Economics for Non-Majors
Textbook Exam Questions
Course Introduction
Economics for Non-Majors is designed to introduce students from diverse academic backgrounds to the fundamental concepts and analytical tools of economics. The course covers essential topics such as supply and demand, markets and pricing, consumer and producer behavior, government intervention, macroeconomic indicators, and the basics of international trade. Emphasizing real-world applications, the curriculum aims to provide students with practical insights into how economic principles shape everyday decisions and influence broader societal issues, empowering them to think critically about current economic events and policies. No prior background in economics or advanced mathematics is required.
Recommended Textbook Issues in Economics Today 8th Edition by Robert Guell
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2
Chapter 1: Economics: the Study of Opportunity Cost
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Q1) Referring to Figure 1.9, if a point is attainable it is in
A)AREA #1 but not on the curve.
B)AREA #1 or is on the curve.
C)AREA #2 but not on the curve.
D)AREA #2 or is on the curve.
Answer: B
Q2) Production possibilities frontier models
A)the choices we make in setting prices.
B)the choices we make in setting output alternatives.
C)the choices we make in setting wages.
D)the choices we make in setting incomes.
Answer: B
Q3) Buyers and sellers in the foreign exchange market negotiate an exchange of A)foreign stocks.
B)foreign banks.
C)foreign government bonds.
D)currencies of various countries.
Answer: D
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3
Chapter 2: Supply and Demand
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Q1) If farmers expect the government to increase subsidies on corn grown next year for ethanol production, we should not be surprised to observe
A)a decrease in corn production.
B)a decrease in ethanol production.
C)a decrease in wheat production.
D)all of the above.
Answer: C
Q2) The equilibrium quantity is
A)the amount exchanged at the equilibrium price.
B)an amount higher than consumers were wanted to buy.
C)an amount lower than producers wanted to sell.
D)always less than the equilibrium price.
Answer: A
Q3) An increase in the excise tax imposed upon consumers of gasoline
A)shifts the demand for gasoline to the left.
B)shifts the demand for gasoline to the right.
C)shifts the supply of gasoline to the right.
D)shifts the market price of gasoline.
Answer: A
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Page 4
Chapter 3: The Concept of Elasticity and Consumer and Producer Surplus
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Q1) If the percentage change in quantity supplied is 0% and the percentage change in price is 10% then the supply for the good is
A)Elastic
B)Inelastic
C)Unit elastic
D)Perfectly inelastic
Answer: D
Q2) If the percentage change in quantity supplied is 10% and the percentage change in price is 10% then the supply for the good is A)Elastic
B)Inelastic
C)Unit elastic
D)Perfectly inelastic
Answer: C
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Chapter 4: Firm Production, Cost, and Revenue
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Sample Questions
Q1) The Total Cost Function in the book
A)is an up-ward sloping straight line.
B)is U-shaped.
C)is shaped as an upside down U.
D)begins by sharply rising, flattens out then sharply rises again.
Q2) If you see that a firm's marginal revenue curve is downward sloping, you can infer that it is a
A)price taker.
B)price maker.
C)price setter.
D)zero price setter.
Q3) The source of the benefits of the division of labor is
A)The efficiency that results from workers specializing in one aspect of production.
B)The fact that anytime you increase labor you get more output.
C)The inefficiency that results from the fact that capital is fixed.
D)The when each worker is equally capable, each worker adds to production exactly the same as the previous one.
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Chapter 5: Perfect Competition, Monopoly, and Economic
Versus Normal Profit
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Q1) An indicator of the degree of competition in an industry is the concentration ratio. It measures
A)the percentage of sales in the industry by the largest firms.
B)the percentage of profit in the industry by the smallest firms.
C)the sales in the industry as a percentage of all consumption in the U.S.
D)the profitability of the industry.
Q2) In Figure 5.7, assuming perfect competition which price(s)is associated with a loss?
A)MR<sub>1</sub>
B)MR<sub>2</sub>
C)MR<sub>3</sub>
D)MR<sub>1</sub> and MR<sub>2</sub>
Q3) In Figure 5.8, if the supply curve moves from S3 to S5
A)The firm will make a smaller economic profit than they used to
B)The firm will go from making an economic profit to a normal profit
C)The firm will go from making a normal profit to a loss but one that is not big enough to make it want to shutdown.
D)The firm will go from making a normal profit to a loss that is big enough to make it want to shutdown.
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Q1) A CPI miscalculation that overstates its increase by 0.8 percentage points will cause
A)the price of goods to rise.
B)the poverty line to rise too slowly.
C)the price of services rise.
