Download 2002 FBLA Economics

PBL Economics
2002 NLC
Indicate whether the sentence or statement is true or false. Mark "A" if the statement is
True or "B" if it is False
1. One expects the price level to fall whenever there is a shortage.
2. A decrease in price generally results in an increase in supply.
3. The price level unambiguously increases when both demand and supply increase.
4. If both demand and supply increase or decrease, the change in quantity is indeterminate.
5. If two goods are complements, a rise in the price of one will lead to a decrease in the
demand for the other.
6. Tariffs and quotas benefit consumers by protecting domestic jobs.
7. Free trade is about the preservation and/or creation of jobs, not the efficient allocation of
resources.
8. Country A has a comparative advantage over country B if country A can produce the same
good at a lower opportunity cost than country B.
9. Free trade may allow countries to consume at a point beyond their production possibility
frontier curve.
10. The Fed buys bonds when it wants interest rates to go down.
11. One of the Fed’s monetary policy tools is the federal funds rate.
12. A decrease in the marginal tax rate may stimulate a struggling economy.
13. Budget deficits and the national debt are conceptually and numerically the same.
14. The main goal of fiscal policy is to reduce the interest rate.
15. To maximize profit, a typical firm must always try to maximize output.
16. Total revenue minus total cost equals profit.
17. Forgone interest from investing your savings in a business is an example of an implicit cost.
18. Pollution implies scarcity.
19. The marginal cost of pollution increases as the quantity of pollution emissions increases.
20. For a given labor force, an increase in real GDP implies a decrease in unemployment.
21. An oligopoly is an industry dominated by a few firms.
22. A perfectly competitive firm will stay in business as long as the price per unit equals or
exceeds average total cost.
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23. A monopoly has no effective rivals. As a result, it can charge any price it wishes.
24. The supply curve is elastic if sellers respond substantially to changes in price.
25. Unexpected inflation can redistribute income between lenders and borrowers.
26. Higher interest rates will lead to increased investment.
27. For investment to occur, saving must also occur.
28. Saving is income not spent on consumption.
29. In a partnership, the owner’s personal assets can be seized to pay the partnership’s debts.
30. In general, both buyers and sellers are worse off when a good is taxed.
Mark the correct answer on your scantron sheet for each of the following questions.
31. Which of the following best illustrates the concept of consumer surplus?
a. A thirsty individual pays $0.50 for a can of Pepsi cold drink when she would have gladly
paid $.75 for the drink.
b. An individual who is willing to accept a job at $10.00 an hour is offered $6.00 per hour.
c. An individual pays the sale price of $20.00 for the same shirt that the individual refused
to buy at $25.00.
d. A farmer has a marginal cost of $5.00 for a bushel of wheat, but sells that bushel of
wheat for $6.00.
32. If the price of a gasoline is set below the equilibrium price by government action
a. there will be a shortage of gasoline.
b. all buyers will be able to purchase their desired quantities.
c. there will be a surplus of gasoline.
d. sellers will find it difficult to finding buyers.
33. The supply curve is upward-sloping because of
a. technological progress.
b. the law of diminishing returns.
c. higher prices.
d. higher consumer incomes.
34. Which of the following would increase the equilibrium price of a used car and decrease the
equilibrium quantity sold?
a. An announcement by the U.S. Attorney General that the windows on older cars were
made with cheaper glass that can explode at high speeds.
b. New federal legislation that raises the legal driving age to twenty-four in all states.
c. A new fee that used car dealers must pay to the government on all sales of used cars.
d. All of the above because each is consistent with the law of demand.
35. Suppose Jeep Cherokees are a normal good. Then if household income increases, the
direct result will be
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a.
b.
c.
d.
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an increase in the supply of the vehicles.
a decrease in the demand for the vehicles.
an increase in the demand for the vehicles.
both A and C.
36. The substitution effect of a price change is brought about by
a. change in nominal income of the consumer.
b. a change in real income cause by a price change.
c. a shift in the demand curve caused by a price increase of the good.
d. a change in the relative prices due to a change in the price of a good.
37. If products x and y are substitutes, and the price of y increases, then
a. the demand for both products will decline.
b. the demand for both products will increase.
c. the demand for x will increase while the quantity demanded for y increases.
d. the demand for x will increase while the quantity demanded for y decreases.
