Which of the following would help alleviate the impending

| November 24, 2016

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 Fund

2. 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.

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