ECON Final

Economic progress Select one: a.reflects that people are achieving higher income levels and living standards. b.indicates that scarcity is no longer a problem. c.indicates income levels are higher even though environmental and health conditions have worsened. d.requires that individuals work longer hours.

a

Economic progress comes primarily through Select one: a.entrepreneurial action directed by competitive markets. b.imposition of trade barriers. c.government investment in heavy industry. d.central planning.

a

If a business firm continues to sustain losses, what usually happens in a market economy? Select one: a.It goes out of business and the resources it was using become available for use in other areas. b.It remains in business and the resources it is using continue to be employed. c.It reorganizes as a government-supported organization and the resources continue to be employed. d.It reorganizes as a nonprofit organization.

a

If a business is to be successful in a competitive market, it must ​ Select one: a.​produce what consumers demand at attractive prices. b.​reduce fixed costs relative to variable costs. c.​pay low wages. d.​be larger than most other firms in the market.

a

If a nation wants to get the most out of its resources, each productive assignment should be carried out by those persons who Select one: a.have a comparative advantage in the productive activity. b.can complete the productive activity most rapidly. c.least enjoy performing the productive activity. d.have the highest opportunity cost.

a

In the Western states, local, state, and federal governments have created publicly owned parks, forests, and monuments. This vast land area can no longer be privately developed. What will be the effect of this policy? Select one: a.The land will be used less productively than under private ownership. b.​More nonrenewable resources will be preserved for the future. c.​The governments will correct any negative externalities. d.​The governments will use the resources of the parks, forests, and monuments to create the most value for the people.

a

Intense competition in a market will generally lead to Select one: a.improvements in the quality of the good or service available to consumers. b.dissatisfaction of consumers about the quality and availability of the product. c.production inefficiencies and higher costs. d.high prices and low quality of the product or service.

a

Legal entitlement to scientific discoveries, inventions, innovations and intellectual property Select one: a.encourages technological advancements. b.protects production on the basis of tradition, social customs and habits. c.reduces the incentive to invest in research and development. d.results in an equal distribution of income and profits.

a

Private entrepreneurs are likely to make better investment decisions than central planners because Select one: a.investors who make mistakes must bear the costs of these mistakes personally. b.entrepreneurs seek ever larger budgets, while planners are more focused on cost reductions and efficiency. c.entrepreneurs can often turn a project's failure into a request for additional funding to rectify the problem. d.the failure of a government project reduces the personal wealth of the planners involved in the decision.

a

The Fed's low short-term interest rate policy of 2002 to 2004 encouraged decision makers to Select one: a.borrow more and increase their purchases of housing. b.borrow less and reduce their purchases of housing. c.make large down payments when purchasing housing. d.purchase housing only if it could be financed with a 30-year, fixed interest-rate mortgage.

a

The invisible hand principle indicates that when individuals are directed by prices determined in competitive markets, their actions will tend to promote the efficient use of resources Select one: a.even when each market participant cares only about their own self interest rather than the overall efficiency of resource use. b.even if business firms fail to produce goods efficiently. c.if, and only if, businesses recognize their social obligation to keep costs low and use resources wisely. d.only if buyers and sellers personally care about economic efficiency.

a

The secondary effects of an economic action refer to the Select one: a.the unintended consequences of a change that are not immediately identifiable but are felt over time. b.impact on the availability of a resource needed to produce a good or service. c.immediate and visible intended consequences of a change. d.best alternative that must be forgone as the result of a choice.

a

When individuals increase their personal wealth through production and exchange, they Select one: a.increase the wealth of others. b.must rely heavily on government intervention and regulation. c.reduce the wealth of others. d.must be selfish and greedy.

a

When regulatory requirements make it costly and complex to open a business, Select one: a.the volume of trade will decline and economic growth will be retarded. b.the likelihood government officials will provide favors to specific businesses and engage in corrupt practices will be reduced c.the level of competition will increase. d.the volume of trade will increase.