D)the poverty line to rise too quickly.
Q2) The data on Real GDP shows that
A)real GDP rises and falls. It has tended to rise and fall equally and has remained roughly constant over time.
B)real GDP rises and falls. It has tended to rise for longer periods and more quickly than it has fallen and therefore has risen through time.
C)real GDP rises and falls. It has tended to fall for longer periods and more quickly than it has risen and therefore has fallen through time.
D)Real GDP growth is almost exactly constant
Q3) One subject of study for macroeconomics is A)unemployment.
B)monopoly.
C)perfect competition.
D)the shape of an individual's demand curve.
Page 8
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Chapter 7: Interest Rates and Present Value
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Q1) The demand for money is likely downward sloping because
A)interest sensitive consumption and business investment are both negatively impacted by increases in the interest rate.
B)interest sensitive consumption and business investment are both positively impacted by increases in the interest rate.
C)the marginal revenue product of labor is decreasing.
D)the government can always borrow what it wants.
Q2) If you were going to evaluate the wisdom of an investment made now that created a stream of profits in the future, which Excel function would help you calculate it.
A)PV
B)Sum
C)Profit
D)Invest
Q3) In the market for money the behavior of savers is represented by the A)demand curve.
B)supply curve.
C)neither the supply curve nor the demand curve.
D)a combination of the supply and demand curves.
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9
Chapter 8: Aggregate Demand and Aggregate Supply
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Q1) An increase in confidence will cause
A)AD to increase (move to the right).
B)AD to decrease (move to the left).
C)AS to increase (move to down and to the right).
D)AS to decrease (move to up and to the left).
Q2) Any event that creates a "crisis in confidence" is likely to lead to
A)higher aggregate prices.
B)lower aggregate prices.
C)higher aggregate output.
D)inflation.
Q3) Which of the following is not a reason for the aggregate demand curve to be downward sloping?
A)Foreign purchases effect
B)Interest rate effect
C)Real balance effect
D)Diminishing marginal utility
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Chapter 9: Fiscal Policy
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Q1) The tax cuts of 2001 and 2003 that came in the form of tax rebate checks are good examples of ______ fiscal policy
A)non-discretionary
B)non-conjunctive
C)discretionary
D)universally discredited
Q2) Discretionary Fiscal Policy differs from Nondiscretionary Fiscal Policy in that
A)the former deals with government spending and the latter deals with tax policy.
B)the former is chosen by Congress while the latter is chosen by the President.
C)the former is always stabilizing, while the latter is never stabilizing.
D)the former often takes years to enact, while the latter takes effect automatically.
Q3) Fiscal policy is purposeful movements in ____________ designed to direct an economy.
A)interest rates
B)legal structures
C)government regulations
D)government spending and taxes
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11
Chapter 10: Monetary Policy
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Q1) When the Federal Reserve wishes to, in the short run, increase real GDP it
A)will increase the money supply by buying bonds.
B)will increase the money supply by selling bonds.
C)will decrease the money supply by selling bonds.
D)has no policy options that will accomplish this.
Q2) The Federal Funds Rate is the rate at which
A)the Federal Reserve lends money to the US government.
B)the Federal Reserve lends money to member banks.
C)banks lend money to the Federal Reserve.
D)banks lend to one another to meet reserve requirements.
Q3) The Federal Reserve expanded their traditional tools set in the 2007-2009 recession to include
A)tax rate changes.
B)government spending policies.
C)labor regulations.
D)the purchase of corporate paper.
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Chapter 11: Federal Spending
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Q1) Prior to 2009, Federal Spending as a percentage of GDP had peaked in A)1973.
B)1976.
C)1982.
D)2005.
Q2) The United States Constitution states that
A)Congress and the President must agree on spending.
B)a law must be passed to approve spending for a government activity.
C)the President may spend money according to his/her own priorities.
D)a law must be passed to approve spending for a government activity that Congress and the President agree on.
Q3) As the federal budget deficit increases,
A)increased interest obligations become more likely.
B)tax cuts become more likely.
C)federal borrowing is likely to decrease.
D)all of the options are correct.
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Chapter 12: Federal Deficits, Surpluses, and the National Debt
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Q1) The amount of US debt owned by the English
A)Dropped from the 1940s through the 1970s, spiked in the 1980s, dropped in the 1990s and early 2000, and rose in the 2010s
B)continues to rise
C)dropped to an all-time low in 2015
D)has remained relatively low and constant (relative to other countries)
Q2) The budget deficit/surplus projections for 2003 that were made in 2000 were wrong because there was an
A)unanticipated recession.
