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- 1. Multiple ChoiceWhich of the following most accurately illustrates the impact of price incentives?a. People usually buy products regardless of price.b. As the price of a product rises, suppliers will be less willing to produce that product.c. The price of a product is unable to bring quantity demanded and quantity supplied into balance.d. Consumers will adjust the amount they purchase in response to changes in prices.
- 2. Multiple ChoiceWith the passage of time and advancements in technology, scarce resourcesa. are transformed into goods and services more efficiently, but still remain scarce.b. are no longer scarce.c. will become less available and the cost of producing goods and services will rise.d. become less scarce, so that we do not have to choose between alternative uses of those resources.
- 3. Multiple ChoiceWhich of the following most accurately states the economic significance of exchange?a. Physical goods have value because they exist; exchange can neither increase nor decrease their valueb. Production of physical goods creates value; exchange merely redistributes this value.c. Exchange creates value by moving goods from parties who value them less to parties who value them more.d. Exchange reduces value since it consumes resources without adding to the physical supply of goods.
- 4. Multiple ChoiceA country should import a good or a servicea. only if the imported item cannot be produced domestically.b. if other countries can provide the imported item cheaper than it could be produced domesticallyc. only if the current rate of unemployment is low.d. as little as possible. It is always better to export as much as possible and import as little as possible.
- 5. Multiple ChoiceWhat is the role of losses in a competitive market economy?a. Losses penalize firms for producing products that are unavailable from other suppliers.b. Losses signal that more resources are needed in a particular market.c. Losses show firms that barriers to entry are high.d. Losses send a message that more value would be created if the resources were used to produce other goods.
- 6. Multiple ChoiceHow does the invisible hand ensure that an economy will not run out of a renewable resource?a. As resources run low, consumers will naturally decrease their demand for those resources.b. Government will begin to regulate scarce resources as an effective means of rationing those resources.c. If there is demand for those resources, producers will continue increasing supply regardless of price.d. Price increases due to the diminishing supply of a resource will both curb consumption and provide incentive for producers to expand supply.
- 7. Multiple ChoicePrivate owners will gain by conserving resources for the future, whena. the current value of a resource exceeds its future value.b. the expected future value of a resource exceeds its current value.c. the owner will still be around when the resource is used.d. government regulations restrict the present use of a resource for future use.
- 8. Multiple ChoiceWhen whale oil was in high demand in the middle of the nineteenth century, whales were being hunted to excess becausea. of the excessive government regulation imposed on whale hunting.b. those who owned the hunting rights failed to see the future value of whale oil.c. the public ignored the need to curb whale oil consumption.d. no one owned the whales or the hunting rights, thus there was no incentive to conserve whales for the future.
- 9. Multiple ChoiceWhen new technology replaces an established product, such as when digital music replaced CDs and records,a. jobs are lost and the economy will stagnate.b. products will be more expensive to consumers.c. the new technologies and improved products will promote economic progress.d. total employment will decline unless the government subsidizes the firms harmed by the new technologies and products.
- 10. Multiple ChoiceIf a nation is rich in natural resources, that nation will increase its wealth ifa. it keeps the resources for its own use and prevents them from being exported.b. it is willing to sell the resources to buyers offering the highest prices even if some of the buyers live in other countries.c. the resources are transformed into products domestically even if the domestic producers of the products have high costs.d. the resources are protected and left untouched so they will be available for future generations.
- 11. Multiple ChoiceWhich of the following is the best example of a public good?a. public financing of a new sports stadiumb. universal healthcarec. government operated schoolsd. national defense
- 12. Multiple ChoiceWhich of the following is the best indication that a project is economically productive?a.The cost of the project is spread out over a large number of taxpayers.b.A majority of people vote to approve the project.c.The total costs exceed total benefits.d. The total benefits exceed total costs.
- 13. Multiple ChoiceSpecial-interest issues are politically attractive becausea. they are almost always economically-productive.b. the public is usually well-informed and generally supportive of projects favoring special interests.c. they generally generate net benefits for all voters.d. special interest groups feel strongly about these issues, while most other voters are poorly informed.
- 14. Multiple ChoiceArticle I, Section 8 of the U.S. Constitution calls for Congress to levy taxesa. uniformly and for programs that promote the common defense and general welfare.b. on the wealthy, to be redistributed to the middle class and the poor.c. that provide benefits to subgroups of the population at the expense of others.d. as long as they are for a good cause and economically productive.
