ECONOMICS

• the use of modern electronic testing equipment in understanding the world.

• the use of controlled experiments in understanding the way the world works.

• the dispassionate development and testing of theories about how the world works

• finding evidence to support preconceived theories about how the world works.

• The difficulty in actually performing an experiment in an economic system.

• The difficulty in devising an economic experiment.

• The difficulty in evaluating an economic experiment.

• All of the above.

• They do without.

• They make up the data.

• They ask policymakers to conduct experiments for them.

• They use whatever data the world gives them.

• To diminish the chance of wrong answers.

• To make certain that all necessary variables are included.

• Because all scientists make assumptions.

• To make the world easier to understand.

• The theory can be useful only in situations involving two countries and two goods.

• It is a total waste of time, since the actual world has many countries trading many goods.

• The theory can be useful in helping economists understand the complex world of international trade involving many countries and many goods.

• The theory can be useful in the classroom, but has no use in the real world.

• If the assumptions underlying the theory are not true, the theory must be false.

• The ideas may be good in theory, but not in practice.

• The theory is a good one if no logical mistakes were made in developing it.

• The theory is a good one if it helps to understand how the world works.

• To provide an interesting, but not useful, framework of analysis

• To help scientists understand how the world works.

• To provoke stimulating debate in scientific journals

• To demonstrate that the developer of the theory is capable of logical thinking

• Lear how the economy works.

• Make their profession appear more precise.

• Make economics difficult for students.

• Make sure that all of the details of the economy are included in their analysis

• Simplifies reality.

• Can explain how the economy is organized.

• Assumes away irrelevant details.

• All of the above

• Plastic.

• Beautiful people.

• Assumptions only.

• Diagrams and equations.

• Economic models attempt mirror reality exactly.

• Economic models are useful, but should not be used for policy- making.

• Economic models cannot be used in the real world because they omit details.

• Economic models omit many details to allow us to see what is truly important.

• Economic policies.

• The legal system.

• Assumptions.

• Statistical forecasts.

• A model that illustrates cost – benefit analysis.

• A model that explains how the economy is organized.

• A model that explains how banks circulate money in the economy.

• A model that shows the flow of traffic in an economic region.

• Inputs into the production process.

• Weather, social, and political conditions that affect production.

• The physical relationships between economic inputs and outputs.

• The mathematical calculations firms make to determine production.

• Is part art.

• Is the flip of a coin.

• Is almost impossible.

• Is the easiest part of the scientific method.

Are acting out of generosity

Are acting because they like you

Are required to do so by government

Do so because they get something in return

cannot gain from trade.

could gain from trade under certain circumstances, but not always.

could gain from trade because each would enjoy a greater variety of food.

could gain from trade only if each were indifferent between hamburgers and french fries.

a country’s production possibilities frontier is also its consumption possibilities frontier.

a country is better off because it will become self-sufficient.

a country can still benefit from international specialization.

more product variety is available in a country.

Trade allows for specialization.

Trade is good for nations.

Trade is based on absolute advantage.

Trade allows individuals to consume outside of their individual production possibilities curve.

With trade

By allocating resources differently

By producing a greater variety of goods and services

By lowering unemployment in the country

a. no tradeoffs exist.

b. the tradeoff between the two goods is always at a constant rate.

c. unemployment is zero.

d. resources are allocated efficiently.

Goods produced abroad and sold domestically

People who work in foreign countries

Whatever is given up to obtain some item

An example of an economic model

Goods produced domestically and sold abroad

A country’s ability to produce a good

A limit placed on the quantity of goods brought into a country

• Supply and demand

• Scarcity and human wants

• Entrepreneurial ability

• Prices and exchange

• Demanders

• Suppliers

• The government

• Both suppliers and demanders

• A place where only buyers come together

• A place where only sellers meet

• A group of demanders and suppliers of a particular good or service

• A group of people with common desires

• Sellers have reason to charge more than their competitors

• Each buyer has a significant influence on the price of the product

• Other sellers are offering very similar products

• None of the above are correct

• Buyers will tend to make their purchases elsewhere

• The owners of the raw materials used in production would raise the prices for the raw materials

