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Economics is best defined as the study of how (Points:
Economics is best defined as the study of how (Points: 1)individuals decide to use scarce resources in an attempt to satisfy their unlimited wants to make money the government should deal with unemployment and inflation to eliminate the problem of scarce resources 2. A resource is something that (Points: 1)is used to produce goods and services is provided by nature, not made by society exists in unlimited quantities must be produced by a firm 3. A rational decision maker will take only those actions for which the expected marginal benefit (Points: 1)is positive is at its maximum level is greater than or equal to the expected marginal cost is less than the expected marginal cost 4. Economic theory (Points: 1)expresses normative values invents imaginative and interesting stories predicts the behavior of a specific economic decision maker after an economic change predicts the average behavior of a group of similar economic decision makers after an economic change 5. Someone who commits the fallacy of composition is likely to assume that (Points: 1)the simplest model is the best predictor event B, which follows event A, was caused by event A event B, which follows event A, was not necessarily caused by event A what is true for the individual is also true for the group 6. A country has an absolute advantage in the production of a good if that country (Points: 1)can produce the good using fewer resources than another country would require has the lowest opportunity cost of producing the good and can produce it with the fewest resources has the lowest opportunity cost of producing the good regardless of whether it is produced with the fewest resources has the greatest opportunity cost of producing the good regardless of whether it is produced with the fewest resources has the greatest opportunity cost of producing the good and produces it with the fewest resources 7. Money facilitates trade because (Points: 1)it eliminates the need for specialization it prevents people from taking advantage of each other it serves as a medium of exchange division of labor allows money to be produced at a lower cost people do not benefit from barter unless money is used 8. If all resources are used efficiently to produce goods and services, a nation will find itself producing (Points: 1)inside its production possibilities frontier somewhere on its production possibilities frontier outside of its production possibilities frontier at one extreme end of its production possibilities frontier more of one product with no decrease in the production of any other product 9. A point outside the production possibilities frontier (Points: 1)represents unemployment of resources represents full employment of resources would not represent an efficient combination of goods cannot be reached using the available technology is less desirable than one that lies inside the frontier 10. Which of the following would shift the production possibilities frontier outward? (Points: 1)a reduction in inefficiency a reduction in the size of the labor force an improvement in technology a change in the combination of goods produced increasing opportunity costs 11. Economists generally assume that (Points: 1)firms act to maximize the dividends paid to stockholders households act to maximize their wealth households act to maximize utility firms act to maximize revenue 12. Which of the following is a disadvantage of the corporation compared to the sole proprietorship? (Points: 1)limited liability difficulty raising start-up money lack of profitability corporate income is taxed twice 13. Gross Domestic Product is the value of all (Points: 1)goods and services produced during a particular year goods and services sold during a particular year final goods and services sold during a particular year final goods and services produced during a particular year 14. Which of the following best defines foreign exchange? (Points: 1)a trade between two countries the market where exporting and importing activities take place the price of a currency relative to another currency the currency of another country used for trading 15. Which of the following is true of import tariffs and quotas? (Points: 1)They benefit domestic producers. Domestic consumers gain because they purchase the output of domestic firms. Specialization and comparative advantage are advanced by tariffs and quotas. They tend to expand the volume of world trade. 