Chapter 2
Which of the following is most likely to be classified as a macroeconomic topic?
A. Tighter immigration rules have increased the cost of agriculture products in California.
B. Convertible automobiles sell better during warmer weather.
C. US business taxes discourage investment and thus slow down the economy.
D. Ethanol fuel subsidies have shifted farming towards corn and away from other grains.
C. US business taxes discourage investment and thus slow down the economy.
Robert fixes the plumbing at his house, even though he does not have a comparative advantage in plumbing. Which of the following would justify this exception to specialization on the basis of utility?
A. Robert only does plumbing in the evening, when he is no longer effective at his day job.
B. Robert thinks plumbers are overpaid.
C. Robert feels a sense of accomplishment from do-it-yourself repairs.
D. Robert wants to keep a broad skill set in case his current career fails.
C. Robert feels a sense of accomplishment from do-it-yourself repairs.
Suppose that electronic grading of homework reduces the cost of educating students. What happens in the market for education as more electronic grading becomes available?
Q rises
A good will have a more inelastic supply if
A. its supply is measured over a longer period of time.
B. its market is defined more broadly.
C. it is regarded as a necessity.
D. its required inputs are more readily available.
B. its market is defined more broadly.
How many Chronicles of Narnia books are there?
A 5
B 7
C 6
D 10
B 7
Which of the following is a normative statement?
A. Workers are more productive after a broad liberal-arts college education.
B. If a nation wants to avoid inflation, it will restrict the growth rate of the quantity of money.
C. Trade restrictions reduce the average American’s income.
D. Equality is more important than efficiency.
D. Equality is more important than efficiency.
When a country has a comparative advantage in producing a certain good,
A. the country’s opportunity cost of that good is high relative to other countries’ opportunity costs of that same good.
B. the country should import that good.
C. the country should produce just enough of that good for its own consumption.
D. None of the above is correct.
D. None of the above is correct.
Suppose that incomes are rising over time. What happens in the market for Otter Pops (an inferior good)?
P falls
Q falls
The price elasticity of demand for a good is computed to be approximately 2. Which of the following events is consistent with a 0.1 percent increase in the price of the good?
A. The quantity of the good demanded decreases by 0.05 percent.
B. The quantity of the good demanded decreases from 200 to 100.
C. The quantity of the good demanded decreases by 0.2 percent.
D. The quantity of the good demanded decreases from 250 to 150.
C. The quantity of the good demanded decreases by 0.2 percent.
Cui is an animal eaten in Peru and Ecuador. Which animal is it?
A Dog
B Goat
C Penguin
D Guinea Pig
D Guinea Pig
Becky and Curt are legislators comparing different income tax plans, and have agreed to evaluate their plans using mathematical models. Which of the following interactions best illustrates how mathematics provides precise definitions?
A. Becky was confused how raising tax rates could lower tax revenue, so Curt reproduces his results one step at a time.
B. Curt thought businesses would cut many employees due to a tax increase, but Becky demonstrates that the reduction is minimal.
C. Curt was worried about whether businesses might relocate to other countries, and Becky points out that her simplifying assumptions left out that option.
D. Becky wants employers to pay most of the tax, but Curt is willing to share the burden between employers and employees.
C. Curt was worried about whether businesses might relocate to other countries, and Becky points out that her simplifying assumptions left out that option.
Which of the following is an example of violating the rule of comparative advantage due to diminishing productivity?
A. Diane works as a professional photographer, but when it comes time to take her own family photos, she is too burnt out and prefers to hire someone else.
B. Tim makes his own soap, even though it costs more than store-bought, because he enjoys the aroma that fills his home while making it.
C. John insists on mowing his own lawn because the local teenagers who have offered won't do as good a job.
D. Abby has installed a gas-powered generator that is expensive to run, just in case the power company fails in a natural disaster.
A. Diane works as a professional photographer, but when it comes time to take her own family photos, she is too burnt out and prefers to hire someone else.
Suppose fewer people are getting married. At the same time, the cost of flour (used in cakes) increases. What happens in the market for wedding cakes?
