1. Which of the following is not one of the three core economic issues that must be resolved?

A. How to produce the goods and services we select.

B. What to produce with unlimited resources.

C. Who should get the goods and services we produce.

D . What to produce with limited resources.

2. The fundamental problem of economics is

A. The law of increasing opportunity costs.

B. The scarcity of resources relative to human wants.

C. How to get government to operate efficiently.

D . How to create employment for everyone.

3. In economics, scarcity means that

A. A shortage of a particular good will cause the price to fall.

B. A production possibilities curve cannot accurately represent the trade-off between two goods.

C. Society's desires exceed the want-satisfying capability of the resources available to satisfy

those desires.

D . The market mechanism has failed.

4. Given that resources are scarce,

A. A "free lunch" is possible, but only for a limited number of people.

B. Opportunity costs are experienced whenever choices are made.

C. Poor countries must make choices, but rich countries with abundant resources do not have to

make choices.

D. D . Some choices involve opportunity costs while other choices do not.

5. A consequence of the economic problem of scarcity is that

A. Choices have to be made about how resources are used.

B. There is never too much of any good or service produced.

C. The production of goods and services must be controlled by the government.

D . The production possibilities curve is bowed outward.

6. The basic factors of production include

A. Land, labor, money, and capital.

B. Land, labor, money, and inputs.

C. Labor and money.

D . Land, labor, capital, and entrepreneurship.

7. Factors of production are

A. Scarce in every society.

B. Scarce only in advanced countries.

C. Scarce only in the poorest countries of the world.

D . Unlimited in quantity.

8. Which of the following is not a factor of production?

A. A psychiatrist.

B. The $100,000 used to start a new business.

C. A bulldozer.

D . Six thousand acres of farmland.

9. With respect to factors of production, which of the following statements is not true?

A. Factors of production are also known as resources.

B. In order to produce any good or service, it is necessary to have factors of production.

C. Factors of production include land, labor, capital, and entrepreneurship.

D . Only those resources that are privately owned are counted as factors of production.

10. Which of the following is the best example of land?

A. The ethanol refined from corn.

B. A factory that produces new goods and services.

C. The water used to make a soft drink.

D . A barber's chair.

11. Capital, as economists use the term, refers to

A. The money needed to start a new business.

B. The costs of operating a business.

C. Shares of stock issued by businesses.

D . Final goods that are used to produce other goods and services.

12. Which economist argued that free markets unleashed the "animal spirits" of entrepreneurs,

propelling innovation, technology, and growth?

A. Lord Kelvin.

B. Kenneth Olsen.

C. Irving Fisher.

D. D . John Maynard Keynes.

13. The role of the entrepreneur in an economy is to

A. Bring the factors of production together and assume the risk of production.

B. Work with government planners to determine what goods are produced.

C. Arrange bank financing for the owners of new businesses.

D . Ensure full employment of labor.

14. Economics can be defined as the study of

A. For whom resources are allocated to increase efficiency.

B. How society spends the income of individuals.

C. How scarce resources are allocated on a macro level to best meet society's goals or on a

micro level to best meet an individual's or firm's goals.

D . None of the choices are correct.

15. Opportunity cost is

A. Measured only in dollars and cents.

B. The total dollar cost to society of producing the goods.

C. The difficulty associated with using one good in place of another.

D . The best alternative that must be given up in order to get something else.

16. Opportunity cost may be defined as the

A. Goods or services that are forgone in order to obtain something else.

B. Dollar prices paid for final goods and services.

C. Dollar cost of producing a particular product.

D . Difference between wholesale and retail prices.

17. The opportunity cost of studying for an economics test is

A. Negative because it may improve your grade.

B. Zero because you knew when you registered for the class that studying would be required.

C. The money you spent on tuition for the class.

D . The best alternative use of your time.

18. The "guns versus butter" dilemma that all nations confront is that

A. Guns and butter can be produced using the same resources at the same time.

B. An increase in national defense implies more sacrifices of civilian goods and services.

C. An increase in national defense is possible only if we produce more butter.

D . All of the choices are correct.

19. A production possibilities curve indicates the

A. Combinations of goods and services an economy is actually producing.

B. Maximum combinations of goods and services an economy can produce given its available resources and technology.

C. Maximum combinations of goods and services an economy can produce given unlimited resources.

D. Average combinations of goods and services an economy can produce given its available resources and technology.

20. Which of the following is an assumption under which the production possibilities curve is drawn?

A. Total unemployment is zero.

B. The supply of resources is fixed.

C. The price level is changing.

D . Technology is changing.

21. A point on a nation's production possibilities curve represents

A. An undesirable combination of goods and services.

B. Combinations of production that are unattainable, given current technology and resources.

C. Levels of production that will cause both unemployment and inflation.

D . The full employment of resources to achieve a particular combination of goods and services.

22. The production possibilities curve illustrates which two of the following essential principles?

A. Factors of production and price signals.

B. Scarce resources and opportunity cost.

C. Market mechanisms and laissez faire.

D . Economic growth and market failure.

23. Which of the following correctly characterizes the shape of a constant opportunity cost production possibilities curve?

A. A straight line indicating that the law of increasing opportunity costs applies.

B. A straight line when there is constant opportunity costs.

C. A line that curves outward when resources are perfectly adaptable in the production of different goods.

D. A line that curves inward when resources are perfectly adaptable in the production of different goods.

24. The production possibilities curve illustrates

A. The limitations that exist because of scarce resources.

B. That there is no limit to what an economy can produce.

C. That there is no limit to the level of output.

D . The existence of unlimited wants and resources.

25. According to the law of increasing opportunity costs,

A. The more one is willing to pay for resources, the smaller will be the possible level of

production.

B. Increasing the production of a particular good will cause the price of the good to remain constant.

C. In order to produce additional units of a particular good, it is necessary for society to sacrifice increasingly larger amounts of alternative goods.

D . None of the choices are correct.

26. According to the law of increasing opportunity costs,

A. Greater production leads to greater inefficiency.

B. Greater production means factor prices rise.

C. Greater production of one good requires increasingly larger sacrifices of other goods.

D. Higher opportunity costs induce higher output per unit of input.

27. If an economy experiences increasing opportunity costs with respect to two goods, then the

production possibilities curve between the two goods will be

A. Bowed outward or concave from below.

B. A straight, downward-sloping line.

C. Bowed inward or convex from below.

D . Bowed outward until the two goods are equal, and then bowed inward.

28. If the United States decides to convert automobile factories to tank production, as it did during

World War II, but finds that some auto manufacturing facilities are not well suited to tank

production, then

A. The production possibilities curve between tanks and automobiles will appear as a straight

line.

B. The production possibilities curve between tanks and automobiles will shift outward.

C. Decreasing opportunity costs will occur with greater automobile production.

D. Increasing opportunity costs will occur with greater tank production.

29. If North Korea is currently producing at efficiency, and it proceeds to increase the size of its

military, then, as long as nothing else changes, its

A. Production possibilities curve will shift outward.

B. Production possibilities curve will shift inward.

C. Production of nonmilitary goods will increase.

D. Production of nonmilitary goods will decrease.

30. When an economy is producing efficiently, it is

A. Producing a combination of goods and services beyond the production possibilities curve.

B. Getting the most goods and services from the available resources.

C. Experiencing decreasing opportunity costs.

D. Producing equal amounts of all goods.

31. Which of the following is true when an economy is producing efficiently?

A. The economy is producing on the production possibilities curve.

B. The economy is producing outside the production possibilities curve.

C. The economy is getting the fewest goods and services from the available resources.

D. Everyone in the economy is happy.

32. The points on a production possibilities curve show

A. Desired output.

B. Actual output.

C. Potential output.

D. None of the choices are correct.

33. In terms of the production possibilities curve, inefficiency is represented by

A. All points on the curve.

B. All points outside the curve.

C. All points inside the curve.

D . A rightward shift of the curve.

34. If an economy is producing inside the production possibilities curve, then

A. There is full employment of resources.

B. It is operating efficiently.

C. It can produce more of one good without giving up some of another good.

D. There are not enough resources available to produce more output.

35. A technological advance would best be represented by

A. A shift outward of the production possibilities curve.

B. A shift inward of the production possibilities curve.

C. A movement from inside the production possibilities curve to a point on the production

possibilities curve.

D. A movement from the production possibilities curve to a point inside the production possibilities

curve.

36. Which of the following events would allow the production possibilities curve to shift outward?

A. The economy's capital stock declines.

B. More teenagers enter the labor force.

C. Technology is lost.

D. People begin to retire at earlier ages.

37. Economic growth would best be represented by a

A. Shift outward of the production possibilities curve.

B. Shift inward of the production possibilities curve.

C. Movement from inside the production possibilities curve to a point on the production

possibilities curve.

D. Movement from the production possibilities curve to a point inside the production possibilities

curve.

38. Which of the following will cause the production possibilities curve to shift inward?

A. An increase in the working-age population.

B. A decrease in the size of the labor force.

C. A technological advance.

D. An increase in knowledge.

39. Which of the following is not a basic decision that all nations must confront?

A. Should we have economic growth?

B. How should we produce goods and services?

C. For whom should goods and services be produced?

D. What goods and services should we produce?

40. In a market economy, the people who receive the goods and services that are produced are

those who

A. Need the goods and services the most.

B. Have the most political power.

C. Want the goods and services the most.

D. Are willing to pay the highest price.

41. Adam Smith's invisible hand is now called

A. Economic growth.

B. The market mechanism.

C. Opportunity cost.

D. Laissez faire.

42. The market mechanism may best be defined as

A. The use of market prices and sales to signal desired output.

B. The use of market signals and government directives to select economic outcomes.

C. The process by which the production possibilities curve shifts inward.

D. Price regulation by government.

43. The market mechanism

A. Is not a very efficient means of communicating consumer demand to the producers of goods

and services.

B. Works through central planning by government.

C. Eliminates market failures created by government.

D. Works because prices serve as a means of communication between consumers and

producers.

44. The invisible hand refers to

A. Intervention in the economy by the government bureaucrats we do not see and over whom we

have no control.