38. Long lines of customers waiting to purchase tickets to a concert suggests that
a. the ticket price is below the equilibrium price.
b. the ticket price is above the equilibrium price.
c. the ticket price is at equilibrium.
d. the ticket price is likely to fall.
39. If the equilibrium price in the market falls, which of the following could not have happened?
a. Supply decreased, with demand remaining constant
b. Demand decreased, with supply remaining constant
c. Demand increased, but supply increased even more
d. Supply decreased, but demand decreased even more
40. The law of diminishing marginal utility states that
a. additional units of consumption yield less extra satisfaction.
b. additional units of consumption result in declines in total satisfaction.
c. additional units of consumption yield no additional satisfaction.
d. consumers stop purchasing additional units of a good when diminishing marginal utility
begins.
41. A market price floor for corn
a. increases the price paid by consumers.
b. decreases the price paid by consumers.
c. decreases the price received by farmers.
d. does not change the price received by farmers.
42. A maximum legal price is called
a. a price support.
b. a price floor.
c. a price ceiling.
d. the parity price.
43. If enforcement is aimed at buyers of prohibited good such as an illegal drug, the result will
be a/an
a. increase in the short run supply of the goods.
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b. decrease in the short run supply of the good.
c. decrease in the demand for the good.
d. increase in the price of the good.
44. A surplus can be eliminated by
a. increasing supply.
b. government raising the price.
c. decreasing the quantity demanded.
d. allowing the price to fall.
45. The main reason why economists overwhelmingly support more open markets is because
trade
a. creates jobs.
b. directly benefits everyone in the country.
c. increases the profit margins of firms.
d. leads to a better allocation of resources.
46. One consequence of labor-saving technology over time is that
a. demand for unskilled labor has been decreasing.
b. demand for skilled labor has been decreasing.
c. demand for unskilled labor has been increasing.
d. demand for unskilled labor has remained constant.
47. Which group is hurt most by a minimum wage law?
a. High-wage, highly skilled workers
b. Older-workers across wage levels
c. Low-wage, unskilled workers
d. Middle-aged workers across wage levels
48. If a country has lower overall productivity levels than its trading partners, then it will
a. be unable to export.
b. have a trade deficit.
c. not be able to obtain gains from trade.
d. have a lower standard of living than its trading partners.
49. If domestic saving is less than domestic investment, then
a. a trade deficit occurs.
b. the government runs a budget deficit.
c. a trade surplus occurs.
d. there will be a positive foreign investment.
50. If Kansas can produce 1 wheat at a cost of 2 corn and Iowa can produce 1 corn at a cost of
1.5 wheat
a. Kansas has a comparative advantage in both wheat and corn.
b. Kansas has a comparative advantage in wheat, while Iowa has a comparative
advantage in corn.
c. Kansas has a comparative advantage in corn, while Iowa has a comparative advantage
in wheat.
d. Iowa has a comparative advantage in both wheat and corn.
51. Net exports refers to
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a. the difference between exports and imports.
b. the difference between the value of exports and the cost of goods sold.
c. the difference between the value of exports and tariffs or duties, which must be paid on
these exports.
d. gross exports minus all taxes.
52. The North American Free Trade Zone links
a. the United States, Canada and Central America.
b. the United States and Central America.
c. the United States, Canada, and Mexico.
d. all countries north of South America.
53. Specialization according to comparative advantage results in
a. more output of both goods available to both countries.
b. less total production of one good and more total production of the other good.
c. less total production of both goods.
d. more output of both goods available to one country, but less of both goods available to
the other country.
54. Which of the following international events would make net exports increase?
a. A recession abroad
b. Rising levels of tariffs and duties abroad
c. Appreciation of the dollar
d. Depreciation of the dollar
55. The responsibility for supervising and controlling the operation of our monetary and banking
system rests with the
a. Treasury Department.
b. Federal Reserve Board of Governors.
c. Council of Economic Advisors.
d. Congress.
