ECOM QUIZ #3
If people work fewer hours, retire early, or forego risky business ventures because of high marginal tax rates, a. the size and productivity of the labor supply will be reduced and output will decline. b. unproductive workers and projects are avoided, leading to an increase in productivity. c. these workers are simply replaced by other workers, resulting in no real change in output. d. the decrease in output will be offset by the increase in tax revenue and the corresponding output of government services.
a
It is often substantially cheaper to own and operate a used car rather than a new one because a. the depreciation cost for a new car will almost always be substantially higher b. the interest rate on a used car loan is generally lower c. the maintenance cost of a new car is generally higher d. this is a trick question. All things considered, the cost per mile traveled is generally cheapest if you buy a new car every year
a
Markets coordinate output decisions by pushing price a. upward when there is a shortage. b. downward when quantity demanded exceeds quantity supplied. c. upward when there is a surplus. c. upward when quantity supplied exceeds quantity demanded.
a
Other things constant, which of the following would most likely cause the supply of garden hoses to decrease? a. An increase in the price of plastic used to make garden hoses. b. A technological advance that lowers the cost of producing garden hoses. c. The occurrence of a very dry year with little rain. d. A decrease in the price of grass seed.
a
Public choice analysis indicates that a. the shortsighted nature of the political process makes borrowing attractive to politicians. b. policy makers can be counted on to balance the budget except possibly during times of war. c. the legislator who is a spending "watch dog" will be able to save the constituents of her district a substantial amount of tax money. d. given the political incentive structure, the large number of budget deficits in recent years is surprising.
a
The minimum wage can be a barrier to entry into labor markets because a. it makes some low-skill workers less attractive to potential employers. b. it prevents businesses from entering a new market. c. it reduces the willingness of low-skill workers to search for employment. d. it requires low-skill workers to obtain an occupational license.
a
The theory that stock prices reflect all available information and that the future movement of stock prices is unpredictable is called the a. random walk theory b. theory of compound interest c. law of comparative advantage d. law of large numbers
a
What effects do specialization and trade have on the allocation of resources and the level of production of a society? a. They create a more efficient allocation of resources and an increase in the level of production. b. They create a less efficient allocation of resources and an increase in the level of production. c. They create a more efficient allocation of resources and a decrease in the level of production. d. They create a less efficient allocation of resources and a decrease in the level of production.
a
Which of the following contributed to the soaring housing prices of 2002-2005? a. Regulations designed to make housing more affordable increased the demand for housing and drove housing prices upward. b. Regulations designed to make housing more affordable decreased the number of sub-prime loans and made home buying a safer investment. c. Mortgage lending standards tightened, and therefore mortgage loans for housing were only available to buyers purchasing highly expensive homes. d. Home buyers were required to make larger down payments and this increased the demand for housing, driving housing prices up
a
Which of the following is most likely to result in cost-effective production methods, innovation, and quality goods at economical prices? a. a business environment of dynamic competition b. an industry dominated by a few larger firms c. a business environment that is heavily regulated by the government d. an industry open to domestic competition, but protected from international competition
a
Which of the following statements is correct? a. Opportunity costs will always be incurred when scarce resources are used to produce a good. b. The value of goods is objective; it is equal to the cost of supplying the good. c. If the buyer of a good gains, the seller must lose an equal amount. d. Changes in incentives generally have no effect on human behavior.
a
in a market economy, the income you earn is determined a. by the market value of the productive resources you sell b. by a central planning committee. c. by the U.S. Bureau of Labor Statistics. d. solely by your number of years of schooling.
a
increase in marginal tax rates will a. reduce the share of additional earnings that individuals are permitted to keep b. increase the incentive of individuals to earn additional income c. allow taxpayers to keep more of what they earn d. make tax deductible purchases more expensive
a
individuals with higher saving and investment rates will more likely a. have highers incomes in future b. have higher current consumption rates c. earn poverty level incomes d. experience financial difficulties
a
the economic way of thinking indicates that real wealth is best measured in terms of a. personal satisfaction and fulfillment b. real per capita GDP c. real wages d. opportunity cost per dollar earned
a
the investment in which one of the following accounts will grow tax-free a. a roth IRA b. a traditional IRA or 401(k) account c. a money market mutual fund d. an equity fund
a
the main postulate of economics is based on the premise that a. changes in personal benefits or costs of an action influence behavior in predictable ways. b. people are always fully informed when making choices. c. people act only out of selfish motives. d. most human behavior is unpredictable.