16. Which of the following statements about demand is true? (Points: 1)Since most college students want a Mercedes sports coupe, their demand for it is high. If price increases, the demand curve shifts to the right. The demand curve for bacon will not shift when the price of bacon changes. If a supply curve shifts, thereby changing the price, the demand curve will shift as well. 17. A decrease in demand for a good could mean that (Points: 1)consumers are willing to buy larger quantities of the good at each price the demand curve has shifted to the left consumers are willing to pay a higher price for each quantity of the good the demand curve has undergone a parallel shift to the right 18. Two goods are considered substitutes only if a(n) (Points: 1)decrease in the demand for one leads to a decrease in the supply of the other increase in the demand for one leads to a decrease in the supply of the other increase in the price of one leads to an increase in the demand for the other decrease in the price of one leads to an increase in the demand for the other 19. The effect of an increase in consumer income on equilibrium price and quantity of Florida orange juice (a normal good) is (Points: 1)to increase equilibrium price and quantity to decrease equilibrium price and quantity to increase equilibrium price and decrease equilibrium quantity to increase equilibrium quantity and decrease equilibrium price 20. If the demand for bicycles increases, (Points: 1)the quantity demanded decreases equilibrium price increases and equilibrium quantity decreases equilibrium price decreases and equilibrium quantity increases quantity supplied increases 21. If demand increases and supply decreases, (Points: 1)equilibrium price will fall and equilibrium quantity will rise equilibrium price will rise; equilibrium quantity will either rise, fall, or remain unchanged equilibrium price and quantity will both rise equilibrium quantity will rise; equilibrium price will either rise or fall 22. Demand is elastic whenever (Points: 1)price elasticity has an absolute value of 1 price elasticity has an absolute value greater than 1 price elasticity has an absolute value less than 1 price elasticity is negative 23. Which of the following will cause demand to be relatively elastic? (Points: 1)There are few substitutes The time interval is relatively long The good is considered a necessity The good involves a relatively small portion of the consumers' budget 24. Along a straight-line downward-sloping demand curve, elasticity is (Points: 1)constant, but its value cannot be determined without measurement constant and equal to an absolute value of one greater at higher prices greater at lower prices 25. If supply is perfectly elastic, the supply curve is (Points: 1)vertical horizontal any straight-line supply curve any supply curve intersecting a perfectly elastic demand curve 26. If the cross-price elasticity of demand is -3, then (Points: 1)one good is price inelastic one good is a luxury good the goods are complements one good is an inferior good 27. Substitutes are pairs of products with (Points: 1)positive cross-price elasticity of demand negative cross-price elasticity of demand positive income elasticity of demand negative income elasticity of demand 28. The law of diminishing marginal returns states that (Points: 1)long-run average cost declines as output increases if the marginal product is above the average product, the average will rise as units of a variable input are added to a given amount of fixed inputs, the marginal product of the variable input eventually diminishes as a person consumes more of a good, the marginal satisfaction from that good eventually diminishes 29. The short-run average variable cost curve (Points: 1)is always downward-sloping is a horizontal line intersecting the vertical axis slopes downward at low rates of output, then slopes upward at higher rates of output starts above the origin and always slopes upward 30. If marginal cost exceeds average variable cost, (Points: 1)average variable cost is negative average variable cost is increasing marginal cost is greater than average total cost average variable cost is decreasing 31. Which of the following is true of the MC curve? (Points: 1)It intersects the ATC curve at its minimum, but it does not intersect the AVC curve at its minimum. It intersects the AVC curve at its minimum, but it does not intersect the ATC curve at its minimum. It intersects both the ATC and the AVC curves at their minimums. It intersects both the ATC and the AFC curves at their minimums. 32. Economies of scale occur where (Points: 1)long-run average cost falls as new firms enter the industry short-run average cost falls as new firms enter the industry long-run average cost falls as one firm expands plant size short-run average cost falls as one firm expands plant size 33. Average revenue minus average total cost equals (Points: 1)total economic profit total accounting profit a normal profit economic profit per unit of output 34. For a perfectly competitive firm operating at the profit-maximizing output level in the short run, (Points: 1)MR = TR MC = price MC = ATC MC = AVC 35. In long-run equilibrium, (Points: 1)perfectly competitive firms in a decreasing-cost industry can earn economic profits perfectly competitive firms in an increasing-cost industry can earn economic profits perfectly competitive firms in a constant-cost industry can earn economic profits perfectly competitive firms can earn only normal profits 36. Firms achieve productive efficiency in the long run by (Points: 1)striving to minimize fixed cost striving to maximize revenue producing at their minimum long-run average cost producing at their minimum long-run marginal cost 37. The term allocative efficiency refers to (Points: 1)the level of output where MC = AVC the equality between MR and MC the production of those goods and services most valued by consumers the point where marginal revenue equals average total cost 38. Economic profits in a competitive industry are signals that (Points: 1)attract new firms into the industry prevent firms from adopting newer technologies encourage existing firms to continue to operate inefficiently indicate that business conditions are improving 39. Which of the following is true of monopoly? (Points: 1)There are no barriers to entry. The firm is a price taker. There are no close substitutes for the product being produced. There are many firms in the industry. 