Question 1. The circular-flow diagram is a
A. visual model of how the economy is organized.
B. visual model of the relationships among money, prices, and businesses.
C. model that shows the effects of government on the economy.
D. mathematical model of how the economy works.
Question 2. In most societies, resources are allocated by
A.a single central planner.
B.a small number of central planners.
C.those firms that use resources to provide goods and services.
D.the combined actions of millions of households and firms.
Question 3. Buyers and sellers who have no influence on market price are referred to as
A. market pawns.
B. marginalists.
C. price takers.
D. price makers.
Question 4. In general, elasticity is a measure of
A.the extent to which advances in technology are adopted by producers.
B.the extent to which a market is competitive.
C.how fast the price of a good responds to a shift of the supply curve or demand curve.
D.how much buyers and sellers respond to changes in market conditions.
Question 5. The unique point at which the supply and demand curves intersect is called
A. market harmony.
B. coincidence.
C. cohesion.
D. equilibrium.
Question 6. Efficiency means that
A.society is conserving resources in order to save them for the future.
B. society's goods and services are distributed equally among society's members.
C. society's goods and services are distributed fairly, though not necessarily equally, among society's members.
D. society is getting the maximum benefits from its scarce resources.
Question 7. In economics, the cost of something is
A. the dollar amount of obtaining it.
B. always measured in units of time given up to get it.
C. what you give up to get it.
D. often impossible to quantify, even in principle.
Question 8. Factors of production are
A. the mathematical calculations firms make in determining their optimal production levels.
B. social and political conditions that affect production.
C. he physical relationships between economic inputs and outputs.
D. Inputs into the production process.
Question 9. A country's consumption possibilities frontier can be outside its production possibilities frontier if
A. the country’s technology is superior to the technologies of other countries.
B. the citizens of the country have a greater desire to consume goods and services than do the citizens of other countries.
C. the country engages in trade.
D. All of the above are correct.
Question 10. The midpoint method for calculating elasticities is convenient in that it allows us to
A. ignore the percentage change in quantity demanded and instead focus entirely on the percentage change in price.
B. calculate the same value for the elasticity, regardless of whether the price increases or decreases.
C. assume that sellers' total revenue stays constant when the price changes.
D. restrict all elasticity values to between 0 and 1.
Question 11. A price ceiling
A. Os a legal maximum on the price at which a good can be sold.
B. is often imposed in markets in which “cutthroat competition” would prevail without a price ceiling.
C. is often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price ceiling.
D. All of the above are correct.
Question 12. Suppose the United States has a comparative advantage over Mexico in producing pork. The principle of comparative advantage asserts that
A. the United States should produce more pork than what it requires and export some of it to Mexico.
B. the United States should produce a moderate quantity of pork and import the remainder of what it requires from Mexico.
C. the United States should refrain altogether from producing pork and import all of what it requires from Mexico.
D. Mexico has nothing to gain from importing United States pork.
Question 13. The term tax incidence refers to the
A. widespread view that taxes always will be a fact of life.
B. ongoing debate about which types of taxes make the most economic sense.
C. division of the tax burden between buyers and sellers.
D. division of the tax burden between sales taxes and income taxes.
Question 14. Economics is the study of
A. production methods.
B. how society manages its scarce resources.
C. how households decide who performs which tasks.
D. the interaction of business and government.
Question 15. Price controls are usually enacted
A.as a means of raising revenue for public purposes.
B. when policymakers believe that the market price of a good or service is unfair to buyers or sellers.
C. when policymakers detect inefficiencies in a market.
D. All of the above are correct.
Question 16. If demand is inelastic, then
A. buyers do not respond much to a change in price.
B. buyers respond substantially to a change in price, but the response is very slow.
C. buyers do not alter their quantities demanded much in response to advertising, fads, or general changes in tastes.
D. the demand curve is very flat.
Question 17. The opportunity cost of an item is
A.the number of hours needed to earn money to buy the item.
B. what you give up to get that item.
C. usually less than the dollar value of the item.
D. the dollar value of the item.
Question 18. A production possibilities frontier that is a straight line shows
A. a truer picture of the real world than does a bowed-out production possibilities frontier.
B. that resources can be shifted easily and seamlessly from the production of one good to the production of a different good.
C. that the opportunity cost of one good in terms of another good depends on the quantities of the two goods that the economy is producing.
D. All of the above are correct.
Question 19. Two goods are complements if a decrease in the price of one good
A. decreases the quantity demanded of the other good.
B. decreases the demand for the other good.
C. increases the quantity demanded of the other good.
D. increases the demand for the other good.
Question 20. Policymakers use taxes
A. to raise revenue for public purposes, but not to influence market outcomes.
B. both to raise revenue for public purposes and to influence market outcomes.
C. when they realize that price controls alone are insufficient to correct market inequities.
D.only in those markets in which the burden of the tax falls clearly on the sellers.
Question 21. Absolute advantage is found by comparing different producers’
A. opportunity costs.
B. payments to land, labor, and capital.
C. input requirements per unit of output.
D. locational and logistical circumstances.
Question 22. The signals that guide the allocation of resources in a market economy are
A. surpluses and shortages.
B. quantities.
C. property rights.
D. prices.
Question 23. The principle of comparative advantage does not provide answers to certain questions. One of those questions is as follows:
A. Do specialization and trade benefit more than one party to a trade?
B. Is it absolute advantage or comparative advantage that really matters?
C. How are the gains from trade shared among the parties to a trade?
D. Is it possible for specialization and trade to increase total output of traded goods?
Question 24. Economists make assumptions in order to
A. mimic the methodologies employed by other scientists.
B. minimize the number of experiments that yield no useful data.
C. minimize the likelihood that some aspect of the problem at hand is being overlooked.
D. focus their thinking on the essence of the problem at hand.
Question 25. The greater the price elasticity of demand, the
A. more likely the product is a necessity.
B. smaller the responsiveness of quantity demanded to a change in price.
C. greater the percentage change in price over the percentage change in quantity demanded.
D. greater the responsiveness of quantity demanded to a change in price.