a
traditional IRAs, 401k plans, and other tax-deffered saving plans will a. reduce your current tax liability because funds paid into these plans are tax deductible b. make it more difficult for a young person to save and accumulate wealth c. increase your tax liability now, but you will pay lower taxes when you withdraw the funds d. help those with the lowest incomes, but will be of little value to those with higher incomes who want to save for retirement
a
which of the following purchases would be most sensible to finance a. a house b. a vacation c. a flat-screen television set d. an expensive jewelry item
a
workers who have success-oriented attitudes tend to be a. more successful b. less cooperative, preferring to work alone c. argumentative to the point of being disrespectful d. over educated daydreamers
a
A movement along a demand curve for a good a. is called a change in demand. b. will occur when there is a shift in the supply of the good. c. will occur when there is a reduction in the income of consumers. d. will occur when there is an increase in the income of consumers.
b
All but one of the following are elements of the economic way of thinking. Which one is not part of it? a. Incentives matter. b. The value of goods can be determined objectively. c. Economic thinking is marginal thinking. d. Information is scarce.
b
Because of the free-rider problem a. competitive markets will tend to undersupply public goods b. the federal government spends too much on national defense. c. fireworks displays have become increasingly dangerous. d. poverty has increased.
b
Goods are scarce because a. of greed; if human beings were not so selfish, goods would not be scarce. b. the desire for goods is far greater than their availability from nature. c. of competition; if people were not so competitive, it would be possible to satisfy people's desire for material goods. d. of private property; if things were not owned privately, scarcity could be eliminated.
b
If The Home Depot constitutes a sizeable share of your current stock holdings, the purchase of which of the following stocks would provide you with the greatest increase in diversification and reduction in risk? a. lowes home improvement b. apple computer c. ace hardware d. true value hardware
b
If a college enforces a new policy where anyone caught cheating is immediately expelled, the basic postulate of economics suggests that a. cheating will be completely eliminated. b. fewer students will attempt to cheat. c. the amount of cheating will be unaffected. d. any of the above is possible because student behavior is unpredictable.
b
Increases in per capita GDP are a. important, because it means governments have more resources. b. important, because they generally improve our living standards. c. not important, as governments take the increased output and waste it. d. not important, because increases in per capita GDP do not affect our living standards.
b
Over the past 200 years, the number of hours worked by people in a week has a. stayed about the same. b. risen slightly. c. fallen significantly. d. none of the above.
b
Since 1871, the average rate of return for stock holdings, adjusted for inflation, has been approximately a. 2.7% b. 7% c. 15% d. 30%
b
Since the late 1960s in the United States, transfer programs have___________; as a share of income and the poverty rate has ____________ (Fill in the blanks) a. decreased; increased sharply b. increased; remained relatively constant c. decreased; decreased substantially d. increased; declined sharply
b
The 2009, Cash for Clunkers, government program provided car buyers with cash payments if they purchased a new car and traded in an older one that had to be destroyed. This program resulted in a. a temporary increase in the supply of used cars and a reduction in their price. b. a reduction in the supply of used cars and a temporary increase in spending on new automobiles. c. a temporary increase in spending on goods other than automobiles. d. an increase in the supply of used cars and a temporary decrease in spending on new automobiles.
b
The list of Forbes Wealthiest Four Hundred is generally comprised of people who made a lot of money a. because they exploited a lot of people. b. because they helped a lot of people. c. while failing to provide anything of real value to others. d. who forced others to purchase goods and services that they sold.
b
The price of an airline ticket from St. Louis to Washington D.C. costs $250. A bus ticket costs $100. Traveling by plane takes 2 hours compared with 32 hours by bus. Other things constant, Andrew would gain by choosing air travel if, and only if, he values his time at more than a. 4.69 an hour b. 5$ per hour c. 10 per hour d. 75 per hour
b
The value of the best alternative given up when a decision is made is called a. an economic good. b. an opportunity cost. c. a trade-off. d. comparative advantage.
