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>Sheet than other trading partners.
during a recession because there are more labor market opportunities.
.
units and quantity demanded is 50 units at the current price. The market is experiencing a(n):
A. equilibrium. A. equilibrium.1
1
The main incentive for business activity is:
A.
government subsidies.
B.
technological advancement.
C.
profit.
D.
employment.
2
Economists argue that for most activities, the most powerful motivator is:
A.
altruism
B.
faith
C.
incentives
D.
survival
3
When it comes to the safety of pharmaceutical drugs:
A.
the government should spare no expense in determining whether drugs are safe.
B.
the government’s lengthy testing to ensure the safety of new drugs may cost lives.
C.
economic cost benefit analysis informs us that more safety is always better.
D.
profit-driven pharmaceutical companies have no incentive to produce safe drugs.
4
The opportunity cost of a choice is:
A.
the value of the opportunities lost.
B.
the net value of the opportunities gained.
C.
the difference between the benefits and costs of the choice.
D.
sometimes positive or negative.
5
The invisible hand concept is:
A.
always present as a force in market outcomes.
B.
never present as a force in market outcomes.
C.
frequently present as a force in market outcomes.
D.
not well understood as it relates to market outcomes.
6
A person has a comparative advantage in activity X when that person’s:
A.
opportunity cost of performing that activity is very high.
B.
ability to perform that activity exceeds that of all other people.
C.
government negotiates a favorable trade agreement.
D.
opportunity cost is
lower
7
Why is it less costly to attend college during a recession?
A.
Tuition is much lower during a recession.
B.
The opportunity cost is
higher
C.
The opportunity cost is lower during a recession because there are fewer labor market opportunities.
D.
Colleges give out better grades during recessions, so the opportunity cost is lower.
8
When the unemployment rate rises, college enrollment tends to:
A.
rise.
B.
remain
the same
C.
fall.
D.
defy prediction.
9
Booms and busts refer to the:
A.
fluctuations in economic activity over time.
B.
theory of the second best.
C.
decreases in a nation’s output growth over time.
D.
monetary inflation and deflation caused by the central bank.
10
The central bank of the United States is:
A.
the Senate.
B.
the Department of Treasury.
C.
the Federal Reserve.
D.
Wall Street.
11
What is thinking on the margin?
A.
Making decisions that are of noneconomic importance.
B.
Making choices that are based on historical precedence.
C.
Making choices that ignore the marginal benefits, but not the marginal costs, of some activity.
D.
Making choices by comparing the additional benefits and additional costs from doing a little bit more of some activity.
12
The Central Bank of the United States can:
A.
minimize a recession.
B.
regulate the money supply in the United States.
C.
cause inflation if it increases the money supply too much and too fast.
D.
All of the answers are correct.
13
What is one cause of inflation?
A.
the persistent rise in prices in the economy
B.
production’s inability to keep up with spending in the economy
C.
increased spending by people and the government.
D.
economic growth without money growth
14
GDP per capita in South Korea is ______ than in North Korea.
A.
10 times less
B.
two times less
C.
two times greater
D.
10 times greater
15
Most developed countries:
A.
have stopped growing.
B.
grow at an unsteady rate.
C.
grow at a steady rate.
D.
grow at an increasing rate.
16
What does specialization do to productivity?
A.
Specialization decreases productivity.
B.
Specialization has nothing to do with productivity.
C.
Specialization increases productivity.
D.
There is not enough information to answer this question.
17
Which of the following is NOT a reason trade increases wealth?
A.
to take advantage of differences in productivity
B.
to take advantage of differences in preferences
C.
to take advantage of differences in knowledge
D.
to take advantage of differences in security
18
Knowledge increases ____________ and specialization __________ total output.
A.
education; increases
B.
productivity; increases
C.
perception; increases
D.
economies of scale; decreases
19
Specialization and trade:
A.
increase the costs of production because of decreased output.
B.
decrease the per-unit costs of production because of economies of scale associated with large-scale production.
C.
create diseconomies of scale, raising the per-unit costs of production.
D.
only work within countries, not across countries.
20
A country has an absolute advantage in production if:
A.
it can produce the same good using fewer inputs than another country.
B.
it can produce a good using fewer inputs than it takes another country to produce a different good.
C.
other countries can produce the same good using fewer inputs.
D.
it has the lowest opportunity cost of producing a good.
21
The ability of one producer to produce one good or service using fewer inputs than another producer is:
A.
comparative advantage.
B.
absolute advantage.
C.
opportunity cost.
D.
competition.
22
According to the theory of comparative advantage:
A.
every country can produce some good with a lower opportunity cost.
