Multiple Choice -- Select the best answer to each
question with the drop-down boxes. Then select the "Check your work" link at
the bottom of the page.
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1.
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When
the price of an input increases, what happens to the supply curve for the output? A) | The supply curve
shifts to the right. | B) | The supply curve shifts to the left | C) | The supply curve
stays in the same position but the quantity supplied goes down. | D) | The supply curve
could shift either to the right or the left depending on the slope of the demand
curve. | | |
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2.
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When
the price of an alternative good (e.g., bread) increases, what happens to the supply curve for the
pizza? A) | The supply curve
shifts to the right. | B) | The supply curve shifts to the left | C) | The supply curve
stays in the same position but the quantity supplied goes down. | D) | The supply curve
could shift either to the right or the left depending on the slope of the demand
curve. | | |
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3.
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The
price of tomatoes at a local market will fall because of the following event: A) | A hailstorm that
destroys one half of the tomatoes just ready for harvest | B) | A news report of
one medical study suggesting tomatoes cure certain illnesses | C) | A shortage of
farm workers leaves one half of the crop rotting in the fields | D) | A summer of
prime tomato-growing weather resulting in a large harvest of tomatoes | E) | A strike by farm
workers resulting in higher wages for harvesting tomatoes | | |
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4.
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Which
answer best describes what can happen to the equilibrium quantity of SUVs if average family income
goes up and the wage for workers at SUV plants also goes up? The equilibrium __________ of SUVs goes
_____; the equilibrium __________ can go up, go down, or stay the same. A) | quantity ...
down; price | C) | price ... down;
quantity | B) | quantity ... up; price | D) | price ... up; quantity | | | | |
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5.
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According to information presented in the New York Times article "Learning from
China," by Nicholas D. Kristof, A) | the beneficiaries of rent control are disproportionately
poor. | B) | rents for unregulated apartments are high because they make up
only one-third of the market, so they are bid up to artificial levels. | C) | rent regulation
earns the city at least $2.3 billion a year in additional property tax
receipts. | D) | Cambridge, Mass., which lifted rent controls in 1994, found
that freeing rents led to a 20 percent decrease in housing investment. | | |
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6.
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Assume that the city council in a city decides that the market price is unfair to
low-income renters and passes a law that establishes a price ceiling below the equilibrium price. If
a shortage results, it will be caused by: A) | The greed of suppliers, the apartment owners, who want too much
money | B) | The greed of demanders, the apartment renters, who want too
many cheap apartments | C) | The greed of both suppliers and demanders, who behave
unreasonably and thwart the good intentions of the city council | D) | The price
ceiling set by the city council | | |
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7.
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Suppose that, in a small country, the equilibrium price of corn is $300 per ton and
that the government establishes a price floor at $200 per ton. What is the impact of the $200 price
floor on the market for corn? A) | The price floor will cause a surplus of corn to be
produced. | B) | The price floor will cause a shortage of corn.
| C) | The price floor
will have no impact on the market for corn. | D) | The price floor
will cause the demand for corn to shift to the left. | | |
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8.
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Who
would benefit the most if the WTO was abolished and rich countries did not have to eliminate their
barriers to trade in textiles? A) | textile producers in the USA | C) | consumers in the United States of
America | B) | textile producers in Pakistan | D) | textile workers in Pakistan | | | | |
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9.
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Based
on the New York Times article “Pakistanis Fume as Clothing Sales to U.S. Tumble” and what
you know about the economy in the United States, decide which of these statements is most likely to
be true. A) | Pakistan has an
absolute advantage in the production of cloth and clothing, and the United States has a comparative
advantage in the production of these goods. | B) | Both Pakistan
and the United States have a comparative advantage in the production of cloth and
clothing. | C) | Pakistan has a comparative advantage in the production of cloth
and clothing, and the United States has an absolute advantage in the production of these
goods. | D) | Both the United States and Pakistan have an absolute advantage
in the production of cloth and clothing | | |
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10.
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Trade
restrictions such as tariffs and quotas __________. A) | Benefit certain
domestic producers but hurt domestic consumers | B) | Benefit domestic
consumers but hurt certain domestic producers | C) | Benefit both
domestic producers and certain domestic consumers | D) | Hurt all
domestic producers and domestic consumers | | |
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11.
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The
income taxes in a certain country are described in the table below. For example, a person with an
income of $100,000 has to pay $9,000 in taxes. Income | Tax on
Income | $10,000 | $1,000 | $100,000 | $9,000 | $200,000 | $16,000 | | |
The income tax system for this country is __________. A) | progressive | B) | proportional | C) | regressive | D) | flat | | | | | | | | |
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12.