b
Under current legislation, Americans can place a fraction of their incomes into non-taxable, qualified college accounts. This policy _________ the incentive to save for college education. (Fill in the blank) a. decreases b. increases c. does not impact d. has an indeterminate impact on
b
What is the cause of inflation? a. Higher wages b. Rapid increases in the money supply c. Higher energy costs d. Higher taxes that drive up the cost of producing goods and services
b
What would be a secondary effect of increasing the tariff rate imposed on foreign-made automobiles? a. An increase in the imports of foreign-made automobiles b. Lower domestic prices of U.S.-made autos c. Fewer exports of U.S.-made goods and services d. An increase in employment in the United States, particularly in sectors other than the auto industry
b
Which of the following is a category of activity that results in government failure? a. externalities b. special interest effect c. public goods d. monopoly
b
Which of the following is often referred to as the basic postulate of economics? a. Individuals act only out of selfish motives. b. Incentives matter; individuals respond in predictable ways to changes in personal costs and benefits. c. The accuracy of the assumptions is the best test of an economic theory. d. The value of a good is objective; it is equal to the cost of producing the good.
b
Which of the following is true? a. Voters have a strong incentive to cast a well-informed vote, but consumers have little incentive to make informed choices. b. Voters have little incentive to cast a well-informed vote, but consumers have a strong incentive to make informed choices. c. Neither voters nor consumers have much incentive to make informed choices. d. Both voters and consumers have a strong incentive to make informed choices.
b
Which of the following statements about incentives is true? a. Understanding how people respond to incentives helps government planners organize the economy. b. Changing one incentive can result in several unseen effects. c. Fair-minded people who care about others will not be affected by incentives. d. Emphasizing incentives ignores altruistic nonmonetary values.
b
Which of the following statements is correct? a. The human desire for goods and services is limited while the resources required for their production are unlimited. b. The human desire for goods and services is virtually unlimited while the resources required for their production are limited. c. Both the human desire for goods and services and the resources required for their production are virtually unlimited. d. Both the human desire for goods and services and the resources required for their production are limited.
b
Which of the following was an unintended consequence of regulations that made mortgage credit for the purchase of housing more readily available to persons with low and moderate incomes during the decade following 1995? a. Taxpayers. b. Poor people in less developed countries with largely grain based diets. c. Beef producers. d. Grain farmers and ethanol refiners.
b
borrowing to finance the cost of your education makes sense if a. you really like your choice of college major b. the increased income you expect from getting a degree in your field will be more than enough to repay the loan, including interest. c. your uncle says he can guarantee you a job if you get your degree d. interest rates on college loans are close to the federal funds rate
b
the average return on stocks is significantly higher than returns on savings accounts and government bonds because a. the stock market is a safer investment b. of higher risk associated with investing in the stock market c. the rate of return is guaranteed when investing in the stock market d. of the high volatility associated with investing in government bonds
b
the primary purpose of a budget is to a. make sure that you do not spend too much money on nonessential items like recreation and vacations. b. make sure you get the most out of your income by spending wisely and saving regularly c. figure out how to borrow more so you can increase your current consumption. d. figure out how to purchase only items that are needed to sustain life.
b
when people take greater risks because they are covered by insurance (and will be paid if an accident occurs) this is known as a. adverse selection b. moral hazard c. an externality d. coinsurance
b
which of the following activities is not part of the protective role of the government? a. unbiased enforcement of contracts b. providing capital to large backs in economic crises c. protection of property rights d. enforcing role against theft, fraud, and violence
b
which of the following is true? a. An unused balance on your credit card is like money in the bank b. interest rates charged by credit card companies are generally high because the loans are unsecured c. An outstanding credit card balance is an asset that adds to your personal wealth d. The power of compound interest benefits those with outstanding credit card balances
b
Between 2001 and 2005, sub-prime and poorly documented mortgages a. remained steady at about 5 percent of the total. b. decreased to about one third of the total, while conventional mortgages increased to about two-thirds. c. increased to about one third of the total, while the share of conventional mortgages declined. d. decreased as a result of regulations designed to tighten mortgage lending standards.