56. The objective of the Federal Reserve System in purchasing large amounts of government
securities is to
a. assist the government in financing the debt.
b. assist the government in maintaining relatively low interest rates.
c. be able to influence the size of commercial bank reserves.
d. maximize income in a risk-free environment
57. If the Federal Reserve wishes to increase the amount of money in the economy it should
a. lower the reserve ratio.
b. raise the reserve ratio.
c. sell government bonds.
d. sell government bonds and lower the reserve ratio.
58. When would a tight money policy be appropriate?
a. If the economy is in a mild recession.
b. If the economy is in an inflationary spiral.
c. If the economy is stationary or static.
d. If the economy is in a deep depression.
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59. The deliberate use of taxes and government spending to alter real output is called
a. monetary policy.
b. nondiscretionary fiscal policy.
c. discretionary fiscal policy.
d. supply-side economics.
60. If the economy is experiencing a recessionary period, the government should adopt a(n)
a. Expansionary fiscal policy.
b. Contractionary fiscal policy.
c. Neutral fiscal policy.
d. Laissez-faire policy.
61. If the government is worried about the potential of inflationary pressure, then a surplus in the
budget should be
a. used to retire some of the public debt.
b. impounded (held idle).
c. used to solve social problems.
d. returned to consumers in the form of a tax cut.
62. Supply-side economists believe that a reduction in tax rates will
a. shift the aggregate supply curve to the left.
b. shift the aggregate supply curve to the right.
c. cause a movement along the aggregate supply curve to the right.
d. cause a downward shift in the aggregate demand curve.
63. What is the largest source of revenue for the federal government?
a. Social security taxes
b. Corporate income taxes
c. Personal income taxes
d. Sales tax
64. Which branches of the government play a role in the enacting the federal budget? (I) The
President. (II) The House of Representatives. (III) The Senate.
a. I and II
b. II and III
c. I, II, and III
d. I.
65. In 1998, the U.S. government budget registered a surplus. By definition, then,
a. tax revenues were less than government expenditure.
b. tax revenues were equal to government expenditure.
c. tax revenues were greater than government expenditure.
d. the government debt became negative.
66. The difference between automatic fiscal policy and discretionary fiscal policy is that
a. Congress initiates automatic fiscal policy.
b. the President has nothing to do with discretionary fiscal policy.
c. Congress must pass laws implementing discretionary fiscal policy.
d. the President initiates discretionary fiscal policy.
67. All of the following components represent sources of government revenue except for
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a.
b.
c.
d.
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social insurance taxes.
personal income taxes.
transfer payments.
corporate income taxes.
68. If the federal government adopted a contractionary fiscal policy then
a. aggregate demand would decrease and real GDP would increase.
b. aggregate demand would increase and real GDP would decrease.
c. aggregate demand and real GDP would both increase.
d. aggregate demand and real GDP would both decrease.
69. Profit maximization
a. causes a firm to become as large as possible.
b. causes a firm to remain small in the long run.
c. increases the likelihood that a firm will survive.
d. causes a firm to become the target of a takeover.
70. To make the best predictions about the decisions made by a firm, we should take account of
a firm’s
a. accounting costs.
b. explicit costs.
c. opportunity costs.
d. implicit costs.
71. Economic profit is the difference between total revenue and
a. implicit costs of production.
b. interest costs of production.
c. opportunity costs of production.
d. explicit costs of production.
72. A golf club manufacturer pays its telemarketers based on the number of golf clubs they sell.
This firm
a. organizes production based on an incentive system.
b. organizes production based on a command system.
c. does not have any implicit costs.
d. does not have explicit costs.
73. Of the following, the one that is not generally a transaction cost is the
a. fee to a broker for buying stocks.
b. cost of a lawyer who drafts a contract.
c. cost of the owner’s time in a proprietorship.
d. cost of phone calls made to find a buyer.
74. Diminishing marginal returns” refer to a situation in which the
a. marginal cost of the last worker hired is less than the marginal cost of the previous
worker hired.
b. average cost of the last worker hired is less than the average cost of the previous worker
hired.
c. marginal product of the last worker hired is less than the marginal product of the
previous worker hired.
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d. average product of the last worker hired is less than the average product of the previous
worker hired.