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Which
of the following is a public good? A) | a lighthouse | B) | a truck
purchased by the military | C) | an amusement park that charges
admission | D) | electricity generated at Glen Canyon
Dam | | |
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13.
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Suppose that the government removes trade barriers that limit imports of tobacco, and
that the price of tobacco falls as a result. If the price of beer_____, then beer and tobacco are
________. A) | rises;
substitutes | C) | falls;
complements | B) | rises; complements | D) | falls; normal goods | | | | |
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14.
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Economics can best be defined as the study of how A) | individuals
decide to use scarce resources in an attempt to satisfy unlimited wants | B) | to make
money | C) | the government should deal with unemployment and
inflation | D) | to eliminate the problem of scarce
resources | E) | to run a business | | |
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15.
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Economists classify all of the following as capital except one. Which one is
not capital? A) | a $20 bill in a firm's petty cash
drawer | B) | the building where our economics class
meets | C) | a plumber's wrench | D) | a railroad
car | E) | a
factory | | |
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16.
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Because resources are scarce, A) | opportunity costs are zero | B) | people must make
choices among alternatives | C) | all human wants and desires can be
satisfied | D) | resource prices are fixed | E) | commodities are
free | | |
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17.
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Which
of the following is a positive statement? A) | An unemployment rate of 7 percent is a national
disgrace. | B) | Unemployment is a less important problem than
inflation. | C) | When the national unemployment rate is 7 percent, the
unemployment rate for inner-city youth is often close to 40 percent. | D) | Unemployment and
inflation are equally important problems. | E) | An inflation rate of 7 percent is too
high. | | |
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18.
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A
good economic theory A) | has realistic assumptions | B) | contains as much
detail as possible | C) | cannot be proven false | D) | predicts
well | E) | can only be
presented in mathematical terms | | |
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19.
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One
might commit the fallacy of composition by concluding that A) | statements that
are true during prosperity are necessarily true during depression | B) | what is good for
the individual is necessarily good for the group | C) | an event that
precedes another is necessarily the cause of the latter | D) | intentions need
not coincide with actions | E) | the composition of a complex product is not revealed by its
exterior appearance | | |
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20.
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In
one week, Mohammed can knit 5 sweaters or bake 240 cookies. The opportunity cost per cookie for
Mohammed is A) | $5 | B) | 5 sweaters | C) | 48
sweaters | D) | 1/48 of a sweater | E) | 48
cookies | | |
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21.
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In
economics, specialization means A) | producing something using only one type of resource, such as
labor | B) | producing something using only one type of
labor | C) | focusing efforts on a particular product or a single
task | D) | producing only
one unit of output | E) | producing something using only one unit of a variable
resource | | |
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22.
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According to the curve in Exhibit 0004, A) | if P = $6, then
Q = 8 | B) | if Q = 10, then P = $4 | C) | the slope is
equal to -1 | D) | Q increases as P increases | E) | there is a
positive relationship between Q and P | | |
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23.
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Comparative advantage is A) | the ability of an individual to specialize and produce a
greater amount of some good than can another individual | B) | the number of
units of one good given up in order to acquire something | C) | the ability of
an individual to produce a good at a lower opportunity cost than can some other
individual | D) | an expression for the amount of capital employed by a
particular individual to produce a fixed amount of capital goods | E) | a reference to
an individual having the greatest opportunity cost of producing the good and produces it with the
fewest resources | | |
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24.
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Don
can produce 10 pens or 20 pencils in one hour while Bob can produce 9 pens or 3 pencils in one
hour. Which of the following statements is correct? A) | Don has an
absolute advantage over Bob in the production of pencils. Bob has an absolute advantage in the
production of pens | B) | Bob has an absolute advantage over Don in the production of
pencils | C) | Bob has a comparative advantage over Don in the production of
pens | D) | Don has a
comparative advantage over Bob in the production of pens | E) | Bob does not
have a comparative advantage in the production of either good | | |
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25.
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Adam
Smith believed that people's pursuit of their own self-interests A) | tended to
promote the general welfare | B) | required the government's "invisible hand" to keep
the economy running smoothly | C) | might cause aggregate demand to be greater than aggregate
supply | D) | would increase the wealth of a nation, which was the quantity
of gold and silver it owned | E) | would decrease the wealth of a nation, which was its ability to
produce goods and services | | |
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26.
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Current production at which point in Exhibit 0022 would lead to the largest outward
shift in the production possibilities frontier in a later year? A) | point a because
this point represents a greater consumption level than point b | B) | point b because
this point represents greater total production than the other two points | C) | point c because
this point represents a greater consumption level than the other two points | D) | point b because
this point represents greater production of capital than point c | E) | point c because
this point represents greater production of capital than the other two
points | | |
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27.
