QUESTION 1

1. When an economist states that a good is scarce, he/she means that
2. further production of the good cannot expand the availability of the good.
3. the good is rare, like a silver dollar. Would you believe that when I was 18, I had a silver dollar collection?
4. the desire for the good exceeds the amount that is freely available in nature.
5. people would want to purchase more of the good at any price.

1 points

QUESTION 2

1. When an economist says that a decision is rational, he/she means that
2. the person making the decision was not insane.
3. the person making the decision did not take excessive risk or put himself in an excessively dangerous situation.
4. a person did not focus on the marginal changes in cost and benefit associated with the action.
5. a person making the decision undertakes the action so long as the cost of the action was less than the benefits received.

1 points

QUESTION 3

1. Suppose that just before Labor Day weekend, the price of gasoline increases dramatically as numerous people are planning on taking out-of-town road trips. This price increase is the result of
2. the demand for gasoline increasing.
3. the supply for gasoline increasing.
4. self-interested oil companies trying to charge a price more than what consumers are willing to pay.
5. the market not finding a new equilibrium.

1 points

QUESTION 4

1. The year is 2021, and you drift-off to an afternoon nap after watching the Detroit Lions lose again. You wake up and find that the year is now 2050. You decide to go to the gas station to buy a gallon of gasoline and find the price of gasoline has risen to $10/gallon. However, you also notice that it does not take any additional purchasing power to buy gasoline in 2050, compared to 2021. Given this, the nominal price of gas has ___________ while the real price of gas has _____________. Note that it does not cost $10 to buy a gallon of gasoline in 2021.
2. increased, remained the same
3. remained the same, increased
4. increased, decreased
5. increased, also increased

1 points

QUESTION 5

1. A New York City businessman pays an expensive fare for a direct flight from New York to Los Angeles. However, a resident of New York City going to Los Angeles for vacation ops for a cheaper flight that involves a two-hour layover in Detroit. What would explain the difference in the choice made between the two individuals?
2. The tourist was not aware of the direct flight, or he would have picked it.
3. The businessman was not aware of the cheaper flight, or he would have picked it.
4. The opportunity cost of the tourist's time is higher than the businessman's.
5. The opportunity cost of the businessman's time is higher than the tourist's.

1 points

QUESTION 6

1. The statement that "one person's trash is another person's treasure" illustrates that
2. some people are irrational, as they place a positive value on garbage.
3. people respond to incentives.
4. the value of a good is subjective.
5. the law of unintended consequences is important.

1 points

QUESTION 7

1. The fact that if the price of a good rises, substitutes become relatively less expensive means that
2. supply curves slope up.
3. supply curves slope down.
4. demand curves slope up.
5. demand curves slope down.

1 points

QUESTION 8

1. In 1949, President Harry Truman made $100,000 in salary. In March 1949, the CPI was 23.7. In March 2021, the CPI was 264.793. What would President Truman's salary be if it were measured in 2021 dollars?
2. $9,000
3. $100,000
4. $1.11 million
5. $2.37 million

1 points

QUESTION 9

1. Refer to question #8. In 2021, President Biden made $400,000 in salary. Thus, the salary for the President of the United States as _________ in nominal terms and ________ in real terms between 1949 and 2021.
2. increased, decreased
3. decreased, increased
4. decreased, decreased
5. increased, increased

1 points

QUESTION 10

1. Which of the following is not a problem or shortcoming of GDP?
2. It tends to understate the growth in living standards because it is hard to measure the quality improvements in output.
3. Goods produced in one period that are sold in the following period fail to get counted in any period.
4. It tends to overstate the growth in living standards because GDP does not make an adjustment for increases in income that occur over time.
5. GDP overstates the value of production since it counts production that takes place in the underground economy.

1 points

QUESTION 11

1. Which of the following would be classified as a durable consumption good?
2. the purchase of a machine by the Callahan Brake Pads Corporation.
3. the purchase of a new house in Grand Blanc
4. the purchase of a new couch to go in the new house.
5. the production of a new car that sits in inventory.

1 points

QUESTION 12

1. Which of the following rationing systems requires people first to do something productive, before they can consume?
2. waiting in line
3. lottery
4. price
5. political process

1 points

QUESTION 13

1. The fact that the value of a good is subjective means that
2. the value of a good is equal to the labor used to produce it.
3. voluntary trade makes both parties better off.
4. people do not look at marginal changes in cost or benefit when making decisions.
5. unintended consequences are not important when forming economic policy.

1 points

QUESTION 14

1. In economics, when we say that something is efficient, we
2. are not wasting resources
3. are undertaking actions even if the cost of the action happens to exceed the benefit.
4. are rationing goods via lottery.
5. have an equitable distribution of goods and services across the population.

1 points

QUESTION 15

1. Corporateprofits$1,000
2. Interestincome200
3. Indirect businesstaxes400
4. Depreciation300
5. Employeecompensation3,200
6. Gross privateinvestment1,400
7. Proprietors'income600
8. Rents100
9. Personalconsumption2,950
10. Government consumption andinvestment1,200
11. Netexports100
12. Income received by Americans working in foreigncountries300
13. Income received by foreigners workingdomestically150
14. Refer to the above table. Gross domestic product equals
15. $5,550
16. $5,650
17. $5,800
18. $6,650

1 points

QUESTION 16

1. Which of the following would be an example of rent seeking behavior?
2. Mr. Burns produces electricity at the Springfield nuclear power plant, which is then sold to consumers in town.
3. Mr. Burns uses some of the profit from selling electricity to make a campaign contribution to his Congressman to get a tax break inserted into the tax code.
4. Bart lines-up outside of Gamestop before it opens to get the new Xbox that is released that day.
5. Lisa wins a contest where the prize is having dinner with a world famous jazz musician.

1 points

QUESTION 17

1. The Law of Supply says that if the price of electricity increases, all else equal, Mr. Burn's profit from producing and selling electricity will
2. decrease.
3. increase.
4. change in an ambiguous direction.
6. remain the same

1 points

QUESTION 18

1. When the market is in equilibrium,
2. there are often surpluses of the good.
3. there are no shortages or surpluses.
4. the market will quickly leave equilibrium, even if there are no changes .
5. there are often shortages of the good.

1 points

QUESTION 19

1. Which of the following would be an example of rent seeking behavior?
3. Mr. Burns produces electricity at the Springfield nuclear power plant, which is then sold to consumers in town.
5. Mr. Burns uses some of the profit from selling electricity to make a campaign contribution to his Congressman to get a tax break inserted into the tax code.
7. Bart lines-up outside of Gamestop before it opens to get the new Xbox that is released that day.
8. Lisa wins a contest where the prize is having dinner with a world-famous jazz musician.

1 points

QUESTION 20

1. Which if the following would be counted as a government purchase in GDP?
2. The Social Security payment that Billy Madison's father receives when he retires as CEO from Madison Hotels.
3. The unemployment assistance Billy Madison receives when he is laid-off from Madison Hotels when the hotels close due to the COVID-19 shutdown.
4. The new police cruiser that Chief Wiggum buys using local tax dollars.
5. All the above are counted as government purchases in GDP.

1 points

QUESTION 21

1. Which of the following would not count in GDP?
2. Paying to go to the dentist to get a cavity filled.
3. Building a new house and selling it in the same year it was built.
4. Buying a final good on the black market.
5. Producing a final good and then holding it in inventories.

1 points

QUESTION 22

1. Suppose you visit a local coffee shop that offers free refills after you buy a cup of coffee for $5. What is the marginal cost the second cup of coffee?
2. $0
3. $2.50
4. $5.00
5. $10.00