40. For a monopolist, marginal revenue is (Points: 1)equal to price greater than price less than price represented by a horizontal curve 41. Which of the following does a monopoly control, that a perfectly competitive firm does not control? (Points: 1)how much to produce technology what price to charge what inputs to use 42. A monopolist (Points: 1)can charge whatever price it wants charges more than almost any consumer is willing to pay is constrained by marginal cost in setting price is constrained by demand in setting price 43. An important difference between a perfectly competitive firm and a monopolist is that (Points: 1)the perfectly competitive firm tends to be larger only the monopolist attempts to maximize profit only the perfectly competitive firm maximizes profit the perfectly competitive firm faces a horizontal demand curve and the monopolist faces a downward-sloping demand curve 44. A monopolist is (Points: 1)a single seller of a product with no close substitutes a single seller of a product with many close substitutes one of a large number of small firms that produce a homogeneous good one of a small number of large firms that produce a differentiated good 45. The term monopolistic competition (Points: 1)denotes an industry with one seller of many differentiated products is an alternate expression for monopoly denotes an industry with many sellers of homogeneous products denotes an industry with many sellers of differentiated products 46. A firm will only earn normal profit in the long run (Points: 1)if firms can freely enter or leave the market if firms do not try to maximize profit only if the industry is perfectly competitive whenever products are not differentiated 47. Compared to a firm in perfect competition, the monopolistically competitive firm tends to (Points: 1)produce less and charge a higher price produce less and charge a lower price produce more and charge a lower price produce more and charge a higher price 48. Game theory is most useful in understanding the decision-making behavior of firms in which type of industry? (Points: 1)perfect competition monopoly natural monopoly oligopoly 49. The term strategy in terms of game theory refers to (Points: 1)the relationship between price and marginal cost the relationship between individual firm demand curves and the market demand curve each firm's game plan in making decisions the interrelationship between price and marginal revenue 50. Which oligopoly model was developed to explain price wars in an industry? (Points: 1)natural oligopolies cartels price leadership by a dominant firm game theory 51. Resource owners will supply additional units of a resource as long as doing so (Points: 1)decreases their opportunity cost increases their income increases their utility decreases their income taxes 52. Marginal revenue product is defined as (Points: 1)the total revenue divided by the number of resources employed the total revenue generated by inputs the additional revenue generated by one additional unit of a resource, other things constant the additional output produced by one additional unit of a resource, other things constant 53. If the wage is below the marginal revenue product, then a profit-maximizing firm will (Points: 1)employ more workers employ fewer workers see an increase in its demand for labor see an increase in its supply of labor 54. An improvement in technology that allows workers to process twice as many insurance forms in an hour than before will cause (Points: 1)more labor to be employed because its marginal revenue product has fallen an increase in insurance premiums fewer workers to be employed because their marginal revenue product has decreased more workers to be employed because their marginal revenue product has increased 55. The market price of output affects (Points: 1)the supply of the resources used to produce it the demand for the resources used to produce it the marginal product of the resources used to produce it the marginal resource cost of the resources used to produce it 56. Leisure is (Points: 1)subject to the law of diminishing marginal utility usually considered an inferior good a complementary good with nonmarket work a complementary good with market work 57. A large inheritance from a relative will tend to (Points: 1)cause movement up and to the right along your labor supply curve cause movement down and to the left along your labor supply curve shift your labor supply curve outward shift your labor supply curve inward 58. The equilibrium wage (Points: 1)is the same in all labor markets occurs where the supply of labor curve begins to bend backward cannot be calculated because there are so many labor