Question 1

During the last four decades, defense expenditures have

Accepted Answer

A)  accounted for approximately one-half of federal expenditures. 
B)  accounted for less than 10 percent of federal expenditures. 
C)  been increasing as a share of federal expenditures. 
D)  been declining as a share of federal expenditures. 
A)  accounted for approximately one-half of federal expenditures. 
B)  accounted for less than 10 percent of federal expenditures. 
C)  been increasing as a share of federal expenditures. 
D)  been declining as a share of federal expenditures.

Question 2

Jacob and Mason go to a diner that sells burritos for $5 and tacos for $3. They agree to split the lunch bill evenly. Mason chooses a taco. The marginal cost to Jacob of ordering a burrito instead of a taco is

Accepted Answer

A)  $1. 
B)  $2. 
C)  $2.50. 
D)  $3. 
A)  $1. 
B)  $2. 
C)  $2.50. 
D)  $3.

Question 3

Measured as a share of the economy, government expenditures on ____ have declined during the last four decades.

Accepted Answer

A)  health care 
B)  national defense 
C)  transfer payments 
D)  Social Security benefits 
A)  health care 
B)  national defense 
C)  transfer payments 
D)  Social Security benefits

Question 4

The overall federal tax structure is

Accepted Answer

A)  regressive because the average tax rate of those with low incomes is higher than the rate imposed on those with higher incomes. 
B)  progressive because the average tax rate of those with high incomes is greater than the rate imposed on those with lower incomes. 
C)  flat because the average tax rate is approximately constant across all income brackets. 
D)  progressive for income levels up to approximately $100,000 but regressive for income levels above this figure. 
A)  regressive because the average tax rate of those with low incomes is higher than the rate imposed on those with higher incomes. 
B)  progressive because the average tax rate of those with high incomes is greater than the rate imposed on those with lower incomes. 
C)  flat because the average tax rate is approximately constant across all income brackets. 
D)  progressive for income levels up to approximately $100,000 but regressive for income levels above this figure.

Question 5

In a democratic setting, debt financing is attractive to elected political officials because

Accepted Answer

A)  it makes it possible for them to spend on current projects favored by their constituents without having to levy current taxes. 
B)  it drives up interest rates, which encourages saving. 
C)  it leads to higher taxes in the future, which will tend to slow economic growth. 
D)  it makes the cost of government more visible, which will help voters allocate government spending more efficiently. 
A)  it makes it possible for them to spend on current projects favored by their constituents without having to levy current taxes. 
B)  it drives up interest rates, which encourages saving. 
C)  it leads to higher taxes in the future, which will tend to slow economic growth. 
D)  it makes the cost of government more visible, which will help voters allocate government spending more efficiently.

Question 6

Which of the following is consistent with the implications of the economic guidepost that information is costly to acquire?

Accepted Answer

A)  Most people do not know the names of their legislators in the U.S. Congress, but those same individuals are likely to know the names of all the cast members on a popular TV show. 
B)  In considering purchases, people are more likely to purchase a consumer ratings magazine that reviews new automobiles before buying a car, but are unlikely to purchase a consumer ratings magazine that reviews pens and pencils before buying a pen or pencil. 
C)  When shopping for something like a new calculator, people will generally not spend the time to do price comparisons at all of the stores in town that sell calculators. 
D)  All of the above are consistent with the economic way of thinking. 
A)  Most people do not know the names of their legislators in the U.S. Congress, but those same individuals are likely to know the names of all the cast members on a popular TV show. 
B)  In considering purchases, people are more likely to purchase a consumer ratings magazine that reviews new automobiles before buying a car, but are unlikely to purchase a consumer ratings magazine that reviews pens and pencils before buying a pen or pencil. 
C)  When shopping for something like a new calculator, people will generally not spend the time to do price comparisons at all of the stores in town that sell calculators. 
D)  All of the above are consistent with the economic way of thinking.

Question 7

Which of the following is part of the economic way of thinking?

