Contemporary Economic Issues
Exam Answer Key
Course Introduction
This course examines pressing economic challenges facing modern societies, integrating theoretical perspectives with real-world case studies. Major topics include globalization, income inequality, unemployment, inflation, financial crises, environmental sustainability, and the impact of technological change. Students explore policy responses at national and international levels, developing the analytical skills needed to critically assess differing viewpoints and potential solutions. By the end of the course, students are equipped to understand and engage in informed debates about the economic issues that shape the contemporary world.
Recommended Textbook
Issues in Economics Today 8th Edition by Robert Guell
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48 Chapters
3693 Verified Questions
3693 Flashcards
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Page 2
Chapter 1: Economics: the Study of Opportunity Cost
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124 Verified Questions
124 Flashcards
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Sample Questions
Q1) When analyzing a problem, if an economist is attempting to understand whether or not an action was fair or just, the economist is thinking
A)positively.
B)negatively.
C)normatively.
D)justifiably.
Answer: C
Q2) In Figure 1.3 A, B and C, which depicts the existence of opportunity cost?
A)Figure A
B)Figure B
C)Figure C
D)All three figures show the existence of opportunity cost.
Answer: D
Q3) Using Figure 1.6 you can tell that
A)there is increasing opportunity cost.
B)there is unemployment.
C)there is constant opportunity cost.
D)the technology does not exist to produce 90 units of soda and 2 units of pizza.
Answer: A
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Page 3
Chapter 2: Supply and Demand
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204 Flashcards
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Sample Questions
Q1) An increase in the excise tax imposed upon consumers of gasoline
A)shifts the demand for gasoline to the left.
B)shifts the demand for gasoline to the right.
C)shifts the supply of gasoline to the right.
D)shifts the market price of gasoline.
Answer: A
Q2) If the price is so high that vendors find too many unsold bottles remaining in inventory, they might dispose of their excess inventory by
A)raising the price per bottle.
B)lowering the price per bottle.
C)closing early.
D)creating a surplus.
Answer: B
Q3) The reason that the supply curve is upward sloping is
A)diminishing marginal costs.
B)diminishing average costs.
C)increasing marginal costs.
D)increasing average costs.
Answer: C
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Page 4
Chapter 3: The Concept of Elasticity and Consumer and Producer Surplus
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Sample Questions
Q1) The cross price elasticity for coffee for a change in the price of tea is likely to be
A)Negative and more negative than -1
B)Negative but less negative than -1
C)Zero
D)Positive
Answer: D
Q2) If the price of a good increases by 10% and the quantity demanded decreases by 5%, then at that price, the good is
A)elastic.
B)inelastic.
C)perfectly inelastic.
D)perfectly elastic.
Answer: B
Q3) Which of the following is true?
A)on a linear demand curve, the higher the price the less elastic is demand
B)on a linear demand curve, elasticity is not constant
C)at the same price demand is more elastic on the steeper demand curve
D)none are true
Answer: B
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Chapter 4: Firm Production, Cost, and Revenue
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Sample Questions
Q1) Which type of firm has no control over its price
A)price taker.
B)price maker.
C)price setter.
D)zero price setter.
Q2) Refer to Table 4.1, Box H should be filled with
A)$0.
B)$110.
C)$125.
D)$150.
Q3) Suppose you are deciding whether or not to increase production. You are currently making a profit. If you produce one more unit your increase in cost will be $10, your average variable costs will increase to less than that and your average fixed costs will decrease. Finally, your average revenue will increase to $10, but your increase in revenue will be $9. You should
A)Increase production by at least 1 unit.
B)Increase production by exactly 1 unit.
C)Leave production unchanged, profit is maximized where you are.
D)Redo the math associated with decreasing production because that may result in greater profit.
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Chapter 5: Perfect Competition, Monopoly, and Economic
Versus Normal Profit
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Sample Questions
Q1) In perfect competition and ____ economic profit will move towards zero
A)Monopoly
B)Monopolistic competition
C)Oligopoly
D)Natural monopoly
Q2) In Figure 5.8, if the supply curve moves from S1 to S5
A)The firm will make a smaller economic profit than they used to
B)The firm will go from making an economic profit to a normal profit
C)The firm will go from making an economic profit to a loss but one that is not big enough to make it want to shutdown.
D)The firm will go from making an economic profit to a loss that is big enough to make it want to shutdown.
Q3) Which of the following is not an assumption of perfect competition?
A)Freedom of entry
B)Powerful buyers
C)Freedom of exit
D)Identical (or indistinguishable)products
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Page 7
Chapter
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Sample Questions
Q1) The period of growth from the level of the previous peak to a new peak in Real GDP is called a A)recession.
