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 competition. d) monopsony.
> When there are many employers in a city and one union, the model that economists use is one for a) monopoly. b) monopsony. c) perfect competition. d) monopolistic competition.
> A stock index is a) essentially the weighted sum of stock prices. b) the simple sum of stock prices. c) the geometric average of stock prices. d) the consensus view of professional economists.
> Most baseball franchises have _____ over the years while the sale price of the typical team has ______. a) made a profit; fallen b) lost money; fallen c) made a profit; risen d) lost money; risen
> The heaviest concentration of proven oil reserves is found in a) Alaska. b) the North Sea. c) the Persian Gulf. d) Texas.
> Because there are _______, adjusted gross income is always ______ taxable income. a) deductions and exemptions; less than b) deductions and exemptions; greater than c) credits; greater than d) credits; less than
> One of the reasons a government-run annuity system such as Social Security may be better for society than simply relying on private savings is that a) no one would save for themselves. b) people, being overly risk averse, will save too much. c) people
> If Head Start were a good long-run investment from a strictly economic perspective, for current children enrolled in the program it would a) make them happier. b) help their parents with subsidized day care/preschool. c) increase the likelihood of fut
> In a simple 300 million-person world of all four-person families, if the poverty line is $12,500 and half of the 10 million families (with 40 million poor people) earn $10,000 and the other half earn $7,500, then the poverty gap is a) $125 billion (= 10
> The fact that education benefits not just the person being educated but society as a while suggests that there is a a) positive externality. b) negative externality. c) congestion. d) monopoly.
> Economists are concerned about nontariff (regulatory) barriers when they are used to prevent imports when a good a) is produced via questionable means (e.g. banning milk produced from cows injected with bovine growth hormone). b) is produced via more
> The fact that education benefits not just the person being educated but society as a while suggests that there is a a) positive externality. b) negative externality. c) congestion. d) monopoly.
> In the long run, rent control has ________ impact because, over time, supply and demand become ______ elastic. a) an increasing; more b) a decreasing; more c) an increasing; less d) a decreasing; less
> Economists ______ the activities of ticket brokers and scalpers. a) draw no distinction between b) separately model c) draw a stark contrast between d) ignore
> In order for the minimum wage to reach its 1968 high in real terms (1999 dollars), it would have to rise to approximately ___ per hour. a) $8 b) $9 c) $10 d) $11
> Price supports in the United States have a) always relied on the government paying farmers to set aside land. b) always relied on the government buying excess crops. c) always relied on forbidding production above certain levels. d) utilized a wide v
> Income inequality as conventionally measured is ____ when you ignore the fact that a higher percentage of the population is filing tax forms. a) overstated b) understated c) property stated
> The earnings of African Americans relative to whites has a) increased from 40 percent in the 1920s to 90 percent today. b) increased from 50 percent in the 1950s to around 60 percent in the 1970s, remaining in that area since. c) remained constant sin
> Antitrust law is designed to limit the impact of a) monopoly. b) oligopoly. c) monopolistic competition. d) perfect competition.
> The economic rationale for farm price supports is generally a) weak, but relies on price variability. b) weak, but relies on the unavailability of crop insurance. c) strong, and relies on the fact that prices are too high. d) strong, and relies on t
> 1. The fundamental value of a share of stock is based on the present value of expected future a) dividends. b) revenues. c) profits. d) costs.
> Deficits cannot occur in a) defined benefit plans. b) defined contribution plans. c) entitlement budgets. d) state and local budgets.
> The tax brackets have higher tax rates for more taxable income. This makes the federal income tax a) proportional. b) regressive. c) progressive. d) integrative.
> 1. Between 1998 and 2007 the real minimum wage a) rose rapidly. b) rose slowly. c) fell steadily. d) fell rapidly.
> This chapter suggests that many economists generally a) accept the notion that a human life is worth the value of the chemicals that can be extracted from it. b) argue that a human life is worth the sum of the person’s future income. c) argue that the
> The argument that casinos have little economic impact on a community is based on the notion of a) supply. b) demand. c) opportunity cost. d) local substitution.
> 1. The impact of a new Walmart on a community’s consumers is a) significantly positive for those that get lower prices b) somewhat negative for those that prefer a personal touch (if stores offering it close). c) substantially negative in all aspects
> When there is only one employer in a city, the model that economists use is one for a) monopoly. b) monopsony. c) perfect competition. d) monopolistic competition.
> The value of a sports franchise to a city’s economy depends greatly on a) the sale of memorabilia to citizens. b) the degree to which non-ticket-based sales increase. c) the degree to which restaurant revenues rise. d) the degree to which noncitizens
> In order to compare the price of gasoline in the 1970s with the price in any other year, you have to adjust for a) the availability of oil. b) the price of oil. c) overall inflation. d) unemployment.
> Social Security’s revenue emanates from taxes on a) all income. b) payrolls. c) capital. d) estates.
> From an economic perspective the tool one would use to analyze the costs and benefits of Head Start would be a) present value. b) supply and demand. c) production possibilities. d) marginal net benefit.
> To counter the slowing rate of economic growth, conservative 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 incom
> 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 _
> 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
> 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.
> 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.
