Economics Final Cram Guide

The Law of Demand... ...refers to the principle that people prefer to purchase fewer goods when the price falls, and they purchase more goods when the price rises. ...refers to the principle that people prefer to purchase more goods when the price falls, and they purchase fewer goods when the price rises. ...only applies to people raised in capitalist countries. People raised in other cultures do no "obey" the law of demand. ...is a law passed by Congress that provides certain protections on the part of consumers.

...refers to the principle that people prefer to purchase more goods when the price falls, and they purchase fewer goods when the price rises.

5) Which of the following is an example of a private good? a. A chicken sandwich. b. National defense. c. An unowned school of fish. d. Watching a movie in a movie theater.

A chicken sandwich.

market power

A firm has market power if they have some "control over the price of their output," in that they: (i) can increase price without losing all customers and (ii) must decrease price in order to increase sales

_______________ refers to the tendency for wealthy people in poor countries to invest their financial resources abroad instead of at home A. Capital flight B. The brain-drain C. The vicious-cycle-of-poverty D. Government failure

A. Capital flight

1. ________________ is an economic system in which the means of production are privately owned and operated for a profit. A. Capitalism B. Communism C. Feudalism D. Socialism

A. Capitalism

Focusing on GDP Growth Rates between 1970 and 2019, _______ grew at an average rate of 9.03% per year over this entire 50 year period. A. China B. the European Union C. India D. Japan

A. China

____________ refers to an asset that is socially and legally accepted as a medium of exchange. A. Money B. Profit C. The bargaining range D. Demand

A. Money

3. ____________ is the academic subfield which uses the tools and framework of economics to analyze issues which traditionally fall within the domain of political science. A. Public Choice B. Real Business Cycle Theory C.Industrial Organization D. Environmental Economics

A. Public Choice

________ is the value of GDP computed using prices from an arbitrary base year. A. Real GDP B. Nominal GDP C. Real GDP Per Capita D. Imaginary GDP

A. Real GDP

The central bank of the United Kingdom A. is the Bank of England, which was founded in 1694. B. is the Federal Reserve, which was founded in 1913. C. is the Bank of Parliament, which was founded in 1981. D. None of the above answers are correct, since the United Kingdom does not have (and has never had) a central bank

A. is the Bank of England, which was founded in 1694.

Monetary Policy in the United States is determined by A. the Federal Reserve. B. the Judicial Branch of the Federal Government. C. the Executive Branch of the Federal Government. D. the Legislative Branch of the Federal Government.

A. the Federal Reserve.

The value of the Pechman-Okner Coefficient for the U.S. Federal Income Tax A. was .0854 in 2018. B. was negative for 14 straight years between 1984 and 1997. C. steadily increased from .0651 in 1960 to .1698 in 1970 to .2275 in 1980. D. ranged between .375 and .425 in every single year between 1939 and 2007.

A. was .0854 in 2018.

The ___________________ refers to government policies aimed at changing the final allotment of goods/services across consumers, usually with the intention of realizing a "fairer" apportionment of consumption, income, and wealth. A. Allocation Function of Government B. Distribution Function of Government C. Stabilization Function of Government D. Free Rider Function of Government

B. Distribution Function of Government

4. Which of the following is a basic characteristic of Capitalism? A. Private ownership of property is illegal. B. Economic decisions occur in markets. C.Income is distributed on the basis of "need." D. Government owns the factors of production.

B. Economic decisions occur in markets.

1. Within our discussion of Logrolling, we noted that _______________ argued that politicians in a democracy often act to maximize the probability of their own re- election. A. Jeremy Bentham B. James Buchanan C. Ronald Coase D. Gordon Tullock

B. James Buchanan

____________ were two of the central figures in the formulation of the ideas of Utilitarian Justice, which argues that total social welfare can be increased by income redistribution, so long as people have a diminishing marginal utility for money. A. Karl Marx and Friedrich Engels B. Jeremy Bentham and John Stuart Mill C. Max Lorenz and Corrado Gini D. John Harsanyi and Robert Frank

B. Jeremy Bentham and John Stuart Mill

The Equation of Exchange is A. Y=C+I+G+NX B. MV=PQ C. D(p)=S(p) D. GDP Per Capita = GDP ÷ Population

B. MV=PQ

____________ was leader of the Soviet Union when the Bolsheviks implemented the New Economic Policy (NEP). A. Karl Marx B. Vladimir Lenin C. Joseph Stalin D. Nikita Khrushchev

B. Vladimir Lenin

Consider the following two statements. Statement 1: "Tariffs and import quotas always increase the general welfare of society." Statement 2: "A ceiling on rents reduces the quantity and quality of available housing." Most economists would A. disagree with both Statement 1 and Statement 2. B. agree with Statement 2, but disagree with Statement 1. C. agree with Statement 1, but disagree with Statement 2. D. agree with both Statement 1 and Statement 2.

B. agree with Statement 2, but disagree with Statement 1.

7. Adam Smith was A. a 17th century English mercantilist. B. an 18th century Scottish economist. C. a 19th century German philosopher, economist, and revolutionary. D. a 21st century American real estate mogul who became a politician.

B. an 18th century Scottish economist.

Suppose that the value of the Consumer Price Index in Canada increased from 178.3 up to 184.8 between 2017 and 2018. Based upon these values, Canada's inflation rate for 2018 was ______. A. approximately 1.04% B. approximately 3.65% C. 6.5% D. approximately 8.30%

B. approximately 3.65%

Economic Man (aka, homo economicus) is A. neither rational nor self-interested. B. both rational and self-interested. C. rational, but not self-interested. D. self-interested, but not rational.

B. both rational and self-interested.

11. The height of the demand curve at a particular quantity illustrates A. seller's reservation price for that unit. B. buyer's reservation price for that unit. C. magnitude of excess demand at the market equilibrium. D. spontaneous order.

B. buyer's reservation price for that unit.

A "Self-Interested" person A. cares only about his own well-being (and does not care at all about the well-being of others). B. cares about his own well-being more than the well-being of others. C. cares about the well-being of others more than his own well-being. D. does not care about the well-being of anyone (including himself).

B. cares about his own well-being more than the well-being of others.

Looking at the scope of central planning in the Soviet Union post WW-II, between 1951 and 1960 the number of items for which output targets were set A. increased from 10 items to 525 items. B. increased from 1,600 items to 12,750 items. C. decreased from 25,482 items to 16,351 items. D. decreased tom 4,592 items to zero items (since central planning was abandoned in the country in 1960).

B. increased from 1,600 items to 12,750 items.

The Laffer Curve illustrates how total tax revenue A. will always increase when the tax rate is increased. B. will always decrease when the tax rate is increased. C may either increase or decrease when the tax rate is increased. D. will be very high when the tax rate is either very low or very high, but will instead be negative if the tax rate is set at an intermediate value.

C may either increase or decrease when the tax rate is increased.

As of 2020, the poverty threshold in the U.S. for a family of four consisting of two adults and two children was A. $1.90 per day. B. 22.4%. C. $26,246 per year. D. $98,088 per year.

C. $26,246 per year.

Consider two countries that each have a Per Capita GDP of $10,000 in 2021. Country A realizes a constant 3% increase of Per Capita GDP, while Country B realizes a constant 12% increase of Per Capita GDP. Given these constant rates of increase, in 2045 (i.e., 24 years in the future), Per Capita GDP in Country B will be ________________ Per Capita GDP in Country A. A. 2 times greater than B. 4 times greater than C. 8 times greater than D. 16 times greater than

C. 8 times greater than

____________________ refers to the time it takes a policymaker to decide upon the specific stabilization policies which should be enacted. A. An Information Lag B. A Recognition Lag C. A Decision Lag D. An Implementation Lag

C. A Decision Lag

4. _______________ traces its philosophical roots to the work of 19th Century Philosopher Karl Marx. A. The "Invisible Hand" B. Capitalism C. Communism D. Feudalism

C. Communism

16. Alec Nove described ______________ as "when the state uses influence, subsidies, grants, [and] taxes [to influence economic decisions], but does not compel." A. Consumer Sovereignty B. Command Planning C. Indicative Planning D. The Invisible Hand

C. Indicative Planning

Which of the following countries had a negative Annual Inflation Rate in 2019? A. Germany. B. Mexico. C. Saudi Arabia. D. Venezuela.

C. Saudi Arabia.

Which of the following is an example of a regressive tax? A. The U.S. Income Tax. B. The Russian Income Tax. C. The U.S. Social Security Payroll Tax. D. None of the above answers are correct (since regressive taxes do not exist in the real world).

C. The U.S. Social Security Payroll Tax.

The Expanded Circular Flow Diagram builds upon the Basic Circular Flow Diagram by A. eliminating the illustration of the role of households. B. adding an illustration of the role of labor unions and monopolies. C. adding an illustration of the role of government and the foreign sector. D. adding an illustration of the role of the central bank.

C. adding an illustration of the role of government and the foreign sector.

Armen Alchain and Gordon Tullock A. were the first to recognize that increasing the minimum wage would decrease the unemployment rate of young and unskilled workers. B. argued that automobile accident rates could be decreased by installing "five point harness" seat belts and improved airbags in every car. C. argued that automobile accident rates could be decreased by installing a sharp, irremovable, foot long, iron spike to the steering wheel of every car. D. wrote a letter to FDR in 1939, advising him to have the U.S. government assist physicists in the U.S. working on research related to the creation of a uranium bomb.

C. argued that automobile accident rates could be decreased by installing a sharp, irremovable, foot long, iron spike to the steering wheel of every car.

During the Great Recession in the U.S. (which officially lasted from January 2008 through June 2009) Real GDP _____________. A. increased by 0.4% B. decreased by 1.3% C. decreased by 4.0% D. decreased by 10.2%

C. decreased by 4.0%

Economic Growth is A. visually illustrated by an inward shift of the Production Possibilities Frontier. B. simply a result of whether or not a country has access to natural resources (and is therefore simply determined by "chance" or "nature"). C. defined as a sustained increases over time in a society's value of real GDP. D. More than one (perhaps all) of the above answers is correct.

C. defined as a sustained increases over time in a society's value of real GDP.

When observing "Average Annual Working Time" across different countries, it was noted that the typical worker in the U.S. spends roughly 1,757 hours per year working. In comparison to other countries, this is A. more hours than any other country in the World (since the country with the second highest value is Mexico, with a figure of 1,718 hours per year). B. fewer hours than any other country in the World (since the country with the second lowest value is Japan, with a figure of 1,798 hours per year). C. higher than the figure for Germany (1,354 hours), roughly equal to the figure for Japan (1,738 hours), but lower than the figure for Mexico (2,255 hours). D. exactly equal to the World average, since there is no variability whatsoever in "Average Annual Working Time" across different countries.

C. higher than the figure for Germany (1,354 hours), roughly equal to the figure for Japan (1,738 hours), but lower than the figure for Mexico (2,255 hours).

Suppose that the Lorenz Curve for the U.S. in 2021 lies completely below the Lorenz Curve for Sweden in 2021. This implies that A. Per Capita Incomes are higher in Sweden than in the U.S. B. Per Capita Incomes are higher in the U.S. than in Sweden. C. incomes are distributed more equally in Sweden than in the U.S. D. incomes are distributed more equally in the U.S. than in Sweden.

C. incomes are distributed more equally in Sweden than in the U.S.

In his writings, Karl Marx referred to the working class as the __________ and to the business owners as the __________. A. 99%; 1%. B. deplorables; admirables C. proletariat; bourgeoisie. D. krest'yane; dvoryane.

C. proletariat; bourgeoisie.

The leading cause of house fires in the former Soviet Union was A. "Molotov cocktails" being thrown through windows by anti-communist revolutionaries. B. gas lamps (which people used for light since most homes lacked electricity) tipping over. C. television sets that would overheat and explode. D. gas leaks from stoves with poorly manufactured pipes.

C. television sets that would overheat and explode.

"Deadweight Loss" refers to A. the burden that consumers incur from having to pay for goods, instead of getting them for free. B. the negative impact of industrial production on our environmental resources. C. the difference between "maximum possible Total Social Surplus" and "realized Total Social Surplus." D. the negative profits (or losses) that firms make in a free market economy when their costs of production are too high.

C. the difference between "maximum possible Total Social Surplus" and "realized Total Social Surplus."

Economics is A. the art of communicating financial information about a business entity to stakeholders, such as employees, managers, shareholders, and customers. B. the social science that studies human mental functions and behavior, with a focus on phenomena such as perception, cognition, personality, and interpersonal relationships. C. the social science that studies decision making in the face of scarcity and the resulting impact of such decisions on both society as a whole and on the individual members therein. D. the social science that studies the allocation and transfer of power in decision-making, systems of governance, and the effects of public policy.

C. the social science that studies decision making in the face of scarcity and the resulting impact of such decisions on both society as a whole and on the individual members therein.

The Unemployment Rate in Greece in 2019 was ______. A. -2.43% B. 1.59% C. 3.76% D. 17.30%

D. 17.30%

11. Which of the following is NOT one of the seven sources of government failure? A. Corruption or kleptocracy. B. Regulatory capture. C. Rent seeking. D. Externalities.

D. Externalities.

"The General Theory of Employment, Interest and Money" was written by A. Milton Friedman B. Anna Schwartz C. Margaret Thatcher D. John Maynard Keynes

D. John Maynard Keynes

The Labor Theory of Value, which states that the value of a commodity depends upon only the amount of labor required to produce the commodity, is most closely associated with the ideas of A. Oscar Wilde. B. Max Lorenz. C. Milton Friedman. D. Karl Marx.

D. Karl Marx.

The ______________ provides a guide for allocating scarce productive resources to various uses, which states that when increasing the production of a good, a society should use the available productive resource with the lowest opportunity cost. A. Opportunity Cost Principle B. Economic Distribution Principle C. Law of Absolute Advantage D. Law of Comparative Advantage

D. Law of Comparative Advantage

5. _________________ is the process by which a legislator votes to approve one bill in exchange for favorable votes from other members on other bills. A. Rational Ignorance B. Regulatory Capture C. Rent Seeking D. Logrolling

D. Logrolling

15. A firm operating in a "Perfectly Competitive Market" has "No Market Power," which implies that the firm A. would lose all its customers if it attempted to increase price above the prevailing market price. B. faces a "vertical demand curve" for its output. C. does not have to decrease price in order to increase the quantity of output sold. D. More than one (perhaps all) of the above answers is correct.

D. More than one (perhaps all) of the above answers is correct.

3. The "Law of Demand" implies that A. if the price of a good increases, then the quantity demanded of the good will decrease. B. demand curves should be "downward sloping." C. demand for a good will increase if consumers realize an increase in income. D. More than one (perhaps all) of the above answers is correct.

D. More than one (perhaps all) of the above answers is correct.

Commenting on the inefficiency of the Soviet economy, Yegor Gaidar (Prime Minister of Russia in 1992) noted: A. "The average construction time for an industrial plant in the U.S.S.R. was more than ten years, in the United States less than two years." B. "In manufacturing per unit, the U.S.S.R. in 1980 used 1.8 times more steel than the United States, 2.3 times more cement, 7.6 times more (mineral) fertilizer, and 1.5 times more timber." C. "The U.S.S.R. produced 16 times as many grain harvesters (as the United States), but harvested less grain and became dependent on grain imports." D. More than one (perhaps all) of the above answers is correct.

D. More than one (perhaps all) of the above answers is correct.

The ______________ is the "most widely accepted arbiter of recessions and recoveries in the U.S. business cycle" (i.e., the entity that determines the dates of the phases of the business cycle for the U.S. economy). A. BEA (Bureau of Economic Analysis) B. BLS (Bureau of Labor Statistics) C. Federal Reserve System D. NBER (National Bureau of Economic Research)

D. NBER (National Bureau of Economic Research)

2. Which of the following countries currently has an economic system which would be best described as "Pure Socialism"? A. Sweden. B. China. C. India. D. None of the above answers are correct.

D. None of the above answers are correct.

___________________ is a general concept that refers to the cost of giving up the best alternative that must be foregone in order to do or acquire something. A. A Property Right B. Comparative Advantage C. The Resource Use Decision D. Opportunity Cost

D. Opportunity Cost

The phase of the business cycle that refers to the point in time at which overall economic activity reaches its minimum is the A. Recovery. B. Peak. C. Recession. D. Trough.

D. Trough.

Between March 2020 and April 2020 the Unemployment Rate in the United States increased by 10.3 percentage points (from 4.4% to 14.7%). Over the entire 878 month period from February 1948 through March 2021 this was the A. second largest month-to-month increase in the unemployment rate, eclipsed only by the 11.4 percentage point increase between September 2008 and October 2008. B. largest month-to-month increase in the unemployment rate, but there were 17 other months in which the month-to-month increase was 8.0 percentage points or more. C. largest month-to-month increase in the unemployment rate, with the next largest being a 5.2 percentage point increase in June 1997. D. largest month-to-month increase in the unemployment rate, and moreover there were only two other months in which the month-to-month increase was 1.0 percentage points or more (a 1.3 percentage point increase in October 1949 and a 1.0 percentage point increase in December 1953).

D. largest month-to-month increase in the unemployment rate, and moreover there were only two other months in which the month-to-month increase was 1.0 percentage points or more (a 1.3 percentage point increase in October 1949 and a 1.0 percentage point increase in December 1953).

The number of times that a typical dollar is used in market transactions in a single year is referred to as A. crowding out. B. fractional reserve banking. C. the turnover of money. D. the velocity of money.

D. the velocity of money.

_____ is the process by which a legislator votes to approve one bill in exchange for favorable votes from other members on other bills. Logrolling Rational ignorance Regulatory capture Rent-seeking

Logrolling

Although economists might disagree with each other regarding values, they often agree on methodology and analysis, and there are many topics and issues on which many economists tend to agree with each other (at least in terms of the analysis of the issue in question if not a particular normative policy). (Article) True False

True

Decrease in Demand

a change in demand consistent with consumers being less willing to purchase the good, in that at every price the new quantity demanded is less than the previous quantity demanded (visually, such a change is illustrated as a "leftward shift" of the demand curve).

negative externality

a cost of an activity borne by someone not engaging in the activity. examples: pollution, noise from low-flying aircraft, speeding on a highway, installation of "The Club" in a car

Assume ceteris paribus for each of the questions associated with the following scenario. When demand increases due to an increase in population (thus causing the demand curve to shift to the right), what happens to the quantity supplied? Does this shift in the demand curve cause a shift in the supply curve? Will the new equilibrium price be higher or lower than the old equilibrium price? (Exam 1) a. Increases; no; higher b. Increases; yes; lower c. Decreases; yes; higher d. Decreases; no; lower

a. Increases; no; higher

A common pool resource is... (Chapter 10) a. rival in consumption and non-excludable. b. rival in consumption and excludable. c. non-rival in consumption and excludable. d. non-rival in consumption and non-excludable.

a. rival in consumption and non-excludable.

Three primary functions of government in the economy:

allocation function, distribution function, and stabilization function

Consider a country in which there are 157.4 million people employed, 12.5 million people in the labor force who do not have jobs, and 112.6 million people who are not in the labor force. The unemployment rate of this country is approximately... (Chapter 9, p. 238, #8) a. 4.4% b. 7.4% c. 7.9% d. 11.1%

b. 7.4%

4) Which of the following is part of the Coasian Solution to the problem of externalities? a. Clearly and fully define property rights. b. Make individuals pay compensation if they infringe upon the property rights of others. c. Allow parties to negotiate with one another regarding infringements on property rights caused by externalities. d. All of the above.

b. Make individuals pay compensation if they infringe upon the property rights of others.

private investment expenditures

purchases of newly produced goods and services by firms (e.g., spending on new plants and equipment) (denoted by I )

market

the collection of all potential buyers and all potential sellers of a good or service.

consumer sovereignty

the freedom for an individual to choose to purchase (or to not purchase) a good or services at a price determined in a free, unfettered market

buyer's reservation price

the maximum amount of money that he is willing to give up to acquire the item.

Spontaneous Order

the natural and undirected emergence of order out of seeming chaos

unemployment rate

the percentage of the labor force that is currently unemployed

inflation rate

the rate at which the overall price level increases on an annual basis

Economic system

the rules and methods put in place by a society to answer the three fundamental economic questions of "What to produce?," "How to produce it?," and "For whom to produce it?"

gross domestic product

the total market value of all final goods and services produced within a society over a certain period of time

coercion

the use or threat of force or incarceration in order to obtain compliance.