B)recovery.
C)expansion.
Q2) If Real GDP contracted by more than 10%, economists would label that a A)Recession.
B)Expansion.
C)Recovery.
D)Depression.
Q3) The annualized monthly CPI numbers are
A)more volatile than the Core CPI.
B)less volatile than the Core CPI.
C)different, but no more or less volatile than the Core CPI.
Q4) On a graph of real gross domestic product over time, recessions appear as A)relatively short and shallow drops on an otherwise increasing path.
B)long, sharp declines on an otherwise increasing path.
Page 8
C)the dips on a path that increases and decreases equally.
D)the periods where the rate of grow, while still positive, slows.
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Chapter 7: Interest Rates and Present Value
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Sample Questions
Q1) In a supply and demand model for the market for money, we typically use the _____ to look at savers' behavior.
A)the demand curve
B)the supply curve
C)the production possibilities frontier
D)the surplus curve
Q2) The difference between the nominal rate of interest and the real rate of interest is the
A)interest rate.
B)expected interest rate.
C)expected rate of inflation.
D)advertised interest rate.
Q3) In the market for money the behavior of borrowers is represented by the A)demand curve.
B)supply curve.
C)neither the supply curve nor the demand curve.
D)a combination of the supply and demand curves.
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Chapter 8: Aggregate Demand and Aggregate Supply
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Sample Questions
Q1) In the Aggregate Demand - Aggregate Supply diagram in Figure 8.1, Box 1 should be filled with
A)PI for Price Index.
B)RGDP for Real Gross Domestic Product.
C)AS for Aggregate Supply.
D)AD for Aggregate Demand.
Q2) A weakening of the dollar will immediately shift
A)aggregate demand to the right.
B)aggregate demand to the left.
C)aggregate supply to the right.
D)aggregate supply to the left.
Q3) If Iraq were to become a stable oil producing friend of the U.S., this would likely
A)increase aggregate demand.
B)increase aggregate supply.
C)decrease aggregate demand.
D)decrease aggregate supply.
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Chapter 9: Fiscal Policy
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Sample Questions
Q1) The portion of the Obama stimulus package that bolstered state welfare plans is best thought of as
A)nondiscretionary fiscal policy.
B)discretionary (and expansionary)fiscal policy.
C)discretionary (and contractionary)fiscal policy.
D)monetary policy.
Q2) A political leader suggesting that an economic downturn will be better dealt with by allowing the built-in stabilizers to work is referring to
A)Monetary policy
B)Discretionary Fiscal Policy
C)Nondiscretionary Fiscal Policy
D)Tax policy changes
Q3) The tax cuts of 2001 and 2003 that came in the form of tax rebate checks are good examples of ______ fiscal policy
A)non-discretionary
B)non-conjunctive
C)discretionary
D)universally discredited
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11
Chapter 10: Monetary Policy
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Sample Questions
Q1) The Federal Reserve has
A)direct control over macroeconomic variables such as unemployment and inflation.
B)indirect influence over macroeconomic variables such as unemployment and inflation through the use of intermediate targets.
C)no control or influence over any significant macroeconomic variables.
D)oversight on issues of the environment
Q2) If money is moved from a consumer checking account into a consumer savings account,
A)M1 and M2 both increase.
B)M1 increases and M2 decreases.
C)M1 decreases and M2 remains unchanged.
D)M1 and M2 both remain unchanged.
Q3) Expansionary monetary policy would shift the
A)aggregate demand curve to the right.
B)aggregate demand curve to the left.
C)aggregate supply curve up and to the left.
D)aggregate supply curve down and to the right.
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12
Chapter 11: Federal Spending
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Sample Questions
Q1) Suppose there was a debate regarding military budgets and the Democrat was arguing for a budget increase from $400 billion to $405 billion and the Republican was arguing for the budget to increase to $425 billion. Further suppose military salaries and procurement of the same weapons systems are project to rise 2%. The Republican accuses the Democrat of proposing a cut to the military, the Democrat insists his plan increases military spending. What is going on here?
A)The Democrat is cutting the military only if you use current services budgeting.
B)The Republican is cutting the military only if you use baseline budgeting.
C)Both are proposing increases. The Republican is lying regardless of budgeting technique.
D)Both are proposing cuts. They are both lying regardless of budgeting technique.
Q2) Between 2009 and 2011, Federal Spending as a percentage of GDP ranged between
A)16% and 22%.
B)22% and 25%.
C)35% and 45%.
D)47% and 61%.
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Chapter 12: Federal Deficits, Surpluses, and the National Debt
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Sample Questions
Q1) The amount of US debt owned by the Chinese
A)Dropped from the 1940s through the 1970s, spiked in the 1980s, dropped in the 1990s and early 2000, and rose in the 2010s
B)continues to rise
C)dropped to an all-time low in 2015
D)fell as a result of the Great Recession
Q2) The national debt is the
A)amount by which revenues exceed expenditures.
B)total amount owed by the federal government.
C)amount by which revenues fall short of projections.
D)amount by which expenditures exceed revenues.
Q3) Most economists would place the costs of a new public transit system in the A)operating budget.
B)capital budget.
C)social budget.
D)smart budget.
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Chapter 13: The Housing Bubble
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71 Flashcards
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Sample Questions
Q1) The "exotic" mortgage instrument of recent years is exemplified by the A)bank mortgage loan.
B)"magical-mystery" mortgage.
C)"negative-amortization" mortgage.
D)"traditional" mortgage.
Q2) In comparing the traditional way of structuring mortgages and the newer structure of providing mortgages that securitized them and insured those securities with credit default swaps , it is clear that the ____ structure increased homeownership rates and that the ___ structure was riskier to the health of the overall economy.
A)traditional; traditional
B)newer; newer
C)traditional; newer
D)newer; traditional
Q3) Monthly payments on "negative-amortization" mortgages typically increase over the life of mortgage.
A)True
B)False
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Page 15
Chapter 14: The Recession of 2007-2009: Causes and Policy
Responses
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Sample Questions
Q1) The slow growth coming out of the Great Recession caused the Fed to A)focus exclusively on the traditional tools of monetary policy.
B)employ new tools of monetary policy.
C)employ discretionary fiscal policy.
D)employ nondiscretionary fiscal policy.
Q2) The efforts to reduce the deficit in 2011 can be best thought of as using A)the traditional tools of monetary policy.
B)new tools of monetary policy.
C)discretionary fiscal policy.
D)none of these options are correct.
Q3) The stimulus plan adopted in 2009 by newly-elected President Obama consisted of A)only tax cuts.
B)only spending increases on newly-created federal programs.
C)only attempts to shore up Medicaid, welfare and unemployment programs.
D)roughly equal tax cuts and spending increases, with additional spending to shore up existing federal programs.
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16
Chapter 15: Is Economic Stagnation the New Normal
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Sample Questions
Q1) Those that believe that the recent period of slow growth will pass and that higher levels of growth can be created through liberal policies focus on ones that would cause
A)Increases to aggregate demand
B)Increases to aggregate supply
C)Increases in interest rates
D)Decreases in aggregate supply
Q2) Economic growth, as measured by increases in real per-capita GDP, exceeded 3% during the
A)1960s
B)1980s
C)1990s
D)2000s and 2010s
Q3) Economic growth, as measured by increases in real per-capita GDP, exceeded 2% during the
A)1950s, 1960s, 1970s and 1980s
B)1980s, 1990s, 2000s and 2010s
C)1960s, 1970s, and 1980s
D)2000s and 2010s
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Chapter
16: Is the Fiscalsky Falling: An Examination of
Unfunded Social Security, Medicare, and State and Local Pension Liabilities
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Sample Questions
Q1) Economists Novy-Marx and Rauh contend that cities are
A)accurately stating their pension liabilities.
B)understating the value of both their assets and liabilities.
C)accurately stating the value of their assets but understating the value of their pension liabilities.
D)accurately stating the value of their assets but overstating the value of their pension liabilities.
Q2) If you overheard a worker say that her pension would only give her what she put in and the interest she garnered on those savings regardless of how long she had worked for the company you would know she had
A)a defined benefit pension program.
B)a defined contribution program.
C)a Ponzi scheme.
D)been exempted from Social Security.
Q3) ERISA focuses much of attention on
A)defined benefit pension programs.
B)defined contribution programs.
C)Ponzi schemes.
D)Social Security.
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Chapter 17: International Trade: Does It Jeopardize
American Jobs
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Sample Questions
Q1) In 2015, which of the following were prominent imports into the U.S.?
A)petroleum
B)electrical machinery and audio and video equipment
C)transportation equipment
D)all of the answers are correct
Q2) In Table 17.2,
A)the United States has an absolute advantage in both goods but a comparative advantage in apples only.
B)Brazil has an absolute advantage in both goods but a comparative advantage in coffee only.
C)the United States has an absolute and comparative advantage in apples while Brazil has an absolute and comparative advantage in coffee.
D)the United States has an absolute and comparative advantage in both goods.
