Econ 434: History of Economic Doctrines

Questions from Previous Final Examinations

Section 1: Multiple Choice.

1. Aristotle’s diamond-water paradox (necessities are often cheaper than “luxuries”), though partially explained by Adam Smith, is more fully resolved logically through application of the (a) income and substitution effects of price changes. (b) equimarginal principle. (c) utilitarian principle of the greatest good for the greatest number. (d) Cartesian syllogism cogito ergo sum. (e) wages fund theory.

2. A rational explanation for why so many people vote is that they: (a) realize that every vote is critical for every election. (b) know that voting is a legal obligation of every adult citizen. (c) expect their votes to make this country a better place to live. (d) enjoy voting or feel guilty if they don’t vote.

3. A scientific theory intended to explain how an economic system distributes national income was not among the major works of: (a) Karl Marx. (b) John Bates Clark. (c) Vilfredo Pareto. (d) Friedrich von Wieser.

4. The preferences in this table can be used to illustrate a problem known as: (a) intransitive tastes and preferences. (b) the paradox of voting. (c) collective decisionmaking conundrum. (d) Condorcet’s dilemma. (e) the ordinal-cardinal puzzle.

5. According to Karl Marx, the fundamental reason capitalism is morally reprehensible is because: (a) free trade does not allow citizens of the country to compete with foreign producers as effectively. (b) individual workers are exploited because they do not derive the full value of their labor. (c) the government should not be allowed to tax less wealthy individuals as much as wealthier individuals. (d) people cannot actively participate in the government. (e) free trade exploits human greed and thus should be regulated.

6. Apparent “apathy” among many citizens who fail to either register or vote can be explained economically by the: (a) failure of schools to instill a proper sense of duty in citizens. (b) instability of political cartels. (c) unimportance of government in a market system. (d) expected higher personal costs than benefits from casting their ballots.

7. Alternatives to capitalistic economic systems do not include: (a) communism. (b) socialism. (c) anarchism. (d) libertarianism. (e) feudalism. (f) syndicalism.

8. Adam Smith and the “classical liberal” economists who followed in his footsteps viewed persistent monopolization and market power as: (a) inefficient and best regulated by government. (b) crucial in determining the rate of technological progress. (c) radical plots to overthrow capitalism. (d) symptoms of governmental interference in the market, and much less efficient than competitive markets.

9. Modern analysis of consumer demands typically assumes: (a) cardinal utility. (b) non-linear budget functions. (c) preference functions that are strictly concave from the origin. (d) interdependent preference functions. (d) decreasing returns to scale. (e) ordinal utility.

10. Among other noteworthy accomplishments, Knut Wicksell [Sweden, 1851-1926]: (a) showed that, in a unanimity voting system, no initiative will succeed unless the change proposed is efficiency enhancing. (b) anticipated Irving Fisher and Milton Friedman in addressing the possibility that a central bank’s attempts to use expansionary monetary policies to drive the real interest rate below its natural rate are self defeating. (c) probably elaborated the operations of price adjustment mechanisms better than had any of his predecessors. (d) described how most production functions entail, first, economies of scale, then constant returns to scale, and finally, diseconomies of scale. (e) He did all of the above.

11. According to John Kenneth Galbraith’s theories of corporate fraud and regulation, during periods of prosperity: (a) government regulation of business is relaxed and the “bezzle” grows. (b) the stock market booms, and investors forecast financial trends with increasing accuracy. (c) regulations limiting business practices are tightened and the amount of corporate fraud shrinks. (d) stock market speculation cools down dramatically as the business cycle peaks and then begins to decline.

12. This idealized Keynesian model suggests that it would be impossible for: (a) declining consumer confidence to move the economy from Qfe to Q0 with no effect on the price level. (b) growing consumer and business confidence (starting at Q0) to increase output but not prices as Aggregate Demand increases. (c) the economy to get stuck at point Q0 with no self correcting forces strong enough to return the economy to Qfe. (d) increased government spending to shift Aggregate Demand from AD0 to AD1. (e) automatic market forces to move the economy from Q0 to Qfe in any reasonable time period.

13. David Ricardo’s Iron Law of Wages states that if money wages increase for a significant period, this leads to expansion of: (a) the money supply so that inflation shrinks real wages back to a natural rate. (b) profit-taking by capitalists so that the share of total surplus value out of national income increases. (c) the domestic production of grain to support an increasingly prosperous populace. (d) demands for labor in the industrial sector, and a reduced supply of labor in the agricultural sector. (e) population, thereby driving wages back down to their natural level.

14. During the Cold War pitting the US against the USSR, each side tried to match or exceed the armaments built by its adversary. In terms of game theory, the reductions in standards of living on both sides caused by the nuclear arms race reflect the outcome of a: (a) positive-sum game. (b) negative-sum game. (c) zero-sum game. (d) partial-sum game.

15. Edwin H. Chamberlin’s theory of monopolistic competition became increasingly discounted as game theory began to dominate the theory of industrial organization in the early 1970s, but it has gained increasing credibility as a foundation for: (a) public choice theories of political behavior. (b) the “new” theory of international trade that began to develop in the early 1970s. (c) modern theories of price setting in auctions. (d) explanations of how firms compete by attempting to create a “brand image” through advertising.

16. From roughly 1920 until 1975, the “Chicago School” of economic theory centered on the idea that: (a) socialism will save society. (b) economic organizations can best be interpreted through institutional analysis. (c) laws and regulations are needed to offset market failures. (d) capitalism yields the optimal organization of economic activity.

17. If all resource markets and markets for goods are initially in a fully competitive equilibrium, the formation of a union and an increase in the wage rate for union members does not cause: (a) unemployment in a one-sector partial equilibrium model. (b) lower wages in the non-union sector of a two-sector partial equilibrium model. (c) a lower total value for national income in a general equilibrium model. (d) entrepreneurs to, on average, receive less economic profit in the long run.

18. French revolutionaries proclaimed goals of “Liberte! Egalite! Fraternite!” during the 1790s. The characteristic that would least well apply to an idealized economic system of socialism would be: (a) vigorous rivalry and competition among business firms. (b) social ownership of productive resources. (b) collective decision making. (d) equality of opportunity and equality in the distribution of income and wealth. (e) compassion for the wellbeing of others.

19. In the 1970s, deregulation of numerous industries in the United States became increasingly advocated by both Democrats and Republicans; representing a shift away from the ideas and ideals of: (a) traditional conservatism. (b) avant-garde socialism. (c) neo-conservatism. (d) supply-side economics. (e) institutionalists who powerfully shaped microeconomic aspects of “New Deal” liberalism.

20. In The Great Crash, John Kenneth Galbraith theorized that regulation and deregulation are cyclical phenomena. Prosperity is accompanied by deregulation and increases in corporate fraud, while economic downturns lead to the exposure of corporate improprieties, resulting in new regulation, which is then moderated during the next prosperous period, and so on. Galbraith suggested that corporate fraud be called: (a) bunco. (b) flim-flam. (c) bamboozle. (d) bilko. (e) bezzle.

21. In Voltaire’s novel, Candide, his character Dr. Pangloss opines that “we live in the best of all possible worlds.” This optimistic prediction is most consistent with the views of capitalism expressed by: (a) anarcho-syndicalists. (b) medieval scholastics. (d) Karl Marx. (e) most classical economists.

22. Consider the figure above. According to the median voter model, a serious candidate from the Left who wanted to win in both the primary election and the general election would be likely to publicly favor policy positions such as those at: (a) point a in the primary election, and point c in the general election. (b) points b or c in the primary election, and point d in the general election. (c) point d in the primary election, and point b or point c in the general election. (d) point d in the primary election, and point e in the general election.