B. Undiscovered natural resources.

C. The allocation of resources by market forces.

D. The person who has the responsibility to coordinate all the markets in a market economy.

45. The doctrine of laissez faire is based on the belief that

A. Markets are likely to do a better job of allocating resources than government directives.

B. Government directives are likely to do a better job of allocating resources than markets.

C. Government failure does not exist.

D. Markets result in an unfair distribution of income.

46. A city's decision to limit smoking in public areas is an example of

A. The invisible hand at work.

B. The market mechanism at work.

C. Market success.

D. Government intervention.

47. A mixed economy

A. Is justified by the superiority of laissez faire over government intervention.

B. Utilizes both market and nonmarket signals to allocate goods and services.

C. Relies on the use of central planning by private firms rather than the government.

D. Is one that allows trade with other countries.

48. Which of the following can be used to correct market failure?

A. The market mechanism.

B. Laws and regulations.

C. Laissez faire price policies.

D. Government failure.

49. When the invisible hand does not produce optimal outcomes for the economy, there is evidence

of

A. Market failure.

B. Government failure.

C. Macroeconomic failure.

D. Scarcity.

50. Government intervention may achieve a more optimal outcome than the market mechanism when

addressing

A. Inefficient bureaucracy.

B. Consumption of cigarettes.

C. Theme park construction.

D. None of the choices are correct

51. If market signals result in pollution beyond the optimal level, then

A. The economy experiences government failure.

B. A laissez faire approach will reduce the level of pollution.

C. The market mechanism has failed to achieve social efficiency.

D. The government is allocating resources inefficiently.

52. Which of the following has occurred when government directives do not produce better economic

outcomes?

A. Government failure.

B. Market failure.

C. Macroeconomic failure.

D. Scarcity.

53. Which of the following is an example of government failure?

A. Bureaucratic delays.

B. Required use of pollution control technology that is obsolete.

C. Inefficient incentives.

D. All of the choices are correct.

54. Macroeconomics focuses on the performance of

A. Individual consumers.

B. Government agencies.

C. The overall economy.

D. All of the choices are correct.

55. Which of the following is not a macroeconomic statement?

A. The unemployment rate for the United States rose to 5 percent in the last quarter.

B. The Federal Reserve lowered interest rates at its last meeting.

C. Congress increased the minimum wage rate in January.

D. Jenny's wage rate rose, and in response, she decided to work more hours.

56. The study of microeconomic theory focuses on the

A. Structure and performance of individual markets and the operation of the price system.

B. Operation of the entire economy.

C. Role of the banking system in the economy.

D. Interaction of international trade and domestic production of goods and services.

57. Microeconomics is concerned with issues such as

A. The demand for bottled water by individuals.

B. The level of inflation in the economy.

C. Maintaining a strong level of economic growth.

D. All of the choices are correct.

58. Economic models are used by economists to

A. Predict economic behavior.

B. Develop economic policies.

C. Explain economic behavior.

D. All of the choices are correct.

59. The Latin phrase ceteris paribus means

A. The production possibilities curve never shifts.

B. Laissez faire.

C. Other things remain equal.

D. The invisible hand.

60.

At which point is society employing some of its available technology but not all of it? (See Figure

1.1.)

A. A.

B. B.

C. C.

D. D.

61.

At which point is society producing the most output possible with the available resources and

technology? (See Figure 1.1.)

A. A.

B. B.

C. C.

D. D.

62.

At which point is society producing some of each type of structure but still producing inefficiently?

(See Figure 1.1.)

A. A.

B. B.

C. C.

D. D.

63.

At which point might society be able to produce if new resources were discovered but cannot

produce with current resources? (See Figure 1.1.)

A. A.

B. B.

C. C.

D. D.

64.

Choose the letter of the curve in Figure 1.2 that best represents a production possibilities curve

for two goods that obey the law of increasing opportunity costs:

A. A.

B. B.

C. C.

D. D.

65.

Choose the letter of the curve in Figure 1.2 that best represents a production possibilities curve

for two goods for which there are constant opportunity costs:

A. A.

B. B.

C. C.

D. D.

66.

Using Figure 1.3 and PP1, an increase in the capacity to produce can be represented by a

movement from

A. Point A to point B.

B. Point A to point C.

C. Point B to point C.

D. Point C to point F.

67.

Using Figure 1.3 and PP1, at point A,

A. There is inefficient use of available resources.

B. The available technology keeps production inside PP1.

C. All available resources are being used efficiently.

D. An increase in the production of mops would definitely require a decrease in the production of

brooms.

68.

Which of the following is true about the combination of mops and brooms represented by point E

in Figure 1.3 and using PP1?

A. Point E is efficient now.

B. Point E is attainable if this economy uses more of its available resources.

C. Point E is unattainable if this economy becomes more efficient.

D. Point E is attainable only if more resources become available or technological advances are

made.

69.

An increase in the proportion of the population that is unemployed above the normal rate is best

represented in Figure 1.3 and using PP1 by a movement from point

A. C to point D.

B. D to point C.

C. C to point A.

D. E to point D.

70.

A movement from point F to point D in Figure 1.3 results in

A. A reallocation of resources from mop production to broom production.

B. Permanent unemployment of workers producing brooms.

C. A reallocation of resources from broom production to mop production.

D. More efficient production.

71.

In Figure 1.3, a shift of the production possibilities curve from PP1 to PP2 could be caused by

A. A decrease in the quantity of raw materials available.

B. A decline in the production skills of workers.

C. The use of improved production technology.

D. All of the choices are correct.

72.

Using Figure 1.4 and starting at PP1, an increase in the capacity to produce can be represented

by a movement from point

A. A to point B.

B. C to point E.

C. A to point C.

D. D to point E.

73.

Which of the following is true about the combination of plasma televisions and MP3 players

represented by point F in Figure 1.4?

A. Point F is inefficient now.

B. Point F is unattainable even with advances in technology.

C. Point F will be more easily attainable if the government takes control of all privately run

factories.

D. Point F can possibly be reached if more economic resources become available or technology

improves.

74.

A movement from point C to point A in Figure 1.4 results in

A. More efficient production.

B. Permanent unemployment of workers producing plasma televisions.

C. A reallocation of resources from MP3 player production to plasma television production.

D. A reallocation of resources from plasma television production to MP3 player production

75.

In Figure 1.4, a shift of the production possibilities curve from PP1 to PP2 could be caused by

A. An increase in the unemployment rate.

B. Implementation of training programs that improve the skills of workers.

C. A flu epidemic that makes many workers sick.

D. Tougher pollution controls for the producers of plasma televisions and MP3 players.

76.

Using Figure 1.5, if an economy has the capacity to produce represented by PP2, then point E

represents

A. A constant trade-off between potato chips and doughnuts.

B. A combination of potato chips and doughnuts that is not attainable.

C. An efficient use of resources.

D. None of the choices are correct.

77.

Using Figure 1.5, if an economy is currently producing on PP2, which of the following would shift

the production possibilities curve toward PP1?

A. An increase in the quantity of labor available.

B. A decrease in the amount of capital available.

C. An increase in the level of unemployment above the normal level.

D . An advancement in technology.

78.

In Figure 1.5, at which of the following points would the opportunity cost of producing another

doughnut be greatest?

A. A.

B. F.

C. C.

D. E.

79.

Using Figure 1.6, if an economy has the capacity to produce represented by PP1, then point E

represents

A. A combination of cars and SUVs that is not attainable.

B. A constant trade-off between cars and SUVs.

C. A change in technology.

D. An efficient use of resources.

80.

In Figure 1.6, if the opportunity cost of producing cars was zero at all levels of production, the

production possibilities curve would be best be represented by a

A. Vertical line.

B. 45-degree line starting at the origin.

C. Horizontal line.

D . Circle.

81.

In Figure 1.6, at which of the following points would the opportunity cost of producing one more

car be the lowest?

A. F.

B. B.

C. C.

D. D.

82.

In Figure 1.6, at which of the following points would the opportunity cost of producing one more

SUV be highest?

A. A.

B. B.

C. C.

D. F.

83.

Refer to Figure 1.7. This economy will achieve efficiency in production at

A. Point D only.

B. Point G only.

C. Point J only.

D. Points D, G, and J.

84.

Refer to Figure 1.7. The cost of producing at point G rather than point D is

A. OA units of food.

B. KL units of clothing.

C. AB units of food.

D . OL units of clothing.

85.

Refer to Figure 1.7. The benefit of producing at point G rather than point D is

A. OA units of food.

B. KL units of clothing.

C. AB units of food.

D . OL units of clothing.

86.

Refer to Figure 1.7. The cost of producing at point D rather than point J is

A. KM units of clothing.

B. AC units of food.

C. OM units of clothing.

D. OA units of food.

87.

Refer to Figure 1.7. If this economy is currently producing at point F, then by employing more

resources this economy

A. Can move to point D, but not points G or J.

B. Can move to points D, G, or J.

C. Can move to point G, but not points D or J.

D. Will remain at point F.

88.

Refer to Figure 1.7. Which of the following points are considered to be inefficient?

A. D.

B. E.

C. G.

D. D, G, and J.

89.

Refer to Figure 1.7. Which of the following points are unattainable, ceteris paribus ?

A. G.

B. F.

C. N.

D. E.

90.

Refer to Figure 1.7. Which of the following points show unemployment of resources above the

normal rate?

A. H.

B. J.

C. N.

D. D.

91.

Table 1.1 shows the hypothetical trade-off between different combinations of Stealth bombers

and B-1 bombers that might be produced in a year with the limited U.S. capacity, ceteris paribus.

Complete the table by calculating the required opportunity costs for both the B-1 and Stealth

bombers.

On the basis of your calculations in Table 1.1, you may infer that the law of increasing opportunity

costs applies to

A. Stealth bombers but not to B-1 bombers.

B. B-1 bombers but not to Stealth bombers.

C. Both B-1 bombers and Stealth bombers.

D. Neither B-1 bombers nor Stealth bombers.

92.

Table 1.1 shows the hypothetical trade-off between different combinations of Stealth bombers and B-1 bombers that might be produced in a year with the limited U.S. capacity, ceteris paribus.

Complete the table by calculating the required opportunity costs for both the B-1 and Stealth bombers.

On the basis of your calculations in Table 1.1, what is the opportunity cost of producing at point S

rather than point T?

