1) According to economics, what causes us to have to make choices? A. greed. B. scarcity. C. unemployment. D. unlimited resources.

2) conomics does not study correct or incorrect !ehaviors, !ut rather it assumes that economic agents make the !est decisions given their knowledge o" the costs and !ene"its. #hat term !est descri!es this !ehavior? A. emotionally B. rationally C. e$uita!ly D. sel"ishly

%) By de"inition, what is economics the study o"? A. the choices people make to attain their goals, given their scarce resources. B. how to make money in a market economy. C. how to make money in the stock market. D. supply and demand.

&) '" a commercial dairy "arm wants to raise "unds to purchase "eeding troughs, in which market does it do so? A. "actor market. B. product market. C. output market. D. dairy products market. () #hich o" the "ollowing is an e)ample o" spending on goods and services in the circular "low model?

A. Celeste !uys "resh her!s at the "armers* market to use in her restaurant. B. +avier !uys ,-- s$uare "eet o" wood "looring "or his vacation home. C. Belinda purchases a new computer "or her ta).preparation !usiness. D. /immy purchases a new e)amination ta!le "or use in his veterinary clinic.

0) #hat might you call an outward shi"t o" a nation*s production possi!ilities "rontier? A. an impossi!le situation. B. rising prices o" the two goods on the production possi!ilities "rontier model. C. economic growth. D. a situation in which a country produces more o" one good and less o" another. 1) conomists in general A. Do not !elieve that people*s tastes determine demand and there"ore they ignore the su!2ect o" tastes. B. Believe that they must !e a!le to e)plain people*s tastes in order to e)plain what happens when tastes change. C. Do not try to e)plain people*s tastes, !ut they do try to e)plain what happens when tastes change. D. 'ncorporate tastes into economic models only to the e)tent that tastes determine whether pairs o" goods are su!stitutes or complements. ,) '" demand is inelastic, the a!solute value o" the price elasticity o" demand is A. greater than one. B. less than one. C. one. D. greater than the a!solute value o" the slope o" the demand curve. 3) A demand curve which is 44444444 represents per"ectly inelastic demand, and a demand curve which is 44444444 represents inelastic demand. A. vertical5 downward sloping B. hori6ontal5 downward sloping

C. downward sloping5 vertical D. upward sloping5 hori6ontal

1-) '", "or a product, the $uantity supplied e)ceeds the $uantity demanded, the market price will "all until A. all consumers will !e a!le to a""ord the product. B. $uantity demanded e$uals $uantity supplied. /he e$uili!rium price will then !e lower than the market price. C. the $uantity demanded e)ceeds the $uantity supplied. /he market will then !e in e$uili!rium. D. $uantity demanded e$uals $uantity supplied. /he market price will then e$ual the e$uili!rium price. 11) A decrease in the price o" 789 systems will result in A. a decrease in the demand "or 789 systems. B. an increase in the supply o" 789 systems. C. a smaller $uantity o" 789 systems supplied. D. a larger $uantity o" 789 systems supplied.

12) #hich o" the "ollowing is the correct way to descri!e e$uili!rium in a market? A. At e$uili!rium, market "orces no longer apply. B. At e$uili!rium, scarcity is eliminated. C. At e$uili!rium, demand e$uals supply. D. At e$uili!rium, $uantity demanded e$uals $uantity supplied. 1%) At low wages, the la!or supply curve "or most people slopes upward !ecause A. as wages increase income also increases unless hours worked decrease. B. the demand "or la!or is per"ectly elastic at low wages. C. the supply o" la!or is per"ectly inelastic at low wages. D. as wages increase the opportunity cost o" leisure increases.

1&) :et ;8 < marginal product, 8 < output price, and # < wage, then the e$uation that represents the condition where a competitive "irm would hire another worker is A. B. C. D. 8 = ;8 > #. 8 = # > ;8. 8 = ;8 < #. 8 = ;8 ? #.

1() ;arginal revenue product "or a per"ectly competitive seller is e$ual to A. the change in total revenue that results "rom hiring another worker. B. the marginal cost o" production. C. the output price multiplied !y the total product o" la!or. D. the output price multiplied !y the num!er workers hired.

10) A decrease in the wage rate causes A. a le"tward shi"t o" the "irm*s la!or demand curve. B. a decrease in la!or*s productivity. C. an increase in the $uantity o" la!or demanded. D. a rightward shi"t o" the "irm*s la!or demand curve. 11) An individual*s la!or supply curve shows A. employ. B. the relationship !etween the $uantity o" hours worked and total income earned !y that individual. C. the ma)imum wage rates o""ered to that individual !y various potential employers. D. supply. the relationship !etween wages and the $uantity o" la!or that she is willing to the relationship !etween wages and the $uantity o" la!or that a "irm is willing to

1,) /he la!or supply "or an industry would decrease i" A. the government welcomes "oreign workers into the country. B. a greater percentage o" women want to work outside the home.