75. Marginal cost is
a. all the costs of the fixed inputs.
b. all the costs of production of goods.
c. all the costs that vary with output.
d. the change in the total cost resulting from a one-unit change in output.
76. Average total costs are
a. total costs divided by total output.
b. total output divided by total costs.
c. the change in total costs divided by the change in output.
d. the change in output divided by the change in total costs.
77. The range of output over which a firm’s average variable cost is decreasing is the same as
the range over which its
a. marginal cost is increasing.
b. average fixed cost is decreasing.
c. average product is increasing.
d. average product is decreasing.
78. Economies to scale refer to
a. the point at which marginal cost equals average cost.
b. the fact that in the long run, fixed costs remain constant as output increases.
c. the range of output over which the long run average cost falls as output increases.
d. a feature of short-run production functions but not long-run production functions.
79. A common source of diseconomies of scale is
a. the application of the law of diminishing marginal returns to capital.
b. the application of the law of diminishing marginal returns to labor.
c. the application of the law of diminishing marginal returns to land.
d. growing complexity of management and organizational structure.
80. Which cost always increases as output increases?
a. Total cost
b. Marginal cost
c. Average total cost
d. Average fixed cost
81. Which of the following is not an assumption of perfect competition?
a. There are many firms, each selling an identical product
b. Many buyers
c. Fixed prices
d. No restrictions on entry into the industry
82. Perfect competition occurs in a market where there is
a. a few firms producing identical goods.
b. a few firms producing goods that differ somewhat in quality.
c. many firms producing identical foods.
d. many firms producing goods that differ somewhat.
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83. A firm will expand the amount of output it produces as long as its
a. average total revenue exceeds its average total cost.
b. average total revenue exceeds its average variable cost.
c. marginal cost exceeds its marginal revenue.
d. marginal revenue exceeds its marginal cost.
84. When a firm is considered to be a “price taker” that means that it
a. can charge any price that it wants to charge, that is, “take” any price it wants.
b. pays a fixed price for all of its inputs.
c. will accept (“take”) the lowest price that its customers offer.
d. cannot influence the industry price of the good that it sells.
85. The firm’s supply curve is it’s
a. marginal cost curve, at all points above the minimum average variable cost curve.
b. marginal cost curve, at all points above the minimum average fixed cost curve.
c. marginal revenue curve, at all points above the minimum average revenue curve.
d. marginal revenue curve, at all points above the minimum average total cost curve.
86. A perfectly competitive firm will have an economic profit of zero if, at its profit-maximizing
output, its marginal revenue equals its
a. average total cost.
b. marginal cost.
c. average variable cost.
d. average fixed cost.
87. If firms exit an industry, the
a. industry supply curve shifts leftward.
b. price of the product falls.
c. profits of the remaining firms decrease.
d. output of the industry increases.
88. Unregulated monopolies
a. take the market price as given.
b. cannot incorporate.
c. cannot change the market quantity.
d. can influence the market quantity and price.
89. A patent grants
a. a guarantee of quality to consumers.
b. the right to practice a profession.
c. an exclusive right to an inventor of a product.
d. control over a unique source or supply of raw materials.
90. Monopolists
a. maximize revenue, not profits.
b. have no short-run fixed costs.
c. face downward sloping demand curves.
d. are price takers.
91. If the demand for its product is inelastic, a monopoly’s
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a.
b.
c.
d.
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total revenue increases when the firm lowers its price.
total revenue is unchanged when the firm lowers its price.
marginal revenue is negative.
marginal revenue is equal to zero.
92. A price discriminating monopolist charges lower prices to customers with
a. lower supply elasticities.
b. higher supply elasticities.
c. lower average willingness-to-pay.
d. higher average willingness-to-pay.
93. A characteristic of monopolistic competition is
a. product differentiation.
b. a high capital-output ratio.
c. a low ratio of fixed to variable costs.
d. the absence of advertising.
94. When monopolistically competitive firms are earning an economic profit, firms will
a. enter the industry, and demand will increase for the original firms.
b. exit the industry, and demand will increase for the firms that remain.
c. exit the industry, and demand will decrease for the firms that remain.
d. enter the industry, and demand will decrease for the original firms.