A. 1 Stealth bomber.

B. 1 B-1 bomber.

C. 10 Stealth bombers.

D. 0.9 Stealth bombers.

93.

Table 1.1 shows the hypothetical trade-off between different combinations of Stealth bombers

and B-1 bombers that might be produced in a year with the limited U.S. capacity, ceteris paribus.

Complete the table by calculating the required opportunity costs for both the B-1 and Stealth

bombers.

On the basis of your calculations in Table 1.1, what is the opportunity cost of producing at point V

rather than point U?

A. 3 B-1 bombers.

B. 1 B-1 bomber.

C. 4 Stealth bombers.

D. 3 Stealth bombers.

94.

Table 1.1 shows the hypothetical trade-off between different combinations of Stealth bombers

and B-1 bombers that might be produced in a year with the limited U.S. capacity, ceteris paribus.

Complete the table by calculating the required opportunity costs for both the B-1 and Stealth

bombers.

In the production range of 7 to 9 Stealth bombers, the opportunity cost of producing 1 more

Stealth bomber in terms of B-1s is

A. 0.

B. 3.

C. 0.5.

D. 2.

95.

Table 1.1 shows the hypothetical trade-off between different combinations of Stealth bombers

and B-1 bombers that might be produced in a year with the limited U.S. capacity, ceteris paribus.

Complete the table by calculating the required opportunity costs for both the B-1 and Stealth

bombers.

The highest opportunity cost anywhere in Table 1.1 for Stealth bombers in terms of B-1 bombers

is

A. 1 B-1 bomber per Stealth bomber.

B. 3 B-1 bombers per Stealth bomber.

C. 2 B-1 bombers per Stealth bomber.

D. 0.5 B-1 bomber per Stealth bomber.

96.

Table 1.1 shows the hypothetical trade-off between different combinations of Stealth bombers

and B-1 bombers that might be produced in a year with the limited U.S. capacity, ceteris paribus.

Complete the table by calculating the required opportunity costs for both the B-1 and Stealth

bombers.

The highest opportunity cost anywhere in Table 1.1 for B-1 bombers in terms of Stealth bombers

is

A. 1 Stealth bomber per B-1 bomber.

B. 3 Stealth bombers per B-1 bomber.

C. 2 Stealth bombers per B-1 bomber.

D. 0.5 Stealth bomber per B-1 bomber.

97.

Table 1.1 shows the hypothetical trade-off between different combinations of Stealth bombers

and B-1 bombers that might be produced in a year with the limited U.S. capacity, ceteris paribus.

Complete the table by calculating the required opportunity costs for both the B-1 and Stealth

bombers.

The lowest opportunity cost anywhere in Table 1.1 for B-1 bombers in terms of Stealth bombers

is

A. 0 Stealth bombers per B-1 bomber.

B. 2 Stealth bombers per B-1 bomber.

C. 1 Stealth bomber per B-1 bomber.

D. 0.5 Stealth bomber per B-1 bomber.

98.

Table 1.2 shows the hypothetical trade-off between different combinations of Stealth bombers

and B-1 bombers that might be produced in a year with the limited U.S. capacity, ceteris paribus.

Complete the table by calculating the required opportunity costs for both the B-1 and Stealth

bombers.

On the basis of your calculations in Table 1.2, the law of increasing opportunity costs applies to

A. Both B-1 and Stealth bombers.

B. B-1 bombers but not to Stealth bombers.

C. Stealth bombers but not to B-1 bombers.

D. Neither bomber.

99.

Table 1.2 shows the hypothetical trade-off between different combinations of Stealth bombers

and B-1 bombers that might be produced in a year with the limited U.S. capacity, ceteris paribus.

Complete the table by calculating the required opportunity costs for both the B-1 and Stealth

bombers.

On the basis of your calculations in Table 1.2, what is the opportunity cost of producing at point B

rather than point C?

A. 45 B-1 bombers.

B. 35 Stealth bombers.

C. 180 Stealth bombers.

D. 10 B-1 bombers.

100.

Table 1.2 shows the hypothetical trade-off between different combinations of Stealth bombers

and B-1 bombers that might be produced in a year with the limited U.S. capacity, ceteris paribus.

Complete the table by calculating the required opportunity costs for both the B-1 and Stealth

bombers.

On the basis of your calculations in Table 1.2, what is gained by producing at point B rather than

point C?

A. 45 B-1 bombers.

B. 30 Stealth bombers.

C. 180 Stealth bombers.

D. 10 B-1 bombers.

101.

Table 1.2 shows the hypothetical trade-off between different combinations of Stealth bombers and B-1 bombers that might be produced in a year with the limited U.S. capacity, ceteris paribus.

Complete the table by calculating the required opportunity costs for both the B-1 and Stealth bombers.

On the basis of your calculations in Table 1.2, what is gained by producing at point B rather than

point A?

A. 35 B-1 bombers.

B. 195 Stealth bombers.

C. 15 B-1 bombers.

D. 15 Stealth bombers.

102. Table 1.2 shows the hypothetical trade-off between different combinations of Stealth bombers and B-1 bombers that might be produced in a year with the limited U.S. capacity, ceteris paribus.

Complete the table by calculating the required opportunity costs for both the B-1 and Stealth bombers.

Refer to Table 1.2. In the production range of 20 to 35 B-1 bombers, the opportunity cost of

producing 1 more B-1 bomber is

A. 195/20 of Stealth bombers.

B. 35/20 of Stealth bombers.

C. 15 Stealth bombers.

D. 1 Stealth bomber.

103.

Table 1.2 shows the hypothetical trade-off between different combinations of Stealth bombers and B-1 bombers that might be produced in a year with the limited U.S. capacity, ceteris paribus.

Complete the table by calculating the required opportunity costs for both the B-1 and Stealth bombers.

The highest opportunity cost anywhere in Table 1.2 for B-1 bombers in terms of Stealth bombers

is

A. 10 Stealth bombers per B-1 bomber.

B. .33 B-1 bomber per Stealth bomber.

C. .10 B-1 bomber per Stealth bomber.

D. .10 Stealth bomber per B-1 bomber.

104.

Table 1.2 shows the hypothetical trade-off between different combinations of Stealth bombers and B-1 bombers that might be produced in a year with the limited U.S. capacity, ceteris paribus.

Complete the table by calculating the required opportunity costs for both the B-1 and Stealth bombers.

The lowest opportunity cost anywhere in Table 1.2 for Stealth bombers in terms of B-1 bombers

is

A. .4 B-1 bomber per Stealth bomber.

B. .3 B-1 bomber per Stealth bomber.

C. .2 B-1 bomber per Stealth bomber.

D. .10 B-1 bomber per Stealth bomber.

105.

Table 1.3 shows the hypothetical trade-off between different combinations of brushes and combs that might be produced in a year with the limited capacity for Country X, ceteris paribus.

Complete the table by calculating the required opportunity costs for brushes and combs.

On the basis of your calculations in Table 1.3, what is the opportunity cost of producing at point

M rather than point N?

A. 23 combs.

B. 21 combs.

C. 1 brush.

D. 2 brushes.

106.

Table 1.3 shows the hypothetical trade-off between different combinations of brushes and combs that might be produced in a year with the limited capacity for Country X, ceteris paribus.

Complete the table by calculating the required opportunity costs for brushes and combs.

On the basis of your calculations in Table 1.3, what is gained by producing at point M rather than point N?

A. 23 combs.

B. 21 combs.

C. 1 comb.

D. 2 combs.

107.

Table 1.3 shows the hypothetical trade-off between different combinations of brushes and combs

that might be produced in a year with the limited capacity for Country X, ceteris paribus.

Complete the table by calculating the required opportunity costs for brushes and combs.

On the basis of your calculations in Table 1.3, what is gained from producing at point L rather than point K?

A. 17 combs.

B. 10 combs.

C. 1 brush.

D. 7 brushes.

108.

Table 1.3 shows the hypothetical trade-off between different combinations of brushes and combs that might be produced in a year with the limited capacity for Country X, ceteris paribus.

Complete the table by calculating the required opportunity costs for brushes and combs.

On the basis of your calculations in Table 1.3, the law of increasing opportunity costs applies to

A. Both brushes and combs.

B. Combs but not brushes.

C. Brushes but not combs.

D. Neither brushes nor combs.

109. Table 1.3 shows the hypothetical trade-off between different combinations of brushes and combs

that might be produced in a year with the limited capacity for Country X, ceteris paribus.

Complete the table by calculating the required opportunity costs for brushes and combs.

On the basis of your calculations in Table 1.3, in the production range of 2 to 3 combs the

opportunity cost of producing 1 more comb in terms of brushes is

A. 3.33.

B. 7.0.

C. 0.67.

D. 0.14.

110. Table 1.3 shows the hypothetical trade-off between different combinations of brushes and combs

that might be produced in a year with the limited capacity for Country X, ceteris paribus.

Complete the table by calculating the required opportunity costs for brushes and combs.

On the basis of your calculations in Table 1.3, in the production range of 21 to 23 brushes the

opportunity cost of producing more comb in terms of brushes is

A. 1/21.

B. 21/23.

C. 1/2.

D. 4.

111. Table 1.3 shows the hypothetical trade-off between different combinations of brushes and combs

that might be produced in a year with the limited capacity for Country X, ceteris paribus.

Complete the table by calculating the required opportunity costs for brushes and combs.

On the basis of your calculations in Table 1.3, in the production range of 1 to 2 combs the

opportunity cost of producing 1 more comb in terms of brushes is

A. 4.

B. 1/2.

C. 2/17.

D. 1/7.

112. Table 1.3 shows the hypothetical trade-off between different combinations of brushes and combs

that might be produced in a year with the limited capacity for Country X, ceteris paribus.

Complete the table by calculating the required opportunity costs for brushes and combs.

On the basis of your calculations in Table 1.3, the highest opportunity cost for brushes in terms of

combs is

A. 0.10 comb per brush.

B. 23 combs per brush.

C. 0.50 comb per brush.

D. 0.29 comb per brush.

113. Table 1.3 shows the hypothetical trade-off between different combinations of brushes and combs

that might be produced in a year with the limited capacity for Country X, ceteris paribus.

Complete the table by calculating the required opportunity costs for brushes and combs.