c
Employers tend to prefer employees who display attitudes such as respectfulness, persistence, and trustworthiness because a. workers with these characteristics are easier to exploit and underpay b. workers with these characteristics are easy to find c. workers with these characteristics tend to be more productive d. workers with these characteristics usually have lots of friends who can be customers
c
If a country with a centrally planned economy (such as Cuba or North Korea) were to convert to a market-based economy, the country would have to a. abandon government aid to poor people. b. increase taxes to develop public services. c. develop a system of clearly defined property rights. d. encourage people to become more selfish.
c
If there is an unexpected increase in the interest rate, the market price of an outstanding long term bond (for example, one that will not mature for another 20 years) will generally a. increase proportionally b. increase, but by less than the proportional increase in the interest rate c. decrease d. remain the same, the market value of outstanding bond in unaffected by the interest rate
c
Lobbying efforts that erect roadblocks that limit entry into markets, a. are generally ineffective and therefore they do not influence the level of productive activity. b. are necessary to ensure fair trade and competition. c. consume valuable resources that could have been used for productive activities. d. result in legislation that promotes economic growth and saves jobs.
c
The demand curve illustrates a. the various quantities of a good or service producers are willing to supply at alternative prices. b. the difference between the current supply of a good or service and the potential supply producers are capable of producing. c. the various quantities of a good or service consumers will purchase at alternative prices. d. the difference between the current demand of a good or service and the potential demand consumers could purchase.
c
The expression, "There's no such thing as a free lunch," implies that a. everyone has to pay for his own lunch. b. the person consuming a good must always pay for it. c. opportunity costs are incurred when resources are used to produce goods and services. d. no one has time for a good lunch anymore.
c
The policies of Fannie Mae and Freddie Mac during 1995-2008 encouraged mortgage originators to a. extend only 30-year, fixed-rate mortgages. b. require higher down payments on home mortgages they extended. c. loosen lending standards and extend more loans to low income and sub-prime borrowers. d. scrutinize carefully the credit-worthiness of borrowers.
c
The price of an airline ticket from Denver to Chicago costs $450. A bus ticket costs $150. Traveling by plane takes 2 hours compared with 32 hours by bus. Other things constant, Erica would gain by choosing air travel if, and only if, she values her time at more than a. $5 per hour. b. $9.38 per hour. c. $10 per hour. d. $300 per hour.
c
The supply curve of a good or service is a. the amount that is physically available for sale at any time. b. downward-sloping, illustrating a negative relationship between price and quantity supplied. c. the various amounts producers are willing to supply at alternative prices. d. the amount producers are willing to supply at the equilibrium price.
c
To say that Iowa has a comparative advantage relative to other states in the production of corn is similar to saying that a. Iowa uses less land to produce corn than other states. b. corn farmers in Iowa have lower earnings than in other states. c. Iowa produces corn at a lower opportunity cost than other states. d. Iowa produces more corn than other states.
c
What is the invisible hand that coordinates the actions of individuals referred to by Adam Smith? a. government policies. b. individuals who put aside their own self-interest for the general welfare. c. market prices d. the vast coordination of citizens
c
What will happen if a nation does not have an absolute advantage in producing any good? a. It will not have a comparative advantage in producing any good either b. It cannot trade with other countries. c. It will still have a comparative advantage in producing some goods. d. It can trade only natural resources.
c
When a price ceiling is set below equilibrium price a. Quantity supplied exceeds quantity demanded b. Quantity demanded exceeds quantity supplied c. B&C d. There is a shortage of product
c
When the money supply of a nation increases faster than the growth of the economy, the result is a. a budget deficit. b. monetary stability. c. inflation. d. trade deficits.
c
Which of the following investments is characterized by low risk, low fees, and high historic returns when held over a lengthy time period? a. A managed mutual fund that has performed well during the past two or three years b. A portfolio of technology stocks c. A mutual fund that holds stocks in the same proportion as a broad stock market index such as the S&P 500 d. A mutual fund invested in medium-term bonds issued by the U.S. Treasury
c
Which of the following is most consistent with the basic postulate of economics: changes in incentives exert a predictable impact on human behavior? a. Farmers produce fewer bushels of wheat in response to an increase in the price of wheat. b. People will buy more milk at a price of $3 per gallon than at $2 per gallon. c. People will buy less gas if the price of gas increases by $0.50 per gallon. d. People will consume more beef if the price increases from $1 to $2 per pound.