a

When the purchasing power of money is stable and predictable, this Select one: a.facilitates gains from specialization, investment, and trade. b.makes it risky for individuals and businesses to save and borrow. c.encourages the use of bartering. d.increases transactions costs

a

Which of the following actions would be most likely to increase economic growth in a developing country? Select one: a.​development of a legal system that fairly protects people and their property b.an increase in foreign aid to finance spending on infrastructure such as roadsand bridges c.​construction of new colleges to expand higher education d.​establishment of a command economy that can set definite goals for the future and implement them

a

Which of the following is most important if a country is going to achieve and sustain rapid economic growth? Select one: a.an open and competitive capital market b.high tariffs and imposition of other trade restrictions c.high rates of inflation d.high marginal tax rates

a

Which of the following was an unintended consequence of the subsidies and mandated expansion in output of gasoline produced from corn-based ethanol? Select one: a.higher food and grain prices. b.a reduction in the demand for battery powered automobiles because of the low prices of gasoline produced from ethanol. c.a substantial reduction in crude oil prices because of the low-cost production of gasoline from ethanol. d.sharply lower prices for feed grains because of a reduction in the demand for corn.

a

Which of the following was the result of Fannie Mae and Freddie Mac being both privately-owned and government-sponsored enterprises? Select one: a.Their activities were more susceptible to political influence and favoritism. b.They were unable to earn profits and pay dividends to their shareholders. c.Their government sponsorship increased their cost of acquiring loanable funds. d.Congressional regulations exerted little or no impact on their business operations.

a

Which of the following will discourage investment? Select one: a.high and variable rates of inflation b.low tax rates c.a low and steady rate of inflation d.well-defined property rights

a

Why is private ownership an important source of economic prosperity? Select one: a.It provides owners with a strong incentive to develop and use assets in ways that others value highly. b.It eliminates the opportunity cost of using a resource. c.It makes it possible for owners to ignore the desires of others without having to bear the cost. d.It allows owners to do anything they want with their property.

a

Adam Smith believed that if people were free to pursue their own interests, Select one: a.they would generally apply their talents to unproductive activities that would generate little value to society. b.the public interest would be served quite well. c.they would have little incentive to undertake productive activities. d.less would be produced than if government planners were in charge of the economy.

b

During 2007-2008, the price of gasoline increased from approximately $1.50 to $4.00 per gallon. As a result, the Select one: a.supply of gas guzzling automobiles decreased, causing their price to increase. b.demand for gas guzzling automobiles, such as the Hummer, decreased, causing their price to decline. c.supply of gas guzzling automobiles increased causing their price to fall. d.demand for gas guzzling automobiles increased, causing their price to increase.

b

If a nation is going to achieve and sustain a high rate of economic growth, it must Select one: a.prohibit low-wage foreign producers from supplying goods to the domestic market. b.have a mechanism capable of attracting savings and channeling them into wealth-creating projects. c.have an abundant domestic supply of low cost energy resources. d.impose regulations that will limit the intensity of competition among domestic firms.

b

If money was not used as a medium of exchange, Select one: a.the transaction costs of exchange would be lower. b.the gains from trade would be severely limited. c.our standard of living would probably improve. d.economic efficiency would increase.

b

If the Fed is going to create an environment for economic progress, it should focus on Select one: a.the regulation of financial institutions in order to control excessive risk taking. b.the achievement of price stability. c.keeping interest rates low. d.shifting back and forth between expansionary and restrictive monetary policy in order to better control the growth of real GDP.

b

If the ownership of a resource is secure Select one: a.the value of the resource will be high but the resource will be used inefficiently. b.the value of the resource will be high and the resource will be used efficiently. c.the value of the resource will be low but the resource will be used efficiently .d.the value of the resource will be low and the resource will be used inefficiently.

b

Inflation is Select one: a.a persistent increase in the price of an individual good, service or resource. b.a persistent increase in the general level of prices. c.a one time increase in the price of an individual good or service. d.a one time increase in the general level of prices.

b

Other things constant, countries with higher investment rates will Select one: a.have to impose high taxes in order to finance the investment. b.tend to have higher incomes in the future. c.have to use central government planning to allocate investment. d.have lower standards of living.

b

Private ownership allows people to decide how they will use their property, as long as Select one: a.they do not derive personal gain from the use of their property. b.they do not invade or damage the property of others. c.their property is put to productive use. d.they get permission from government officials who can be counted on to direct the use of property into activities that promote the general welfare.