Choose the answer option that best explains the following paradox regarding price gouging: "The only way to guarantee low prices is to allow sellers to charge high prices." Price ceilings do not cause shortages. They prevent greedy sellers from raising their prices too high during times of crisis. If sellers are not allowed to charge high prices, there won't be the necessary market signals that would entice new sellers to enter the market and provide new supply while allocating existing supply to buyers who needed it the most. Sellers who charge high prices would be arrested and prosecuted by local authorities enforcing anti-price-gouging laws, which would signal to other sellers not to increase their prices drastically during natural disasters. If sellers are not allowed to charge high prices, consumers would not know which sellers were looking to exploit them during times of crisis; therefore, consumers might accidentally patronize unvirtuous sellers.

If sellers are not allowed to charge high prices, there won't be the necessary market signals that would entice new sellers to enter the market and provide new supply while allocating existing supply to buyers who needed it the most.

Brian recently attended a concert by the rapper 2 Chainz at the Mississippi Coast Coliseum in Biloxi, MS. His Total Benefits from seeing this show were $125, while his Total Costs were $75. From this information, it follows that his Economic Surplus from attending the show was A. $75 - $125 = - $50 (i.e., negative fifty dollars). B. $125 - $75 = $50. C. $125 + $75 = $200. D. (2)($125 + $75) = $400.

B. $125 - $75 = $50.

Johnny has worked for Amy for the past twenty years. In 2005 his annual salary was $38,500. The value of the price index in 2005 was 123.2, and the value of the price index in 2017 was 156.9. His real income in 2017 would have been exactly the same as in 2005 if his nominal annual salary in 2017 was ________. A. $30,230.72 B. $49,031.25 C. $51,474.50 D. $60,406.50

B. $49,031.25

The country of Benthamstan imposes a progressive income tax which reduces the value of its Gini Coefficient from .40 to .32. This implies that the value of the Pechman-Okner Coefficient for this tax is equal to ______. A. .08 B. .20 C. .36 D. .72

B. .20

Within the last decade, Venezuela experienced hyperinflation with prices increasing by __________ in 2018. A. 257.9% B. 130,060% C. 79,600,000,000% (i.e., 79.6 billion percent) D. 41,900,000,000,000,000 (i.e., 41.9 quadrillion percent)

B. 130,060%

The ___________ Amendment to the U.S. Constitution, ratified on ___________, authorized the creation of a Federal Income Tax. A. 1st Amendment; July 4, 1776. B. 16th Amendment; February 3, 1913. C. 10th Amendment; November 5, 1939. D. 29th Amendment; March 7, 1982.

B. 16th Amendment; February 3, 1913.

Suppose that "County Z" were to realize a constant GDP Growth Rate of 4% per year. It follows that Real GDP would double in roughly ________ years. A. 4 B. 18 C. 25 D. 72

B. 18

The value of the Unemployment Rate in the U.S. in February 2020 (right before the start of the COVID-19 Recession) was A. 1.7%, an all-time record low Unemployment Rate. B. 3.5%, the 24th consecutive month with a rate of 4.0% or lower. C. 5.9%, just above the mean Unemployment Rate between January 1948 and March 2021. D. 16.2%, the highest Unemployment Rate since April 1992.

B. 3.5%, the 24th consecutive month with a rate of 4.0% or lower.

f, over the course of a year, the value of a country's Consumer Price Index increased from 186.4 up to 193.9, it follows that the country realized an inflation rate of ______. A. 3.87% B. 4.02% C. 7.5% D. 380.3%

B. 4.02%

In 2019 there were ________ deaths from malaria world-wide, with _____ of these occurring in Africa. A. 3,512; 27%. B. 409,000; 94%. C. 12.4 million; 59%. D. None of the above answers are correct (since malaria was eradicated in 2017).

B. 409,000; 94%.

In 2018, the U.S. Federal Income Tax had A. 2 different tax brackets of 15% and 28%. B. 7 different tax brackets, ranging from a low of 10% to a high of 37%. C 14 different tax brackets, ranging from a low of 7% to a high of 65%. D. 22 different tax brackets, ranging from a low of 5% to a high of 90%.

B. 7 different tax brackets, ranging from a low of 10% to a high of 37%.

Consider a country in which there are 157.4 million people employed, 12.5 million people in the labor force who do not have jobs, and 112.6 million people who are not in the labor force. The unemployment rate of this country is roughly ______. A. 4.4% B. 7.4% C. 7.9% D. 11.1%

B. 7.4%

_______________ specifies what different parties must do, whatever the external circumstances, and provides for enforcement or compensation for non- performance. A. Socialism B. A Contract C.A Market D. The Invisible Hand

B. A Contract

__________________ refers to someone who undertakes and oversees a business venture. A. An Invisible Hand B. An Entrepreneur C. A Central Planner D. A Social Surplus

B. An Entrepreneur

______________ moved to Hawai'i in 1983 in order to avoid having to pay income taxes to the United Kingdom at a Marginal Tax Rate of 83%. A. Prince Harry B. Brian Johnson C. Ronald Reagan D. Chris Rock

B. Brian Johnson

____________ is defined as an increase in the money supply which provides a short term stimulus to the macro economy, resulting in higher levels of output, employment, and incomes. A. Contractionary monetary policy B. Expansionary monetary policy C. A supply shock D. Hyperinflation

B. Expansionary monetary policy

The _________________ is the Central Bank of the United States. A. Bank of America B. Federal Reserve C. U.S. Congress D. None of the above answers are correct (since the U.S. Central Bank was abolished by President Reagan in 1982).

B. Federal Reserve

Which of the following is NOT one of the primary policy tools used by a central bank? A. Setting the "discount rate." B. Loaning money to low income home buyers at below market interest rates (in order to make housing "affordable for all"). C. Setting "reserve requirements." D. None of the above answers are correct (since each of the choices listed is one of the primary policy tools used by a central bank).

B. Loaning money to low income home buyers at below market interest rates (in order to make housing "affordable for all").

Lyla and Sally spend each workday assembling bicycles and fixing computers. Lyla can assemble 24 bicycles in a single day, while Sally can assemble 18 bicycles in a single day. Based upon this information alone, we know that A. Lyla possesses a Comparative Advantage in assembling bicycles. B. Lyla possesses an Absolute Advantage in assembling bicycles. C. Sally possesses an Absolute Advantage in fixing computers. D. More than one (perhaps all) of the above answers is correct.

B. Lyla possesses an Absolute Advantage in assembling bicycles.

Which markets are represented in the Basic Circular Flow Diagram? A. Markets for "Imports and Exports" and markets for "Factors of Production." B. Markets for "Goods and Services" and markets for "Factors of Production." C. Markets for "Goods and Services" and markets for "Financial Assets." D. Markets for "Financial Assets" and markets for "Imports and Exports."

B. Markets for "Goods and Services" and markets for "Factors of Production."

6. Which of the following is a good example of a "Pure Public Good"? A. A grilled chicken taco from Del Taco. B. National Defense. C. A bus ride on MARTA. D. More than one (perhaps all) of the above answers are correct

B. National Defense.

5. ________________ specify/specifies obligations of others not to interfere in your exercise of your rights. A. Positive Rights B. Negative Rights C. Control Rights D. Social Justice

B. Negative Rights

_____________________ refers to the production of goods and services, valued in each period according to current period prices. A. Hyperinflation B. Nominal GDP C. Real GDP D. Real GDP per capita

B. Nominal GDP

__________________ is a broad term which refers to a transfer of a good or service to someone which directly increases the amount of the item they are able to consume. A. A Compensating Differential B. Redistribution In-Kind C. Income Support D. Income Taxation

B. Redistribution In-Kind

7. ____________ refers to attempts by people to manipulate government action or influence government decisions in order to make themselves better off at the expense of others. A. The Condorcet Paradox B. Rent seeking. C. Logrolling. D. Rational ignorance.

B. Rent seeking.

The ________________ provides a measure of the degree of progressivity of a tax, defined as the ratio of the area between the Lorenz Curve and the Tax Concentration Curve to the entire area below the Lorenz Curve. A. Gini Coefficient B. Stroup Coefficient C. Pechman-Okner Coefficient D. Lorenz Coefficient

B. Stroup Coefficient

6. Which of the following is an example of a "Natural Asset"? A. The "college education" which has been acquired by approximately 27% of the U.S. population. B. The 1.7 trillion tons of coal reserves in the United States. C. The Volkswagen manufacturing plant near Chattanooga, TN. D. More than one (perhaps all) of the above answers is correct.

B. The 1.7 trillion tons of coal reserves in the United States.

Why are pencils cheap? (Intro) A. Capitalist pencil factory owners are exploiting workers by paying low wages in sweatshop conditions to make cheaper pencils. B. The worldwide division of labor and interconnectedness through markets allows people to specialize in the production of specific goods and services, which lowers input production costs over time. C. Pencils do not have many inputs and can be made using only a few workers in a factory. D .Protectionist trade policies have kept American pencil manufacturers in business, which allows them to produce goods cheaply.

B. The worldwide division of labor and interconnectedness through markets allows people to specialize in the production of specific goods and services, which lowers input production costs over time.

Why would economists say that the Ford Motor Company has never made a choice or a decision? (Intro) A. They're wrong. Ford answers to greedy shareholders. B. To remind non-economists of methodological individualism - the concept that only individuals within an organization, rather than the organization itself, make choices C. Ford doesn't make choices - only the U.S. automobile industry does. D. Ford answers to the United Auto Workers union.

B. To remind non-economists of methodological individualism - the concept that only individuals within an organization, rather than the organization itself, make choices

19. The present economic system of the United Kingdom would be most accurately described as ______________________, while the present economic system of Spain ______________________. A. a Mixed Economy: would be most accurately described as Pure Socialism. B. a Mixed Economy; would also be most accurately described as a Mixed Economy. C. Pure Capitalism; would be most accurately described as Pure Socialism. D. Pure Socialism; would be most accurately described as Communism.

B. a Mixed Economy; would also be most accurately described as a Mixed Economy.

Between May 2020 and June 2021 there was a decrease in both price and quantity traded of corn. This change in market equilibrium outcome would result from A. an increase in Demand. B. a decrease in Demand. C. an increase in Supply. D. a decrease in Supply.

B. a decrease in Demand.

16. A government policy that attempts to "Internalize an Externality" can be generally described as A. a policy which completely bans an activity that generates an externality. B. a policy which introduces a cost (or foregone gain) that would be realized by a decision maker who generates an externality. C. a policy which mandates the exact level of an activity that decision makers must engage in. D. None of the above answers are correct.

B. a policy which introduces a cost (or foregone gain) that would be realized by a decision maker who generates an externality.

Focusing on the U.S. Federal Income Tax, in 2018 the Top 1% of wage earners paid A. virtually no taxes, due to all of the loopholes in the current tax code. B. about 40.1% of all taxes collected, an amount slightly greater than the 39.7% of all taxes collected that was paid by the "bottom 95% of wage earners." C. about 31.6% of all taxes collected, an amount slightly less than the 32.2% of all taxes collected that was paid by the "bottom 75% of wage earners." D. about 20.9% of all taxes collected, an amount exactly equal to their share of total adjusted gross income earned.

B. about 40.1% of all taxes collected, an amount slightly greater than the 39.7% of all taxes collected that was paid by the "bottom 95% of wage earners."

Person A has a(n) _____ in the production of a good if that person can produce more of the good than Person B with the same amount of inputs. (chapter 2) A. comparative advantage B. absolute advantage C. tradeoff D. opportunity cost

B. absolute advantage

The Basic Circular Flow Diagram builds upon the Preliminary Circular Flow Diagram by A. deleting the illustration of the role played by firms in the economy. B. adding an illustration of the movement of money between households and firms, which facilitates the voluntary transfer of economic resources. C. adding an illustration of how equilibrium price and quantity are each determined in a market. D. adding an illustration of the role of government in collecting taxes from firms and households.

B. adding an illustration of the movement of money between households and firms, which facilitates the voluntary transfer of economic resources.

A Central Bank can increase the Money Supply in a country by A. selling treasury debt securities to the public. B. decreasing the discount rate. C. increasing the reserve requirement. D. More than one (perhaps all) of the above answers is correct

B. decreasing the discount rate.

The market equilibrium price A. prevents the efficient quantity of trade from arising. B. determines the split of total gains from trade between buyers and sellers at the market outcome. C. determines if Deadweight Loss is positive or negative at the market outcome. D. None of the above answers are correct.

B. determines the split of total gains from trade between buyers and sellers at the market outcome.

The market equilibrium price... (chapter 5, p. 131, #8) A. prevents the efficient quantity of trade from arising. B. determines the split of total gains from trade between buyers and sellers at the market outcome. C. determines if Deadweight Loss is positive or negative at the market outcome. D. None of the above answers are correct.

B. determines the split of total gains from trade between buyers and sellers at the market outcome.

9. Privately owned enterprises in a free market economy have a primary goal of A. exploiting workers. B. earning as large of a profit as possible. C. tricking consumers into thinking that they are "environmentally conscious." D. More than one (perhaps all) of the above answers is correct.

B. earning as large of a profit as possible.

In 2019 High School graduates earned $8,008 per year more than non-High School graduates. If this difference had instead been $12,500 per year, then we would expect A. more people to drop out of school before graduating High School. B. fewer people to drop out of school before graduating High School. C. more children to start eating breakfast before school. D. that nobody would change their behavior.

B. fewer people to drop out of school before graduating High School.

One of the "7 Determinants of Productivity, Income, and Wealth" is "effort," which refers to the recognition that differences in income or wealth across individuals could result from differences in A. the amount of money that individuals receive as inheritances during their lifetime. B. how hard individuals choose to work. C. the natural talents that people are endowed with at birth. D. the skills and experiences that people acquire through education, training, and work experience.

B. how hard individuals choose to work.

Consider a country with a population of 3,485,000 people and Real GDP of €88.132 billion. It follows that Real GDP Per Capita A. is also equal to €88.132 billion. B. is roughly equal to €25,289. C. is roughly equal to €307,140,020. D. cannot be determined from the given information.

B. is roughly equal to €25,289.

An output combination is characterized by Productive Efficiency if A. it cannot possibly be produced (given the limits imposed by the scarcity of resources and current technology). B. it is possible to produce the output combination, and further it is not possible to increase the amount produced of any good without decreasing the amount produced of some other good. C. it is possible to produce the output combination, and further it is possible to increase the amount produced of some good without decreasing the amount produced of any other good. D. one single worker possesses a comparative advantage in producing every good that is a part of the output combination.

B. it is possible to produce the output combination, and further it is not possible to increase the amount produced of any good without decreasing the amount produced of some other good.

Based upon the current values of "life expectancy at birth" for different countries around the world which were discussed in lecture, A. life expectancy at birth is lowest in "capitalist societies" (such as Singapore (59.2 years)), because of big business exploiting labor and "working people to death." B. life expectancy at birth in the U.S. (78.9 years) is neither the longest nor the shortest life expectancy in the world. C. countries around the world typically fall into one of two categories - "long life span countries" (those with life expectancies above 85 years, which account for about 38% of countries worldwide) and "short life span countries" (those with life expectancies below 60 years, which account for 53% of countries worldwide) - with very few countries (only 9%) realizing life expectancies between 60 and 85 years. D. More than one (perhaps all) of the above answers is correct.

B. life expectancy at birth in the U.S. (78.9 years) is neither the longest nor the shortest life expectancy in the world.

"Voluntary Trade" generally A. makes both parties to the trade worse off. B. makes both parties to the trade better off. C. makes buyers better off, but sellers worse off. D. makes sellers better off, but buyers worse off.

B. makes both parties to the trade better off.

5. Last weekend Brenda won $900 at a casino in Biloxi, Mississippi. She decided to use the money to purchase a new TV from Walmart. She was able to use the money to acquire the new TV since money serves as a A. contract. B. medium of exchange. C. store of value. D. unit of account.

B. medium of exchange.

Last weekend Brenda won $1,500 at a casino in Biloxi, Mississippi. She decided to use the money to purchase a new TV from Walmart. She was able to use the money to acquire the new TV since money serves as a A. dual coincidence of wants. B. medium of exchange. C. store of value. D. unit of account.

B. medium of exchange.

Between 1959 and 2019, the poverty rate in the United States has ranged between a A. minimum of 16.8% in 1983 and a maximum of 24.2% in 1991. B. minimum of 10.5% in 2019 and a maximum of 22.4% in 1959. C. minimum of 14.8% in 2015 and a maximum of 20.7% in 2017. D. minimum of 0% in 1962 and a maximum of 14.7% in 2018.

B. minimum of 10.5% in 2019 and a maximum of 22.4% in 1959.

Maurice is a citizen of Canada, but lives, works, and attends college in the United States. Last year he went on vacation to Mexico during Spring Break. He works at a daycare in Roswell, GA. Last year he provided "daycare services" valued at $22,500. The value of these services would be included in the calculation of GDP for A. only Canada, since he is a Canadian citizen. B. only the United States, since that is where the production took place. C. only Mexico, since that is where he went to relax on vacation (which was a necessary activity for him to be able to work hard in school and on the job throughout the rest of the year). D. all three countries (i.e., Canada, Mexico, and the United States) since he has an "economic tie" to each of the three countries.

B. only the United States, since that is where the production took place.

2. ______________ has been described as "an ill-governed kleptocracy in which corruption is not a happy side-effect of power, but the core of the system." A. present day India B. present day Russia C. the United States during the 1980s D. Great Britain during the 1970s

B. present day Russia

According to the views held by Monetarists, if the money supply is drastically increased, then in the long run A. the level of real output will increase but prices will not increase. B. prices will increase but the level of real output will not increase. C. neither prices nor the level of real output will increase. D. both prices and the level of real output will increase.

B. prices will increase but the level of real output will not increase.

Mike Tyson bought a white tigerfrom Joe Exotic for $71,000 (in early '90s dollars). Mike's reservation price was $101,000, and a total social surplus of $50,000 was generated by the trade. Therefore, JoeExotic realized a _____ from this trade. (chapter 5) A. producersurplus of $50,000 B. producer surplus of $20,000 C. consumersurplus of $20,000 D. consumersurplus of $30,000

B. producer surplus of $20,000

Consumption Expenditures are defined as A. goods/services produced in a foreign country and purchased by residents of the home country. B. purchases of newly produced goods/services by households. C. purchases of newly produced goods/services by firms. D. purchases of newly produced goods/services by local, state, and federal governments.

B. purchases of newly produced goods/services by households.

9. While playing baseball in their front yard, Wally and his little brother break the windshield of Ward's car. Wally and his brother concede that it is right for them to cover the costs of repairing the broken windshield. In taking this position, they are recognizing that Ward has a ______________ in regards to his car windshield. A. right to control B. right to restitution C. right to transfer D. right to consumer sovereignty

B. right to restitution

7. In a "free market economy" profits A. refer to the "gain" that a buyer gets from purchasing a good/service. B. serve as a "signaling device," directing resources to their most valued uses. C. are only earned by firms who exploit workers. D. None of the above answers are correct.

B. serve as a "signaling device," directing resources to their most valued uses.

According to the theory of capitalism, in a "free market economy" profits A. refer to the "gain" that a buyer gets from purchasing a good/service. B. serve as a "signaling device," directing resources to their most valued uses. C. are only earned by firms who exploit workers. D. More than one (perhaps all) of the above answers is correct.

B. serve as a "signaling device," directing resources to their most valued uses.

Jay lives in a country in which military output is not provided by the government, but rather is supplied by profit maximizing firms and purchased by individual consumers in a free market. Jay chooses to enjoy the benefits of national security which result from military output purchased by others in society, while purchasing "zero units of military output" of his own. This example illustrates A. Joseph Schumpeter's account of a "gale of creative destruction." B. the Free Rider Problem. C. the Coasian Solution to the problem of externalities. D. Adam Smith's Invisible Hand.

B. the Free Rider Problem.

20. The "Incidence of a Tax" refers to A. which level of government is imposing the tax. B. who bears the burden of the tax in terms of decreased welfare. C. the frequency with which an individual has to pay the tax. D. which individual is legally responsible for writing a check to pay the tax.

B. who bears the burden of the tax in terms of decreased welfare.

Consider a market in which maximum possible Total Social Surplus is equal to $850,000 (which is realized if 32,500 units are traded). If instead 28,000 units are traded, then realized Total Social Surplus is equal to $700,000. It follows that if 28,000 units are traded, then Deadweight Loss is equal to ____________. A. - $150,000 (i.e., negative $150,000) B.$150,000 C. $775,000 D.$1,550,000

B.$150,000

Chapter 4 of Economics in One Lesson discusses some of the consequences of public works projects that the government puts into action using tax dollars specifically for the purpose of providing employment. One such hypothetical is the construction of a "bridge to nowhere" that will cost $1 million (in 1950s dollars) and provide 500 jobs for a year but otherwise has no practical use (i.e., it will not be used very frequently by the public after it is built). What are some of the unseen opportunity costs ofthisgovernment project that might be overlooked if observers only focus on what is directly seen? A portion of that $1 million will be spent on those 500 workers, who will now be able to spend their incomes on various goods and services. Because public works must be paid with taxes, that $1 million must come from taxpayers. What is not seen is what those taxpayers would have done with that $1 million, which might have been spent on cars, refrigerators, etc. They would also alter their behavior in response to the tax being imposed upon them. Taxpayers that provide the $1 million of tax dollars to the government weren't going to spend that money, anyway, so there is no cost to taxing it away from them. All of the above.

