Questions and Answers of Issues in economics

The fundamental value of a share of stock is based on the present value of expected futurea. Dividends.b. Revenues.c. Profits.d. Costs.
The rational criminal model explains crimes ofa. Passion.b. Stupidity.c. Profit.d. Love.
In 2005, General Motors announced a 20 percent reduction in its staffing levels and the closure of many assembly plants. Those laid off as a result would likely be classified asa. Seasonally
To an economist, the correct distribution of money among police, the justice system and prisons is one thata. Sets an equal amount to each.b. Sets the amount each gets equal to its average benefit.c.
One problem with using real gross domestic product as a measure of social welfare is thata. It fails to count home production.b. It fails to count services, a growing part of the economy.c. It
Economists are concerned about nontariff (regulatory) barriers when they are used to prevent imports when a gooda. Is produced via questionable means (e.g. banning milk produced from cows injected
When the National Hockey League had its 2004–2005 work stoppage, it wasa. A player strike over salaries that were too low.b. A player strike over a limited ability to move to another team.c. An
The average cost per crime has been estimated at betweena. $500 and $2,500.b. $1,000 and $10,000.c. $10,000 and $100,000.d. $100,000 and $1,000,000.
The consumer price index (CPI) is a heavily criticized measure of inflation becausea. The government does nothing to fix its known deficiencies.b. It consistently understates the increase in the cost
Economists note that a reason exists for policy makers to subsidize sports stadiums, and it is thata. They bring in billions of dollars to their communities.b. They result in large increases in city
When choosing to limit trade, a country can impose a tax on imported goods. This is calleda. An estate tax.b. A tariff.c. A quota.d. A capital gains tax.
The motorsports industry is dominated by independent teams running in series operated asa. Monopolies.b. Oligopolies.c. Monopolistic competitors.d. Perfect competitors.
Of the following justifications for limiting trade, which one would economists be least likely to endorse? Some goods should not be imported becausea. They are important for national defense (e.g.,
In early 2005, inflation increased unexpectedly due to an increase oil prices. This helpeda. Borrowers.b. Lenders.c. People on fixed incomes.d. Workers.
If a crime prevention mechanism works initially, but increasing it further has no additional impact that is an example ofa. Diminishing returns.b. Downward sloping demand.c. The division of labor.d.
The typical problem for generating parity in sports leagues is thata. There is no mechanism for bringing in new talent in a way that helps the bad teams.b. There is no means by which players on one
Inflation is measured using _________ in a price index.a. The absolute increaseb. A multiyear weighted average increasec. The percentage year-to-year increase d. Logarithm-adjusted absolute
Most baseball franchises have _____ over the years while the sale price of the typical team has ______.a. Made a profit; fallenb. Lost money; fallenc. Made a profit; risend. Lost money; risen
The optimal level of police protection would compare the _______ with the ________.a. Marginal cost of hiring an additional officer; marginal benefit of crime reductionb. Average cost of all
Using simple linear production possibilities frontiers in a simple two-good, two-country model, absolute advantage is evident whena. One country can make more of a good than the country other can.b.
The value of a sports franchise to a city’s economy depends greatly ona. The sale of memorabilia to citizens.b. The degree to which non-ticket-based sales increase.c. The degree to which restaurant
If judges had to be trained as economists before taking their position, they might use ____ analysis when deciding on the right sentence.a. Marginalb. Punitivec. Religiousd. Average
Using simple linear production possibilities frontiers in a simple two-good, two-country model, comparative advantage is evident whena. One country can make more of both goods than the other.b. The
Gross domestic product is counted using two methods: one which counts all the ways people _____ money and another which counts all the ways people _____ money.a. Earn, spendb. Spend, savec. Earn,
The trends in U.S. international trade are such thata. Imports are increasing and exports are decreasing.b. Imports are decreasing and exports are increasing.c. Both imports and exports are
In measuring gross domestic product, goods produced by foreign firms in the United States area. Counted, and so are goods produced by American firms in foreign countries.b. Counted, but goods
Gasoline prices in early 2007 were above $2.25. They werea. The highest nominal prices and highest inflation-adjusted prices in American history.b. The highest nominal prices but were not the highest
Theoretically speaking, all trade is based ona. Comparative advantage.b. Absolute advantage.c. Numerical advantage.d. Political advantage.
Cartels are considered ______ because each participant is motivated to ______.a. Stable; work with each other cooperativelyb. Stable; work in their own interest to produce morec. Unstable; work with
In 2015, which country had the largest trade surplus with the United States?a. Saudi Arabiab. Canadac. Chinad. Japan
When a group of competitors joins together to form a monopoly, they are forming aa. Cartel.b. Coalition.c. Union.d. Trust.
America’s most significant trading partner isa. Saudi Arabia.b. Canada.c. China.d. Japan.
The heaviest concentration of proven oil reserves is found ina. Alaska.b. The North Sea.c. The Persian Gulf.d. Texas.