On the basis of your calculations in Table 1.3, the lowest opportunity cost for combs in terms of

brushes is

A. 10 brushes per comb.

B. 2 brushes per comb.

C. 0.33 brush per comb.

D. 8.5 brushes per comb.

114. One World View article is titled "Chronic Food Shortage Shows Despite Efforts by North Korea to

Hide It." On a production possibilities curve between private and public goods, a decrease in

military spending in an effort to increase food production could be represented as

A. A movement along the production possibilities curve toward more public goods.

B. A movement along the production possibilities curve toward more private goods.

C. A shift outward of the production possibilities curve.

D. A shift inward of the production possibilities curve.

115. One World View article is titled "Chronic Food Shortage Shows Despite Efforts by North Korea to

Hide It." If North Korea reduces the size of its military and produces more food, this is most consistent with

A. A movement along the economy's production possibilities curve.

B. Privatization.

C. A laissez faire policy.

D. The law of increasing opportunity costs.

116. The Economy Tomorrow on "Harnessing the Sun" states that the percentage of electricity that is generated from burning oil and coal is:

A. Less than 10%.

B. Between 10% and 30%.

C. Between 30% and 50%.

D. Greater than 50%.

117.

Figure 1.8 suggests that

A. The law of increasing opportunity cost does not apply.

B. Resources can be perfectly adapted between study time and grade point average.

C. The relationship between study time and grade point average is first linear, then nonlinear.

D. The relationship between study time and grade point average is constant.

118.

Refer to Figure 1.8. If the university decides to lower grading standards, then

A. This curve will shift rightward.

B. This curve will pivot up and to the left.

C. The curve will begin to bend downward at an earlier point.

D. We will slide up the curve from point B to point C.

119.

In Figure 1.9, as you move up the curve from point J toward point M, the slope

A. Increases.

B. Remains constant.

C. Decreases.

D . Becomes negative.

120.

In Figure 1.9, the slope of the line between points L and M is

A. 1.20.

B. 0.80.

C. 0.75.

D. 0.67.

121.

In Figure 1.9, the slope of the line between points K and L is

A. 1.25.

B. 0.80.

C. 0.75.

122.

In Figure 1.9 the slope of the line is

A. Greater at point K than point L.

B. Equal to zero at all points.

C. The same at points J and K.

D. Greater at point M than point L.

123. The slope of a curve at any point is given by this formula:

A. The change in y coordinates between two points divided by the change in their x coordinates.

B. The change in x coordinates between two points divided by the change in their y coordinates.

C. The percentage change in y coordinates between two points divided by the percentage

change in their x coordinates.

D. The percentage change in x coordinates between two points divided by the percentage

change in their y coordinates.

124. A line that slopes downward from left to right has a

A. Negative slope.

B. Positive slope.

C. Slope that changes as you move along the curve.

D. Slope of zero.

125. A linear function can be distinguished by

A. The continuous change in its slope.

B. The same slope throughout the line.

C. The changing relationship between the two variables.

D. A shift in the function.

126. When the relationship between two variables changes,

A. There is movement from one point on the curve to another point on the curve.

B. The curve becomes linear.

C. The entire curve shifts.

D. All of the choices are correct.

127. The fact that there are too few resources to satisfy all our wants is attributed to

A. Scarcity.

B. Greed.

C. Shortages.

D . Lack of money.

128. According to the text, there is no such thing as a free lunch because

A. The producer must charge something to cover the cost of production.

B. Resources used to produce the lunch could be used to produce other goods and services.

C. The government must raise taxes to pay for the lunches.

D. No one would pay for lunch anymore if they could get it for free.

129. In using a guns and butter production possibilities curve with increasing opportunity cost,

producing more and more tanks

A. Lowers the cost of each individual tank.

B. Can be done at a constant opportunity cost.

C. Requires us to give up larger and larger amounts of butter per tank produced.

D. Is not possible due to scarcity.

130. Producing at a point inside the production possibilities curve

A. Means society must be using its resources efficiently.

B. Is unattainable given the present level of technology.

C. Is feasible when the nation is at war but not feasible when the nation is at peace.

D. Suggests we are forgoing the ability to produce more of both goods.

131. Greater regulation to correct the imbalances in the economy, as well government intervention to

maintain full employment, was associated primarily with the work of

A. John Maynard Keynes.

B. Adam Smith.

C. Karl Marx.

D. Ronald Reagan.

132. The book Wealth of Nations was written by

A. Adam Smith in 1776.

B. John Maynard Keynes in 1776.

C. Adam Smith in 1936.

D. John Maynard Keynes in 1936.

133. Scarcity results when available resources cannot satisfy all desired uses of those resources.

True False

134. Critics of government regulation argue that government interference in the marketplace stifles the

animal spirits of entrepreneurship.

True False

135. Opportunity cost is a theoretical concept with no practical application.

True False

136. Every time we use scarce resources in one way, we give up the opportunity to use them in other

ways.

True False

137. The production possibilities decrease as more resources and better technology are utilized.

True False

138. All output combinations that lie outside a production possibilities curve are attainable with

available resources and technology.

True False

139. Output combinations that lie inside the production possibilities curve are characterized by

efficient use of resources.

True False

140. If the economy is inside the production possibilities curve, then more output can be produced

using existing resources.

True False

141. All economies must make decisions concerning what to produce, how to produce it, and for

whom to produce.

True False

142. The essential feature of the market mechanism is the price signal.

True False

143. Government failure occurs when government intervention fails to improve economic outcomes or

makes them worse.

True False

144. Microeconomics is concerned with individual performance as well as the economy as a whole.

True False

145. The Latin phrase ceteris paribus refers to holding other variables constant.

True False

146. To calculate the slope of a line, find the vertical distance between two points and divide it by the

horizontal distance between the same two points.

True False

147. The slope of a production possibilities curve is positive.

True False

148. When a curve shifts, the underlying relationship between the two variables has changed.

True False

149. Explain why an economist would say, "There is no such thing as a free lunch."

150. Describe the shape of the typical production possibilities curve and explain why it has this shape.

151. Why do opportunity costs increase as society produces more of a good?

152. Explain the concept of inefficiency in terms of a production possibilities curve.

153. Explain the difference between macroeconomics and microeconomics. Give examples of each.

154. How does the market mechanism answer the WHAT, HOW, and FOR WHOM questions

1. Approximately how much of the world's output does the United States produce?

A. 4 percent.

B. 20 percent.

C. 30 percent.

D. 1.5 percent.

2. The United States has roughly how much of the world's population?

A. 5 percent.

B. 10 percent.

C. 15 percent.

D. 20 percent.

3. The United States has roughly how much of the world's arable land?

A. 14 percent.

B. 12 percent.

C. 10 percent.

D. 8 percent.

4. The best definition of GDP is

A. The sum of the physical amounts of goods and services in the economy.

B. A dollar measure of final output produced during a given time period.

C. A measure of the per capita economic growth rate of the economy.

D. A physical measure of the capital stock of the economy.

5. The measure of final new goods and services produced in the United States is the

A. GDP of the United States.

B. Percentage change in the GDP of the United States.

C. Per capita GDP in the United States.

D. Total sales of all goods during the year.

6. Approximately how much of the world's output does China produce?

A. 13 percent.

B. 0 percent.

C. 9 percent.

D. 1.5 percent.

7. China has roughly how much of the world's population?

A. 10 percent.

B. 20 percent.

C. 30 percent.

D. 40 percent.

8. Which of the following countries (or regions) produces the most output annually?

A. Japan.

B. United States.

C. China.

D. Germany.

9. Which of the following statements is true about the U.S. economy?

A. The United States produces over one-fifth of the world's production.

B. The United States has the world's third largest economy.

C. The United States produces less than half as much as China does.

D . The United States produces less than one-third as much as Japan does.

10. Per capita GDP is

A. The sum of consumer goods, investment goods, government services, and net exports.

B. A dollar measure of the economic growth rate of a country.

C. The value of the factors of production used to produce output in a country.

D. GDP divided by total population.

11. Average GDP per person is

A. Also known as GDP.

B. Also known as per capita GDP.

C. The value of the factors of production used to produce output in a country.

D. A measure of the economic growth rate of a country.

12. Which of the following is an indicator of how much output the average person would get if all

output were divided up evenly among the population?

A. GDP.

B. Nominal GDP.

C. Per capita GDP.

D . Real GDP.

13. Those who are interested in assessing the relative standard of living of different countries over a

given time period are most likely to look at

A. GDP.

B. Percentage change in GDP.

C. Population.

D. Per capita GDP.

14. The best measure of how much output the average person would get if all output were divided

evenly among the population would be

A. GDP.

B. The economic growth of the economy.

C. Per capita GDP.

D. The capital stock of the economy.

15. Average living standards are best measured using

A. GDP.

B. The economic growth of the economy.

C. Per capita GDP.

D. The capital stock of the economy.

16. What percentage of the world's population subsists on incomes of less than $2 a day?

A. 33 percent.

B. 50 percent.

C. 60 percent.

D. 70 percent.

17. Per capita GDP will rise if GDP

A. Increases more rapidly than the population increases.

B. Increases at the same rate as the population increases.

C. Decreases and the population increases.

D. Increases more slowly than the population increases.

18. Per capita GDP will definitely fall if

A. The population falls.

B. The rate of economic growth falls.

C. The rate of economic growth is less than the rate of population growth.

D. There is a decrease in the size of the labor force.

19. Per capita GDP will definitely rise if

A. The population falls and GDP does not fall.

B. The rate of economic growth falls.

C. The rate of economic growth is less than the rate of population growth.

D. There is a decrease in the size of the labor force.

20. If population growth is less than output growth for a country,

A. Real GDP has decreased.

B. Average living standards will decrease.

C. GDP must have fallen at a fairly rapid rate.

D. The per capita living standard will increase.

21. If output growth exceeds population growth for a country,

A. Average living standards will increase.

B. GDP must have fallen at a very rapid rate.

C. Per capita GDP will decrease.

D. This country must have overcome the problem of scarcity.

22. Economic growth

A. Is an increase in output or real GDP.

B. Causes a contraction in the production possibilities curve.

C. Involves reduced capacity in the short run.

D. None of the choices are correct.

23. On average, since 1900 U.S. output has grown roughly ____ times faster than population growth.

A. 5

B. 4

C. 3

D. 2

24. On average, since 1900 the population of the United States has grown by roughly ____ percent

per year.