95. Advertising by firms in monopolistic competition
a. provides consumers with no useful information.
b. does not occur.
c. can persuade customers that product differentiation exists.
d. wastes resources because the entry of rivals forces firms to be price takers.
96. One difference between oligopoly and monopolistic competition is that
a. a monopolistically competitive industry has fewer firms.
b. in monopolistic competition, the products are identical.
c. monopolistic competition has barriers to entry.
d. fewer firms compete in oligopolies than in monopolistic competition.
97. A duopoly is a form of
a. perfect competition.
b. monopolistic competition.
c. oligopoly.
d. monopoly.
98. A cartel usually has a collusive agreement to
a. restrict output.
b. boost output.
c. lower the price.
d. increase the number of firms in the industry.
99. A tit-for-tat strategy can be used in
a. a single-play game or a repeated game.
b. a single-play game but not a repeated game.
c. a repeated game but not a single-play game.
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d. neither a repeated game nor a single-play game.
100. Generally, economists define competition as
a. a rivalry between any two firms.
b. a widespread diffusion of economic power between large numbers of businesses and
large numbers of consumers.
c. a widespread diffusion of economic power between large numbers of businesses and
any number of consumers.
d. more than ten firms in any one market
101.
a.
b.
c.
d.
Which of the following is not an aspect of competition?
There must be a large number of independently acting buyers in the market.
There must be a large number of independently acting sellers in the market.
Buyers and sellers must be free to enter or leave the market.
Government must assure that prices established in the markets are reasonable and fair.
102.
a.
b.
c.
d.
Antitrust policy refers to
attempts to prevent the acquisition of monopoly power.
attempts to encourage the acquisition of monopoly power.
encouragement of collusion in the market place.
attempts to limit private enterprise.
103.
a.
b.
c.
d.
Selling below cost by foreign firms is called
dumping.
undercutting.
fair competition.
monopolistic practice.
104.
a.
b.
c.
d.
The demand for labor is called a derived demand because it depends on the
wage rate.
quantity of labor used.
demand for the product the labor produces.
elasticity of the supply of labor.
105.
a.
b.
c.
d.
Organized workers in the U.S. now represent about
16% of the civilian labor force.
22% of the civilian labor force.
50% of the civilian labor force.
65% of the civilian labor force.
106. The demand for labor increases (that is, the demand for labor curve shifts rightward) if
the
a. wage rate increases.
b. wage rate decreases.
c. price of the firm’s output rises.
d. price of the firm’s output falls.
107.
a.
b.
c.
Studies of the effect of unions on labor productivity
show it to be immediately positive.
show it to be immediately negative.
show it to be positive, but only after a long time period.
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d. have been inconclusive.
108.
a.
b.
c.
d.
Paying a minority less than other workers would be
employment discrimination.
wage discrimination.
occupational discrimination.
human-capital discrimination.
109.
a.
b.
c.
d.
A major disadvantage of the corporate form of business organization is
unlimited liability.
the use of retained earnings.
the large number of shareholders.
the double taxation of corporate income.
110.
a.
b.
c.
d.
A major advantage of a single proprietorship is
limited liability and the ability to plow back profits.
that the owner has full control of the business and that it is simple to set up.
that the owner must personally raise capital.
that the owner can issue shares to partners.
111.
a.
b.
c.
d.
Corporate profits
can either be paid out in dividends or be plowed back into the company.
are always positive.
are equal to corporate costs minus revenues.
can be paid out on convertible stock but not on common stock.
112.
a.
b.
c.
d.
The value of a share of a corporation’s stock
reflects the company’s current profits.
reflects the present value of the corporation’s future profits.
depends on whether the corporation is large or small.
is not affected by current profits.
113.
a.
b.
c.
d.
In a corporation, most business decisions are made by
the owners of a common stock.
the owners of a preferred stock.
the owners of convertible bonds.
a professional management team.
114.
a.
b.
c.
d.
Capital gains are
the increase in the market value of an asset above the initial price level.
the difference between interest rates paid and interest rates received.
the rate of return on capital.
another name for profits.
115. If the government imposes a tax on the production of goods, which of the following will
occur in the market for goods?
a. There will be a movement to the right along the supply curve.
b. There will be a movement to the right along the demand curve.
c. The supply curve will shift to the right.
d. The supply curve will shift to the left.
