Answer Options:
a. higher equilibrium price
b. shortage
c. fairer price
d. surplus
e. better equilibrium
Answer: b. shortage
Question: What does the 90-10 rule refer to?
Answer Options:
In village economies, it took 90 percent of the workforce working in agriculture to feed themselves as well as the remaining 10 percent
At any point in time, about 90 percent of the population are stupid; the other 10 percent understand what is going on
At any point in time, about 10 percent of the population are stupid; the other 90 percent understand what is going on
Only 10 percent of the population own 90 percent of the wealth
Answer: In village economies, it took 90 percent of the workforce working in agriculture to feed themselves as well as the remaining 10 percent
Question: In which section of Freud’s iceberg model of the human mind would you find “thoughts”?
Answer Options:
Conscious
Preconscious
Unconscious
Anti-American
Answer: Conscious
Question: Has anyone ever figured out how to eliminate creative destruction?
Answer Options:
a. Yes, it has been very common
b. Yes, but it has been rather rare
c. No
d. It is impossible to tell because this type of competition is seldom seen and has never been adequately studied
Answer: c. No
Question: According to the rationality assumption, we assume that people:
Answer Options:
Are usually smart
Are usually dumb
Will not knowingly do something that will hurt themselves
Never make mistakes
Answer: Will not knowingly do something that will hurt themselves
Question: In the Adam Smith’s Wealth of Nations (1776), Smith argued that people were motivated by _________ to engage in economic activity like, working and investing. Choose the answer that fills in the blank.
Answer Options:
Religion
Ethics
Love
Honor
Justice
Altruism
Self-interest
The Golden Rule
Answer: Self-interest
Question: Court cases involving price discrimination are rare today. However, dry cleaners seem to always be in court over price discrimination. Why?
Answer Options:
a. dry cleaners are not very good at price discriminating in a manner that avoids law suits
b. dry cleaners are especially aggressive in price discriminating and their price differences are too high
c. dry cleaners are price discriminating, but women customers have interpreted this as gender discrimination and have filed law suits
d. dry cleaners have ruthlessly prevented arbitrage which has angered the public
e. men customers have chosen to boycott dry cleaners to protest price discrimination
Answer: c. dry cleaners are price discriminating, but women customers have interpreted this as gender discrimination and have filed law suits
Question: A superior good will have an Income Elasticity that is
Answer Options:
a. small
b. large
c. positive, but less than one
d. positive, and greater than one
e. negative
Answer: d. positive, and greater than one
Question: An increase in the minimum wage is good for workers. This statement is:
Answer Options:
obviously true
obviously false
a positive statement (or positive analysis)
a normative statement (or normative analysis)
Answer: a normative statement (or normative analysis)
Question: Compared to coach (basic ticket) prices, airlines charge first-class customers higher prices, but it also costs the airlines more to provide first-class services and amenities. However, economists still consider this to be a case of price discrimination because:
Answer Options:
a. Any price difference is price discrimination regardless of the size of cost differences
b. The price differences are the same size as the cost differences
c. The price differences greatly exceed the differences in cost
d. The U.S. FAA regulates airfares and they prohibit price differences
e. Only the rich can afford to fly first class
Answer: c. The price differences greatly exceed the differences in cost
Question: Why did Western economists argue that the Pet Rock had to be a socially beneficial product?
Answer Options:
a. They usually said that everything that a capitalist did was good
b. They argued that no one was ever forced to buy or sell a Pet Rock, so it must have made them better off
c. No one was ever attacked by a Pet Rock
d. They could think of a clear societal need for such products
e. The government certified that the Pet Rock was an acceptable product
Answer: b. They argued that no one was ever forced to buy or sell a Pet Rock, so it must have made them better off
Question: Economists define the short run as
Answer Options:
a. More than one year
b. More than five years
c. Lasting as long as there are any fixed inputs
d. A period of time where all inputs are fixed
e. A period of time where all inputs are variable
Answer: e. A period of time where all inputs are variable
Question: In court, the legal requirements for proving “price discrimination” requires that:
Answer Options:
a. the products be identical
b. the customers be identical
c. discrimination occurred without any regard for motive (i.e., the reason) for price discrimination
d. the products be similar, but not identical
e. the products be substitutable
Answer: d. the products be similar, but not identical
Question: An inferior good will have an Income Elasticity that is:
Answer Options:
a. small
b. large
c. positive, but less than one
d. positive but greater than one
e. negative
Answer: e. negative
Question: Assuming that something old is automatically better than something new
Answer Options:
Appeal to Reason
Appeal to Tradition
Appeal to Novelty
Answer: Appeal to Tradition
Question: Consider the statement: The Minimum wage causes unemployment to increase. Is this a positive or normative statement? Why?
Answer Options:
Obviously true
Obviously incorrect
Normative because it is not convertible
Positive because it is meant to be a statement of fact
Normative because it involves an ethical criteria
Answer: Positive because it is meant to be a statement of fact
Question: What sign will the cross elasticity be for a complement?
Answer Options:
a. Positive
b. Negative
c. Zero
d. Sign does matter
Answer: b. Negative