A. 9

B. 6

C. 3

D. 1

25. On average, since 1900 U.S. output has grown by roughly ____ percent per year.

A. 9

B. 6

C. 3

D. 1

26. Which of the following countries experienced a decline in total output from 2000 to 2009?

A. Canada.

B. Zimbabwe.

C. China.

D. Burundi.

27. Which of the following countries had the highest average growth rate for per capita GDP from

2000 to 2009?

A. Canada.

B. Haiti.

C. China.

D. Burundi.

28. The current U.S. economy is based primarily on the production of

A. Agricultural goods.

B. Goods for federal government use.

C. Manufacturing goods.

D. Services.

29. As the U.S. economy relies more and more heavily on the production of services rather than

goods,

A. GDP will decrease since there will be less real production.

B. International trade will become more difficult.

C. Mass unemployment will result.

D. Nearly all future job growth will be in service-producing industries.

30. Which of the following is considered a service in the calculation of GDP?

A. Reclining chairs.

B. Photographs.

C. Tax preparation.

D. Automobiles.

31. Differences in size of real GDP across countries are best explained by

A. Population growth.

B. Human capital.

C. Large farming sector.

D. None of the choices are correct.

32. Which of the following has been a century-long trend in the United States?

A. Decline of total value of world trade.

B. Relative increase in farming to manufacturing.

C. Relative decline in manufacturing to the service sector.

D. Relative decline in service sector to manufacturing.

33. Which of the following contains the two sectors whose percentage contribution to the real GDP

has declined since 1900?

A. Farming and manufacturing.

B. Manufacturing and exports.

C. Farming and services.

D. Services and exports.

34. High U.S. incomes have led to the transformation of the United States into primarily

A. A manufacturing economy.

B. A closed economy with little foreign trade.

C. An agricultural economy.

D . A service economy.

35. To an economist, the four factors of production are

A. Labor, workers, profit, and services.

B. Land, labor, capital, and entrepreneurship.

C. Entrepreneurship, machinery, workers, and profit.

D. None of the choices are correct.

36. The WHAT question can best be answered using data about which of the following?

A. The distribution of output among manufacturing, services, and agricultural sectors.

B. Per capita GDP.

C. Productivity.

D. The distribution of GDP among different income quintiles.

37. As of the year 2000, services accounted for what percentage of total U.S. output?

A. 25 percent.

B. 50 percent.

C. 80 percent.

D. 90 percent.

38. As of the year 2000, manufacturing, mining, and construction accounted for what percentage of

total U.S. output?

A. 15 percent.

B. 19 percent.

C. 28 percent.

D. None of the choices are correct.

39. As of the year 2000, agriculture accounted for what percentage of total U.S. output?

A. 1 percent.

B. 5 percent.

C. 8 percent.

D. None of the choices are correct.

40. Which component(s) of U.S. real GDP decreased in size relative to total U.S. real GDP from 1950

to 2000?

A. Only agriculture.

B. Only manufacturing.

C. Agriculture and manufacturing.

D. Only services.

41. Which component(s) of U.S. real GDP increased in size relative to total U.S. real GDP from 1950

to 2000?

A. Only agriculture.

B. Only manufacturing.

C. Agriculture and manufacturing.

D. Only services.

42. According to the World View chart in the text, from highest to lowest real GDP, which is correct?

A. United States, Japan, China, Germany, Britain.

B. United States, China, Japan, Germany, Russia.

C. United States, China, Japan, Germany, Britain.

D. United States, China, Germany, Japan, Canada.

43. According to the World View chart in the text, from highest to lowest real GDP per capita, which is

correct?

A. United States, Japan, France, Canada, China.

B. United States, China, Japan, Germany, Russia.

C. United States, Canada, Japan, France, South Korea.

D. United States, China, India, Jordan, Germany, Japan, Russia.

44. As of 2010, per capita GDP in the United States was approximately how many times the world

average?

A. 3.

B. 5.

C. 7.

D. 9.

45. As of 2010, per capita GDP in the United States was approximately

A. $26,000.

B. $37,000.

C. $47,000.

D. None of the choices are correct.

46. A capital-intensive production process is one that

A. Has a high ratio of labor to capital.

B. Has a high ratio of capital to labor.

C. Is used only in the United States.

D. All of the choices are correct.

47. A labor-intensive production process is one that

A. Has a low ratio of labor to capital.

B. Has a low ratio of capital to labor.

C. Is used only in the United States.

D. All of the choices are correct.

48. The United States has a larger real GDP than China because

A. The U.S. population is smaller but works in capital-intensive jobs.

B. The U.S. population is smaller but works in labor-intensive jobs.

C. The U.S. population is larger but works in capital-intensive jobs.

D. The U.S. population is larger but works in labor-intensive jobs.

49. As a country's literacy rate and human capital capacity increase, the relative number of

A. Labor-intensive production processes increases.

B. Capital-intensive production processes increases.

C. Sector service jobs decreases.

D. None of the choices are correct.

50. Regarding increasing productivity, factor mobility is

A. Important in that it helps to fix a stable labor-intensive production process.

B. Important in that it helps to fix a stable capital-intensive production process.

C. Important in that it helps to reallocate resources in a dynamic economy.

D. Not important in either a stable or dynamic economy.

51. Factor mobility aids in economic development when

A. A region suffers a natural disaster such as an earthquake or tornado.

B. A technological advance causes some firms to go out of business.

C. There is an increase in both outsourcing and insourcing.

D. All of the choices are correct.

52. How will an increase in factor mobility, ceteris paribus, affect an economy's production

possibilities curve?

A. Shift the curve inward.

B. Result in a movement from inside the curve to a point on the curve.

C. Shift the curve outward.

D. Result in a movement along the curve.

53. How will a decrease in technology from a natural disaster such as a hurricane, ceteris paribus ,

affect an economy's production possibilities curve?

A. Shift the curve inward.

B. Result in a movement from inside the curve to a point on the curve.

C. Shift the curve outward.

D. Result in a movement along the curve.

54. A U.S. firm that outsources jobs would be

A. Building a factory in Canada and hiring Canadian workers.

B. Buying raw materials from a Chinese firm instead of a U.S. firm.

C. Buying computers assembled in Mexico that used U.S. parts.

D. All of the choices are correct.

55. Although the necessary role of government in the economy is highly debated, many people agree

that it should

A. Provide a legal framework.

B. Protect the environment.

C. Protect consumers and labor.

D. All of the choices are correct.

56. In providing a legal framework, the government

A. Protects patents to encourage entrepreneurship.

B. Protects copyrights to encourage textbook protection.

C. Protects the ownership of private property to encourage the private sector.

D. All of the choices are correct.

57. When the government provides a legal framework,

A. Private market transactions suffer and government market transactions suffer.

B. Private market transactions suffer and government market transactions benefit.

C. Private market transactions benefit and government market transactions benefit.

D. None of the choices are correct.

58. When the government provides a legal framework,

A. Domestic market transactions suffer and foreign trade market transactions suffer.

B. Domestic market transactions benefit and foreign trade market transactions benefit.

C. Domestic transactions benefit and foreign market transactions suffer.

D. None of the choices are correct.

59. The term externalities refers to

A. Only positive benefits of a market activity borne by a third party.

B. Only negative costs of a market activity borne by a third party.

C. The negative costs and positive benefits of a market activity borne by a third party.

D. None of the choices are correct.

60. An example of a positive externality is

A. Increased factory use of private sector robotics that came from government research.

B. Increased health problems from air pollution.

C. Increased business profits at a hardware store that benefited from a tornado.

D. None of the choices are correct.

61. The government regulates monopolies in order to

A. Ensure that product quality meets minimum standards.

B. Prohibit mergers or acquisitions that would lessen competition.

C. Protect consumers from false advertising.

D. All of the choices are correct.

62. The government intervenes in the economy to protect labor by

A. Enforcing minimum age and working conditions for child labor.

B. Ensuring workplace safety conditions.

C. Ensuring minimum wages in addition to overtime provisions.

D. All of the choices are correct.

63. According to economists, which of the following is NOT a factor of production?

A. Land.

B. Labor.

C. Money.

D. Entrepreneurship.

64. An example of human capital would be

A. A computer.

B. Carpentry skills.

C. A carpenter's saw.

D. All of the choices are correct.

65. The term factor of production refers to

A. Only those goods that are produced and then used to produce other goods and services.

B. Labor only.

C. Any resource used to produce goods and services.

D. Factories and machinery only.

66. Human capital is defined as the

A. Amount of machinery, factories, and buildings an individual owns.

B. Dollar value of all the stocks and bonds an individual owns.

C. Knowledge and skills workers possess.

D. None of the choices are correct.

67. How will an increase in the level of human capital, ceteris paribus, affect an economy's

production possibilities curve?

A. Shift the curve inward.

B. Result in a movement from inside the curve to a point on the curve.

C. Shift the curve outward.

D. Result in a movement along the curve.

68. As a nation's average education level increases, the nation's level of productivity

A. Increases, and the production possibilities curve shifts to the right.

B. Decreases, and the nation's production possibilities curve shifts to the left.

C. Increases, and the nation moves to a new point on the same production possibilities curve.

D. Decreases, and the nation moves to a new point on the same production possibilities curve.

69. Which of the following will increase the level of human capital in an economy?

A. An increase in land mass.

B. An increase in literacy rates.

C. An increase in factory capacity.

D . A decrease in the population.