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116.
a.
b.
c.
Which of the following statements about the aggregate supply curve is correct?
The aggregate supply curve is vertical in the long run.
The aggregate supply curve is vertical in the short run.
The aggregate supply curve is downward-sloping in the short run, but upward-sloping in
the long run.
d. The aggregate supply curve is perfectly horizontal in the long run but vertical in the short
run.
117.
a.
b.
c.
d.
In the short run, the impact of demand-pull inflation will be to
shift the aggregate supply curve to the right.
increase real output and the price level.
shift the aggregate supply curve to the left.
increase the price level but have no impact on real output.
118.
a.
b.
c.
d.
In the long run, the impact of demand-pull inflation will be to
shift the aggregate supply curve to the right.
increase real output and the price level.
shift the aggregate supply curve to the left.
increase the price level but have no impact on real output.
119.
a.
b.
c.
d.
The impact of cost-push inflation on the aggregate supply curve is that it
moves the equilibrium point up and to the right.
shifts it to the left.
shifts it to the right.
has no impact on the aggregate supply curve.
120.
a.
b.
c.
d.
All of the following will shift the aggregate supply curve to the right except
career & technical education training.
job information.
nondiscrimination.
an increase in income.
121. Technological progress will
a. shift the long-run aggregate supply curve rightward but will not shift the short-run
aggregate supply curve.
b. not shift either the long-run aggregate supply or the short-run aggregate supply curve.
c. shift both the long-run aggregate supply and short-run aggregate supply curves
rightward.
d. shift the short-run aggregate supply curve rightward but will not shift the long-run
aggregate supply curve.
122. Moving along the aggregate demand curve, a decrease in the quantity of real GDP
demand results of a/an
a. increase in the price level.
b. decrease in the price level.
c. increase in income.
d. decrease in income.
123. One reason that the aggregate demand curve has a negative slope is because
a. people buy fewer goods and save more when the price level rises because their real
wealth decreases.
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b. firms produce more when the price rises.
c. people earn more money when output rises.
d. the premise of the question is wrong because the aggregate demand curve has a
positive slope.
124.
a.
b.
c.
d.
A rise in the foreign exchange rate of the dollar
increases aggregate demand.
increases the aggregate quantity demanded.
decreases the aggregate quantity demanded.
decreases aggregate demand.
125.
a.
b.
c.
d.
A fall in the expected future inflation rate
increases aggregate demand.
increases the aggregate quantity demanded.
decreases the aggregate quantity demanded.
decreases current aggregate demand.
126.
a.
b.
c.
d.
An increase in the income of our trading partners
increases aggregate demand in the United States.
increases the aggregate quantity demanded in the United States.
decreases the aggregate quantity demanded in the United States.
decreases aggregate demand in the United States.
127.
a.
b.
c.
d.
If the economy experiences inflation, aggregate
demand increases faster than aggregate supply.
demand increases more slowly than aggregate supply.
supply increases faster than aggregate demand.
demand and supply increase at about the same rate.
128. The claim that lower environmental standards reduce industrial competitiveness is valid
because
a. higher environmental standards requirements raise the cost of production to a firm or
industry abiding by the rules.
b. there will be a race-to-the-bottom competition on environmental standards.
c. the interests of firms that are subject to the high standards coincide with the nation’s
interests, one-for-one.
d. environmental standards in most countries have gotten more lax over time.
129. Domestic firms operating abroad may find it economically beneficial to adopt
environmentally friendly standards because
a. foreign nations may be upset if firms do not use environmentally friendly technology.
b. the lest-cost strategy usually involves the adoption of one set of environmentally friendly
technology rather than multiple standards.
c. they may be forced to replace the old technology whenever the foreign country
experience positive economic development.
d. their environmentally unfriendly technology may be replace by foreign-based technology.
130. The race-to-the-bottom concept refers to
a. the situation in which countries with high standards are forced to lower their standards or
face the loss of jobs and industry.
b. the situation in which human rights are not respected by trading countries.
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c. adopting the standards by a few selected middle-income and high-income countries.
d. the use of per-capita income as a means of comparing the well-being of individuals.