Q3) In the language of international trade, "dumping" is the act of
A)selling goods of substandard quality.
B)selling goods cheaper than the competition.
C)selling goods below cost so as to drive competitors out of business.
D)producing goods without consideration of their environmental consequences.
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Chapter 18: International Finance and Exchange Rates
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Sample Questions
Q1) Any restriction on the ease of exchanging on currency for another tends to harm
A)only the prospective purchaser of imported goods.
B)only the prospective manufacturer of goods for export.
C)both the prospective import purchaser and the prospective export manufacturer.
D)no one.
Q2) Anything that makes it more difficult to exchange one currency for another tends to A)increase exports.
B)decrease imports.
C)increase imports.
D)all of the options are correct.
Q3) If a country tries to maintain a managed floating exchange rate system it must be
A)willing to sell gold and hard currency to weaken its currency, if needed.
B)willing to print and sell its own currency to weaken it, if needed.
C)willing to print and sell its own currency to strengthen it, if needed.
D)a communist nation to accomplish it.
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Chapter 19: The European Debt Crisis
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Sample Questions
Q1) In 2001, Spain was _____ percent poorer than Germany.
A)10
B)15
C)20
D)25
Q2) The threat of a Greek exit from the euro system
A)led to the exit of Spain from the euro.
B)increased the viability of the Greek exit.
C)spurred economic activity in Greece.
D)left Greek banks bankrupt.
Q3) In which year did long-term interest rates in Greece rise to an all-time high of close to 30%?
A)2003
B)2005
C)2009
D)2011
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Chapter 20: Economic Growth and Development
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Sample Questions
Q1) In developing economies, the fraction of the economy in non-market transactions can be as much as
A)10 percent.
B)25 percent.
C)50 percent.
D)75 percent.
Q2) From 1990 to 2004 among developed countries, a 1 percentage point increase in productivity growth was associated with increased per capita GDP growth of A)0.01%.
B)0.30%.
C)1.50%.
D)3.00%.
Q3) Since the 1960s, development proceeded without many natural resources in A)Canada.
B)Saudi Arabia.
C)Japan.
D)all of the options are correct.
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Page 22
Chapter 21: Nafta, Gatt, Wto:
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Sample Questions
Q1) Which of the following trade agreements includes Mexico?
A)NAFTA
B)CAFTA
C)GATT
D)All of these include Mexico
Q2) Which of the following purports to be a "free-trade" agreement?
A)NAFTA
B)GATT
C)WTO
D)USSR
Q3) The notion of creative destruction suggests that
A)people need to lose their jobs involuntarily to seize better opportunities.
B)people are generally lazy and that losing a job shakes them out of that.
C)people are not well-trained enough to keep the jobs they have.
D)it is always easier to scramble an egg than to unscramble one.
Q4) CAFTA governs
A)agricultural trade only
B)trade between the U.S., Canada, and Central America
C)trade between California and the rest of the U.S.
D)health food products
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Chapter 22: The Line Between Legal and Illegal Goods
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Sample Questions
Q1) The 1998 tobacco settlement requires that tobacco companies pay ___ to the states in the settlement over a period of twenty years.
A)$2.5 million
B)$250 million
C)$2.5 billion
D)$250 billion
Q2) Which of the following reasons for making drugs sales illegal do economists generally see as potentially legitimate, but beyond their area of expertise?
A)Drugs are immoral and allowing them to be sold is immoral.
B)The harm they do to innocent victims.
C)That addictive drugs do not allow for people to learn from the mistake of taking them.
D)The harm that addictive drugs do to innocent victims and that they do not allow for people to learn from the mistake of taking them.
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24
Chapter 23: Natural Resources, the Environment, and Climate Change
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Sample Questions
Q1) Which of the following would economists label as an example of the "tragedy of the commons?"
A)The use of pesticides on private farm land.
B)The use of growth hormone on cattle.
C)The over-fishing of the oceans.
D)The neighbor who does not mow his yard.
Q2) The Endangered Species Act was originally passed in
A)the 1930's.
B)the 1970's.
C)the 1980's.
D)the 1990's.
Q3) In Figure 23.1 for a good with no externality, which area represents consumer surplus to the consumer?
A)AP*C
B)0ACQ*
C)0BCQ*
D)0P*CQ*
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Page 25
Chapter 24: Health Care
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Sample Questions
Q1) The Children's Health Insurance Program was created in the A)1940s.
B)1960s.
C)1980s.
D)1990s.
