Which is more scarce: a chicken or an egg?

A) Both are equally scarce

B) Both are abundant and therefore not scarce

C) The egg

D) The chicken

D

(The price it takes to recall the item reflects relative scarcity)

The common habit of viewing middlemen as unproductive bandits on the highway of free trade assumes

A) Voluntary exchange is not mutually benficial

B) Information is a free good

C) Transaction costs are zero

D) all of the above

E) none of the above

Fill in the blank: According to the text a commercial soceity cannot develop successfully in the absense of _________.

A) Low interest rates

B) Massive government works projects

C) central economic planning

D) the rule of law

E) perfect and complete information

According to the law of demand

A) wants are indefinitely expansible and can never be fully satsified

B) demand generates a supply sufficent to satisfy the demand

C) people will purchase less of a good when its price raises

D) nothing will be produced unless there is a demand for it

E) whatever people want will eventually be supplied

Suppose the pizza at Pizza House and Little Wheezers are fairly close substitues. If Pizza Hut raises their price 20% and Little Wheezers keeps their price unchanged, which is most likely to occur?

A) The demand for Little Wheezers will increase

B) The demand for Pizza Hut will decrease

C) Both A and B

D) None of the above

Suppose most consumers who eat hotdogs also use mustard, a complementary good. If the price of hotdogs rises, what is most likely to happen?

A) The demand curve for mustard will likely shift left

B) The demand curve for mustard will likely shift right

C) The demand curve for hotdogs will fall

D) The demand curve for hotdogs will shift right

Demand relates the amounts of a good purchased to

A) The quantity needed

B) The amounts actually obtained

C) The sacrifices required to obtain the good

D) The gross domestic product

E) The time required to produce the good

If the average money price of all the goods increased 3 percent last year, we could most reasonably infer that

A) the value of money had fallen by about 3 percent

B) the quantity of demanded goods had decreased

C) the demand for goods in general was highly inelastic

D) the quantity of goods demanded had increased

Sunk costs are irrelevant to economic decisions because

A) they do not appear on financial statements

B) they represent no oppurtunity for choice

C) they cannot affect a firm's net revenue

D) they are merely oppurtunity costs rather than monetary expenditures

Suppose there is currently a shortage in the guitar market, Pick the correct statement

A) the actions of buyers and sellers

B) increased supply by sellers

C) increased demand from buyers

D) All of the above are true

E) None of the above are true

According to your authors, market clearing

A) is planned by all buyers and sellers

B) is planned by all buyers

C) is planned by all sellers

D) is an unitended consequence of people pursing their own plans

E) is planned by economists and governement agencies

If you travel through the western US in the summer, you are much more likely to encounter a shortage of camping spaces than a shortage of motel rooms because

A) motels are more often privately owned

B) the government has not yet provided as many camping spaces as the public wants 

C) camping sites are usually less expensive than motel rooms

D) there are more motel rooms than camping spaces

What is the relationship between scarcity and shortage, as economists use the terms?

A) Shortages are the basic cause of scarcity

B) Scarcity creates shortages in the long run

C) Scarcity and shortages cannot exist simultaneously

D) Scarcity is relative while shortages are absolute

E) Scarcity is unavoidable but shortages are not

When prices are allowed to fluctuate after a crisis, such as Hurricane Katrina, the high prices

A) justify government intervention

B) provide information to suppliers about where goods and services are most hightly desired

C) Population growth

D) All of the above

From the economic point of view, profit is

 A. a four-letter word.

B. the same as loss.

C. the result of uncertainty.

 D. a sign of economic injustice.

 E. none of the above.

Use the economic way of thinking to complete the following statement: An entrepreneur who owns his own building

 A. enjoys the building as a free good.

B. sacrifices rental income he could have been earned on the building.

 C. enjoys lower costs than other entrepreneurs who choose to rent buildings from others.

D. enjoys larger economic profits compared to other entrepreneurs who choose to rent buildings from others.

My son is a smart entrepreneur.  Rather than borrow money from others, he used his own savings to start his music business, and thereby avoided paying interest on loans."  An economist would respond by saying

 A. both you and your son are complete idiots."

B. it's always good to avoid borrowing and paying interest."

 C. nobody can avoid paying interest, not even your clever son."

D. your son might have avoided paying interest, but he also avoided earning interest."

"Loss" is another word for

 A. profit.

B. negative profit.

C. cost.

 D. exploitation.

Entrepreneurs obtain control over the resources employed in the projects they undertake by