70. In terms of an economy's production possibilities curve, a decrease in the level of human capital,

ceteris paribus, will cause

A. An inward shift of the curve.

B. A movement from the curve to a point inside the curve.

C. A movement along the curve.

D. An expansion of the curve.

71. Productivity is a measure of

A. Output per unit of input.

B. Output per dollar of input.

C. Input per unit of output.

D. Input per dollar of output.

72. Productivity

A. Rises when the value of output rises relative to the cost of inputs.

B. Falls when the value of output rises relative to the cost of inputs.

C. Rises when the ratio of output to input increases.

D. Falls when factors of production cost more.

73. Which of the following definitely means productivity has increased?

A. More output from fewer workers.

B. Less output from fewer workers.

C. More output from more workers.

D. Less output from more workers.

74. When economists describe a production process as capital-intensive, they mean that the

A. Process uses a high ratio of machinery and other capital to labor.

B. Process needs a greater emphasis on labor in order to increase productivity.

C. Capital used in the process reflects the most advanced technology.

D. Capital used in the process tends to wear out (depreciate) very rapidly.

75. Production processes that use a high ratio of capital to labor inputs are referred to as

A. Labor-intensive.

B. Production-intensive.

C. Capital-intensive.

D. Factor-intensive.

76. Which of the following contributes to the high productivity of American workers?

A. The labor-intensive production process in the United States.

B. The abundance of capital relative to labor.

C. The low level of factor mobility.

D. The decreasing investment in human capital.

77. Which of the following is likely to be most capital-intensive?

A. Farming in developing countries.

B. Production of apparel by the Chinese.

C. Oil refining in the United States.

D. None of the choices are correct.

78. The investment in human capital through education and training can result in

A. Greater productivity.

B. Low factor mobility.

C. Less capital-intensive production.

D. Reduced output per labor hour.

79. Factor mobility refers to

A. Technological change in the use of capital.

B. The ease of reallocating resources.

C. Technological change in the use of labor.

D. The increase in labor productivity.

80. When workers move from one industry to another in response to demand changes, this is an

example of

A. Factor quality.

B. Factor mobility.

C. Capital stock.

D. The decreasing investment in human capital.

81. One characteristic that has allowed the U.S. economy to change the mix of output in response to

consumer demand is the

A. Ease with which resources move from one industry to another.

B. Abundance of scarce resources.

C. Large number of proprietorships.

D. Labor-intensive production process.

82. Whenever technology advances, an economy can produce more output with

A. Fewer resources.

B. More resources.

C. Current resources.

D. No resources.

83. Which of the following does not contribute to the high productivity of the U.S. economy?

A. The capital stock.

B. Factor mobility.

C. Negative externalities.

D. Technology.

84. Which of the following will contribute to accelerated growth for the U.S. economy?

A. A decrease in factor mobility.

B. A decrease in the number of government-sponsored student loans.

C. Increased use of outsourcing for inputs and increased use of comparative advantage for trade

in final goods and services.

D. A decrease in tax credits for research and development.

85. Outsourcing leads to

A. Increases in productivity and increases in total output.

B. Increases in productivity and decreases in total output.

C. Decreases in productivity and increases in total output.

D. Decreases in productivity and decreases in total output.

86. Outsourcing leads to

A. Increases in total output, but with temporary job losses for some domestic workers.

B. Increases in total output, but with permanent job losses for some domestic workers.

C. Decreases in total output, but with no changes in the number of domestic jobs available.

D. Decreases in total output, along with permanent job losses for some domestic workers.

87. Which of the following would be a legitimate government activity in the U.S. economy?

A. The provision of public goods and services.

B. The regulation of water pollution.

C. Enforcing child labor laws.

D. All of the choices are correct.

88. The government establishes the rules of the game for economic transactions in order to

A. Legitimatize and enforce contracts.

B. Discourage the production of capital.

C. Discourage the ownership of property.

D. Encourage spillover costs.

89. The term externalities refers to

A. Black-market economic activity.

B. The impact on markets of imported goods.

C. The costs or benefits of a market activity borne by a third party.

D. The inequitable distribution of income.

90. The cost or benefit of a market activity borne by a third party is

A. An externality.

B. A government directive.

C. A monopoly.

D. Black-market economic activity.

91. Which of the following is an example of an external cost?

A. Unemployment.

B. Unfair pricing behavior by a monopoly.

C. Automobile exhaust fumes.

D. Poverty.

92. When the production of a good creates external costs,

A. Profits for the producer of the good will be lower.

B. Production of the good will be lower.

C. Society's collective well-being will be lower.

D. The level of environmental pollution will be lower.

93. Goods that have spillover costs are overproduced because

A. The government has failed to establish rules for contracts.

B. Most businesses are more concerned about profits than how the environment is affected.

C. The government has failed to enforce contract provisions.

D. The government is concerned about broad economic welfare.

94. Government intervention to reduce the level of pollution is prompted by the existence of

A. An inequitable distribution of income.

B. Negative externalities.

C. A monopoly.

D. Government failure.

95. The government regulates food additives

A. To keep food producers from dominating their markets.

B. To restrain the market power of food producers.

C. To assess their safety.

D. To prevent externalities.

96. A monopoly exists when

A. A small number of firms are the only producers of a good.

B. Consumers are being exploited.

C. The government intervenes on behalf of consumers.

D. One firm produces the entire market of a good or service.

97. When unregulated monopolies exist,

A. Prices tend to be higher than with a competitive market.

B. Quality tends to be higher than with a competitive market.

C. Production tends to be higher than with a competitive market.

D. Externalities occur.

98. The purpose of antitrust policy in the United States is to

A. Encourage competition among producers.

B. Check the validity of advertising claims.

C. Determine drug safety and performance.

D. Encourage business mergers and acquisitions.

99. In a market economy with no government intervention, the HOW to produce question is based on

A. Production costs alone.

B. Production costs plus environmental considerations.

C. Environmental considerations only.

D . Consumer demand.

100. The result of government intervention in the market is that

A. Society is always better off.

B. The production possibilities curve always shifts outward.

C. Society may be worse off.

D. Society is always worse off.

101. Which of the following statements about the way markets allocate resources is most accurate

from society's perspective?

A. The market always allocates resources in the best way.

B. The market may allocate resources in a way that is not in society's best interest.

C. Resource allocation by markets may not be perfect, but it is always better than government

allocation of resources.

D. Markets always fail to allocate resources properly, so we must rely on the government to

determine the proper use of our resources.

102. The bottom 80 percent of the families in the United States receive approximately ______ percent

of total income.

A. 10

B. 20

C. 50

D. 90

103. The theory of how to grow GDP is

A. An equity concept while the theory of how to divide GDP is an equity concept.

B. An equity concept while the theory of how to divide GDP is an efficiency concept.

C. An efficiency concept while the theory of how to divide GDP is an equity concept.

D. An efficiency concept while the theory of how to divide GDP is an efficiency concept.

104. Income inequality is greatest in

A. Poorest countries.

B. Middle-income countries.

C. Richest countries.

D. None of the choices are correct.

105. A country that increased its literacy rate and thereby its average human capital would probably

A. Increase GDP but not equity.

B. Increase GDP and increase equity.

C. Increase GDP and decrease equity.

D. None of the choices are correct.

106. A rich country that opened its borders to trade with a poor country would cause in the long run

A. Increased GDP for the rich country but not the poor country.

B. Increased GDP for the rich country and the poor country.

C. Increased GDP for the poor country but not the rich country.

D. None of the choices are correct.

107. A rich country that opened its borders to trade with a poor country would cause in the long run

A. More equitable distribution of income GDP for the rich country but not the poor country.

B. More equitable distribution of income GDP for the poor country but not the rich country.

C. More equitable distribution of income GDP for the rich country and the poor country.

D. None of the choices are correct.

108. As of 2010, to be in the top quintile for income distribution in the United States, a family needed

in income at least

A. $52,000.

B. $85,000.

C. $102,000.

D . $114,000.

109. As of 2010, to be in the bottom quintile for income distribution in the United States, a family

needed in income no more than

A. $15,000.

B. $21,000.

C. $27,000.

D. $35,000.

110. As of 2010, for income distribution in the United States, the minimum family earnings in the top

quintile were approximately _______ times the maximum family earnings in the bottom quintile.

A. 3

B. 5

C. 7

D. 10

111. A laissez faire economy

A. Relies predominantly on government policy rather than free market action.

B. Relies predominantly on free market action rather than government policy.

C. Relies equally on government policy and free market action.

D. None of the choices are correct.

112. The income distribution of the United States is basically the nation's answer to the

A. WHAT question.

B. HOW question.

C. FOR WHOM question.

D. WHAT, HOW, and FOR WHOM questions.

113. Which of the following statements is true concerning income inequality?

A. Income is equally distributed in poor countries.

B. Developed countries have greater income inequality than developing countries.

C. The government has no way to alter income inequality.

D. The free market produces an unequal distribution of income.

114. One-fifth of the population, rank ordered by income, is

A. A population quintile.

B. An income quintile

C. An earnings-population quintile.

D. None of the choices are correct.

115. The richest 20 percent of the families in the United States receive approximately ______ percent

of total income.

A. 10

B. 20

C. 50

D. 90

116. The 20 percent of families with the lowest income in the United States receive approximately

______ percent of total income.

A. 1

B. 3

C. 15

D. 20

117. When compared to the average household in most low-income countries, poor people in the

United States receive

A. About the same amount of goods and services.

B. Somewhat fewer goods and services.

C. Far fewer goods and services.

D. Far more goods and services.

118. Income inequality is

A. Often greatest in the richest countries.

B. An issue because households in the lowest quintile receive more than their share of income.

C. Often greatest in the poorest countries.

D. Not an issue in the United States because of the redistribution of income through the federal

tax system.

119. Income inequalities are greatest in

A. Highly developed countries.

B. Poor countries.

C. Rich countries.

D. Countries with many factors of production.

120. According to the World View titled "Income Share of the Rich," in which of the following would the

top tenth of the population be most likely to receive the highest percentage of the country's

income?

A. Namibia.

B. South Africa.

C. Canada.

D. Japan.

121. According to the World View titled "Income Share of the Rich," in which of the following would the

top tenth of the population be most likely to receive the highest percentage of the country's

income?

A. Japan.

B. The United States.

C. Germany.

D . Haiti.

