1) The economic function of profits and losses is to:
a) bring about a more equal distribution of income.
b) signal that resources should be reallocated.
c) eliminate small firms and reduce competition.
d) tell government which industries need to be subsidized.
2) Other things equal, interest rates are:
a)higher on large loans than on small loans.
b)higher on loans with tax-exempt interest payments.
c)lower on less risky loans than on riskier loans.
d)lower on short-term loans than on long-term loans.
3) The primary force encouraging the entry of new firms into a purely competitive industry is:
a) normal profits earned by firms already in the industry.
b) economic profits earned by firms already in the industry.
c) government subsidies for start-up firms.
d) a desire to provide goods for the betterment of society.
4) Economists call the pursuit of a transfer of wealth through government at someone else's expense:
a) the paradox of voting.
b) adverse selection.
c) rent-seeking behavior.
d) the benefits-received principle.
5) Long-run real wages in the United States have:
a) risen, because growth in the demand for labor has exceeded growth in the supply of labor.
b) risen, because the supply of labor has fallen over time.
c) fallen, because growth in the supply of labor has exceeded growth in the demand for labor.
d) fallen, because the demand for labor has fallen over time.
6) The production possibilities curve illustrates the basic principle that:
a)the production of more of any one good will in time require smaller and smaller sacrifices of other goods.
b)an economy will automatically obtain full employment of its resources.
c)if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced.
d) an economy's capacity to produce increases in proportion to its population size.
7) The field of economics that analyzes government decision making, politics, and elections is called:
a) public finance.
b) public choice theory.
c) collective economics.
d) political economy.
8) If the several oligopolistic firms that comprise an industry behave collusively, the resulting price and output will most likely resemble those of:
a)bilateral monopoly.
b)pure monopoly.
c)monopolistic competition.
d)pure competition.
9) Which of the following is not a source of economies of scale?
a) learning-by-doing.
b) labor specialization.
c) use of larger machines.
d) inelastic resource supply curves.
10) The supply of land is:
a) almost perfectly inelastic.
b) negatively sloped.
c) relatively elastic.
d) perfectly elastic.
11) Defined narrowly as wages and salaries, labor's share of the national income is about:
a) 70 percent.
b) 53 percent.
c) 42 percent.
d) 89 percent.