Because public works must be paid with taxes, that $1 million must come from taxpayers. What is not seen is what those taxpayers would have done with that $1 million, which might have been spent on cars, refrigerators, etc. They would also alter their behavior in response to the tax being imposed upon them.

In 1900, Real Per Capita GDP was $4,583 in Argentina and $2,206 in Singapore. By 2018, Real Per Capita GDP was ______ in Argentina and ______ in Singapore. A. $28,940; $35,384. B. $45,228; $37,598. C. $18,556; $68,402. D. $3,284; $92,591

C. $18,556; $68,402.

In 1950 (three years before the Cuban Revolution), Real Per Capita GDP was $2,577 in Panama, $2,638 in Cuba, and $3,416 in Puerto Rico. By 2018, Real Per Capita GDP was ________ in Panama, ________ in Cuba and ________ in Puerto Rico. A. $12,986; $20,874; $40,306. B. $20,746; $33,290; $29,871. C. $22,637; $8,326; $35,076. D. $34,293; $16,998; $14,337.

C. $22,637; $8,326; $35,076.

Per Capita GDP in the European Union is approximately $44,436. In comparison, the value of Per Capita GDP in the U.S. is approximately A. $37,220 (about 16.2% lower than the value in the E.U.). B. $44,112 (roughly the same as the value in the E.U.). C. $62,530 (about 40.7% higher than the value in the E.U.). D. $89,425 (just over double the value in the E.U.).

C. $62,530 (about 40.7% higher than the value in the E.U.).

Historically, the highest value of the discount rate set by The Fed was _________. A. 1.75% from October 2001 to June 2003 B. 5.5% from August 1993 to December 1994 C. 14%, from June 1981 to October 1981 D. 25%, in September 1964

C. 14%, from June 1981 to October 1981

Individual Income Taxes account for ___ of all U.S. Federal Government revenues. A. 0% (since the U.S. Federal Government does not impose taxes on individual income) B. 19.4% (making it the third largest source of U.S. Federal Government revenues) C. 47.0% (making it the largest single source of U.S. Federal Government revenues) D. 100% (since the U.S. Federal Government has no other sources of revenue)

C. 47.0% (making it the largest single source of U.S. Federal Government revenues)

Since January 1948 there have only been three instances in which the unemployment rate in the U.S. (reported on a monthly basis) has been above 8%. This occurred most recently for A. 10 consecutive months in from December 1994 through September 1995. B. 31 consecutive months from May 2005 through November 2007. C. 5 consecutive months from April 2020 through August 2020. D. None of the above answers are correct (since the unemployment rate has never been above 8% in any single month since the end of the Great Depression).

C. 5 consecutive months from April 2020 through August 2020.

Which of the following could NOT result in a "Change in Supply" for umbrellas? A. An improvement in the technology used to produce umbrellas. B. A decrease in the number of sellers of umbrellas. C. An increase in the market price of umbrellas. D. A decrease in the price of plastic (an input used in the production of umbrellas).

C. An increase in the market price of umbrellas.

___________________ refers to a general decrease in the level of overall prices. A. Inflation B. Hyperinflation C. Deflation D. The Law of Demand

C. Deflation

Consider a society consisting of only three people: Amy, Bill, and Carrie. Amy and Bill spend all day producing clothing and food. At the end of each day they bring their output to Carrie, who then divides it between the three individuals. The "basic economic question" that Carrie is answering for this society is the A. Resource Use Decision. B. Production Decision. C. Distributional Decision. D. Choice of Incentives.

C. Distributional Decision.

____________________ states that the fairest distribution of income and consumption is the one realized when the government establishes and enforces a legal code which respects all voluntary economic interactions between individuals in a society. A. Rawlsian Justice B. Utilitarian Justice C. Libertarian Justice D. Labor Theory of Value

C. Libertarian Justice

18. ________________ first said "From each according to his ability, to each according to his need." A. Adam Smith B. Karl Marx C. Louis Blanc D. Max Weber

C. Louis Blanc

3. ______________ observed that the government or the state differs from other decision making entities in that it alone has established "the monopoly of the legitimate use of physical force within a given territory." A. Karl Marx B. Egon Neuberger C. Max Weber D. Adam Smith

C. Max Weber

_________ said that "Inflation is always and everywhere a monetary phenomenon." A. Richard Nixon B. Donald Rumsfeld C. Milton Friedman D. Barrack Obama

C. Milton Friedman

5. Which of the following is NOT part of the Coasian Solution to the problem of externalities? A. Clearly and fully define property rights. B. Make individuals pay compensation if they infringe upon the property rights of others. C. Prevent parties from negotiating with one another regarding infringements of property rights caused by externalities. D. None of the above answers is correct (since each choice is part of the Coasian Solution to the problem of externalities).

C. Prevent parties from negotiating with one another regarding infringements of property rights caused by externalities.

The Manne (2014) article "All Education Is For-Profit Education" states the following: "[T]here is a significant difference in these two forms of organization (i.e., for-profit and non-profit enterprises) that neither Hansmann nor Shireman acknowledges."What is that significant difference? (Article, Quiz 1 #10) A. Property rights in the assets and stream of income of a for-profit organization exist, but they are not transferable; property rights in the assets and stream of income of a nonprofit organization do not exist at all. B. The managers of a for-profit organization are incentivized to maximize their own personal wealth and total compensation; the managers of nonprofit organizations are much more altruistically inclined and, thus, are incentivized to maximize revenue for their organizations. C. Property rights in the assets and stream of income of the nonprofit organizations are not transferable; property rights in the assets and stream of income of a for-profit organization are transferable. D. Nonprofit organizations are, always and everywhere, better than for-profit organizations. This fact is especially true in the world of education.

C. Property rights in the assets and stream of income of the nonprofit organizations are not transferable; property rights in the assets and stream of income of a for-profit organization are transferable.

19. In advance of the election for Probate Judge, Cardi and Megan are discussing the different candidates. Cardi states: "I haven't really researched the positions and backgrounds of the four candidates. To do so properly I would have to invest a great deal of time, and, after all, the chance of my vote deciding the election is very small and I don't think things will be very different for me regardless of who wins." Her statement is most closely related to the issue of ______________. A. the Condorcet Paradox B. Log-rolling C. Rational Ignorance D. the Invisible Hand

C. Rational Ignorance

10. _________________ refers to the natural and undirected emergence of order out of chaos. A. Command Planning B. Excess Demand C. Spontaneous Order D. An increase in Demand

C. Spontaneous Order

The ______________ refers to government policies with the primary aim of minimizing fluctuations in overall macroeconomic activity. A. Allocation Function of Government B. Distribution Function of Government C. Stabilization Function of Government D. Taxation Function of Government

C. Stabilization Function of Government

_______________ refers to the logical error whereby someone incorrectly concludes that simply because there are benefits (to some people) from higher levels of an activity, that more of the activity is always better. A. The Invisible Hand B. The Economic Calculation Problem C. The Open-Ended Fallacy D. Deadweight Loss

C. The Open-Ended Fallacy

Which of the following is an accurate characterization of Say's Law? (chapter 5) A. People can benefit mutually from specialization and trade. B. Destruction of goods does not breed economic prosperity. C. The value of goods and services anyone can purchase is equal to the market value of what he/she supplies. D. Supply creates its own demand.

C. The value of goods and services anyone can purchase is equal to the market value of what he/she supplies.

1. "Government Failure" can be described as a situation in which A. the "free market outcome" is NOT efficient. B. a single seller of a good has substantial control over the price of the good. C. Total Social Surplus is decreased by government intervention in a market. D. None of the above answers are correct.

C. Total Social Surplus is decreased by government intervention in a market.

The first economic system implemented by the new communist government following the Russian Revolution was A. Perfect Communism, which lasted from 1866 to 1874 B. Pacifist Communism, which lasted from 1879 to 1929 C. War Communism, which lasted from 1918 to 1921. D. Social Communism, which lasted from 1946 to 1989.

C. War Communism, which lasted from 1918 to 1921.

Which of the following countries experienced hyperinflation that peaked at an annual rate of 79,600,000,000% in mid-November 2008 (at which time prices would approximately double every 24.7 hours)? A. Nepal B. Germany C. Zimbabwe D. None of the above answers are correct (since no country has experienced hyperinflation since the United States at the end of the Revolutionary War).

C. Zimbabwe

The open-ended fallacy is... (chapter 5) A. a logical error that assumes that because something is true of the part of a whole, it must also be true of the whole. B. a logical error that assumes that because a later event took place after an earlier event first occurred, that earlier event must have caused that later event to occur. C. a logical error whereby someone incorrectly concludes that simply because there are benefits (to some people) from higher levels of an activity, more of the activity is always better. D. the idea that whenever a producer begins a production process for some good, it should always complete production of that good before moving on to something else.

C. a logical error whereby someone incorrectly concludes that simply because there are benefits (to some people) from higher levels of an activity, more of the activity is always better.

7. One of the three primary types of "economic incentives" is "moral suasion," which could be described as A. the use or threat of force or incarceration to obtain compliance. B.the use of monetary rewards or direct increases in consumption which result from engaging in an activity. C. attempts to convince individuals to behave in a certain manner because doing so is "the right thing to do." D. the use of torture or other "enhanced interrogation techniques" in order to elicit information from someone.

C. attempts to convince individuals to behave in a certain manner because doing so is "the right thing to do."

According to the depiction provided by the Expanded Circular Flow Diagram, government collects taxes from A. only domestic households. B. only domestic firms. C. both domestic households and domestic firms (but not from any foreign sources). D. domestic households, domestic firms, foreign households, and foreign firms.

C. both domestic households and domestic firms (but not from any foreign sources).

Qihong was born in China. Throughout his entire life he has excelled academically. After earning a Master's degree from the China University of Mining and Technology in Beijing, he came to the United States to pursue a PhD. Upon completion of his PhD he was hired by a prestigious research university in Oklahoma, where he works to this day. This story provides an illustration of the A. Rule of 72. B. catch-up effect. C. brain-drain. D. vicious-cycle-of-poverty.

C. brain-drain.

Focusing on the "Average Tax Rate" of the "Bottom 50% of Income Earners," this figure ______________ between 1981 and 2009 and then ______________ between 2009 and 2018. A. increased from 2.89% up to 5.16%; increased further from 5.16% up to 7.41% B. decreased from 14.23% down to 10.11%; decreased further from 10.11% down to 6.93% C. decreased from 6.62% down to 2.35%; increased from 2.35% up to 3.36% D. increased from 20.12% up to 24.53%; decreased from 24.53% down to 18.74%

C. decreased from 6.62% down to 2.35%; increased from 2.35% up to 3.36%

17. Looking at the results of the "Economic Freedom of the World" study, between 2004 and 2018, the EFWI value of the United States A. increased consistently over this entire period from 5.4 in 2004 up to 9.04 in 2018. B. decreased consistently over this entire period from 7.8 in 2004 down to 4.64 in 2018. C. decreased from 8.2 in 2004 down to 7.60 in 2009, but then increased to 8.22 in 2018. D. increased from 6.7 in 2004 up to 8.52 in 2009, but then decreased to 7.64 in 2018.

C. decreased from 8.2 in 2004 down to 7.60 in 2009, but then increased to 8.22 in 2018.

The "Great Inflation" refers to the period of high inflation in the U.S. during the A. end of Great Depression and start of WW-II (from roughly August 1937 through October 1942). B. Kennedy and Johnson Administrations from 1960 through 1967. C. early 1970's through the early 1980's (from roughly August 1973 to July 1982). D. first part of the time when President Obama was in office (from roughly March 2009 to July 2011).

C. early 1970's through the early 1980's (from roughly August 1973 to July 1982).

3. Regulatory Capture refers to a situation in which A. a government regulatory is thrown in jail for unethical behavior. B. legislators trade votes in order to have multiple policies enacted (each of which would otherwise not garner a majority of support). C. firms in a regulated industry influence a regulatory agency to t he point where the agency makes decisions which are in the best interest of the firms (even if the decisions are not in the best interest of the public). D. government regulators collect bribes from the firms being regulated.

C. firms in a regulated industry influence a regulatory agency to t he point where the agency makes decisions which are in the best interest of the firms (even if the decisions are not in the best interest of the public).

The "Catch-up effect" suggests that, all other factors fixed, A. the only way for firms in high tech industries to catch-up to their competitors is to invest large amounts of resources in research and development. B. the global economy is "rigged against new entrants," in that there is no way for poor countries to catch-up with rich countries. C. growth rates of less developed countries typically exceed growth rates of developed countries, implying that the gap in GDP between less developed and developed countries will decrease over time. D. whenever a countries experiences rapid growth in GDP, they must also experience an increase in income inequality.

C. growth rates of less developed countries typically exceed growth rates of developed countries, implying that the gap in GDP between less developed and developed countries will decrease over time.

When considering potential government policies, it is important to recognize that A. most businesses are not run by "rational decision makers." B. voluntary trade generally makes sellers better off but buyers worse off. C. if a policy alters the costs and/or benefits for a decision maker, then the decision maker might change his behavior as a result of the policy. D. voters are self-interested but politicians are not.

C. if a policy alters the costs and/or benefits for a decision maker, then the decision maker might change his behavior as a result of the policy.

The Incentive Principle states that A. scarcity is a universal phenomenon that arises because resources are limited. B. an action should be taken if and only if the additional benefits from taking the action are at least as great as the additional costs of doing so. C. if the marginal benefit of an activity increases, then a rational person will engage in more of the activity. D. having more of one thing usually means getting by with less of something else.

C. if the marginal benefit of an activity increases, then a rational person will engage in more of the activity.

Real GDP Per Capita (measured in 1990 G-K International Dollars) in the Soviet Union increased from $1,913 in 1946 to $7,112 in 1989. In comparison, between these same years the corresponding figure for Western Europe A. decreased from $13,748 to $11,942. B. increased from $1,793 to $8,556. C. increased from $3,925 to $16,751. D. increased from $5,429 to $6,984.

C. increased from $3,925 to $16,751.

One of the principal functions of money is that it serves as a "store of value." This role could be described by recognizing that money A. is used as a basic unit of measuring economic activity. B. is an asset used as payment when purchasing goods and services. C. is an asset that can be used as a means to hold wealth for the future. D. None of the above answers are correct.

C. is an asset that can be used as a means to hold wealth for the future.

One of the principle functions of money is that it serves as a "unit of account." This role could be described by recognizing that money A. is an asset used as payment when purchasing goods and services. B. is an asset that can be used as a means to hold wealth. C. is used as a basic unit of measuring economic activity. D. None of the above answers are correct.

C. is used as a basic unit of measuring economic activity.

The "Unemployment Rate" is defined as the A. number of people in the labor force who are currently not looking for a job. B. number of people in the labor force currently unemployed. C. percentage of people in the labor force that are currently unemployed. D. percentage of people in the labor force who have a job, but who feel that they are "undercompensated," "unappreciated at work," or "could easily find a better job."

C. percentage of people in the labor force that are currently unemployed.

If the federal government of Keynesland (a small island nation off the western coast of Portugal, with an economy highly dependent upon bowling ball production) had revenues of €950,000,000 and expenditures of €800,000,000 in 2012, then in 2012 this government A. realized a budget deficit of €150,000,000. B. realized a budget deficit of €1,750,000,000. C. realized a budget surplus of €150,000,000. D. realized a budget surplus of €1,750,000,000

C. realized a budget surplus of €150,000,000.

The arguments made by John Maynard Keynes suggest that during an economic downturn, the government should A. have the government seize ownership of and directly control the "Commanding Heights" of our economy. B. deploy the military in order to conquer and colonize other countries with large amounts of natural resources (e.g., Middle Eastern countries with tremendous oil reserves). C. run a budgetary deficit, in order to stimulate the economy by replacing missing private spending with government spending. D. run a budgetary surplus, so that we do not accumulate a tremendous amount of debt that will ultimately burden our children and grandchildren.

C. run a budgetary deficit, in order to stimulate the economy by replacing missing private spending with government spending.

Incomes may differ across different individuals in a free market society due to A. only factors which are beyond the control of the individual (such as their "endowment at birth of natural talent and ability"). B. only factors which are under the direct control of the individual (such as "how much education to acquire"). C. some factors which are under the control of the individual (such as "how much education to acquire") and some factors which are beyond the control of the individual (such as their "endowment at birth of natural talent and ability"). D. None of the above answers are correct (since, in general, income levels in a free market society are "entirely random").

C. some factors which are under the control of the individual (such as "how much education to acquire") and some factors which are beyond the control of the individual (such as their "endowment at birth of natural talent and ability").

Consider a country which imposes a "negative income tax" according to the formula: T = (I - 50,000)(.20). Under this tax, A. someone earning $50,000 receives a $10,000 transfer payment from the government. B. everyone has to pay exactly 20% of all income earned in taxes. C. someone earning $100,000 has to pay $10,000 of taxes. D. low income earners have to pay taxes, but high income earners receive transfer payments from the government.

C. someone earning $100,000 has to pay $10,000 of taxes.

A "Rational Decision Maker" should A. always take every action for which there is a positive Marginal Benefit. B. never take any action for which there is a positive Marginal Cost. C. take an action if and only if the Marginal Benefit of the action is at least as great as the Marginal Cost of the action. D. More than one (perhaps all) of the above answers is correct.

C. take an action if and only if the Marginal Benefit of the action is at least as great as the Marginal Cost of the action.

Assume that taxes are imposed on an economy for the express purpose of funding public works projects to provide employment. Assume also that these taxes are collected through 1) personal income taxes imposed as a percentage of an individual taxpayer's income, and 2) corporate income taxes imposed as a percentage of a corporation's income. According to chapter 5 of Economics in One Lesson, what else is true regarding the imposition of those taxes on the economy? (E1L chapter 5) A. Both corporations and taxpayers still lose 100% of every dollar lost in investments that do not pan out. B. The taxes will change the incentives of corporations and taxpayers to produce/invest since they do not gain 100% of every dollar "won" from making worthwhile investments. C. A tax rate of 50% is equivalent to working for the government for six months out of a year; a tax rate of 75% is equivalent to working for the government for nine months out of a year. D. All of the above.

D. All of the above.

Country A is more productive (i.e., has more production possibilities) in every industry than Country B. Which statement most clearly illustrates the concept of comparative advantage? (chapter 2) A. Country A will lose out in the long run if each country chooses to specialize in its lowest opportunity cost industry; both countries should cut off trade and work on improving their productivity until their production possibilities are both equal. B. Country A will lose out in the long run and should impose a tariff on cheaper imports from Country B in order to protect workers in Country A's industries. C. Country B will gain at the expense of Country A as workers who are willing to accept lower salaries and wages migrate from Country B to Country A and send funds (i.e., remittances) back to their families in Country B. D. Both countries can still benefit from specialization and voluntary trade as long as Country A has a lower opportunity cost than Country B in some industry.

D. Both countries can still benefit from specialization and voluntary trade as long as Country A has a lower opportunity cost than Country B in some industry.

Suppose cheeseburgers and hotdogs are substitute goods. If the price of hotdogs increases by 20% while the price of cheeseburgers remains the same, which is most likely to occur? (chapter 4) A. Demand for hotdogs would decrease. B. Demand for hotdogs would increase. C. Demand for cheeseburgers would decrease. D. Demand for cheeseburgers would increase.

D. Demand for cheeseburgers would increase.

________________ broadly refers to the knowledge, education, skills, experience, work ethic, inter-personal skills, and other attributes which determine worker productivity. A. Worker Mortality B. Technology C. Physical Capital D. Human Capital

D. Human Capital

Which of the following is a fair summation of the "action axiom"? (Intro) A. Through the process of trial and error, people will take risks in the market to try to solve problems and make corrections over time. B. People only act in groups, so majority rule represents the will of the people. C. Greed is good; greed will meet the need. D. Humans employ means according to values and ideas to achieve ends.

D. Humans employ means according to values and ideas to achieve ends.

When discussing the material balances approach, which of the following was not identified as a "use of resources"? A. Government services. B. Interindustry demand. C. Consumer goods. D. Imports.

