Questions and Answers of Issues in economics

When tackling local environmental problems, taxes and regulations can be useful. The reason that global problems (like global warming) are more difficult to control is thata. It is in every
Which of the following tools would have likely have the impact of raising short-term interest rates the most?a. Cutting the Fed Funds target by one-quarter point.b. Buying $1 million dollars in
The fact that the demand for eggs is inelastic should not surprise you becauseA. They are a very cheap food.B. The demand for nearly all food products are inelastic.C. The supply of eggs is
An example of an externality that we see everyday isa. People paying high prices for gasoline.b. People enjoying their ability to drive to work.c. Oil companies making record profits.d. The emissions
The ability of the Federal Reserve to control interest rates isa. Limited almost entirely to short-term rates.b. Limited almost entirely to long-term rates.c. Limited almost entirely to
If anti-scalping laws are perfectly enforced, it will result ina. Dead-weight loss.b. A significant increase in consumer surplus.c. A significant increase in producer surplus.d. A significant loss to
During 1999 through 2006 the Federal Reservea. Was passive and simply let things happen.b. Reacted actively to quell potentially inflationary expansions but did nothing to deal with the recession.c.
The model for a promoter is _____ whereas the model for scalpers is that of ________.a. Monopoly; monopolistic competitionb. Monopolistic competition; perfect competitionc. Monopoly; oligopolyd.
If a chemical does environmental damage but is used in the production of a good that provides satisfaction to the consumer and profit to the producer an economista. Will insist that the market be
Suppose you observe that minor changes in supply seem to cause dramatic changes in price, you would conclude thatA. Demand is unit elastic.B. Demand is elastic.C. Demand is inelastic.D. Demand is
The distinct feature of the marginal cost curve in the analysis of venues is that it isa. A vertical line.b. A horizontal line.c. A check-shaped curve.d. A backward L.
The “creation” of money isa. Entirely the purview of Congress.b. Entirely the purview of the Federal Reserve.c. Formally the purview of the Federal Reserve, constitutionally the purview of
Fundamentally, housing prices are a function of the home’sa. Location and amenities.b. Amenities only.c. Location only.d. Interest rates only.
The Constitution of the United States grants to Congress the power of monetary policy in Article 1, Section 8. Since 1913, Congress hasa. Jealously guarded this power.b. Granted this power to the
The argument that employers would actually not lose money if the minimum wage were raised is based ona. The idea that workers would spend the extra money buying goods from their employer.b. The idea
In which type of mortgage do you neither build nor lose equity?a. A zero-down mortgageb. A traditional constant-payment, zero-down mortgagec. An interest-only mortgaged. A negative-amortization
The argument that the minimum wage hurts society more than it helps is based on ________analysis.a. Consumer and producer surplusb. Production possibilitiesc. Aggregate supply–aggregate demandd.
In which type of mortgage to you build equity the fastest?a. A zero-down mortgageb. A traditional constant-payment, 20 percent-down mortgagec. An interest-only mortgaged. A negative-amortization
The argument that the minimum wage does not significantly increase unemployment is based ona. Producer surplus.b. Consumer surplus.c. Elasticity.d. Aggregate demand.
The introduction of e-cigarettes provides a substitute for regular cigarettes. The result is likely that thea. Elasticity of supply increases.b. Elasticity of supply decreases.c. Elasticity of demand
The argument that the minimum wage is worse than the Earned Income Tax Credit is based on the idea thata. The people who earn the minimum wage are really poor.b. The minimum wage applies to all
Suppose a firm cannot figure out whether the demand for the good it sells is elastic or inelastic but discovers that every time it raises its price, its total revenue declines. TheirA. Demand is unit
The optimal venue for an event is one wherea. The number of seats exceeds the number where marginal cost equals marginal revenue.b. The number of seats is less than number where marginal cost equals
The notion of “clean enough” isa. Appealing to an economist thinking about average benefit and average cost.b. Appealing to an economist thinking about marginal benefit and marginal cost.c.
