Refer to the graph below.A government-imposed price floor of $2 will result in

Which of the following would help alleviate the impending

Which of the following would help alleviate the impending

Question
1
. Which of the following would help alleviate the impending Social Security problem? (Points : 2)

Reducing payroll taxes

Raising the age at which one is eligible to receive payments

Eliminating means testing

Dismantling the Social Security Trust Fund2
. The Social Security system is: (Points : 2)

Sound and faces no significant problems in the future
.

Threatened by large budget surpluses
.

Threatened by the recent collapse of the Social Security Trust Fund
.

Threatened by the retirement of the Baby Boomers
.

3
. It is known that part-time college professors are paid a flat fee per class taught
. This creates a price ceiling on the wages of certain professors, those teaching in the math and sciences
. Given what you know about price ceilings, what do you expect to see in the market for organic chemistry (science) professors? (Points : 2)

A shortage of organic chemistry professors

A surplus of organic chemistry professors

An equilibrium quantity of professors demanded and supplied

An excess supply of organic chemistry professors

4
. An “increase in the quantity demanded” means that (Points : 2)

the demand curve has shifted to the right
.

the supply curve has shifted to the left
.

price has declined and consumers therefore want to purchase more of the good
.

given supply, the price of the good can be expected to rise
.

5
. Refer to the graph below
. A government-imposed price floor of $2 will result in:

(Points : 2)

neither excess supply nor excess demand since it is binding
.

neither excess supply nor excess demand since it is not binding
.

an excess demand of 2
.

an excess supply of 2
.

6
. According to the text, the introduction of e-commerce is likely to do all of the following except: (Points : 2)

decrease competition
.

reduce overhead by creating virtual office-space
.

reduce the importance of conventional retailing
.

increase the amount of information available to buyers and sellers
.

7
. Refer to the graph below
. The relevant market is corn
. The impact of a poor corn harvest on the market for corn would most likely be demonstrated by which graph?

(Points : 2)

Graph A

Graph B

Graph C

Graph D

8
. The invisible hand is: (Points : 2)

not affected by social and political forces
.

affected by social but not political forces
.

affected by political but not social forces
.

affected by both political and social forces
.

9
. Economic reasoning is based on the premise that: (Points : 2)

all decisions or actions are costless
.

only non-economic decisions or actions have a cost associated with them
.

only economic decisions or actions have a cost associated with them
.

all decisions and actions have a cost associated with them
.

10
. The relationship between price and quantity supplied is given by the: (Points : 2)

law of opportunity cost
.

law of profit maximization
.

law of supply
.

law of demand
.

11
. The three central coordination problems of the economy given in the book are: (Points : 2)

what to produce, how to produce, and for whom to produce
.

whether to produce, what to produce, and why
.

for whom to produce, what to produce, and why
.

how to produce, when to produce, and what to produce
.

12
. The point where the PPC intersects the horizontal axis is: (Points : 2)

unattainable
.

attainable and efficient
.

attainable but inefficient
.

attainable and neither efficient nor inefficient
.

13
. Suppose that the table below shows the demand and supply schedules for pork bellies
. Based on the table, the equilibrium price of pork bellies is:

(Points : 2)

$0
.10/lb
.

$0
.25/lb
.

$0
.50/lb
.

$0
.75/lb
.

14
. The point at which quantity supplied is exactly equal to quantity demanded is called: (Points : 2)

equilibrium, because quantity demanded equals quantity supplied so there is no tendency for price to change
.

equilibrium, because quantity demanded exceeds quantity supplied so there is a shortage
.

equilibrium, because quantity supplied exceeds quantity demanded so there is a surplus
.

irrelevant, because real-world prices never reach this point
.

15
. Vietnam recently entered the coffee market with large exports of the crop
. The Coffee Growers Association was fearful that this would lead to lower coffee prices, and consequently launched a very successful advertising campaign, aimed at the youth, to turn their preferences towards drinking more coffee
. What occurred? (Points : 2)

Supply increased and demand increased

Supply decreased and demand increased

Supply increased and demand decreased

Supply decreased and demand decreased

16
. Faculty pay $15 per year for a parking permit, but many complain that they are not able to find a parking place in designated university lots
. This suggests that: (Points : 2)

the price paid is above equilibrium
.

the price paid is below equilibrium
.

the price paid is at equilibrium
.

the university should make parking free
.

