Economics Final
Which of the above is most likely to restrain excessive spending by the federal government
a Constitutional rule requiring three-fourths approval of both Houses of Congress for spending proposals
Entrepeneurs have a strong incentive to
do all the above
It makes sense for a business to purchase a resource or service from another firm
if it is more economical to acquire it through trade than to produce it in house
Which of the following is a characteristic of "public goods"
it is difficult to restrict their availability
The economizing problem is essentially one of the deciding how to make the best use of
limited resources to satisfy virtually unlimited wants
According to the law of supply
more of a good will be offered by suppliers as the price rises
The expression, "There is no such thing as a free lunch." implies that
opportunity costs are incurred when resources are used to produce goods and services
A government fulfills a protective function when it
prevents illegal seizure of private property
Investments and improvements in technology are primarily the result of
the actions of entrepreneurs who take risks in the hope of profit
Which statement best explains why legislators find debt financing more attractive than taxation?
the current cost of debt financing is less visible than taxation
Goods are scarce because
the desire for goods is far greater than their availability from nature
When decentralized governmental units operate independently and compete with each other, governments will attract residents and expand their tax based as
they provide residents with desired services at an attractive tax cost
In economics, transaction costs refer to the
time, effort , and other resources needed to search out and negotiate an exchange
In order to obtain support for favored political proposals, special interest groups have an incentive
to exaggerate the perceived benefits and understate the expected costs associated with a proposal.
The fact that voters perceive their votes as unlikely to actually change election outcomes causes
voters to have little incentive to become informed about candidates and political issues
When resources are allocated by markets, profits and losses provide information
which resources are being used productively and which resources should be allocated to other uses
how does the invisible hand principle explain why self-interested individuals pursue activites that benefit others
The pursuit of profit and income gives individuals a strong incentive to provide goods and services that are highly valued by others
Resources will be used most productively when
competition and the pursuit of profit are present
When an emerging industry renders an existing industry obsolete because of advances in technology
it spurs economic progress through increased productivity and expansion in goods and services that are valued more highly relative to cost
Public goods are often difficult for markets to allocate efficiently because
public goods must be produced by the government
Individuals are most likely to prosper in an economy that
rewards employment that expands production of goods and services that others value highly relative to cost
While waiting in line to buy a cheeseburger and a soft drink for $3, Stephanie notices that the value meal containing a cheeseburger, soft drink, and fries can be purchased for $3.25. For Stephanie, the marginal cost of purchasing the fries would be
$.25
Supposed political unrest in a major oil producing country leads to a reduction in the supply of crude oil, a resource used to produce gasoline. If a government fixes the prices of gasoline in order to prevent price gouging, which of the following will result
A shortage of gasoline will occur, because at the fixed price consumers will not have incentive to change their driving habits in order to decrease consumption
Which of the following best explains why Americans produces and earn approximately thirty times as much per person today than in 1750
Capital formation, improvements in technology, and gains from trade have made higher incomes possible
Which of the following is the best example citizens "voting with their feet"
Citizens choose where to live based on the services offered and the level of taxation
Which of the following is most necessary for a market economy to efficiently satisfy consumers?
Competition and open entry into markets
Given freedom of movement for both goods and resources, if Florida producers specialize in oranges and Goergia producers specialize in peaches, it would be reasonable to conclude that
Florida has a comparative advantage in producing oranges
Why is there little incentive for legislators to fight for an overall reduction in government spending
If a legislator is able to achieve overall spending cuts, most of the benefits will accrue to voters in his district, as well as other 434 districts equally
Which of the following is true?
In a market economy, the link between productivity and income provides individuals with an incentive to provide resources that are highly valued by others
Why is the market process more likely to approve productive projects and reject unproductive projects, than the political process
In the market, projects will continue to be undertaken only if they generate revenues that are sufficient to cover their costs
If a poor country is going to grow rapidly and achieve a high level of per capita income, which of the following is most important
Institutions and policies that encourage productive activities
If students who earn an A in a class were asked to transfer some of their points to low-performing students, which of the following would be most likely to occur
Neither high nor low-performing students would work as hard to earn additional points
How does the invisible hand ensure that an economy will not run out of a renewable resource
Price increases due to the diminishing supply of a resource will both curb consumption and provide incentive for producers to expand supply.