Economists ______ the activities of ticket brokers and scalpers.a. Draw no distinction betweenb. Separately modelc. Draw a stark contrast betweend. Ignore
A bursting of a housing bubble could create more problems than the NASDAQ crash in 2000 because the housing bubble involvesa. Assets, and NASDAQ was about debts.b. Risky forms of debt.c. More
Federal Reserve independence isa. Completely fictitious.b. Totally complete.c. Subject to Congress’s desire to keep it independent.d. Subject to the Supreme Court’s desire to keep it independent.
Ticket scalping is a symptom ofa. Stupid promoters.b. Market prices being greater than the face value of the ticket.c. Market prices being less than the face value of the ticket.d. Stupid consumers.
A housing bubble occurs when _________ drive(s) prices more than fundamental factors.a. The price of gasolineb. A home’s expected future pricec. Interest rate changesd. Property tax increases
The most precise tool of monetary policy isa. The adjustment of the federal funds target.b. The adjustment of the discount rate.c. The adjustment of the reserve requirement.d. The use of open-market
The elasticity of demand is related to the slope of the demand curveA. And only the slope of the demand curve.B. But also the (price, quantity) position on the demand curve.C. But also the slope of
When engaging in monetary policy, the impact of expansionary policy on an aggregate demand – aggregate supply model is toa. Increase aggregate demand.b. Increase aggregate supply.c. Decrease
One unsettling consequence of setting a tax on tobacco sufficiently high to reduce consumption would bea. It would likely reduce Medicare costs.b. It would likely increase tobacco revenues to
The type of mortgage that allows you to make the lowest possible payment is called a(n)a. Zero-down mortgage.b. Traditional constant-payment, 20 percent-down mortgage.c. Interest-only mortgage.d.
As the baby boom generation (born between 1946 and 1964) ages, which of the following is a likely outcome?a). A movement to the right in the demand for nursing home bedsb). A movement to the left in
Part of the Patient Protection and Affordable Care Act involved a tax on indoor tanning that tanning salons are required to collect from tanners and send to the federal government. Which of the
The last time the minimum wage alone was sufficient to keep a family of three above the poverty line wasa. 1979.b. 1985.c. 1990.d. 1998.
In order for the minimum wage to reach its 1968 high in real terms (1999 dollars), it would have to rise to approximately ___ per hour.a. $8b. $9c. $10d. $11
When examining the “right tax” on a good that produces an externality, the tax should be such thata. It is greater than the externality.b. It is less than the externality.c. It is exactly equal
If Midwestern grain farmers can plant either soybeans or corn on their land with equal profitability and there is an increase in the price of soybeans, which of the following will result?a). A
Between 1998 and 2007 the real minimum wagea. Rose rapidly.b. Rose slowly.c. Fell steadily.d. Fell rapidly.
If policy makers were to attempt to set a tax equal to the external costs of alcohol, one would have to evaluatea. The cost of production.b. The price paid by consumers.c. The value of innocent lives
The underlying reason for the upward-sloping nature of the supply curve is thata). The production of most goods comes with increasing marginal benefits.b). The production of most goods comes with
Compared to a recreational user of a drug, an addicted user’s elasticity of demand isa. Much more elastic.b. Much less elastic.c. Much less.d. Flatter.
Without an increase in price, an increase in demand will lead toa). A shortage.b). A surplus.c). Socialism.d). Equilibrium.