b

The U.S. government subsidizes the production of ethanol from corn and requires gasoline to contain a specific percentage of ethanol.What are the unintended consequences of this program?higher corn priceshigher prices for cornbread and tortillas, products made from cornlower prices for gasoline because corn is a renewable resource Select one: a.II only b.I and II c.I, II, and III d.I only

b

Voluntary trade promotes economic progress because Select one: a.it discourages trade based on the comparative advantage of suppliers .b.it moves goods, services and resources from people who value them less to individuals who value them more. c.This is a trick question; voluntary exchange does not promote economic progress. d.it discourages businesses from seeking lower per-unit costs through adoption of mass production methods.

b

When a price control pushes the price of a good or resource below the market equilibrium, then Select one: a.the scarcity of the good will be eliminated. b.a shortage of the good will develop. c.the quantity supplied will be greater than the quantity demanded of the good. d.a surplus of the good will develop.

b

When political officials have substantial discretionary power to override the rule of law, Select one: a.business investment will increase because the rule of law will no longer stifle investment. b.this creates uncertainty and makes business activity less attractive. c.uncertainty is reduced and the government will be able to promote economic progress more effectively. d.the incentive to solicit bribes and political favors is weak.

b

Which of the following is true of occupational licensing laws? Select one: a.​Occupational licensing is mandated by the Occupational Safety and Health Administration in order to make employment safer for workers. b.​Occupational licensing laws reduce competition in some occupations and make it more difficult for new entrants to compete in these labor markets. c.​Occupational licensing has become less common over the past 40 years in the U.S. d.​Occupational licensing requires that the competency of workers be certified, but no one is prohibited from providing their services in the licensed occupations.

b

Which of the following is/are a source of economic progress? I. Improvements in technology II. A legal system that protects individuals and markets III. Improvements in human capital Select one :a.I and II b.I, II, and III c.II only d.I only

b

Why do supermarkets stock thousands of items that people enjoy? Select one: a.​State governments regulate supermarkets. b.​Competition, self-interest, and market prices influence the supermarkets' decisions on which items to stock. c.​The federal Food and Drug Administration requires supermarkets to stock certain items. d.​The rules of the SNAP program, formerly known as food stamps, require supermarkets to stock certain items.

b

By 2003, the average person in the West had about​ Select one: a.​ten times as much income as the average person in the West in 1820. b.50% more income than the average person in the West in 1820. c.​twice as much income as the average person in the West in 1820. d.​twenty times as much income as the average person in the West in 1820.

c

Does voluntary exchange create wealth? Select one: a.No, exchange merely shuffles the existing supply of goods and services among people. b.Uncertain, it will increase wealth if it creates more goods and services; otherwise it exerts no impact on the wealth of people. c.Yes, exchange makes it possible for the trading partners to gain more value from the existing supply of goods and it also makes larger output levels possible. d.No, if one person gains, the other party must lose an equal amount.

c

Economic growth benefits people because​ Select one: a.​it allows them to consume more goods and services, including a cleaner environment. b.​it leads to greater life expectancy. c.​all of the above. d.​it provides them with greater income.

c

Fannie Mae and Freddie Mac held a competitive advantage over other mortgage lenders primarily because Select one: a.they were exempt from federal regulations monitoring lending practices. b.they instituted higher loan standards than other banks and mortgage lenders. c.they could borrow funds cheaper than other lenders because their bonds were perceived to be backed by the federal government. d.they were established as non-profit entities and thus did not need to show that they were profitable.

c

Government regulations that make it more costly to dismiss workers will Select one: a.​lower a country's unemployment rate .b.​encourage economic growth .c.​reduce the incentive for an employer to hire new workers. d.​improve economic efficiency.

c

In a free market economy, current consumption, saving and investment decisions Select one: a.are necessarily controlled by big businesses. b.are controlled largely by the government. c.shape the future course of the national economy. d.require protection from foreign forces if individuals desire wealth accumulation.

c

In a market economy, persons undertaking an investment project must Select one: a.obtain approval from political authorities before the project can be undertaken. b.get the approval of several banks before the project can be undertaken. c.either personally supply the required funds or convince other investors to do so. d.use a corporation as a form of business organization.

c

In economics, secondary effects refer to the Select one: a.value of a good derived by the consumer. b.value of the goods that an individual must give up as the result of choosing an alternative. c.indirect effects that often result from an action or policy change. d.immediate and highly visible intended consequences of an action or policy change.

c

Private ownership of property Select one: a.creates an incentive for owners to ignore the wishes of others. b.causes the Tragedy of the Commons to occur. c.provides owners with an incentive to maintain and conserve resources. d.results in the overuse of resources.