Accepted Answer

A)  Opportunity costs will always be incurred when scarce resources are used to produce a good. 
B)  When the cost of an option increases, individuals will be less likely to choose it. 
C)  In addition to their immediate direct effects, economic actions often generate secondary effects that are observable only after the passage of time. 
D)  All of the above are part of the economic way of thinking. 
A)  Opportunity costs will always be incurred when scarce resources are used to produce a good. 
B)  When the cost of an option increases, individuals will be less likely to choose it. 
C)  In addition to their immediate direct effects, economic actions often generate secondary effects that are observable only after the passage of time. 
D)  All of the above are part of the economic way of thinking.

Question 8

Ethan washes and irons his own shirts. Sophia, his boss, sends her clothes to a laundry. Which is the most plausible economic explanation for this difference?

Accepted Answer

A)  Ethan must enjoy ironing more than Sophia does. 
B)  Ethan must be better at ironing than Sophia is. 
C)  The opportunity cost of ironing is greater for Ethan. 
D)  Sophia has a higher opportunity cost of laundering her clothes than Ethan does. 
A)  Ethan must enjoy ironing more than Sophia does. 
B)  Ethan must be better at ironing than Sophia is. 
C)  The opportunity cost of ironing is greater for Ethan. 
D)  Sophia has a higher opportunity cost of laundering her clothes than Ethan does.

Question 9

OECD data for 1960 through 1999 indicates that a 10 percent increase in government expenditures as a percent of GDP

Accepted Answer

A)  increases economic growth by about 5 percent. 
B)  increases economic growth by about 2 percent. 
C)  has no effect on economic growth. 
D)  reduces economic growth by about 1 percent. 
A)  increases economic growth by about 5 percent. 
B)  increases economic growth by about 2 percent. 
C)  has no effect on economic growth. 
D)  reduces economic growth by about 1 percent.

Question 10

Measured as a share of the economy, government spending

Accepted Answer

A)  has been between 10 and 15 percent of the U.S. economy since 1930. 
B)  has been between 20 and 25 percent of the U.S. economy since 1930. 
C)  rose from less than 10 percent in 1929 to approximately 40 percent in the most recent fiscal year. 
D)  declined from more than 50 percent in 1929 to approximately 25 percent in the most recent fiscal year. 
A)  has been between 10 and 15 percent of the U.S. economy since 1930. 
B)  has been between 20 and 25 percent of the U.S. economy since 1930. 
C)  rose from less than 10 percent in 1929 to approximately 40 percent in the most recent fiscal year. 
D)  declined from more than 50 percent in 1929 to approximately 25 percent in the most recent fiscal year.

Question 11

In 1960, more than half (52 percent) of federal expenditures were for national defense. Today national defense accounts for approximately

Accepted Answer

A)  60 percent of the federal budget. 
B)  44 percent of the federal budget. 
C)  29 percent of the federal budget. 
D)  16 percent of the federal budget. 
A)  60 percent of the federal budget. 
B)  44 percent of the federal budget. 
C)  29 percent of the federal budget. 
D)  16 percent of the federal budget.

Question 12

When the number of families with someone employed by the government is added to those receiving income from transfer programs, the share of American families receiving income from the government is

Accepted Answer

A)  less than 20 percent 
B)  approximately 50 percent of the total 
C)  approximately 62 percent of the total 
D)  a little more than 75 percent of the total 
A)  less than 20 percent 
B)  approximately 50 percent of the total 
C)  approximately 62 percent of the total 
D)  a little more than 75 percent of the total

Question 13

Your professor loves her work, teaching economics. She has been offered other positions in the corporate world that would increase her income by 25 percent, but she has decided to continue working as a professor. Her decision would not change unless

Accepted Answer

A)  the marginal cost of teaching increased. 
B)  the marginal benefit of teaching increased. 
C)  the marginal cost of teaching decreased. 
D)  the marginal benefit of a corporate job decreased. 
A)  the marginal cost of teaching increased. 
B)  the marginal benefit of teaching increased. 
C)  the marginal cost of teaching decreased. 
D)  the marginal benefit of a corporate job decreased.