Q2) If a health economist is worried that a system of health insurance will break down because those with health insurance will be less likely to eat right and exercise because they will not be financially liable for the health care costs that follow, that economist is focused on the problem of
A)moral hazard.
B)adverse selection.
C)mandation.
D)lack of universal coverage.
Q3) In 2014 the percentage of people who were not covered by health insurance for the entire year was
A)10%.
B)16%.
C)25%.
D)55%.
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Page 26
Chapter
Medicaid, Medicare, and the Child Health Insurance Program
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Sample Questions
Q1) When Medicare was created, costs were to be shared between government and the insured
A)equally, on a 50-50 basis
B)with government paying 25 % of the cost
C)with government paying 75% of the cost
D)with government paying 100% of the cost
Q2) To be eligible for Medicaid, children under nineteen must live in a household with family income under
A)$10,000.
B)133% of the poverty line for their family size.
C)185% of the poverty line for their family size.
D)$35,000.
Q3) Under the intermediate set of assumptions of the Medicare Trustees Report, payroll taxes ______ cover the likely increase in Medicare expenses.
A)would have to grow substantially to B)would have to remain constant to C)could be cut and still
D)and sales tax would have to remain constant to
Page 27
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Chapter 26: The Economics of Prescription Drugs
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Sample Questions
Q1) Economists generally agree that price controls in the U.S. would
A)increase prices to consumers.
B)increase the motivation to invent new drugs.
C)diminish profits to drug companies.
D)increase the motivation to invent new drugs and diminish profits to drug companies.
Q2) The reason why a cure to a disease such as AIDS would have less elastic demand than a vaccine at every price is that
A)the vaccine would be more expensive.
B)the cure would be more expensive.
C)for a person without AIDS there is a freely available substitute-monogamy with an unaffected partner.
D)for a person without AIDS there are no substitutes.
Q3) After a drug has been invented, monopoly (when compared to perfect competition)creates
A)deadweight loss.
B)lower profits to firms.
C)higher prices to consumers.
D)deadweight loss and higher prices to consumers.
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Sample Questions
Q1) A trademark is a temporary, exclusive ownership right legally granted to
A)the creator of a written or recorded work.
B)a business for use of a phrase, logo or name.
C)the inventor of a new product or technique.
D)criminals who develop an easily recognizable modus operandi.
Q2) If Bob (the publisher)promises to give Susan (the author)15% of the proceeds of the sale of a work of Susan's
A)a contract is necessary.
B)no contract is necessary.
C)a copyright is necessary.
D)a trademark is necessary.
Q3) Which form of intellectual property protects a drug manufacturer against a rival stealing its brand name?
A)Patent
B)Trademark
C)Copyright
D)Copymark
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Page 29
Chapter 28: The Economics of Crime
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Sample Questions
Q1) Among the most difficult costs of crime to evaluate might be the
A)costs of law enforcement activities undertaken because of the crime.
B)market value of material possessions stolen, damaged or destroyed.
C)deterioration in quality of life due to physical injury.
D)wages lost due to missed work days following an assault.
Q2) Marginal benefit-marginal cost analysis suggests that we spend too much money incarcerating
A)young criminals.
B)female criminals.
C)male criminals.
D)elderly criminals.
Q3) Under the rational criminal model, a decrease in the legal income producing opportunities available to a population will
A)increase crime.
B)have no effect on crime.
C)decrease crime.
D)simple shift crime from white-collar to blue-collar crime.
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Chapter 29: Antitrust
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Sample Questions
Q1) In Figure 29.1 the area that represents the producer surplus under monopoly is
A)P<sub>PC</sub>AC
B)P<sub>monopoly</sub>AB
C)FP<sub>PC</sub>C
D)FP<sub>monopoly</sub>BE
Q2) Monopolies such as those created by copyrights and patents
A)are necessary to motivate innovation and authorship.
B)inhibit but do not prevent innovation and authorship.
C)stifle innovation and authorship.
D)lower prices.
Q3) Following court rulings against file-sharing services Napster and Kazaa, Apple Computer successfully introduced its iTunes music download software that exploited the company's
A)fear of entry by large competitors such as Microsoft.
B)extensive political connections.
C)popular iPod brand of audio hardware.
D)clunky desktop user interface.
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Chapter 30: The Economics of Race and Discrimination
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Q1) Treating two otherwise equal people differently because of their race is called
A)"perfect" discrimination.
B)disparate treatment discrimination.
C)rational discrimination.
D)adverse impact discrimination.
Q2) Which of the following reasons why women earn less than men is considered by some to be economic, and by others to be sociological?
A)women are the only ones who can give birth.
B)the average man is physically stronger than the average women.
