If supply and demand are lines then at equilibrium consumer and producer surplus are both a) equal. b) shown as squares. c) shown as trapezoids. d) shown as triangles.
> Poverty is a _______ concept in that a person with that income in the United States may be considered in poverty, while a person with that same income in Somalia may be in the upper quarter of income earners. a) relative b) absolute c) irrelevant d)
> The evidence on the impact of spending on K–12 education outcomes suggests that, ceteris paribus, a) the more a school district spends, the better it does. b) the more a school district spends, the worse it does. c) the more a school district spends o
> The evidence on the impact of spending on K–12 education outcomes suggests that, ceteris paribus, a) the more a school district spends, the better it does. b) the more a school district spends, the worse it does. c) the more a school district spends o
> The principal argument against rent control is that a) landlords and all tenants are made worse off. b) landlords and a few tenants are made worse off by less than the majority of tenants are made better off. c) landlords and a few tenants are made w
> As the baby boom generation (born between 1946 and 1964) ages, which of the following is a likely outcome? a) A movement to the right in the demand for nursing home beds b) A movement to the left in the supply for nursing home beds c) A movement to th
> Part of the Patient Protection and Affordable Care Act involved a tax on indoor tanning that tanning salons are required to collect from tanners and send to the federal government. Which of the following would be the predicted result? a) A movement to t
> If Midwestern grain farmers can plant either soybeans or corn on their land with equal profitability and there is an increase in the price of soybeans, which of the following will result? a) A movement to the right in the demand for corn b) A movement
> The underlying reason for the upward-sloping nature of the supply curve is that a) the production of most goods comes with increasing marginal benefits. b) the production of most goods comes with increasing marginal costs. c) the consumption of most
> Ticket scalping is a symptom of a) stupid promoters. b) market prices being greater than the face value of the ticket. c) market prices being less than the face value of the ticket. d) stupid consumers.
> If MR > MC, then when an additional unit is sold, the firm’s a) profit will be positive. b) profit will increase. c) profit will be negative. d) profit will decrease.
> Policy makers have considered putting computer chips in cars that would allow tax collectors to charge people based on how often they drive during rush hours. These policy makers are dealing with the fact that public roads are a) purely private good.
> Without an increase in price, an increase in demand will lead to a) a shortage. b) a surplus. c) socialism. d) equilibrium.
> Joseph Schumpeter coined the phrase “creative destruction.” The idea of creative destruction is that a) people need to be forced from their comfort zone in order to make crucial decisions that enhance their economic prospects. b) unemployment affects soc
> If a program’s cost rises only with inflation and increases in those that qualify for the program, this represents a) an increase in spending using baseline budgeting. b) a decrease in spending using current-services budgeting. c) no increase or decr
> Of these, economists consider this the worst: a) inflation of 5 percent. b) recession. c) deflation of 5 percent. d) depression.
> In a diagram of perfect competition, the marginal revenue line moves up and down when there is exit and entry, respectively, because a) the market demand for the good rises and falls when there is exit and entry, respectively. b) the market demand for
> If you were to conclude, after carefully examining data and using proper evaluation techniques, that a tax credit for attending college benefits the poor more than a tax deduction (of equal total cost to the government) would, you would have engaged in _
> Local telephone service was once an area in which consumers had no choices. Many young people no longer use “landlines,” preferring instead to use their cellular phones. This means that the market has moved toward a) monopoly. b) oligopoly. c) perfect
> When choosing to limit trade, a country can impose a tax on imported goods. This is called a) an estate tax. b) a tariff. c) a quota. d) a capital gains tax.
> Income inequality, when measured as the percentage of total income going to the top 1 percent, increased most rapidly during the a) 1950s. b) 1960s. c) 1980s and 1990s. d) 2000s.
> A 60-month car loan (where no down payment was made) with a 6 percent interest rate and a monthly payment of $500 would allow the borrower to buy a a) $35,500 car. b) $30,000 car. c) $25,863 car. d) $28,200 car.