Question 14

Which of the following is a positive economic statement?

Accepted Answer

A)  Raising the federal minimum wage to $6.50 per hour will cause the rate of unemployment to increase. 
B)  The United States spends too much on welfare. 
C)  Philosophy is not as interesting as economics. 
D)  Cold weather is much more enjoyable than warm weather. 
A)  Raising the federal minimum wage to $6.50 per hour will cause the rate of unemployment to increase. 
B)  The United States spends too much on welfare. 
C)  Philosophy is not as interesting as economics. 
D)  Cold weather is much more enjoyable than warm weather.

Question 15

Which of the following is not consistent with the basic postulate of economics that incentives matter?

Accepted Answer

A)  Farmers produce fewer bushels of wheat in response to an increase in the price of wheat. 
B)  A politician votes against a proposal because most of his constituents oppose it. 
C)  People drive less because of higher gas prices. 
D)  People buy more milk in response to a reduction in the price of milk. 
A)  Farmers produce fewer bushels of wheat in response to an increase in the price of wheat. 
B)  A politician votes against a proposal because most of his constituents oppose it. 
C)  People drive less because of higher gas prices. 
D)  People buy more milk in response to a reduction in the price of milk.

Question 16

The expression "There's no such thing as a free lunch" means

Accepted Answer

A)  in an exchange, if one person gains, someone else must lose. 
B)  each person must pay for exactly what he or she receives. 
C)  the use of resources to meet one need means that those resources can no longer be used to meet another need. 
D)  in an exchange, if one person gains, someone else must lose and equal amount. 
A)  in an exchange, if one person gains, someone else must lose. 
B)  each person must pay for exactly what he or she receives. 
C)  the use of resources to meet one need means that those resources can no longer be used to meet another need. 
D)  in an exchange, if one person gains, someone else must lose and equal amount.

Question 17

As the size of government increases as a share of the economy,

Accepted Answer

A)  the burden of deadweight losses of taxation generally diminishes. 
B)  the rate of return derived from projects undertaken by the government will tend to increase. 
C)  the government generally becomes more heavily involved in unproductive and even counterproductive activities. 
D)  the activities of government are generally limited to protective functions such as public safety , national defense, and provision of a limited set of public goods. 
A)  the burden of deadweight losses of taxation generally diminishes. 
B)  the rate of return derived from projects undertaken by the government will tend to increase. 
C)  the government generally becomes more heavily involved in unproductive and even counterproductive activities. 
D)  the activities of government are generally limited to protective functions such as public safety , national defense, and provision of a limited set of public goods.

Question 18

Which of the following is often referred to as the basic postulate of economics?

Accepted Answer

A)  Individuals act only out of selfish motives. 
B)  Incentives matter--individuals respond in predictable ways to changes in personal costs and benefits. 
C)  The accuracy of the assumptions is the best test of an economic theory. 
D)  The value of a good is objective; it is equal to the cost of producing the good. 
A)  Individuals act only out of selfish motives. 
B)  Incentives matter--individuals respond in predictable ways to changes in personal costs and benefits. 
C)  The accuracy of the assumptions is the best test of an economic theory. 
D)  The value of a good is objective; it is equal to the cost of producing the good.

Question 19

Economists are generally opposed to tariffs or other restrictions on imported goods because of the negative secondary effects they create that more than offset the benefits to employment in the domestic industry. Which of the following could be considered a secondary effect of these trade restrictions?

Accepted Answer

A)  The price to consumers of the good in question will be higher as a result of the restriction, meaning consumers will be worse off. 
B)  As consumers must spend more money to purchase the good, there will be employment losses in other domestic industries as consumers cut back on their spending on other things. 
C)  Because there is a link between a country's imports and its exports, less imports from other countries will result in lower domestic employment in export industries. 
D)  All of the above. 
A)  The price to consumers of the good in question will be higher as a result of the restriction, meaning consumers will be worse off. 
B)  As consumers must spend more money to purchase the good, there will be employment losses in other domestic industries as consumers cut back on their spending on other things. 
C)  Because there is a link between a country's imports and its exports, less imports from other countries will result in lower domestic employment in export industries. 
D)  All of the above.