An increase in the income of consumers will cause thea). supply of all goods to rise.b). demand for all goods to rise.c). supply of all goods to fall.d). The demand for some goods to rise and for
Decriminalizing a drug is likely to lead to a price decrease ifa. The anticipated supply effect is greater than the anticipated demand effect.b. The anticipated demand effect is greater than the
Which of the following will impact both supply and demand?a). A change in priceb). A change in quantityc). A change in expected future priced). A change in income
By way of international comparison, recent U.S. deficits have increased the ratio of debt to GDPa. Such that the United States has the highest ratio in the industrialized world.b. But every other
Looking at the Figure 32.3, maintaining Pfloor as the target minimum price (rather than equilibrium) by having the government purchase how much of the product farmers wished to produce would cost the
Looking at the Figure 32.3, maintaining Pfloor as the target minimum price (rather than equilibrium) woulda. Raise consumer surplus more than it would decrease producer surplus.b. Raise producer
If you became convinced that marijuana was neither addictive nor contributed to externalities, then banning it createsa. A social benefit without social cost.b. What economists call dead-weight
An increase in which of the following determinants of demand will have an ambiguous (uncertain) effect on price?a). Tasteb). Price of a complementc). Incomed). Price of a substitute
A price support mechanisma. Can only regulate supply.b. Can only regulate demand.c. Must involve government purchases.d. Can involve government manipulation of the supply or demand of the good.
When discussing an addictive drug, an economist is likely to focus ona. Both the external costs and the “information problem” associated with addiction.b. The moral costs totally.c. The cost of
The oil price increases of 2002-2005 are an example of aa. Positive aggregate demand shock.b. Negative aggregate demand shock.c. Positive aggregate supply shock.d. Negative aggregate supply shock.
If the supply and demand curves cross at a quantity of 100, then the price necessary to get firms to sell more than that will have to be _______ equilibrium.a). Aboveb). Atc). Belowd). Within 10
Farm price supports are typically fora. Basic commodities like raw milk and grain.b. Fruits and vegetables.c. Refined products like flour.d. Manufactured products like breakfast cereals.
When examining the question of tobacco taxes, economists focus almost entirely ona. The cost to cigarette companies of production.b. The cost to cigarette smokers for the cigarettes themselves.c. The
Price supports in the United States havea. Always relied on the government paying farmers to set aside land.b. Always relied on the government buying excess crops.c. Always relied on forbidding
Discretionary fiscal policy as a tool for making things better isa. Universally applauded as being helpful.b. Universally derided for never being effective.c. Considered by many to be effective but
If the supply and demand curves cross at a price of $2, at any price above that there will bea). An equilibriumb). A surplusc). A shortaged). A crisis
The economic rationale for farm price supports is generallya. Weak, but relies on price variability.b. Weak, but relies on the unavailability of crop insurance.c. Strong, and relies on the fact that
When looking at a balanced-budget amendment to the U.S. Constitution, economistsa. Are universally opposed to it.b. Are universally in favor of it.c. Are of two minds with opponents concerned about
The notion that the United States is the “land of opportunity” where who your parents are and how much they earn is unrelated to your income is (relative to other industrial powers)a. Clearly
The portion of the national debt owed to citizens of other countriesa. Is economically irrelevant however big it is.b. Is economically important, but it has been falling in recent years.c. Is
One typical response to an overheated economy using in discretionary fiscal policy is toa. Raise taxes and cut spending.b. Lower taxes and cut spending.c. Raise taxes and increase spending.d. Lower
When an economics student draws a supply and demand diagram to model an increase in the income, she is assuming this change happensa). Semper fidelis.b). Ceteris paribus.c). Lpso facto.d). Defacto.
Social discord resulting from income inequality can be lessened if there is (are)a. High levels of inter-generational income mobility.b. High levels of income mobility of individuals.c. Belief that
The $400 billion deficits of 2005 werea. Accurately forecast by the Office of Management and Budget in 2000.b. Accurately forecast by the Office of Management and Budget in 2002.c. Accurately
The benefits of income inequality area. Always greater than the costs.b. Always less than the costs.c. Associated with rewarding hard work and work that society values.d. Associated with the social
Joseph Schumpeter coined the phrase “creative destruction.” The idea of creative destruction is thata. People need to be forced from their comfort zone in order to make crucial decisions that
The U.S. budgeta. Is required to be balanced.b. Is never truly balanced, but historically surpluses are more common than deficits.c. Is never truly balanced but historically surpluses are less common
A change in the price of eggs will impacta). The demand for eggs.b). The supply of eggs.c). The quantity demanded and the quantity supplied of eggs but neither demand nor supply.d). Both the supply
The off-budget – on-budget distinctiona. Is important because two large programs, Social Security and Medicare, largely run off-budget.b. Is a historical fiction.c. Deals with long-lasting products
One typical response to a recession using discretionary fiscal policy is toa. Raise taxes and cut spending.b. Lower taxes and cut spending.c. Raise taxes and increase spending.d. Lower taxes and
Which of the following had the effect of increasing income inequality?a. The increase in the female labor force participation rateb. The decrease in globalization of capitalc. The increase in
The consensus among economists is that NAFTA’s impact on the U.S. economy isa. Enormously positive.b. Enormously negative.c. Marginal in net though it has increased both imports and exports.d.