131. Whenever human activity produces a sufficient concentration of a substance in the
environment to cause a harm to people or to resources valued by people, the result is
a. market inefficiency.
b. gross domestic product.
c. prosperity.
d. pollution.
132.
a.
b.
c.
d.
The efficient rate of emissions occurs where
there is absolutely no damage done to a pristine environment.
government forces zero pollution to take place, no matter what the cost.
the marginal benefits of pollution exceed the marginal costs pf pollution.
the change in benefits is equal to the change in costs due to an additional unit of
emissions.
133.
a.
b.
c.
d.
When the amount of pollution is reduced through abatement programs
it increases benefits to some people with no cost imposed on anyone else.
benefits and costs may both be increased.
it results only in cost increases.
there is no way to estimate the costs and benefits of such activity.
134.
a.
b.
c.
d.
An incentive approach to pollution control is
Reliance on direct controls.
Removing taxes on emissions.
Marketable pollution permits.
Command and control regulation.
135.
a.
b.
c.
d.
A tax on a good
raises the price buyers pay and lowers the price sellers receive
raises the price buyers pay and raises the price sellers receive.
lowers the price buyers pay and lowers the price sellers receive.
lwers the price buyers pay and raises the price sellers receive.
136.
a.
b.
c.
d.
Taxes may cause deadweight losses because
they transfer purchasing power to the government, which always wastes money.
they prevent buyers and sellers from realizing some of the gains from trade.
marginal buyers and sellers leave the market causing the quantity sold to fall.
both B and C are correct.
137.
a.
b.
c.
d.
The social security is, primarily, a tax on
earnings on labor.
interest income.
real estate holdings.
consumption spending.
138.
a.
b.
c.
The demand for beer is more elastic than the demand for milk. A tax on beer would
have no deadweight loss.
have less deadweight loss than a similar tax on milk.
have greater deadweight loss than a similar tax on milk.
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2002 NLC
d. generate more revenue than a similar tax on milk even if the same amounts of each
were consumed prior to the tax.
139.
a.
b.
c.
d.
The argument that cutting income tax rates will increase tax revenues
clearly has the merit for the United States but not most other countries.
clearly has merit for all countries that have income taxes.
may not have merit for the United States but has merit for most other countries.
is most likely to have any country that has very high marginal tax rates.
140.
a.
b.
c.
d.
Taxes and government expenditures of tax proceeds
make society poorer.
make the allocation of resources less efficient.
shift the control of resources from private, individual control to social control.
have no impact on individual or corporate earnings.
141. A major political problem with collecting taxes to finance government spending is that
a. taxes make taxpayers worse off, but government spending benefits no one.
b. taxes make taxpayers worse off, but government spending benefits only those on
welfare.
c. the people who pay taxes are often not the same people who benefit from the
government expenditure of tax funds.
d. taxes reduce economic welfare more than the expenditure of tax funds benefits society.
142. An automobile gasoline tax is an example of an attempt to correct for a _________
externality.
a. negative production
b. positive consumption
c. positive production
d. negative consumption
143.
a.
b.
c.
d.
The increase in the capital stock equals the amount of
gross investment.
depreciation.
net investment.
private sector spending.
144.
a.
b.
c.
d.
Other things remaining the same, the greater the expected profit rate from capital the
less the amount of investment.
greater the amount of investment.
steeper is the investment demand curve.
flatter is the investment demand curve.
145.
a.
b.
c.
d.
The opportunity cost of investment is the
nominal interest rate on government bonds.
nominal interest rate on corporate bonds.
real interest rate.
nominal interest rate.
146. A household’s real net assets are
a. assets – debts.
b. (assets – debts)/price level.
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2002 NLC
c. assets/price level.
d. debts/price level.
147. If the real interest rate is above the equilibrium real interest rate
a. lenders will be unable to find borrowers willing to borrow all of the available funds and
the real interest rate will fall.
b. borrowers will be unable to borrow all of the funds they want to borrow and the real
interest rate will rise.
c. lenders will be unable to find borrowers willing to borrow all of the available funds and
the real interest rate will rise.
d. borrowers will be unable to borrow all of the funds they want to borrow and the real
interest rate will fall.
