An economic activity in which benefits or costs affect third parties is called
A) a public good.
B) a third-party good.
C) the exclusion principle.
D) an externality.
Ques. 2The rationing function of prices refers to
A) the situation when government must intervene in a market when there is a large shortage or surplus.
B) the synchronization of decisions by buyers and sellers that leads to an equilibrium.
C) the synchronization of decisions by buyers and sellers through the direction of government agencies.
D) the situation when only the rich get the goods they want.
Ques. 3Static tax analysis assumes that
A) an increase in a tax rate may lead to a decrease in the tax base.
B) an increase in a tax rate will lead to an increase in the tax base.
C) an increase in a tax rate will leave the tax base unchanged.
D) the tax base will always remain unchanged.
Ques. 4Suppose the current unemployment rate is 15 percent. If it rises to 20 percent
A) the economy will move up along the production possibilities curve.
B) the economy will move closer to the production possibilities curve.
C) the production possibilities curve will shift inward.
D) the economy will operate farther inside the production possibilities curve.
Ques. 5Refer to the above figure. For a normal good, the rightward shift of the curve could have been caused by
A) a technological improvement.
B) an increase in the cost of inputs.
C) an increase in income.
D) a decrease in income.
Ques. 6Both the precautionary and asset demand for money are influenced by
A) the U.S. Treasury.
B) the interest rate.
C) gold prices.
D) none of the above.
Ques. 7To be counted in the labor force
A) a person has to be working at least 40 hours per week.
B) a person has to be at least 16 or older, have a job, or if unemployed has to be actively seeking employment.
C) a person, irrespective of his or her age, has to be working or, if out of work, actively seeking employment.
D) a person has to be over 16 years of age, irrespective of whether she or he is actively seeking work.
Ques. 8An example of ad valorem taxation is
A) a luxury tax.
B) the corporate profit tax.
C) the personal income tax.
D) the Social Security tax.
Ques. 9A technological improvement can cause the production possibilities curve to shift outward because
A) it increases costs and contributes to lower production rates.
B) maximum feasible outputs of both goods increase.
C) production will fall, but jobs will be saved.
D) it causes increases in unemployment.
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