The supply and demand model examines how prices and quantities are determineda). In markets.b). By governments.c). By churches.d). By monopolists
In 2015 the national debt was approximatelya. $18 million.b. $18 billion.c. $18 trillion.d. $18 quadrillion.
Which of the following had the effect of decreasing income inequality?a. The increase in the female labor force participation rateb. The increase in globalization of capitalc. The increase in
From the perspective of the United States, a major accomplishment of the 1999 round of GATT wasa. The complete banning of “domestic content” provisions in movie and television production.b.
The World Trade Organization governs the provisions ofa. NAFTA.b. GATT.c. CAFTA.d. SHAFTA.
The aggregate demand-aggregate supply model examines the impact of discretionary fiscal policy and nondiscretionary fiscal policy by focusing on movements ofa. Interest rates.b. Aggregate supply.c.
When one country objects to the trade restrictions of another, the provisions of trade treaties typicallya. Allow it to militarily exact retribution against the offending party.b. Require that it
Free trade agreementsa. Are just that, about tariff and quota-free trade.b. Have very little to do with the trade of goods and services and more to do with currency exchange.c. Are about making trade
Wealth inequality is _____ related to the ratio of mean to median wealth.a. Positivelyb. Negativelyc. Not
Non-discretionary fiscal policy has its impact bya. Magnifying the economic ups and downs already occurring.b. Purposefully adjusting interest rates.c. Congress focusing its constant attention on the
Which concept from Chapter 1 can be used to explain how it is possible for it to be in the individual interest of each nation to engage in protectionist policies but for everyone to be worse off if
Income inequality as conventionally measured is ____ when you ignore the decreases in the capital gains tax rate.a. Overstatedb. Understatedc. Property stated
If you were to conclude, after carefully examining data and using proper evaluation techniques, that a tax credit for attending college benefits the poor more than a tax deduction (of equal total
Trade agreements are enforceda. Militarily by the United States.b. Militarily by the United Nations.c. By the consent of the parties to abide by the judgment of the arbitrators.d. Only by the
Of course, all individual students are better off if they get better grades. If you were to conclude that all students would be better off if everyone received an A you woulda. Have fallen victim to
Imagine an economist ordering pizza by the slice. When deciding how many slices to order she would pick that number where the enjoyment of the---------------- equals the enjoyment she could get from
Income inequality as conventionally measured is ____ when you ignore the fact that a higher percentage of the population is filing tax forms.a. Overstatedb. Understatedc. Property stated
Income inequality, when measured as the percentage of total income going to the top 1 percent, increased most rapidly during thea. 1950s.b. 1960s.c. 1980s and 1990s.d. 2000s.
Trade agreements are often necessary becausea. Free trade is in no one’s best interest.b. Limiting trade is in no one’s best interest.c. Limiting trade helps those doing the limiting but
The optimization assumption suggests that people makea. Irrational decisions.b. Unpredictable decisions.c. Decisions to make themselves as well off as possible.d. Decisions without thinking very hard.
Discretionary fiscal policy is the purview ofa. Congress only.b. The president only.c. Congress and the president collectively through law.d. The Federal Reserve.
The underlying reason production possibilities frontiers are likely to be bowed out (rather than linear) isa. choices have consequences.b. there are always opportunity costs.c. some resources and

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