markets is determined by the market demand for labor and the market supply of labor 59. When industrial unions negotiate with an entire industry, wage gains come at the cost of (Points: 1)longer working hours worse working conditions reduced total employment worse products 60. An appeal to consumers to purchase union-made products represents an attempt to (Points: 1)increase the supply of union labor increase the demand for union labor decrease the supply of union labor decrease the quantity demanded of union labor 61. Economic regulation of business is justified if, by intervening, government can (Points: 1)improve the allocation of resources in society create economic rents for special interest groups reduce output and increase prices for an industry increase tax revenue from the regulated industry 62. If a monopolist is forced to set price equal to average total cost, economic profit (Points: 1)will be negative, and the monopolist may go out of business will be zero will be positive will be negative, and the firm will stay in business if there are significant fixed costs 63. If firms accused of antitrust violations sign a consent decree, they have (Points: 1)admitted guilt and accept the lawful penalties admitted guilt, but are relieved of any penalties by agreeing to cease the violations agreed to cease the alleged wrongdoing, without admitting guilt denied the accusation and requested a formal hearing or trial 64. Individuals serving on the boards of directors of competing firms is called (Points: 1)interlocking directorates tying contracts the rule of reason exclusive dealing 65. Why might two presidential candidates appear to have very similar opinions during an election year even if they come from different parties? (Points: 1)They aim to please special-interest groups. They are logrolling. They try to appeal to the median voter. Republicans and Democrats usually agree on most issues. 66. If a voter expects to have little effect on government choices, that voter's behavior will reflect (Points: 1)rational ignorance a cyclical majority rent seeking vote trading 67. The purpose of a political action committee is (Points: 1)to help elect officials sympathetic to its members' special interests to help elect officials who will enact fair legislation to raise money for public interest groups to exchange trade secrets 68. Legal attempts to arrange one's financial decisions so as to pay the least tax possible are known as (Points: 1)tax evasion logrolling tax avoidance rent seeking 69. The socially efficient level of output is determined where (Points: 1)marginal social cost equals marginal social benefit marginal private cost equals marginal social benefit average social cost equals average social benefit average private cost equals average social benefit 70. Markets fail when externalities are present (Points: 1)because all of the costs and benefits of producing a good are reflected in the market price because some of the costs and benefits of producing a good are not reflected in the market price only if they are negative; positive externalities are not market failures because profits are not maximized 71. If producers cannot afford the fees for pollution rights, (Points: 1)they will pollute they will buy pollution rights they will sell pollution rights they will have to find a cheaper way to deal with their pollution 72. In order to increase society's well-being, education might be (Points: 1)taxed to discourage production subsidized to encourage production taxed to encourage production subsidized to discourage production 73. Which of the following is a stock variable? (Points: 1)business spending on capital equipment consumer income the federal government's debt the federal government's budget deficit 74. A recession is best defined as a period during which (Points: 1)the percentage of the population employed is declining employment, output, and income decline the price level is declining more resources are used 75. If the wealth of consumers increases substantially, this would shift (Points: 1)the aggregate supply curve outward the aggregate demand curve outward the aggregate demand curve inward the aggregate supply curve inward 76. Equilibrium of aggregate supply and aggregate demand is best described as a situation in which (Points: 1)the slope of aggregate demand equals the slope of aggregate supply quantity demanded exceeds quantity supplied quantity demanded equals quantity supplied at a unique price level quantity supplied exceeds quantity demanded at a unique price level 77. Fine-tuning the economy means (Points: 1)making government economic policy more "people oriented" using government policies to adjust the economy and promote economic stability tinkering with microeconomic problems such as externalities and losing sight of the big picture placing fewer regulations on the private sector, thereby eliminating the need for government intervention 78. Labor productivity is measured by (Points: 1)total employment/total output total output/total employment labor force/total output total output/labor force 79. Human capital represents (Points: 1)the equipment that labor uses on-the-job to improve labor productivity a direct method of measuring