122. According to the World View excerpt that compares GDP figures for several nations, Japan's real

GDP is approximately

A. Second only to that of the United States.

B. More than that of China.

C. More than that of Germany.

D. All of the choices are correct.

123. According to the World View excerpt that compares GDP figures for several nations, Russia's

real GDP is approximately

A. More than that of Germany.

B. More than that of China.

C. More than that of South Korea.

D. None of the choices are correct.

124. The World View article titled "The Education Gap between Rich and Poor Nations" says that 85

percent of all Americans graduate from high school. This is an example of

A. The inequitable distribution of income.

B. A negative externality.

C. Investment in human capital.

D. Capital-intensive production.

125. The World View article titled "The Education Gap between Rich and Poor Nations" says that a greater percentage of people graduate from high school in rich nations than in poor nations. This investment in human capital can lead to

A. Lower productivity.

B. Increased output per worker.

C. Lower labor quality.

D. A bigger capital stock.

126. The World View article in the text titled "Income Share of the Rich" reports, "In poor, developing

countries the richest tenth of the population typically gets 40 to 50 percent of all income." Which

of the following is a form of government intervention designed to change this situation?

A. Antitrust laws.

B. Spillover costs.

C. Laissez faire.

D. Rich nations opening up their domestic markets to exports from poor nations.

127. In the United States today, nearly _________ of the population has attained a college degree.

A. 30 percent

B. 15 percent

C. 50 percent

D . 40 percent

128. The role of the government in establishing how private business can operate includes all of the

following except

A. Providing a legal framework.

B. Providing raw materials to business.

C. Protecting the environment.

D. Protecting consumers from defective products.

129. According to the World View article that compares GDP per capita figures for several nations,

which of the following nations has the highest GDP per capita?

A. Japan.

B. Great Britain.

C. United States.

D. China.

130. Externalities measure

A. Only costs of a market activity borne by a third party.

B. Only benefits of a market activity borne by a third party.

C. Either costs or benefits of a market activity borne by a third party.

D. None of the choices are correct.

131. Over many years the capital stock in the United States has grown to approximately

A. $50 trillion.

B. $40 trillion.

C. $30 trillion.

D. $20 trillion.

132. The GDP is a measure of the market value of all final goods and services produced in the

economy in a given time period.

True False

133. The GDP of the United States includes production by foreign-owned firms that are located in the

United States.

True False

134. The standard of living rises when population growth exceeds economic growth.

True False

135. The relative decline in goods production compared to services produced means that we're

producing fewer goods than in earlier decades.

True False

136. On average over the last century, the U.S. population has grown three times as fast as the U.S.

real GDP.

True False

137. A good approximation of a country's standard of living is per capita GDP, which is population

divided by real GDP.

True False

138. According to the World Bank, nearly one-third of the people on earth subsist on incomes of less than $2 per day.

True False

139. In the years from 2000 through 2009, China's standard of living or per capita GDP grew faster than that of the United States.

True False

140. Education and training are examples of investment in human capital.

True False

141. The high productivity of the U.S. economy results from using highly educated workers in a capital-intensive production process.

True False

142. Outsourcing is a source of increased U.S. output.

True False

143. Government intervention is sometimes used to reduce the external costs of production.

True False

144. Monopolists can dictate the price or the quantity of the product they produce, but not both.

True False

145. The richest fifth of U.S. households get nearly half of all U.S. income.

True False

146. Income inequalities are often greatest in the poorest countries.

True False

147. How is per capita GDP calculated, and what does it tell us about the economy?

148. How is per capita GDP affected by GDP growth and population growth?

149. Compare the composition of U.S. output in the year 1900 with its composition in the year 2000.

150. What are externalities, and how do they affect who pays the true cost of a polluting factory?

151. What factors contribute to the high level of productivity of the American worker?

152. What is human capital, and how does it affect U.S. productivity?

1. Who participates in markets?

A. Business firms.

B. Business firms and consumers.

C. Consumers and government agencies.

D. All of the choices are correct.

2. The goal of the consumer in a market economy is to use his or her limited income to buy

A. The greatest number of goods and services possible.

B. The goods and services that maximize profits for businesses.

C. Those goods and services with the lowest prices.

D. The set of goods and services that maximizes the consumer's total utility.

3. The goal of the business firms in a market economy is to maximize

A. Total profits.

B. Total sales.

C. Total utility.

D. Total welfare.

4. People benefit by participating in the market because

A. Resources are no longer limited.

B. There are always participants in the market that are more efficient than you are in production.

C. Market participation allows individuals to specialize and, with trade, ultimately consume more.

D. Participants in the market do not have to make choices.

5. Which of the following is a market transaction?

A. A stock increases in value over the 30 years that it is owned.

B. A college student purchases a laptop computer.

C. Weather destroys a farmer's crops, leaving the farmer unable to buy groceries.

D. A radio station changes its programming from classical to rock.

6. A factor market is any place or process where

A. Finished goods are bought and sold.

B. Land, labor, or capital is bought and sold.

C. Finished services are bought and sold.

D. None of the choices are correct.

7. Which of the following is purchased in a product market?

A. Cell phone service.

B. Undeveloped farmland in Texas.

C. Crude oil.

D. The skills of an X-ray technician.

8. Which of the following is purchased in a factor market?

A. A bag of jellybeans.

B. National defense.

C. The labor of a state university professor.

D. A motorized scooter used for commuting by a student.

9. Business firms supply goods and services to ____ and purchase factors of production in ____.

A. factor markets; product markets

B. national markets; factor markets

C. product markets; factor markets

D. factor markets; national markets

10. Individual consumers supply ____ and purchase ____.

A. factors of production; final goods and services

B. intermediate goods; final goods and services

C. final goods and services; factors of production

D. national goods and services; factors of production

11. International participants

A. Take no part in American markets.

B. Participate only in American product markets.

C. Participate only in American factor markets.

D. Participate in both American factor markets and American product markets.

12. A market in which final goods and services are exchanged is a

A. Public goods market.

B. Product market.

C. Factor market.

D. Labor market.

13. A buyer is said to have a demand for a good only when

A. The buyer wants to own the good.

B. The buyer is both willing and able to purchase the good at alternative prices.

C. The price of the good is low enough.

D. An adequate supply of the good is available for purchase.

14. Jessie's demand schedule for candy bars indicates

A. Her opportunity cost of buying candy bars.

B. How much she likes candy bars.

C. How many candy bars she will actually buy.

D. Why she likes candy bars.

15. The term opportunity cost refers to the

A. Value of all the alternatives given up when a good or service is produced.

B. Financial costs of all the factors of production used to produce a good or service.

C. Amount of resources used to produce a good but not a service.

D. Value of the best alternative given up when a good or service is produced.

16. The most desired goods or services that are given up when a choice is made are called the

A. Rationing device.

B. Economic profit.

C. Opportunity cost.

D. Utility cost.

17. Ceteris paribus , if the opportunity cost of purchasing a good rises, then the maximum price a

particular consumer is willing to pay for that good

A. Does not change since the demand curve does not change.

B. Decreases.

C. Increases.

D. Decreases as long as supply also falls.

18. According to the law of demand, during a given period of time, the quantity of a good demanded

A. Increases as its price rises, ceteris paribus.

B. Increases as its price falls, ceteris paribus.

C. Decreases as its price falls, ceteris paribus.

D. Does not change when price changes.

19. According to the law of demand, a demand curve

A. Has a negative slope.

B. Is a horizontal or flat line.

C. Has a positive slope.

D. Exceeds the economy's ability to produce.

20. A lower quantity demanded of a good reflects, ceteris paribus,

A. Lower income.

B. A downward shift of the supply curve.

C. A higher price of the good.

D. Fewer units actually purchased.

21. Ceteris paribus , if the price of a digital camera rises, then we can expect

A. An increase in the demand for digital cameras.

B. An increase in the quantity demanded of digital cameras.

C. A decrease in the demand for digital cameras.

D. A decrease in the quantity demanded of digital cameras.

22. Ceteris paribus , which of the following is most likely to cause an increase in the quantity

demanded of perfume?

A. A decrease in the price of perfume.

B. A decrease in tastes for perfume.

C. An increase in income.

D. An increase in the price of electricity.

23. Which of the following is not held constant along a given demand curve for a good?

A. Price.

B. Consumer's income.

C. The price of substitutes.

D. Consumer tastes.

24. Ceteris paribus , which of the following would generally cause an increase in the demand curve for

new automobiles?

A. A decrease in the price of new automobiles.

B. An increase in consumers' income.

C. The new models being perceived as ugly compared with old models.

D. Consumer expectations that the price of new automobiles will be lower next year.

25. Ceteris paribus , which of the following would you expect to have no effect on the demand curve

for new automobiles?

A. A rise in the price of gasoline.

B. Consumer expectations that the price of new automobiles will be lower next year.

C. Consumer expectations that a significant recession will develop and last for a year.

D. An increase in the price of new automobiles.

26. Ceteris paribus , if buyers expect the price of airline tickets to fall in the future, then right now there

should be

A. An increase in the demand for airline tickets.

B. A decrease in the supply of airline tickets.

C. A decrease in the demand for airline tickets.

D. No change in the supply of or demand for airline tickets because the price is not changing right

now.

27. Which determinant of demand changes in the personal computer market as more individuals

become interested in "surfing the Internet"?

A. Cost of factors of production.

B. Income.

C. Expectations.

D. Number of buyers.

28. Assume that pencils and pens are substitutes. If the price of pencils rises, then we will see

A. An increase in the demand for pens.

B. A decrease in the demand for pens.

C. An increase in the supply of pens.

D. A decrease in the supply of pens.

29. If bagels and doughnuts are substitutes, then a decrease in the price of doughnuts will result in

A. An increase in the demand for doughnuts.

B. A decrease in the demand for doughnuts.

C. An increase in the demand for bagels.

D. A decrease in the demand for bagels.

30. If there are only two airlines that fly between Dallas and New Orleans, what will happen in the

market for one airline if the other one goes out of business?