 A. acquiring ownership through investment of their own funds.

 B. borrowing funds with which to purchase the resources.

 C. floating new issues of stock or bonds.

D. offering credible guarantees to owners of resources.

E. reinvesting the profits from previous successful projects.

It is important for a business firm to have a residual claimant because

A. income not claimed for accounting purposes is lost.

 B. otherwise surplus profits would set off a process of profit inflation.

 C. residuals account for as much as thirty percent of the wealth generated annually in the United States.

 D. some person must finally be liable for all corporate acts.

E. the claimant produces an effective incentive to consider all costs and benefits relevant to a firm.

If freezing weather destroys half of the current Florida orange crop, wealth will increase for

 A. almost all Florida orange growers.

 B. no Florida orange growers.

C. some Florida orange growers and all California orange growers.

D. some Florida orange growers and some California orange growers.

If competing price searchers adjust their own prices on the basis of a close monitoring of their rival's prices,

 A. all prices will tend to be the same, which proves prices are not competitive.

 B. all prices will tend to be the same, which proves sellers are not competing on price.

C. each price searcher's demand curve will be indeterminate

D. prices will fluctuate regularly.

 E. prices will rise when costs increase but will not fall when costs decrease.

Competition among sellers occurs

A. when marginal revenue equals marginal cost.

 B. when price equals marginal cost.

 C. when price equals marginal revenue.

D. whenever sellers try to attract customers from one another.

The most immediate and direct effect of minimum price laws designed to prevent "predatory pricing" is to

A. guarantee profits to all sellers, large or small.

 B. guarantee profits to large sellers exclusively.

 C. guarantee profits to small sellers exclusively.

 D. preserve competition without guaranteeing profits.

E. prevent competition without guaranteeing profits.

State legislators who wanted to eliminate state regulation of the trucking industry would be most likely to find support among

A. business owners who must pay higher prices for deliveries as a result of the regulations.

B. owners and managers of large trucking concerns.

 C. owners of small trucking concerns.

 D. unions that represent truck drivers.

Sellers turn so frequently to government in efforts to protect themselves from competition because government

A. can be influenced by monetary payments.

B. can use coercion against competitors.

 C. has rather consistently forced firms to compete when they preferred not to.

 D. is charged with protecting the public interest.

 E. is under the thumb of monopolists.

According to the text, a government policy of promoting competition must

A. assure small businesses they won't fail because of below-cost pricing or other "predatory" practices by larger businesses.

 B. assure small businesses they won't fail under any circumstances.

 C. equate profit margins among competing suppliers.

D. maintain a process rather than some state of affairs.

 E. work toward making sellers' demand curves completely elastic.

When competing firms set prices with attention to the prices set by their competitors, the demand curve faced by each firm.

A. becomes indeterminate.

B. becomes less elastic.

 C. becomes more elastic.

 D. shifts toward the northeast.

 E. shifts toward the southwest.

Who is likely to complain to state regulatory authorities about unlicensed movers defrauding customers?

 A. Consumer organizations.

 B. Individual customers who are planning to move.

C. Individual customers who have already used unlicensed movers and have not been thoroughly satisfied.

D. Licensed movers.

 E. Unlicensed movers.

Government licensing of occupations or trades

A. has usually been created over the objections of sellers in the licensed industry.

B. is more often supported than opposed by the persons and firms to be regulated.

 C. is usually supported by legislators because they want to protect consumers against inferior-quality products.

 D. will not reduce competition if it merely imposes higher costs on potential entrants into the occupation or trade.

Which of the following pricing practices, if proved, would prove a firm engaged in predatory pricing?

 A. The firm sets prices below marginal cost per unit.

 B. The firm sets prices below sunk cost per unit.

C. The firm sets prices below total cost per unit.

 D. The firm sets prices low enough to drive all its competitors out of business.

E. None of the above would prove predatory pricing had occurred.

Competition is best characterized as

 A. a fully regulated set of market activities.

B. a fair and just set of outcomes.

C. a process of bids and offers.

 D. a necessary evil.

Which of the following clearly restricts the competitive market process?

A. Selling below cost.

 B. Selling above cost.

 C. Selling at cost.

 D. Setting a price above marginal cost.

E. None of the above.

Are the owners of taxicabs in New York City earning large profits because the city severely restricts the number of licenses?