D. Imports.

2. During the last several decades, health officials in the United States have argued that eating too much beef might be harmful to humans. As a result, there has been a significant decrease in the amount of beef produced. Which of the following best explains this decrease in production? A. Government officials ordered beef producers to produce relatively less beef (out of concern for consumer health). B. Animal Rights Activists have made it difficult for both buyers and sellers of beef to freely trade the good in free markets. C. Beef producers (whose primary concern is the health of their customers) decided to produce relatively less beef. D. Individual consumers (concerned about their own health) decreased their demand for beef (resulting in a decrease in both the equilibrium price and equilibrium quantity of beef).

D. Individual consumers (concerned about their own health) decreased their demand for beef (resulting in a decrease in both the equilibrium price and equilibrium quantity of beef).

Which of the following demonstrates the "Law of Demand"? A. After Clarissa got a raise at work, she bought more donuts at a price of $8.00 per dozen than she did before her raise. B. After the price of flour increased by 8%, Sabrina chose to sell fewer donuts. C. Melissa would choose to sell more donuts at $7.50 per dozen than at $6.25 per dozen. D. Joan would choose to buy fewer donuts at $10.00 per dozen than at $8.50 per dozen.

D. Joan would choose to buy fewer donuts at $10.00 per dozen than at $8.50 per dozen.

3. Which of the following is a common source of "Market Failure"? A. Pricing by firms with market power. B. Market provision of private goods. C. Market provision of a good which generates an externality. D. More than one (perhaps all) of the above answers are correct.

D. More than one (perhaps all) of the above answers are correct.

15. In a typical modern economy, it is common for Government to have an impact on economic outcomes by A. defining and enforcing property rights. B. regulating the behavior of business. C. redistributing income. D. More than one (perhaps all) of the above answers is correct.

D. More than one (perhaps all) of the above answers is correct.

5. In a free market economy, households A. are the ultimate consumers of most finished goods/services. B. are the primary suppliers of labor to firms. C. do not behave as "rational decision makers." D. More than one (perhaps all) of the above answers is correct.

D. More than one (perhaps all) of the above answers is correct.

A "seller's reservation price" A. refers to the maximum dollar amount a buyer is willing to pay for an item. B. refers to the minimum dollar amount a seller is willing to accept for an item. C. is visually illustrated by the height of the supply curve. D. More than one (perhaps all) of the above answers is correct.

D. More than one (perhaps all) of the above answers is correct.

A society can achieve economic growth by A. making deliberate investments in human capital and physical capital. B. making deliberate investments in overhead capital. C. realizing an improvement in technology. D. More than one (perhaps all) of the above answers is correct.

D. More than one (perhaps all) of the above answers is correct.

If the efficient level of trade is 6,400 units, Deadweight Loss would be positive if A. 0 units were traded. B. 3,250 units were traded. C. 9,125 units were traded. D. More than one (perhaps all) of the above answers is correct.

D. More than one (perhaps all) of the above answers is correct.

In March 2010, when the "Patient Protection and Affordable Care Act" (a.k.a., Obamacare) was being finalized by and debated in Congress, A. over 40 economists (including Daniel Kahneman, one of the co-recipients of the 2002 Nobel Prize in economics) wrote a letter to President Obama supporting the legislation. B. over 130 economists (including Vernon Smith, one of the co-recipients of the 2002 Nobel Prize in economics) wrote a letter to House Minority Leader Rep. John Boehner opposing the legislation. C. no economist publicly expressed any opinion on the legislation (upholding a longstanding tradition within the profession of never getting involved in public policy debates). D. More than one (perhaps all) of the above answers is correct.

D. More than one (perhaps all) of the above answers is correct.

Positive Statements A. attempt to describe how the world actually is or actually functions. B. are scientific in nature, in that given enough research, evidence, and data, they can potentially be shown to be either true or false. C. are supported (either implicitly or explicitly) by the priorities, goals, and value judgments of the person making the statement. D. More than one (perhaps all) of the above answers is correct.

D. More than one (perhaps all) of the above answers is correct.

The value of the Stroup Coefficient for the U.S. Federal Income Tax A. was equal to .7259 in 2018. B. was above .98 in every year between 1929 and 1939. C. was below .7 for 66 straight years from 1942 through 2007. D. More than one (perhaps all) of the above answers is correct.

D. More than one (perhaps all) of the above answers is correct.

Which of the following pieces of legislation were part of the "War on Poverty" launched by President Lyndon Johnson in the mid-1960s? A. Economic Opportunity Act of 1964. B. Elementary and Secondary Education Act. C. Social Security Act of 1965. D. More than one (perhaps all) of the above answers is correct.

D. More than one (perhaps all) of the above answers is correct.

Which of the following statements regarding GDP in the U.S. is accurate? A. "Nominal GDP was lower in 2020 than it was in 1920." B. "Real GDP was roughly 23.6 times larger in 2020 than in 1920." C. "Between 1920 and 2020 Real GDP Per Capita (measured in 2012 dollars) increased from $7,328 to $55,685." D. More than one (perhaps all) of the above answers is correct.

D. More than one (perhaps all) of the above answers is correct.

Consider the U.S. Social Security Payroll Tax. Under this tax, the first $142,800 of income earned is taxed at a marginal rate of 12.4% while income above this level is not taxed. It follows that over all income ranges, this tax is a A. Rawlsian tax. B. Progressive tax. C. Proportional tax. D. Regressive tax.

D. Regressive tax.

________________ refers to an environment in which well-connected unscrupulous business people use corrupt political systems to their advantage in order to obtain preferential treatment from government. A. Crony Capitalism B. Economic Development C. The Catch-Up Effect D. Rule-of-Law

A. Crony Capitalism

President Biden is concerned that the U.S. economy is not experiencing a sufficiently strong economic recovery. In light of this view, he argues that we should drastically decrease income tax rates in 2021 for low and middle income households, in an attempt to further stimulate overall macroeconomic activity. This proposal could be described as A. Expansionary Fiscal Policy. B. Expansionary Monetary Policy. C. Crowding Out. D. the setting of the reserve requirement.

A. Expansionary Fiscal Policy.

Assume ceteris paribus for each of the questions associated with the following scenario. When demand increases due to an increase in population (thus causing the demand curve to shift to the right), what happens to the quantity supplied? Does this shift in the demand curve cause a shift in the supply curve? Will the new equilibrium price be higher or lower than the old equilibrium price? (chapter 4) A. Increases; no; higher B. Increases; yes; lower C. Decreases; yes; higher D. Decreases; no; lower

A. Increases; no; higher

_________________ wrote A Theory of Justice (1971), in he argued that a "social contract" designed behind a "veil of ignorance" would aim to "maximize the well-being of the worst-off member of society." A. John Rawls B. Karl Marx C. Max Lorenz D. Robert Nozick

A. John Rawls

Which of the following statements is a "Positive Statement"? A. Kennesaw State University was established on October 9, 1963. B. The production, possession, and consumption of all types of alcohol should be illegal. C. Our country would be a better place to live if we decreased spending on national defense and increased spending on education. D. More than one (perhaps all) of the above answers is correct.

A. Kennesaw State University was established on October 9, 1963.

Which of the following is NOT one of the primary policy tools used by a central bank? A. Loaning money to low income home buyers at below market interest rates (in order to make housing "affordable for all"). B. Setting the "discount rate." C. Setting "reserve requirements." D. None of the above answers are correct (since each of the choices listed is one of the primary policy tools used by a central bank).

A. Loaning money to low income home buyers at below market interest rates (in order to make housing "affordable for all").

The Selick (2003) article "There's No Such Thing as a Nonprofit Organization" states the following: "[I]n fact, every single employee of a nonprofit institution is actually a 'profit center' in himself." Is that statement true? Why/why not? (Article, Quiz 2 #8) A. True. Employees of nonprofits still incur personal expenses in order to work, which they seek to minimize, while they seek to maximize their personal income, which results in their personal profit. B. True. Employees of nonprofits are more altruistically inclined than employees of for-profit organizations, so they view their personal profit as being tied up with the success or failure of the organization. C. False. Employees of nonprofits face no incentives to maximize their personal income since the managers of the nonprofits have personal stakes in minimizing the organization's expenses. D. False. Employees of nonprofits on average earn less than their private-sector counterparts, which shows how much more dedicated they are to the mission of their organizations.

A. True. Employees of nonprofits still incur personal expenses in order to work, which they seek to minimize, while they seek to maximize their personal income, which results in their personal profit.

8. An increase in income will result in an increase in demand for _______________. A. a normal good B. an inferior good C. a substitute good D. a complementary good

A. a normal good

21. The "Economic Calculation Problem" posits that A. a system of planning can never achieve efficient outcomes, precisely because the planners do not have the information generated by market transactions available to them. B. in order for economic outcomes to be fair, it is necessary to redistribute wealth through a highly progressive tax structure. C. calculating the true economic value of a worker can only be done under a socialist system. D.it is impossible to come up with any estimate of the costs of complying with government bureaucracy.

A. a system of planning can never achieve efficient outcomes, precisely because the planners do not have the information generated by market transactions available to them.

Consider the following outcomes from a tax: Ann has income of $100,000 and pays 8.5% of her income in taxes; Bob has income of $100,000 and pays 12.4% of his income in taxes; and Cathy has income of $150,000 and pays 10.7% of her income in taxes. If economic capacity is measured by income and tax burden is measured by Average Tax Rate, then there appears to be A. a violation of both horizontal equity and vertical equity. B. a violation of horizontal equity (but no violation of vertical equity). C. a violation of vertical equity (but no violation of horizontal equity). D. no violation of either horizontal equity or vertical equity.

A. a violation of both horizontal equity and vertical equity.

A good that is used in the production process that is not (itself) a final good or service is _________________. A. an intermediate good B. a permanent good C. an inferior good D. a necessary good

A. an intermediate good

An "optimal plan" is A. both consistent and efficient. B. consistent, but not efficient. C. efficient, but not consistent. D. neither consistent nor efficient.

A. both consistent and efficient.

8. Economic Man (aka, homo economicus) is A. both rational and self-interested. B. rational, but not self-interested. C. self-interested, but not rational. D. neither rational nor self-interested.

A. both rational and self-interested.

On February 8, 2021, the NBA's Detroit Pistons traded Derrick Rose to the New York Knicks in exchange for Dennis Smith, Jr. and a 2021 2nd round draft pick. Since this voluntary trade took place, we can infer that A. both the New York Knicks and the Detroit Pistons thought the trade was in the best interest of their respective team. B. the Detroit Pistons thought the trade was not in the best interest of their team. C. neither team thought the trade was in their own best interest, but league commissioner Adam Silver thought it was in the best interest of the NBA. D. None of the above answers are correct.

A. both the New York Knicks and the Detroit Pistons thought the trade was in the best interest of their respective team.

Focusing on the discount rate set by the Fed in the U.S., in March 2020 (i.e., at the start of the COVID-19 Recession) the Fed ____________________. A. decreased the discount rate from 2.25% down to 0.25% B. decreased the discount rate from 6.125% down to 4.875%. C. increased the discount rate from 7.8% up to 9.1%. D. increased the discount rate from 12.75% up to 14.5%.

A. decreased the discount rate from 2.25% down to 0.25%

Growth due to bringing new land into cultivation or building new manufacturing facilities is _________; growth due to increased worker productivity is _________. A. extensive growth; intensive growth. B. linear growth; exponential growth. C. intrinsic growth; extrinsic growth. D. capital growth; labor growth.

A. extensive growth; intensive growth.

The "Great Misery" refers to the period of time A. from November 1973 through June 1983 when the sum of the unemployment rate and inflation rate was 12.50 or higher for 116 consecutive months. B. when George W. Bush was President, during which the U.S. Federal budget deficit increased by 196%. C. when Donald Trump was initially President, during which the unemployment rate was above 18% for 14 consecutive months from February 2017 through March 2018. D. right after Joe Biden was elected President (but before he took office) when the Dow Jones Industrial Average lost more than half its value in less than six weeks (dropping from 18,427 in early November 2020 to 8,947 in late December 2020).

A. from November 1973 through June 1983 when the sum of the unemployment rate and inflation rate was 12.50 or higher for 116 consecutive months.

Monetarists believe that increasing the money supply can potentially increase real output A. in the short run but not the long run. B. in the long run but not the short run. C. in neither the long run nor the short run. D. in both the long run and the short run.

A. in the short run but not the long run.

"Good X" is a substitute for "Good Y." Consequently, if the price of "Good Y" were to increase, then for "Good X" equilibrium price would ________ and equilibrium quantity would ________. A. increase; increase. B. increase; decrease. C. decrease; increase. D. decrease; decrease.

A. increase; increase.

Between 1969 and 2019, for the U.S. the value of the Gini Coefficient ___________ while the value of Real Median Household Income ___________. A. increased from .391 to .484; increased from $51,863 to $68,703. B. increased from 1.143 to 1.295; increased from $48,497 to $58,892. C. increased from .567 to .614; decreased from $71,984 to $67,982. D. decreased from .424 to .396; decreased from $56,942 to $51,648.

A. increased from .391 to .484; increased from $51,863 to $68,703.

18. Monopoly refers to a market structure in which there A. is a single seller of a unique good for which there are no close substitutes. B. are exactly two firms selling goods which consumers view as very similar but somewhat different from each other. C. are many firms selling goods which consumers view as very similar but somewhat different from each other. D. are many firms selling goods which consumers view as identical to each other.

A. is a single seller of a unique good for which there are no close substitutes.

The "Misery Index" A. is an economic indicator created by Arthur Okin. B. is computed by multiplying the unemployment rate by the inflation rate. C. measures the fraction of population that is clinically depressed. D. More than one (perhaps all) of the above answers is correct.

A. is an economic indicator created by Arthur Okin.

17. Widgets are non-rival in consumption and non-excludable. As a result, if widgets were simply sold in the marketplace, we should expect A. less than the efficient amount of widgets to be traded. B. exactly the efficient amount of widgets to be traded. C. more than the efficient amount of widgets to be traded. D. None of the above answers are necessarily correct (since we need to know something about costs of production in order to be able to determine whether the resulting level of trade will be more than, less than, or exactly equal to the efficient level of trade).

A. less than the efficient amount of widgets to be traded.

6. Consider the costs of complying with bureaucratic regulations to economic decision makers in India, Singapore, and Venezuela. According to the results of the "Ease of Doing Business" study, of these three countries, such costs are: A. lowest in Singapore and highest in Venezuela. B. lowest in Venezuela and highest in India. C. lowest in India and highest in Singapore. D. lowest in India and highest in Venezuela.

A. lowest in Singapore and highest in Venezuela.

The Preliminary Circular Flow Diagram illustrates the A. movement of economic resources (i.e., factors of production and finished goods/services) between households and firms. B. transfer of money between households and firms. C. the limits of production that a society faces, by identifying the maximum amount of one good that can be produced for every possible level of production of another good. D. gains in output that can be realized when individuals focus their efforts on producing the goods for which they possess a comparative advantage.

A. movement of economic resources (i.e., factors of production and finished goods/services) between households and firms.

In June 2016, voters in Switzerland considered (but rejected) a proposal which would have A. paid all adults a guaranteed minimum income of roughly $30,924 per year. B. made it illegal to be unemployed. C. mandated that all workers in the country earn the exact same income ($50,000 per year). D. taxed all future inheritances at a rate of 100%.

A. paid all adults a guaranteed minimum income of roughly $30,924 per year.

Andrea has $60 to spend and wants to purchase either a sweatshirt or a ticket to a concert. Each item costs exactly $60, so she can only purchase one of the two. This scenario illustrates the basic concept that A. people face tradeoffs. B. most consumers are irrational. C. rational people never respond to incentives. D. economic insights are never useful for analyzing consumption decisions.

A. people face tradeoffs.

2. Consider an outcome for which Al loses $4, Beth gains $3, and Charles gains $2. Based upon this information, it appears as if this is a A. positive-sum environment. B. zero-sum environment. C. negative-sum environment. D. win-win outcome.

A. positive-sum environment.

20. Beta Industries is a privately owned firm that produces "Good B" in order to earn a profit. In 2020 when the price of "Good B" was $75, Jim chose to buy the good. In 2021 when Beta Industries increased the price to $90, Jim chose to not buy the good. Jim's choices to buy the good in 2020 but not buy the good in 2021 A. provide an example of Jim exercising his consumer sovereignty. B. provide an example of Jim's behavior being influenced by coercion. C. illustrate how a system of command planning operates. D. reveal that Jim lives in a country in which firms face a high "cost of doing business."

A. provide an example of Jim exercising his consumer sovereignty.

Demand A. refers to the entire relationship between the price of a good and the number of units that people are willing and able to purchase, all other factors fixed. B. refers to the amount of a good that consumers buy at a particular arbitrary price. C. refers to the amount of a good that consumers buy at the equilibrium price. D. provides a summary of the behavior of both buyers and sellers in a market.

A. refers to the entire relationship between the price of a good and the number of units that people are willing and able to purchase, all other factors fixed.

Mike Ditka's suggestion that football related injuries could likely be reduced by have participants play without helmets (or at least without facemasks on their helmets) A. relies heavily upon the Incentive Principle. B. does not make any sense whatsoever when analyzed using the tools of economics. C. implicitly assumes that football players are irrational. D. implicitly assumes that football players are not self-interested.

A. relies heavily upon the Incentive Principle.

The vicious-cycle-of-poverty A. suggests that poverty is self-perpetuating, because poor countries do not have sufficient resources available to make the investments in capital which are necessary for economic growth. B. is apparently true, since every country that was poor a century ago is still poor today. C. has no merit whatsoever, since even poor societies typically have an overabundance of financial capital. D. More than one (perhaps all) of the above answers is correct

A. suggests that poverty is self-perpetuating, because poor countries do not have sufficient resources available to make the investments in capital which are necessary for economic growth.

In a free market, the equilibrium quantity of trade and equilibrium price of a good are determined by A. the interaction of both self-interested buyers and self-interested sellers in the marketplace. B. only the buyers in the market. C. only the sellers in the market. D. neither buyers nor sellers, but rather by a government bureaucrat.

A. the interaction of both self-interested buyers and self-interested sellers in the marketplace.

The opening chapters of Economics in One Lesson explain how destruction can bring about economic prosperity.How could disasters like hurricanes or wars improve the standard of living of an economy? (E1L chapters 1-3) A. It explains that the window maker would not have received the income from the shopkeeper had the young hoodlum notthrown the brick through the shopkeeper's window. The window maker is therefore worse off without the destruction wrought by the hoodlum. B. War brings with it many innovations in new technologies. These developments could not have come about through more peaceful ways. C. Hurricanes bring with them aneconomic boon to the construction companies and suppliers of the goods that were destroyed as the localities affected by the disaster try to rebuild and recover. D. To quote Bryce Harper, "That's a clown question, bro." The opening chapters make the exact opposite case that the question asserts. Disasters and wars are net negatives for the economy as a whole. What is unseen is what sort of economic development might have taken place had those examples of destruction and death not taken place.

D. To quote Bryce Harper, "That's a clown question, bro." The opening chapters make the exact opposite case that the question asserts. Disasters and wars are net negatives for the economy as a whole. What is unseen is what sort of economic development might have taken place had those examples of destruction and death not taken place.

Charles' income is higher than Debbie's income. Two of the notable differences between their jobs are that Charles must work outside year round (even when it is very hot in the summer and very cold in the winter) and Charles runs a greater risk of being injured (or even killed) on the job. These observations would suggest that the difference in incomes between the two individuals is A. a consequence of Debbie being paid a wage rate below the minimum wage. B. due to gender discrimination. C. an indication of the Labor Theory of Value. D. a compensating differential.

D. a compensating differential.

Consider the following two statements: (1) "Fiscal Policy can never have any stimulative impact on the macroeconomy" and (2) "Inflation is caused primarily by too much growth in the money supply." Most economist would A. agree with both statements. B. disagree with both statements. C. agree with Statement (1) but not Statement (2). D. agree with Statement (2) but not Statement (1).

D. agree with Statement (2) but not Statement (1).

Suppose that in Spain between 2020 and 2021 the Unemployment Rate increased and the Inflation Rate decreased. It follows that the value of the Misery Index in 2021 _____________ the value of the Misery Index in 2020. A. must be greater than B. must be less than C. must be exactly equal to D. could be greater than or could be less than

D. could be greater than or could be less than

Between 1980 and 2018 the global "Time Price" of crude oil ____________. A. increased by 23.74% B. increased by 8.93% C. decreased by 12.36% D. decreased by 64.84%

D. decreased by 64.84%

Based upon the World Bank's poverty threshold of income of $1.90 per day, between 1981 and 2017 the global poverty rate A. increased drastically from 20.7% up to 41.5%. B. increased moderately from 19.4% up to 27.7%. C. decreased slightly from 51.3% down to 49.2%. D. decreased drastically from 42.7% down to 9.3%.