23. In Walrasian general equilibrium analysis, instantaneous adjustments of all relative prices so that all that markets clear are ensured because: (a) firms reduce quantities to cure excess supplies . (b) markets adjust in accord with Lerner wage-price reaction functions. (c) auctioneers are assumed to adjust prices correctly. (d) Cournot reaction functions determine quantities and Bertrand reaction functions determine price. (e) firms increase quantities to cure excess demands.

24. In combination with the prevalence of price discrimination, the adage, “variety is the spice of life,” may be a partial rebuttal for the view that product differentiation is inefficient, which was central to the theory of: (a) utility maximization developed by William Stanley Jevons. (b) duopoly developed by Antoine Augustin Cournot and Jules Dupuit. (c) oligopoly developed by Joan Robinson. (d) games developed by Jon von Neumann and Oskar Morgenstern. (e) monopolistic competition developed by Edward Chamberlin.

25. Karl Marx and Joseph Schumpeter had very different perceptions about the virtues of capitalism, but their views are in accord in predicting that: (a) social forces will cause capitalism to be replaced by socialism. (b) economic progress depends on ambitious entrepreneurs. (c) the working class will eventually resort to armed conflict to overthrow the government. (d) the gold standard was doomed by unavoidable inflationary pressure.

26. Milton Friedman, after leading the monetarist counter-revolution, eventually conceded that changes in monetary policy to combat a recession could: (a) require long run adjustments that would be complete only after we are all dead. (b) take from three to ten years to fully work through the economy. (c) be far less efficient that properly designed fiscal policy would be. (d) operate properly only in a socialist economy.

27. John Maynard Keynes was well aware of the Cambridge equation [Md = kPQ] and Irving Fisher’s equation of exchange [MV = PQ], and that the equation of exchange is tautological [true by definition because V ≡ PQ / M]. Keynes favored increasing Aggregate Demand through fiscal policies to pull the economy out of a recession. But AD ≈ MV. Thus, one reasonable interpretation of Keynes’ advocacy of government deficits is a crucial implicit assumption that: (a) government deficits would increase the amounts of bonds issued by the Treasury. (b) the “Keynesian multipliers” he described would increase the velocity of money, and that the government would print extra currency to cover its extra spending. (c) the productive capacity of the economy would increase to absorb the additional government spending. (d) all of the extra government contracts would be awarded to domestic firms instead of international conglomerates. (e) the price level would increase proportionally with the money supply, so fiscal policy is superior to monetary policy because inflation effects are absent.

28. Not among issues central to innovative theories developed by the Nobel-prize winning economist Gary Becker would be the economics of: (a) crime and punishment. (b) divorce. (c) macroeconomic rules versus discretionary policies. (d) suicide. (e) racial discrimination. (f) time.

29. Most libertarians would favor government policies to: (a) raise minimum wage laws to reduce exploitation. (b) protect private property rights and enforce contracts. (c) raise taxes to eliminate budget deficits. (d) outlaw immoral behavior. (e) re-institute a military draft.

30. Nationalization of heavy industry and municipal ownership of public utilities were centerpieces for policies advocated by: (a) William Godwin. (b) neoconservatives. (c) the Fabian Society. (d) Karl Marx. (e) anarchists and syndicalists.

31. Nobel Prize winner Daniel Kahneman developed a peak/end rule indicating that the absolute values of outcomes may be somewhat less important for individuals’ assessments of their own welfare than are the: (a) most recent changes in direction of the path of the outcome for the individual. (b) subjective marginal values of the goods considered. (c) objective real values of the relevant goods. (d) most recent changes in the overall status of the economy.

32. Of the following pairs, the two schools of thought about political economy with the most ideas in common are: (a) libertarianism and classical liberalism. (b) social Darwinism and utopian socialism. (c) Buddhist economics and rugged individualism. (d) anarchism and Marxist socialism. (e) neo-conservatism and scholasticism and supernaturalism. (f) physiocracy and phrenology.

33. Not among the scholars working in Europe who were pivotal in “the marginalist revolution” was the great economist: (a) Leon Walras. (b) Jules Dupuit. (c) Carl Menger. (d) Antoine-Augustin Cournot. (e) John Rogers Commons.

34. Parts of Harold Demsetz’ reputation derive from his theory that: (a) bottom-up organizations tend to produce goods at the lowest cost. (b) technological advances respond to profit incentives. (c) property rights tend to be assigned to those who will use resources most efficiently. (d) “death taxes” are disincentives for work and saving by industrious people with strong endowment and legacy motives.

35. Political scientists use the term “rat choice” to refer to their version of the subdiscipline of economics known as: (a) bounded rationality. (b) public choice analysis. (c) constrained optimization. (d) behavioral economics. (e) cognitive economics.

36. Of the following thinkers, the one whose theories about international trade were least consistent with those of the other thinkers listed was: (a) David Ricardo. (b) Alexander Hamilton. (c) Friedrich List. (d) Thomas Robert Malthus.

37. Of the following, the theorist who would have been least likely to join a fan club for successful entrepreneurs was: (a) Joseph Schumpeter. (b) Ayn Rand. (c) Hans K.E. von Mangoldt. (d) Albertus Magnus. (e) George Gilder. (f) Richard Cantillon.

38. Relative to firms in other market structures, firms in oligopoly markets tend to: (a) be consciously interdependent and to engage in strategic behavior. (b) adopt price-taking and quantity-adjusting strategies. (c) engage far more frequently in accounting fraud and significant exploitation of workers. . (d) be technologically stagnant, with sticky rates of innovation. (e) focus on rent-seeking behavior instead of profit maximization.

39. Roberto Michels’ “Iron Law of Oligarchy” suggests that if the political leaders of the world’s 50 most populous democracies, the leaders of the world’s 50 largest unions, and the CEOs of the world’s 50 largest multinational companies were all given personality tests: (a) the political leaders, on average, would be the best educated and most knowledgeable. (b) they would all have more in common with each other than they would with the people they lead. (c) the business leaders would tend to be most knowledgeable about economics. (d) the union leaders and business leaders would be more like each other than the political leaders, who would tend to span a large variety of different personality types.

40. People stop searching for information about prospective activities when the expected marginal benefit from further information is perceived as exceeding expected marginal cost, which gives rise to a phenomenon that economists call: (a) planned obsolescence. (b) irrational exuberance. (c) money illusion. (d) rational ignorance. (e) incomplete optimization.

41. Relative to the analyses of most other notable economic theorists, treatments of economic concepts by Aristotle, Ibn Kaldur, Abu-Hamid al Ghazali, Albertus Magnus, and Thomas Aquinas are distinguished by their emphasis on: (a) the subjective nature of prices in a market system. (b) moral and ethical aspects of economic activity. (c) formal models based in pure logic. (d) the will of God operating through the concept Adam Smith later called “the invisible hand.”

42. Richard Musgrave’s normative theory of public finance proposed compartmentalization that would yield perpetually balanced governmental budgets for his: (a) allocation and distribution branches of government. (b) consolidated federal, state, and local government budgets. (c) stabilization branch of government. (d) business cycle branch of government. (e) exhaustive spending branch of government, but not for his investment branch of government.

43. The complete title of John Maynard Keynes’ 1936 treatise, The General Theory, did not contain the word: (a) Economics. (b) Employment. (c) Money. (d) Interest.