> On a graph of real gross domestic product over time, recessions appear as a) relatively short and shallow drops on an otherwise increasing path. b) long, sharp declines on an otherwise increasing path. c) the dips on a path that increases and decrease
> One unsettling consequence of setting a tax on tobacco sufficiently high to reduce consumption would be a) it would likely reduce Medicare costs. b) it would likely increase tobacco revenues to farmers. c) it would likely increase tobacco company prof
> The consensus among economists is that NAFTA’s impact on the U.S. economy is a) enormously positive. b) enormously negative. c) marginal in net though it has increased both imports and exports. d) marginal in net because it has affected neither impor
> To counter the slowing rate of economic growth, liberal economists would recommend a) taxation and spending policies that decrease aggregate demand. b) taxation and spending policies that increase aggregate demand. c) corporate and personal income tax
> In determining whether the distribution of federal spending among various agencies was correct, an economist would want to make sure a) that each agency manager got what (s) he thought was needed in that area. b) that the last dollar spent in each area
> Which of the following tools would have likely have the impact of raising short-term interest rates the most? a) Cutting the Fed Funds target by one-quarter point b) Buying $1 million dollars in bonds c) Raising the reserve requirement from 8 percent
> Discretionary fiscal policy as a tool for making things better is a) universally applauded as being helpful. b) universally derided for never being effective. c) considered by many to be effective but subject to several concerns over timing and motive
> When a satellite television company gains a subscriber there is no impact on existing subscribers. That is, there is no rivalry in the consumption for their service. This is an example of a a) purely private good. b) purely public good. c) congestible
> An increase in the income of consumers will cause the a) supply of all goods to rise. b) demand for all goods to rise. c) supply of all goods to fall. d) the demand for some goods to rise and for others to fall.
> How academics look at the evidence on how much women make relative to men is an issue that very much depends on a) which year you look at. b) which state you look at. c) whether you categorize some variables as “choices” or as “further evidence of dis
> The result that a firm should produce where MC = MR except when the shutdown condition is met is based on the assumption that it is attempting to a) maximize profit. b) maximize market share. c) minimize marginal costs. d) minimize average costs.
> Of course, all individual students are better off if they get better grades. If you were to conclude that all students would be better off if everyone received an A you would a) have fallen victim to the fallacy of scarcity. b) be right. c) have fallen
> When examining the “right tax” on a good that produces an externality, the tax should be such that a) it is greater than the externality. b) it is less than the externality. c) it is exactly equal to the externality. d) it makes consumption prohibiti
> Of the following justifications for limiting trade, which one would economists be least likely to endorse? Some goods should not be imported because a) they are important for national defense (e.g., tanks, fighter airplanes). b) they are important for
> One issue that some call a consequence and others call a cause of slowing growth is a) a slowing rate of increase in the population. b) a change in the demographic mix of people to nonworking populations. c) a declining middle class. d) an increase i
> The ability of the Federal Reserve to control interest rates is a) limited almost entirely to short-term rates. b) limited almost entirely to long-term rates. c) limited almost entirely to intermediate-term rates. d) unlimited.
> The present value of a $1,000 payment received two years from now at 5 percent annual interest will be less than $900 because of a) taxes. b) compounding. c) withholding. d) double jeopardy.
> When looking at the impact of a change in trade policy, economists use consumer and producer surplus to look at the winners and losers. Free-trade economists insist that a) no one loses. b) everyone loses. c) there are winners and losers but that the
> Which of the following will impact both supply and demand? a) A change in price b) A change in quantity c) A change in expected future price d) A change in income
> Medicare’s prescription drug coverage will likely a) cost substantially more than it was estimated to cost in 2003. b) cost substantially less than it was estimated to cost in 2003. c) cost slightly less than it was estimated to cost in 2003. d) cost
> Walmart’s entry into the grocery business in the 1990s a) turned it into a monopoly. b) had no impact on the market form; it remained perfectly competitive. c) had no impact on the market form; it remained monopolistically competitive. d) had no imp
> The problem of the “third-party payer” arises in health care in the form of a) doctors having to pay part of the own expenses. b) government and/or private insurance paying a significant part of the costs. c) patients having to have to pay a significa
> From the perspective of the United States, a major accomplishment of the 1999 round of GATT was a) the complete banning of “domestic content” provisions in movie and television production. b) creation of major restrictions on child labor. c) the worl
> In determining whether the federal government is the right size, an economist would determine whether a) the first dollar spent produced $1 worth of social good. b) the average dollar spent produced $1 worth of social good. c) the last dollar spent p
> One typical response to an overheated economy using in discretionary fiscal policy is to a) raise taxes and cut spending. b) lower taxes and cut spending. c) raise taxes and increase spending. d) lower taxes and increase spending.
