Exam 1 MC Rustici

Pizza is discovered to prevent cancer (Pizza) A. A leftward shift of the supply curve B. A decrease in demand C. A surplus of pizza D. An increase in demand E. None of the above

D

Which of the following is an example of a normative statement? A. The minimum wage causes unemployment. B. Price controls cause shortages and surpluses. C. Exchange benefits both parties, ex ante. D. Market exchange is more efficient than central planning by government. E. None of the above.

E

An increase in the legal drinking age for beer (Beer). A. A leftward shift of the demand curve B. A rightward shift I the supply curve C. A leftward shift in the supply curve D. A rightward shift in the demand curve E. A shortage of beer

A

Jane S. Shaw notes in "Public Choice Theory", that "Anthony Downs, in one of the earliest public choice books, An Economic Theory of Democracy, pointed out that the voter is largely ignorant of political issues and that this ignorance is what? A. Rational B. Irrational C. Nonexistent D. Immoral E. None of the above

A

The neoclassical revolution A. Introduced the idea of subjectivism in value. B. Introduced absolute quantity of analysis. C. Was begun by Adam Smith. D. Introduced the Equality of Exchange doctrine. E. Introduced the Law of Comparative Advantage.

A

The price of socks, a complement for shoes, goes up (Shoes) A. A decrease in demand for shoes B. An increase in the supply of shoes C. An increase in demand for shoes D. A shortage of shoes E. None of the above

A

Which of the following causes changes in the supply or demand for a good? A. Technology B. Relative price of a Good C. Own price of a good D. Barter price of a good E. Changes in the y-axis

A

Which of the following determines the law of supply? A. The opportunity cost of the next unit. B. Increasing marginal utility with each successive unit. C. Law of diminishing marginal utility. D. The decreasing value of each successive unit. E. None of the above.

A

According to Israel Kirzner in "Entrepreneurship", entrepreneurs earn pure economic profit by: A. Acting as Walrasian auctioneers. B. Discovering and facilitating previously unrealized gains from trade. C. Discovering new opportunities for monopolistic competition. D. Producing goods until the marginal costs is equal to the marginal revenue. E. Forcing consumers to buy things they do not want or need.

B

The major problem with the "Equality of Exchange" idea was: A. There is no problem with the Equality of Exchange doctrine, as seen by modern price theory being based on this principle. B. It could not explain why voluntary exchange occurs, because equal values in trade benefits no one. C. Exchange is zero-sum, meaning one person gains at another's expense. D. The Just Price Doctrine more closely resembles how transactions come into being. E. None of the above.

B

The number of sellers of coffee increases (Coffee) A. A rightward shift in the demand curve B. A rightward shift in the supply curve C. A shortage of coffee D. A leftward shift of the supply curve E. A leftward shift of the demand curve

B

The price of milk goes up. Milk is used in making butter. (Butter). A. A surplus of butter B. A decrease in the supply of butter C. An increase in the supply of butter D. A decrease in the demand for butter E. None of the above

B

Which of the following is true? A. The Current Account is tabulated by the Federal Reserve, the US Treasury, and the IRS. B. The Current Account consists of the value of all goods and some services that move through customs. C. Gains from trade are always the exports to foreign countries. D. Comparative advantage is the reason we should try to maximize our exports in relation to our imports. E. Tariffs are beneficial to all citizens because they encourage people to purchase U.S. made goods.

B

A war wipes out half of the automobile factories in a country (Automobiles) A. A rightward shift of the supply curve B. A leftward shift of the demand curve C. A leftward shift of the supply curve D. An increase in the quantity supplied E. An increase in the quantity demanded

C

According to F.A. Hayek in "The Use of Knowledge in Society", a market economy prices: A. Are chosen by technocrats trained in economic theory. B. Are determined by the cost of a good. C. Convey tacit information, not known by any single person in entirety, that is relevant to the decisions of producers and consumers. D. Convey scientific information that is relevant to the decisions of producers and consumers. E. None of the above.

C

In "The Function and Formation of Prices", Hans Sennholz writes that the value of a good or serve comes from: A. The labor used to produce it. B. The intrinsic worth. C. The most important needs being served with the available quantities. D. The value of its inputs. E. The subjective judgments of buyers and sellers.

E

A minimum price control is placed on beer (Beer) A. A surplus of beer B. A shortage of beer C. A decrease in the demand for beer D. A decrease in the supply of beer E. None of the above

A

Which of the following is NOT a mistake of the Classical School of thought? A. The infinite regression in value. B. The objective theory of value. C. The labor theory of value. D. Exchange is a zero-sum game. E. The relevant quantities were wrong.

D

In "Capitalism, Socialism, and Democracy," Joseph Schumpeter describes the economic process of a capitalist system:"Capitalism...is by nature a form or method of economic change and not only never is but never can be stationary...The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumer's goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates."Schumpeter refers to this process as: A. Perfect competition B. Monopolistic competition C. Creative destruction D. Economic stationarity E. Government planning

C

A more efficient way of mass-producing gasoline is invented (Gasoline) A. A decrease in quantity supplied B. A decrease in quantity demanded C. A leftward shift in the supply curve D. A rightward shift in the supply curve E. None of the above

D

The guiding force behind what economist call the "Invisible Hand" is A. Encouraging "nudges" by government B. An unseen, mysterious historical force that economics struggles to explain C. The psychological biases of market participants D. Self-interested, maximizing behavior by individuals E. Benevolent, altruistic concern for the well-being of others

D

The law of demand states that there exists: A. A direct positive relationship between the relative price of the good and the quantity of that good supplied. B. An inverse relationship between the relative price of the good and the quantity of that good supplied. C. A direct positive relationship between the relative price of the good and the quantity of that good demanded. D. An inverse relationship between the relative price of the good and the quantity of that good demanded. E. A direct positive relationship between the relative price of the good and the supply.

D

Which of the following is NOT true? A. Rent controls cause housing shortages. B. OPEC's monopoly power is the direct result of price controls that were instituted on domestic oil prices. C. Price controls are people controls, since prices come from people's values. D. A price support will cause a shortage. E. All of the above are true.

D

Kansas has a year of perfect farming weather (Wheat) A. An excess demand for wheat B. An increase in demand for wheat C. A leftward shift of the supply curve D. A shortage of wheat E. A rightward shift in the supply curve

E

The price support is placed on tea (Tea) A. A shortage of tea B. An excess demand of tea C. An increase in demand for tea D. A decrease in demand for tea E. None of the above

E