Question 20

What do economists mean when they state that a good is scarce?

Accepted Answer

A)  There is a shortage or insufficient supply of the good at the existing price. 
B)  It is impossible to expand the availability of the good beyond the current amount. 
C)  People will want to buy more of the good regardless of the price of the good. 
D)  The amount of the good that people would like exceeds the supply freely available from nature. 
A)  There is a shortage or insufficient supply of the good at the existing price. 
B)  It is impossible to expand the availability of the good beyond the current amount. 
C)  People will want to buy more of the good regardless of the price of the good. 
D)  The amount of the good that people would like exceeds the supply freely available from nature.

During the last four decades, defense expenditures have

Jacob and Mason go to a diner that sells burritos for $5 and tacos for $3. They agree to split the lunch bill evenly. Mason chooses a taco. The marginal cost to Jacob of ordering a burrito instead of a taco is

Measured as a share of the economy, government expenditures on ____ have declined during the last four decades.

The overall federal tax structure is

In a democratic setting, debt financing is attractive to elected political officials because

Which of the following is consistent with the implications of the economic guidepost that information is costly to acquire?

Which of the following is part of the economic way of thinking?

Ethan washes and irons his own shirts. Sophia, his boss, sends her clothes to a laundry. Which is the most plausible economic explanation for this difference?

OECD data for 1960 through 1999 indicates that a 10 percent increase in government expenditures as a percent of GDP

Measured as a share of the economy, government spending

In 1960, more than half (52 percent) of federal expenditures were for national defense. Today national defense accounts for approximately

When the number of families with someone employed by the government is added to those receiving income from transfer programs, the share of American families receiving income from the government is

Your professor loves her work, teaching economics. She has been offered other positions in the corporate world that would increase her income by 25 percent, but she has decided to continue working as a professor. Her decision would not change unless

Which of the following is a positive economic statement?

Which of the following is not consistent with the basic postulate of economics that incentives matter?

The expression "There's no such thing as a free lunch" means

As the size of government increases as a share of the economy,

Which of the following is often referred to as the basic postulate of economics?

What do economists mean when they state that a good is scarce?

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters

Exam 1: The Economic Approach

During the last four decades, defense expenditures have

Jacob and Mason go to a diner that sells burritos for $5 and tacos for $3. They agree to split the lunch bill evenly. Mason chooses a taco. The marginal cost to Jacob of ordering a burrito instead of a taco is

Measured as a share of the economy, government expenditures on ____ have declined during the last four decades.

The overall federal tax structure is

In a democratic setting, debt financing is attractive to elected political officials because

Which of the following is consistent with the implications of the economic guidepost that information is costly to acquire?

Which of the following is part of the economic way of thinking?

Ethan washes and irons his own shirts. Sophia, his boss, sends her clothes to a laundry. Which is the most plausible economic explanation for this difference?

OECD data for 1960 through 1999 indicates that a 10 percent increase in government expenditures as a percent of GDP

Measured as a share of the economy, government spending

In 1960, more than half (52 percent) of federal expenditures were for national defense. Today national defense accounts for approximately

When the number of families with someone employed by the government is added to those receiving income from transfer programs, the share of American families receiving income from the government is

Your professor loves her work, teaching economics. She has been offered other positions in the corporate world that would increase her income by 25 percent, but she has decided to continue working as a professor. Her decision would not change unless

Which of the following is a positive economic statement?

Which of the following is not consistent with the basic postulate of economics that incentives matter?

The expression "There's no such thing as a free lunch" means

As the size of government increases as a share of the economy,

Which of the following is often referred to as the basic postulate of economics?

What do economists mean when they state that a good is scarce?

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters