The free-rider problem is encountered when:

A. People can receive benefits from a good without paying for it B. Individuals who consume a public good pay for it

C. All goods consumed and produced are private goods

D. All individuals are willing to pay for what they consume

• The scalping of tickets for an event is a sign that at the stated price on the ticket, the: A. Supply of tickets has increased
• B. Quantity demanded equals the quantity supplied
• C. Quantity demanded is greater than quantity supplied D. Quantity supplied is greater than quantity demanded
• Which is not an example of an externality? A. Air pollution from automobiles
• B. Water pollution by a chemical factory
• C. The rise in the price of gasoline because of higher crude oil prices
• D. A decrease in your chances of getting polio if others get polio immunization shots
• A paper plant creates a chemical waste which it dumps it into a nearby river. If this situation applied to most paper plants in the nation, then you can conclude that:

A. The demand for the paper is greater than the supply of paper

B. The supply of paper is greater than the demand for paper

C. The market price of the paper is too low because the supply of the paper fails to incorporate

all Costs of production

D. The market price of paper is too high because consumers are not able to pay enough money to

get pollution-free paper

• In an economy experiencing a declining production capacity: A. the nation's stock of capital goods is expanding.
• B. net exports are necessarily zero.
• C. depreciation exceeds gross investment.
• D. NDP exceeds GDP.
• GDP excludes:
• A. the market value of unpaid work in the home.
• B. the production of services.
• C. the production of nondurable goods. D. positive changes in inventories.
• GDP is equal to: (where Ig is gross investment, In is net investment, and Xn is the balance of trade) A. C + Ig - G + Xn.
• B. C + Ig + G - Xn. C. C - In + G + Xn. D. C + In + G - Xn.
• Value added refers to:
• A. any increase in GDP that has been adjusted for adverse environmental effects.
• B. the excess of gross investment over net investment.
• C. the difference between the value of a firm's output and the value of the inputs it has purchased
• from others.
• D. the portion of any increase in GDP that is caused by inflation as opposed to an increase in real
• output.
• Which of the following best defines disposable income?
• A. income received by households less personal taxes
• B. the before-tax income received by households
• C. all income earned by resource suppliers for their current contributions to production D. the market value of the annual output net of consumption of fixed capital
• If the equilibrium exchange rate changes so that the U.S. dollar price for Japanese yen decreases, it means that:
• A. The U.S. dollar has depreciated in value
• B. The Japanese yen has appreciated in value
• C. U.S. citizens will be able to buy fewer Japanese goods and imports would decrease D. Japanese citizens will be able to buy fewer U.S. goods and exports would decrease
• Which would be an example of a nontariff or non-quota barrier that could affect the balance of trade? A. The voluntary restraint agreement that limits imports of autos to the United States from Japan B. A limit on the import of textile products from China
• C. The use of extensive custom checks on product quality
• D. A $5.00 per case tax on imported wine is
• Protective tariffs in imports will tend to shift: A. Supply toward foreign products
• B. Demand toward foreign products
• C. Demand toward domestic products D. Have no effect on demand or supply
• A primary way that government redistributes income is through: A. Owning natural monopolies
• B. Providing positive externalities C. Making transfer payments
• D. Regulating business
• One effect of international trade in the United States has been: A. Less improvement in the quality of products
• B. An increase in the prices consumers pay for products
• C. A decrease in the range of consumer choice of products
• D. More competition for domestic firms that make imported products
• If government receives tax revenues primarily from middle- and upper-income groups and provides transfer payments primarily to lower-income groups, the result is likely to be:
• A. More competition
• B. Less competition
• C. A more equal distribution of income D. A less equal distribution of income
• All of the following generate positive externalities except: A. Public education
• B. Automobile exhaust fumes
• C. Public health programs
• D. Requiring drivers to undergo periodic eye examinations
• Is it reasonable that snow removal on streets is a service often provided by local governments?
• A. Yes, in some cases it is prohibitively expensive for private companies to charge and collect
• from all of those who benefit
• B. Yes, private companies cannot afford to have all the equipment sitting idle throughout the
• other three seasons
• C. No, it is not really necessary. People would pay just as much to private firms as they pay in
• local taxes
• D. No, this is simply an example of government intervention into the market resulting from a
• desire to increase governmental power
• Why is there a shortage of human organs available for transplant?
• A. The supply curve for human organs is perfectly elastic at the current zero price
• B. The demand curve for organs is perfectly inelastic at the current zero price
• C. The quantity supplied is greater than the quantity demanded at the current zero price D. The quantity demanded is greater than the quantity supplied at the current zero price
• Over a period of time both the price and the quantity sold of a certain product have increased. One possible explanation might be that:
• A. Supply increased over time, while demand remained the same B. Demand increased over time, while supply remained the same C. Supply decreased over time, while demand remained the same D. Supply increased over time, while demand declined
• If product Y is an inferior good, an increase in consumer incomes will: A. Result in a surplus of product Y
• B. Not affect the sales of product Y
• C. Shift the demand curve for product Y to the left D. Shift the demand curve for product Y to the right
• If service stations raise the price of gasoline and experience a decrease in demand for automobile tires, then gasoline and tires are:
• A. Substitute goods
• B. Economic goods
• C. Inferior goods
• D. Complementary goods
• Consider a barter situation where you have pens and you want pencils. To achieve your objective there must be a(n):
• A. Use of capital goods
• B. Entry and exit from the market C. Large number of sellers
• D. Coincidence of wants
• How does human specialization contribute to an economy's output? A. It makes use of differences in abilities
• B. It is a process of creative destruction C. It works like an "invisible hand"
• D. It decreases derived demand
• Clara states that "there is a high correlation between the level of people's education and the level of their income." Ellie replies that the correlation occurs because "more education is the best way to earn more income in this country."
• A. Both Clara's and Ellie's statements are positive
• B. Both Clara's and Ellie's statements are normative
• C. Clara's statement is normative and Ellie's statement is positive D. Clara's statement is positive and Ellie's statement is normative

The Keynesian approach to macroeconomics includes all of the following themes except: A. prices are sticky.

B. markets sometimes fail and need regulation.

C. there is no role for government policy in pushing the economy towards full employment. D. risk and uncertainty are important in determining market outcomes.

Essays: Do all of the following.

• Recently the FDA approved a vaccine for HPV manufactured by Merck Co. and will likely approve a similar vaccine made by GlaxoSmithKline this year. (HPV is a virus that causes most cases of cervical cancer in women.) Currently there is a huge debate in several states over requiring the vaccine for girls by age 12.
• a)What kind of market failure would support this regulation? (Hint: Think about public goods, externalities and google "herd immunity"). Explain. Be complete and use the language of economics.
• b)What kind of government failures could result? Explain. Be complete and use the language of economics.
• Imagine the country of Zed, which has the following production possibilities curve:
• a) What is the opportunity cost between tanks and noodles? Is it constant? Graph the ppc. b) True, false, uncertain, and explain:
• "This economy should produce 30 noodles and 300 tanks because that is the most even distribution of resources between the two goods."
• a) In a market economy, will units of a good be produced and purchased if consumers value them more than their cost of production? Explain. If the production cost per unit of a good exceeds the value derived by consumers, will the good continue to be produced and consumed? Why or why not?
• b) Which of the following statements support the claim that incentives matter? Explain.
• When income transfers to the able-bodied poor increase, the recipients will have less incentive to work.
• An increase in the fines associated with downloading music and videos protected by copyright laws
• reduces the number of people engaging in this activity.
• An increase in the number of people downloading music and videos negatively impacts the commercial
• production of music and videos.