> Disagreements about the shape of the aggregate supply curve focus on the degree of _________ in the economy. a) unemployment b) inflation c) fraud d) confidence
> In 2005, General Motors announced a 20 percent reduction in its staffing levels and the closure of many assembly plants. Those laid off as a result would likely be classified as a) seasonally unemployed. b) cyclically unemployed. c) frictionally unemp
> An indicator of the degree of competition in an industry is the concentration ratio. It measures a) the percentage of sales in the industry by the largest firms. b) the percentage of profit in the industry by the smallest firms. c) the sales in the in
> Imagine an economist ordering pizza by the slice. When deciding how many slices to order she would pick that number where the enjoyment of the _____ equals the enjoyment she could get from using the money on another good. a) first slice b) last slice c)
> The evidence on most environmental pollutants (lead in the air and water, sulfur in the air, etc.) is that a) they are not nearly as harmful as once thought. b) they are increasing at an alarming rate. c) they have decreased substantially in the last
> The introduction of e-cigarettes provides a substitute for regular cigarettes. The result is likely that the a) elasticity of supply increases. b) elasticity of supply decreases. c) elasticity of demand increases. d) elasticity of demand decreases.
> Using an interest rate of 5%, which figure has the smallest present value? a) $5,000 b) $5,050 to be received two years from now c) $5,075 to be received three years from now d) $5,500 to be received ten years from now
> When a firm chooses to shut down, it is a) making a poor decision because it should always produce where marginal cost equals marginal revenue. b) making a poor decision because it should always produce where average costs exceed average revenue. c) m
> An increase in which of the following determinants of demand will have an ambiguous (uncertain) effect on price? a) Taste b) Price of a complement c) Income d) Price of a substitute
> The approval process for new drugs, if governed by economic thinking, should set stringency standards so that the __________ equals the ___________. a) total cost; total benefit b) average cost; average benefit c) marginal cost; marginal benefit d) c
> The Medicare Trust Fund is necessary because a) current expenses are greater than current revenues. b) current expenses are less than current revenues. c) future expenses will be greater than future revenues. d) future expenses will be less than futu
> Medical care inflation is likely to be easily overstated (if you look simply at the increase in the cost of a hospital stay) because that calculation ignores a) the original costs. b) the new costs. c) quality increases. d) quality decreases.
> If policy makers were to attempt to set a tax equal to the external costs of alcohol, one would have to evaluate a) the cost of production. b) the price paid by consumers. c) the value of innocent lives lost to drunk driving. d) the value of the shor
> The World Trade Organization governs the provisions of a) NAFTA. b) GATT. c) CAFTA. d) SHAFTA.
> Using simple linear production possibilities frontiers in a simple two-good, two-country model, absolute advantage is evident when a) one country can make more of a good than the country other can. b) the slopes of the two production possibilities fron
> What source of rapid (1950–1975) growth is not duplicable? a) Electrification of lighting b) Increases in education c) Increases in productivity
> The job losses during this recession were a) typical of a short recession. b) nonexistent. c) significant and rapid.
> By way of international comparison, recent U.S. deficits have increased the ratio of debt to GDP a) such that the United States has the highest ratio in the industrialized world. b) but every other industrialized nation’s ratio is much worse. c) but t
> When looking at a balanced-budget amendment to the U.S. Constitution, economists a) are universally opposed to it. b) are universally in favor of it. c) are of two minds with opponents concerned about its procyclical nature. d) are of two minds with
> Total federal spending on health care, after adjusting for inflation, has been a) growing. b) relatively constant. c) declining slowly. d) declining rapidly.
> During 1999 through 2006 the Federal Reserve a) was passive and simply let things happen. b) reacted actively to quell potentially inflationary expansions but did nothing to deal with the recession. c) reacted actively to deal with the recession but
> One typical response to a recession using discretionary fiscal policy is to a) raise taxes and cut spending. b) lower taxes and cut spending. c) raise taxes and increase spending. d) lower taxes and increase spending.
> An economist worrying about the economic impact of environmental regulations would model that impact with a a) decrease in aggregate supply. b) increase in aggregate supply. c) decrease in aggregate demand. d) increase in aggregate demand.
> One problem with using real gross domestic product as a measure of social welfare is that a) it fails to count home production. b) it fails to count services, a growing part of the economy. c) it double, triple, and sometimes quadruple counts goods th
> Under perfect competition, the supply curve is a) the marginal cost curve for all price quantity combinations. b) the marginal cost curve, but only that portion that is downward sloping. c) the marginal cost curve, but only that portion that is upward
> The optimization assumption suggests that people make a) irrational decisions. b) unpredictable decisions. c) decisions to make themselves as well off as possible. d) decisions without thinking very hard.
> Using an interest rate of 5 percent, which figure has the largest present value? a) $5,000 b) $5,050 to be received two years from now c) $5,075 to be received three years from now d) $5,500 to be received ten years from now
> Compared to a recreational user of a drug, an addicted user’s elasticity of demand is a) much more elastic. b) much less elastic. c) much less. d) flatter.
> A bursting of a housing bubble could create more problems than the NASDAQ crash in 2000 because the housing bubble involves a) assets, and NASDAQ was about debts. b) risky forms of debt. c) more people. d) fewer people.