44. Some recent research suggests that file-sharing [illicitly downloading music and movies from the internet] is typically engaged in by consumers who are most like: (a) the marginal crossers of Jules Dupuit’s bridge. (b) social Darwinists who believe in “survival of the fittest.” (c) the utopian socialists sponsored by Robert Owen. (d) panhandlers who respond to doles by increasing their time spent begging. (e) the entrepreneurs celebrated by Richard Cantillon and George Gilder.

45. Rugged individualism is most consistent with the views expressed by: (a) Simon Newcomb when describing the economics of charity. (b) Plato, when describing his idealized philosopher king in The Republic. (c) Thomas More, in his treatise, Utopia. (d) Mohandas Gandhi, when advocating passive civil disobedience. (e) Thomas Hobbes, in Leviathan.

46. The assumption that people are self-interested is probably LEAST applicable for: (a) heads of business firms. (b) heads of government agencies. (c) heads of households. (d) heads of nonprofit corporations. (e) people covered by headstones.

47. Some thinkers believe that collective ownership can foster a love of work and education, and facilitate replacement of competitive greed with internal desires to share the fruits of our individual labor. The idea that internal satisfaction can replace self-interested materialism is least compatible with (a) Abraham Maslow’s upper levels in his hierarchy of needs. (b) Adam Smith’s invisible hand. (c) Mohandas Gandhi’s views, sometimes characterized as small is beautiful. (d) Karl Marx’s ultimate communist society. (e) Mao Zedong’s attempts to mold a “new man in China.” (f) Utopian socialism.

48. Some basic behavioral assumptions imbedded in standard economic theory are disputed by modern behavioral economists, most of whom would characterize human behavior as strongly influenced by: (a) ingrained habits shaped by institutions that differ across cultures. (b) bounded rationality, bounded self interest, and bounded willpower. (c) a narrow focus on self interest. (d) “the selfish gene,” which yields needs to propagate our species.

49. Such social Darwinists as Herbert Spencer, William Graham Sumner, and Simon Newcomb would have agreed with Ayn Rand’s opposition to labor unions, welfare payments, and minimum legal wages on the grounds that: (a) giving workers higher wages stimulates them to buy more alcohol and drugs. (b) jobless people are probably unemployed because of their personal failings. (c) low wages will induce people to work harder. (d) people at the top of the income spectrum usually deserve their positions. (e) all of the above.

50. The argument that infant industries should be protected from competition by established foreign industries was first advanced by: (a) Richard List. (b) Gustav Schmoller. (c) David Ricardo. (d) Alexander Hamilton. (e) Thomas Robert Malthus. (f) early mercantilists.

51. The assumption that is least central to the conclusion of the neoclassical macroeconomic model that a market economy naturally gravitates towards a full employment level of output is: (a) Say’s law. (b) price flexibility. (c) growth of the money supply is consistent with the growth of potential output. (d) wage flexibility. (e) interest rate flexibility. (f) Q = F(K, L) (g) competitive markets.

52. The brilliant Hungarian-born mathematician who concluded that almost all human interactions can be viewed as strategic games was: (a) Laurence Klein. (b) John von Neumann. (c) John Maynard Keynes. (d) Frederick von Hayek. (e) Leon Walras.

53. The distinction between normative and positive economics was emphasized by: (a) John Neville Keynes. (b) Henry George. (c) John Rawls. (d) Adam Smith. (e) Robert Nozick.

54. Consider the four scenarios below. “Sticky” wages and prices (a centerpiece of Keynesian analysis) will be least flexible if workers tend to: (a) prefer Scenario I. (b) prefer Scenario II. (c) prefer Scenario III. (d) be indifferent between these three scenarios.

55. Scenario I: Wage increases by 6%, Price level increases by 4%

56. Scenario II: Wage remain constant, Price level decreases by 2%

57. Scenario III: Wage increases by 2%, Price level remains constant

58. The classical demand for money was summarized in the late 19^th century at England’s Cambridge University in an equation written: (a) [G-T] = [S-I] + [M-X]. (b) V = MQ/P. (c) C=I=G=(X-M) = Y. (d) M_d = kPQ, or M_d =kY. (e) MV=PQ.

59. The concept of regression as described by Francis Galton implies that the children of extremely gifted athletes are likely to be: (a) about as athletic as their parents. (b) further from the mean in athleticism than are their parents. (c) of only average athleticism. (d) closer to the mean in athleticism than are their parents.

60. The concepts of competitive equilibria, price elasticity of demand, internal and external economies of scale, increasing and decreasing cost industries, quasi-rent, and consumer surplus can be directly attributed to the works of: (a) Alfred Marshall. (b) John Maynard Keynes. (c) Karl Marx. (d) Joan Robinson. (e) John Stuart Mill.

61. The eccentric legal reformer and philosopher who lived from 1748 to 1832 and whose embalmed body still serves on the Board of Trustees of the University of London was: (a) James Mill, the father of John Stuart Mill. (b) Edwin Chadwick. (c) William Petty. (d) Jeremy Bentham. (e) Francis Y. Edgeworth.

62. The equimarginal principle [also known as the law of equal marginal advantage] emphasizes the idea that efficiency requires: (a) the fairness of the distribution of income to be judged by how close it comes to equality. (b) all identical resources to be allocated in identical ways. (c) deployment at the margin of equivalent resources in equivalently valuable ways. (d) marginal social benefit to most greatly exceed marginal social cost [MSB>MSC]. (e) wealth creation which entails maximizing “the greatest good for the greatest number.”

63. The first clear example of the use of game theory in economic modeling was (a) Plato’s discussion of relationships between ordinary citizens and the philosopher king. (b) Karl Marx’s discussion of the clash between the proletariat and the bourgeoisie. (c) A. Jules E. Dupuit ’s exposition of efficient pricing for a public good, such as a bridge. (d) Antoine-Augustin Cournot’s quantity adjustment model of a duopoly. (e) Rene Descartes’ exposition of cogito ergo sum.

64. The Great Depression finally ended when the government of the United States: (a) published John Maynard Keynes's General Theory. (b) launched massive public works programs in 1933. (c) created the Federal Deposit Insurance Corporation and the Federal Reserve System. (d) entered World War II. (e) boycotted the Berlin Olympics in 1936.

65. The idea that the problem of scarcity is best resolved by reducing wants so that they are consistent with the goods available is a part of the philosophy underpinning: (a) the Judeo-Christian heritage that dominates western society. (b) Karl Marx’s ultimate communist society. (c) aspects of Buddhism, Taoism, and Hinduism. (d) the golden age of Greece, during the times of Socrates, Plato, and Aristotle.

66. The Keynesian theory of liquidity preference treats the cost of holding money as: (a) current interest rates. (b) nothing. (c) the value of the goods that someone could buy with a dollar. (d) downwardly limited because of sticky pricing.

67. The issue of land rent was least central to the economic theories of (a) Johann H. von Thünen. (b) Eugen von Böhm-Bawerk. (c) David Ricardo. (d) Henry George.

68. The idea that capitalism is dynamically unstable because the quest for profit stimulates economic concentration and the immiseration of workers is central to: (a) classical macroeconomics. (b) Keynesian theory. (c) monetary velocity cycles. (d) Marxist theory. (e) Austrian theory of the business cycle.

69. The idea that governmental redistributions of income or wealth will ultimately have no effect on how disparate income and wealth are distributed is sometimes called: (a) Say’s Law of Markets. (b) the Law of Comparative Advantage. (c) Keynes’ Law. (d) Schumpeter’s Law. (e) Pareto’s Law.