output-per-worker the education, skills and training embodied in workers the technology, developed by humans, that is embodied in equipment 80. Which of the following would increase labor productivity? (Points: 1)a decrease in amount of capital per unit of labor technological change a decrease in the unemployment rate an increase in the number of inexperienced workers entering the labor force 81. Physical capital includes all of the following except (Points: 1)roads and bridges machinery and factories communications networks high school diploma or college degree 82. The ultimate goal of studying the circular flow model is to understand the flow of (Points: 1)money through the market system consumer spending through the economy goods and services through the product market resources, goods, and money through the economy 83. Which of the following is not a problem associated with GDP as a measure of social welfare? (Points: 1)It excludes many nonmarket activities. It values all types of output equally. It excludes pollution damage. It excludes intermediate goods as a separate entry. 84. Depreciation refers to a decrease in the value of a durable good caused by (Points: 1)an increase in the price level changes in the depreciation allowance wear and tear over time changes in tax law 85. If the price index for 2008 was 100 and the price index for 2009 was 109, then how much did prices change between 2008 and 2009? (Points: 1)1 percent increase 8 percent increase 9 percent increase 12 percent increase 86. In order to convert nominal GDP to real GDP, we must divide (Points: 1)real GDP by the price index nominal GDP by the price index the price index by nominal GDP the price index by real GDP 87. Which of the following is true about labor force participation? (Points: 1)When workers become unemployed, the labor force participation rate declines. When the unemployed become "discouraged workers," the labor force participation rate declines. When workers are not fully using their skills, the labor force participation rate decreases. Since the 1950s the labor force participation rate of women has decreased in the United States. 88. Sharon was being treated unfairly by her boss, so she stormed off the job and two weeks later found another position. For two weeks Sharon experienced (Points: 1)cyclical unemployment structural unemployment seasonal unemployment frictional unemployment 89. Inflation is (Points: 1)a reduction in everyone's standard of living a rise in the real prices of all goods and services a general and continuing rise in the money prices of goods and services a continuing rise in everyone's standard of living 90. In times of rapid inflation, (Points: 1)money loses its use as a store of value money becomes an attractive store of wealth people postpone purchases as long as possible people spend less in transactions costs 91. An increase in the interest rate, other things constant, will (Points: 1)shift the supply of loanable funds curve to the left shift the supply of loanable funds curve to the right increase the quantity of loanable funds supplied shift the demand for loanable funds curve to the left 92. Because of automatic stabilizers, government budget deficits are (Points: 1)positive during both expansions and contractions negative during both expansions and contractions smaller during expansions and larger during contractions zero if averaged out over the entire business cycle 93. John Maynard Keynes is best known for advocating (Points: 1)a policy of annually balancing the budget deficit spending by the federal government during recessions the fixed-growth-rate monetary rule adoption of the biennial budget process 94. The difference between the federal budget deficit and the national debt is that the (Points: 1)deficit is a stock and the debt is a flow deficit is a flow and the debt is a stock debt includes interest payments and the deficit does not deficit can be positive but the debt cannot 95. If there is a decrease in the supply of money, which one of the following is most likely to happen? (Points: 1)the demand for money will increase planned investment spending will increase interest rates will rise aggregate expenditure will increase 96. If the Fed sells government securities to banks, eventually we expect (Points: 1)short-run aggregate supply to increase interest rates to increase the price level to increase aggregate demand to increase 97. Velocity measures (Points: 1)the average length of time that people hold wealth how fast aggregate spending will increase for a given decline in money demand how fast inflation will rise for a given increase in the money supply how quickly money changes hands 98. The United States is a major exporter of (Points: 1)diamonds bauxite coffee corn 99. International trade is most likely to occur whenever (Points: 1)one of the trading nations is self-sufficient all of the trading nations are self-sufficient one of the trading nations gains from trade each of the trading nations gains from trade 100. The rate at which two countries trade one good for another (Points: 1)is known as the foreign exchange rate is known as the terms of trade is known as the export line equals the slope of the import line