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A
major distinguishing feature between capitalism and socialist or command economies is
that A) | with capitalism
the average citizen is always wealthier than in socialist economies | B) | decision making
is typically decentralized in socialist economies and is centralized in capitalistic
economies | C) | socialist countries all have red flags which capitalistic
economies do not | D) | public ownership of resources with
capitalism | E) | decision making is typically decentralized under capitalism
while it is centralized in command economies | | |
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28.
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If
the price of vanilla ice cream decreases, it is likely that A) | demand for
vanilla ice cream will increase | B) | demand for vanilla ice cream will
decrease | C) | demand for chocolate ice cream will
increase | D) | demand for chocolate ice cream will
decrease | E) | the quantity demanded of vanilla ice cream will
decrease | | |
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29.
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Sugar
and honey are viewed as substitutes for each other in many cooking applications. If the price of
sugar rises, we would expect A) | the demand for honey to increase | B) | the demand for
honey to decrease | C) | the quantity demanded of honey to
decrease | D) | the price of honey to decrease | E) | the quantity
demanded of honey to increase | | |
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30.
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Which
of the following would shift the supply curve for a product to the right? A) | an increase in
the price of a resource used in the good's production | B) | the expectation
of a higher price in the near future | C) | an increase in the price of the
product | D) | an increase in the price of an alternative
good | E) | an improvement
in the technology for producing the good | | |
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31.
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A
decrease in the demand for peanut butter (a normal good) could be caused by a(n) A) | increase in the
supply of peanut butter | B) | increase in the price of peanut
butter | C) | doubling of the price of bread | D) | drought in
Georgia that destroyed 30 percent of the peanut crop | E) | increase in
consumer income | | |
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32.
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Which
of the following would cause an increase in the supply of wheat? A) | an increase in
fertilizer costs | B) | a decrease in the price of bread | C) | a decrease in
the price of corn | D) | an increase in land prices | E) | the price is
expected to be higher next period | | |
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33.
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A
shortage of textbooks will cause A) | a decrease in the supply of textbooks | B) | a decrease in
the demand for textbooks | C) | both an increase in the supply of textbooks and a decrease in
the demand for textbooks | D) | an increase in the price of textbooks, caused by a shift in
either the supply curve or the demand curve | E) | an increase in
the price of textbooks | | |
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34.
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An
increase in demand will cause a(n) A) | increase in supply | B) | decrease in
supply | C) | decrease in quantity supplied | D) | increase in
quantity supplied | E) | decrease in equilibrium price | | |
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35.
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If
the tea harvest is bad in a particular year, the supply of tea will be A) | lower, its price
will be lower, and demand for coffee will go up | B) | lower, its price
will be higher, and demand for coffee will go up | C) | lower, its price
will be higher, and demand for coffee will go down | D) | lower, its price
will be lower, and demand for coffee will go down | E) | higher, its
price will be higher, and demand for coffee will go up | | |
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36.
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Suppose demand increases and supply increases. Which of the following must
happen? A) | equilibrium
price increases | B) | equilibrium price decreases | C) | equilibrium
quantity increases | D) | equilibrium quantity decreases | E) | neither
equilibrium price nor equilibrium quantity changes | | |
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37.
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In
which of the following situations will the equilibrium price of wheat increase and the change in the
equilibrium quantity of wheat be indeterminate? A) | if supply and demand both decline | B) | if supply and
demand both rise | C) | if supply declines and demand rises | D) | if supply rises
and demand declines | E) | if supply remains constant and demand
rises | | |
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38.
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Many
people argue against increasing the minimum wage because they believe the result would be increased
unemployment. Which of the following best summarizes this argument? A higher minimum wage
would A) | increase the
supply of labor while decreasing the demand for labor | B) | decrease the
supply of labor while increasing the demand for labor | C) | increase the
quantity supplied of labor while decreasing the quantity demanded of labor | D) | decrease the
quantity supplied of labor while increasing the quantity demanded of labor | E) | increase the
supply of labor while decreasing the quantity demanded of labor | | |
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39.
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The
term "fiscal policy" refers to A) | the amount of physical output produced by
firms | B) | the means by which government policy makes firms more
productive | C) | the avenue by which government influences credit
markets | D) | spending and taxing by governments | E) | a tool of
government that works in the opposite direction of monetary policy | | |
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40.
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Government policies are coercive, whereas markets are not. This implies
that A) | government
activity will always be less efficient than market activity | B) | households
cannot maximize utility if they consume any government goods and services | C) | market
transactions result in an equal number of gainers and losers | D) | self-interest
and public interest are always in conflict | E) | government can provide some goods and services when private
markets fail to do so | | |
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41.