• Other sellers would also raise their price

• Buyers would tend to buy more from this seller

• They can somewhat influence the market price

• They have ultimate control over market price

• Buyers will be able to find prices lower than those determined in the market

• They have no influence on market price because there are so many in the market

• Perfectly competitive

• Monopolistic

• Monopolistically competitive

• Oligopolistic

• Your actions are quickly followed by competitors

• Your pricing has no impact on the amount you can sell

• Your actions essentially have no effect on the market price

• Increases in the price of your product have an impact on the market price

• A monopoly

• Oligopolistic

• Monopolistically competitive

• Is a monopolist

• Is producing a homogeneous product

• Will eventually have to decrease the price

• Is participating in a monopolistically competitive market

• Tastes

• The price of related goods

• Income

• The prices of the inputs used to produce the good

• A decrease in the demand for the good

• No change in the demand for the good

• An increase in the demand for the good

• A lower market price

• It would increase

• It would decrease

• It would be unaffected

• There is insufficient information given to answer the question

• Increase the demand for flashlights

• Decrease the demand for electricity

• Increase the demand for electricity

• Increase the demand for batteries

• the friction that develops between buyer and seller in a market.

• a measure of how much government intervention is prevalent in a market.

• a measure of how much buyers and sellers respond to changes in market conditions.

• a measure of the competitive nature of a market.

• if the price of the good responds substantially to changes in demand.

• if demand shiftssubstantially when the price of the good changes.

• if the quantity demanded responds substantially to changes in the price of the good.

• if buyers don’t respond much to changes in the price of the good.

• if the price of the good responds only slightly to changes in demand.

• if demand shiftsonly slightly when the price of the good changes.

• if buyers respond substantially to changes in the price of the good.

• if the quantity demanded changes only slightly when the price of the good changes.

• elastic.

• inelastic.

• unit elastic.

• horizontal.

• elastic.

• inelastic.

• unit elastic.

• horizontal.

• elastic.

• inelastic.

• unit elastic.

• horizontal.

• elastic.

• inelastic.

• unit elastic.

• weak.

• the greater the availability of complements.

• the longer the period of time considered.

• the fewer substitutes there are.

• the broader the definition of the market .

• the demand for good A would tend to be price elastic.

• the supply of good A would tend to be price elastic.

• the demand for good A would tend to be price inelastic.

• the demand for good A would tend to beincome elastic.

• the greater the availability of close substitutes.

• the narrower the definition of the market.

• the longer the period of time.

• All of the above are correct.

• the percentage change in the price divided by the percentage change in quantity demanded.

• the change in the quantity demanded divided by the change in price.

• the percentage change in the quantity demanded divided by the percentage change in price.

• the percentage change in the quantity demanded divided by the percentage change in income.

• 1.

• 0.

• 6.

• Infinite.

• 2.00.

• 1.00.

• 1.55.

• .64.

• 4.0 percent decrease in the quantity demanded.

• 10 percent decrease in the quantity demanded.

• 40 percent decrease in the quantity demanded.

• 400 percent decrease in the quantity demanded.

• gives the same answer regardless of the direction of change.

• rounds prices to the nearest dollar.

• uses fewer numbers.

• rounds quantities to the nearest whole unit.

• Raise the price of the bread sticks.

• lower the price of the bread sticks.

• Reduce costs.

• Leave the price of the bread sticks alone.

• price floor

• price stabilization

• price support

• price ceiling

• price floor

• price stabilization

• price ceiling

• price cut

• the equilibrium price is above the ceiling

• the equilibrium price is below the ceiling

• it has no legal enforcement mechanism

• people must voluntarily agree to abide by it

• has no effect

• is a detriment to society

• will cause a shortage

• will cause a surplus

• the equilibrium price must be below the price ceiling

• the equilibrium price must be above the price ceiling

• the forcesof supply and demand must be in equilibrium

• it will have no effecton supply or demand

• the actual price will be below the price ceiling

• the actual price will be above the price ceiling

• the equilibrium price will equal the price ceiling

• the actual price will be equal the price ceiling

• the quantity demanded of peaches will be greater than the quantity supplied

• the quantity demanded of peaches will be equal to the quantity supplied

• the quantity demanded of peaches will be smaller than the quantity supplied

• the quantity demanded of peaches will be artificiallyrestricted by the price ceiling

o a surplus of computers

o a shortage of computers

o an increase in the demand for computers

o quantity demanded of computers to be equal to quantity supplied

o supply more of the product

o develop a way of rationing the product, because there will be a shortage

o develop a better marketing plan, because there will be a surplus

o increase demand for product, because there will be a surplus

• is inefficient, because it wastes buyers’ time

• is efficient, because those who are willing to wait the longest get the goods

• is the only way scarce goods can be rationed

• is only necessary if price ceilings are not binding

• the supply curve slopes downward

• firms are willing to produce a greater quantity of a good when the price of the good is higher