D. decreased drastically from 42.7% down to 9.3%.

In March 2020 The Fed A. increased the level of the Reserve Requirement from 10% to 20%. B. decreased the level of the Reserve Requirement from 50% to 40%. C. decreased the level of the Reserve Requirement from 12% to 8%. D. decreased the level of the Reserve Requirement from 10% to 0% (effectively eliminating the Reserve Requirement for the time being). Answers

D. decreased the level of the Reserve Requirement from 10% to 0% (effectively eliminating the Reserve Requirement for the time being). Answers

To be eligible to receive a means tested benefit, a recipient must A. show that they are seeking employment and not using recreational drugs. B. be over a certain age. C. agreed with the Rawlsian Justice argument for redistribution. D. have income below a certain level.

D. have income below a certain level.

Examining how Real (i.e., inflation adjusted) Household Incomes have changed between 1969 and 2019, mean household income of the "bottom 5th of all households" ____________ while the mean household income of the "top 5th of all households" ____________ between these years. A. decreased from $19,819 to $16,937; decreased from $79,224 to $65,136. B. decreased from $41,928 to $37,411; increased from $358,480 to $552,792. C. increased from $32,387 to $45,042; decreased from $201,517 to $174,663. D. increased from $11,944 to $15,286; increased from $126,860 to $254,449.

D. increased from $11,944 to $15,286; increased from $126,860 to $254,449.

21. Between 2009/2010 and 2018, the level of economic freedom in the United States A. increased in all five sub-dimensions. B. decreased in all five sub-dimensions. C. increased in the dimension of Sound Money, but decreased in the dimension of Legal System & Property Rights. D. increased in the dimensions of Size of Government and Regulation, but decreased in the dimension of Freedom to Trade Internationally.

D. increased in the dimensions of Size of Government and Regulation, but decreased in the dimension of Freedom to Trade Internationally.

4.If a per unit tax is placed on sellers of a product, the "price ultimately paid by buyers" ____________, while the "price ultimately received by sellers" ____________. A.increases; remains unchanged. B. remains unchanged; decreases. C. increases; increases. D. increases; decreases.

D. increases; decreases.

In February 2021 the Kansas City Chiefs lost the Super Bowl against the Tampa Bay Buccaneers by a score of 31 to 9. Around this same time an earthquake in Indonesia killed 105 people and injured 3,369 others. If Chiefs quarterback Patrick Mahomes was more upset about the outcome of the Super Bowl than about the loss of life from the earthquake in Indonesia, then it would seemingly suggest that he A. is not as good of a person as Buccaneers quarterback Tom Brady. B. does not care about anyone other than himself. C. is an irrational individual. D. is a self-interested individual.

D. is a self-interested individual.

4. A good is "excludable" if A. consumption by one person does not diminish the quantity/quality of consumption by others. B. consumption by one person does diminish the quantity/quality of consumption by others. C. it is difficult (or very costly) to prevent consumption by those who do not pay for the good. D. it is easy (or relatively costless) to prevent consumption by those who do not pay for the good.

D. it is easy (or relatively costless) to prevent consumption by those who do not pay for the good.

12. On September 4, 2009, former California Governor Arnold Schwarzenegger offered a $100,000 reward for anyone who could provide information leading to the arrest and conviction of arsonists who set a wildfire in southern California which claimed the lives of two firefighters. In this situation, Gov. Schwarzenegger was attempting to obtain the desired information by A. coercion. B. command planning. C. moral suasion. D. offering a material reward.

D. offering a material reward.

As depicted in Figure 8.1, the expansion phase of the business cycle can be further decomposed into periods of A. peak and trough. B. acceleration and deceleration. C. recession and depression. D. recovery and prosperity.

D. recovery and prosperity.

The longest period of expansion for the U.S. economy post WW-II was _________. A. the 6 month period from February 2014 through July 2014. B. the 45 month period from November 1979 through August 1983. C. the 92 month period from January 1967 through September 1974. D. the 128 months period from July 2010 through February 2020.

D. the 128 months period from July 2010 through February 2020.

The benefits principle of taxation states that A nobody should ever have to pay any taxes, because taxation is theft. B. taxes should only ever be imposed with the intention of redistributing income. C. the amount a person pays in taxes should be related to the ease with which the person is able to bear the burden of paying taxes. D. the amount a person pays in taxes should be related to the benefits he receives from the goods and services provided by government.

D. the amount a person pays in taxes should be related to the benefits he receives from the goods and services provided by government.

Per Capita GDP in Mexico is $19,796, while Per Capita GDP in Nigeria is only $5,136. These values directly imply that A. people in Mexico are more highly educated than people in Nigeria. B. people in Mexico are roughly 3.85 times as happy as people in Nigeria. C. people in Mexico must live longer than people in Nigeria. D. the market value of goods/services produced per person is roughly 3.85 times larger in Mexico than in Nigeria.

D. the market value of goods/services produced per person is roughly 3.85 times larger in Mexico than in Nigeria.

Production refers to A. the consumption of goods/services. B. the creation of additional scarce resources/inputs. C. inputs, which can be broadly categorized as land, labor, and capital. D. the process by which inputs are transformed into outputs.

D. the process by which inputs are transformed into outputs.

marginal revenue

the amount by which revenue changes as the firm's quantity of output is increased by a unit

economic calculation problem

the argument that a system of planning will never be able to achieve efficient outcomes, precisely because under such a system the planners do not have the information generated by market activities available to them first made by Ludwig von Mises and later refined by Friedrich von Hayek

When economists refer to productive efficiency in government, they are referring to... the fact that the government is much more efficient than private firms since it does not have to make a profit. the fact that government agencies have a well-known ability to produce goods at lower costs than do private firms. the government producing whatever it has chosen to produce at the lowest cost in resources. the government choosing the right things to produce, which is way more important than whether the goods produced are at the lowest possible cost.

the government producing whatever it has chosen to produce at the lowest cost in resources.

firms

the institutions which transform factors of production into finished goods/services

efficient level of trade

the level of trade which maximizes Total Social Surplus

seller's reservation price

the minimum amount of money that she is willing to accept in exchange for the item.

households

the most fundamental part of any economic system; ultimate consumers of most finished goods/services; primary suppliers of labor

logrolling

the process by which a legislator votes to approve one bill in exchange for favorable votes from other members on other bills not necessarily a "bad thing" => logrolling can be potentially beneficial, since it allows for an expression of "intensity of preference" but, particularly when voters are "rationally ignorant," the process can give rise to inefficient outcomes

demand

the relationship between the price of a good and the quantity that consumers are willing and able to purchase, all other factors fixed

right to restitution

the right to be compensated by another person when he damages your property or infringe upon your rights.

right to transfer

the right to obtain ownership of property from or relinquish ownership of property to another person.

human capital

the skills, education, and training which individuals in the labor force possess

comparative economic systems

the subfield of economics that compares and contrasts the structure and the performance of different types of economic organization (i.e., different economic systems).

Bourgeoisie

the term which Karl Marx used to refer to business owners.

Proletariat

the term which Karl Marx used to refer to the working class.

A change in the productive capacity of an economy over time can be illustrated by shifts in the maximum curve of the PPF. (chapter 2) True False

True

In order for a person to be able to purchase goods and services (i.e., act as consumers) in a market, he must first produce a good or service (i.e., act as a supplier) in another market. In other words, the value of goods and services that he can purchase is equal to the value of what he supplies in other markets. Therefore, production must always precede consumption. (chapter 5) True False

True

The defining characteristic that distinguishes a governmental entity from a firm is the fact that the government has a monopoly on the legitimate, legal use of physical force in a given territory. While consumers have a choice to veto potential transactions with private firms, they do not have that same ability with transactions involving governments. (chapter 4) True False

True

The Selick (2003) article "There's No Such Thing as a Nonprofit Organization" states the following: "[I]n fact, every single employee of a nonprofit institution is actually a 'profit center' in himself." Is that statement true? Why/why not? True. Employees of nonprofits still incur personal expenses in order to work, which they seek to minimize, while they seek to maximize their personal income, which results in their personal profit. True. Employees of nonprofits are more altruistically inclined than employees of for-profit organizations, so they view their personal profit as being tied up with the success or failure of the organization. False. Employees of nonprofits face no incentives to maximize their personal income since the managers of the nonprofits have personal stakes in minimizing the organization's expenses. False. Employees of nonprofits on average earn less than their private-sector counterparts, which shows how much more dedicated they are to the mission of their organizations.

True. Employees of nonprofits still incur personal expenses in order to work, which they seek to minimize, while they seek to maximize their personal income, which results in their personal profit.

intermediate good

a good used in the production process that is not a final good or service

contract

a legal document which specifies what different parties must do, whatever the external circumstances, and provides enforcement or compensation for non- performance

open-ended fallacy

a logical error whereby someone incorrectly concludes that simply because there are benefits (to some people) from higher levels of an activity, that more of the activity is always better.

consumer's surplus

a measure of the net gain that a buyer realizes from making a purchase, equal to the difference between his reservation price for the item and the price he actually pays for the item.

total producers' surplus

a measure of the total gains from trade realized by all sellers, defined as each individual's Producer's Surplus, added over all units sold.

total social surplus

a measure of the total gains from trade realized by society, defined as Social Surplus, added over all units traded.

incidence of a tax

a measure of who bears the burden of a tax in terms of decreased welfare

Economic Man (or homo economicus

a person who is both self-interested and rational (this is the standard assumption within mainstream economics)

A binding price floor is... a price control that does not allow the market price to rise above a certain level. It is set below the market equilibrium, thus resulting in a persistent shortage. a price control that does not allow the market price to rise above a certain level. It is set below the market equilibrium, thus resulting in a persistent surplus. a price control that does not allow the market price to fall below a certain level. It is set above the market equilibrium, thus resulting in a persistent shortage. a price control that does not allow the market price to fall below a certain level. It is set above the market equilibrium, thus resulting in a persistent surplus.

a price control that does not allow the market price to fall below a certain level. It is set above the market equilibrium, thus resulting in a persistent surplus.

A binding price ceiling is... a price control that does not allow the market price to rise above a certain level. It is set below the market equilibrium, thus resulting in a persistent shortage. a price control that does not allow the market price to rise above a certain level. It is set below the market equilibrium, thus resulting in a persistent surplus. a price control that does not allow the market price to fall below a certain level. It is set above the market equilibrium, thus resulting in a persistent shortage. a price control that does not allow the market price to fall below a certain level. It is set above the market equilibrium, thus resulting in a persistent surplus.

a price control that does not allow the market price to rise above a certain level. It is set below the market equilibrium, thus resulting in a persistent shortage.

Condorcet Paradox

a situation in which a series of pair-wise majority votes over more than two options leads to a cycling of winners first formalized in the 18th century by Nicolas de Condorcet when such a cycle occurs, it reveals that social preferences are irrational (i.e., not clearly defined) since they are non-transitive (i.e., internally non- consistent or internally contradictory)

excess demand

a situation in which quantity demanded is greater than quantity supplied (resulting in "upward pressure" on price).

excess supply

a situation in which quantity supplied is greater than qua ntity demanded (resulting in "downward pressure" on price).

market failure due to lack of information - for some goods consumers may have difficulty knowing their "true reservation price" => especially common for goods purchased infrequently or for which quality is difficult to observe (e.g., house, car, education, medical procedure, meal at a restaurant)

when consumers lack accurate information about costs or benefits of consuming a good, they may fail to make efficient choices in the marketplace Further note, "information" is often a "club good" (non-rival in consumption and excludable). o Once a club good is produced, the additional cost of providing it to the next person is essentially zero => to maximize social surplus, everyone who has a positive value for the information should be able to access it o Additionally, as long as the information is accurate, total costs to society are minimized if the information is only generated once (e.g., it is a waste of resources to have both the National Weather Service and AccuWeather come up with weather forecasts)

What is the "economic calculation problem" that formed the basis of Ludwig von Mises's economic critique of socialism? (Capitalism vs. Socialism lecture) a. Without private ownership of the means of production, there is no exchange without exchange, there are no prices without prices, there is no economic calculation without economic calculation, production decisions are made in the dark. When that happens, basic needs go unmet. b. Lazy workers would free ride on the labor of highly motivated workers, who would have to carry the weight of society on their backs. c. Mises thought that socialism could work in practice if there were the right people in charge who could know the preferences of all individuals in society. d. With the advent of supercomputers and artificial intelligence, there is no "economic calculation problem."

a. Without private ownership of the means of production, there is no exchange without exchange, there are no prices without prices, there is no economic calculation without economic calculation, production decisions are made in the dark. When that happens, basic needs go unmet.

7) A government policy that attempts to internalize an externality can be generally described as... a. a policy which introduces a cost (or foregone gain) that would be realized by a decision maker who generates an externality. b. a policy which completely bans an activity that generates an externality. c. a policy which mandates the exact level of an activity that decision makers must engage in. d. None of the above.

a. a policy which introduces a cost (or foregone gain) that would be realized by a decision maker who generates an externality.

Law of Supply

all other factors fixed, a greater quantity of a good will be supplied at higher prices (supply curves are upward sloping).

corruption

an environment in which regulations are not enforced and decisions are not made evenly and without bias => corruption leads to inefficient decisions

command planning

an environment in which the government directly controls nearly all economic activity, and almost all production takes place within enterprises owned/controlled by the government.

indicative planning

an environment in which the government guides the behavior of individuals in regards to economic decisions by establishing policies which alter costs and benefits.

kleptocracy

an environment of extreme corruption in which government officials unabashedly seek personal gain at the expense of the public interest present day Russia: "an ill-governed kleptocracy" in which "corruption is not a happy side effect of power, but the core of the system" and as a consequence "a small group of people wholly above the law has, in the past decade, become rich beyond the wildest dreams of the tsars."

Ceteris paribus,a decrease in income will result in an increase in demand for... an inferior good. a normal good. a complementary good. a substitute good.

an inferior good.

Win-lose outcome

an outcome for which some people are better off and some people are worse off than they would have been if the outcome was not realized (i.e., some people "win" but other people "lose").

James Buchanan (1919-2013; Noble Prize in 1986)

argued that politicians in a democracy often act so as to maximize their probability of re-election => it is in the best interest of the representative from GA to engage in logrolling (i.e., vote trading) with others to ensure passage of trade protection for peanuts (even if it means passing other programs as well)

The Condorcet paradox... is not a paradox at all; people who make rational decisions in their private life will make rational decisions in their political decisions was named after a German economist who first discovered that only a government can produce public goods due to the free-rider problem arises when voters are confronted with a series of pairwise votes on three or more issues, and the overall winner of the vote can cycle based on who was placed in the runoff election first proves that majority voting always leads to a socially rational outcome where we can declare that the winner of the election represents the "will of the people"

arises when voters are confronted with a series of pairwise votes on three or more issues, and the overall winner of the vote can cycle based on who was placed in the runoff election first

rent seeking

attempts by people to manipulate government action or influence government decisions in order to make themselves better off at the expense of others e.g., U.S. trade restrictions on imported peanuts very beneficial to owners/workers of U.S. peanut farms (who therefore have a strong incentive to lobby hard to keep the restrictions in place) => peanut producers have an incentive to expend resources to secure these "rents" costly to consumers, foreign peanut producers, and U.S. producers of any goods which use peanuts as an input

_____ refers to a decrease in the rate of increase in the overall price level. a. Inflation b. Disinflation c. Hyperinflation d. Deflation

b. Disinflation

A typical market is characterized by having multiple equilibria. (Exam 1) a. True b. False

b. False

An economy that shows a high degree of generalization in production will be more productive and enjoy a higher standard of living than an economy that shows a high degree of specialization in production. Both economies would still engage in a high degree of generalization in consumption. (Exam 1) a. True b. False

b. False

Ceteris paribus, a change in the price of a good in a market would result in a shifting of either the entire supply curve or the entire demand curve. A change in price results in a change in demand/supply rather than quantity demanded/quantity supplied. (Exam 1) a. True b. False

b. False

Fascist governments did not infringe on the rights of private property owners such as the right to control and the right to transfer their own property; these governments supported the purest expression of unfettered capitalism possible. (Capitalism vs. Socialism lecture) a. True b. False

b. False

Industrialization in the Soviet Union was characterized by an outward shift of its PPF (assume the trade-off modeled by this PPF is between industrial production and agricultural production) driven by technological change, which exemplified its success in implementing socialism. (Article) a. True b. False

b. False

Ludwig von Mises's economic critique of socialism does not apply to a society of selfless, benevolent New Soviet Men and New Soviet Women. In such a society, the "economic calculation problem" does not exist, and socialism could work just fine. (Capitalism vs. Socialism lecture) a. True b. False

b. False

Choose the answer option that best explains the following paradox regarding price gouging: "The only way to guarantee low prices is to allow sellers to charge high prices." (EconTalk podcast episode) a. Price ceilings do not cause shortages. They prevent greedy sellers from raising their prices too high during times of crisis. b. If sellers are not allowed to charge high prices, there won't be the necessary market signals that would entice new sellers to enter the market and provide new supply while allocating existing supply to buyers who needed it the most. Therefore, for sellers to receive the correct signals to increase supply, they must be allowed to charge high prices. c. Sellers who charge high prices would be arrested and prosecuted by local authorities enforcing anti-price gouging laws, which would signal to other sellers not to increase their prices drastically during natural disasters. d. If sellers are not allowed to charge high prices, consumers would not know which sellers were looking to exploit them during times of crisis; therefore, consumers might accidentally patronize unvirtuous sellers.

b. If sellers are not allowed to charge high prices, there won't be the necessary

According to chapter 7 of Economics in One Lesson, what has been one of the long-run effects of increased automation on employment and the economy? a. Since capital and labor are substitutes, automation displaces many workers and destroys jobs. None of those workers are able to get hired in other industries since machines and automation will just continue to take over more sectors of the economy. b. Labor-saving devices and automation allow for lower production costs and greater output. Consumers thus have greater purchasing power that they can use to spend on other industries, which allows those industries to expand and create employment opportunities that did not previously exist. c. Population growth has outpaced job growth, which means that more and more people compete for fewer and fewer jobs. d. The premise of the question is incorrect. The economy has not become more automated in the long run.

b. Labor-saving devices and automation allow for lower production costs and greater output. Consumers thus have greater purchasing power that they can use to spend on other industries, which allows those industries to expand and create employment opportunities that did not previously exist.

In his 1945 article The Use of Knowledge in Society, Hayek uses the example of the tin market to illustrate the mechanics of the international price system. In one of the hypotheticals he uses, he says that "it is very significant that it does not matter which of these two causes has made tin more scarce," the two causes being either 1) "a new opportunity for the use of tin has arisen," or 2) "one of the sources of supply of tin has been eliminated." What was Hayek's reasoning as to why it doesn't really matter which change has occurred in the tin market? (Article) a. Producers of tin will find out through their own information networks if tin supplies have decreased and will increase their production. b. The end result is the same: consumers of tin will limit their uses while producers of tin expand their production simply by observing the price increase. c. Tin users will tell all of the producers that they need to increase their production when they go to purchase their tin. d. Industry trade groups will communicate with the public and receive feedback from tin users to calculate how much tin that producers should supply to the market.

b. The end result is the same: consumers of tin will limit their uses while producers of tin expand their production simply by observing the price increase.

3) A good is rival if... a. consumption by one person does not diminish the quantity/quality of consumption by others. b. consumption by one person diminishes the quantity/quality of consumption by others. c. it is difficult (or very costly) to prevent consumption by those who do not pay for the good. d. it is easy (or relatively costless) to prevent consumption by those who do not pay for the good.

b. consumption by one person diminishes the quantity/quality of consumption by others.

The market equilibrium price... (Exam 1) a. prevents the efficient quantity of trade from arising. b. determines the split of total gains from trade between buyers and sellers at the market outcome. c. determines if Deadweight Loss is positive or negative at the market outcome. d. None of the above answers are correct.

b. determines the split of total gains from trade between buyers and sellers at the market outcome.

A market failure can be described as a situation in which... (Chapter 10, p. 266, #1) a. a single seller of a good has little to no control over the price of the good. b. the free-market outcome is NOT efficient. c. government intervention leads to a greater Deadweight-Loss than the free-market outcome. d. government imposes progressive taxes, in order to redistribute income.

b. the free-market outcome is NOT efficient.

A market failure can be described as a situation in which... a. a single seller of a good has no control over the price of the good. b. the free-market outcome results in a deadweight loss. c. government intervention leads to a greater deadweight loss than the free-market outcome. d. government imposes progressive taxes in order to redistribute income.

b. the free-market outcome results in a deadweight loss.

6) When economists speak of "land" as a factor of production, they are referring... (ch. 2) a. only to the unexploited surface of the earth that can be farmed or built upon. b. to both the surface of the earth and all natural resources on it or beneath it. It is a synonym for unexploited natural resources. c. to the single most important resource used in modern economies. d. to the only resource an economy needs to produce goods and services.

b. to both the surface of the earth and all natural resources on it or beneath it. It is a synonym for unexploited natural resources.