B)unanticipated increase in interest rates.
C)anticipated increase in immigration.
D)anticipated increase in defense spending.
Q3) In 2005-2006, the magnitude of the federal budget deficit decreased because
A)government spending decreased precipitously.
B)government spending increased precipitously.
C)income tax rates were significantly increased across the board.
D)growth in income increased tax receipts by more than government spending increased.
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Chapter 13: The Housing Bubble
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Sample Questions
Q1) Homeowner with good credit history usually will be
A)wise enough never to borrow any of their home equity for any purpose.
B)wise enough to borrow part of their home equity only for sensible goals, like a big new SUV.
C)able to borrow part of the equity in their home to achieve reasonable financial goals.
D)unaware that borrowing part of the equity in their home will increase their monthly payments.
Q2) A notable macroeconomic effect of the bursting U.S. housing bubble in 2007 was a
A)modest reduction in Real GDP growth of one percentage point.
B)marked expansion in the construction sector of the economy.
C)dramatic contraction of aggregate consumption spending.
D)all of the options are correct.
Q3) By 2006 and 2007, foreclosure rates in some previously-booming states such as Nevada and Colorado were
A)still far below the national average.
B)roughly equal to the national average.
C)three times the national average.
D)one hundred times the national average.
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Chapter 14: The Recession of 2007-2009: Causes and Policy
Responses
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Q1) The Federal Reserve is blamed by some for the recession of 2007-2009 because it
A)raised interest rates too fast in 2005-2007.
B)lowered interest rates too fast in 2008.
C)kept interest rates high in 2005-2007.
D)kept interest rates too low prior to 2005 leading to a housing boom (that ultimately went bust.
Q2) If home prices rise far above the value of the homeowner's mortgage loan,
A)default risk faced by lenders tends to decrease.
B)default risk faced by lenders tends to increase.
C)homeowners will be tempted to default on their mortgage loans.
D)homeowners will have greater difficulty obtaining a home equity line of credit.
Q3) During the recession of 2007-2009, the Federal Reserve began cutting its target for the Federal Funds rate in
A)January of 2007.
B)September of 2007.
C)September of 2008.
D)January of 2009.
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Page 16
Chapter 15: Is Economic Stagnation the New Normal
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Q1) The tightening of credit standards after the Great Recession
A)was a significant reason behind the slowing of economic growth during that period.
B)was entirely countered by an opposite trend in regulation so was nearly zero.
C)was more than countered by an opposite trend in regulation so growth was robust. D)should have been a source of growth but wasn't.
Q2) The innovations that allowed from robust economic growth between 1950 and 2000
A)were unrepeatable.
B)were repeated in the period after 1980 but didn't have the same impact
C)were never really that important
D)were focused on entertainment
Q3) When women entered the workforce in greater numbers after World War II, this had its greatest impact on growth through which source?
A)An increase in the number of workers
B)An increase in the productivity of workers
C)An increase in economic freedom
D)Education
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Chapter 16: Is the Fiscalsky Falling: An Examination of
Unfunded Social Security, Medicare, and State and Local Pension Liabilities
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Q1) The core-theory relied upon most to answer questions with regard to unfunded liabilities is
A)consumer and producer surplus.
B)externalities.
C)elasticity.
D)present value.
Q2) In nominal terms the combined deficits over time in Social Security adds to A)$36 million.
B)$36 billion
C)$36 trillion.
D)$36 Trillion.
Q3) The dire predictions about the underfunded nature of Social Security, Medicare, and state and local pensions could be wrong because
A)interest rates may turn out to be higher in the future.
B)modest changes to the programs could be enacted soon.
C)unemployment rates may turn out to be higher than they are currently predicted to be.
Page 18
D)taxable incomes may turn out to be lower than they are currently predicted to be.
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Chapter 17: International Trade: Does It Jeopardize
American Jobs
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Q1) Trade sanctions were effective in getting Iran to give up its nuclear missile program.
A)True
B)False
Q2) In Table 17.4
A)the United States has an absolute advantage in both goods but a comparative advantage in cars only.
B)Brazil has an absolute advantage in both goods but a comparative advantage in lumber only.
C)the United States has an absolute and comparative advantage in Cars while Brazil has an absolute and comparative advantage in lumber.
D)the United States has an absolute and comparative advantage in both goods.
Q3) In 2015, the U.S. experienced a deficit in its balance of trade with A)China.
B)Mexico.
C)Canada.
D)all of the answers are correct.
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Chapter 18: International Finance and Exchange Rates
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Q1) Over time, the U.S. current account balance has primarily reflected
A)the U.S. balance of trade.
