Multiple Choice Help for Intro To Economics

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The post hoc fallacy suggests that:

	A.	It is a mistake to believe that one event causes another event to occur, especially when using an unrealistic theory.
	B.	It is impossible to prove that some event A causes a second event B to occur.
	C.	It is a mistake to believe that some event A causes a second event B to occur because event A precedes event B.
	D.	Theoretical knowledge is inherently flawed, especially when trying to understand causal relationships.
	E.	It is mistake to believe that any event can cause a second event to occur.

A good economic theory is best described as one that::

	A.	Incorporates all aspects of the real world into the model;
	B.	Is true.
	C.	Allows economists to understand the real world, predict events in the real world, and to guide policy;
	D.	Most economists have confidence in;
	E.	Realistically depicts the real world economists are trying to model;

Which of the following reasons best describes why firms use command systems?

	A.	The command system eliminates the need to hire managers.
	B.	The command system greatly reduces the taxes firms have to pay.
	C.	The command system is more flexible and reduces transactions costs.
	D.	The command system allows firms to grow large quickly.
	E.	The command system enables firms to keep prices high and avoid competition

The discipline of economics can be defined as:

	A.	The study of economic growth and business cycles.
	B.	The study of efficiency properties of markets.
	C.	The study of technology and its impact on producers and consumers.
	D.	The study of how societies produce and distribute goods and services to meet their people’s needs.
	E.	The study of business strategy and decision making.

The ceteris paribus assumption implies that:

	A.	Economic models can predict well only if they are true.
	B.	Economic models cannot predict because they are unrealistic.
	C.	Economic models can predict well only if one thing changes at a time.
	D.	Economic models cannot predict because economists have too many disagreements.
	E.	Economic models cannot predict because economists have political biases.

Markets coordinate economic life by:

	A.	Producers responding to the tastes of workers and consumers.
	B.	Producers and consumers responding to price and quantity signals.
	C.	Producers and consumers following the relevant customs on how to produce and which goods to consume.
	D.	Producers and consumers responding to the commands of managers on how to produce and what to consume.
	E.	Producers and consumers responding to the commands of government officials on how to produce and what to consume.

Scarcity is best defined as a condition where:

	A.	Demand exceeds supply;
	B.	The desire for output exceeds the available output;
	C.	The supply of goods is drastically reduced creating a severe shortage of output.
	D.	The vast majority of people are living at or near subsistence;
	E.	Price is so high that the vast majority of people cannot afford to purchase a good;

Which of the following is NOT a concern of macroeconomists?

	A.	The relationship between government budget deficits and interest rates.
	B.	The reasons the financial crisis of 2008 produced a large drop in employment.
	C.	Whether or not recent college grads are receiving a fair return on their investments in education.
	D.	Why job growth after the crisis of 2008 has been disappointing.
	E.	The reasons why monetary policy failed to promote a robust recovery after the 2008 crisis.

Which of the following is NOT a concern of microeconomists?

	A.	The pay differences between college-educated workers and those with no college degrees.
	B.	How individual consumers allocate their budgets.
	C.	The reasons the rate of inflation increased in the 1970s.
	D.	The nature of competition in the mobile phone industry.
	E.	How a firm decides the number of workers to hire.

The fallacy of composition suggests that:

	A.	What works for one individual may not work for another individual.
	B.	What makes an individual better off must make the community better off.
	C.	What is good for an individual may not be good for the community as a whole.
	D.	What is true for an individual must be true for the community as a whole.
	E.	What is true for an individual may not be true for the community as a whole.

If we are on the frontier, to produce more guns and less butter, we need to:

	A.	Find ways to reduce waste to produce more guns and less butter.
	B.	Move land, labor, and capital from the production of butter to the production of guns.
	C.	Move land, labor, and capital from the production of guns to the production of butter.
	D.	Use unemployed resources to produce more guns and less butter.
	E.	Develop new technologies that permit us to produce more guns and less butter.

Which of the following is NOT a reason the production possibilities frontier shifts out?

	A.	New technologies reduce the need for labor in production.
	B.	We make investments in new capital.
	C.	The labor force expands.
	D.	Idle resources are put back to work.
	E.	We improve the quality of our labor force by investing in education and health care.

Which of the following is a reason we can be inside the production possibilities frontier?

	A.	The labor force is shrinking due to an aging population.
	B.	Some natural resources become scarce.
	C.	We are unable to invent new technologies.
	D.	We have idle resources.
	E.	We reduce investments in education and health care.

A public good creates a market failure because:

The private sector cannot produce it.

The public sector usually produces it.

Neither the public sector nor the private sector can produce it.

The cost of producing it is prohibitive.

Consumers will not pay for it.

Which of the following is NOT a recognized method of dealing with asymmetric information problems? CORRECT

	A.	Patent laws.
	B.	Truth in advertising laws.
	C.	Disclosure laws.
	D	Label laws.
	E	Transparency laws.

A public good is:

A good that is both produced by the public sector and most of the public consumes.

A good that is produced by the public sector.

A good that that most of the public consumes.

A good that creates large, public benefits when it is consumed.

A good that one person’s consumption of it does not reduce another person’s consumption of it.

Which of the following is a recognized method of promoting those activities that produce large, external benefits?

Subsidizing those activities.

Creating markets in those activities.

Taxing those activities.

Regulating those activities.

Advertising those activities.

The main purpose of the Anti-trust laws is to:

Help small and mid-sized firms compete against their larger rivals.

To promote fairness in our economy by keeping prices as low as possible for consumers.

To reduce the growth of big business.

To promote competition by preventing monopolies and collusion.

To protect the bargaining power of workers employed by large employers.

External costs create a market failure because unlike most costs:

	A.	External costs are so low that producers and consumers ignore them.
	B.	External costs are so high that it is impossible for consumers and producers to pay for them.
	C.	External costs are ignored because most individual consumers and producers do not understand their impact.
	D.	External costs are imposed on the community as a whole so that individual consumers and producers have no incentive to reduce them.
	E.	External costs are ignored because individual consumers and producers only pay them infrequently.

If sellers have more information than buyers this can create a market failure because:

Both buyers and sellers can lose from the exchange.

Sellers can be lied to and cheated by buyers.

Buyers can be lied to and cheated by sellers.

Sellers can harm the community at large.

Buyers can harm the community at large.

External benefits create a market failure because:

	A.	The activities that create external benefits may create high external costs that harm communities.
	B.	External benefits do not improve the lives of individuals.
	C.	The activities that produce external benefits are too costly to produce.
	D.	The activities that produce external benefits only improve the lives of poor people.
	E.	The activities that produce external benefits may not create sufficient private benefits to producers and consumers to warrant their production.

Which of the following is NOT recognized as a way to reduce pollution?

	A.	Fining polluters.
	B.	Creating markets in pollutants.
	C.	Promoting free competition.
	D.	Taxing polluters. NOT IT
	E.	Regulating polluters.

A public good like national defense can best be paid for by:

	A.	Taxing the firms that make profit from producing the public good.
	B.	Taxing the general public using an “ability to pay” principle.
	C.	Establishing a “user tax” on those who use the public good.
	D.	Relying on voluntary contributions by publicly-minded individuals and firms.
	E.	Taxing the rich as they tend to use the public good more than the rest of the population.