• firms’ production levels are not correlated with the price of a good

• none of the above

• How industries organize for political advantage

• Now firms’ decisions regarding prices and quantities depend on the market conditions they face

• How labor unions organize workers in industries

• How profitable firms are in organized industries

• Total revenue

• Total net profit

• Total gross profit

• Net revenue

• Total cost

• Variable cost

• Marginal cost

• Fixed cost

• Net revenue minus depreciation

• Average revenue minus average total cost

• Marginal revenue minus marginal cost

• Total revenue minus total cost

• Total revenue

• Not profit

• Operational profit

• Capital profit

• Total output multiplied by sales price of output

• Total output multiplied by the profit

• (total output multiplied by sales price) – inventory surplus

• (total output multiplied by sales price) – inventory shortage

• competitors

• substitutes

• opportunity cost

• explicit costs

• $30,000.

• $28,500.

• $26,125.

• -$3,875.

• Explicit costs

• Implicit costs

• Forgone income.

• all of the above

• (i) and (iii)

• (iii) only

• (ii) and (iii)

• All the above

• (i) only

• (ii) and (iii)

• (i) and (iii)

• All the above

• The cost of raw materials for producing bread in a bakery.

• The cost of a delivery truck in a business that rarely makes deliveries.

• The income an entrepreneur could have earned working for someone else.

• All of the above

• How does the difference in the number of firms affect prices and efficiency of market outcomes?

• Why are consumers subject to the law of demand?

• Why do firms experience falling marginal product of labor?

• Why do firms consider production costs when determining product supply?

• Cost of shoe polish

• Dividends John’s money was earning in the stock market before John sold his stock and bought a shoe-shine booth

• Wages John could earn washing windows

• All of the above

• The opportunity cost of financial capital that has been invested in the business

• The cost of accounting services

• The cost of compliance with government regulation

• The cost of debt

(i) and (iii) only

(i) and (ii) only

(ii) and (iii) only

All of the above

Slightly different from goods sold be other firms

Produced at minimum average cost

Identical to other goods sold in the market

Produced at minimum marginal cost

Above marginal cost since each firm is a price setter

Equal to marginal cost since each firm is a price taker

Below marginal cost since each firm is a price setter

Always a fraction of marginal cost since each firm is a price setter.

(i) only

both (i) and (ii)

(ii) only

all of the above

(i) only

(i) and (ii) only

(ii) and (iii) only

All of the above are correct.

Faces a downward-sloping demand curve for its product

Faces a horizontal demand curve at the market clearing price

Is characterized by market share maximization

Has no barriers to entry

Average revenue exceeds average total cost

Marginal revenue is equal to marginal cost

Average total cost is minimum

Average total cost is equal to marginal revenue

Revenue is always maximized along with profit

Average revenue exceeds marginal revenue

Marginal revenue exceeds average revenue.

Average revenue is equal to marginal revenue.

• It would not be operating in a monopolistically competitive market

• It would not have excess capacity in its production as long as it is earning zero economic profit

• It is not able to choose the price at which it sells its product

• All the above

• Horizontal

• Vertical

• Downward sloping

• Upward sloping

• Panel a

• Panel b

• Panel c

• Panel d

• Zero

• The Nash equilibrium

Aggregate stock

Capital

Aggregate demand

Long term inventory

Land and capital

Long term inventory

Aggregate stock

Aggregate demand

(i) Only

(i) and(iii)

(ii) Only

(ii) and(iii)

(i)only

(iii)only

(i)and(iii)

(ii)and(iii)

Derived demand

Supplied demand

Differentiated demand

Secondary demand

Supply and demand

Regulation and supply

Supply only

Demand only

Monopolist

Oligopolist

Perfect competitor

Monopolistic competitor

Hire more crew workers

Become a seller in the factor market

Reduce her demand for crew workers

Try to increase her catch to make up for lost revenue

Price taker in the salmon market and a wage setter in the crew market

Price taker in both markets

Price takerin the crew market and a price setter in the salmon market

Price setter in both markets

The wage to pay the crew she hires

How many crew members to hire

The price of fish she will catch

The size of the boats others use to catch salmon

Her intrinsic desire to hire crew members

Her primary goal of maximizing profit

Altruistic motives to provide fresh salmon to consumers

All of the above

It is driven to produce as much of its product as possible

It does not care directly about the number of workers it hires

It will measure its success by the number of employees it has

Its revenue will always be maximized as well

• The study of market regulation.