In order to compare the price of gasoline in the 1970s with the price in any other year, you have to adjust fora. The availability of oil.b. The price of oil.c. Overall inflation.d. Unemployment.
If an attorney wishes to combine the small claims of many people into one lawsuit against a defendant, he or she is engaging in aa. Summary judgment.b. Frivolous tort.c. Pointed claim.d. Class action
When one party harms another and the harmed party hires a lawyer who will collect only if the harmed party wins the suit, they have hired aa. Personal injury attorney.b. Contingency attorney.c.
Deficits cannot occur ina. Defined benefit plans.b. Defined contribution plans.c. Entitlement budgets.d. State and local budgets.
State and local pensions for government employees are usuallya. Defined benefit plans.b. Defined contribution plans.c. Entitlements.d. Determined year to year.
The dependency ratio in the United States isa. Growing.b. Steady.c. Falling rapidly.d. Falling slowly.
Economists insist that bankruptcy laws are always harmful to a well-functioning economy.a. Trueb. False
If MR>MC, then when an additional unit is sold, the firm’sa. Profit will be positive.b. Profit will increase.c. Profit will be negative.d. Profit will decrease.
Which of the following would immediately be more valuable for most people?a. A $1,000 increase in the child creditb. A decrease in the degree to which brackets are inflation-indexedc. An indexing of
If someone is in the 25 percent tax bracket, this means that ______ is owed in taxes.a. 25 percent of his or her salaryb. 25 percent of his or her adjusted gross incomec. 25 percent of his or her
Using a higher rate of discounta. Makes no difference when calculating the present value of future liabilities.b. Raises the present value of future liabilities.c. Lowers the present value of future
In a diagram of perfect competition, the marginal revenue line moves up and down when there is exit and entry, respectively, becausea. The market demand for the good rises and falls when there is
If Congress wants to use $100 billion on tax cuts, the version that would help a family of four making $40,000 a year woulda. Lower marginal tax rates by one percentage point.b. Increase the standard
A monopolistic competitor’s brand identity is protected by aa. Trademark.b. Patent.c. Copyright.d. Bond.
In terms of when these fiscal shortfalls are likely to require significant changes to budgets or program rules, which of the following is likely to occur first?a. State pension fundsb. Local pension
The alternative minimum tax has the effect of limitinga. Income.b. Taxable income.c. Deductions.d. Exemptions.
Because there are _______, adjusted gross income is always ______ taxable income.a. Deductions and exemptions; less thanb. Deductions and exemptions; greater thanc. Credits; greater thand. Credits;
The type of private property that is protected by a copyright or patent isa. Land.b. Financial capital.c. Intellectual property.d. Personal property.
In terms of magnitude, which of the following has the greatest fiscal shortfall?a. State pension fundsb. Local pension fundsc. Medicared. Social Security
The tax brackets have higher tax rates for more taxable income. This makes the federal income taxa. Proportional.b. Regressive.c. Progressive.d. Integrative.
Local telephone service was once an area in which consumers had no choices. Many young people no longer use “landlines,” preferring instead to use their cellular phones. This means that the
An indicator of the degree of competition in an industry is the concentration ratio. It measuresa. The percentage of sales in the industry by the largest firms.b. The percentage of profit in the
Which one of the following communities would likely see the greatest economic impact from a new casino?a. Plain-field, IN (just outside Indianapolis)b. Gary, IN (outside Chicago and already has
Economists generally believe that a new casino in a city that already has them would likely have_________ economic impact.a. An enormously negativeb. A modestly negativec. An enormously positived. A
Use the aggregate supply-aggregate demand model to determine which of the following will lead to higher prices.a. A tax increaseb. A fall in world oil pricesc. An increase in interest ratesd. An
The argument that casinos have little economic impact on a community is based on the notion ofa. Supply.b. Demand.c. Opportunity cost.d. Local substitution.
If a woman does not get an interview for a job requiring heavy lifting because the manager has noted that the average women can lift less than the average man, this isa. A legal example of
Any event that creates a “crisis in confidence” is likely to lead toa. Higher aggregate prices.b. Higher aggregate output.c. Lower aggregate prices.d. Inflation.
The method of detecting sex discrimination most likely to maximize it would be to usea. Simple differences in income between men and women.b. Simple differences in full-time wages for men and
Walmart’s entry into the grocery business in the 1990sa. Turned it into a monopoly.b. Had no impact on the market form; it remained perfectly competitive.c. Had no impact on the market form; it
The predominant market form for the grocery business in the majority of U.S. cities is one ofa. Monopoly.b. Oligopoly.c. Monopolistic competition.d. Perfect competition.
The method of detecting sex discrimination most likely to minimize it would be to usea. Simple differences in income between men and women.b. Simple differences in full-time wages for men and
Which advantage does a typical developing country have in attempting to draw foreign investment?a. Very low wagesb. Poor educationc. Easy profit repatriationd. Independent central banks
Substitution in the context of the “rational terrorist model” suggests that a clampdown at airports willa. End terrorism.b. Cause terrorists to target airports even more as they attempt to show
For the ruler of a developing country, the opportunity cost of a choice to invest in universal educationa. Is the reduction in health care spending.b. Does not exist because food is a necessity.c.
