1. Refer to the diagram. Solid arrows show real flows; broken arrows show monetary flows. Flow (2) might represent
A. the provision of national defense by government.
B. welfare payments to low-income families.
C. corporate income tax payments.
D. a government subsidy to farmers.
2. Which of the following might be a reason for low fertility in modernized countries?
A. Higher wages for children
B. Increased medical technology
C. Changing attitudes towards religion
D. Increased incidences of war
3. If two inputs are substitutes and there is an increase in the price of capital, the output effect states that
A. production costs will go down.
B. more capital will be used.
C. production costs will go up.
D. output will go up.
4. The elasticity of resource demand measures the
A. ratio of marginal revenue product to resource price.
B. responsiveness of workers to changes in wage rates.
C. sensitivity of marginal revenue product to changes in product price.
D. responsiveness of producers to changes in resource prices.
5. The idea that a specific amount of money is more valuable to a person the sooner it is obtained is known as
A. the interest effect of money.
B. the time-value of money.
C. the present value of money.
D. the immediate value of money.
6. The downward sloping demand curve for land is due in part to
A. diminishing returns.
B. fixed land rent.
C. lower output as additional units of land are purchased.
D. predictable fluctuations in supply.
7. Which of the following taxes would be considered a progressive tax?
A. Federal income tax
B. Sales taxes
C. License fees
D. Excise taxes
8. Why does land have a perfectly inelastic supply?
A. Land is in great demand.
B. It's expensive to produce more land.
C. There is a fixed amount of land.
D. There is a fixed price on land.
9. The three most important sources of federal tax revenue in order of descending value are
A. sales, payroll, and personal income taxes.
B. personal income, corporate income, and sales taxes.
C. personal income, corporate income, and payroll taxes.
D. personal income, payroll, and corporate income taxes.
10. Wage differentials may result from all the following except
A. geographic and sociological immobilities of workers.
B. differences in the education and skills of workers.
C. differences in the nonmonetary aspects of various occupations.
D. the tendency of qualified workers to move from lower pay jobs to higher pay jobs.
11. What is happening to population growth in modernized countries?
A. They tend to have rising birthrates.
B. They tend to have falling birthrates.
C. Birthrates have increased greatly since the 1800s.
D. Birthrates have held constant.
12. Which of the following is correct?
A. Both the nominal and the real wage must always rise.
B. The nominal and the real wage may both fall.
C. The nominal wage may fall, but the real wage can never decline.
D. The real wage may fall, but the nominal wage can never decline.
13. A profit-maximizing company should extract a nonrenewable resource in the present up to the quantity where the
A. selling price of the resource equals the extraction cost of the resource.
B. extraction cost of the resource equals the user cost of the resource.
C. selling price of the resource equals the total cost plus the user cost of the resource.
D. selling price of the resource equals the extraction cost plus the user cost of the resource.
14. Which of the following is an example of an insurable risk?
A. Consumer tastes moving away from a company's products
B. Fire damage to a building
C. A recession in the country
D. Increased government taxation
15. What is the relationship between living standards and birthrates?
A. They are unrelated.
B. The relationship is positive (directly related).
C. The relationship is negative at low levels of income but becomes increasingly positive as incomes rise.
D. The relationship is negative (inversely related).
16. A competitive employer should hire additional labor as long as
A. the wage rate is less than MP.
B. MC exceeds MR.
C. the MRP exceeds the wage rate.
D. average product exceeds MP.
17. Which of the following is true regarding resource economics?
A. Commodity prices have risen over time.
B. Consumption of water appears to be leveling off.
C. Resources are easily transferable from region to region.
D. Consumption of energy is greatly growing.
18. What is the name given for a government payment made to someone for which there is no domestic output?
A. Government revenue
B. Finance payment
C. Government purchase
D. Transfer payment
19. Which of the following is an exhaustive governmental outlay?
A. A Temporary Assistance to Needy Families payment made by the state of New York.
B. A federal $5,000 subsidy check to an Illinois farmer.
C. A NASA payment to Boeing Corporation for space hardware.
D. A federal old age insurance payment to a retired coal miner.
20. What is the likely result of a labor market where the employer is in a monopsony position?
A. Wages will be higher and fewer people will be hired than in a competitive market.
B. Wages will be higher and more people will be hired than in a competitive market.
C. Wages will be lower and more people will be hired than in a competitive market.
D. Wages will be lower and fewer people will be hired than in a competitive market.