A. The demand curve will shift to the right.

B. The demand curve will shift to the left.

C. There will be a movement to the right along the initial demand curve.

D. There will be a movement to the left along the initial demand curve.

31. Peanut butter and jelly are complements. A decrease in the price of one will result in

A. A decrease in the demand for the other.

B. A decrease in the quantity demanded of the other.

C. An increase in the demand for the other.

D. An increase in the quantity demanded of the other.

32. Assume a series of forest fires reduces the supply of lumber, which is an input in the production

of wooden bats. Baseballs and wooden bats are complements. If the price of wooden bats

increases, we can expect the

A. Demand for baseballs to decrease.

B. Supply of baseballs to decrease.

C. Demand for baseballs to increase.

D. Supply of baseballs to increase.

33. Ceteris paribus means

A. Holding everything constant except for the variables you are interested in examining.

B. Allowing the free market to decide, not government.

C. Changing prices to see how demand or supply shifts.

D. Holding constant the determinant of demand or supply that you are interested in examining.

34. A change in demand means there has been a shift in the demand curve, and a change in quantity

demanded

A. Results from a change in price of other goods.

B. Means a shortage or surplus will result from holding prices constant.

C. Also means demand has shifted.

D. Means that price has changed and there is movement along the demand curve.

35. Market demand is determined by all of the following except

A. The number of potential sellers.

B. Income.

C. Tastes.

D. Expectations about future income.

36. To calculate market demand, we

A. Add the quantities demanded for each individual demand schedule horizontally.

B. Add the quantities demanded for each individual demand schedule vertically.

C. Find the average quantity demanded at each price.

D. Find the difference between the quantity demanded and the quantity supplied at each price.

37. Which of the following is a determinant of market supply?

A. Consumer expectations.

B. Consumers' income.

C. Consumers' desire for the good.

D. Available technology.

38. Which of the following is a determinant of supply?

A. Consumer tastes or preferences.

B. The prices of the factors of production.

C. Income.

D. Number of buyers.

39. A change in the price of a good

A. Causes a shift in the supply curve.

B. Results in a change in quantity supplied.

C. Results in a change in supply.

D . Is a determinant of supply.

40. Which of the following is not held constant along a given supply curve for a good?

A. The cost of factors of production.

B. Price.

C. Technology.

D. Taxes.

41. Ceteris paribus , which of the following is most likely to cause an increase in the quantity supplied

of perfume?

A. An improvement in perfume-making technology.

B. An increase in the salaries paid to perfume makers.

C. An increase in the price of perfume.

D. An increase in the number of sellers of perfume.

42. A shift in supply is defined as a change in

A. Price.

B. Quantity supplied because of a change in price.

C. Equilibrium quantity.

D. Supply because of a change in a nonprice determinant.

43. Ceteris paribus , which of the following is most likely to cause a decrease in the supply of

skateboards?

A. An increase in the price of skateboards.

B. An increase in the cost of materials used to produce skateboards.

C. An improvement in skateboard-making technology.

D. All of the choices are correct.

44. The law of supply implies that

A. Supply curves are flat.

B. Supply curves are upward-sloping to the right.

C. Supply curves are downward-sloping to the right.

D. A change in a determinant of demand shifts the supply curve.

45. To calculate market supply, we

A. Add the quantities supplied for each individual supply schedule horizontally.

B. Add the quantities supplied for each individual supply schedule vertically.

C. Find the average quantity supplied at each price.

D. Find the difference between the quantity supplied and the quantity demanded at each price.

46. Ceteris paribus , if the subsidies given to corn syrup producers decrease, then we can expect

A. A decrease in the demand for corn syrup.

B. A decrease in the supply of corn syrup.

C. An increase in the demand for corn syrup.

D. An increase in the supply of corn syrup.

47. Which of the following events would cause a rightward shift in the market supply curve for

automobiles?

A. A technological improvement that reduces the cost of production.

B. An increase in the wages of autoworkers.

C. A higher sales tax on automobiles.

D. A decrease in the number of sellers.

48. If corn and wheat are alternative pursuits for a farmer, a change in the supply of corn will take

place when, ceteris paribus,

A. The price of corn changes.

B. The price of wheat changes.

C. The demand for corn changes.

D. Consumers want to buy more corn at the same price.

49. Which of the following would not cause the market supply of cell phones to change?

A. Telecommunications are deregulated, and anyone who wants to can produce and sell cell

phones.

B. A cheaper technology for producing plastics used in producing cell phones is developed.

C. A reduction in the demand for cell phones causes the price to fall.

D. Taxes levied on cell phone production are reduced.

50. Assume that steel is used to produce monkey wrenches. Ceteris paribus, if the price of steel

rises, then

A. The supply curve for monkey wrenches will shift to the left.

B. The supply curve for monkey wrenches will shift to the right.

C. There will be a leftward movement along the initial supply curve for monkey wrenches.

D. There will be a rightward movement along the initial supply curve for monkey wrenches.

51. Which of the following can change without shifting either demand or supply, ceteris paribus?

A. The price of the good itself.

B. The prices of other goods.

C. Incomes.

D. Expectations.

52. Ceteris paribus , which of the following is most likely to shift both the demand and the supply

curves?

A. Technology.

B. Expectations.

C. The price of the good itself.

D. Income.

53. A market is said to be in equilibrium when

A. Demand is fully satisfied at all alternative prices.

B. The buying intentions of all consumers are realized.

C. The supply intentions of all sellers are realized.

D. The quantity demanded equals the quantity supplied.

54. The equilibrium price in a market is found where

A. The market supply curve intersects the market demand curve.

B. The market supply curve intersects the y-axis.

C. The market demand curve intersects the y-axis.

D. The market supply curve intersects the x-axis.

55. At the equilibrium price, there are

A. Shortages.

B. Surpluses.

C. Excess inventories.

D . No shortages or surpluses.

56. If there is a shortage at a given price, then

A. That price is the equilibrium price.

B. That price is greater than the equilibrium price.

C. That price is less than the equilibrium price.

D. There is no equilibrium price in the market.

57. If there is a surplus at a given price, then

A. The market is in equilibrium at that price.

B. That price is greater than the equilibrium price.

C. That price is lower than the equilibrium price.

D. The price is zero.

58. In most markets, the equilibrium price is achieved

A. Through detailed databases.

B. Using an equilibrium price formula.

C. Through government mandate.

D. Through trial and error.

59. The term market mechanism refers to

A. The use of market prices and sales to determine resource allocation.

B. The establishment of a ceiling price in a market.

C. Supply curves but not demand curves.

D. Government laws and regulations concerning how the market should operate.

60. When a surplus exists for a product,

A. Producers increase supply.

B. Consumers increase demand.

C. Government purchases decrease.

D. Producers reduce the level of output and reduce price.

61. A ballet performance had many empty seats. This implies that the

A. Hall where the performance was being held was very large.

B. Price of the tickets must have been very low because of the low demand.

C. Ballet group was not very well known.

D. Price of the tickets must have been above the equilibrium price.

62. If the quantity demanded of a good is greater than the quantity supplied of the good at the current

price, then

A. Price will increase until it reaches the equilibrium price.

B. The demand curve will shift to the left to create equilibrium.

C. The supply curve will shift to the right to create equilibrium.

D. There is a surplus of the good.

63. A market shortage is

A. The amount by which the quantity demanded exceeds the quantity supplied at a given price.

B. The result of a price floor.

C. A situation in which producers cannot sell all the goods and services that they are willing and

otherwise able to sell.

D. The amount by which the cost of production exceeds the price of a good.

64. As a result of a shortage,

A. Consumers increase demand for the product.

B. Producers reduce supply.

C. Producers increase output and raise price.

D. Government purchases decrease.

65. Tickets to a sporting event go on sale and sell out almost instantly. This implies that

A. There are too many tickets to the event.

B. The price for the tickets is below the equilibrium price.

C. The tickets must be very expensive.

D. There is a surplus of tickets.

66. A rightward shift in a demand curve and a rightward shift in a supply curve both result in a

A. Lower equilibrium price.

B. Lower equilibrium quantity.

C. Higher equilibrium price.

D. Higher equilibrium quantity.

67. A rightward shift in a demand curve and a leftward shift in a supply curve both result in a

A. Lower equilibrium price.

B. Lower equilibrium quantity.

C. Higher equilibrium price.

D. Higher equilibrium quantity.

68. A leftward shift of the market demand curve for HDTVs, ceteris paribus, causes equilibrium price

to

A. Increase and quantity to decrease.

B. Decrease and quantity to decrease.

C. Increase and quantity to increase.

D. Decrease and quantity to increase.

69. Ceteris paribus , an increase in the number of sellers of running shoes causes equilibrium price to

A. Decrease and equilibrium quantity to increase.

B. Decrease and equilibrium quantity to decrease.

C. Increase and equilibrium quantity to increase.

D. Increase and equilibrium quantity to decrease.

70. Assume peanut butter and jelly are complements. Ceteris paribus, an increase in the price of

peanut butter will cause the equilibrium price of jelly to

A. Increase and the equilibrium quantity of jelly to decrease.

B. Increase and the equilibrium quantity of jelly to increase.

C. Decrease and the equilibrium quantity of jelly to decrease.

D. Decrease and the equilibrium quantity of jelly to increase.

71. A rightward shift of the market demand curve for MP3 players, ceteris paribus, causes

equilibrium

A. Price to increase and equilibrium quantity to decrease.

B. Price to decrease and equilibrium quantity to decrease.

C. Price to increase and equilibrium quantity to increase.

D. Price to decrease and equilibrium quantity to increase.

72. When the demand for coffee increases, ceteris paribus, the equilibrium price will also increase

because

A. A shortage exists at the old equilibrium price.

B. There must be a surplus of the good.

C. The market supply and demand curves do not intersect.

D. Market demand must be upward-sloping.

73. Assume two goods are substitutes. Ceteris paribus, a decrease in the price of one good will

cause the equilibrium price of the other good to

A. Increase and the equilibrium quantity of the other good to increase.

B. Increase and the equilibrium quantity of the other good to decrease.

C. Decrease and the equilibrium quantity of the other good to increase.

D. Decrease and the equilibrium quantity of the other good to decrease.

74. Assume milk is used to produce ice cream. Ceteris paribus , a decrease in the price of milk will

cause the equilibrium price of ice cream to

A. Increase and the equilibrium quantity of ice cream to increase.

B. Increase and the equilibrium quantity of ice cream to decrease.

C. Decrease and the equilibrium quantity of ice cream to increase.

D. Decrease and the equilibrium quantity of ice cream to decrease.

75. An increase in the supply of gasoline, ceteris paribus, will cause equilibrium price

A. To rise and equilibrium quantity to fall.

B. To fall and equilibrium quantity to rise.

C. And equilibrium quantity to rise.

D. And equilibrium quantity to fall.