One of the biggest problems for developing countries is that they are all too oftena. Ruled by representative democracies.b. Populated by people unwilling to work hard.c. Lack the financial,
Under many economic models of terrorism, the terrorist is assumed to acta. Without regard for incentives, costs, or benefits.b. In a predictable way, since they maximize costs subject to minimizing
The negative externality associated with self-protection from terrorism suggests thata. Terrorists cause more damage than they think they will.b. People engage in less self-protection than they
In order to sustain economic growth in a developed economy, it is important fora. Taxes to continuously decrease.b. Government spending to continuously increase.c. Worker productivity to increase.d.
The government’s role in terrorism insurance is that ofa. A primary provider.b. A reinsurance provider of last resort/re-reinsurer.c. Innocent bystander.d. Disinterested observer.
The chief effect of reinsurance is thata. Insurance premiums are higher.b. Insurance companies are prevented from engaging in fraud.c. Insurance companies can offer insurance without fear of a major
Economists call the increase in insurance costs that resulted from the September 11th attacks an _____ shock which leads to the ________.a. Aggregate demand; aggregate demand curve shifting leftb.
For developed economies sustained increases in aggregate supply, absent increases in aggregate demand, will result ina. Growth for a while, but ultimately it will result in only inflation.b.
Economists call the reduction in consumer confidence that resulted from the September 11th attacks an _____ shock which leads to the ________.a. Aggregate demand, aggregate demand curve shifting
The destruction of the World Trade Center and damage to the Pentagon and the accompanying work to rebuild and repair led to _____ to the insurance companies and _____ in GDP.a. Gains; gainsb. Losses;
For developed economies, sustained increases in aggregate demand, absent increases in aggregate supply, will result ina. Growth for a while, but ultimately it will result in only inflation.b.
This chapter suggests that many economists generallya. Accept the notion that a human life is worth the value of the chemicals that can be extracted from it.b. Argue that a human life is worth the
The use of a backward-L shaped aggregate supply curve allows us to ________ in a way that other shapes would not.a. Consider various levels of pricesb. Consider different macroeconomic points of
Affirmative actiona. Can take many forms.b. Is almost always a racial quota.c. Applies only to women.d. Has been typically been declared unconstitutional.
Disagreements about the shape of the aggregate supply curve focus on the degree of _________ in the economy.a. Unemploymentb. Inflationc. Fraudd. Confidence
An economist worrying about the economic impact of environmental regulations would model that impact with aa. Decrease in aggregate supply.b. Increase in aggregate supply.c. Decrease in aggregate
The concern that gambling affects not only the gambler and casino but others is called a _____ and suggests that there would be too _______ production in an unregulated or untaxed market.a. Positive
The Federal Reserve has indirect control over short-term interest rates, and as a result, their ability to control economic activity is througha. Aggregate supply.b. Aggregate demand.c. Residual
The argument that increasing the number of casinos in a state will increase overall tax revenue in the state isa. Substantially correct, because they pay substantial taxes.b. Overstated but still
Congress and the president have control of the tax system and government spending. As a result, their policies will directly impacta. Aggregate supply.b. Aggregate demand.c. Residual demand.d. The
Those who believe that wages paid to minorities will rise without governmentintervention believe that bosses are primarily motivated bya. Profit.b. Religion.c. Doing right.d. Helping the downtrodden.
The percentage that casinos make on the average bet is called thea. Vig.b. Rip.c. Take.d. Rob.
The text book production industry has a great deal in common with the pharmaceutical industry in that there are __________ fixed costs and ____________ marginal costs.a. High; highb. High; lowc. Low;
In 2014, unless a state was willing to forgo all federal money for Medicaid, a member of a family earning less than 133 percent of the poverty line isa. Ineligible for any health care assistance.b.
When firms add workers and find that the additional workers add less to output than their predecessors did, they are experiencinga. The division of labor.b. Diminishing returns.c. The law of large
When firms add workers and get more efficient, they are benefiting froma. The division of labor.b. Diminishing returns.c. The law of large numbers.d. Diminishing marginal utility.
What are the key reasons why college costs are higher than high school costs?a. The expenses of researchb. College faculty salaries are higher than K–12 faculty salariesc. Subsidies to education
In determining whether the distribution of federal spending among various agencies was correct, an economist would want to make surea. That each agency manager got what (s)he thought was needed in
Which of the following college costs has experienced the slowest increase?a. Overall pricesb. College textbook pricesc. College tuition
In determining whether the federal government is the right size, an economist would determine whethera. The first dollar spent produced $1 worth of social good.b. The average dollar spent produced $1
Total federal spending on health care, after adjusting for inflation, has beena. Growing.b. Relatively constant.c. Declining slowly.d. Declining rapidly.
The largest single item in federal spending isa. International aid.b. Welfare.c. Interest on the debt.d. Social Security.

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