8) Which of the following is an example of a negative externality? a. A farmer's cattle operation is fouling his own pond where he gets irrigation water for his corn crop. b. Customers of McDonalds gain weight from eating too much unhealthy food. c. A nightclub opens near a residential neighborhood. The neighborhood suffers from noise at late hours, but it is not compensated by the club owner. d. Construction company owners have a higher injury rate for workers than retail companies. The higher injury rate is, therefore, a negative externality for construction workers.

c. A nightclub opens near a residential neighborhood. The neighborhood suffers from noise at late hours, but it is not compensated by the club owner.

Which of the following is an example of a positive externality? (Quiz 3 #9) a. A power plant produces electricity for its customers who get a benefit from having lights in their houses. b. A factory hires an engineering firm to help it reduce its fuel consumption in order to save money. In the process, the engineering firm earns higher profits. c. An outdoor concert venue frequently hosts rock concerts that can be heard at a nearby public park. The venue is not otherwise disturbing any residents in the area. d. Engineers working for Tide detergent invent a new cleaner. Tide's customers get much better-looking clothes that don't need to be replaced as often.

c. An outdoor concert venue frequently hosts rock concerts that can be heard at a nearby public park. The venue is not otherwise disturbing any residents in the area.

9) Which of the following is an example of a positive externality? a. A power plant produces electricity for its customers who get a benefit from having lights in their houses. b. A factory hires an engineering firm to help it reduce its fuel consumption in order to save money. In the process, the engineering firm earns higher profits. c. An outdoor concert venue frequently hosts rock concerts that can be heard at a nearby public park. The venue is not otherwise disturbing any residents in the area. d. Engineers working for Tide detergent invent a new cleaner. Tide's customers get much better-looking clothes that don't need to be replaced as often.

c. An outdoor concert venue frequently hosts rock concerts that can be heard at a nearby public park. The venue is not otherwise disturbing any residents in the area.

According to George Reisman, why does socialism "positively require" (that is, from an objective, analytical standpoint) a totalitarian police state? (Article/video lecture) a. Before the next generations of children can be raised to become New Soviet Men and New Soviet Women, the generation that saw the transition from capitalism into socialism might still be self-motivated. b. Since the means of production belong to the government, socialist governments needed to protect their property from capitalists who might return to take back their expropriated property. c. If socialist states did not implement strict enforcement of their economic policies, people would be incentivized to transact in black markets, which are markets in which goods are illegally bought and sold. d. Reisman is wrong; socialism does not require a totalitarian dictatorship to implement.

c. If socialist states did not implement strict enforcement of their economic policies, people would be incentivized to transact in black markets, which are markets in which goods are illegally bought and sold.

10) The Manne (2014) article All Education Is For-Profit Education states the following: "[T]here is a significant difference in these two forms of organization (i.e., for-profit and non-profit enterprises) that neither Hansmann nor Shireman acknowledges." What is that significant difference? ECON 1000 - Fall 2022 - Quiz 1 - Answer Key a. Property rights in the assets and stream of income of a for-profit organization exist, but they are not transferable; property rights in the assets and stream of income of a nonprofit organization do not exist at all. b. The managers of a for-profit organization are incentivized to maximize their own personal wealth and total compensation; the managers of nonprofit organizations are much more altruistically inclined and, thus, are incentivized to maximize revenue for their organizations. c. Property rights in the assets and stream of income of the nonprofit organizations are not transferable; property rights in the assets and stream of income of a for- profit organization are transferable. d. Nonprofit organizations are, always and everywhere, better than for-profit organizations. This fact is especially true in the world of education.

c. Property rights in the assets and stream of income of the nonprofit organizations are not transferable; property rights in the assets and stream of income of a for- profit organization are transferable.

What is the first, most basic lesson of economics? (ch. 1) a. Prices are determined in markets by the interaction of supply and demand b. Value is subjective; there is no such thing as an "objective" value of anything c. Scarcity - there is never enough of anything to satisfy all those who want it d. As consumption of a good increases, the marginal utility of each additional unit declines

c. Scarcity - there is never enough of anything to satisfy all those who want it

Suppose the government were to pay for an increase in military spending financed by money printing. The suppliers of the government's newly ordered additional materiel (i.e., defense contractors) would be the initial recipients of this newly printed money. The government announces this program publicly, so the rest of the public is fully aware of all details of the program. The suppliers of any goods and services that the employees of these defense contractors would purchase are second-order recipients of that newly printed money. According to chapter 22 of Economics in One Lesson, what would be some of the economic effects when the defense contractors spend their increased incomes into the economy? a. The defense contractors will see no change in prices since the second-order recipients would be able to employ more workers. Thus, there is a "multiplier" effect where each dollar printed and spent into the economy adds to overall economic productivity. b. The defense contractors will find that the aggregate price level has already adjusted to the announced increase in the money supply. Since the public knows all of the program's details, the second-order recipients as well as prospective third-order, fourth-order, etc. recipients have already raised their prices. c. The second-order recipients would be able to increase their prices and spend their increased incomes elsewhere (and so on). This process would continue until the inflationary process stops at the source. However, not all prices increase at the same time, nor do all incomes increase at the same time, so the initial recipients of that new money would benefit at the expense of the last recipients. d. None of the above.

c. The second-order recipients would be able to increase their prices and spend their increased incomes elsewhere (and so on). This process would continue until the inflationary process stops at the source. However, not all prices increase at the same time, nor do all incomes increase at the same time, so the initial recipients of that new money would benefit at the expense of the last recipients.

Perhaps as many as 55 million people died between 1958 and 1962 during China's "Great Leap Forward" (i.e., communist China's attempt to "leap" into communism). How? (EconTalk podcast episode) a. Many new strains of incurable diseases ravaged the Chinese countryside. b. A drought caused by climate change caused prolonged large-scale crop failures. c. When the Chinese Communist Party attempted to collectivize and centrally administer all agriculture throughout the Chinese economy, a deadly combination of Mises's "economic calculation problem" and Hayek's "knowledge problem" arose in agriculture, which resulted in an otherwise avoidable man-made famine. d. China was invaded by foreign enemies and lost massive numbers of soldiers and civilians in war.

c. When the Chinese Communist Party attempted to collectivize and centrally administer all agriculture throughout the Chinese economy, a deadly combination of Mises's "economic calculation problem" and Hayek's "knowledge problem" arose in agriculture, which resulted in an otherwise avoidable man-made famine.

When considering potential government policies, it is important to recognize that (Chapter 1, p. 21, #19) a. most businesses are not run by "rational decision makers." b. voluntary trade generally makes sellers better off but buyers worse off. c. if a policy alters the costs and/or benefits for a decision maker, then the decision maker might change his behavior as a result of the policy. d. voters are self-interested but politicians are not

c. if a policy alters the costs and/or benefits for a decision maker, then the decision

6) A movie playing at a local movie theater is an example of an activity that is... a. non-excludable b. rival c. non-rival d. More than one (perhaps all) of the above answers is correct.

c. non-rival

A movie playing at a local movie theater is an example of an activity that is... (Quiz 3 #6) a. non-excludable b. rival c. non-rival d. More than one (perhaps all) of the above answers is correct.

c. non-rival

Maurice is a citizen of Canada but lives, works, and attends college in the United States. Last year, he went on vacation to Mexico during Spring Break. He works at a daycare in Roswell, GA. Last year, he provided daycare services valued at $22,500. The value of these services would be included in the calculation of GDP for... (Chapter 7, p. 191, #20) a. only Mexico since that is where he went to relax on vacation, which was a necessary activity for him to be able to work hard in school and on the job throughout the rest of the year. b. only Canada since he is a Canadian citizen. c. only the United States since that is where the production took place. d. all three countries (i.e., Canada, Mexico, and the United States) since he has an economic tie to each.

c. only the United States since that is where the production took place.

The fundamental difference between government and market in answering the three fundamental economic questions is that... (Chapter 3) a. government activity is necessary in a socialist system but is not necessary in a capitalist system. b. government is based on voluntary interaction while the market requires coercion. c. the market is based on voluntary interaction while government is based on coercion. d. governments are responsive to consumer desires whereas markets are not.

c. the market is based on voluntary interaction while government is based on coercion.

Determinants of Supply (factors that change supply)

changes in the following will result in an increase in supply: (1) a decrease in the cost of any factors of production used to produce the good; (2) an improvement in technology that reduces production costs; (3) a favorable realization of "natural events"; (4) an increase in "market size"; (5) an expectation of lower future prices. Changing any of these factors in " the opposite direction" would result in a decrease in supply.

According to Economics in One Lesson, what are some of the effects of a minimum wage? (Quiz 4, question #10) a. Workers whose work is not valued by at least as much as the minimum wage will not be employed at all. b. If producers try to pass the cost of the minimum wage on through to their customers simply by raising their prices, some consumers will substitute away from their products while others purchase less of it. c. Marginal producers that cannot pass the cost of the minimum wage on through to their customers will be forced to go out of business. d. All of the above.

d. All of the above.

According to Marxism, profit itself is exploitative by definition. They believed that workers were being systemically exploited by business owners. What is one counterargument to this belief? (Capitalism vs. Socialism lecture) 7 a. Relationships between workers and firms were voluntary. b. Those firms would not exist if not for the risk-taking and initiative of the business owners. c. Nothing is stopping those workers from leaving those firms and starting up their own to compete. d. All of the above.

d. All of the above.

Assume that taxes are imposed on an economy for the express purpose of funding public works projects to provide employment. Assume also that these taxes are collected through 1) personal income taxes imposed as a percentage of an individual taxpayer's income, and 2) corporate income taxes imposed as a percentage of a corporation's income. According to chapter 5 of Economics in One Lesson, what else is true regarding the imposition of those taxes on the economy? (Exam 1) a. Both corporations and taxpayers still lose 100% of every dollar lost in investments that do not pan out. b. The taxes will change the incentives of corporations and taxpayers to produce/invest since they do not gain 100% of every dollar "won" from making worthwhile investments. c. A tax rate of 50% is equivalent to working for the government for six months out of a year; a tax rate of 75% is equivalent to working for the government for nine months out of a year. d. All of the above.

d. All of the above.

Country A is more productive (i.e., has more production possibilities) in every industry than Country B. Which statement most clearly illustrates the concept of comparative advantage? (Exam 1) a. Country A will lose out in the long run if each country chooses to specialize in its lowest opportunity cost industry; both countries should cut off trade and work on improving their productivity until their production possibilities are both equal. b. Country A will lose out in the long run and should impose a tariff on cheaper imports from Country B in order to protect workers in Country A's industries. c. Country B will gain at the expense of Country A as workers who are willing to accept lower salaries and wages migrate from Country B to Country A and send funds (i.e., remittances) back to their families in Country B. d. Both countries can still benefit from specialization and voluntary trade as long as Country A has a lower opportunity cost than Country B in some industry.

d. Both countries can still benefit from specialization and voluntary trade as long as

Which of the following is a fair summation of the "action axiom"? (Exam 1) a. Through the process of trial and error, people will take risks in the market to try to solve problems and make corrections over time. b. People only act in groups, so majority rule represents the will of the people. c. Greed is good; greed will meet the need. d. Humans employ means according to values and ideas to achieve ends

d. Humans employ means according to values and ideas to achieve ends

What is the first, most basic lesson of economics? (Intro, Quiz 1 #1) - Prices are determined in markets by the interaction of supply and demand -Value is subjective; there is no such thing as an "objective" value of anything -Scarcity; there is never enough of anything to satisfy all those who want it -As consumption increases, the marginal utility of each additional unit declines

Scarcity; there is never enough of anything to satisfy all those who want it

The opening chapters of Economics in One Lesson explain how destruction can bring about economic prosperity. How could disasters like hurricanes or wars improve the standard of living of an economy? (Exam 1) a. It explains that the window maker would not have received the income from the shopkeeper had the young hoodlum not thrown the brick through the shopkeeper's window. The window maker is therefore worse off without the destruction wrought by the hoodlum. b. War brings with it many innovations in new technologies. These developments could not have come about through more peaceful ways. c. Hurricanes bring with them an economic boon to the construction companies and suppliers of the goods that were destroyed as the localities affected by the disaster try to rebuild and recover. d. To quote Bryce Harper, "That's a clown question, bro." The opening chapters make the exact opposite case that the question asserts. Disasters and wars are net negatives for the economy as a whole. What is unseen is what sort of economic development might have taken place had those examples of destruction and death not taken place.

d. To quote Bryce Harper, "That's a clown question, bro." The opening chapters make the exact opposite case that the question asserts. Disasters and wars are net negatives for the economy as a whole. What is unseen is what sort of economic development might have taken place had those examples of destruction and death not taken place.

7) A production possibilities frontier... (ch. 2) a. shows that tradeoffs are never required except when an economy is operating inefficiently. b. shows that there is no economic cost due to moving from one point on the curve to another point. c. illustrates a "free lunch" by moving from one spot on the maximum curve of the frontier to another one. d. can illustrate an opportunity cost by moving from one point on the maximum curve to another, thus representing a reduction of the production of one good in order to increase the production of the other good.

d. can illustrate an opportunity cost by moving from one point on the maximum curve to another, thus representing a reduction of the production of one good in order to increase the production of the other good.

In such cases, have government license, inspect, and/or regulate providers of such goods in order to:

i. provide people with the important information needed to make good decisions in markets and ii. minimize the costs to society of providing the information o e.g., "Cobb and Douglas Public Health" inspects restaurants and assigns letter grades based upon compliance with health codes => government "regulates product" and "provides information"

Equivalence between "per unit tax imposed on buyers" and "per unit tax imposed on sellers." Consider either "a per unit tax of $T imposed on buyers" or "a per unit tax of $T imposed on sellers"...

The outcomes of these two alternative policies are identical in terms of: level of trade; per unit price ultimately paid by buyers; per unit price ultimately received by sellers; decrease in Consumers' Surplus; decrease in Producers' Surplus; tax revenue generated by the government; magnitude of resulting Deadweight-Loss. That is, the two policies are equivalent to each other from the perspective of buyers, from the perspective of sellers, and from the perspective of society. Thus, if the government were to impose an additional $1 of taxes on gasoline, consumers should not care whether they are responsible for paying the tax or if gas station owners are responsible for paying the tax.

"Horizontal Interpretation" of Supply Curve

start by focusing on a particular price, and then go over to the supply curve horizontally to determine the corresponding quantity supplied at this particular price.

"Vertical Interpretation" of Demand Curve

start by focusing on a particular quantity demanded, and then go up to the demand curve vertically to determine the corresponding price at which this particular quantity would be demanded.

"Vertical Interpretation" of Supply Curve

start by focusing on a particular quantity supplied, and then go up to the supply curve vertically to determine the corresponding price at which this particular quantity would be supplied.

____________ are the decision making entities whose primary objective is to obtain benefits from consuming goods and services. A. Politicians B. Households C. Firms D. Entrepreneurs

B. Households

2. _________________ refers to the skills, education, and training which individuals in the labor force possess. A. Produced Assets B. Human Capital C. Natural Assets D. A Property Right

B. Human Capital

Widespread price controls were implemented in the U.S. in an unsuccessful attempt to reduce inflation during the time when ____________ was President. A. Lyndon Johnson B. Richard Nixon C. Jimmy Carter D. Ronald Reagan

B. Richard Nixon

Two broad causes of Government Failure:

(1) government fails to perform a necessary task efficiently and (2) government fails to do only those tasks that it should do

seven specific sources of government failure:

(1) informational problems, (2) costs of complying with government bureaucracy, (3) corruption or kleptocracy, (4) regulatory capture, (5) rent-seeking, (6) logrolling and rational ignorance, and (7) deadweight-loss from taxes

three dimensions of Private Ownership of Property:

(i) "right to control," (ii) "right to transfer," and (iii) "right to restitution."

Adam Smith

18th century (1721-1790) Scottish economist, who wrote "An Inquiry into the Nature and Causes of the Wealth of Nations," in which he laid out the central arguments for why private ownership/control of resources and trade in free markets often result in desirable outcomes

Karl Marx

19th century (1818-1883) German philosopher, economist, and revolutionary, who wrote "Das Kapital" (1867, 1884, 1885) and co-wrote (with Friedrich Engels) "The Communist Manifesto" (1848)

14. On March 31, 2018, heavyweight boxing champion Anthony Joshua defeated challenger Joseph Parker by unanimous decision in Cardiff, Wales. This fight was televised in the U.S. on the premium cable network Showtime. The broadcast of this bout on Showtime was excludable but non-rival, and was therefore a A. Club Good. B. Common Good. C. Public Good. D. Private Good.

A. Club Good.

13. _________________ is the subfield of economics that compares and contrasts the structure and performance of different types of economic organization. A. Comparative Economic Systems B. International Trade C. Industrial Organization D. Public Choice

A. Comparative Economic Systems

2. The ________________ refers to a situation in which a series of pair-wise majority votes over more than two options leads to a cycling of winners. A. Condorcet Paradox B. Buchanan Puzzle C. Coase Conjecture D. Shapley Value

A. Condorcet Paradox

According to Economics in One Lesson, what are some of the effects of a minimum wage? Workers whose work is not valued by at least as much as the minimum wage will not be employed at all. If producers try to pass the cost of the minimum wage on through to their customers simply by raising their prices, some consumers will substitute away from their products while others purchase less of it. Marginal producers that cannot pass the cost of the minimum wage on through to their customers will be forced to go out of business. All of the above.

All of the above.

Zack is the starting quarterback on his high school football team. After the first five games of the season he is averaging 152.4 passing yards per game. Based upon this information, which of the following statements is true? A. "If he has zero passing yards in his next game, his average will drop to 76.2 yards per game." B. "If he throws for 153 or more yards in his next game, his average will increase." C "His average will decrease if he throws for more than 152.4 yards in his next game." D. None of the above answers are correct.

B. "If he throws for 153 or more yards in his next game, his average will increase."

Which of the following is one of the "Three Basic Economic Questions" that every society must address? A. "How can we reduce our carbon footprint?" B. "Which productive resources should be used for the production of which goods?" C. "How can we guarantee that all people have access to healthcare?" D. More than one (perhaps all) of the above is one of the "Three Basic Economic Questions" that every society must address.

B. "Which productive resources should be used for the production of which goods?"

The ______________ refers to the periodic but irregular fluctuation in overall macroeconomic activity which occurs over time. A. Stabilization Function of Government B. Business Cycle C. velocity of money D. None of the above answers are correct.

B. Business Cycle

Dave bought 10 comic books from Eric. This trade gave Eric a Producer's Surplus of $20 and generated a Social Surplus of $36. It follows that Dave realized a ______________________ from this trade. A. negative Consumer's Surplus B. Consumer's Surplus of $16 C. Consumer's Surplus of $56 D. None of the above answers are correct.

B. Consumer's Surplus of $16

An increase in income will result in a decrease in demand for _______________. A. a normal good B. an inferior good C. a substitute good D. a complementary good

B. an inferior good

1. "Market Failure" can be described as a situation in which A. a single seller of a good has substantial control over the price of the good. B. the "free market outcome" is NOT efficient. C. government intervention leads to a greater Deadweight-Loss than does the "free market outcome." D. government imposes progressive taxes, in order to redistribute income. 2.

B. the "free market outcome" is NOT efficient.

During the COVID-19 Recession the unemployment rate in the U.S. peaked at ___. A. 8.5% B. 10.2% C. 14.7% D. 21.3%

C. 14.7%

4. Consider the market for oranges. If there is "excess supply" at a price of $2.35, then the equilibrium price must be: A. above $2.35. B. exactly equal to $2.35. C. below $2.35. D. None of the above answers are correct (since more information is needed to answer this question).

C. below $2.35.

In order to include many different goods and services in a single aggregate measure, GDP is computed by valuing goods according to A. Consumer and Producer Surpluses. B. dollar amounts based upon telephone surveys of consumers. C. market prices D. production costs.

C. market prices

A situation in which the sum of gains and losses over all people is positive in value is defined as a A. win-win outcome. B. win-lose outcome. C. positive-sum environment. D. negative-sum environment.

C. positive-sum environment.

The term "Deadweight Loss" refers to... (chapter 5, p. 131, #4) A. the burden that consumers incur from having to pay for goods, instead of getting them for free. B. the negative impact of industrial production on our environmental resources. C. the difference between "maximum possible Total Social Surplus" and "realized Total Social Surplus." D. the negative profits (or losses) that firms make in a free-market economy when their costs of production are too high.

C. the difference between "maximum possible Total Social Surplus" and "realized Total Social Surplus."

10. A "4th of July Fireworks display in downtown Atlanta" is A. easily "Excludable." B. perfectly "Rival in Consumption." C. very "Non-Rival in Consumption." D. More than one (perhaps all) of the above answers is correct.