C. the wage rate "alls. D. the percentage o" the population "rom age 10 to 0( decreases. 13) #hich o" the "ollowing displays rivalry and e)cluda!ility in consumption? A. $uasi.pu!lic goods B. common resources C. pu!lic goods D. private goods

2-) 8rivate costs A. are !orne !y producers o" a good while social costs are !orne !y society at large. B. are !orne !y producers o" a good while social costs are !orne !y those who cannot a""ord to purchase the good. C. are !orne !y producers o" a good while social costs are !orne !y government. D. are !orne !y consumers o" a good while social costs are !orne !y government.

21) #hich o" the "ollowing displays these two characteristics@ nonrivalry and none)cluda!ility in consumption? A. $uasi.pu!lic goods B. common resources C. pu!lic goods D. private goods

22) A monopoly is a seller o" a product A. with a per"ectly inelastic demand. B. without a well.de"ined demand curve. C. with many su!stitutes. D. without a close su!stitute.

2%) Ane reason why the co""eehouse market is competitive is that

A. consumption takes place in pu!lic. B. demand "or specialty co""ee is very high. C. !arriers to entry are low. D. it is trendy and there"ore is likely to have a customer "ollowing. 2&) /he reason that the co""eehouse market is monopolistically competitive rather than per"ectly competitive is !ecause A. entry into the market is !locked. B. !arriers to entry are very low. C. products are di""erentiated. D. there are many "irms in the market. 2() #hich o" the "ollowing would !e directly counted in 7D8 in 2-1-? A. kitchen ca!inets purchased "rom Bome Depot in 2-1- to !e installed in a house !uilt in 1331 B. kitchen ca!inets !uilt in 1,,1, e)tracted "rom the 1,,1 home, and installed in a !rand new country.style home C. kitchen ca!inets !uilt in 1,,1, e)tracted "rom the 1,,1 home, and installed in a "arm house !uilt in 13(D. none o" the these

20) /he 8hilippines and Cietnam have roughly the same si6e population. 9uppose the 7D8 o" the 8hilippines is D1,--- !illion and the 7D8 o" Cietnam is D1-,--- !illion. Eou should conclude A. it is not possi!le to make a good comparison o" the economic well !eing o" a typical individual in the 2 countries without additional in"ormation. B. a typical person in Cietnam is 1- times as well o"" as the typical person in the 8hilippines. C. a typical person in Cietnam is less than 1- times as well o"" as the typical person in the 8hilippines. D. a typical person in Cietnam is more than 1- times as well o"" as the typical person in the 8hilippines. 21) 7ross domestic product understates the total production o" "inal goods and services !ecause o" the omission o" A. e)ports.

B. the underground economy. C. in"lation. D. intermediate goods.

2,) #hich o" the "ollowing is an o!2ective o" "iscal policy? A. high rates o" economic growth B. energy independence "rom ;iddle ast oil C. discovering a cure "or A'Ds D. health care coverage "or all Americans

23) Be"ore the 7reat Depression o" the 13%-s, the ma2ority o" government spending took place at the 44444444 and a"ter the 7reat Depression the ma2ority o" government spending took place at the 44444444. A. "ederal level5 state level B. state and local levels5 "ederal level C. "ederal level5 state and local levels D. local level5 "ederal level

%-) Fiscal policy re"ers to changes in A. the money supply and interest rates that are intended to achieve macroeconomic policy o!2ectives. B. state and local ta)es and purchases that are intended to achieve macroeconomic policy o!2ectives. C. "ederal ta)es and purchases that are intended to "und the war on terrorism. D. o!2ectives. "ederal ta)es and purchases that are intended to achieve macroeconomic policy

%1) #hich o" the "ollowing assets is most li$uid? A. stock B. money C. savings account D. !ond

%2) Dollar !ills in the modern economy serve as money !ecause A. people have con"idence that others will accept them as money. B. they are !acked !y the gold stored in Fort Gno). C. they have value as a commodity independent o" their use as money. D. they can !e redeemed "or gold !y the central !ank.

%%) #hich o" the "ollowing "unctions o" money would !e violated i" in"lation were high? A. medium o" e)change B. unit o" account C. certi"icate o" gold D. store o" value %&) Dollar !ills in the modern economy serve as money !ecause A. people have con"idence that others will accept them as money. B. they are !acked !y the gold stored in Fort Gno). C. they have value as a commodity independent o" their use as money. D. they can !e redeemed "or gold !y the central !ank.

%() /he ;1 measure o" the money supply e$uals A. currency plus checking account !alances plus traveler*s checks plus savings account !alances. B. paper money plus coins in circulation. C. currency plus checking account !alances plus traveler*s checks. D. currency plus checking account !alances.

%0) #hich o" the "ollowing "unctions o" money would !e violated i" in"lation were high? A. medium o" e)change B. unit o" account

C. certi"icate o" gold D. store o" value

%1) ;oney market mutual "unds sell shares to investors and use the money to !uy A. overseas assets through "oreign direct investment. B. "oreign currency. C. short.term securities. D. mortgage.!acked securities.

