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Economics
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Questions in this quiz (97)
1Government policies designed to promote efficiency:
- Ausually do so at the expense of equality.
- Btend to cause the economy to grow more slowly.
- Cusually don't work.
- Dtend to add a lot of bureaucracy to firms in the economy.
2The government enacted regulation requiring people to wear seatbelts in their cars.
All of the following resulted from this regulation, EXCEPT:- Aoverall deaths due to car accidents changed very little in the United States.
- Bfewer deaths occurred per accident.
- Cless pedestrians were killed in car accidents.
- Dthe frequency of accidents increased
3When two individuals trade voluntarily
- Aone person always gains at the expense of the other
- Bboth persons generally gain from the exchange.
- Cone person generally gains at the expense of the other
- Dthe overall well-being of the two persons remains unchanged.
4A government that implements a policy designed to reduce inflation can expect
unemployment to:- Aincrease in the short run.
- Bdecrease in the short run.
- Cincrease in the long run.
- Ddecrease in the long run.
5All of the following can be considered a student's costs of going to college, EXCEPT
- Atextbooks
- Btuition and fees.
- Croom and board (that cost her about the same as she was paying before entering college)
- Dthe student's time, which can no longer be devoted to earning a salary
6A plane from Los Angeles to New York is about to take off, but it still has a few seats
empty. If the average cost per seat is $500, what price should the airline charge
passengers in standby to fill in those remaining seats? (Consider that quantitative
decisions are made at the margin.)- AAt least $1,000.
- BExactly $500.
- CAny price that will cover the additional cost of an additional passenger to the airline.
- DSlightly more than $500
7In a market economy, the decisions of what and how much to produce are generally
made by:- Avoters in elections.
- Ball producers and consumers.
- Cthe President and Congress.
- Dnon-governmental agencies.
8Even though markets do a great job in organizing economic activity, governments are
needed to do all of the following EXCEPT:- Aestablish and enforce property rights.
- Bintervene when markets fail due to externalities.
- Cintervene when markets fail due to market power.
- Ddecide what and how much should be produced.
9Living standards in the United States have risen tremendously over the years, mainly
due to:- Aincreases in the productivity of labor over time.
- Bthe efforts of labor unions.
- Csuccessive increases in the minimum wage
- Dtrade protection from competition from countries with low wages, such as China.
10Rapid and persistent inflation occurs mainly due to:
- Ahigh wage increases demanded by labor unions.
- Bgreedy firms that abuse consumers with higher-than-necessary prices.
- Crapid increases in the quantity of money in the economy.
- Dtrade with other countries.
11Economists use assumptions in order to:
- Arecreate real situations accurately, with all their complexity.
- Bavoid dealing with issues they would rather not talk about.
- Csimplify economic theories, so as to make it possible to answer economic questions.
- Dmake their theories more realistic.
12In the circular-flow model of the economy:
- Athe economy has only two sectors: firms and households.
- Bdollars in the economy are used over and over in an endless cycle.
- Cfirms produce and provide factors of production.
- Dthe government is the source of revenue for households to purchase goods and services
from firms.
13Economic growth in the economy can be portrayed in the model of the production
possibilities frontier as a:- Amovement up and left along the PPF
- Bshift of the PPF away from the origin.
- Cmovement down and right along the PPF.
- Dshift of the PPF toward the origin.
14Points on the production possibilities frontier are
- Ainefficient
- Bnormative
- Cunattainable
- Defficient.
15Economic growth is depicted by
- Aa shift in the production possibilities frontier outward.
- Ba movement from inside the curve toward the curve.
- Ca shift in the production possibilities frontier inward
- Da movement along a production possibilities frontier toward capital goods.
16Which of the following is FALSE, regarding economics as a science?
- AEconomic knowledge is obtained through the scientific method, just as in any other science
- BIt is difficult to conduct experiments in economic matters.
- CEconomists pay close attention to natural experiments resulting from historical events
- DEconomic theories represent irrefutable facts.
17Economic models are:
- Asimplified versions of economic theories
- BAll of the other options are true.
- Ccreated by making assumptions.
- Dusually composed of diagrams and equations.
18All of the following are characteristics of the circular-flow model of the economy, EXCEPT:
- Athe model has two markets: one for goods and services and one for factors of production.