C. very "Non-Rival in Consumption."

Consider a market in which maximum possible Total Social Surplus is equal to $850,000 (which is realized if 32,500 units are traded). If instead 28,000 units are traded, then realized Total Social Surplus is equal to $700,000. It follows that if 28,000 units are traded, then Deadweight Loss is equal to _____. (chapter 5, p. 131, #6) A. $1,550,000 B. $775,000 C. -$150,000 D. $150,000

D. $150,000

In 2017, Goldman Sachs made cash donations of ______ to private charities. A. $0 (since Goldman Sachs is a for-profit company, and such companies never take any actions that do not maximize profit) B. $975,253 C. $84.2 million D. $280 million

D. $280 million

In 2020, Nominal GDP in the United States was _______________ the value of Nominal GDP in the United States in 1920. A. 2.8 times larger than B. 7.6 times larger than C. 23.6 times larger than D. 234.2 times larger than

D. 234.2 times larger than

In 1960, 12% of all U.S. households had air conditioning. In contrast, by 1997, _____ of U.S. households below the poverty line had air conditioning. A. 9% B. 14% C. 33% D. 70%

D. 70%

Money exists to solve what central economic problem? (chapter 4) A. High transaction costs associated with barter B. You want what I have, but I don't want what you have C. Lack of double coincidence/mutual reciprocity of wants D. All of the above

D. All of the above

___________________ can potentially be used by the government in order to stabilize the performance of the macroeconomy (i.e., to minimize fluctuations in the rate of economic growth) over time. A. Neither Monetary Policy nor Fiscal Policy B. Monetary Policy, but not Fiscal Policy C. Fiscal Policy, but not Monetary Policy D. Both Fiscal Policy and Monetary Policy

D. Both Fiscal Policy and Monetary Policy

Inflation is defined as an increase in A. average household income. B. the total market value of all goods and services produced within an economy over a specific period of time. C. the price of any one single good in an economy. D. the overall, general level of prices for goods in the economy.

D. the overall, general level of prices for goods in the economy.

"Maximum Total Social Surplus" and "Inefficiency of too much or too little trade": To maximiz

Do trade all units for which 0)( >− sb rr (or equivalently sb rr > ) • Do not trade any units for which 0)( <− sb rr (or equivalently sb rr < )

A typical market is characterized by having multiple equilibria. (chapter 4) True False

False

Scarcity is a thing of the past. We live in a post-scarcity society. (Intro) True False

False

There have been many randomized controlled trials (RCTs) that prove beyond a shadow of a doubt that wearing masks (cloth, surgical, or otherwise) prevent the spread of COVID-19. Therefore, there are no tradeoffs to consider when the government imposes a mask mandate. (Article) True False

False

Which of the following is NOT one of the primary functions of money? Medium of exchange Unit of account Store of value Must be denominated in dollars

Must be denominated in dollars

What is the role of profits and losses (i.e., negative profits) in a market system? Profits serve as signaling mechanisms that incentivize market actors to marshal resources to their most valuable uses. Profits exist to enrich the capitalist class at the expense of workers. Profits are a signal that suppliers are charging too much for their products. Companies that earn profits should have a tax imposed on them; the role of profits, therefore, is to fund public works through the taxes that are collected.

Profits serve as signaling mechanisms that incentivize market actors to marshal resources to their most valuable uses.

Rent-seeking is illegal because... the only way to get a government official to change the rules to help your industry is to bribe them. it is illegal for the government to do things that are economically inefficient. it is illegal for government officials to rent out government owned property for their own private gain. The premise of the question is false. Rent-seeking is perfectly legal since it works through the normal process of petitioning our elected leaders to do things which are themselves legal.

The premise of the question is false. Rent-seeking is perfectly legal since it works through the normal process of petitioning our elected leaders to do things which are themselves legal.

What is social science?

The study of how humans behave and interact with other humans

government failure

a situation in which Total Social Surplus is decreased by government intervention in a market

regulatory capture

a situation in which firms in a regulated industry influence a regulatory agency to the point where the agency enacts policies that are in the best interest of the regulated firms (even if the decisions are not in the best interest of the public)

Positive-sum environment

a situation in which the sum of gains and losses over all people is positive in value

Zero-sum environment

a situation in which the sum of gains and losses over all people is zero in value

Which of the following is a statement of normative economics? (Exam 1) a. The government should run deficits to cure economic slumps and lower unemployment. b. Gas prices will fall if the government reduces certain regulations on the fossil fuel industry. c. An increase in the minimum wage will increase the standard of living of all low- wage workers. d. There will be no unintended consequences from President Biden's decision to forgive up to $10,000 of student loan debt.

a. The government should run deficits to cure economic slumps and lower

In many ways, the average American living nowadays is richer than even John D. Rockefeller. (Article) a. True b. False

a. True

Law of Demand

all other factors fixed, a greater quantity of a good will be demanded at lower prices (demand curves are downward sloping).

money

an asset that is socially and legally accepted as a medium of exchange.

stabilization function

attempts by government to minimize fluctuations in overall macroeconomic activity.

When economists refer to allocative efficiency in the government, they are referring to the need of the government to... change the distribution of final goods to particular groups of people. choose the right things to produce allocate the right government agency to the task chosen. allocate the production of military goods to supportive congressional districts.

choose the right things to produce

5) Person A has a(n) _____ in the production of a good if that person can produce more of the good than Person B with the same amount of inputs. (ch. 2) a. tradeoff b. opportunity cost c. comparative advantage d. absolute advantage

d. absolute advantage

three functions of money:

medium of exchange - an asset used as payment when purchasing goods/services store of value - an asset that serves as a means of holding wealth unit of measure - a basic measure of economic activity

material rewards

monetary rewards or direct increases in consumption from engaging in an activity.

natural assets

natural resources, including minerals, naturally occurring vegetation, water resources, topographical features, and available agriculturally productive land

"Horizontal Interpretation"

of Demand Curve - start by focusing on a particular price, and then go over to the demand curve horizontally to determine the corresponding quantity demanded at this particular price.

"The Great Inflation"

period of abnormally high inflation rates from early 1970'sthrough early 1980's

internalizing an externality

policies which introduce a cost (or foregone gain) that is realized if the person continues to generate a negative externality

Role of the Entrepreneur

profits can only serve as effective signals insofar as someone is able to recognize, appreciate, and respond according to different levels of profit.

Role of Profits in a free market economy

profits serve as a vital "signaling device" in free market economies, directing resources to their most valuable use.

trade surplus

the excess of exports over imports

four common sources of market failure:

(1) profit maximization by a firm with market power, (2) market provision of public goods, (3) market provision of goods generating externalities, and (4) lack of information by market participants

The Law of Supply... ...is also based on the laws of the U.S. Constitution. The Constitution of the U.S. makes the law of supply mandatory in all 50 states. ...postulates that in a world of self-interest, businesses will only increase their production if prices are falling. ...states that, ceteris paribus, producers will sell more of a good as its price increases; producers will sell less of a good as its price decreases. ...is based on the theory of "Economic Man," or homo economicus. Economic Man responds to higher prices by reducing production.

...states that, ceteris paribus, producers will sell more of a good as its price increases; producers will sell less of a good as its price decreases.

Potential policies to reduce the DWL associated with a "negative externality"

1. ban the activity entirely ("illegal to emit any pollution") 2. establish minimum compliance standards for manufacturers ("can only pollute up to a certain level") 3. "cap and trade" - issue a certain number of "pollution permits" for society as a whole, and allow people to trade these permits amongst themselves 4. offer subsidies to manufacturers that reduce pollution ("pay the polluter to reduce their level of pollution") 5. charge manufacturers a fee for each unit of pollution emitted ("polluter must pay for the right to pollute")

In most markets Total Social Surplus is equal to A. "Total Consumers' Surplus" plus "Total Producers' Surplus." B. "Total Consumers' Surplus" minus "Total Producers' Surplus." C. "Total Benefit to Buyers" minus "Total Amount Paid by Buyers." D. "Equilibrium Price" multiplied by "Equilibrium Quantity."

A. "Total Consumers' Surplus" plus "Total Producers' Surplus."

The economy of the former Soviet Union grew at an average annual rate of 7.2% between 1950 and 1960. In contrast, between 1980 and 1985 it grew at an average annual rate of ______. A. 0.6% B. 2.1% C. 7.1% D. 12.4%

A. 0.6%

As of 2018, the highest Marginal Tax Rate for the U.S. Federal Income Tax is A. 37%. B. 50%. C 70%. D. 91%.

A. 37%.

In Economics in One Lesson, Hazlitt says that "the whole of economics can be reduced to a single lesson." What is that lesson? (E1L chapter 1, Quiz 1 #8) A. Economics trains us to examine not only the primary effects of a policy but also the secondary effects of any act or policy; it also trains us to examine the consequences of those actions/policies on all groups of people in society. B. Economics is only useful to policymakers and people in important positions of power in government and large corporations. C. Economics tells us that we could achieve a "post-scarcity" society today if we eliminated the artificial barriers imposed by various government policies that currently protect the capitalist class from being overtaken by the exploited worker class. D. Economics teaches us that a government-provided healthcare system (that is, a healthcare system that operates as a government agency) is the best way to provide and deliver healthcare goods and services

A. Economics trains us to examine not only the primary effects of a policy but also the secondary effects of any act or policy; it also trains us to examine the consequences of those actions/policies on all groups of people in society.

6. According to the World Bank's World Governance Indicators Project, the perceived level of corruption is lowest in __________ and highest in __________. A. New Zealand; South Sudan. B. Russia; the United States. C. Germany; Singapore. D. Zimbabwe; North Korea.

A. New Zealand; South Sudan.

Ty owns a copy of the book "Sapiens" autographed by the author Yuval Noah Harari. His reservation price as a seller of this item is $45. Ed's reservation price as a buyer of this item is $5. If this unit was traded (i.e., transferred from Ty to Ed) A. Social Surplus would be decreased by $40. B. Social Surplus would be increased by $25. C. Social Surplus would be increased by $40. D. Social Surplus would be increased by $50.

A. Social Surplus would be decreased by $40.

Which of the following is an example of a progressive tax? A. The U.S. Income Tax. B. The Bulgarian Income Tax. C. The U.S. Social Security Payroll Tax. D. None of the above answers are correct (since progressive taxes do not exist in the real world).

A. The U.S. Income Tax.

Which of the following statements is NOT true about the study of macroeconomics? (Intro) A. There is a clear dividing line between microeconomics and macroeconomics; microeconomic principles aren't really connected to macroeconomic phenomena B. Macroeconomics studies the national (or even international) economy as a whole C. One of the primary tools of macroeconomics is the use of statistical aggregates like unemployment, gross output (GO), and gross domestic product (GDP) D. The GDP levels of many U.S. states are comparable in size to other countries

A. There is a clear dividing line between microeconomics and macroeconomics; microeconomic principles aren't really connected to macroeconomic phenomena

In a simple model of the supply and demand for pizza, when buyers' income increases, the price of pizza _____ and the quantity purchased _____ (note: assume that pizza is a normal good). (chapter 4) A. increases; increases B. increases; decreases C. decreases; increases D. decreases; decreases

A. increases; increases

The quote by Milton Freidman on page 17 suggests that he believed Mother Theresa was A. rational and self-interested. B. rational but not self-interested. C. irrational and not self-interested. D. irrational but self-interested.

A. rational and self-interested.

The U.S. Federal Income Tax A. was first established in 1913 (and authorized by the passage of the 16th Amendment to the U.S. Constitution). B. is a Proportional Tax. C. was abolished by President Barack Obama during his last year in office. D. More than one (perhaps all) of the above answers is correct.

A. was first established in 1913 (and authorized by the passage of the 16th Amendment to the U.S. Constitution).

Trent enjoys going to the movies. In June he saw 6 movies in the theatre. His Marginal Benefit of the 6th movie was $20, while his Marginal Cost of the 6th movie was $14. Based upon this information alone, his Economic Surplus A. would have been smaller if he had instead gone to the movies 5 times. B. would have been larger if he had instead gone to the movies 5 times. C. was clearly maximized by going to the movies exactly 6 times. D. would have been larger if he had instead gone to the movies 7 times.

A. would have been smaller if he had instead gone to the movies 5 times.

22. A group of teachers at an elementary school is trying to decide where to take their students on a field trip. They are considering three options: an art gallery, an amusement park, and a zoo. When voting between only the art gallery and the amusement park, the art gallery receives more votes. When voting between only the zoo and the art gallery, the zoo receives more votes. When voting between only the amusement park and the zoo, the amusement park receives more votes. These outcomes illustrate ______________. A.the Condorcet Paradox B. Corruption C. Regulatory Capture D. Rent Seeking

A.the Condorcet Paradox

Assume that the taxes discussed in question #9 are collected through 1) personal income taxes imposed as a percentage of an individual taxpayer's income, and 2) corporate income taxes imposed as a percentage of a corporation's income. According to chapter 5 of Economics in One Lesson, what else is true regarding the imposition of those taxes on the economy? Both corporations and taxpayers still lose 100% of every dollar lostin investments that do not pan out. The taxeswill change the incentives of corporations and taxpayers to produce/invest since they do not gain 100% of every dollar "won" from making worthwhile investments. A tax rate of 50% is equivalent to working for the government for six months out of a year; a tax rate of 75% is equivalent to working for the government for nine months out of a year. All of the above.

All of the above.

Jamal owns a popular food truck which he operates near campus. Last week he earned revenues of $3,500 and incurred costs of $2,500. Based upon these numbers, it follows that his profit was ____________. A. -$1,000 (i.e., negative $1,000) B. $1,000 C. $3,000 D. $6,000

B. $1,000

Consider an item for which Amy has a reservation price as a seller of $25 and Benny has a reservation price as a buyer of $45. Which of the following prices is inside their bargaining range? A. $20. B. $35. C. $70. D. None of the above prices is inside their bargaining range.

B. $35.

________________ is defined as the flow of money earned by an individual during a period of time. A. Human Capital B. Income C. Wealth D. The Lorenz Curve

B. Income

A.C. and Zack produce surfboards and hair gel. A.C.'s opportunity cost of producing a surfboard is lower than Zack's opportunity cost of producing a surfboard. The _________________ suggests that they can increase their total output of these two goods if A.C. focuses his production on surfboards while Zack focuses his production on hair gel. A. Law of Absolute Advantage B. Law of Comparative Advantage C. Cost-Benefit Principle D. Incentive Principle

B. Law of Comparative Advantage

____________ is the branch of economics which studies how individual decision-makers behave and interact with each other, often with a focus on how households and firms behave and interact with each other in markets. A. Macroeconomics B. Microeconomics C. Comparative Economic Systems D. Public Choice

B. Microeconomics

Gross Domestic Product can be expressed by the following formula: __________. A. Y = MX + B B. Y = C + I + G + NX C. Y = (C)(I) + (G)(NX) D. Y = (C - I)(G - NX)

B. Y = C + I + G + NX

In the former Soviet Union, GOSPLAN A. was the primary military agency, which provided for national defense of the country. B. was the primary planning agency, which drew up plans for the economy, setting goals for output levels and overseeing coordination of economic activity. C. were the various industrial ministries, which executed economic plans, by running state owned enterprises thereby making day-to-day decisions regarding the use of economic resources. D. were the workers who were members of both the official Communist Party and the labor union "Solidarity" (only about 17% of the workforce belonged to both groups).

B. was the primary planning agency, which drew up plans for the economy, setting goals for output levels and overseeing coordination of economic activity.

When interpreting a Production Possibilities Frontier, which of the following statements is true? A. "All Attainable combinations of output are characterized by Productive Efficiency." B. "A combination of goods is characterized by Productive Inefficiency if it cannot possibly be produced with the currently available resources and technology." C. "A combination of goods is Unattainable if it cannot possibly be produced with the currently available resources and technology." D. None of the above answers are correct.

C. "A combination of goods is Unattainable if it cannot possibly be produced with the currently available resources and technology."

As of 2012, government spending on welfare programs in the U.S. was roughly A. $156 billion (about 1% of GDP). B. $302 billion (about 2% of GDP). C. $952 billion (about 6% of GDP). D. $2,476 billion (about 16% of GDP).

C. $952 billion (about 6% of GDP).

If "County Z" currently has an Inflation Rate of 2.1% and an Unemployment Rate of 5.9%, then the value of the Misery Index in "County Z" would be ______. A. 3.8 B. 4 C. 8 D. 12.39

C. 8

8. ____________ refers to the freedom of an individual to choose to purchase (or to choose to not purchase) a good or service at a price determined in a free market. A. The Invisible Hand B. Command Planning C. Consumer Sovereignty D. Indicative Planning

C. Consumer Sovereignty

___________________ refers to decreases in private spending that occur following increases in government spending. A. Expansionary Fiscal Policy B. Contractionary Fiscal Policy C. Crowding Out D. Monetarism

C. Crowding Out

__________________ is a broad term which refers to monetary payments made by the government to certain individuals in society, with the impact of altering the distribution of income within a society. A. Monetary Policy B. Redistribution In-Kind C. Income Support D. Income Taxation

C. Income Support

High income countries with primarily market based economies, large stocks of technologically advanced industrial capital, and a highly educated and skilled workforce (e.g., the United States, Norway, Australia, Germany, and Japan) are referred to as A. Commercially Dependent Countries. B. Less Developed Countries. C. Industrially Advanced Countries. D. Economically Superior Countries.

C. Industrially Advanced Countries.

6. _________________ wrote the essay "I, Pencil," which illustrates the importance of the notion of spontaneous order in a market system. A. Adam Smith B. Karl Marx C. Leonard Read D. Joseph Schumpeter

C. Leonard Read

3. The economy of the "former Soviet Union" A. achieved Karl Marx vision of an "ideal communist society," since the ownership and use of all resources was in the hands of "the people" without any intervention whatsoever by the government. B. functioned so efficiently that the country produced a combination of goods beyond its production possibilities curve year after year after year. C. perhaps provides the best example of a large society with an economic system close to "pure socialism." D. More than one (perhaps all) of the above answers is correct.

C. perhaps provides the best example of a large society with an economic system close to "pure socialism."

"Fiscal Policy" can be described as government policy A. which determines the "money supply" of an economy. B. aimed at changing the underlying institutions of a nation's economy. C. related to spending and revenue generation. D. related to securing the borders of and protecting the homeland of a nation.

C. related to spending and revenue generation.

3. Consider an item that Scott values as a buyer at $15 and Brad values as a seller at $10. Trade of this item (i.e, transferring ownership from Brad to Scott) A. is a zero-sum environment. B. results in a win-win outcome if trade takes place at a price of $25. C. results in a win-lose outcome if trade takes place at $5. D. None of the above answers are correct.

C. results in a win-lose outcome if trade takes place at $5.

What are some of the primary functions of profits in an economy? (Articles, chapter 4) A. To direct multitudes of producers to marshal physical resources and output efforts towards meeting the various demands of multitudes of consumers B. To incentivize producers to discover new ways of producing goods more efficiently (i.e., to use fewer resources and inputs to produce the same output) C. To compensate entrepreneurs for their risks and opportunity costs associated with engaging in their endeavors D. All of the above

D. All of the above

4. Which of the following statements is correct? A. "In a positive-sum environment a win-win outcome will always be realized." B. "In a zero-sum environment a win-win outcome can never be realized." C. "A win-lose outcome can possibly be realized in a positive-sum environment." D. More than one (perhaps all) of the above statements are correct.

D. More than one (perhaps all) of the above statements are correct.

14. In which of the following countries do individuals enjoy the least amount of Economic Freedom? A. France. B. Hong Kong. C. Norway. D. Venezuela.

D. Venezuela.

A situation in which the sum of gains and losses over all people is positive in value is defined as a A. win-win outcome. B. win-lose outcome. C. negative-sum environment. D. positive-sum environment

D. positive-sum environment

"Vinny's Sports Pub" is Jessica's favorite restaurant. After recently joining their frequent diner club for free, she got a coupon by e-mail which can be redeemed for either a free order of Buffalo wings or a free slice of pizza. Last night she used the coupon to get a free slice of pizza. Her Opportunity Cost of the slice of pizza is A. zero, since she received the code for free. B. the maximum amount of money she would have been willing to pay for the slice of pizza if she did not have the coupon. C. the regular menu price of a slice of pizza. D. the value she places on an order of Buffalo wings.

D. the value she places on an order of Buffalo wings.

Consider an outcome in which Joe gains $30, Kevin gains $20, and Nick loses $40. Based upon this alone information, it appears as if this is a A. win-win outcome in a positive-sum environment. B. win-win outcome in a negative-sum environment. C. win-lose outcome in a zero-sum environment. D. win-lose outcome in a positive-sum environment.