B)the volume of U.S. exports.
C)the extent of U.S. investment in other countries.
D)transfers of money home by U.S. citizens working in other countries.
Q2) Suppose, for whatever reason, real interest rates in the United States are projected to fall and real interest rates in Europe are projected to remain flat and suppose that before this happens the exchange rate between the euro and the dollar is .75 euros/dollar. The resulting exchange rate would likely
A)rise to (perhaps).9 euros/dollar.
B)fall to (perhaps).6 euros/dollar.
C)cause the exchange rate to have to be expressed in dollars per euro (because the other way would no longer make sense).
D)remain unchanged.
Q3) If the market exchange rate of yen per dollar rises this means the
A)dollar has strengthened and the yen has weakened.
B)yen has strengthened and the dollar has weakened.
C)dollar has strengthened but the yen has not changed.
D)dollar has weakened but the yen has not changed.
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Chapter 19: The European Debt Crisis
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Q1) Which of the following reasons promoted lending to the poorer member countries in the European Union during 2001-2007?
A)The long-term interest rates in the poorer countries were as low as the interest rates in the richer member countries.
B)The investment in human capital in the poorer countries was higher than the investment in the richer countries.
C)The debt to GDP ratio was much lower in the poorer countries than in the richer countries.
D)The poorer countries experienced lower rates of inflation than the richer countries.
Q2) If Appleland decides to adopt austerity policies, it will
A)increase spending and taxes
B)decrease spending and taxes
C)increase spending and cut taxes
D)decrease spending and increase taxes
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21
Chapter 20: Economic Growth and Development
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Q1) International comparisons of Gross National Income using the concept of purchasing power parity are based upon the
A)relative cost of purchasing a similar market basket of goods.
B)Gini Index of income disparity in the different countries.
C)relative stock market values in the different countries.
D)national unemployment rates in the different countries.
Q2) If a country resolves its corruption issues that had inhibited the ability of local businesses to be as productive as possible, it will impact its economy by A)increasing aggregate demand.
B)decreasing aggregate demand.
C)increasing aggregate supply.
D)decreasing aggregate supply.
Q3) Since the 1960s, development proceeded without many natural resources in A)Canada.
B)Saudi Arabia.
C)Japan.
D)all of the options are correct.
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Chapter 21: Nafta, Gatt, Wto:
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Q1) Trade agreements are designed to limit the ability of a country to put on A)tariffs only.
B)quotas only.
C)tariffs and quotas.
D)neither tariffs or quotas.
Q2) One of the major issues in the Uruguay round of GATT was A)domestic content provisions for movies and television.
B)the use of trade as a diplomatic weapon.
C)the question of the Euro's convertibility.
D)the placement of the WTO offices in Uruguay.
Q3) Violent protests against the WTO meeting in Seattle reflected popular concerns over A)the lack of exports.
B)high tariffs.
C)the consequences of globalization.
D)the 2000 Presidential election outcome.
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Chapter 22: The Line Between Legal and Illegal Goods
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Q1) The elasticity of demand for cigarettes by children is such that an increase in cigarette taxes to one dollar would
A)have absolutely no effect of childhood smoking.
B)actually increase adult smoking.
C)cut adult smoking by around 10%.
D)cut adult smoking by 25%.
Q2) Recent estimates of the elasticity of demand for cigarettes by adults
A)shows that it has increased markedly in part because of the existence of e-cigarettes.
B)shows that it has increased by only a small (and insignificant)amount.
C)shows that it has remained remarkably constant despite the existence of e-cigarettes.
D)shows that it has declined markedly in part because of the existence of e-cigarettes.
Q3) For a previously legal good, criminalization will cause
A)supply to increase.
B)supply to become more elastic.
C)demand to become less elastic.
D)price to rise, unambiguously.
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Chapter 23: Natural Resources, the Environment, and Climate Change
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Q1) Crude oil would be considered a
A)limited natural resource.
B)renewable natural resource.
C)sequestered natural resource.
D)sustainable natural resource.
Q2) If it costs Con Ed approximately $26 per additional ton of air pollution abated, but it costs PG&E only $18 per additional ton of air pollution abated, the two companies could both benefit from trading a marketable pollution permit at any price between
A)$0 per ton and $18 per ton.
B)$0 per ton and $26 per ton.
C)$18 per ton and $26 per ton.
D)$26 per ton and $36 per ton.
Q3) Which of the following would economists label as an example of the "tragedy of the commons?"
A)The use of pesticides on private farm land.
B)The use of growth hormone on cattle.