 A. No, because the city also regulates fares.

B. No, because the cost of owning a license absorbs the potential profit.

 C. Yes, because the number of licenses has not been increased for 50 years.

 D. Yes, because if they were not the number of taxicabs would decline and profits would rise.

E. We cannot tell because profit arises from uncertainty.

A national taco chain offers in-house customers free refills on drinks.  It is

A. attempting to increase total profit.

 B. selling its meals below cost.

C. selling drinks below cost.

 D. engaging in predatory pricing.

 E. doing all of the above.

The property rights people actually possess

A. are limited to the rights sanctioned by law.

 B. are the rights they can exercise regardless of what others do.

 C. are the similar rights they grant other because all rights in a society must be mutual.

D. depend heavily on the cooperation of other people.

Could pollution be eliminated by banning all activities harmful to the environment?

 A. No, because legislation is influenced by industrial lobbyists.

B. No, because the cost of doing so would be higher than even the most dedicated environmentalist would agree to accept.

C. Not until we have better information on the sources of pollution.

 D. Yes, if we are willing to place long-run considerations ahead of short-run profits.

According to the text, because people in an urban-industrial society will always disagree to some extent about who ought to have which rights,

A. it is unreasonable to expect negative externalities to be completely eliminated.

 B. negative externalities cannot be reduced without government coercion.

 C. negative externalities should not be thought of as the consequence of disagreement over property rights.

 D. there is no point in discussing the matter.

E. we must depend upon government to decide exactly what should be prohibited or commanded.

Freeways in large cities tend to be congested during rush hours to the point where they offer little or no advantage over non-freeway routes because

 A. drivers generally ignore marginal benefits and costs.

 B. drivers usually ignore marginal benefits and costs during rush hours.

C. no monetary fee is charged for the use of freeways during rush hours.

 D. not enough freeways have been constructed due to special interests' control of the government.

E. people need to get to work and the demand for freeway travel is consequently inelastic during rush hours.

In chapter 1 your authors marveled at the way highway traffic is orderly and self-regulating.  In chapter 10, however, they discuss a growing problem on urban roadways – congestion.  What's the cause of roadway congestion?

A. Typically, road use is a scarce good with a marginal price tag of zero for drivers.

 B. Not enough drivers have studied economics.

 C. More and more drivers think only of themselves.

D. Population growth.

Which of the following is a clear difference between the market system and government?

 A. Collective welfare controls government policy; the market system serves the welfare of individuals.

B. Competition regulates the market system, but competition does not constrain the actions of government officials.

 C. The market system serves the interests of some; government serves the interests of all.

 D. Each of the above statements expresses the difference between the two.

E. None of the above expresses the difference between the two.

Assuming everyone wants to advance their interests in an effective way is an assumption of

A. capitalism.

B. economic theory.

 C. government.

 D. selfishnes

How does the text distinguish between government and the market?

 A. The government is the place around the capital city; the market is everywhere else.

 B. The government is populated with publicly-spirited people; the market is populated with selfish people.

C. The government is based on cooperation; the market is based on competition.

 D. In all of the above ways.

E. In none of the above ways.

Which statement is consistent with the economic way of thinking?

A. Politicians seek to advance their own interests.

 B. Politicians are not only concerned with money and material goods.

 C. Politicians do not necessarily pursue narrow or selfish goals.

D. All of the above.

How does the text distinguish between coercion and persuasion?

A. Coercion uses force; persuasion uses reasoning.

 B. Coercion uses violence; persuasion is peaceful.

 C. Coercion cannot make everyone better off, but persuasion can.

 D. Coercion is evil, and persuasion is good.

E. Coercion induces cooperation by threatening to reduce options, persuasion by promising to expand options.

Which of the following is an important difference between police protection and food and explains why one is commonly provided by government while the other is not?

A. Food can easily be withheld from people who don't pay for it.

B. Food is not a traditional concern of government.

 C. Food is too vital to be entrusted to government.

 D. Food producers form a powerful political lobby.

 E. Food provided through government would be inefficient.

According to economic theory, national defense can be supported through taxation because

 A. national security generates no benefits for which any one would be willing to pay.

 B. people are insufficiently patriotic.

C. taxation makes everyone pay in proportion to the benefits they receive.

D. the people who refuse to pay the cost cannot easily be excluded from the benefits.

 E. we must choose between coercion through taxation and coercion through a draft.

Legislators who must stand for re-election every two years will tend to support

 A. policies beneficial to all the people eligible to vote.

 B. policies beneficial to all the people now living.

 C. policies beneficial to all present voters and future generations of voters.

D. policies promising early benefits and deferred costs.

E. policies representing the public interest.

When we apply economic analysis to democracies, it is reasonable to expect government policies to be serving

A. many extremely partial or special interests.

 B. the interests of business generally.

 C. the interests of consumers.

 D. the interests of the majority.

E. the interests of the people who most highly value the results of government actions.

Economic theory assumes elected and appointed government officials

A. place their personal or private welfare ahead of the public interest.

 B. place the public interest ahead of any personal or private interests of their own.

 C. are free to pursue the public interest because they aren't constrained by competition.

D. respond to the anticipated costs and benefits to themselves of decisions contemplated.

According to your text, what is the significant distinction between the government and the nongovernment sector of society?