Which of the following factors explains why the managers of government agencies and firms have only a weak incentive to keep cost low and operate efficiently
Public-sector managers have no fear of losses and bankruptcy if operational efficiency is not achieved
Why are lobbying and other activities designed to acquire favors from the government often described as "plunder"
These activities consume resources that would otherwise be used to create wealth and generate income
Which of the following is the most likely result of a quota that limits steel imports into the U.S.
a reduction in output and employment in domestic industries that utilize steel as a resource
The "Cash for Clunkers" program of 2009
a reduction in the supply of used cars and temporary increase in spending on new automobiles
Which of the following is the best example of a middleman
a used car dealer
The link between helping others and earning profit provides a strong incentive for young people to
acquire skills and invest in education that will increase their ability to provide valuable goods and services to others
Which of the following explains why democratic decision-making often leads to the adoption of counterproductive projects
all of the above
Which of the following explains why pork-barrel spending is often approved, even when the spending is inefficient
all of the above
Which of the following is true of central planning
all of the above
General agreement exists that the legitimate economic functions of government include
all the above
Which of the following is the best example of a public good
an anit-missile system surrounding the city of Washington D.C.
Which of the following is a predictable side effect of increased government activity designed to redistribute income among citizens
an increase in rent-seeking activity
Transfers and subsidies currently account for
approximately 50 percent of the federal budget
The protective function of the government is vitally important in order to
assure people that they will permitted to keep most of what they earn
Voluntary exchange creates wealth
because trade moves products into the hands of people who value them more
Professional sports teams will trade the services of players only if
both teams expect to benefit from the trade
The law of demand indicates that as the price of a good decreases
buyers will purchase more of it
In a free market economy, innovative products or services will ultimately be judged
by the consumer's willingness to purchase the product or service
Which of the following will improve the efficiency of government and help protect individuals from exploitation by their government
competition among decentralized government units
When gas prices rise sharply, as they did in 2007-2008, the "incentives matter" postulate of economics prices indicate that
consumers will adjust their driving habits eventually reducing the quantity for demanded gas
The economic way of thinking indicates that personal benefits and costs influence the actions of
consumers, producers, voters, politicians in both the private and public sectors
In the invisible hand principle, the word "invisible" refers to
directions provided by prices in competitive markets, which are largely taken for granted
Taxes for the financing of government projects involve coercion because
dissenting minorities must help pay for the project even though they are opposed to it
Governments promote growth and prosperity when they
encourage productive activity and discourage plunder
The persistent budget deficits of recent decades are
expected, because politicians have an incentive to spend on current programs financed by borrowing
"Steve Jobs has made tens of millions of dollars producing and selling the iPod. Many workers and consumers must have suffered in order for Jobs to amass such enormous wealth. The person who made this statement
has failed to understand that specialization and exchange generally result in mutual economic gain.
From the consumer's standpoint, the price of a good
helps consumers decide among goods and allocate resources toward the things they value most
Which of the following is most likely to undermine long run growth
high taxes, excessive regulation, and persistent inflation
A country should import a good or a service
if other countries can provide the imported item cheaper than it could be produced domestically
if People expect the price of coffee to rise next month, the demand for coffee will
increase now
Websites such as Craig's List and eBay, function with middlemen by
increasing the efficiency in matching sellers and buyers
Various subsidy programs in the U.S. illustrate that when the benefits are concentrated among targeted producers and the costs are widespread among unorganized consumers, the political process leads to
inefficient and wasteful use of resources
Federal spending is something like a common pool resource, because
interest groups will figure that if they do not grab more of the federal budget, other groups will.