- Bthe model includes two sectors: firms and households
- Cthe model describes two circular flows: one for inputs and one for outputs.
- Dthe two flows described by the model move in opposite directions.
19Which of the following is true regarding the production possibilities frontier (PPF) for the
economy?- AAny point on the PPF represents an efficient level of production.
- BAny point inside the PPF represents a combination of production that is not feasible.
- CThe opportunity cost of producing one more unit of one of the goods remains the same at any
point along the PPF. - DIncreases in the resources available for production will cause the PPF to shift toward the
origin.
20Microeconomics is the study of
- Ahow governments can get the economy out of a recession
- Beconomy-wide phenomena, including inflation, unemployment, and economic growth.
- Chow households and firms make decisions and how they interact in markets.
- Dhow governments can reduce inflation.
21Which of the following is an example of a normative statement?
- AHigher interest rates will cause people to borrow and invest less.
- BThe government should increase spending during recessions, so that the economy
recovers quickly. - CWhen the price of a good increases, consumers respond by reducing the quantity of that
good they want to purchase. - DOver the past 50 years, the number of women who participate in the labor force has
increased dramatically.
22Economists tend to disagree with each because:
- Adifferent economists espouse different theories, so they believe different things are going on in
the economy. - Bdifferent economists make different assumptions, leading them to different conclusions in
economic matters. - Cdifferent economists have different values and priorities in economic matters.
- Dall the other options are true.
- Adifferent economists espouse different theories, so they believe different things are going on in
23If a nation has an absolute advantage in the production of a good:
- Ait can produce that good at a lower opportunity cost than its trading partner.
- Bit can produce that good using fewer resources than its trading partner.
- Cit can benefit by restricting imports of that good.
- Dit will specialize in the production of that good and export it
24Suppose a country's workers can produce 4 watches per hour or 12 rings per hour. If there is no
trade:- Athe opportunity cost of 1 watch is 3 rings.
- Bthe opportunity cost of 1 watch is 1/3 of a ring
- Cthe opportunity cost of 1 watch is 4 rings.
- Dthe opportunity cost of 1 watch is 1/4 of a ring.
25Prices of electronics can be stated in terms of units of food. What is the range of prices of
electronics for which both countries could gain from trade?- AThe price must be greater than 1/ 5 of a unit of food but less than 1/4 of a unit of food.
- BThe price must be greater than 4 units of food but less than 5 units of food.
- CThe price must be greater than 1/4 of a unit of food but less than 1/2 of a unit of food.
- DThe price must be greater than 2 units of food but less than 4 units of food.
26Suppose the world consists of two countries-the United States and Mexico. Furthermore,
suppose there are only two goods-food and clothing. Which of the following statements is true?- AIf the United States has an absolute advantage in the production of food, then Mexico must
have an absolute advantage in the production of clothing. - BIf the United States has a comparative advantage in the production of food, then
Mexico must have a comparative advantage in the production of clothing. - CIf the United States has a comparative advantage in the production of food, it must also have
a comparative advantage in the production of clothing. - DIf the United States has a comparative advantage in the production of food, Mexico might
also have a comparative advantage in the production of food.
- AIf the United States has an absolute advantage in the production of food, then Mexico must
27Joe is a tax accountant. He receives $100 per hour doing tax returns. He can type 10,000
characters per hour into spreadsheets. He can hire an assistant who types 2,500 characters per
hour into spreadsheets. Which of the following statements is true:- AJoe should not hire an assistant because the assistant cannot type as fast as he can.
- BJoe should hire the assistant as long as he pays the assistant less than $100 per hour
- CJoe should hire the assistant as long as he pays the assistant less than $25 per hour
28A perfectly elastic demand is represented graphically by a
- Arelatively steep demand curve
- BRelatively flat demand curve
- Cvertical demand curve
- DHorizontal demand curve
29What effect will an increase in the price have on total revenue if demand is elastic?