c
Which of the following is the best place to set funds aside for "surprise" expenditures? a. the stock market b. your regular checking account c. a saving account d. ownership of real estate
c
Which of the following most accurately states the economic significance of exchange? a. Physical goods have value because they exist; exchange can neither increase nor decrease their value. b. Production of physical goods creates value; exchange merely redistributes this value. c. Exchange creates value by moving goods from parties who value them less to parties who value them more. d. Exchange reduces value since it consumes resources without adding to the physical supply of goods.
c
Which one of the following statements most accurately indicates the basic motivation for behavior? a. Individuals are motivated primarily by selfish desires; thus, personal costs and benefits influence their actions. b. Individuals are motivated primarily by humanitarian concerns; therefore, personal costs and benefits exert little influence on most of their actions. c. Individuals are motivated by a variety of forces; however, changes in personal benefits and costs influence the choices of both selfish and humanitarian individuals. d. Individuals are motivated by a variety of forces; however, changes in personal benefits and costs affect behavior only when individuals are motivated by selfishness.
c
because indexed equity funds engage in less research and stock trading a. they are usually outperformed by managed funds b. there are fewer fees involved, but the returns are lower than those of managed funds c. they charge lower fees, so the more of your investment dollars flow directly into the purchase of stock d. their administrative costs are generally higher, but they still outperform managed funds
c
the volatility of investing in the stock market can be reduced by a. buying and selling stocks frequently b. investing in the stocks for a few companies c. investing in a diverse portfolio of stocks d. investing in high-risk in hopes of large profits
c
which of the following is major pitfall to avoid when purchasing a home? a. making a large down payment b. use a fixed rate mortgage to cover 80% of the purchase price c. making a small down payment, for example 5% percent or less d. economical purchase of a home that has gone through the foreclosure process
c
which of the following is the best example of an item that a real world savings account is designed to cover a. the monthly payment for the lease of your apartment b. the purchase of the gasoline you use driving back and forth to work c. an unexpected expenditure to repair the transmission of your car d. funds you are setting aside for your retirement years
c
which of the following is true? a. The parents of successful entrepreneurs almost always have at least a college education b. Entrepreneurs are under-represented among millionaires c. successful entrepreneurs are good at discovering profitable opportunities that have been overlooked by others d. all above
c
which of the following items would be least prudent to purchase on credit a. an automobile b. a house c. a vacation d. a college education
c
which of the following statements about automobile insurance is correct a. liability coverage pays for your car repairs after an accident b. only three states require drivers to purchase liability automobile c. liability coverage pays other people for damage to themselves or their vehicle is they are injured by your driving d. the premiums for an insurance policy will generally be higher if the deductibility level is higher
c
A price floor set above an equilibrium price tends to cause persistent imbalances in the market because a. quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage. b. quantity demanded exceeds quantity supplied but price cannot fall to remove the surplus. c. quantity supplied exceeds quantity demanded but price cannot rise to remove the shortage. d. quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus.
d
A prudent person is most likely to find the use of financing attractive when purchasing which one of the following items? a. entertainment b. clothes c. rental housing d. a college education
d
According to economic reasoning, you should offer one hour of volunteer service per week when a. the total benefits of doing so are less than the total costs. b. the additional costs of doing so are greater than the additional benefits. c. the additional costs of doing so are the same as the additional benefits. d. the additional benefits of doing so are greater than the additional costs.
d
An effective minimum wage a. imposes a price ceiling on the wages of various categories of low-skill workers. b. increases the demand for low-skill workers. c. makes it easier for low skill workers to find jobs. d. increases the earnings of some low-skill workers while reducing the employment and training opportunities available to others.