%,) Apen market operations re"er to the purchase or sale o" 44444444 to control the money supply. A. H.9. /reasury securities !y the H.9. /reasury B. H.9. /reasury securities !y the Federal Ieserve C. corporate !onds and stocks !y the H.9. /reasury D. corporate !onds and stocks !y the Federal Ieserve %3) /o o""set the e""ect o" households and "irms deciding to hold less o" their money in checking account deposits and more in currency, the Federal Ieserve could A. lower !ank ta)es. B. !uy /reasury securities. C. raise the discount rate. D. raise the re$uired reserve ratio.

&-) /oll Brothers, a residential home !uilder, did well during the recession in 2--1 !ut did not do so well in 2--1 a"ter the housing !u!!le !urst. /he reason "or this is A. the Fed raised interest rates in 2--1 !ut lowered interest rates in 2--1 to revive the housing market. B. the Fed lowered interest rates in 2--1 !ut did not !elieve that cutting the interest rate in 2--1 would !e enough to revive the housing market.

C. the Fed raised interest rates in 2--1 !ut did not !elieve that cutting the interest rate in 2--1 would !e enough to revive the housing market. D. the Fed lowered interest rates in 2--1 !ut raised interest rates in 2--1 to help "ight in"lation.

&1) ;onetary policy re"ers to the actions the A. Federal Ieserve takes to manage government spending and ta)es to pursue its economic o!2ectives. B. Federal Ieserve takes to manage the money supply and interest rates to pursue its macroeconomic policy o!2ectives. C. 8resident and Congress take to manage government spending and ta)es to pursue their economic o!2ectives. D. 8resident and Congress take to manage the money supply and interest rates to pursue their economic o!2ectives. &2) /he goals o" monetary policy tend to !e interrelated. For e)ample, when the Fed pursues the goal o" 44444444, it also can achieve the goal o" 44444444 simultaneously. A. sta!ility o" "inancial markets5 a low current account de"icit B. high employment5 lowering government spending C. economic growth5 a low current account de"icit D. high employment5 economic growth &%) 9peciali6ing in the production o" a good or service in which one has a comparative advantage ena!les a country to do all o" the "ollowing e)cept A. "rontier. B. increase the variety o" products that it can consume with no increase in resources. C. "rontier. D. engage in mutually !ene"icial trade with other nations. consume a com!ination o" goods that lies outside its own production possi!ilities produce a com!ination o" goods that lies outside its own production possi!ilities

&&) /a!le 2.% 9erenaBaley Bracelets , 3 Jecklaces 10 12 Ie"er to /a!le 2.%. #hich o" the "ollowing statements is true?

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A. !racelets.

Baley has a comparative advantage in making necklaces and 9erena in making

B. 9erena has a comparative advantage in making !oth products. C. necklaces. Baley has a comparative advantage in making !racelets and 9erena in making

D. Baley has a comparative advantage in making !oth products.

&() For each !ottle o" wine that 'taly produces, it gives up the opportunity to make 1- pounds o" cheese. France can produce 1 !ottle o" wine "or every 2( pounds o" cheese it produces. #hich o" the "ollowing is true a!out the comparative advantage !etween the two countries? A. France has the comparative advantage in wine. B. 'taly has the comparative advantage in wine. C. France has the comparative advantage in wine and cheese. D. 'taly has the comparative advantage in cheese.

&0) #hen the market value o" the dollar rises relative to other currencies around the world, we say that A. the supply o" dollars has increased. B. the dollar has depreciated. C. the demand "or dollars has increased. D. the dollar has appreciated.

&1) '" the nominal e)change rate !etween the American dollar and the Canadian dollar is -.,3 Canadian dollars per American dollar, how many American dollars are re$uired to !uy a product that costs 2.( Canadian dollars? A. D2.,1 B. D2.2% C. D2.1( D. D1.%2

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&,) Bow does an increase in a country*s e)change rate a""ect its !alance o" trade? A. An increase in the e)change rate raises imports, reduces e)ports, and increases the !alance o" trade. B. An increase in the e)change rate reduces imports, raises e)ports, and reduces the !alance o" trade. C. An increase in the e)change rate reduces imports, raises e)ports, and increases the !alance o" trade. D. An increase in the e)change rate raises imports, reduces e)ports, and reduces the !alance o" trade. &3) '" relative purchasing power !etween the Hnited 9tates and Argentina is %.22 pesos per dollar, under which circumstances would we say that the dollar is KovervaluedK? A. i" the actual e)change rate !etween the dollar and the Argentinean peso is % pesos per dollar B. i" the actual e)change rate !etween the dollar and the Argentinean peso is -.22 pesos per dollar C. i" the actual e)change rate !etween the dollar and the Argentinean peso is & pesos per dollar D. i" the actual e)change rate !etween the dollar and the Argentinean peso is %.22 pesos per dollar (-) '" the purchasing power o" the dollar is greater than the purchasing power o" the euro, purchasing power parity predicts that the e)change rate will A. not "luctuate and stay constant in the long run. B. !e e$ual to the relative purchasing power across the currencies in the long run. C. decrease i" the e)change rate is less than 1 euro per dollar. D. increase i" the e)change rate is greater than 1 euro per dollar.

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