• The study of economy-wide phenomena.

• The study of how households and firms make decisions and how they interact .

• The study of money and financial markets.

• Microeconomic, since they affect individual households and firms.

• Both microeconomic and macroeconomic.

• Macroeconomic, since they tell us something about the economy as a whole.

• Neither macroeconomic nor microeconomic.

• To explain the economic changes that affect a particular household, firm, or market.

• To explain the economic changes that affect many households, firms, and markets at once.

• To devise policies to deal with market failures such as monopoly, externalities, common resources, and public goods.

• All of the above.

• The total income of everyone in the economy.

• The total expenditure on the economy’s output of goods and services.

• Both a and b.

• Neither a nor b.

• Income must equal expenditure.

• Expenditure exceeds income because of taxes.

• Income exceeds expenditure because of saving.

• Expenditure exceeds income because of the government budget deficit.

• Are seldom equal because of the dynamic changes which occur in an economy.

• Are equal only when all goods and services produced are sold.

• Are always equal because every transaction has both a buyer and seller.

• Are always equal because of accounting rules.

• The increase in expenditure in the economy will equal the increase in income in economy.

• The increase in expenditure in the economy will exceed the increase in income in the economy

• The increase in income in the economy will exceed the increase in expenditure in the economy.

• It is impossible to tell whether the increase in income in the economy will equal the increase in expenditure.

• How weather patterns affect the economy.

• The most efficient organization of the work process.

• The flow of income and expenditures in an economy.

• How banks create money.

• Only if households spend all of their income and buy all the goods and services produced in the economy

• Only if households spend all of their income.

• Only if households buy all the goods ad services produced in the economy.

• Regardless of whether households spend all of their income or buy all of the goods and services produced in the economy.

• Government taxes firms and redistributes the money to households until household income is high enough to equal total expenditures.

• Total income and total expenditure are always equal in an economy because only households purchase goods and services.

• Total income and total expenditure are equal in an economy because firms use the money they receive in sales to pay for workers' wages, landowners' rent, and firm owners' profit.

• All of the above are correct explanations

• The market value of all final goods and services produced within a country in a given period of time.

• The market value of all final goods and services produced by a country’s citizens in a given period of time

• The market value of all goods and services producedwithin a country in a given period of time.

• The market value of all goods and services producedby a country’s citizens in a given period of time.

• Households do not buy all goods and services produced in the economy, and households do not spend all of their income on goods and services.

• Saving should be counted as part of expenditure.

• Taxes should be included as part of expenditure.

• The income government gives poor people should be counted as government production of human capital.

• Uses a combination of weights and measures.

• Uses a combination of price indexes and costs of productions

• Uses only cost of production of the products.

• Uses market prices.

• Nominal GDP.

• Real GDP.

• Nominal GDP per person.

• Real GDP per person.

• U.S. government bonds.

• Currency

• Fine art.

• All of the above correct.

• Currency

• U.S. government bonds

• Fine art

• All of the above are correct

• Store of value

• Medium of exchange

• Unit of account

• None of the above is correct

• You pay for your textbooks with currency

• You mark prices of CDsat your music store in dollars

• You keep a jar of pennies

• None of the above is correct

• A measurement of the intrinsic value of commodity money

• The stability of an asset to serve as a store of value

• None of the above refers to liquidity

• The ease with which an asset is converted to the medium of exchange

• Is used as a medium of exchange.