C)The over-fishing of the oceans.
D)The neighbor who does not mow his yard.
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Chapter 24: Health Care
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Q1) When neither the patient nor the doctor is cost conscious as a result of health insurance, economists label this the A)moral hazard problem.
B)the insurance fiasco.
C)risk neutrality.
D)efficiency outcome.
Q2) People generally buy insurance of any kind because they are A)risk neutral.
B)risk loving.
C)risk averse.
D)risk seeking.
Q3) The percentage of people without health insurance at some time during 2014 was A)76%.
B)17%.
C)8%.
D)2%.
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Chapter 25: Government-Provided Health Insurance:
Medicaid, Medicare, and the Child Health Insurance Program
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Q1) Medicaid covers
A)all procedures performed by doctors.
B)only procedures performed in hospitals.
C)only procedures performed in doctors' offices.
D)nearly all procedures except abortions, cosmetic surgeries, and weight-loss and hair growth drugs.
Q2) In 2013, Medicaid spending (net of CHIPs)per patient was on average
A)$938.
B)$1,652.
C)$4,211.
D)around $7,000.
Q3) In 2014, Medicaid and the Children's Health Insurance Program combined covered
A)only children and no adults.
B)44 million children and 27 million adults.
C)relatively wealthy families.
D)only families able to pay the high fees.
Q4) States often will use Medicaid funds to pay Medicare premiums for their poor elderly.
A)True
B)False
27
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Chapter 26: The Economics of Prescription Drugs
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Q1) FDA approval is ______ if the increase in costs to patients (including the increase in deaths)is equal to the increase in benefits due to more rapid approval
A)too lax
B)too stringent
C)just right
Q2) A patent
A)is better for a writer of books than it is for an inventor of medicines.
B)makes a good that has recently been invented more expensive than it would otherwise be.
C)is never sought for inventions anymore.
D)makes inventing the good less appealing.
Q3) A patent is a legal device which prevents
A)a company from charging whatever it likes for its product.
B)others from copying an invention.
C)others from copying music and books without author permission.
D)companies from charging unreasonable amounts for their invention.
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Q1) The incentives to work that result from the existence of private property accrue to
A)only the strong.
B)only the weak.
C)both the weak and the strong.
D)neither the weak nor the strong.
Q2) Which form of intellectual property protects a song writer?
A)Patent
B)Trademark
C)Copyright
D)Copymark
Q3) A jury award that wildly overstates non-monetary losses can harm the economy primarily because it
A)takes from the rich and gives to the poor.
B)still fails to adequately compensate the injured party for all damages.
C)enriches greedy plaintiff's lawyers.
D)causes overly-cautious buyers and sellers to avoid mutually beneficial transactions.
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Chapter 28: The Economics of Crime
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Q1) The proper economic method of selecting a sentence length would be to
A)compare the reduction in the total cost of (marginal cost)crime being perpetrated by the offender if released a year earlier with the reduction in incarceration costs (marginal benefit)for that shorter sentence.
B)compare the total cost of crime being perpetrated by the offender if released a year earlier with the incarceration costs for that shorter sentence.
C)compare the average cost of crime being perpetrated by the average offender if released a year earlier with the average incarceration costs for that shorter sentence. D)poll pro bono defense attorneys and follow their recommendation.
Q2) The costs borne by an individual victim of theft can diverge from the social costs if the
A)stolen items were covered by insurance.
B)stolen items were priceless.
C)stolen items were destroyed by the thief.
D)all of the options are correct.
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Chapter 29: Antitrust
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Q1) In Figure 29.1 the area that represents the amount the consumers pay the producers under perfect competition is
A)OP<sub>PC</sub>CQ<sub>PC</sub>
B)OP<sub>monopoly</sub>BQ<sub>monopoly</sub>
C)OFCQ<sub>PC</sub>
D)OFEQ<sub>monopoly</sub>
Q2) In Figure 29.1 the area that represents the total variable cost to producers under perfect competition is
A)OP<sub>PC</sub>CQ<sub>PC</sub>
B)OP<sub>monopoly</sub>BQ<sub>monopoly</sub>
C)OFCQ<sub>PC</sub>
D)OFEQ<sub>monopoly</sub>
Q3) As of late-2007, Apple Computer's use of music download software to reinforce its already dominant position in the audio hardware market has been A)challenged by the U.S. government but not by the European Union. B)challenged by the European Union but not by the U.S. government. C)challenged by both the U.S. government and the European Union.
D)challenged by both Napster and Kazaa as anti-competitive violation of the Sherman Anti-Trust Act.