A. Government decisions are made by collectives rather than by individuals.

B. Government is usually granted the right to coerce adults.

 C. Government officials pursue the public interest rather than narrow special interests.

 D. Government takes the long-run view and thus cares for the interests of future generations.

 E. The government sector is not characterized by competition.

According to the textbook, government supplies police protection because

A. it is difficult to supply police protection exclusively to people who pay for it.

 B. police protection is every citizen's right.

 C. police use force, violence, and coercion.

D. the supply of police protection is in the public interest.

 E. the value of police protection is greater than its marginal cost.

According to the economic way of thinking, it is efficient to support a system of law and order through taxation because

 A. we need law and order.

B. law and order are not free goods.

C. law and order create significant spillover benefits.

 D. citizens ultimately despise law and order.

According to the authors of your text, a politician's interest in getting reelected

 A. expands the politician's time horizon.

B leads the politician to concentrate on policies capable of generating short-run benefits.

C. further encourages the politician to conform more to acting in the public interest.

 D. is based chiefly on selfish interest.

In national income accounting, a "final good" is

A. a finished product.

 B. something purchased with the goal of further resale.

C. something purchased by an ultimate user in the household, business, or government sector.

 D. something that is impossible to determine.

Which of the following might be an "intermediate good"?

 A. A box of Kellogg's corn flakes.

 B. An IBM laptop computer.

C. A U-Haul rental vehicle.

 D. An economics textbook.

E. All of the above.

Does the gross domestic product account measure the market value of all goods and services?

A. No, because that would include double-counting.

    B. Yes, because the data is readily available.

C. Yes, except for illegally exchanged goods and services.

D. Yes, otherwise the gross domestic product accounting system is not a reliable indicator of economic activity.

Inflation is

A. a decline in the total purchasing power of an economy.

B. a decrease in the amount of  goods and services that a unit of money will purchase. 

C. a fall in people's real incomes. 

D. an increase in the cost of living.

E. all of the above.

When determining value added, national income accounting systematically ignore

 A. accounting profits.

B. economic profits.

 C. accounting losses.

D. the expected market value of unsold inventory.

GDP, or Gross Domestic Product, is a measure of

A. the total happiness of the nation.

B. market values, as determined by suppliers and demanders who agree to make exchanges in widely diverse markets and settings.

C. the total material well-being of a nation.

D. the total expenditures on newly-produced final goods and services.

E. the difference between the total market value and the total cost of final goods and services.

F. expressed in a common denominator so values may be compared, and is measured in units of money.

G. A and B above 

H. A and C above

    I. B and E above

J. B, D, and F above

K. All of the above

According to your authors, America's Great Depression was evidence of

A. an unstable market system. 

B. rampant greed among entrepreneurs.

C. a cluster or accumulation of errors.

D. an antagonistic interests among the propertied and nonpropertied classes.

E. all of the above.

According to your textbook, expansionary monetary policy

 A. encourages entrepreneurs to invest in projects that only appear profitable.

B. creates a temporary "boom," or economic expansion.

 C. will ultimately be followed by a "bust," as entrepreneurs learn of their forecasting errors.

D. tends to generate all of the above.

When economists say people "demand" money, they are saying

A. people really insist on having more money. 

B. people want to consume money.

C. people are willing to hold money.

D. greed is the driving force of a monetary system.

Which is an example of expansionary fiscal policy?

A. An increase in tax rates.

B. An increase in government spending. 

C. An decrease in government spending. 

D. A lowering of tax rates.

E. Both B and D are examples of fiscal policy..

Legislators facing a close electoral contest will tend to favor

A. policies with benefits greater than costs for everyone.

B. policies with benefits greater than costs for the majority.

C. policies  with benefits in the near future and deferred costs.

D. policies representing the public interest.

If elected officials prefer policy actions that make benefits available quickly while deferring costs, they will be inclined to favor

A. an easier monetary policy to counter recession.

 B. increased appropriations to provide jobs for unemployed workers.

 C. a wage and price freeze to control inflation.

D. all of the above.

 E. none of the above.

What is a necessary condition for sustainable economic growth?

A. Very high interest rates that encourage household saving 

B. Careful economic planning

C. Low cost systems of transportation and communication

D. Government monitoring and manipulation of aggregate investment

E. All of the above.