c

The income and living standard of a country will generally improve whenproperty rights are protected.jobs are protected.banks are protected. Select one: a.I and II b.II only c.I only d.II and III

c

The invisible hand principle indicates that competitive markets can help promote the efficient use of resources Select one: a.only if buyers and sellers really care, personally, about economic efficiency. b.​even if business firms fail to produce goods efficiently. c.​even when each market participant cares only about their own self-interest rather than about the overall efficiency of resource use. d.​if, and only if, businesses recognize their social obligation to keep costs low and use resources wisely.

c

What is inflation? Select one: a.an increase in the cost of land, labor or capital b.a general increase in the prices of corporate stocks c.a sustained increase in the general price level d.an increase in the price of a specific good or service

c

When private ownership rights are clearly defined and well enforced, owners of resourcesSelect one: a.have an incentive to consume the resource as quickly as possible before others seize it .b.have no incentive to consider the desires of others or the potential future value of the resource. c.have an incentive to develop and expand resources that are expected to be valuable in the future. d.have little incentive to take care of the resource or conserve it for the future.

c

When the money supply is expanding rapidly and the general level of prices increasing sharply, economic growth is Select one: a.enhanced because profits are higher so that capital investment is greater. b.enhanced because existing debt is reduced in value, so people are willing to buy more goods. c.slowed by the resulting unpredictability of the future level of prices. d.enhanced as economic activity grows more rapidly.

c

Which of the following is a major implication of the invisible hand concept? Select one: a.Prosperity cannot be achieved unless the selfish nature of people can be changed. b.Competition is harmful to the health of an economy because it results in wasteful duplication. c.When directed by competitive market prices, the actions of self-interested individuals will tend to promote overall economic prosperity. d.Government-operated firms tend to have lower costs than private sector firms.

c

Which of the following is most important for the achievement of higher income levels and living standards? Select one: a.restriction of imports that expand employment in the protected industries b.an increase in total employment c.production of additional goods and services that people value highly relative to the cost of their production d.increases in government spending that create jobs

c

Which of the following is most likely to help the residents of a nation produce more goods and services and achieve higher income levels? Select one: a.higher tax rates b.greater use of taxation to transfer income from the rich to the poor c.a higher rate of investment d.a smaller trade sector

c

Which of the following policies is most likely to encourage innovation, higher quality goods, and lower prices?Encouraging public-private partnershipsPassing government regulations to reduce business failures and protect consumersReducing barriers that limit entry of firms into new and existing markets Select one: a.​I only b.​II and III c.​III only d.​I and II

c

Why is voluntary exchange an important source of economic prosperity? Select one: a.It makes it possible to produce a larger output as a result of lower per unit costs that often accompany large-scale production. b.It makes it possible to produce a larger output as a result of gains from division of labor and specialization. c.All of the above are correct. d.It moves goods from people who value them less to people who value them more.

c

​During the past 1000 years, the income per person of the world has Select one: a.​increased each century, and it is now five times greater than the level of 1000 years ago. b.​risen rapidly in Western Europe, North America, Japan, and Australia, but there has been little change in income per person in other parts of the world. c.​increased by approximately tenfold during the past 200 years, but there was only a small increase during the 800 years prior to 1800. d.​persistently increased, but the largest increases occurred during the 1200 to 1800 era.

c

​Throughout all of human history, until the last couple centuries, the average human was Select one: a.​wealthy but short-lived. b.​poor but long-lived. c.​poor and short-lived. d.​wealthy and long-lived.

c

Because private owners are held responsible for damages their property causes to the property of others, private owners have Select one: a.little incentive to take good care of the property. b.a strong incentive to use their property now rather than conserving it for the future. c.little incentive to consider the physical harm their property imposes on others. d.a strong incentive to take steps to reduce the chance that they will harm the property of others.

d

If a business is realizing economic losses in a competitive market, it is A. price gouging its customers. B. exploiting its workers. C. producing goods and services in a market that is characterized by high entry barriers. D. producing goods and services that are valued less than the resources required to produce them.