d
Congressman Willis Hawley once said the following "I want to see American workers employed producing American goods for American consumption." If public policy and tax payer dollars are used to place U.S. workers into jobs producing U.S. goods intended for U.S. consumption, which of the following will occur? a. the rate of return will be higher than if the available funds were directed by private investors. b. there will be no difference in the allocation of investment funds, because politicians like Congressman Hawley will be motivated by the same incentives as private investors. c. funds will be directed to the projects with the least political support, rather than simply the projects with the highest rate of return. d. political influence, rather than market returns, will decide which workers will work and which production projects will be undertaken.
d
Economic analysis assumes that a. individuals act only out of selfish motives. b. although individuals are at times selfish and at times altruistic, only their selfish actions may be predicted. c. people are basically altruistic, and their actions are, therefore, impossible to predict. d. changes in the personal benefits and costs associated with a choice will exert a predictable influence on human behavior.
d
High transaction costs will tend to a. increase the number of mutually beneficial exchanges that occur. b. allow easier specialization according to the law of comparative advantage c. increase the value created by exchanges in an economy. d. reduce the number of mutually beneficial exchanges that occur.
d
If a government imposed price ceiling legally sets the price of beef below market equilibrium, which of the following will most likely happen? a. The quantity of beef demanded will decrease. b. The quantity of beef supplied will increase. c. There will be a surplus of beef. d. There will be a shortage of beef.
d
On what basis do people make most of their decisions? a. on the basis of which choice increases benefits by the greatest amount b. on the basis of which choice increases the opportunity cost by the greatest amount c. on the basis of comparing total costs to total benefits d. on the basis of comparing additional costs to additional benefits
d
Standby passengers on airlines who pay low rates for seats benefit from the low price. How are the airlines affected? a. they lose, bc standby passengers don't cover the full costs of the seat b. they gain as long as the price is paid by the standby passengers exceeds the average cost of providing the seats c. they lose, bc the gain of the standby passengers must necessarily come at the expense of the airline d. they benefit as long as the additional revenue derived from the standby passengers exceeds the marginal cost
d
Susan is trying to decide whether to quit her $20,000 per year job so she can return to college next year as a full time student. If she goes to college next year, her books and supplies will cost $500, tuition will cost $3,000, and her other expenses (transportation, housing, and food) will increase by $2,000. What is Susan's opportunity cost of attending college next year? a. $3,000 b. $3,500 c. $5,500 d. $25,500
d
The law of demand indicates that as the price of a good decreases, a. suppliers will sell less of it. b. suppliers will sell more of it. c. buyers will purchase less of it. d. buyers will purchase more of it.
d
When a price floor is above the equilibrium price a. Quantity supplied exceeds quantity demanded b. Quantity demanded exceeds quantity supplied c. There is a surplus d. A &C
d
Which of the following is the most likely result of a quota that limits the importation of steel into the United States? a. a reduction in the price of steel in the U.S. market b. a reduction in the cost of producing goods that utilize steel as a resource c. an increase in U.S. exports of steel d. a reduction in output and employment in domestic industries that utilize steel as a resource
d
Which of the following reflects the trading of a legislator's vote on one issue for the vote of other legislators on another issue? a. the shortsightedness effect b. the special-interest effect c. the rational-ignorance effect d. logrolling
d
financial insecurity in America is primarily the result of a. a shortage of financial planners and portfolio managers b. the low incomes of Americans c. the huge amount of time and complex knowledge required for basic financial planning d. a low rate of personal saving and poor financial planning
d
the success of self-employed entrepreneurs depends on a. the government and its investment in research and development b. a strong need to stay with tried and true ways of doing things c. high personal consumption rates d. an ability to discover and act on valuable opportunities overlooked by others
d
which of the followin investments would provide the best protection against inflation a. corporate bonds b. U.S treasury bonds c. an indexed equity mutual fund d. treasury inflation protected securities (TIPS)
d
which of the following goods is/are considered to be scarce?Education, Time, Water a. I only b. I and II c. I and III d. I, II, and III
d
you can improve your human capital throughout your lifetime by a. learning b. acquiring new skills c. receiving advanced training d. all of the above
d
your opportunity cost of attending a baseball game is a. the subjective value of the disappointment you will feel if your team loses b. the monetary cost of the drinks and food you purchase at the game c. the price of the ticket d. the highest valued alternative forgone because of the time and money required to attend the game
d