17
. Refer to the graph below
. Without government intervention, market forces would result in:

(Points : 2)

800 labor hours demanded, 800 labor hours supplied, and a wage rate of $4
.60 per hour
.

500 labor hours demanded, 900 labor hours supplied, and a wage rate of $5
.15 per hour
.

1200 labor hours demanded, 500 labor hours supplied, and a wage rate of $3
.50 per hour
.

500 labor hours demanded, 500 labor hours supplied, and a wage rate of $5
.15 per hour
.

18
. The benefit forgone by not undertaking the next-best activity is called: (Points : 2)

the total cost
.

the sunk cost
.

the opportunity cost
.

the marginal cost
.

19
. A budget deficit that would not exist if the economy were at potential income is called: (Points : 2)

a passive deficit
.

a real deficit
.

a structural deficit
.

a nominal deficit
.

20
. Refer to the graph below
. The market is spinach
. Which graph best represents the impact of news reports carrying the story of an E Coli outbreak from consuming spinach?

(Points : 2)

Graph A

Graph B

Graph C

Graph D

21
. If the economy were not operating below its level of potential output, then there would be no: (Points : 2)

passive deficit
.

structural deficit
.

deficit at all
.

debt
.

22
. Over the last few years, oil prices have been rising dramatically, thereby increasing the costs of transportation
. Oil is an input in transportation, and shipping services (like UPS or FedEx) are in the business of transportation
. What happens to the supply of shipping services given higher oil prices? (Points : 2)

A decrease in the quantity demanded shipping services

A decrease in the demand for shipping services

An increase in the quantity supplied of shipping services

A decrease in the supply of shipping services

23
. If people begin to favor science fiction novels to a greater degree than previously, the demand curve for science fiction novels: (Points : 2)

shifts rightward
.

shifts leftward
.

stays constant
.

can shift either rightward or leftward
.

24
. Licenses: (Points : 2)

lower the price of the good or service to consumers
.

lower the wage received by those who have licenses
.

increase the wage received by those who have licenses
.

increase the demand for goods
.

25
. An action taken by a government to influence the course of economic events is: (Points : 2)

an economic theory
.

an economic institution
.

an economic policy
.

a cultural norm
.

26
. In a pure market economy, the government: (Points : 2)

relies on the market to allocate goods and services
.

allocates goods and services according to need
.

allocates goods and services according to ability
.

allocates goods and services according to effort
.

27
. Which of the following would most likely generate a positive externality? (Points : 2)

Roller coaster rides

Pollution

Alcoholic beverages

Education

28
. Refer to the graph below
. At a price of 60 cents per dozen:

(Points : 2)

there is a surplus of 2000 dozen eggs per week
.

the market is in equilibrium
.

there is a shortage of 3000 dozen eggs per week
.

there is a shortage of 2000 dozen eggs per week
.

29
. The law of supply states that (Points : 2)

quantity supplied increases as price increases, other things constant
.

quantity supplied decreases as price increases, other things constant
.

more of a good will be supplied the higher its price, other things changing proportionately
.

less of a good will be supplied the higher its price, other things changing proportionately
.

30
. The economic policy of leaving coordination of individuals’ actions to the market is called: (Points : 2)

comparative advantage
.

laissez faire
.

government regulation
.

specialization
.

31
. In the evolution of economic systems: (Points : 2)

socialism preceded capitalism
.

capitalism preceded mercantilism
.

mercantilism preceded feudalism
.

feudalism preceded capitalism
.

32
. The marginal benefit of owning another hardback book this month to Shelby is $20
. If the $22 price of hardback books reflects their marginal cost to Shelby and she is rational, then: (Points : 2)

Shelby will sell the hardback books she has to others who are willing to pay less
.