C)women outnumber men.
D)women are more likely to choose to stay at home to raise small children.
Q3) The labor force participation rate for women 16 and over has
A)increased from 38% in the 1960s to 57% today.
B)increased from 8% in the 1960s to 18% today.
C)remained steady for nearly 40 years at 50%.
D)decreased since the 1960s.
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Chapter 31: Income and Wealth Inequality
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Q1) When the housing bubble collapsed, _____.
A)the median household's wealth fell by 40%
B)the mean household's wealth fell by 40%
C)the median household's wealth increased by 15%
D)the mean household's wealth increased by 15%
Q2) Which of the following was a problem with using the conventional press measure of income inequality during 1971-1998?
A)There was a rapid decrease in the income tax filings during the period between 1971 and 1998.
B)There was a rapid increase in the income tax filings during the period between 1971 and 1998.
C)There was a rapid increase in the working class population during the period between 1971 and 1998.
D)There was a rapid decrease in the working class population during the period between 1971 and 1998.
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Chapter 32: Farm Policy
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Q1) The Eau Claire Rule is in place to
A)protect dairy farmers in Wisconsin.
B)ensure low prices to consumers.
C)protect dairy farmers outside Wisconsin.
D)protect foreign dairy farmers.
Q2) Viewed from the perspective of a U.S. beef farmer, gasoline price variability can be viewed as a source of
A)demand variability, because an increase in gasoline costs drive up corn costs and corn is what farmers feed their cattle.
B)supply variability, because an increase in gasoline costs drive up corn costs and corn is what farmers feed their cattle.
C)static variability.
D)demand and supply variability, because an increase in gasoline costs drive up corn costs and corn is what farmers feed their cattle.
Q3) The governmental expense of a farm price support tends to diminish as the price of the good falls.
A)True
B)False
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Chapter 33: Minimum Wage
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Q1) Of the people working for the minimum wage ___ live in households with incomes below the poverty line.
A)10%
B)30%
C)70%
D)90%
Q2) City governments are not allowed to increase the minimum wage in their cities. A)True
B)False
Q3) If a fast food restaurant was one of many hiring workers, the minimum wage was $7.25 an hour and it was paying $7.25 an hour to new employees. Suppose a worker earns a $0.75 raise to $8 an hour. Now suppose the minimum wage rises to $8.25 an hour. The government requires this worker to be paid
A)$8.00 an hour.
B)$8.25 an hour.
C)$9.00 an hour.
D)somewhere between $8.25 and $9.00 an hour depending on the policies of the restaurant.
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Chapter 34: Ticket Brokers and Ticket Scalping
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Q1) Referring to Figure 34.2, the price that this promoter will choose will
A)sell out the facility.
B)be where the demand curve crosses the marginal cost curve.
C)will be such that there are many empty seats.
D)sell out the facility and will be where the demand curve crosses the marginal cost curve.
Q2) Suppose one of baseball's most controversial records - the Bonds' 72 home run season - were on the line. Tickets to the games leading up to breaking of the record might command three times the face-value price for tickets. Economists would suggest that a scalping market would appear and it
A)would make all ticket holders and potential buys worse off.
B)would make all ticket holders and potential buys better off (or at least no worse off).
C)cause the price to fall below the face value.
D)cause the price to fall back to the face value.
Q3) The marginal cost curve used to model promoter sold tickets to an event is
A)u-shaped.
B)check-shaped.
C)L-shaped.
D)backward L-shaped.
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Page 36
Chapter 35: Rent Control
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Q1) In Figure 35.1, if rents are uncontrolled then the amount that renters will want, will be A)0
B)Q'
C)Q*
D)Q"
Q2) One result of rent control is the desire by landlords for tenants to leave, so tenants A)simply leave.
B)have an incentive report all infractions, no matter how minor to the authorities, C)have an incentive to perform many repairs for themselves.
D)have an incentive to offer more rent.
Q3) One city that has repealed many of its rent-control laws is A)San Jose.
B)Boston.
C)New York.
D)Miami.
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Chapter 36: Economics of K-12 Education
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Q1) In determining whether a further investment in education for a individual is worth the costs, an economist would look at whether the sum of the
A)annual education costs is exceeded by the sum of annual income to the person.
B)annual education costs is exceeded by the sum of the increases in income that are attributable to the increased education.
C)present value of the annual education costs is exceeded by the sum of the present value of the annual income to the person.
D)present value of the annual education costs is exceeded by the sum of the present value of the increases in income that are attributable to the increased education.
Q2) In 2011, Wisconsin and Indiana state legislatures were focused on which of the following costs of public education?