- 15. Multiple ChoiceIf a project is approved by a majority of voters, does this mean that the project is economically productive?a. No, only projects that are undertaken through market allocation are economically productive.b. No, when the costs imposed on the minority are considered, total costs may exceed the benefits.c. Yes, because the majority of voters are indicating that they are willing to bear the cost of the project.d. Yes, if a majority of voters approve a project, it must be productive
- 16. Multiple ChoiceIf the Federal Reserve is going to establish an environment for economic growth and prosperity, it should focus ona. keeping short-term interest rates low in order to stimulate real output and economic growth.b. providing the U.S. Treasury with funds to finance budget deficits.c. keeping inflation low and the general price level relatively stable.d. monetary expansion in order to reduce unemployment.
- 17. Multiple ChoiceAs personal income tax rates are increased,a. the incentive to work and engage in productive activity increases.b. the incentive to engage in productive activity is unchanged, but the tax revenue collected by the government will increase.c. the incentive to engage in tax-avoidance activity decreases.d. the incentive to engage in tax-avoidance activity increases.
- 18. Multiple ChoicePrior to 1960, what was the prevailing attitude toward federal budgets?a. The Keynesian view was dominant, so the government regularly ran budget deficits during recessions and surpluses during economic booms.b. Deficits were run when the president was a Democrat and surpluses when the president was a Republican.c. Deficits were run when the president was a Republican and surpluses when the president was a Democratd. Most people thought that federal budgets should be in balance, so any deficits or surpluses were relatively small, except during wars.
- 19. Multiple ChoiceWhy are lobbying and other activities designed to acquire favors from the government often described as “plunder”?a. These activities assure that the government will remain neutral and provide “equal treatment under the law” for all segments of the population.b. Lobbying efforts and favor seeking activities produce goods and services that are highly valued by consumers.c. These activities employ workers and expand the availability of goods and services that are highly valued relative to costs.d. These activities consume resources that would otherwise be used to create wealth and generate income.
- 20. Multiple ChoiceHigher expected incomes and greater wealth are associated with self-employment primarily becausea. persons who are self-employed can pay themselves higher salaries.b. self-employment involves greater risk and therefore the market rewards are higher.c. employers generally do not pay their employees enough for their services.. there are fewer risks associated with self-employment
- 21. Multiple ChoiceThe “miracle of compound interest” is a key to saving for retirement becausea. though the compound interest earned directly reduces current consumption, it increases future wealth.b. compound interest yields the same payoff no matter when you begin saving for retirement.c. funds in a savings account grow substantially when interest is earned on both the principal and interest earned during prior years.d. though it requires a large amount of money to take advantage of compound interest, it forces you to save for retirement.
- 22. Multiple ChoiceWhich of the following is most likely to undermine long-run growth?a. high taxes, excessive regulation, and persistent inflationb. reductions in trade barriers and tariffsc. lower taxes and price stabilityd. competitive markets and a legal system that enforces contracts even-handedly >
- 23. Multiple ChoiceThe more complex the system of levying and collecting a taxa. the lesser the administrative, enforcement, and compliance cost of the tax.b. the greater the percentage of income collected in taxes.c. the greater the administrative, enforcement, and compliance cost of the tax.d. the smaller the collection costs as a share of revenue.
- 24. Multiple ChoiceAgricultural subsidies and other special-interest spending programs generally benefita. consumers, in the form of lower prices and less taxes.b. small businesses that would otherwise struggle to survive.c. large scale operations, whose owners have incomes well above the national average.d. all U.S. households.
- 25. Multiple ChoiceWhat should be the portfolio mix of stocks and bonds for a young person saving for retirement in about thirty years?a. a much larger mix of stocks than bondsb. an equal amount of stocks and bondsc. a much larger mix of bonds than stocksd. almost exclusively bonds
- 26. Multiple ChoiceJohn graduated from college with a teaching degree. He has had several job offers but is still searching for the right one. What category of unemployment best describes John’s situation?FrictionalStructuralCyclicalSeasonal
- 27. Multiple ChoiceWhich market structure has a large number of businesses selling identical products?MonopolisticPure Price CompetitionOligopolyMonopoly
- 28. Multiple ChoiceWhen the market is going down over the long run you have a _____________ market.stockBearBullCompetitive
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