Countries are likely to reduce the ability of their citizens to achieve prosperity when they
interfere with voluntary exchange either domestically or internationally
"Production should be for people, not profit." This statement
is incorrect,because it fails to recognize that firms must increase the value of resources to earn a profit
Government is most likely to align the self-interests of votes, politicians, and bureaucrats with economic progress, when
it is limited in scope and remains neutral among the various subgroups of citizens
If a nation is rich in natural resources, the nation will increase its wealth if
it is willing to sell its resources to buyers offering the highest prices even if some of the buyers live in other countries.
Economic analysis indicates that higher unemployment benefits will
lead to more lengthy spells of unemployment and a higher unemployment rate
Scarcity implies that when a resource is used to produce a good
less of that resource will be available produce other goods.
When the federal government become heavily involved in levying taxes on some in order to finance programs that benefit well-organized interest groups, the expected result is
less rapid economic growth, because of increased rent-seeking and adoption of counterproductive spending programs
The framers of the U.S. Constitution sought to design a political system that would
limit the powers of the federal government and protect the rights of individuals
The distinctive feature of the American political process and the key to economic progress is
limited and decentralized government, protection of people and their property from aggressors, and provision of a limited set of public goods
The political structure that is most consistent with economic growth and progress is
limited government, protection of individuals from aggression by others, and decentralized political decision-making
When legislators trade votes on one issue for the votes of other legislators on other issues, is called
logrolling
investment in both physical and human capital tends to increase income per person because it generally
makes it possible for individuals to produce more goods and services
Once the criterion for the receipt of an income transfer is established
people will modify their behavior in order to qualify for the transfer, decreasing their net gain from the tranfer
When the government becomes heavily involved in taxing some in order to make income transfers to others
people will spend more time organizing and lobbying politicians and less time producing goods and services
Which of the following is most likely to prevent price from bringing the quantity demanded and quantity supplied into balance?
price controls
If a government is going to promote economic progress, whic of the following is most important
protection of people and their property from aggressors and the provision of a few goods that are difficult to supply through markets
Middlemen are individuals who
provide services that reduce the cost of transactions and help achieve additional gains from trade
Governmental policies designed to "protect" a specific industry through the use of taxes, licensing requirements, or tariffs generally result in
reductions in the gains from trade
In a market economy, when the government uses the subsidies to keep a company in business even though it is unprofitable, a secondary effect of the subsidies will likely be that
resources that are being used and unproductively will continue to be employed in unproductive ways
As the baby boomers begin moving into the retirement phase of life during the years following 2010, spending Social Security and Medicare will
rise and this will make it more difficult for the federal government to balance its budget
Special-interest issues are politically attractive because
special interest groups feel strongly about these issues, while most other voters are poorly informed
When managing budgets, a government agency will have the incentive to
spend all of its allotted budget so that it can make a case for a larger budget next year
When the government is heavily involved in projects that provide benefits to some businesses at the expense of others, this will increase the incentive of businesses to
spend more time lobbying and seeking government favors
When enterprises get more funds from government subsidies provided by central planners and less from consumers, they will have incentive to
spend more time trying to influence politicians and less time trying to reduce costs and please customers
Competition among decentralized governmental units will
strengthen the incentive of governments to operate efficiently and cater to the views of taxation
As taxes are increased to finance more income transfers
support for the income transfers among the recipients will increase
Colorado experiences a record snowfall during the winter season. What impact will this have on the market for snowmobiles
the demand for snowmobiles will increase and the price of snowmobiles will increase
Why is it popular for politicians to argue that more spending on their favorite programs create jobs?
the employment generated by the additionally spending is highly visible, while the employment crowded out by taxing, spending, and borrowing is largely unseen
In a market economy, why will some people earn higher incomes than others
the high earners find ways to provide valuable goods and services to others in exchange for income
Your opportunity cost of attending a football game is
the highest valued alternative forgone because of the time and money required to attend the game
As personal income tax rates are increased
the incentive to engage in tax-avoidance activity increases
When there is an excess supply of a product in a market,
the market price will tend to fall
Which of the following is the best indication that a project is economically productive
the total benefits exceed the total costs
When politicians push for "free healthcare", what they are actually advocating is
the use of tax revenues to cover the actual costs of the "free" healthcare
