The demand curve shows the relationship between
A. price and production costs.
B. price and quantity demanded.
C. money income and quantity demanded.
D. consumer tastes and the quantity demanded.
2. Macroeconomics approaches the study of economics from the viewpoint of
A. the entire economy.
B. governmental units.
C. individual firms.
D. the operation of specific product and resource markets.
3. In performing its stabilization function, it may be appropriate for the nation’s central bank (the Federal Reserve in the United States) to
A. lower interest rates to stimulate private spending and reduce unemployment.
B. increase government spending to reduce unemployment.
C. raise taxes to reduce inflation.
D. increase subsidies to businesses to reduce unemployment.
4. Which one of the following statements about the scarcity problem is correct?
A. The scarcity problem persists because economic wants exceed available productive resources.
B. The scarcity problem has been eliminated in affluent societies such as the United States and Canada.
C. The scarcity problem has been solved in all industrialized nations.
D. The scarcity problem persists only because countries have failed to achieve continuous full employment.
5. Taxes on commodities or on purchases are known as _______ taxes.
A. personal income
C. corporate income
D. sales and excise
6. Which one of the following statements about trade blocs is correct?
A. A trade bloc is an area of a nation where manufacturers can import product components without paying tariffs.
B. A trade bloc is a group of nations that allows free trade among member nations but restricts imports from nonmember nations via tariffs and quotas.
C. A trade bloc is a group of nations that advertise their common export goods abroad.
D. A trade bloc is a tariff or quota that impedes imports.
7. The largest functional share of the national income consists of
A. wages and salaries.
B. corporate profits.
C. proprietors’ income, that is, the income of unincorporated businesses.
D. interest and rental income.
8. Macroeconomic stability is said to exist in an economy whenever
A. the rates of output growth, unemployment, and inflation are all zero.
B. total spending exceeds production capacity.
C. output matches production capacity, labor is fully employed, and inflation is low and stable.
D. there’s no inflation.
9. A person should consume more of something when its marginal
A. cost exceeds its marginal benefit.
B. cost equals its marginal benefit.
C. benefit is still positive.
D. benefit exceeds its marginal cost.
10. According to the concept of comparative advantage, a good should be produced in that nation where
A. the terms of trade are maximized.
B. its domestic opportunity cost is greatest.
C. money is used as a medium of exchange.
D. its domestic opportunity cost is least.
11. Black markets are associated with _______ and the resulting product _______.
A. ceiling prices, shortages
B. price floors, surpluses
C. price floors, shortages
D. ceiling prices, surpluses
12. Microeconomics is concerned with
A. the establishing of an overall view of the operation of the economic system.
B. a detailed examination of specific economic units that make up the economic system.
C. positive economics, but not normative economics.
D. the aggregate or total levels of income, employment, and output.
13. The advantages of the corporate form of business include
A. the elimination of the principal-agent problem.
B. the fact that owners are subject to unlimited liability.
C. the ability to raise financial capital by selling stocks and bonds.
D. single taxation of corporate earnings.
14. Government’s economic role is complicated by the fact that
A. public goods entail no opportunity costs.
B. the public sector can’t base decisions on marginal costs and marginal benefits.
C. economic decisions are made in a political context.
D. the marginal utility of public goods rises rather than falls.
15. Which one of the following statements correctly describes the term laissez-faire?
A. Land and other natural resources should be publicly owned, but capital equipment should be privately owned.
B. Government shouldn’t interfere with the operation of the economy.
C. Land and other natural resources should be privately owned, but capital should be publicly owned.
D. Government action is necessary if the economy is to achieve full employment and full production.
16. If a product is in surplus supply, its price
A. is in equilibrium.
B. is above the equilibrium level.
C. is below the equilibrium level.
D. will rise in the near future.
17. Which one of the following is not a characteristic of the market system?
A. Competition in product and resource markets
B. Private property
C. Freedom of enterprise
D. Government ownership of the major industries
18. The production possibilities curve illustrates the basic principle that
A. if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced.
B. an economy will automatically obtain full employment of its resources.
C. an economy’s capacity to produce increases in proportion to its population size.
D. the production of more of any one good will in time require smaller and smaller sacrifices of other goods.
19. The U.S. Food Stamp program, which provides coupons that allow low-income individuals to buy food, is an illustration of
A. public provision of a suitable legal framework for the market system.
B. the stabilization function of government.
C. the redistributional function of government.
D. a government action designed to enhance competition.
20. Welfare checks and food stamps are examples of _______ used by the government to redistribute
A. market intervention
B. transfer payments
C. corporate subsidies