- Atotal revenue will increase
- Btotal revenue will decrease
- Ctotal revenue will first decrease and then increase
- Dtotal revenue will remain unchanged
30The price elasticity of demand tends to be more elastic
- Aat points further up and to the left along the demand curve
- Bat points further down into the right along the demand curve
- Cwhen the demand curve becomes steeper
- Dwhen the demand curve is vertical
31Suppose that a good has an income elasticity of demand of -2.0. This means that the
good is- Anormal
- Binferior
- Ca substitute
- Da complement
32Suppose that two goods have a cross-price elasticity of demand of -0.8. This means
that these goods are- Anormal
- Binferior
- Ca substitute
- Da complement
33A good will tend to have an inelastic demand if:
- AThe good has many close substitutes
- BThe good is a luxury
- CThe market is defined very broadly
- DThe time horizon is long
34Suppose that General Cars increases the price of its Cadillac model from $13,500 to
16,500. As a result of this the quantity demanded of the Cadillac model decreases from
$600,000 to $400,000 per year. Find the price elasticity of demand of the Cadillac- A3.0
- B0.5
- C1.5
- D.33
35If a firm needs to increase its total revenue, the firm should ________ the price, if the
demand for its product is:- ADrop, inelastic
- Braise, elastic
- CDrop, elastic
- DDrop, unit elastic
36Suppose that consumers income rise by 3% and that this causes the quantity demanded
for a good to increase by 4.5%. What is the income elasticity of demand?- A1.50
- B0.67
- C-1.50
- D-0.67
37The price of good A increases from $4.50 to $5.50. This causes the quantity demanded of
good B to increase from 900 to 1100 units per month. Find the cross price elasticity of
demand.- A+1,0
- B+2,0
- C-1,0
- D-2,0
38Suppose that a regulation is in place that does not allow the price of a good to exceed $5. If
this price is above the equilibrium point in the market, this would be an example of a:- Abinding price ceiling.
- Bnon-binding price ceiling.
- Cbinding price floor.
- Dnon-binding price floor.
39.Suppose that a regulation is in place that does not allow the price of a good to fall below
$10. If this price is above the equilibrium point in the market, this would be an example of a:- Abinding price ceiling.
- Bnon-binding price ceiling.
- Cbinding price floor.
- Dnon-binding price floor
40Suppose that a regulation is in place that does not allow the price of a good to exceed $5. If
this price is below the equilibrium point in the market, this would be an example of a- Abinding price ceiling
- Bnon-binding price ceiling.
- Cbinding price floor.
- Dnon-binding price floor
41If a price floor is in place and it is not binding, the market will:
- Aremain in equilibrium, unaffected by the price floor.
- Bexperience a shortage.
- Cexperience a surplus
- Dadjust the equilibrium price until it is equal to the price floor.
42If a tax is imposed on buyers of a good, the ________ curve of the good will shift ________
by the amount of the tax- Ademand, up
- Bdemand, down
- Csupply, up
- Dsupply, down
43If a price floor is in place and it is binding, the market will:
- Aremain in equilibrium, unaffected by the price floor
- Bexperience a shortage
- Cexperience a surplus.
- Dadjust the equilibrium price until it is equal to the price floor.
44If a price ceiling is in place and it is binding, the market will:
- Aremain in equilibrium, unaffected by the price floor
- Bexperience a shortage.
- Cexperience a surplus.
- Dadjust the equilibrium price until it is equal to the price ceiling.
45If a tax is imposed on sellers of a good, the ________ curve of the good will shift
________ by the amount of the tax.- Ademand, up
- Bdemand, down
- Csupply, up
- Dsupply, down
46If a tax is imposed on a good and the incidence of the tax ends up falling more heavily on
the sellers than on the buyers, we can tell that:- Ademand is more elastic than supply for that good.
- Bdemand is less elastic than supply for that good.
- Cthe tax was imposed on the buyers of the good.
- Dthe tax was imposed on the sellers of the good.
47If a tax is imposed on a good and the incidence of the tax ends up falling more heavily on
the buyers than on the sellers, we can tell that:- Ademand is more elastic than supply for that good.
- Bdemand is less elastic than supply for that good.
- Cthe tax was imposed on the buyers of the good.
- Dthe tax was imposed on the sellers of the good.
48Economies of scale occur when ________ as the quantity of output increases.
- Ashort-run average total cost falls
- Bshort-run average total cost rises
- Clong-run average total cost falls
- Dlong-run average total cost rises
49If a production function exhibits diminishing marginal product, its slope
- Ais linear (a straight line).