P ambiguous
Q falls
Suppose demand is perfectly elastic, and the supply of the good in question decreases. As a result,
A. the equilibrium quantity decreases, and the equilibrium price is unchanged.
B. the equilibrium price increases, and the equilibrium quantity decreases.
C. the equilibrium price decreases, and the equilibrium quantity increases.
D. the equilibrium quantity and the equilibrium price both are unchanged.
E. the equilibrium price increases, and the equilibrium quantity is unchanged.
A. the equilibrium quantity decreases, and the equilibrium price is unchanged.
Which of these animals is a monotreme?
A Bandicoot
B Tasmanian Devil
C Echidna
D Hedgehog
C Echidna
As Emma makes her case, she uses mathematics. Which of the following is an example of how math ensures a logical flow of the argument?
A. Emma acknowledges her value judgments in making normative recommendations.
B. Emma offers estimates of how much tax revenue is raised by the sales tax.
C. Emma derives her predictions by solving equations in the model.
D. Emma must define a precise measure of tax burden.
C. Emma derives her predictions by solving equations in the model.
Andreas takes 30 minutes to fill one cavity while Paul takes 15. Andreas takes 15 minutes to perform one teeth cleaning and Paul takes 5. Between these two dentists, Andrea has the absolute advantage in ________ and a comparative advantage in _______.
A. both; cleanings.
B. both; fillings.
C. neither; cleanings.
D. neither; fillings.
E. fillings; cleanings.
F. fillings; fillings.
G. cleanings; cleanings.
H. cleanings; fillings.
D. neither; fillings.
Suppose that more students graduate with a degree in elementary education. What happens in the labor market for elementary school teachers?
P falls
Q rises
Suppose the equilibrium price of shoes is $70 in 2016 and $70 in 2017, but the equilibrium quantity was 5 million in 2016 and 6 million in 2017. One possible explanation of this data is that the supply of shoes is perfectly _________ while demand is moderately elastic, and that _________ increased between 2016 and 2017.
A. inelastic; supply
B. elastic; supply
C. elastic; demand
D. inelastic; demand
C. elastic; demand
Which of these is not a town in New Mexico?
A Las Vegas
B Dora
C Cuba
D Des Moines
E They all are
E They all are
In following the scientific method, economists propose a hypothesis by
A. surveying public opinion on hypothetical products and prices.
B. using mathematical models to predict human behavior.
C. setting up economic experiments with different policies in different states.
D. looking for correlations in historical data.
B. using mathematical models to predict human behavior.
Which of the following statements best indicates why specialization leads to gains from trade?
A. A trading partner who looks quite similar to me will also value the same things as me and produce the things I want, thus giving me the greatest gains from trade.
B. By becoming the only producer of a good, I can obligate the other person to buy from me at a much higher price.
C. I give up less of the good in which I specialize when I trade it for the other good rather than produce the other good myself.
D. By trading, I can produce exclusively those goods where I have an absolute advantage.
C. I give up less of the good in which I specialize when I trade it for the other good rather than produce the other good myself.
Suppose such a cold snap wipes out tender tomato plants that will be harvested in two months, so everyone expects a higher future price of tomatoes. What happens to the market for the tomatoes today?
P falls
Q amiguous
Jana notices the following data on demand for theater performances. For plays, they sell 4000 tickets at a price of $70, and 6000 tickets at a price of $50. For musicals, they sell 7000 tickets at a price of $95, and 9000 tickets at a price of $65. Which of the following theories could possibly explain the difference in demand elasticities, all else equal?
A. Tickets consume a larger fraction of play attendees’ budgets than tickets do for musical attendees’ budgets.
B. This demand for musicals was measured over a year, while the demand for plays was measured over a month.
C. There are fewer good substitutes for a play than for musicals.
D. Musicals require highly specialized performers, where plays can use any actors.
A. Tickets consume a larger fraction of play attendees’ budgets than tickets do for musical attendees’ budgets
In 1990, Kevin Bacon starred in two horror movies, those being Flatliners and _______.
A Tremors
B Night of the Living Dead
C Gremlins 2: The New Batch
D Shakma
A Tremors