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The
largest source of federal government revenue is A) | corporate income taxes | B) | individual
income taxes | C) | payroll taxes | D) | sales and excise
taxes | E) | tariffs on imported goods and other customs fees and
duties | | |
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42.
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Which
of the following is not based on the benefits-received principle of taxation? A) | charging a fee
for use of public golf courses | B) | differences between residential and out-of-state college
tuition | C) | the excise tax on gasoline | D) | toll booths on a
highway | E) | charging a fee per bag to haul away
garbage | | |
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43.
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When
drawing a production possibilities frontier, all of the following are usually assumed except one.
Which is the exception? A) | The quantity of resources is rapidly
growing. | B) | Technology is fixed. | C) | Resources can be
shifted between production of the two goods. | D) | The production
possibilities frontier is drawn for a particular time period. | E) | Resources are
fully and efficiently employed. | | |
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44.
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Smoking cigarettes is a leading cause of many diseases. The government has opened
several public clinics that treat smoking-related diseases and is trying to decide how to fund these
clinics. One suggestion is to get the funds for the public clinics from a cigarette tax. This tax
follows . . . A) | the
ability-to-pay tax principle. | B) | the benefits-received tax principle. | C) | both the
ability-to-pay and benefits-received tax principles. | D) | neither the
ability-to-pay nor the benefits-received tax principles. | | |
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45.
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Suppose that the world consists of only two countries, Alaska and Greenland, and that
these countries produce ice cubes and fur hats with labor only under conditions of constant costs
(that is, the cost of producing an extra ice cube or an extra fur hat is always the same). The
information in the table below reports the labor productivity (output for 1 hour of labor) in each
industry in each country.
Ice Cubes Fur Hats
Alaska
5 20
Greenland
1
8
The opportunity cost of producing one fur hat in Alaska is: A) | 0.125 ice
cube | C) | 4 ice
cubes | B) | 0.25 ice cube | D) | 8 ice cubes | | | | |
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46.
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Assume that workers in Zambia are capable of producing either 40 pounds of copper per
day or 10 pounds of cotton per day. Workers in Tanzania can produce either 25 pounds of copper per
day or 50 pounds of cotton per day. (Assume the opportunity costs are constant in each country. That
is, the production possibilities frontier is a straight line.)
What is the opportunity cost of copper
in Zambia, measured in pounds of cotton?
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47.
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Assume that workers in Zambia are capable of producing either 40 pounds of copper per
day or 10 pounds of cotton per day. Workers in Tanzania can produce either 25 pounds of copper per
day or 50 pounds of cotton per day. (Assume the opportunity costs are constant in each country. That
is, the production possibilities frontier is a straight line.)
Zambia has ___________ advantage in ____________.
A) | an absolute;
cotton | C) | a comparative;
copper | B) | a comparative; cotton | D) | an absolute; both cotton and copper | | | | |
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48.
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Angelo recently completed his residency in internal medicine and has decided to open
his own practice. In interviewing potential office assistants, Angelo discovered that the best
candidate types 30 words per minute. Thanks to an excellent typing course in high school and lots of
practice writing for his college newspaper, Angelo can type 45 words per minute himself. Assume the
current wage for office assistants is $10 per hour and that doctors can see five patients per hour.
Also assume the office assistant has neither the knowledge nor the license necessary to treat
patients.
What price (in dollars per patient visit) would make Angelo
indifferent between hiring an office assistant and doing the typing himself?
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49.
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The
market price of pizza in College Town decreased recently. Some students in an economics class suggest
that the price fell because several new pizza parlors opened for business in the area. Other students
attributed the fall in the price of pizza more to the fall in the price of hamburgers at local burger
joints. Everyone agreed that the fall in the price of hamburgers was caused by a fall in the price of
ground beef. Which explanation is the dominant or main cause of the decrease in the price of
pizza? A) | It depends on
whether the demand curve or supply curve changed first. | B) | If the
equilibrium quantity of pizza increased, then the dominant cause must have been the supply shift in
the market for pizza. | C) | If the equilibrium quantity of pizza increased, then the
dominant cause must have been the demand shift in the market for pizza caused by the decrease in the
price of hamburgers. | D) | If the equilibrium quantity of pizza decreased, then the
dominant cause must have been the supply shift in the market for pizza. | | |
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50.
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Recall the article “With Textbooks, Students Show How Smart They Are,” by
David Leonhardt in the September 5, 2005 New York Times -- and assigned for your homework. According
to the article, why would new textbook sales fall in the years following the release of the latest
edition? A) | As the edition
of the textbook ages, college libraries tend to hold fewer copies for check
out. | B) | The expected
resale value of the textbook increases. | C) | The pool of books in the used textbook market
grows. | D) | More professors adopt the new edition of the textbook for
their classes. | | |
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