148. A decrease in the expected profit rate shifts the ____ curve leftward and ____ the real
interest rate.
a. saving supply; lowers.
b. investment demand; lowers.
c. saving supply; raises.
d. investment demand; raises.
149.
a.
b.
c.
d.
Gross investment
increases during recessions and decreases during expansions.
increases during both recessions and expansions.
decreases during both recessions and expansions.
decreases during recessions and increases during expansions.
150.
a.
b.
c.
d.
Net investment equals
capital stock minus depreciation.
gross investment minus depreciation.
the total quantity of plant, equipment and buildings.
gross investment/depreciation.
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151.
182.
183.
189.
195.
201.
207.
213.
219.
225.
231.
237.
243.
249.
255.
261.
267.
273.
279.
285.
291.
297.
Answers to the True/False Questions.
152. 1. F
153. 7. F
157. 2. F
158. 8. T
162. 3. F
163. 9. T
167. 4. F
168. 10. T
172. 5. T
173. 11. T
177. 6. F
178. 12. T
2002 NLC
154.
159.
164.
169.
174.
179.
Answers to the Multiple-Choice Questions.
1. A
184. 21. A
185. 41. C
186.
2. A
190. 22. C
191. 42. A
192.
3. B
196. 23. A
197. 43. C
198.
4. C
202. 24. D
203. 44. C
204.
5. C.
208. 25. B
209. 45. D
210.
6. D
214. 26. B
215. 46. A
216.
7. D
220. 27. A
221. 47. C
222.
8. A
226. 28. B
227. 48. C
228.
9. A
232. 29. C
233. 49. D
234.
10. A
238. 30. A
239. 50. A
240.
11. A
244. 31. B
245. 51. C
246.
12. C
250. 32. B
251. 52. C
252.
13. C
256. 33. C
257. 53. D
258.
14. D
262. 34. C
263. 54. D
264.
15. D
268. 35. C
269. 55. A
270.
16. A. 274. 36. C
275. 56. B
276.
17. C
280. 37. C
281. 57. A
282.
18. D
286. 38. D
287. 58. D
288.
19. A
292. 39. C
293. 59. C
294.
20. C
298. 40. C
299. 60. C
300.
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13. F
14. F
15. F
16. T
17. T
18. T
61. C
62. C
63. A
64. D
65. C
66. D
67. C
68. A
69. A
70. B
71. D
72. A
73. A
74. C
75. A
76. C
77. D
78. B
79. D
80. B
155.
160.
165.
170.
175.
180.
19. T
20. T
21. T
22. T
23. F
24. T
187.
193.
199.
205.
211.
217.
223.
229.
235.
241.
247.
253.
259.
265.
271.
277.
283.
289.
295.
301.
156.
161.
166.
171.
176.
181.
81. A
82. B
83. D
84. A
85. D
86. A
87. B
88. D
89. B
90. D
91. C
92. B
93. A
94. D
95. D
96. A
97. A
98. A
99. B
100. A
25. T
26. F
27. T
28. T
29. T
30. T
188.
194.
200.
206.
212.
218.
224.
230.
236.
242.
248.
254.
260.
266.
272.
278.
284.
290.
296.
302.
101. D
102. D
103. B
104. C
105. A
106. D
107. A
108. C
109. D
110. C
111. C
112. D
113. C
114. B
115. C
116. B
117. A
118. B
119. D
120. B
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PBL Economics
303.
2002 NLC
REFERENCES
1. Parkin, Michael, Economics, Fifth Edition (Addison Wesley Longman
Inc. Reading, MA, 2000.
2. Makiw, Gregory N., Principles of Microeconomics (The Dryden Press,
Fort Worth, TX, 1998).
3. McConnell, Cambell R., and Stanley L. Brue, Macroeconomics,
Principles, problems, and Policies, Fifteenth Edition (McGraw Hill,
New York, New York, 2002.
4. Tregarthen, Timothy and Lobby, Macroeconomics and
Microeconomics, Second Edition (Worth Publishers, New York, N.Y.,
2000.
5. Ruffin, Roy, and Paul Gregory. Principles of Economics, Fourth
Edition (Scott, Foresman, Glenview, IL, 1990).
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