• Is equivalent to wealth

• Is backed by gold

• Both b and c are correct

• More commonly used than fiat money

• Backed by gold

• Money with intrinsic value

• All of the above are correct

• Percentage change in the consumer price index

• Change in the consumer price index

• Percentage change in the price of a specific commodity

• Change in the price of a specific commodity

• The rate of increase in nominal GDP

• The rate of increase in the price of particular good

• The rate of change in nominal interest rates

• The rate of increase in the overall level of prices

• Inflation falls

• Prices fall

• Output and prices fall

• Output falls

• Deflation

• Disinflation

• Classical inflation

• Hyperinflation

• Argues that inflation is caused by too little money in the economy

• Can explain both moderate and hyperinflations

• Is a fairly recent addition to economic theory

• All of the above are correct

• Refers to the price of individual goods

• Is high when the value of money is high

• All of the above are correct

• Is measured by a price index like the CPI or GDP deflator

• Increases, so the value of money rises

• Increases, so the value of money falls

• Decreases, so the value of money rises

• Decreases, so the value of money falls

• Is positively related to the price level

• Is constant

• Is determined by the supply and demand of money

• Is not explained by the quantity theory of money

a) “Environment”

c) “One who manages a household”

b) “One who participates in a market”

d) “Conservation”

a) Poverty

b) Scarcity

c) Change

d) Power

a) What goods will be produced

b) What determines consumer preferences

c) Who will produce goods

d) Who will consume the goods

a) There is less than an infinite among

b) There is less of a good or resources

c) Society can meet the wants (доконцаневидно)

d) невидно

a) The study of business

b) The study of how society manages its scarce resources

c) The study of central planning

d) The study of government regulation

a) How people make decisions

b) How people interact with each other

c) How forces and trends affects the overall economy

d) How countries choose national leaders

b) the increase in skill he obtains from playing basketball for that hour.

a) Nothing, because he enjoys playing basketball more than working.

c) the $6 he could have earned.

d) nothing, because he spent $6 for admission into the sports complex to play basketball.

a) there is no tradeoff, since everyone benefits from reduced pollution.

b) there is no tradeoff for society as a whole, since the cost of reducing pollut(доконцаневидно)

c) there is a tradeoffonly if some firms are forced to close.

d) there is no tradeoff because of reduced incomes o the firm (доконцаневидно) customers

a) everyone receiving the same income

b) fairness

c) efficiency

d) (доконцаневидно)

a) the out-of-pocket expense of obtaining it

b) what you give up to get it

c) always measured in units of time

d) always higher than people think

a) the total spent on food, clothing, books, transportation tuition, lodging, and other expenses.

b) zero for studens who are fortunate enough to have all of their college expenses paid by someone else.

c) the value of the best opportunity a student gives up to attend college.

d) zero, since a college education will allow a student to earn a larger income after graduation.

a) transportation, parking, and entertainment

b) tuition, fees, and books.

c) room and board.

d) the wages given up to attend school.

a) the $8 she earns

b) the enjoyment she would have received had she watched the video

c) the $8 minus the enjoyment she would have received from watching the video

d) nothing, since she would have received less than $8 of enjoyment from the video

a) are making a bad economic decision, since they can't play forever.

b) are unaware of their opportunity cost of attending college.

c) underestimate the value of a college education.

d) are well aware that their opportunity cost of attending college is very high.

a) following tradition

b) comparing costs and benefits

c) experience

d) calculating dollar costs

a) Mark graduates from college and takes a job. His income increases from $10,000 per year to $50,000 per year.

b) The price of housing rises in Seattle by 25% in one year.

c) Kim works at the college bookstore. She gets a raise from $5.15 per hour to $5.20 per hour.

d) A drought hits the upper Midwest and the price of wheat increases from $4.00 per bushel to $8.00 per bushel.

a) The marginal benefit is greater than the marginal cost

b) The marginal benefit is less than the marginal cost

c) The marginal benefit is greater than the average cost

d) The marginal benefit is greater than both the average cost and the marginal cost

a) You should complete the repairs and sell the car

b) You should cut your losses and take the $300

c) You should never sell something for less than it costs

d) It doesn’t matter which action you take; the outcome is the same either way

b) To conserve on costs, so as to maintain efficiency in the economy

a) To produce good quality products so that society benefits from the resources used

c) To produce these products that society desires most

d) To produce enough to meet the output target, without regard for quality or cost

a. there is usually a tradeoff between equity and efficiency.

d. increasing efficiency usually results in more equity.

c. equity can usually be achieved without an efficiency loss.

b. equity and efficiency goals are usually independent of each other.