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Page 31
Chapter 30: The Economics of Race and Discrimination
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Q1) The removal of legal barriers alone may not be sufficient to eliminate the pay gap between whites and blacks because the increased competition may not be able to overcome
A)the wide gap in pay.
B)employer preferences to discriminate.
C)customer preferences that lead employers to discriminate.
D)employer preferences to discriminate and customer preferences that lead employers to discriminate.
Q2) If a restaurant hired only men to be bartenders because that is the way their patrons wanted it this would be an example of
A)statistical discrimination.
B)disparate treatment discrimination.
C)rational discrimination.
D)adverse impact discrimination.
Q3) Treating two otherwise equal people differently because of their race is called A)"perfect" discrimination.
B)disparate treatment discrimination.
C)rational discrimination.
D)adverse impact discrimination.
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Page 32
Chapter 31: Income and Wealth Inequality
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Q1) Which period saw the biggest increase in systemic income inequality measured conventionally?
A)1980s and 1990s
B)2000s
C)1960s and 1970s
D)1950s
Q2) Which of the following is a reason behind increase in household income and wealth inequalities in the U.S?
A)Increase in manufacturing jobs
B)Increase in robotic production
C)Decrease in international competition in the manufacturing sector
D)Increase in the production of consumer durables during the 1990s
Q3) According to the Pew Charitable Trust methodology for identifying the middle class, if people near the boundary between the lowest and the lower middle income class gain more income, the middle class will ___
A)shrink, but that is unambiguously a good thing.
B)shrink, and that is unambiguously a bad thing.
C)increase, and that is unambiguously a good thing.
D)increase, and that is unambiguously a bad thing.
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Page 33
Chapter 32: Farm Policy
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Q1) Simply establishing a price floor affects/changes
A)demand and supply.
B)demand and quantity supplied.
C)quantity demanded and quantity supplied.
D)quantity demanded and supply.
Q2) Government can support agricultural prices by
A)making it illegal to produce without a government-provided license alone.
B)buying up all output that consumers do not buy at the supported price alone.
C)making it illegal to consume more than a specified amount.
D)making it illegal to produce without a government-provided license and buying up all output that consumers do not buy at the supported price.
Q3) Economists are general supporters of farm price support programs as being economically efficiency enhancing.
A)True
B)False
Q4) The governmental expense of a farm price support tends to increase as the price of the good falls.
A)True
B)False
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Chapter 33: Minimum Wage
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Q1) If a fast food restaurant was one of many hiring workers, the minimum wage was $7.25 an hour and it was paying $7.25 an hour to new employees. Suppose a worker earns a $0.75 raise to $8 an hour. Now suppose the minimum wage rises to $8.25 an hour. The government requires this worker to be paid
A)$8.00 an hour.
B)$8.25 an hour.
C)$9.00 an hour.
D)somewhere between $8.25 and $9.00 an hour depending on the policies of the restaurant.
Q2) In Figure 33.1, at the minimum wage the consumer surplus is
A)W*AC
B)BW*C
C)BW<sub>min</sub>EF
D)W<sub>min</sub>AE
Q3) Economists generally believe that increases in the minimum wage will
A)increase teen unemployment.
B)decrease teen unemployment.
C)have a dramatic impact on the poverty rate.
D)have a dramatic impact on the taxes paid by the working poor.
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Page 35
Chapter 34: Ticket Brokers and Ticket Scalping
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Q1) Suppose one of baseball's most controversial records - the Bonds' career home run record - were on the line. Tickets to the games leading up to breaking of the record might command three times the face-value price for tickets. Economists would suggest that a scalping market would appear and it
A)would make all ticket holders and potential buys worse off.
B)would make all ticket holders and potential buys better off (or at least no worse off).
C)cause the price to fall below the face value.
D)cause the price to fall back to the face value.
Q2) A promoter might charge less than the profit maximizing ticket price because
A)he believes his own "hype" about the demand for the event.
B)he knows that the cost of constructing the facility is a "sunk cost", and must be ignored. C)the talent may want to create a reputation for charging fair price so as to get more in the future.
D)all of the options are correct.
Q3) Under any definition there is no service that a scalper performs.
A)True
B)False
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Page 36
Chapter 35: Rent Control
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Q1) In Figure 35.1, if rents are controlled so that they may go no higher than R<sub>max</sub>, the amount that landlords will want, will be
A)0
B)Q'
C)Q*
D)Q"
Q2) In Figure 35.1, if rents are controlled then number of apartments that used to be rented that are now no longer rented is A)0
B)Q*-Q'
C)Q"-Q*
D)Q"-Q'
Q3) An economist looks at rent controlled prices as an example of a A)price floor.