70. The implicit assumptions of classical and neoclassical economic theorists that culture and historical time are irrelevant for useful economic analysis was most emphatically rejected by: (a) utilitarians. (b) German historicists. (c) mercantilists. (d) physiocrats. (e) logical positivists.

71. The International Workers of the World (IWW) “wobblies” were: (a) responsible for nationalizing British heavy industry. (b) in favor of collective bargaining and profit sharing. (c) Russian liberals overthrown by V. I. Lenin’s Bolsheviks. (d) instrumental in establishing Yugoslavian worker committees. (e) pre-World War I syndicalist radicals who sought to take over U.S. industry.

72. The labor theory of value was rejected most vehemently by: (a) members of the Austrian school of economics. (b) orthodox Marxists. (c) David Ricardo. (d) 19^th Century advocates of laissez faire policies. (e) John Stuart Mill.

73. The macroeconomic theory born in the classical era and refined in the neoclassical era that should more descriptively and accurately be called “a monetary theory of price level” is: (a) rational expectations theory. (b) capital and interest theory. (c) marginal productivity theory. (d) the quantity theory of money. (e) inflationary theory.

74. The thinkers most likely to have agreed that government can reassign property rights and redistribute income and wealth would be: (a) Robert Nozick and John Rawls. (c) Ayn Rand and Milton Friedman. (b) Adam Smith and Karl Marx. (d) Thomas Hobbes and John Stuart Mill. (e) Jeremy Bentham and David Ricardo.

75. The Normans led by William the Conqueror occupied the British Isles after defeating England’s King Harald at the Battle of Hastings [1066 AD]. Suppose, instead, that King Harald had soundly defeated and permanently squelched the Norman invasion. The philosopher whose theories about social and scientific processes affectively asserted that the world today would be, at most, insignificantly different, was: (a) Adam Smith. (b) Zeno. (c) Thomas Aquinas. (d) Albert Einstein. (e) Protagoras.

76. The quote “But the rule holds with but slight exceptions that, whether warriors or priests, the upper classes are exempt from industrial employments, and this exemption is the economic expression of their superior rank,” identifies ideas expressed in: (a) Karl Marx’s Das Kapital. (b) Adam Smith’s Wealth of Nations. (c) Thorstein Veblen’s Theory of the Leisure Class. (d) Leo Tolsoy’s War and Peace. (e) John Maynard Keynes’ General Theory.

77. The sacrifices of parents who pay for their children’s college educations when they could otherwise be consuming more goods personally is most completely explained by the basic assumptions of: (a) conventional economics. (b) anthropologists. (c) physiocrats. (d) sociologists. (e) sociobiologists.

78. The most renowned American economic theorist of the late 19^th Century was (a) Alfred Marshall. (b) Arthur Cecil Pigou. (c) John Bates Clark. (d) Paul Samuelson.

79. The theory of demand based on indifference analysis assumes that, with reasonable precision, consumers can: (a) cardinally measure their utility. (b) determine how healthy their diets are. (b) predict how future events will affect a household’s income level. (c) ordinally specify the rank order of alternative bundles of goods. (d) distinguish between the physical characteristics of different brands of bleach or cola.

80. The theory that the macroeconomic activity is at most trivially affected by whether government spending is funded through taxation, borrowing, or printing money is known as: (a) Ricardian equivalence. (b) rational expectations. (c) Condorcet’s paradox. (d) the equimarginal principle.

81. The theory that there is an orderly set of proper rules for governing society, and that the appropriate task of the scholar is to discover those rules through reason is known as: (a) self interest. (b) mercantilism. (c) natural law. (d) economic sociology. (e) contrarian conjecture.

82. The traditional structure-conduct-performance [S-C-P] paradigm yields results that are least consistent with: (a) monopoly. (b) traditional models of oligopoly. (c) models of purely- or perfectly-competitive markets. (d) monopolistic competition. (e) strategic behavior in game theory.

83. The voting system proposed by Knut Wicksell that, unfortunately, erects the highest barriers against correcting preexisting inequity is: (a) simple plurality. (b) majority rule. (c) point voting. (d) unanimity voting.

84. Two relatively sophisticated thinkers for their time whose ideas provided a bridge from the dominance of a simplistic version of the mercantilist school of thought and the publication of Adam Smith’s Wealth of Nations were: (a) Abu-Hamid al Ghazali and François Quesnay. (b) William Petty and Richard Cantillon. (c) Bernard Mandeville and Thomas Aquinas. (d) William Pitt and Alexander Hamilton. (e) Simon Newcomb and Edwin Chadwick.

85. The writer who described capitalism as a process of creative destruction and called the entrepreneur “the white hot fire that drives capitalism forward” was (a) John Stuart Mill (b) Carl Menger. (c) St. Thomas Aquinas. (d) Joseph A. Schumpeter. (e) William Stanley Jevons.

86. Were all of the following still alive, the least likely of these groups to oppose the globalization of markets and international “outsourcing” would be: (a) German historicists and Alexander Hamilton. (b) mercantilists and Thomas Robert Malthus . (c) David Hume, Adam Smith, and David Ricardo. (d) Samuel Gompers [AFL], John L. Lewis [CIO], and current members of American trade unions.

87. When an action negatively affects someone not directly involved in the decision about the action, a market failure may occur that is characterized as a negative: (a) externality. (b) spinover. (c) synergy. (d) irrationality. (e) overspin.

88. Scarcity is chronic and incurable if scarcity exists because our limited resources and technologies cannot produce sufficient goods to fully satisfy our unlimited wants. Thinkers who viewed scarcity as potentially resolved by curbing our appetites for material goods included: (a) Jeremy Bentham. (b) Mohandas Gandhi. (c) Abu Hamid al-Ghazali. (d) Xenophon. (e) Ibn Khaldun.

89. The classical macroeconomic theory developed prior to 1930 was most consistent with: (a) asset demands for money. (b) transaction demands for money. (c) money as a store of value. (d) precautionary demands for money. (e) speculative demands for money.

90. One modern theorist argues that society allocates property rights in response to the effort individuals expend in efforts to assert rights over property, and that people most willing to spend energy in these efforts tend to be those who will use the property in the most valuable ways. This theory of the development of property rights is attributable to: (a) John Rawls. (b) John Locke. (c) Hugo Grotius. (d) Thomas Hobbes. (e) Robert Nozick. (f) Harold Demsetz.

91. A list of American institutionalists would not include: (a) John Kenneth Galbraith. (b) John Commons. (c) Thorstein Veblen. (d) Edwin Hastings Chamberlin. (e) Clarence Ayres.

92. The concept that economic inefficiency exists whenever anyone can be made better off without reducing the welfare of some other person was first made explicit by: (a) Vilfredo Pareto. (b) Leon Walras. (c) Antoine Augustin Cournot. (d) Jules Dupuit. (e) Carl Menger.

93. John Maynard Keynes mocked the conservative monetary policymakers at the Bank of England as: (a) the little old ladies of Threadneedle Street. (b) boring drones of the rentier class. (c) dispirited farm animals on a train bound for the slaughter house. (d) myopic judges of financial “beauty contests”. (e) addle-pated practitioners of the conventional wisdom.

94. Changes in quantities as mechanisms for adjusting to changes in circumstances that disrupt equilibrium were emphasized by: (a) Jules Dupuit, Joseph Bertrand, and Emile de Cheysson, (b) Antoine-Augustin Cournot, Alfred Marshall, and John Maynard Keynes. (c) Carl Menger, Eugen von Bohm-Bawerk, and Friedrich Wieser. (d) Leon Walras, Vilfredo Pareto, and William Stanley Jevons.