- Bbecomes steeper as the quantity of the input increases
- Ccould be any of these answers
- Dbecomes flatter as the quantity of the input increases.
50If there are implicit costs of production,
- AEconomics profit will exceed accounting profit
- BAccounting profit will exceed economic profit
- Ceconomic profit and accounting profit will be equal
- DEconomic profit will always be zero
51If a production function exhibits diminishing marginal product, the slope of the
corresponding total-cost curve- Abecomes steeper as the quantity of output increases
- Bbecomes flatter as the quantity of output increases
- CIs linear (a straight line)
- DCould be any of the above
52Based on the table above, what is the average variable cost of the fourth unit?
- A$250
- B$125
- C$240
- D$100
53Based on the table above, if the fixed cost is $500, what is the average total cost of the fifth
unit?
- A$250
- B$140
- C$240
- D$100
54Based on the table above, what is the marginal cost of the tenth unit?
- A$250
- B$200
- C$50
- D$300
55The factory rent payments made by a firm fall under the category of:
- Afixed costs.
- Bvariable costs.
- Cshort-run costs.
- Daverage variable costs.
56The cost of raw materials will fall under the category of:
- Afixed costs.
- Bvariable costs.
- Cimplicit costs.
- Daverage fixed costs
57The law of diminishing marginal product of labor occurs when:
- Aevery additional worker hired reduces the quantity produced by the firm.
- Bevery additional worker hired reduces the total costs of the firm.
- Cevery additional worker hired contributes a smaller increase in production than previously
hired workers. - Devery additional worker hired contributes a smaller increase in total costs than previously
hired workers.
58 Accounting profit is generally ________ than economic profit, because accountants
________ implicit costs in their calculations.- Agreater, consider
- Bgreater, do not consider
- Csmaller, consider
- Dsmaller, do not consider
59Everything that needs to be given up whenever a choice is made is called:
- Aan implicit cost.
- Ban explicit cost.
- Can opportunity cost.
- Da sunk cost.
60 Of all the costs shown below incurred by Superior Airways, which is an example of an
implicit cost?- AThe salaries paid to the pilots.
- BThe jet fuel bills.
- CThe purchases of parts needed for maintenance of the aircraft.
- DThe rent that could be earned on an aircraft that is owned and used by Superior.
61 Accounting profit is equal to total revenue minus
- AImplicit costs
- BExplicit costs
- CThe sum of implicit and explicit costs
- DMarginal costs
62Economic profit is equal to total revenue minus
- AImplicit costs
- BExplicit costs
- CThe sum of implicit and explicit costs
- DMarginal costs
63The diagram depicting monopolistic competition in the short run
- Ais very similar to the short-run monopoly diagram.
- Bis very similar to the short-run perfect competition diagram.
- Cis very similar to the short-run oligopoly diagram.
- Dis completely different from the diagrams of all the other types of markets
64If the average-total-cost curve of a firm in monopolistic competition happens to be above the
demand curve, it means- Athe firm will have to sell a lot in order to make a profit
- Bthe firm will have to sell at a very high price in order to make a profit.
- Cother firms are performing better in the market than the firm depicted in the diagram
- Dthe firm will be incurring losses in the short run.
65In the long run, firms in monopolistic competition will see their price:
- Abecome equal to their average variable cost.
- Bbecome equal to their average total cost.
- Cremain well above their average total cost
- Dbecome equal to their marginal cost.
66If firms in monopolistic competition are enjoying positive economic profits, in the long run:
- Athey will continue enjoying such profits, since new firms will be unable to enter the
industry. - Bconsumers will cease wanting to buy the good and will switch to cheaper alternatives.
- Cthis will attract new firms into the industry, causing prices to drop and profits to disappear.
- Dthe government will have to step in and regulate the price.
- Athey will continue enjoying such profits, since new firms will be unable to enter the
67In long-run equilibrium, firms in monopolistic competition ________ than firms in perfect
competition- Aproduce less
- Bcharge a lower price
- Chave bigger profits
- Dhave lower costs
68What effect does an increase in the expected rate of inflation have on the short-run and the
long-run Phillips curves?- AOnly the short-run Phillips curve shifts right.
- BOnly the short-run Phillips curve shifts left.