A)Material costs
B)Teacher salaries
C)Defined benefit pensions
D)Defined contribution pensions
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Chapter 37: Economics of College and University Education
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Q1) Payment of a share of prospective royalties to the author before publication is called the A)advance. B)bonus.
C)stipend.
D)allowance.
Q2) One side effect of the increased speed with which used books circulate is A)used books are cheaper.
B)used books are more expensive.
C)new editions come out more frequently.
D)new editions come out less frequently.
Q3) In the United States, the average government subsidy for a college education at a regional, bachelors-only public institution is approximately __ for every $1 spent by the student.
A)$0.85
B)$2
C)$5
D)$10
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Chapter 38: Poverty and Welfare
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Q1) Which of the following is true?
A)The poverty rate among the elderly is greater than the poverty rate among children.
B)The poverty rate among men is greater than the poverty rate among women.
C)The poverty rate among blacks is greater than the poverty rate among whites.
D)The poverty rate among Hispanics is less than the poverty rate among whites.
Q2) Which of the following is true about poor populations?
A)There are fewer poor whites than poor blacks.
B)The poor are disproportionately black and Hispanic.
C)The poor are less likely to be children than the elderly.
D)The poor are more likely to have graduated from high school.
Q3) The incentives built into nearly all welfare programs
A)encourage work.
B)encourage family planning.
C)discourage marriage.
D)encourage savings.
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Chapter 39: Head Start
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Q1) The percentage of households with a Head Start enrollee where there are two parents present and where both have jobs is
A)20%.
B)33%.
C)50%.
D)67%.
Q2) The newest evidence on Head Start suggests that ______ participants are more likely to graduate from high school than equally situated non-participants.
A)all
B)African-American
C)Asian
D)white
Q3) Annual Head Start costs per child served are _______ average child care costs. A)somewhat higher than B)about the same as C)much lower
D)declining when compared to
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41
Chapter 40: Social Security
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Q1) The solvency of Social Security can be extended if
A)the retirement age is increased.
B)the cap on taxable earnings is lowered.
C)the trust fund invests in government bonds.
D)the tax rate is reduced.
Q2) In 2014 the Social Security Trust Fund held approximately
A)$3 trillion in cash.
B)$3 trillion in government bonds.
C)$3 trillion in stocks.
D)$30 trillion in gold.
Q3) The induced retirement effect
A)causes an increase in savings because people retire later.
B)causes an increase in savings because people retire earlier.
C)causes a decrease in savings because people retire later.
D)causes a decrease in savings because people retire earlier.
Q4) Which of the following types of income are subject to FICA taxes?
A)Business profit from the self-employed
B)Interest earned on checking accounts
C)Inheritance
D)Profits earned from dividends
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Chapter 41: Personal Income Taxes
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Q1) Economists generally believe that tax credits and deductions that are used to create an incentive for individuals to go to college
A)perversely, cause fewer people to go to college.
B)cause dramatically more people to go to college, working precisely as was intended.
C)cause a few more people to go to college, working somewhat as was intended.
D)cause no more people to go to college, amounting to a special break for people who would have gone to college anyway.
Q2) One of the key outcomes of the 2010 mid-term elections was that
A)2003 tax cuts were continued for everyone through the end of 2012.
B)1986 tax increases were finally repealed in 2011.
C)A national sales tax was created and replaced the income tax.
D)Iraqi oil revenues were taxed by the U.S. to provide care for disabled Iraqi War veterans.
Q3) Capital gains are
A)total net income from all sources.
B)any profit you have from asset sales.
C)total sales prices of from assets.
D)the amount of income a taxpayer has after taxes are paid.
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Page 43
Chapter 42: Energy Prices
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Q1) The large decrease in gasoline prices during 2014-2015 was attributable to A)hydraulic fracturing.
B)directional drilling.
C)hyperaccurate seismologic mapping.
D)all of these.
Q2) Although crude oil prices briefly fell below $55 per barrel in late 2006, they quickly rebounded and throughout much of 2007 remained well above
A)$60 per barrel.
B)$80 per barrel.
C)$100 per barrel.
D)$125 per barrel.
Q3) Cartel members are motivated to increase production beyond their quotas because they are at a point where, if they can increase their own production without affecting the cartel price,
A)they are making a profit.
B)they are making a loss.
C)their marginal cost exceeds their marginal revenue.
D)their marginal revenue exceeds their marginal costs.
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44
Chapter
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Sample Questions
Q1) European soccer doesn't have issues with a reserve clause because A)there are leagues in other countries where players can always play.
B)soccer pays so little.