B)equilibrium.
C)price ceiling.
D)engaged price.
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Chapter 36: Economics of K-12 Education
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Q1) Research by Jonah Rockoff suggests that there is
A)a positive relationship between teacher performance and student achievements.
B)no relationship between teacher performance and student achievements.
C)a positive relationship between the number of teachers and class sizes.
D)no relationship between the number of teachers and class sizes.
Q2) Teacher pensions in the U.S. are frequently defined by the "_____" clause.
A)rule of 60
B)rule of 65
C)rule of 70
D)rule of 85
Q3) In 2011, these states saw challenges to the collective bargaining rights of their teachers.
A)Wisconsin and Indiana
B)New York and California
C)Nevada and Texas
D)Alabama and Florida
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Chapter 37: Economics of College and University Education
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Q1) If faculty choose to stay with an old edition of a book this is predicted to cause A)new textbook prices to rise.
B)used textbook prices to rise (for the current edition).
C)used textbook prices to rise (for the older edition).
D)used textbook prices to fall (for the older edition).
Q2) To a prospective full-time college student, the cost of a college education reflects the cost of A)tuition.
B)tuition and fees.
C)tuition, fees, books and supplies.
D)tuition, fees, books and supplies plus any income foregone while in school.
Q3) Between 1992 and 2012, the percentage of college students receiving federally funded grants
A)increased from 8% to 13%.
B)slowly increased to around 47%.
C)increased from 58% to 73%.
D)decreased from 73% to 58%.
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Chapter 38: Poverty and Welfare
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Q1) The poverty line goes up as the size of the household increases. A doubling of the family size
A)more than doubles the poverty line.
B)less than doubles the poverty line.
C)exactly doubles the poverty line.
Q2) Which of the following is the most costly program for the poor?
A)Medicaid
B)AFDC/TANF
C)WIC
D)SNAP (Food Stamps)
Q3) Which of the following programs are in-kind?
A)AFDC/TANF
B)EITC
C)WIC
D)AFDC/TANF and EITC
Q4) Which of the following is the group with the highest poverty rate?
A)Blacks in general.
B)Hispanics in general.
C)Children in general.
D)Female-headed households with children.
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Chapter 39: Head Start
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Q1) If you grant that the long-term benefits of Head Start are in doubt and focus, instead, on the short-term benefits you find that
A)Head Start has no effect there either.
B)children in Head Start are less likely to need special education classes.
C)children in Head Start are more likely to repeat first or second grade.
D)Head Start children do much worse in Kindergarten.
Q2) The newest evidence on Head Start suggests that it is
A)enormously effective in the long run.
B)curiously counterproductive in the long run.
C)completely irrelevant for all populations in the long run.
D)modestly effective for specific populations in the long run.
Q3) The median Head Start teacher has been teaching
A)less than 6 months.
B)between 6 months and a year.
C)5 years with Head Start and 10 years total.
D)15 years with Head Start and 20 years total.
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Chapter 40: Social Security
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Q1) In 1982, the retirement age was raised in such a manner that it is 65 for everyone born before 1938
A)and 70 for everyone else.
B)and 67 for everyone else.
C)and 70 for everyone born in 1960 or after, with a gradual increase in between.
D)and 67 for everyone born in 1960 or after, with a gradual increase in between.
Q2) If you overhear a group of people talking about their plans to save for their retirement and one of them says that it causes them to save less because, as they reason it, "the government is saving for me" you would attribute this to the
A)slovenly effect.
B)bequest effect.
C)induced retirement effect.
D)asset substitution effect.
Q3) Present value analysis suggests that the real rate of return on Social Security is
A)more than 10% for high income earners.
B)around 10% for workers of all income levels.
C)roughly 3% for low income earners and negative for high income earners.
D)roughly 3% for high income earners and negative for low income earners.
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Page 42
Chapter 41: Personal Income Taxes
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Q1) The filing status of an unmarried single parent living with another person is likely to be
A)married filing jointly.
B)married filing separately.
C)single head of household.
D)single.
Q2) The top 10% of income earners pay ____ of federal income taxes.
A)10%
B)53%
C)71%
D)93%
Q3) The 2001 and 2003 tax cuts of the George W. Bush administration each had provisions to
A)lower the earned income tax credit.
B)raise tax rates at the lower end.
C)raise tax rates at the upper end.
D)lower (or speed up the already scheduled lowering)of tax rates.
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Chapter 42: Energy Prices
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Q1) The majority of proven world oil reserves are
A)in the Persian Gulf region.
