Question 1. Economics would have little to say if it were not for
a. the law of diminishing returns
b. the fact that people are fickle
c. the principle of substitution
d. scarcity
Question 2. Which of the following best describes why you are probably not willing to pay twice the price of a single scoop, when you buy a double-scoop at the ice-cream parlor?
a.The law of decreasing marginal cost.
b.The law of increasing marginal returns
c.You get the same extra satisfaction out of each and every scoop of ice-cream consumed.
d.You expect to get less extra satisfaction out of the second scoop than you will from a single scoop.
Question 3. Economists make simplifying assumptions
a. in order to confuse students with Latin phrases
b. so they can have the last word by twisting reality all out of shape
c. because they are too dull to understand the complexities of reality
d. in order to abstract from reality and focus on one key relationship at a time.
Question 4. One of the most important simplifying assumptions made by economists when developing the model of supply and demand is the following:
a.It is possible to change the value of only one variable at a time.
b.Income has nothing to do with consumption
c.People are completely irrational
d.Only the rich should be taxed
Question 5. In general the results of increasing both supply and demand at the same time is:
a. A decrease in both the equilibrium price and quantity traded.
b.An increase in both the equilibrium price and quantity traded.
c.an increase in the price and a decrease in the quantity traded.
d.An increase in the quantity traded and an undetermined effect on price.
Question 6.Minimum wage legislation is an example of
a.an foreign exchange policy
b.a monetary policy
c.a fiscal policy
d.a price floor
Question 7.If some of the costs of transaction fall on third parties
a.the good in question is a public good, and will be produced by the government
b.the government may subsidize the production of the good or service in question
c.the government will certainly not intervene in the market
d.the market is said to fail
Question 8. Our ability to make purchases is:
a.Constrained by the prices of goods and services
b.Not constrained by our incomes
c.Both of the above
d.None of the above
Question 9. Inflation and Unemployment are called the "twin evils of macroeconomics" because:
a. fighting Unemployment often leads to raising Inflation.
b.Fighting Inflation never leads to rising Unemployment
c.Both of the above
d.None of the above
Question 10. Under which of the following circumstances would the Open Market Commitee recommend a contractionary Monetary policy?
a.Consumer confidence in the financial system is at a new low due to scandals in the savings and loan industry.
b.Factory orders are down, and so is business and consumer confidence
c.Unemployment is reported to be falling
d.Inflation is repoted to be falling