B.
every country should produce goods that involve high opportunity costs.
C.
some countries have a comparative advantage in producing every good.
D.
some countries should import every good from other countries.
23
Gains from international trade are best characterized as potential gains from:
A.
importation.
B.
exportation.
C.
neither importation nor exportation.
D.
both importation and exportation.
24
eBay creates value by:
A.
helping sellers trick buyers into purchasing broken items.
B.
moving goods like broken laser pointers from people who don’t want them to people who do.
C.
helping people with the same preferences find one another.
D.
moving toys from children who want them to children who don’t.
25
The production possibility frontier shows:
A.
how society can produce more of one good without giving up the production of another good.
B.
what people can consume given different combinations of goods produced.
C.
the combinations of output that an economy can produce given its productivity and inputs.
D.
the types of goods and services that society should produce to satisfy social interest.
26
The better a person is at producing one good:
A.
the worse he is at producing other goods.
B.
the higher the opportunity cost to him of producing other goods.
C.
the lower the incentive he has to trade with other people.
D.
the better he is at producing other goods.
28
As income rises for Indian workers, the demand for automobiles
A.
decreases.
B.
increases.
C.
remains the same.
D.
decreases because automobiles are an inferior good for which demand decreases when income increases.
30
The demand curve:
A.
shows how much buyers are willing and able to buy at different prices.
B.
is the amount that buyers are willing and able to buy at a particular price.
C.
shows how much sellers are willing and able to sell at different prices.
D.
is the amount that sellers are willing and able to sell at a particular price.
32
The law of demand suggests a ______ relationship between price and ______.
A.
positive, quantity demanded
B.
positive, quantity supplied
C.
negative, quantity demanded
D.
negative, quantity supplied
33
The quantity supplied is the:
A.
amount of inputs that a firm earns profit on.
B.
change in the sellers’ output multiplied by the change in price.
C.
incremental cost of producing one more unit of output, holding all other things constant.
D.
amount of a good that firms are willing and able to sell at a particular price during a given period of time.
34
What does the law of supply state?
A.
There is a positive relationship between price and quantity supplied.
B.
There is a negative relationship between price and quantity supplied.
C.
When prices rise, suppliers sell more.
D.
When prices rise, buyers buy less of the product.
36
In the week before Hurricane Katrina, the price of flashlights rose in New Orleans because of:
A.
an increase in supply.
B.
an increase in demand.
C.
a decrease in supply.
D.
a decrease in demand.
37
When demand increases, what happens to price and quantity in equilibrium?
A.
Price increases and quantity increases.
B.
Price increases and quantity decreases.
C.
Price decreases and quantity increases.
D.
Price decreases and quantity decreases.
41
In a free market equilibrium, prices and quantities are uniquely:
A.
stable.
B.
unstable.
C.
moving in the “right” direction.
D.
moving in the “wrong” direction.
42
Imagine a free market in which quantity supplied is
50
A.
equilibrium.
B.
surplus.
C.
shortage.
D.
shift.
43
Imagine a free market in which quantity supplied is 40 units and quantity demanded is 50 units at the current price. The market is experiencing a(n):
B. surplus.
C. shortage.
D. shift.
44
Imagine a free market in which quantity supplied is 50 units and quantity demanded is 40 units at the current price. The market is experiencing a(n):
B. surplus.
C. shortage.
D. shift.
45
If demand decreases, ceteris paribus, market price will be ______ at the new equilibrium point.
A. higher
B. lower
C. the same
D.
either higher or lower
46
What is the difference between a shift in the demand curve and a movement along the demand curve?
A.
A shift is a reaction to a movement along the demand curve.
B.
A shift implies a change in the whole demand curve; a movement does not.
C.
A shift conveys a change in the opportunity cost; a movement does not.
D.
A shift creates a new equilibrium price; a movement creates a new equilibrium quantity.
49
Which of the following would result from an increase in the price of granite?
I. a decrease in the demand for granite countertops
II. a decrease in the supply of granite countertops
III. an increase in the price of granite countertops
IV. a decrease in the quantity demanded of granite countertops
A.
I, II, and III only
B.
II and III only
C.
II, III, and IV only
D.
I, II, III, and IV
50
An increase in the demand for organic foods will lead to:
A.
an increase in the price, and hence an increase in the supply of organic foods.
B.
an increase in the price, and hence an increase in the quantity supplied of organic foods.
C.
a decrease in the price, and hence a decrease in the supply of organic foods.
D.
a decrease in the price, and hence a decrease in the quantity supplied of organic foods.