- CBoth the short-run and the long-run Phillips curves shift to the right.
- DBoth the short-run and the long-run Phillips curves shift to the left.
69In long-run equilibrium in a monopolistically competitive market, the price will be equal to:
- Amarginal cost.
- Bmarginal revenue.
- Caverage variable cost
- Daverage total cost.
70A major critique of advertising is that
- Ait provides information to consumers that they would be better off without.
- Bit manipulates people's tastes and preferences.
- Cit promotes excessive competition among firms in the industry.
- Dit undermines the market price
71A major argument in favor of advertising is that:
- Ait provides information to consumers that allows them to make better choices.
- Bit helps people reaffirm their tastes and preferences.
- Cit promotes competition among firms in the industry, leading to lower prices.
- Dit will lower the market price.
72According to the text, branding can be good for society because:
- Ait allows people to show off the branded goods they use or wear.
- Bit keeps generic goods from taking over the market.
- Cit provides useful information to consumers about the quality of branded goods.
- Dit helps firms enjoy higher prices and profits.
73The value of the marginal product of labour is
- Athe price of the output times the wage of labour.
- Bthe price of the output times the marginal product of labour
- Cthe wage of labour times the marginal product of labour
- Dthe wage of labour times the quantity of labour.
74For a competitive, profit-maximizing firm, the value-of-the-marginal-product curve for capital
is the firm's- Asupply curve of capital
- Bdemand curve for capital.
- Cproduction function.
- Dmarginal cost curve.
75An increase in the supply of labour
- Aincreases the value of the marginal product of labour and decreases the wage.
- Bdecreases the value of the marginal product of labour and decreases the wage.
- Cdecreases the value of the marginal product of labour and increases the wage.
- Dincreases the value of the marginal product of labour and increases the wage.
76A decrease in the demand for fish
- Adecreases the value of the marginal product of fishermen, reduces their wage, and reduces
employment in the fishing industry. - Bincreases the value of the marginal product of fishermen, increases their wage, and increases
employment in the fishing industry. - Cdecreases the value of the marginal product of fishermen, reduces their wage, and increases
employment in the fishing industry - Dincreases the value of the marginal product of fishermen, increases their wage, and
decreases employment in the fishing industry.
- Adecreases the value of the marginal product of fishermen, reduces their wage, and reduces
77If both input and output markets are competitive and firms are profit maximizing, then in
equilibrium each factor of production earns- Aan amount equal to the price of output times total output.
- Bthe amount allocated by the political process.
- Can equal share of output.
- Dthe value of its marginal product.
78An individual firm's demand for a factor of production
- Aslopes downward because an increase in the production of output reduces the price at which
the output can be sold in a competitive market, thereby reducing the value of the marginal
product as more of the factor is used. - Bslopes downward due to the factor's diminishing marginal product.
- Cslopes upward due to the factor's increasing marginal product.
- Dis perfectly elastic (horizontal) if the factor market is perfectly competitive.
- Aslopes downward because an increase in the production of output reduces the price at which
79An increase in the demand for a firm's output
- Adecreases the prosperity of the firm but increases the prosperity of the factors hired by the
firm. - Bdecreases the prosperity of both the firm and the factors hired by the firm.
- Cincreases the prosperity of both the firm and the factors hired by the firm.
- Dincreases the prosperity of the firm but decreases the prosperity of the factors hired by the
firm
- Adecreases the prosperity of the firm but increases the prosperity of the factors hired by the
80A competitive, profit-maximizing firm should hire workers up to the point where
- Athe wage, the rental price of capital, and the rental price of land are all equal.
- Bthe marginal product of labour equals zero and the production function is maximized.
- Cthe value of the marginal product of labour equals the wage.
- Dthe marginal product of labour equals the wage.
81Which of the following is not true with regard to workers who have a high value of marginal
product? These workers- Ahave skills that are in relatively scarce supply.
- Bproduce output for which there is great demand.
- Cusually have little capital with which to work.
- Dare usually highly paid
82An increase in the price of automobiles shifts the demand for autoworkers to the
- Aleft and decreases the wage.
- Bright and decreases the wage.
- Cright and increases the wage.
- Dleft and increases the wage.
