Question 1
The economic surplus of a particular action is:
Answer
The value of the action
The cost of the action
The difference between the benefit and the cost of the action
The average of the benefits and costs
2 points
Question 2
For many students, the opportunity cost of taking an 8:00 a.m. Monday, Wednesday, and Friday class is the value of one hour's worth of:
Answer
Studying
Dental work
Washing
Sleeping
2 points
Question 3
Dillon purchased his nonrefundable, nontransferable ticket to see the M. C. Hammer/Vanilla Ice Career Revival show for $30 last week, while Bob has yet to buy his ticket but wants to go. In deciding whether to go to the show, the price of the ticket is a ________ to Dillon and a _________ to Bob.
Answer
sunk cost; sunk cost
relevant cost; sunk cost
sunk cost; variable cost
fixed cost; variable cost
2 points
Question 4
If a given production combination is known to be attainable, then it must be:
Answer
On the production possibilities curve
Beyond the production possibilities curve
An inefficient point
Either an inefficient or efficient point
2 points
Question 5
Application of the principle of comparative advantage leads to:
Answer
Greater and greater specialization of labor and other factors of production
Lesser and lesser specialization of labor
Societies where everyone can do a little of everything
Lower total output
2 points
Question 6
According to the textbook, the largest factor explaining the variance in the performance of the economies of the world is the:
Answer
Degree of specialization
Size of government
Location of the country
Type of government
2 points
Question 7
In order to understand how the price of a good is determined in the free market, one must account for:
Answer
The desires of demanders exclusively
The desires of suppliers exclusively
The desires of lobbyists exclusively
The desires of demanders and suppliers
2 points
Question 8
The statement "Holding all other relevant factors constant, consumers will purchase more of a good as its price falls" reflects the behavior underlying:
Answer
The demand curve
An increase in demand
The supply curve
A decrease in the demand curve
2 points
Question 9
The market for a good is comprised of:
Answer
Only buyers of the good
Only sellers of the good
Both buyers and sellers of the good
Only the price at which the good is sold
2 points
Question 10
If the percentage change in quantity demanded is less than the corresponding percentage change in price, demand is price _________.
Answer
inelastic
elastic
unit elastic
perfectly elastic
2 points
Question 11
The demand for a specific brand of juice will be _______ the demand for juice in general.
Answer
more elastic than
less elastic than
as elastic as
as inelastic as
2 points
Question 12
Which of the following is most likely to have a negative income elasticity of demand?
Answer
Generic drugs
Luxurious overseas vacations
New SUVs
New computers
2 points
Question 13
The property of diminishing marginal utility means that as more units of a good are consumed:
Answer
Total utility falls
The marginal utility of the extra units is negative
The marginal utility of the extra units becomes smaller and smaller
Total utility diminishes
2 points
Question 14
Joe has a fixed amount of income and buys two different goods, M and N, in accordance with the rational spending rule. If the price of M were to rise, one could predict that Joe would buy:
Answer
The same amount of M and reduce purchases of N
The same amount of N and reduce purchases of M
More N and less M
Less of both M and N
2 points
Question 15
The cost of any particular good or service is equal to the:
Answer
Monetary cost divided by any nonmonetary costs
Monetary cost minus any nonmonetary costs
Monetary cost plus any nonmonetary costs
Difference between the list price and the price one actually pays
2 points
Question 16
A price taker confronts a demand curve that is:
Answer
Vertical at the market price
Upward sloping
Downward sloping
Horizontal at the market price
2 points
Question 17
The common goal shared by all private firms is to:
Answer
Be a responsible member of the community
Treat workers fairly
Maximize profit
Be environmentally friendly
2 points
Question 18
In which of the following short-run scenarios should a firm shut down?
Answer
Price is less than average cost.
Price is less than marginal cost.
Price is less than average variable cost.
Price is less than average revenue.
2 points
Question 19
The reduction in total economic surplus that results from the adoption of a policy is called:
Answer
Deadweight loss
Externality loss
Collateral damage
Rent-seeking loss
2 points
Question 20
When the supply curve for a good is perfectly ________, the burden of a tax collected from sellers falls entirely on _______.
Answer
elastic; buyers
elastic; sellers
inelastic; buyers
vertical; buyers
2 points
Question 21
The rationing and allocative functions of price:
Answer
Work in opposition to each other
Are mutually exclusive
Work together to guide resources to their highest value
Produce disequilibrium in the market
2 points
Question 22
Applying the no cash on the table principle to the stock market means new information:
Answer
Provides opportunities to the first few who act on it
Provides opportunities to all investors
Was already contained in the stock price
Fails to affect the market
2 points
Question 23
A more efficient alternative to restricting trade is:
Answer
To compensate the winners
To compensate the losers
To repeal the principle of comparative advantage
A system of voluntary export restraints
2 points
Question 24
Who loses from import quotas?
Answer
Consumers of imported goods
Consumers of exported goods
Producers of imported goods
Firms that hold import licenses
2 points
Question 25
Which of the following is not correct about the effects of the voluntary export restraints (VERs) that the U.S. imposed on Japanese automobiles in the 1980s?
Answer
It benefited the U.S. automakers.
It hurt the U.S. auto consumers.
It benefited the Japanese automakers.
It hurt the U.S. government.