B)held by non-Persian Gulf OPEC members.
C)under Alaska.
D)in the former Soviet Union.
Q2) Non-inflation-adjusted ("nominal")gasoline prices reached their all-time highs in A)1982.
B)1991.
C)2001.
D)2008.
Q3) With a natural monopoly, a potentially insurmountable barrier to entry can be the A)decreasing average total costs.
B)decreasing marginal costs.
C)high fixed costs.
D)low profit margins.
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Q1) Which of the following teams is not in its original franchise?
A)The Arizona Cardinals (football).
B)The Green Bay Packers (football).
C)The Pittsburgh Steelers (football).
D)The Kansas City Royals (baseball).
Q2) In the era of free agency, small market franchises in baseball
A)can only make money when they win games.
B)will lose money regardless of whether they win games.
C)often must choose between making money and winning games.
D)will make money whether or not they win games.
Q3) The least amount of money that a player will accept to play for a team is called the player's
A)reservation wage.
B)marginal revenue product.
C)average compensation.
D)minimum wage.
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Chapter 44: The Stock Market Crashes
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Q1) In an efficient market, an average investor who is outside Wall Street
A)must be constantly vigilant by analyzing and adjusting their portfolio to get average returns.
B)cannot expect to get average returns.
C)will get average returns in a well-diversified portfolio even without analyzing or managing it.
D)will habitually exceed average returns.
Q2) Economic bubbles are created because of inflated (and in the short-term self-fulfilling)expectations of
A)interest rates.
B)future asset prices.
C)overall economic growth.
D)earnings.
Q3) Which of the following stock market decreases is best explained by the notion of a bubble collapsing?
A)The early 1982 drop in the DJIA.
B)The decade of the 1970s.
C)The U.S. stock market in late 1929.
D)The U.S. stock market's drop in late 2008.
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Page 46
Chapter 45: Unions
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Q1) Which of the following explains why public employees (more frequently than private employees)tend be in defined benefit programs?
A)They tend to begin and end their career with the same employer.
B)They tend to move from employer to employer.
C)They tend to fall for Ponzi schemes.
D)They have well-funded private savings plans.
Q2) The future of private sector labor unions is
A)bright, because of the spectacular success of the PATCO strike.
B)bright, because of the increased availability of undocumented workers from other countries.
C)bleak, because of the growing economic importance of the service and retailing industries.
D)bleak, because of the recent increases in the minimum wage earned by non-union workers.
Q3) The number of workers represented by unions has A)decreased.
B)increased.
C)stay roughly the same.
D)represented an ever-larger fraction of the shrinking U.S. labor force.
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Q1) When Walmart enters a city, the net effect upon consumers is that they A)lose about as much as they win.
B)win.
C)lose.
D)never knew what hit them.
Q2) Independent grocery stores are best-advised to A)"out Walmart" Walmart by lowering prices.
B)hire less qualified people to keep costs down.
C)sell exactly the same goods Walmart does.
D)provide a level of service, community involvement, and types of goods Walmart does not.
Q3) When a new Walmart locates in an area, other businesses in the area are A)all helped.
B)all hurt.
C)all unaffected.
D)both helped and hurt.
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Chapter 47: The Economic Impact of Casino Gambling
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Q1) If "local substitution" is complete, then the economic impact of a casino is A)significantly negative.
B)zero.
C)moderately negative.
D)moderately positive.
Q2) If you compute the odds of winning and losing, the casinos A)breakeven.
B)lose a small percentage.
C)win a small percentage.
D)lose a large percentage.
Q3) The question of legality in daily fantasy comes down to A)whether it is a game of skill or chance. It is usually legal if it is a game of chance.
B)whether it is a game of skill or chance. It is usually illegal if it is a game of chance.
C)whether the points system is transparent.
D)how big the bet is.
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Chapter 48: The Economics of Terrorism
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Q1) The Paris Bataclan massacre by Al-Qaeda, which struck a French target that was lightly defended, was an example of the "rational terrorist's"
A)diversion technique.
B)marginalist technique.
C)compression effect.
D)substitution effect.
Q2) In the context of auto theft, protecting one's own car with an anti-theft device has
A)the positive externality of making all cars safer.
B)the negative externality of making other cars relatively more attractive to thieves.
C)the positive externality of making other cars relatively more attractive to thieves.
D)the negative externality of making all cars safer.
Q3) Terrorism insurance is much more likely to be available where
A)terrorism has never occurred.
B)terrorism is a relatively predictable thing.
C)insurance of any kind is rare.
D)insurance is highly regulated.
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