d

Many Americans have been hurt by recent economic events. Raising the minimum wage is the best policy to improve the wages and employment opportunities of Americans. This argument is Select one: a.incorrect because the government has too big a deficit to pay for the increase in the minimum wage. b.correct because most minimum wage workers are household heads trying to earn enough to support their family. c.correct because a higher minimum wage will increase total income which will stimulate aggregate demand and employment. d.incorrect because while some people will receive higher wages, others will experience less employment and fewer training opportunities.

d

Money is Select one: a.an object that is directly consumed. b.something that can be used to buy things but cannot be saved. c.widely used in a barter economy. d.whatever is generally used to pay for goods, services and resources.

d

Secure property rights promote economic progress because they Select one: a.transfer the costs of a decline in property value to the government. b.discourage property owners from engaging in activities that provide value to others. c.weaken the incentive to take actions that increase the value of resources. d.encourage individuals to produce efficiently and undertake productive activities.

d

Wal-Mart is a low-wage firm and this indicates that it exploits its workers. Which of the following should cause one to question the validity of this statement? Select one: a.the high profits of Wal-Mart b.the large sales revenue of Wal-Mart c.This is a trick question. Wal-Mart does exploit its workers and the below average wage of Wal-Mart employees illustrates this point. d.No one is required to work for Wal-Mart and, therefore, it must attract workers by paying them more attractive wages than they could earn elsewhere.

d

What has happened to the world's economy over the past 200 years? ​ Select one: a.​People have more consumer goods but health and happiness has decreased. b.​Rich countries have become richer and poor countries have become poorer. c.​People have become malnourished because they no longer grow most of their own food. d.​There has been economic growth, less poverty, and longer life spans.

d

What role do losses play in a competitive market? A. They penalize a firm for producing a good that consumers value highly relative to its cost. B. They signal that more resources are needed in this market. C. They show firms that barriers to entry are high. D. They send a message that more value would be created if the resources were used to produce other goods.

d

When whale oil was in high demand in the middle of the nineteenth century, whales were being hunted to excess because Select one: a.the public ignored the need to curb whale oil consumption. b.of the excessive government regulation imposed on whale hunting. c.those who owned the hunting rights failed to see the future value of whale oil. d.no one owned the whales or the hunting rights, thus there was no incentive to conserve whales for the future.

d

Which of the following contributed to the soaring housing prices during 2002-2004? Select one: a.the Fed's high-interest rate policy b.the tightening of loan standards by commercial lenders c.the increasing popularity of fixed-rate, long-term loans to lock in low interest rates d.the Fed's low-interest rate policy

d

Which of the following contributed to the soaring housing prices of 2002-2005? Select one: a.Home buyers were required to make larger down payments and this increased the demand for housing, driving housing prices up. b.Mortgage lending standards tightened, and therefore mortgage loans for housing were only available to buyers purchasing highly expensive homes. c.Regulations designed to make housing more affordable decreased the number of sub-prime loans and made home buying a safer investment. d.Regulations designed to make housing more affordable increased the demand for housing and drove housing prices upward.

d

Which of the following is a predictable, secondary effect of a sharp increase in gasoline prices? Select one: a.the termination of research on the cost-effectiveness of alternative fuels to power automobiles. b.Producers will increase the production of gas guzzling vehicles. c.The federal government will place a quota on the number of fuel-efficient cars for sale, thus forcing consumers to purchase the gas guzzling vehicles. d.Producers will increase the production of fuel-efficient cars

d

Which of the following is true of regulation? Select one: a.Past regulations have been effective at averting crises, but they are unpopular because they reduce the profitability of the regulated industry. b.Mortgage lending and banking have historically been unregulated and therefore regulation in these sectors is unpopular. c.Policy-makers are hesitant to call for new regulations even when it is clear they would help avert future crises. d.Regulatory agencies often ignore the secondary effects of their actions and fail to foresee future problems.

d

Which of the following will most likely occur under a system of clearly defined and enforced private property rights? Select one: a.Resource owners will fail to consider the wishes of potential future buyers when they decide how to employ privately owned resources. b.Resource owners will fail to conserve vital resources, even if they expect their scarcity to increase. c.Resource owners will ignore the wishes of others, including others who would like to use the resource that is privately owned. d.Resource owners will gain by discovering and employing their resources in ways that are highly valued by others.

d

Which of the following would a private owner be prohibited from doing? Select one: a.erecting a fence designed to keep others from using the property b.selling the property to another person c.painting the property a color that others do not like d.using the property in a manner that invades or infringes on the property of another

d