> A housing bubble occurs when _________ drive(s) prices more than fundamental factors. a) the price of gasoline b) a home’s expected future price c) interest rate changes d) property tax increases
> The Federal Reserve has indirect control over short-term interest rates, and as a result, their ability to control economic activity is through a) aggregate supply. b) aggregate demand. c) residual demand. d) the exchange rate.
> When one party harms another and the harmed party hires a lawyer who will collect only if the harmed party wins the suit, they have hired a a) personal injury attorney. b) contingency attorney. c) corporate lawyer. d) disbarred attorney.
> The market form for a new drug in an area that had one other drug is a) perfect competition. b) monopolistic competition. c) oligopoly. d) monopoly.
> The DRG system controls Medicare expenses by a) preventing doctors from using particular procedures. b) paying hospitals after they submit bills. c) paying hospitals on the basis of a disease or injury rather than expenses. d) paying the patient who
> Which of the following forms of private insurance is likely to have the lowest premiums and least doctor choice flexibility? a) Medicare b) An HMO c) A PPO d) A fee-for-service plan
> Overfishing certain parts of the ocean and certain species of fish has been a problem for centuries with countries actually going to war over fishing disputes. Ronald Coase would suggest that there would be no the problem if a) someone owned (and could
> When one country objects to the trade restrictions of another, the provisions of trade treaties typically a) allow it to militarily exact retribution against the offending party. B) require that it submit its objections to an adjudication body to dete
> For the ruler of a developing country, the opportunity cost of a choice to invest in universal education a) is the reduction in health care spending. b) does not exist because food is a necessity. c) is much lower than a similar choice for the ruler o
> The reason the European Central Bank (ECB) didn’t engage in the kind of expansionary monetary policy that the Federal Reserve did for the United States was that a) the ECB didn’t view the problem as serious. b) the ECB could not raise the capital. c)
> The oil price increases of 2002-2005 are an example of a a) positive aggregate demand shock. b) negative aggregate demand shock. c) positive aggregate supply shock. d) negative aggregate supply shock.
> Using simple linear production possibilities frontiers in a simple two-good, two-country model, comparative advantage is evident when a) one country can make more of both goods than the other. b) the slopes of the two production possibilities frontiers
> State and local pensions for government employees are usually a) defined benefit plans. b) defined contribution plans. c) entitlements. d) determined year to year.
> The large increase in the Labor Force Participation Rate is ________ source of growth. a) a duplicable b) an unduplicable
> The Obama administration's stimulus package was a) almost entirely made up of tax cuts. b) almost entirely made up of spending on "shovel ready" projects. c) a balance between tax cuts, spending on projects, and shoring up the unemployment and welfare
> The portion of the national debt owed to citizens of other countries a) is economically irrelevant however big it is. b) is economically important, but it has been falling in recent years. c) is economically important and it has been rising in recent
> The largest single item in federal spending is a) international aid. b) welfare. c) interest on the debt. d) Social Security.
> The “creation” of money is a) entirely the purview of Congress. b) entirely the purview of the Federal Reserve. c) formally the purview of the Federal Reserve, constitutionally the purview of Congress, but banks have a practical means of creating mon
> The aggregate demand-aggregate supply model examines the impact of discretionary fiscal policy and nondiscretionary fiscal policy by focusing on movements of a) interest rates. b) aggregate supply. c) aggregate demand. d) regulatory policies.
> The consumer price index (CPI) is a heavily criticized measure of inflation because a) the government does nothing to fix its known deficiencies. b) it consistently understates the increase in the cost of living. c) it consistently overstates the incr
> Economic theory would suggest that the profitability of an industry would be a) directly related to the number of firms competing in the industry. b) inversely related to the number of firms competing in the industry. c) unrelated to the number of fir
> Substitution in the context of the “rational terrorist model” suggests that a clampdown at airports will a) end terrorism. b) cause terrorists to target airports even more as they attempt to show their strength. c) cause terrorists to seek alternative
> Whether marginal revenue is constant or decreasing depends on a) whether the firm is benefiting from the division of labor. b) whether the firm is dealing with diminishing returns. c) how much the firm sells. d) whether the firm faces competition.
> Combined the consumer surplus and producer surplus at equilibrium is a) lower than it would be at prices below equilibrium. b) lower than it would be at prices above equilibrium. c) typically negative. d) as big as it can get.
> If the supply and demand curves cross at a quantity of 100, then the price necessary to get firms to sell more than that will have to be _______ equilibrium. a) above b) at c) below d) within 10 percent either way of