95. Mercantilists would have been most likely to have opposed: (a) the idea that monarchs rule by divine right. (b) running balance of trade deficits. (c) the top-down approach to management and administration. (d) state authorized monopolies. (e) imperialistic policies.

96. Classically-oriented macroeconomists would view excessive unemployment as a symptom that wage rates relative to output prices: (a) cause excessive Aggregate Demand. (b) are too high to clear labor markets. (c) are too low to clear labor markets. (d) require militant unionism to be curbed.

97. Critics would be least likely to identify as “market failures” specific to capitalism such problems as: (a) inadequate adjustments for negative externalities as pollution. (b) enormous disparities in the distributions of income and wealth. (c) inadequate market incentives for basic scientific research. (d) control over government policies by a small autocratic elite. (e) the promotion of competitive instead of cooperative modes of behavior.

98. The succession of military dictators and autocratic leaders in Central America and Africa and the deposition of Batista by Fidel Castro in Cuba could be considered examples of Roberto Michels’: (a) inevitability of bureaucracy. (b) will to power theory. (c) iron law of oligarchy. (d) cobweb model. (e) philosopher king.

99. Thomas Malthus was pessimistic about the long run state of humankind. Although he feared that his preferred solution to overpopulation was impossible, he favored the preventative check of: (a) war. (b) disease. (c) starvation. (d) abstinence and delayed marriage. (e) famine.

100. “Laplace’s demon” [named after Pierre-Simon, Marquis de Laplace [1749-1827], and also sometimes known as “Maxwell’s demon”] addresses the possibility that if a demon fully understood the laws of physics and knew the position of every particle in the universe at any given point in time, that “nothing could be uncertain and the future just like the past would be present before its [the demon’s] eyes." This theory of the universe is known as: (a) hysterisis. (b) path dependence. (c) determinism. (d) spiritualism. (e) reductionism.

101. Pairs of property rights theorists whose views are relatively most compatible in their underlying logic would include: (a) Robert Nozick and John Rawls. (b) Hugo Grotius and Thomas Hobbes. (c) Karl Marx and Jean Jacques Rousseau. (d) Plato and Mohandas Gandhi. (e) Harold Demsetz and John Locke.

102. Jeremy Bentham’s musings provided major philosophical foundations for: (a) the abolition of slavery. (b) syndicalism. (c) free international trade. (d) feudalism. (e) utilitarianism.

103. A view that all phenomena conform to inherently stable and universal principles is least consistent with the concepts that underpin: (a) scientific laws about the cosmos developed by Isaac Newton. (b) Adam Smith’s “invisible hand” of the marketplace. (c) Zeno’s primitive theories of equilibrium. (d) social homeostasis, as elaborated by Talcott Parsons. (e) path dependence, chaos theory, and the notions of Heraclites. (f) Ludwig Feurbach’s determinism and Karl Marx’s dialectical materialism.

104. A person who explains the world through a set of formulaic questions and then faith based, authoritarian answers is, perhaps unconsciously, following the methodology of: (a) Druid monks. (b) medieval scholastics. (b) David Ricardo. (c) Utopian socialists. (d) modern libertarians. (e) transcendental meditators.

105. “Shocks” to technologies, resources, and the structures of demands occur continuously. Market adjustments take time. Consequently, David Colander’s macroeconomic model concludes that a Walrasian “long run” general equilibrium is unachievable. His model is known as: (a) chase equilibrium. (b) dynamic disequilibrium. (c) stochastic macroequilibration. (d) asymmetric wage-price reaction functions. (e) creative destruction.

106. This figure depicts a: (a) Phillips curve. (b) Lorenz curve. (c) Edgeworth-Bowley curve. (d) Clark-Wicksteed curve. (e) Marshallian inequality index. 107. The social philosopher who hypothesized that the economic system or form of political governance does not affect the shape of the area of inequality in the long run, was: (a) Friedrich Nietzsche. (b) Karl Marx. (c) Knut Wicksell. (d) Vilfredo Pareto. (e) Eugen von Böhm-Bawerk.

108. Materialistic accumulation and consumption were most central to the theories of: (a) Socrates, Plato, and Aristotle. (b) Abu Hamid al-Ghazali, Ibn Khaldun, and other early Islamic thinkers. (c) Albertus Magnus, Thomas Aquinas, and other medieval scholastics. (d) Gautama Buddha, Mohandas Gandhi, and E.F. Schumacher. (e) Jay Gould, Jim Fisk, Cornelius Vanderbilt, and other “robber barons” whose activities were described by, among others, Thorstein Veblen.

109. According to late 19^th Century versions of the labor theory of value: (a) the interactions of supply and demand determine relative prices. (b) the value of anything is exactly proportional to the labor time socially necessary for its production. (c) human capital and labor are equally "socially necessary" for production. (d) demand is more important than supply in determining the relative value of anything.

110. The excess-demand function and comprehension that the sum of excess demands must equal the sum of excess supplies were among innovations in theory by the neoclassical economist: (a) John Maynard Keynes. (b) Léon Walras. (c) Paul Sweezy. (d) Antoine-Augustin Cournot. (e) William Stanley Jevons.

111. John Maynard Keynes asserted that social change is most heavily influenced by: (a) the ideas of economic philosophers and theorists. (b) mindless conformity and harmful social conventions. (c) the concentrated economic and political power wielded by special interest groups. (d) use of the scientific method to generate new knowledge and innovate new products and technologies. (e) religious zealotry.

112. The management structures and operations of a modern major government agency and a giant business corporation tend to be: (a) so different that comparisons are impossible. (b) consistently maximized in efficiency. (c) similarly bureaucratic in many ways. (d) directed at maximizing total profit.

113. Fervently held metaphysical/religious beliefs were least central to the writings of: (a) John Stuart Mill. (b) Abu Hamid al-Ghazali. (c) Ibn Khaldun. (d) Thomas Aquinas. (e) Karl Marx.

114. That wages vary in inverse proportion to the agreeableness and constancy of the employment was an idea first explicitly stated by. (a) Adam Smith. (b) Karl Marx. (c) Thomas Malthus. (d) John Stuart Mill. (e) David Ricardo.

115. In Wealth and Poverty [1981], George Gilder opined that: (a) welfare payments and inherited wealth are equally likely to decrease the work habits and grit of the recipients. (b) entrepreneurs may be even more motivated to make the world a better place [as they perceive it] than they are in high profits and luxurious lifestyles. (c) income and most other taxes feasibly could be replaced by a single tax on land. (d) a system of negative income taxes should be enacted to replace the current welfare system.

116. A social theory that does not advocate the ultimate minimization or elimination of an economic role for government is: (a) Marxism. (b) laissez faire capitalism. (c) syndicalism. (d) Fabian socialism. (e) Utopian socialism.

117. David Ricardo’s theory of wage determination: (a) is all of the below. (b) based on his formulation of an “Iron Law of Wages.” (c) concludes that the wage rate [w] is inversely proportional to the amount of labor supplied. (d) relies heavily on Malthusian population theory in the long run. (e) concludes that, in the long run, the wage rate [w] is inversely proportional to population. (f) can be graphed as a rectangular hyperbola, with labor on the horizontal axis, and wage rates on the vertical axis, so that the amount of labor supplied rigidly determines that wage rate.

118. Private property rights are LEAST compatible with pure: (a) libertarianism. (b) anarchism. (c) laissez-faire policies. (d) syndicalism and pure socialism.. (e) capitalism

119. Early in the eighteenth century, a leading industrialist responded to an advisor of France’s King Louis IV, who asked how the crown could best facilitate the world of commerce, with “Laissez nous faire,” which means: (a) “let justice be done, though the heavens fall.” (b) “leave us alone.” (c) “cut taxes to the bone.” (d) “eliminate the welfare system.” (e) “let us eat cake.”

120. Nationalism, self-sufficiency, and imperial power were central concerns of early: (a) mercantilists. (b) Greek hedonists. (c) Marxists. (d) French physiocrats. (e) neoclassical economists.

121. The public choice perspective on special interest groups’ attempts to mold political decisions is most consistent with: (a) Plato’s advocacy of governance by a philosopher king. (b) self interested opportunism. (c) Karl Marx’s view that class interest causes most people to advocate social or legal “reforms” favoring groups they belong to, and that they try to support such policies with superficially ethical arguments. (d) medieval scholar’s support for theocratic policies. (e) myopic solipsism.

122. The highest level in Abraham Maslow’s “Hierarchy of Wants” is: (a) nirvana. (b) self interest. (c) security. (d) humanitarianism. (e) self actualization. (f) love and respect. (g) socialism.

123. Neither the “dialectic method” developed as an explanation for advances in understanding by Georg Hegel nor the version altered by Karl Marx as an explanation of all history (dialectical materialism) would be particularly consistent with the notion that: (a) thesis +antithesis è synthesis. (b) Marxism + Christian socialism è liberation theology. (c) mature capitalism + exploited proletariats è revolution. (d) individual aptitude + individual effort è economic success. (e) long + short è distance.

124. Interest, rent and profit are collectively known by Marxists as: (a) materialistic bloat. (b) dialectics. (c) finance capital. (d) exploitation indicators. (e) surplus values.

125. Mercantilists would most likely agree that international trade: (a) should be promoted through the reduction of tariffs. (b) should contribute to the wealth and power of a nation. (c) is probably most efficient if largely unencumbered by tariffs or quotas. (d) is expected to be mutually beneficial to all parties involved. (e) widens inequitable disparities in the distribution of national income.

126. Aristotle did not argue that: (a) charging usury – interest on loans – is both inefficient and unfair. (b) buyers and sellers both gain when exchanges are made voluntarily. (c) unnecessary exchange is facilitated by coined money. (d) international trade invariably enhances the wealth of both trading nations.

127. A voting system that allows only policy changes that are expected to improve economic efficiency requires: (a) a democratic majority. (b) a plurality of the votes. (c) unanimity. (d) elimination of income inequity.

128. The policies of England attacked by David Ricardo and defended by Thomas Malthus were (a) the gold standard as a foundation for the money supply. (b) the Protestant reformation. (c) mercantilist conquest of less developed territories to establish colonies. (d) the enclosure movement. (e) protectionist “Corn Laws.”

129. In Alfred Marshall’s “immediate period” (in contrast to the short run or long run), prices for non-storable goods are determined solely by: (a) minimization of production costs. (b) a subjective labor theory of value. (c) market demand. (d) utility maximization.

130. In purely competitive markets, the efficiency characteristics of an equilibrium price arguably correspond most closely to the: (a) medieval concept of a “just price.” (b) labor theory of value. (c) physiocrats’ assumption that agriculture is the ultimate source of all value. (d) surplus value concept developed by Karl Marx.

131. The idea that the price of produced good reflects, not the labor embodied in it, but rather the subjective usefulness of the last unit purchased is based on the concept of: (a) excess demand. (b) marginal productivity. (c) marginal utility. (d) the wages-fund. (e) decreasing costs.

132. Issues notably addressed by Vilfredo Pareto did not include: (a) elitism as a major determinant of social and economic policies. (b) the relative distributions of income or wealth. (c) sociobiological foundations for individual utility maximization. (d) economic efficiency in the context of Walrasian general equilibrium.

133. Given these scenarios, a believer in neoclassical theory would expect working people to: (a) prefer Scenario I. (b) prefer Scenario II. (c) prefer Scenario III. (d) be indifferent between these scenarios.

Scenario I: Wage increases by 6%, Price level increases by 4%

Scenario II: Wage remain constant, Price level decreases by 2%

Scenario III: Wage increases by 2%, Price level remains constant

134. Alfred Marshall formalized use of the analytical technique known as: (a) general equilibrium analysis (b) felicific calculus. (c) partial equilibrium analysis. (d) differential equations. (e) linear programming.

135. According to Karl Marx, economic history: (a) is determined by the interaction of Aggregate Demand and Aggregate Supply. (b) is the result of class struggles. (c) will reach its pinnacle when socialism replaces feudalism. (d) arises when new social and philosophical ideas are introduced into the economic structure.

136. A theory of oligopoly developed by Paul Sweezy and elaborated by Joan Robinson in which a firm cannot gain market share significantly by lowering prices because other firms will also cut prices, but the firm loses significant market share if it raises prices because other firms will not match price hikes is known as: (a) limit pricing. (b) monopolistic competition. (c) pure monopoly. (d) monopsonistic competition. (e) the kinked demand curve model.

137. Economic theories about crime and punishment were least central to major analyses by: (a) Jeremy Bentham. (b) Gary Becker. (c) Sir Edwin Chadwick. (d) Reverent Thomas Malthus.

138. According to David Ricardo, differences in land rents depend on differences in fertility. Johann H. von Thünen argued that land rents depend far more on: (a) the aesthetics of the scenery. (b) location. (c) population density. (d) subjective evaluations.

139. The models of imperfect competition that are intermediate cases in the Structure-Conduct-Performance paradigm are least attributable to theories of industrial organization developed by: (a) Leon Walras. (b) Joan Robinson. (c) Antoine-Augustin Cournot. (d) Edwin H. Chamberlin. (e) Joseph L. F. Bertrand.

140. The notion that communism should be imposed on a nation’s rulers so that they would neither be tempted by possessions nor diverted from the task of wise governance was initially proposed by: (a) Plato. (b) Xenophon. (c) Aristotle. (d) Protagoras. (e) Karl Marx.

141. Adam Smith’s “system of natural liberty” is a clear exposition of the central tenets of: (a) anarchism. (b) libertarianism. (c) democracy. (d) communism. (e) socialism.

142. John Stuart Mill’s sentiment in his On Liberty, that “…there are many acts which, being directly injurious only to the agents themselves, ought not to be legally interdicted” would attract most wholehearted agreement from modern: (a) libertarians. (b) syndicalists. (c) scholastics. (d) fundamentalists. (e) royalists. (f) real business cycle theorists

143. One reason that rent-seeking yields economic inefficiency is because: (a) politicians try to project middle-of-the-road images. (b) lobbying by special interests absorbs resources. (c) bureaucrats understate social and economic problems. (d) consumers are less rationally ignorant than voters.

144. John Stuart Mill developed a theory that long run price level stability does not require governmental action beyond the coining of money, and would automatically be achievable through market forces. His laissez faire theory of the supply of money is based on an assumption that: (a) government deficits and surpluses cancel each other out over the long run. (b) the long run supply curve for gold is roughly a horizontal line. (c) international trade is based on reciprocal demands and supplies. (d) “good money drives out bad.” (e) deflation is a result of “too much money chasing too many goods.”

145. “Render unto Caesar that which is Caesar’s, and unto God that which is God’s”. (Matthew 22:21). This passage: (a) is cited by conservative theologians who believe in preserving existing distributions of income, wealth, status, and power. (b) was used by mercantilists to justify the accumulation of gold. (c) is cited by Christian Socialists who believe in existing distributions of wealth, status, and power. (d) was quoted by Reverend Thomas Malthus in a famous sermon to the House of Commons.

146. Neoclassical monetary theory suggests that if your monetary income doubles, but all other prices double as well, you will ultimately: (a) adjust your spending to secure a fair share of the larger amount of goods now available. (b) conform to the spending patterns of families in similar income brackets. (c) reduce your work effort because additional monetary income is subject to the law of diminishing returns. (c) be far more deeply in debt than you were before inflation occurred. (e) change your “real” behavior not one iota—or even a smidgen.

147. The notion that wages and prices adjust asymmetrically to excess demands or supplies is most closely associated with (a) natural rate theory. (b) modern monetarism. (c) classical macroeconomics. (d) Keynesian theory. (e) Steven Hawking’s reformation of the theory of economic entropy.

148. The allocative role of profit in stimulating economic growth in a capitalist system is least a primary focus of theories expounded by: (a) H.K.E. von Mangoldt. (b) Frank Knight. (c) Karl Marx. (d) John Maynard Keynes. (e) Richard Cantillon.

149. Liberation theology has been advocated at times by many revolutionary South American priests, and blends the ideas of: (a)Utopianism and creationism. (b) syndicalism and Titoism. (c) Marxism and Christian socialism. (d) anarchism and revisionism.

150. The adage, “variety is the spice of life,” may be a partial rebuttal for the view that product differentiation is inefficient, which was central to the theory of: (a) utility maximization developed by William Stanley Jevons. (b) duopoly developed by A.A. Cournot and Jules Dupuit. (c) oligopoly developed by Joan Robinson. (d) games developed by Jon von Neumann and Oskar Morgenstern. (e) monopolistic competition developed by Edward Chamberlin.

151. The median voter model helps explain why: (a) special interest groups will seek rents. (b) middle‑of‑the‑road positions yield electoral success. (c) voters will seek the best information available. (d) political parties will differ dramatically.

152. The lineage of StructureàConductàPerformance [SCP] analysis of industrial organization is most strongly imbedded in the works of: (a) John Stuart Mill and Alfred Marshall. (b) Joan Robinson and Edwin H. Chamberlin. (c) William Petty and Bernard Mandeville. (d) Carl Menger and Joseph Schumpeter. (e) Leon Trotsky and Joseph Stalin.

153. Karl Marx believed that the unfolding of history is explained by: (a) competition among workers that ensures high standards of living. (b) dialectical idealism. (c) resolutions to conflicts between different political parties. (d) the clash between thesis and antithesis in the ways societies produce, exchange, and distribute economic goods.

154. The mechanism that is least useful in giving a minority interest group power to influence political decisions is: (a) logrolling. (b) lobbying. (c) a unanimity voting rule. (d) low rates of voter participation. (e) simple majority rule.

155. Irrational exuberance, the term now widely used to explain why prices for many tech stocks rose far above their reasonable market values in the 1990s, was characterized by John Maynard Keynes as: (a) “peak/end explosiveness.” (b) “NASDAQ mania.” (c) “unwarranted exhilaration.” (d) “animal spirits.” (e) “cognitive dissonance.” (f) “ego slippage.”

156. Public choice analysis begins with an assumption that individual behavior in the political arena is essentially: (a) democratic. (b) anarchic. (c) humanitarian. (d) self‑interested. (e) republican. (f) liberal. (g) conservative.

157. The concept that "demand creates its own supply" is most consistent with: (a) marginalist theory. (b) Keynesian theory. (c) natural rate theory. (d) new classical macroeconomics. (e) Marxist analysis. (f) modern monetarism.

158. Of the following, the LEAST rational and informed reason for citizens to vote is if, as individuals, they: (a) will feel guilty if they don't vote. (b) enjoy expressing their political preferences by voting. (c) believe that every citizen has a duty to vote. (d) are convinced that single votes commonly swing election results.

159. Leon Walras’ general equilibrium theory does not hinge on an assumption of: (a) self interested behavior among individuals. (b) the labor theory of value.(c) flexibility in shifting resources. (d) perfect competition.

160. The main implication of Adam Smith's notion of an "invisible hand" was that: (a) pursuit of individual self interest must be controlled. (b) most people lose sight of what's good for society. (c) most people are motivated primarily by social welfare. (d) competition channels self‑interested behavior to serve all of society.

161. Production automatically generates income of comparable value, and no one produces anything unless they intend to buy something else. This line of reasoning implies that, in the aggregate, demand is automatically present if goods are supplied, and is the primary underpinning for: (a) Jean Baptiste Say’s “Law of Markets”, which is sometimes summarized as “supply creates its own demand.” (b) Keynesian theory, which asserts that no one will produce anything unless they expect someone else to buy it. (c) George Stigler’s Law, which asserts that the sum of excess demands must equal the sum of excess supplies. (d) Adam Smith’s concept of “the invisible hand” of the market place. (e) David Ricardo’s theory of specialization and trade according to comparative advantage.

162. The economic theory most supportive of a Panglossian view that, in economies that rely primarily on markets, “we live in the best of all possible worlds” (from Voltaire’s Candide) is: (a) early classical macroeconomics. (b) Gandhi’s “small is beautiful” theory. (c) institutionalism. (d) neoclassical economics. (e) Keynesian macroeconomics. (f) Kenneth Boulding’s characterization of our Spaceship Earth.

163. Joseph Schumpeter’s version of the Austrian school of economic thought emphasizes that major disruptions to "purely" competitive markets arise from: (a) profit maximization by imitative firms. (b) entrepreneurial innovations. (c) job training by workers. (d) laissez-faire government policies.

164. Trying to raise your bureau’s budget by exaggerating the hurdles it faces and the importance of its mission is known as: (a) boosterism. (b) frosting the cake. (c) boondoggling. (d) empire building.

165. Utilitarianism proposes that the best society is one that provides the: (a) basic goods to meet people's needs. (b) greatest happiness for the greatest number of people. (c) accurate measurement of utility and disutility. (d) highest guaranteed incomes for everyone.

166. Vilfredo Pareto accepted Karl Marx’s view that history unfolds as a consequence of class conflict, but he disagreed with Marx’s prediction that a classless society would emerge, instead believing that: (a) leaders of socialist and communist movements would ultimately become merely a new exploitative and autocratic elite group. (b) Marx was incorrect to reject the labor theory of value. (c) capitalism would be too adaptive to succumb to revolutionary communism. (d) class differences would become blurred as economic development progressed.

167. Undergraduate economics students receive the greatest exposure to innovations in microeconomic theory developed by: (a) Alfred Marshall. (b) Thorstein Veblen. (c) John R. Commons. (c) Wesley Clair Mitchell. (d) John Bates Clark.

168. The theorist who, if alive today, would be least likely to join a fan club for any entrepreneur, was: (a) Van Mangoldt. (b) Richard Cantillon. (c) Joseph Schumpeter. (d) Thorstein Veblen.

169. The theorist who most notably disagreed with the idea that money is neutral – that “the absolute quantity of money in a nation has no affect on the real output of that nation” would have been: (a) John Maynard Keynes. (b) Adam Smith. (c) David Hume. (d) David Ricardo. (e) John Stuart Mill. (f) Milton Friedman. (g) Irving Fisher.

170. Stronger preferences for current consumption over future consumption would be indicated by a: (a) higher interest rate. (b) more rapid rate of investment. (c) larger government budget surplus. (d) surplus in the balance of trade.

171. The robust market for illegal drugs in the United States may exist because of its profitability, according to reasoning expressed by the early Chinese philosopher: (a) Guan Zhong. (b) Lao Tzu. (c) Confucius. (d) Ming Tao. (e) Omar Khayyam.