D. win-lose outcome in a positive-sum environment.

A deadweight loss can result engaging in either "too much" trade or "too little" trade. (chapter 5) True False

False

A decrease in consumers' income will result in a decrease in the demand curve for inferior goods. (chapter 4) True False

False

Ceteris paribus, a change in the price of a good in a market would result in a shifting of either the entire supply curve or the entire demand curve. A change in price results in a change in demand/supply rather than quantity demanded/quantity supplied. (chapter 4) True False

False

Invisible Hand

Smith's recognition that under certain conditions, the behavior of self-interested decision makers interacting in free markets leads to outcomes which are better for all parties. when the "invisible hand" is applicable, any possible alternative to the market outcome would be less desirable for some individuals in society. "free market forces" are the "invisible hand" that leads us to an outcome that is "efficient" (in that "total social surplus" is maximized).

Which of the following is astatement of normative economics? (Intro, chapter 1) -The government should run deficits to cure economic slumps and lower unemployment. -Gas prices will fall if the government reduces certain regulations on the fossil fuel industry. -An increase in the minimum wage will increase the standard of living of all low-wage workers. -There will be no unintended consequences from President Biden's decision to forgive up to $10,000 of student loan debt.

The government should run deficits to cure economic slumps and lower unemployment.

An economy that shows a high degree of generalization in production will be more productive and enjoy a higher standard of living than an economy that shows a high degree of specialization in production. Both economies would still engage in a high degree of generalization in consumption. (chapter 2, chapter 5) True False

True

For a 2-person, 2-good economy in which one worker has an absolute advantage in the production of both goods, it will still be true in all cases that the less productive worker will still have a comparative advantage in producing something. (chapter 2) True False

True

equilibrium

a "stable state" for a system which will persist as long as outside factors do not change. at the market equilibrium no individual buyer and no individual seller can alter his or her own behavior in such a way as to increase his or her own surplus.

positive externality

a benefit from an activity realized by someone not engaging in the activity examples: vaccines, installation of smoke detector in an "attached apartment," installation of Lojack in a car

externality

a benefit or cost that is realized by someone who is not directly engaging in an activity

Increase in Demand

a change in demand consistent with consumers being more willing to purchase the good, in that at every price the new quantity demanded is greater than the previous quantity demanded (visually, such a change is illustrated as a "rightward shift" of the demand curve).

Decrease in Supply

a change in supply consistent with firms being less willing to sell the good, in that at every price the new quantity supplied is less than the previous quantity supplied (visually, such a change is illustrated as a "leftward shift" of the supply curve).

Increase in Supply

a change in supply consistent with firms being more willing to sell the good, in that at every price the new quantity supplied is greater than the previous quantity supplied (visually, such a change is illustrated as a "rightward shift" of the supply curve).

government

a decision-making institution with the legal authority t o impose restrictions or mandates on the behavior of other decision-makers (i.e., the ability to use legal coercion).

deflation

a general decrease in the level of overall prices (i.e., a realization of a negative inflation rate)

private good

a good that is excludable and rival in consumption. e.g., Big Mac from McDonald's; market provision is typically efficient

public good

a good that is non-excludable and non-rival in consumption e.g., national defense

common good

a good that is non-excludable and rival in consumption e.g., stock of fish in the ocean

producer's surplus

a measure of the net gain that a seller realizes from making a sale, equal to the difference between the price she actually receives for the item and her reservation price for the item.

social surplus

a measure of the net gains to society from a trade, equal to the summation of the individual gains (or losses) from the trade over all members of society.

total consumers' surplus

a measure of the total gains from trade realized by all consumers, defined as each individual's Consumer's Surplus, added over all units purchased.

market failure

a situation in which the "free market outcome" is inefficient, in that there is a positive Deadweight-Loss at the resulting "free market level of trade."

Negative-sum environment

a situation in which the sum of gains and losses over all people is negative in value

8) In Economics in One Lesson, Hazlitt says that "the whole of economics can be reduced to a single lesson." What is that lesson? a. Economics trains us to examine not only the primary effects of a policy but also the secondary effects of any act or policy; it also trains us to examine the consequences of those actions/policies on all groups of people in society. b. Economics is only useful to policymakers and people in important positions of power in government and large corporations. c. Economics tells us that we could achieve a "post-scarcity" society today if we eliminated the artificial barriers imposed by various government policies that currently protect the capitalist class from being overtaken by the exploited worker class. d. Economics teaches us that a government-provided healthcare system (that is, a healthcare system that operates as a government agency) is the best way to provide and deliver healthcare goods and services to the public.

a. Economics trains us to examine not only the primary effects of a policy but also the secondary effects of any act or policy; it also trains us to examine the consequences of those actions/policies on all groups of people in society.

9) The Rothbard (1956) article Demonstrated Preference begins with the following: "Human action is the use of means to arrive at preferred ends. Such action contrasts to the observed behavior of stones and planets, for it implies purpose on the part of the actor." What can we deduce about the preferences of a person who chooses to spend two hours at a concert rather than a movie? a. That person places going to the concert higher in his value scale/preference order than going to the movie. b. That person places going to the movie higher in his value scale/preference than going to the concert. c. That person enjoys going to the concert three times as much as he enjoys going to the movie. d. That person enjoys going to the movie three times as much as he enjoys going to the concert.

a. That person places going to the concert higher in his value scale/preference order than going to the movie.

For a 2-person, 2-good economy in which one worker has an absolute advantage in the production of both goods, it will still be true in all cases that the less productive worker will still have a comparative advantage in producing something. (Exam 1) a. True b. False

a. True

In analyzing the end result of all the market adjustments that take place in response to a per unit tax that has been imposed on a market, it makes no difference whether the buyer or the seller is the entity that actually pays the tax to the government. (Chapter 11) a. True b. False

a. True

In order for a person to be able to purchase goods and services (i.e., act as consumers) in a market, he must first produce a good or service (i.e., act as a supplier) in another market. In other words, the value of goods and services that he can purchase is equal to the value of what he supplies in other markets. Therefore, production must always precede consumption. (Exam 1) a. True b. False

a. True

One of the potential dangers of wearing face masks (in a vain attempt to prevent the spread of COVID-19) is breathing in mold, fungi, and bacteria that continually build up on reused face masks as well as breathing in synthetic fibers, which could have detrimental health effects. These dangers/trade-offs are often overlooked by mandatory face mask policies imposed by officials. (Article) a. True b. False

a. True

The labor theory of value is an "objective" theory of value that measures the value of a good according to the quantity of "socially necessary labor-time" required for its production. (Capitalism vs. Socialism lecture) a. True b. False

a. True

When interpreting a Production Possibilities Frontier (PPF), a combination of goods is unattainable if it cannot possibly be produced with the currently available resources and technology. (Chapter 2, p. 41, #1) a. True b. False

a. True

4) The law of _____ means that the additional value that a person gets from consuming an additional unit of a good decreases as the person consumes more of it. (ch. 1) a. diminishing marginal utility b. scarcity c. unintended consequences d. Demand

a. diminishing marginal utility

In a simple model of the supply and demand for pizza, when buyers' income increases, the price of pizza _____ and the quantity purchased _____ (note: assume that pizza is a normal good). (Exam 1) a. increases; increases b. increases; decreases c. decreases; increases d. decreases; decreases

a. increases; increases

A government agency can be said to suffer from regulatory capture when... (Chapter 11) a. private businesses influence the decisions of that agency to such a degree that the agency protects the interests of the firms and not the public. b. government regulators from one federal agency displace the regulators of another federal agency. For example, the Environmental Protection Agency claims jurisdiction from the Department of Agriculture when farm pesticides are being regulated. c. government regulators from one federal agency displace the regulators of a state level agency. For example, the federal Dept. of Transportation claims jurisdiction from the Georgia Dept. of Transportation whenever interstate highways are regulated. d. federal courts mandate that an agency change its rules or regulations to conform with federal law.

a. private businesses influence the decisions of that agency to such a degree that the agency protects the interests of the firms and not the public.

mixed economy

an economic system in which some factors of production are owned and controlled by individuals, while some factors of production are owned and controlled by the state (i.e., a system which contains some elements of capitalism and some elements of socialism).

Win-win outcome

an outcome for which all people are better off than they would have been if the outcome was not realized (i.e., everybody "wins").

moral suasion

attempts to convince individuals to behave in a certain manner because doing so is the right thing to do.

Supercomputers combined with artificial intelligence can "solve" the economic calculation problem. (Article) a. True b. False

b. False

2) Which of the following is a statement of positive economics? (ch. 1) a. The federal minimum wage should be eliminated completely. b. The federal minimum wage is currently $2,000 per hour for all industries. c. The federal minimum wage should be increased to $15 per hour. d. The federal minimum wage should only apply to heavily populated

b. The federal minimum wage is currently $2,000 per hour for all industries.

3) The Cost-Benefit principle states that... (ch. 1) a. scarcity is a universal phenomenon that arises because resources are limited. b. a person should undertake an action if and only if the marginal benefit of the action is greater than the marginal cost of the action. c. if the marginal benefit of an activity increases, then a rational decision maker will engage in more of the activity. d. having more of one thing usually means getting by with less of something else.

b. a person should undertake an action if and only if the marginal benefit of the action is greater than the marginal cost of the action.

A good that is used in the production process that is not itself a final good or service is... a. a permanent good b. an intermediate good c. an inferior good d. a necessary good

b. an intermediate good

Mike Tyson bought a white tiger from Joe Exotic for $71,000 (in early '90s dollars). Mike's reservation price was $101,000, and a total social surplus of $50,000 was generated by the trade. Therefore, Joe Exotic realized a _____ from this trade. (Exam 1) a. producer surplus of $50,000 b. producer surplus of $20,000 c. consumer surplus of $20,000 d. consumer surplus of $30,000

b. producer surplus of $20,000

A rational decision maker should... (Chapter 1, p. 20, #12) a. always take every action for which there is a positive marginal benefit. b. take an action if and only if the marginal benefit of the action is at least as great as the marginal cost of the action. c. never take any action for which there is a positive marginal cost. d. All of the above.

b. take an action if and only if the marginal benefit of the action is at least as great as

Consider a market for apples. If there is an excess supply of apples at a price of $5 per bushel, the equilibrium price must be... above $5 per bushel exactly equal to $5 per bushel below $5 per bushel Not enough information

below $5 per bushel

If, over the course of a year, the value of a country's Consumer Price Index increased from 186.4 to 193.9, the country's realized rate of inflation was approximately... (Chapter 9, p. 235, #4) a. 380.3% b. 3.87% c. 4.02% d. 7.50%

c. 4.02%

According to chapter 17 of Economics in One Lesson, what are some of the consequences of a price ceiling set at a binding level below the market equilibrium price for a particular good? (E1L chapter 17, PDF p. 116) a. Scarcity is an artificial construct; nothing negative happens. b. Greedy producers are forced to sell the good at a socially just price. c. Production of that good is discouraged as profit margins are reduced/wiped out and marginal producers are driven out of business. d. All of the above.

c. Production of that good is discouraged as profit margins are reduced/wiped out

Which of the following is an accurate characterization of Say's Law? (Exam 1) a. People can benefit mutually from specialization and trade. b. Destruction of goods does not breed economic prosperity. c. The value of goods and services anyone can purchase is equal to the market value of what he/she supplies. d. Supply creates its own demand.

c. The value of goods and services anyone can purchase is equal to the market value

The Misery Index... a. is computed by multiplying the unemployment rate by the inflation rate. b. measures the fraction of population that is clinically depressed. c. does not include GDP in its calculation. d. All of the above.

c. does not include GDP in its calculation.

Determinants of Demand (factors that change demand)

changes in the following will result in an increase in demand: (1) a decrease in the price of a Complement Good; (2) an increase in the price of a Substitute Good; (3) an increase in income (for a Normal Good); (4) a decrease in income (for an Inferior Good); (5) an increased preference for the good by consumers; (6) an increase in "market size"; (7 ) an expectation of higher future prices. Changing any of these factors in "the opposite direction" would result in a decrease in demand.

10) The _____ function of government can be described as government production of goods or regulation of business, aimed at getting the right mix of products produced, each in the ideal quantity and at the ideal quality. a. Distribution b. Stabilization c. Taxation d. Allocation

d. Allocation

2) Which of the following is a common example of a market failure? a. Pricing by firms with market power. b. Market provision of private goods. c. Market provision of a good which generates an externality. d. More than one (perhaps all) of the above answers are correct.

d. More than one (perhaps all) of the above answers are correct.

Rent-seeking is illegal because... (Quiz 3 #8) a. the only way to get a government official to change the rules to help your industry is to bribe them. b. it is illegal for the government to do things that are economically inefficient. c. it is illegal for government officials to rent out government owned property for their own private gain. d. The premise of the question is false. Rent-seeking is perfectly legal since it works through the normal process of petitioning our elected leaders to do things which are themselves legal.

d. The premise of the question is false. Rent-seeking is perfectly legal since it works through the normal process of petitioning our elected leaders to do things which are themselves legal.

Suppose that between 2020 and 2021, Australia's unemployment rate increased, and its inflation rate decreased. Therefore, the value of Australia's Misery Index in 2021 _____ the value of its Misery Index in 2020. a. must be greater than b. must be less than c. must be exactly equal to d. could be greater than or less than

d. could be greater than or less than

Assume goods X and Y are complements of each other. Therefore, if the price of good X were to increase, the equilibrium price of good Y would _____, and the equilibrium quantity of good Y would _____. increase; increase increase; decrease decrease; increase decrease; decrease

decrease; decrease

Communism

economic system in which the means of production are collectively owned by all people in a society (without intervention by a government or state) A stateless, classless economic system in which all the factors of production are owned by the workers and people share in production according to their needs: "From each according to his ability, to each according to his need" (Louis Blanc in "The Organization of Work," 1839)

socialism

economic system in which the means of production are owned by the government.

capitalism

economic system in which the means of production are privately owned and operated for a profit.

Coasian solution to the problem of externalities - Ronald Coase (1910-2013; Noble Prize in 1991; Professor Emeritus at Univ. of Chicago Law School) argued that problems of externalities are at their core due to undefined property rights and can be address by the following approach:

i. clearly and fully define property rights ii. make individuals pay compensation if they infringe upon the property rights of others iii. allow parties to negotiate with one another regarding infringements on property rights caused by the externality Coase showed that regardless of which party is given the property right, negotiation between the parties will result in the efficient level of the externality (so long as the costs of negotiation and enforcement are low enough) defining property rights and allowing parties to negotiate essentially "internalizes the externality"

free rider problem

if a public good were supplied in a free market, the amount traded would be less than the efficient quantity, since many people would attempt to enjoy the benefits of units purchased by others, while not purchasing any units themselves

Less Developed Countries (LDC's)

lower income countries which are held back by some combination of poor economic institutions, undeveloped industrial capital,and/or an uneducated and unskilled workforce (e.g., India, Ghana, Bangladesh, and the Democratic Republic of the Congo)

monopoly

market structure in which there is one single seller of a unique good with no close substitutes. The "polar opposite" of "perfect competition." The demand curve facing a monopolist is the market demand curve. They can choose any price/quantity combination along the market demand curve.

Market provision

of a good for which there is an externality is inefficient: Negative externality => free markets provide more than the optimal amount (i.e., too much) of the good Positive externality => free markets provide less than the optimal amount (i.e., not enough) of the good

A government agency can be said to suffer from regulatory capture when... private businessmen influence the decisions of that agency to such a degree that the agency protects the interests of the firms and not the public. government regulators from one federal agency displace the regulators of another federal agency - e.g., the Environmental Protection Agency claims jurisdiction from the Department of Agriculture when farm pesticides are being regulated. government regulators from one federal agency displace the regulators of a state-level agency - e.g., the federal Dept. of Transportation claims jurisdiction from the Georgia Dept. of Transportation whenever interstate highways are regulated. federal courts mandate that an agency change its rules or regulations to conform with federal law.

private businessmen influence the decisions of that agency to such a degree that the agency protects the interests of the firms and not the public.

consumption expenditures

purchases of newly produced goods and services by households (denoted by C )

government purchases

purchases of newly produced goods and services by local,state, or federal government (denoted by G )

rational ignorance

since becoming informed on matters of public policy has high costs and low benefits for individual voters, it is rational for them to remain uninformed

entrepreneur

someone who organizes and manages a business, typically with considerable initiative and exposure to risk.

The Market Equilibrium in the model of Supply and Demand is:

stable - if we are there we will stay there, unless outside forces change unique - there is one and only one equilibrium, a property which follows from the "Law of Demand" and "Law of Supply" self enforcing - at higher prices there is downward pressure on price; at lower prices there is upward pressure on price - therefore if we are at some other price, we will be pushed toward the equilibrium price

marginal costs of production

the amount by which production costs change as the firm's quantity of output is increased by a unit

produced assets

the currently available machines, factories, and inventories of finished goods available as industrial capital, as well as social capital such as transportation and communications infrastructure, and educational institutions

trade deficit

the excess of imports over exports

economic resources or factors of production

the inputs such as factories, farms, stores, trucks, and equipment used to produce goods and services.

supply

the relationship between the price of a good and the quantity that firms are willing and able to sell, all other factors fixed

right to control

the right to decide how to use your property.

real GDP

the value of GDP computed using prices from an arbitrary base year (i.e.,a measure of GDP that controls for changes in prices, since across different periods goods/services are valued at common, constant prices)

real GDP per capita

value of real GDP divided by total population of the country

hyperinflation

an extremely high rate of inflation, generally above 100% per year

nominal GDP

the value of GDP computed using current period prices

three primary types of economic incentives:

material rewards, moral suasion, and coercion.

costs of complying with government bureaucracy

when governments impose rules/regulations, individual households and firms need to expend resources to comply with the policies use of resources for compliance imposes a cost => the greater the bureaucracy, the higher are these costs => if the costs are sufficiently large, they will outweigh any benefits of the regulation "Permit Raj" in India: "a complex, irrational, almost incomprehensible system of controls and licenses" under which "everything needed (government) approval and a stamp." Recall the "Ease of Doing Business" study. Costs of starting a new business in... o Venezuela: 20 procedures, 230+ days, costing 211.8% of annual per capita income o New Zealand: 1 procedure, as little as half a day, costing 0.2% of annual per capita income

rival good

a good for which consumption by one person does diminish the quantity or quality of consumption by others

non-rival good

a good for which consumption by one person does not diminish the quantity or quality of consumption by others

non-excludable good

a good for which it is difficult (or very costly) to prevent consumption by those who do not pay

excludable good

a good for which it is easy to prevent consumption by those who do not pay

import

a good or service produced in a foreign country and purchased by someone in the home country

export

a good or service produced in the home country and sold in a foreign country

club good

a good that is excludable and non-rival in consumption e.g., satellite radio or television broadcast

New Soviet Man

a person motivated primarily by selfless benevolence.

The stagflationary "Great Inflation" period refers to a time of high inflation and high unemployment in the U.S. during... a. the early 1970s through the early 1980s (from roughly August 1973 to July 1982). b. the time between the end of Great Depression and the start of WW-II (from roughly August 1937 through October 1942). c. the Kennedy and Johnson Administrations from 1960 through 1967. d. part of President Obama's first term (from roughly March 2009 to July 2011).

a. the early 1970s through the early 1980s (from roughly August 1973 to July 1982).

public choice

academic subfield which uses the tools and framework of economics to analyze issues that historically fall within the domain of political science

Misery Index

economic indicator created by Arthur Okin, calculated by simply adding together the annual inflation rate and the unemployment rate

feudalism

economic system in which land ownership is restricted to an aristocratic nobility.

net export

exports minus imports (denoted by NX )

distribution function

government policies aimed at changing the final distribution of goods/services across consumers, usually with the intention of realizing a "fairer" apportionment of consumption/income/wealth.

allocation function

government production of goods or regulation of business, aimed at improving the allocative efficiency of the economy (i.e., getting the "right mix" of products produced, each in the "ideal quantity" and at the "ideal quality").

Industrially Advanced Countries (IAC's)

high income countries with primarily market based economies, large stocks of technologically advanced industrial capital,and a highly educated and skilled workforce (e.g., U.S., Norway, Australia, Germany,Japan)

four primary economic institutions:

households, firms, markets, and government

three surprising insights from "I, Pencil":

no one person possesses the know-how to make a pencil most who helped make the pencil did not intend to or necessarily care to specifically make a pencil but yet, the entire process takes place (and valued goods, such as pencils, are produced) without any planner overseeing or dictating the process

deadweight loss -

the difference between maximum possible Total Social Surplus and realized Total Social Surplus. by construction, Deadweight Loss is zero at the efficient level of trade and is positive at any other level of trade.

profit

the difference between revenues and costs of production