Shelby can gain by buying more 
.

Shelby will buy more hardback books this month
.

Shelby will not buy any more hardback books this month
.

33
. Which price ceiling will cause the greatest excess demand?

(Points : 2)

$1

$2

$3

$4

34
. Refer to the graph below
. Floods in the U
.S
. Midwest in the early 1990s reduced the U
.S
. corn crop
. Which graph depicts the effect of the floods on the U
.S
. corn market?

(Points : 2)

I

II

III

IV

35
. The minimum wage law is an example of a price ceiling
. (Points : 2)

True

False

36
. An increase in the price of good B caused an increase in the demand for good C
. This indicates that: (Points : 2)

B and C are complements
.

B and C are substitutes
.

B and C are neither substitutes nor complements
.

B and C are normal goods
.

37
. What form of business is the most common in the United States? (Points : 2)

Non-profit businesses
.

Corporations
.

Sole proprietorships
.

Partnerships
.

38
. Which of the following characteristics applies more to a market economy than a Soviet-style socialist economy? (Points : 2)

Government ownership of the means of production

Labor allocation by individual choice

Capital allocation by government planning

Government-determined, rather than market-determined, distribution of income

39
. As the price of good A rises, the demand for good B rises
. Therefore, goods A and B are (Points : 2)

normal goods
.

inferior goods
.

substitutes
.

complements
.

40
. Refer to the graph below
. A price ceiling would be binding, resulting in a market shortage if it is set at
.

(Points : 2)

$3
.00

$2
.25

$1
.50

either $3
.00 or $1
.50

41
. Refer to the graph below
. Free market equilibrium occurs at:

(Points : 2)

700 labor hours demanded, 700 labor hours supplied, and a wage rate of $9
.20 per hour
.

400 labor hours demanded, 800 labor hours supplied, and a wage rate of $10
.30 per hour
.

1100 labor hours demanded, 600 labor hours supplied, and a wage rate of $7
.00 per hour
.

400 labor hours demanded, 400 labor hours supplied, and a wage rate of $3
.50 per hour
.

42
. The invisible hand refers to: (Points : 2)

the role of government in a market economy
.

the price mechanism that guides economic actions
.

political forces
.

social forces
.

43
. If countries trade on the basis of comparative advantage: (Points : 2)

the production and consumption of each good in each country rises
.

the production and consumption of each good in each country falls
.

global production and consumption of each good increases
.

global production and consumption of each good decreases
.

44
. Entrepreneurship is an ability that is most closely related to: (Points : 2)

household spending
.

business formation
.

consumer sovereignty
.

e-commerce
.

45
. An economic system: (Points : 2)

can eliminate scarcity
.

must solve the questions of what to produce, how to produce, and for whom to produce
.

requires government planning of production and distribution
.

must meet the needs of all individuals
.

46
. If resources are not “equally suited” for the production of two goods, the PPC is: (Points : 2)

a straight line
.

bowed outward
.

upward sloping
.

any of the above
.

47
. An upward sloping supply curve implies that: (Points : 2)

consumers will buy less of an item when its price rises
.

producers will offer more of an item for sale when its price rises
.

producers are not responsive to the true needs of consumers
.

consumers will buy more of an item when its price rises
.

48
. An effective price ceiling is best defined as: (Points : 2)

a government-imposed limit on how high a price can be charged
.

a government-imposed limit on how low a price can be charged
.

a legislated price higher than equilibrium price
.

a price lower than any supplier is willing to sell
.

49
. The law of demand states that: (Points : 2)

sellers supply less of a good when its price increases
.

consumers buy less of a good when its price increases only if their income increases at the same time
.

consumers buy less of a good when its price increases even if other demand determinants change at the same time
.

consumers buy less of a good when its price increases, provided all shift factors of demand are fixed
.

50
. If Max’s demand for hot dogs falls as his income rises, then hot dogs are (Points : 2)

a bad good
.

an inferior good
.

a preferential good
.

a normal good
.

Which of the following would help alleviate the impending


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