Political Economy Final Exam

MCQs and Essay Questions

Gross Domestic Product in the US is currently about:

29 Trillion

Which of is the largest component of GDP?

consumption

Hayek thought if the law is to minimize coercion it should have the following

characteristic

all of the above

Suppose it costs $6 to produce a DVD in the U.S. and $3 to produce a scarf.

Suppose it costs $5 to produce a DVD in Mexico, and $1 to produce a scarf. Which of

the following is true?

The United States will produce DVDs and Mexico will produce scarves and they will trade

Which of the following is/are a foundatioi of liberalism according to Mises

tolerance of religion

Which of the following is NOT true

Money will not function as a medium of exchange unless it is government-issued

Questions 7 and 8 use the following information.

Suppose you have the following total benefits schedule for your consumption of

sandwiches at Handmade:

# of Sandwiches Total Benefit

1 $7.00

2 $13.00

3 $18.00

4 $22.00

7. _____ Suppose the price Handmade charges for a sandwich is $5.25. How many

sandwiches will you buy?

2

Questions 7 and 8 use the following information.

Suppose you have the following total benefits schedule for your consumption of

sandwiches at Handmade:

# of Sandwiches Total Benefit

1 $7.00

2 $13.00

3 $18.00

4 $22.00

Suppose Handmade charges $6.50 for the first sandwich, $5.25 for the second

sandwich and $3.50 for each sandwich after that. How many sandwiches will you buy?

4

Which of the following would Bastiat and Hayek agree on?

true philanthropy only comes with the freedom to pursue your own action

Which of the following is true about the period of Western history 1750-1880?

all of the above

Which of the following is true?

all of the above

Which of the following is consistent with Hayeks view:

it is not obvious that universal suffrage is required by some basic principle

Hayek’s position on responsibility was:

a free society demands more than any other that people be held responsible for their actions

Suppose that peanut butter is an inferior good and incomes go down, while at

the same time the price of peanuts rises. Which of the following is correct?

the price of peanut butter will rise, but we cannot tell what will happen to the

equilibrium quantity

Which fo the following is true?

all of the above

Mises claimed that socialism cannot work because:

it cannot solve the incentive problem nor the inflation problem

Which of the following is true of the period 1450-1750?

Innovation was concentrated in trade and the expansion of markets

Which of the following is true?

Profit directs resources to the production of goods and services where there is

increased consumer demand

Which of the following is true?

all of the above

Suppose you are currently the only producer of hot dogs and are earning

economic profit. Which of the following will happen in the absence of government

intervention?

The quantity of hot dogs sold will increase and the price will fall

True or False: If the government sets a price for a good then there will be less of a good

produced in the market than would be produced at the equilibrium price whether the

government sets the price above equilibrium or below equilibrium

true

True or False: The authors of How the West Grew Rich argue that the medieval viewpoint

shielded people from the painful psychological consequence that attends a belief that

personal disasters may very well be attributed to one’s own miscalculation

True

True or False: The marginal cost of producing a good generally falls as the amount of the good

produced increases

False

True or False: Discussing Prohibition, Mises argued that legal prohibitions against personal

vices might open up a Pandora’s box of other dangers no less mischievous than

alcoholism

True

True of False: An increase in the price of hot dogs will shift the demand for hot dogs to the left

True

True or False: Trade between countries will result in more goods and services being produced

than would be the case if countries did not trade

True

True or False: In our discussion of the basic ingredients needed for human progress it was

pointed out that two important ones are belief in the importance of the individual and

property rights

True

True or False: In calculating GDP, government expenditures on goods and services are

counted as GDP regardless of the value to consumers

True

True or False: If a good is inelastic in demand then people will buy the same amount no matter

what the price

False

True or False: Hayek pointed out that Hamilton thought the Bill of Rights might imply that

the federal government had powers not enumerated in the Constitution

False

True or False: A problem with the consumer price index is how to account for changes in the

quality of goods

True

True or False: The story of Jack and the Beanstalk is used by Professor Wolfram to explain

opportunity cost

True

True or False: The invention of the limited liability corporation allowed for the

decentralization of investment

True

True or False: Bastiat argued that socialists do not fear all liberties, but only those having to

do with economic liberty

True

True or False: The German trading cities formed a league in the 1300s to protect the trade

routes

True

The story of Jack and the Beanstalk demonstrates:

how innovation can lead to economic growth

Whic h of the following is not true?

Bastiat would probably believe that a law that limits campaign spending is an effective

means of limiting government

Which of the following is true?

Bastiat questioned why legislators would think that individuals were capable of making

the proper choice of legislators and not capable of determining their own economic

activities

According to Hayek in The Constitution of Liberty:

all of the above

Which of the following it true?

all of the above

True or False: Rosenberg and Birdzell argue that feudalism preceded capitalism in rejecting

the notion of an absolute state in favor of a state with powers and limits determined by

agreement with its inhabitants

true

True or False: If I observe you eating a hot dog rather than a hamburger I know you like hot

dogs more than hamburgers

False

True or False: An increase in the price of peanuts will shift the demand for peanuts to the left

false

True or False: Rosenberg and Birdzell point out that one of the aspects of Western economic

growth was that the poor benefited more than the rich did

True