C)soccer pays so much.
D)soccer teams are owned by the players.
Q2) If an athlete were to pick the sport where being the best at a position would easily allow you to move to a city destined to win a championship, it would be
A)NBA basketball.
B)NFL football.
C)Major League Baseball.
D)European soccer.
Q3) The extra revenue to a team associated with a player is called the player's A)reservation wage.
B)marginal revenue product.
C)average compensation.
D)minimum wage.
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Chapter 44: The Stock Market Crashes
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Q1) Swings in stock prices in a graph covering seventy years can be
A)imperceptible in the logarithmic scale but obvious in the level scale.
B)imperceptible in the level scale but obvious in the logarithmic scale.
C)understandable in the level scale but mystifying in the logarithmic scale.
D)understandable in the logarithmic scale but mystifying in the level scale.
Q2) If the price of a company's stock truly reflects the value of a share in the company, then
A)it is impossible for the stock price to change by 20% in a single day, as in 1987.
B)it is impossible for the stock price to increase by 84% within a single year, as in 1999.
C)stock prices can only change abruptly when accounting scandals are uncovered, as in 2002.
D)abrupt stock price changes reflect abrupt changes in the public's perception of fundamentals and risk.
Q3) Stock market bubbles are A)fiction.
B)occur every 3 to 5 years.
C)rare but do occur.
D)an everyday experience.
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Chapter 45: Unions
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Q1) If there are powerful buyers in a labor market, the use of the supply and demand model to analyze labor markets
A)is inappropriate.
B)is completely accurate.
C)will cause you to believe the wage will be lower than it is.
D)will cause you to believe that fewer people will be hired than there will be.
Q2) Which of the following acts limited the power of unions?
A)The Taft-Hartley Act
B)The Norris-LaGuardia Act
C)The National Industrial Recovery Act
D)The Wagner Act
Q3) Which of the following explains why private employees (more frequently than public employees)tend be in defined contribution programs?
A)They tend to begin and end their career with the same employer.
B)They tend to move from employer to employer.
C)They tend to fall for Ponzi schemes.
D)They have well-funded private savings plans.
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Q1) If you got a new job and moved to Terre Haute, Indiana (population 60,000)you would expect to find ten grocery stores (two Walmart Supercenters, three Krogers, a Meijer, two IGA affiliates, and two independent grocery stores), the market form is A)monopoly.
B)oligopoly.
C)monopolistic competition.
D)perfect competition.
Q2) It is noted by some sociologists that a new Walmart store in town will A)raise prices.
B)pay exorbitant wages.
C)provide extensive same-sex benefits.
D)negatively impact community leadership.
Q3) Nationally, the place you are most likely to find a butcher creating special cuts for customers is
A)a Walmart or other Superstore.
B)a Sam's or Costco warehouse club.
C)a national chain grocery store.
D)an independent or IGA affiliated grocery store.
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Chapter 47: The Economic Impact of Casino Gambling
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Q1) The question of legality in daily fantasy comes down to A)whether it is a game of skill or chance. It is usually legal if it is a game of skill. B)whether it is a game of skill or chance. It is usually illegal if it is a game of skill. C)whether the points system is transparent D)how big the bet is.
Q2) Economic estimates of a "modest upside" to casino gambling suggest that the "local substitution" is A)zero.
B)nearly, but not totally, complete. C)slight.
D)complete.
Q3) U.S. casinos serve about ____ people per year.
A)1 million
B)5 million
C)76 million
D)250 million
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Chapter 48: The Economics of Terrorism
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Q1) Using Figure 48.1, modeling the attacks of September 11, 2001 you would show the impact of higher oil prices by using
A)Panel 1 only with a shift from AD<sub>A</sub> to AD<sub>B</sub>.
B)Panel 1 only with a shift from AD<sub>B</sub> to AD<sub>A</sub>.
C)Panel 2 only with a shift from AS<sub>B</sub> to AS<sub>A</sub>.
D)Panel 1 to model the aggregate demand shock (AD<sub>B</sub> to AD<sub>A</sub>)and Panel 2 to model the aggregate supply shock (AS<sub>B</sub> to AS<sub>A</sub>).
Q2) Up until the occurrence of Hurricanes Katrina and Sandy, the worst insurance outcome in U.S. history was
A)Hurricane Andrew.
B)the September 11<sup>th</sup> terrorist attack.
C)the Northridge earthquake.
D)the sinking of the Titanic.
Q3) Without reinsurance, insurance companies would be less likely to insure A)homes in hurricane prone areas.
B)against auto accidents.
C)against home fires.
D)against home burglaries.
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