83When capital is owned by the firm as opposed to being directly owned by households,
capital income may take any of the following forms except- Ainterest
- Bdividends
- Cincreases in stocks of goods.
- Dretained earnings.
84Suppose that a war is fought with biological weapons. The weapons destroy people but not
capital. What is likely to happen to equilibrium wages and rental rates after the war when
compared to their values before the war?- AWages rise and rental rates fall.
- BWages rise and rental rates rise.
- CWages fall and rental rates rise.
- DWages fall and rental rates fall.
85Which of the following statements is FALSE?
- Aa. The value of the marginal product of labor represents the benefit to the firm from hiring an additional worker.
- Bb. The value of the marginal product of labor curve represents the firm's demand for labor curve.
- Cc. The value of the marginal product of labor diminishes as more workers are hired.
- Dd. The value of the marginal product of labor is the same thing as the marginal product of labor
86If the supply curve for labour is backward bending, and if the wage of a worker increases,
she might choose to work:- Aa. fewer hours per week, since she can earn the same income working fewer hours.
- Bb. more hours per week, since she can earn the same income working fewer hours.
- Cc. fewer hours per week, since every hour of leisure is cheaper than before.
- Dd. more hours per week, since she needs to work more hours to earn the same income.
87The price paid for any factor of production tends to be equal to:
- Aa. the wage rate.
- Bb. the value of the marginal product of that input.
- Cc. the price of the product sold by the firm that inputs.
- Dd. the price of the product sold by the firm that buys the inputs.
88Which of the following is a reason why the Consumer Price Index (CPI) is not calculated as a
simple average of all prices?- ASome goods experience large price changes and the CPI would be too variable if
computed by a simple average. - BGoods differ in their importance in the average consumer's budget.
- CSome goods never experience price changes and the CPI would not be variable enough if
computed as a simple average. - DIt would be difficult to compute a price index using a simple average of all prices.
- ASome goods experience large price changes and the CPI would be too variable if
89Use this table to find the real wage.
- A8.06
- B8.13
- C8,39
- D13.00
90When the inflation rate ends up being lower than expected
- Aeveryone benefits because money is cheaper.
- Beveryone benefits because prices do not increase.
- Clenders of fixed-rate mortgages generally benefit because they will make higher profits than they had
calculated. - Dborrowers with fixed-rate loans will benefit because their purchasing power will not decline as much
91A key benefit of foreign direct investment to poorer countries is
- Athey gain all the returns on such investment.
- Bthat such investment is very reliable.
- Cthey avoid the need to have their own stock market
- Dthey gain state-of-the-art technological knowledge.
92The concept of diminishing returns to investment refers to the fact that
- Afirms in rich countries invest less than firms in poorer countries.
- Bany given increase in investment yields less economic growth in a rich country than in a poor country.
- Cfirms in poor countries invest less than firms in rich countries
- Dany given increase in investment yields less economic growth in a poor country than in a rich country.
93All the following promote outward oriented growth policies, EXCEPT
- Aavoiding tariffs and other trade restrictions
- Breducing as much as possible the paperwork needed to export and import parts and finished goods.
- Callowing foreign money to be invested in our country with the least amount of restrictions.
- Drequiring foreign companies to produce their goods in our country, if they want to sell here
94Education might lead to someone coming up with an improved method of producing some
particular good that is then taken up by all producers of that good. This is an example of- Aproductivity.
- Ba patent.
- Ca positive externality.
- Dhe brain drain
95Which of the following would decrease the likelihood that foreign business firms will invest in
a country?- Aa low corporate profit tax rate
- Bpolitical stability
- Ca well-established legal system
- Dpolitical instability
96Assuming a closed economy, which of the following is FALSE in the market for loanable
funds?- ANational saving provides the supply of loanable funds.
- BDomestic investment provides the demand for loanable funds.
- CThe loanable funds market determines the interest rate in the economy.
- DThe amount of funds loaned depends on national saving alone.
97Which of the following represents a productivity-enhancing investment in human capital
- Aa new labour-saving technology
- Ba new health clinic
- Ca new factory that will employ 1,000 workers
- Dan increase in fringe benefits, such as paid vacations and overtime pay
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- Computer Science Quiz on Economics, created by Nurlykhan Omarov on 17/01/2019.
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- Nurlykhan Omarov
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