Chapter 30: Interest, Rent, and Profit

Q1) Pure economic rent is

A) the payment to factors owned by entrepreneurs.
B) economic profits.
C) the payment to factors whose supply is perfectly elastic.
D) a payment made to land.
E) the payment to factors whose supply is perfectly inelastic.

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Q2) If the demand for consumption loans rises,this could be the result of
A) the discovery of new roundabout methods of production.
B) a higher rate of time preference in society.
C) an increase in (people) saving.
D) a higher interest rate.
E) a and c

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Q3) If the demand for consumption loans rises,this could be the result of
A) the discovery of new roundabout methods of production.
B) a higher rate of time preference in society.
C) an increase in (people) saving.
D) a higher interest rate.
E) a and c

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 Chapter 1: What Economics Is About

Q1) If it is discovered that using drugs enhances a person's chance of contracting a

lethal disease,the cost of using drugs
A) increases.
B) decreases.
C) is not affected.
D) is irrelevant, since they are illegal anyway.

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Q2) The cost of building a new interstate highway system is reported to be high at $25
[Link] it necessarily follow that the interstate highway is not worth building?
A) Yes, because it is better to spend $25 billion on ending poverty than on building
another interstate highway system.
B) No, because building a new interstate highway system promotes economic growth,
which helps everyone.
C) No, because the benefits of building a new interstate highway system may be greater
than $25 billion.
D) Yes, because the benefits of building a new interstate highway system may be
greater than $25 billion.

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Q3) Economists sometimes refer to the resource category land as natural resources.

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 Chapter 31: Market Failure: Externalities, Public Goods, and

Asymmetric Information

Q1) It is argued that the market will

A) not produce a nonexcludable public good.
B) produce the socially optimal output of a nonexcludable public good.
C) produce too much of a nonexcludable public good.
D) produce a nonexcludable public good if marginal social benefits are equal to
marginal private benefits.
E) b and d

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Q2) The government's provision of nonexcludable public goods such as national defense
is accepted because
A) government is more efficient than private firms at producing goods.
B) the market fails to produce nonexcludable public goods as a result of the free-rider
problem.
C) people do not value public goods such as national defense very highly.
D) a and c
E) all of the above

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Q3) Describe the Coase theorem and explain why it is significant in the analysis of
externatility problems.

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 Chapter 22: Production and Costs

Q1) Exhibit 22-8

Exhibit 22-8 shows how output varies with the only variable input used in its

[Link] table indicates that diminishing marginal returns set in with the hiring of

which unit of labor?

A) first

B) second

C) third

D) fourth

E) fifth

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 Chapter 4: Prices: Free, Controlled, and Relative

Q1) Buyers always prefer lower prices to higher prices.

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Q2) Buyers always prefer lower prices to higher prices.

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Q3) A price ceiling is a government-mandated

A) minimum price below which legal trades cannot be made.
B) maximum price above which legal trades cannot be made.
C) minimum price above which legal trades cannot be made.
D) maximum price below which legal trades cannot be made.

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 Chapter 10: Keynesian Macroeconomics and Economic

Instability: A Critique of the Self-Regulating Economy

Q1) If total production (TP)is less than total expenditures (TE),it follows that
A) optimum inventory levels fall.
B) firms have underproduced.
C) firms increase the quantity of goods they produce.
D) b and c
E) a, b, and c

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Q2) If total production (TP)is less than total expenditures (TE),it follows that
A) optimum inventory levels fall.
B) firms have underproduced.
C) firms increase the quantity of goods they produce.
D) b and c
E) a, b, and c

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Q3) If autonomous consumption rises,the TE curve shifts __________,the marginal

propensity to consume __________,and the TP curve __________.
A) upward; rises; shifts downward
B) upward; remains unchanged; remains unchanged
C) downward; rises; remains unchanged
D) upward; remains unchanged; shifts downward
E) none of the above

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 Chapter 28: Wages,Unions,and Labor

Q1) The lower the elasticity of demand for labor,

A) the larger the cutback in labor for a given wage increase.
B) the smaller the cutback in labor for a given wage increase.
C) the higher the wage rate that a labor union receives for its membership.
D) the lower the wage rate that a labor union receives for its membership.
E) the more members of a given union.

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Q2) Which of the following is true for a monopsony?

A) It cannot buy additional units of a factor without increasing the price it pays for the
factor.
B) It can buy additional units of a factor without increasing the price it pays for the
factor.
C) The supply of labor it faces is the industry supply of labor.
D) a and c
E) b and c

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Q3) Among the stated objectives of the National Collegiate Athletic Association
(NCAA)regulations is to
A) maintain the amateur standing of college athletes.
B) prevent schools with more money from getting all of the good players.
C) enhance the competitiveness of college sports.
D) all of the above

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Chapter 33: Building Theories to Explain Everyday Life: From

Observations to Questions to Theories to Predictions

Q1) A theory predicts that all swans are white. A thousand people go out into the field
and identify the color of the swans they see. Their results reveal that,of the 10,000 swans
they saw,all were white. It follows that
A) the swan theory is a falsifiable theory.
B) the swan theory is correct.
C) the evidence fails to reject the swan theory.
D) a and b
E) a and c

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Q2) A theory predicts that the more a student studies,the higher his or her grades will be.
This theory is
A) not falsifiable.
B) falsifiable.
C) too difficult a theory to test.
D) inconsistent with the fact that some students study less than other students, yet
receive higher grades.
E) b and d

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Q3) Identify and describe each step of the five-step process outlined in the text for
building and testing theories.

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 Chapter 16: Expectations Theory and the Economy

Q1) An unanticipated decrease in aggregate demand will cause an upward shift in the
short-run Phillips curve.

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Q2) An increase in the actual inflation rate is represented by a

A) movement up and along a given Phillips curve.
B) movement down and along a given Phillips curve.
C) leftward shift in the Phillips curve.
D) rightward shift in the Phillips curve.

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Q3) According to new classical economists,if a decrease in aggregate demand is

correctly anticipated,the short-run aggregate supply curve will shift __________ at
the same time the AD curve shifts _________ so that there will be no change in Real
GDP .
A) rightward; rightward
B) leftward; rightward.
C) leftward; rightward
D) rightward; leftward..
E) none of the above

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 Chapter 7: Macroeconomic Measurements: GDP and Real

GDP

Q1) Compensation of employees is the largest spending component of GDP.

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Q2) Look at the following data: personal income = $4,900 billion; personal taxes = $900
billion; transfer payments = $980 [Link] is disposable income?
A) $3,200 billion
B) $4,000 billion
C) $4,980 billion
D) $1,880 billion
E) There is not enough information to answer the question.

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Q3) If in the process of calculating GDP,the market value of all intermediate goods is
added to the market value of all final goods,this would
A) overstate the actual value of GDP.
B) produce the correct value of GDP.
C) understate the actual value of GDP.
D) avoid the possible error of double counting.

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