood. B. The time lags of both fiscal and monetary policies make eliminating boom/bust cycles impossible. C. Economic booms/busts could be avoided, if politicians would put good economics ahead of good politics. D. The economy is always being struck by unavoidable shocks.

D. The economy is always being struck by unavoidable shocks.

The central planning approach proved ________ because ________. A. successful; central planners use state-of the-art military computers to efficiently allocate resources B. a failure; it was never given enough time to be successfully implemented in most countries C. successful; central planners, unlike CEOs, are not solely interested in maximizing profits and raising prices D. a failure; central planners lack information and incentives to allocate resources efficiently

D. a failure; central planners lack information and incentives to allocate resources efficiently

Which of the following choices contains only factors that cause the supply curve to shift to the right? A. a fall in production costs, a rise in technology, an increase in taxes on output B. a fall in tastes and preferences for the product, economic growth, and a rise in technology C. a decrease in taxes on production, a fall in subsidies on production, a rise in costs of production D. a rise in technology, a fall in the costs of production, a fall in taxes on output

D. a rise in technology, a fall in the costs of production, a fall in taxes on output

The quantity supplied is the: A. amount of inputs that a firm earns profit on. B. change in the sellers' output multiplied by the change in price. C. incremental cost of producing one more unit of output, holding all other things constant. D. amount of a good that firms are willing and able to sell at a particular price during a given period of time.

D. amount of a good that firms are willing and able to sell at a particular price during a given period of time.

The great economic problem is to: A. increase resources to satisfy as many of our limited wants as possible. B. equally allocate resources in order to satisfy as many of our limited wants as possible. C. create unlimited resources to satisfy as many of our infinite wants as possible. D. arrange our limited resources to satisfy as many of our infinite wants as possible.

D. arrange our limited resources to satisfy as many of our infinite wants as possible.

How do speculators mitigate shortfalls in the equilibrium quantities traded in markets? A. by buying up unsold inventories and then selling them when there is a shortage in the market B. by causing market quantities to rise and fall C. by buying up items when the prices have risen D. by buying up items in advance of rising prices, and then selling them in the market when prices increase

D. by buying up items in advance of rising prices, and then selling them in the market when prices increase

An economy with permanent, universal price controls is in essence a: A. market economy. B. social economy. C. free economy. D. command economy.

D. command economy.

Walter provides lawn-cutting services and notices that his total revenue increases when he cuts prices. The elasticity of demand for his services is: A. unit elastic. B. inelastic. C. perfectly inelastic. D. elastic.

D. elastic

If the central bank creates too much money, _____ is the result. If the central bank doesn't create enough money, an economic _____ is the result. A. deflation; boom B. inflation; boom C. deflation; slowdown D. inflation; slowdown

D. inflation; slowdown

A rent control is a regulation that: A. ensures that there are apartments available for rent. B. controls rents at constant levels. C. upholds rents to above equilibrium levels. D. prevents rents from rising to equilibrium levels.

D. prevents rents from rising to equilibrium levels.

Institutions that support economic growth are the ones that: A. encourage consumption and discourage savings. B. give the government more control over what is produced and how it is produced. C. require companies to act in the social interest. D. provide incentives for entrepreneurs to take risks and innovate.

D. provide incentives for entrepreneurs to take risks and innovate.

How can sellers increase profits when they face a price ceiling? A. charge a higher price for the good B. charge a lower price for the good to undercut rival sellers C. produce and sell more output D. reduce the quality of the product and provide less customer service

D. reduce the quality of the product and provide less customer service

A ________ creates a situation in which the price received by sellers ________ the price paid by buyers. a. tax; exceeds B. tax; equals C. subsidy; is less than D. subsidy; exceeds

D. subsidy; exceeds

The historical rise in living standards of American workers is primarily a result of: A. the influence of labor unions in America. B. tariff protection imposed by the American government. C. the enactment of minimum wage laws in America. D. the rise in American productivity.

D. the rise in American productivity.

The opportunity cost of a choice is: A.the opportunity of using the money to buy something else cheaper. B. the money cost that a person does not have to pay when doing something. C. the money that a buyer has to pay for an item. D. the value of the next best opportunity foregone.

D. the value of the next best opportunity foregone.

The decisions made by the Federal Reserve Bank sometimes result in negative effects on the economy because: A. the economy is weakened when the Fed uses monetary policy. B. the government uses money inefficiently when it comes to fiscal policy. C. the Fed finds that forecasting economic conditions is easy but controlling the money supply is difficult. D. too much money or too little money might induce inflation or unemployment due to bad timing of decisions.

D. too much money or too little money might induce inflation or unemployment due to bad timing of decisions.

Adam Smith coined the term "invisible hand" to mean: A. a physical hand that leads individuals to promote social interest by pursuing self-interest. B. a metaphorical hand that leads individuals to promote social interest by pursuing self-interest. C. a physical hand that leads individuals to promote self-interest by pursuing social interest. D. a metaphorical hand that leads individuals to promote self-interest by pursuing social interest.

a metaphorical hand that leads individuals to promote social interest by pursuing self-interest.

In the 2 hours between classes a student can do one of three things, ranking them from most to least desirable as: (1) chat with friends, (2) study economics, or (3) eat lunch. This student's opportunity cost of chatting with friends is: A. the total value of studying economics and eating lunch. B. the value of studying economics. C. the value of chatting with friends. D. There is no opportunity cost because students do not pay their friends to chat with them.

the value of studying economics.