172. Eugen von Böhm-Bawerk’s concept of roundabout production entails: (a) maximizing the production of capital goods during each production period. (b) investing in capital goods by postponing consumption, thereby enabling the production of greater amounts of consumer goods in the future. (c) outsourcing of intermediate goods by a firm that is not fully integrated. (d) maximizing r + i + π = surplus value.

173. The idea that furthering the prospects of an individual organism’s “breeding rights” motivates behavior to enhance class, status, and power, is most central to the discipline of: (a) sociology. (b) cultural anthropology. (c) Darwinian evolution. (d) sociobiology. (e) behavioral economics.

174. Arrow’s “Voting-Paradox” theorem suggests that intransitive preferences may cause choices based on voting to be inconsistent with the preferences of anyone, and that these democratic choices are likely to be the least preferred of all options for many citizens. The logic underpinning Arrow’s theorem can be traced to the writings of: (a) the Marquis de Condorcet. (b) John Stuart Mill. (c) Ambrose Bierce. (d) Henry David Thoreau. (e) Roberto Michels. (f) James Madison.

175. The process of social homeostasis hypothesized by the sociologist Talcott Parsons is a mechanism that implicitly underpins a theory of the distribution of income advanced earlier by: (a) John Stuart Mill. (b) Vilfredo Pareto. (c) David Ricardo. (d) John Bates Clark. (e) Karl Marx.

176. Marxist revolutions in Russia, China, and Cuba all represent refutations of Marxian predictions because: (a) their revolutions were not especially bloody. (b) Marxist governments did not follow imperialist policies. (c) “Marxist revolutions” all occurred in relatively feudal agricultural economies. (d) economic growth was slower after the revolution than before.

177. According to the quantity theory of money central to neoclassical macroeconomic models: (a) output grows when the price level rises. (b) real output is unaffected by the money supply. (c) employment depends on the velocity of money. (d) growth of per capita income is impossible in the long run.

178. The behavioral scientist most likely to have written, “Classic economic theory, based as it is on an inadequate theory of human motivation, could be revolutionized by accepting the reality of higher human needs, including the impulse to self-actualization and the love for the highest values,” was: (a) Franz Boaz. (b) Francis Galton. (c) Margaret Meade. (e) Sigmund Freud. (e) Abraham Maslow. (f) B.F. Skinner.

179. A central assumption separating John Maynard Keynes from previous economists was the debate over whether: (a) surplus value does not include wages (b) supply creates its own demand. (c) income should be distributed equally. (d) all goods should be provided freely.

180. A cultural relativist with respect to his views on modern culture and its assumed superiority was the notably eccentric: (a) Thorstein Veblen. (b) Thomas Malthus. (c) Carl Menger. (d) Wesley Clair Mitchell. (e) John Kenneth Galbraith.

181. A Marxist prediction that may have proven at least partially accurate is: (a) the decline in the average rate of profit. (b) cyclically increasing unemployment rates and explosive business cycles. (c) communist revolutions in industrialized societies. (d) increased concentration of wealth and power in large corporations.

182. A nineteenth century economist whose insights into savingàinvestment decisions provided intellectual ancestry for John Maynard Keynes’ observation that savers and investors are different people with different motives so that that aggregated desires to save may exceed aggregated desires to invest was: (a) David Ricardo. (b) Jeremy Bentham. (c) John Stuart Mill. (d) Nassau Senior. (e) Thomas Robert Malthus.

183. Adam Smith and Carl Menger agreed on stringent limits to government’s involvement in the economy. However, Menger and his Austrian colleagues probably believed this in part because they viewed markets to be efficient, and in part because: (a) expected the invisible hand to overcome raw political power. (b) most were born into the politically-conservative Austrian or German aristocracy. (c) they were early libertarians who emphasized freedom above all else. (d) they viewed all government activity as inherently socialistic. (d) they were quite liberal politically and favored worker participation in managerial decisions, and thought individuals should be able to participate in a free market system.

184. A sequence of argument such as “If A exceeds B, and B exceeds C, then A exceeds than C”, which was central to the methods of inquiry developed by the ancient Greeks [Socrates, Plato, Aristotle, et al.], is an example of a logical: (a) syllogism. (b) dialecticism. (c) scientism. (d) quantification. (e) scientology.

185. According to John Neville Keynes [father of John Maynard Keynes], an economic theory is not a positive theory unless it is: (a) in accord with Occam’s razor. (b) based on unanimously held value judgments. (c) proven to correspond to real world experience. (d) empirically testable, at least conceptually, for its truth or falsity. (e) pragmatically useful in maximizing the value of output, employment, and purchasing power.

186. According to George Stigler, physically identical units of a commodity may have more than one price even when markets are in equilibrium due to: (a) consumer ignorance. (b) price discrimination. (c) the costs of information. (d) monopoly power.

187. According to neoclassical macroeconomic theory, buying anything is most clearly evidence that, prior to the purchase, you: (a) had unmet subsistence needs. (b) were strongly influenced by advertising and marketing, according to John Kenneth Galbraith. (c) had a shortage of the good you bought, and relatively too much money. (d) gained utility from a similar previous exchange. (e) were experiencing a positive marginal propensity to save.

188. Allocative failures of a pure market system would not include: (a) externalities through which an imperial government exploits its colonies. (b) asymmetric information – when one party to a transaction has relevant knowledge not possessed by the other party. (e.g., adverse selection or moral hazard). (c) monopoly – where the price set by the monopoly exceeds the marginal costs of production. (d) the public goods problem – goods that are non-rival and non-exclusive will be underprovided.

189. According to neoclassical macroeconomics, the Aggregate Supply curve in a market economy is roughly: (a) vertical at a full employment level of output. (b) horizontal at the current level of prices. (c) a 45 degree line from the origin of quantity/price space. (d) a rectangular hyperbola in price/quantity space. (e) the vertical sum of the marginal cost curves of all firms in the economy.

190. Conscious parallelism of action in which firms tend to move together is a hallmark of: (a) pure competition. (b) monopolistic competition. (c) oligopoly. (d) imperfect competition. (e) monopsony.

191. Alexander Hamilton’s advocacy of tariffs to protect “infant industries” was later [not earlier, as asserted in some texts] echoed in the works of: (a) German historicists. (b) mercantilists. (c) American institutionalists. (d) David Hume. (e) French physiocrats.

192. An assumption that would be least crucial for the conclusion of neoclassical macroeconomics that business cycles will automatically be cured by market adjustments would be a requirement that: (a) supply creates its own demand, per Say’s Law. (b) prices are flexible. (c) the money supply is stable, per Fisher’s Law. (c) wages are flexible. (d) interest rates are flexible.

193. Antoine Augustin Cournot (1801-1877) was a school superintendent, but he was also arguably among the top-ten all-time pioneers of economic theory. His path-breaking contributions did not include developing: (a) a proof that marginal revenue = marginal cost is a requirement for profit maximization. (b) an early form of game theory. (c) demand and supply curves as the partial derivatives of demand and supply functions. (d) a formal model of perfect competition. (e) the concept of marginal revenue.

194. Adam Smith would have agreed most with the idea that wages are: (a) positively related to physical comfort while working. (b) negatively related to the cost of learning the business. (c) positively related to the stability of employment. (d) negatively related to the trust that must be placed in the employee. (e) negatively related to the probability of success.

195. Areas of inquiry in which Nobel Prize winner Gary Becker innovatively applied economic reasoning do not include significant insights into: (a) political decisionmaking. (b) such personal activities as marriage, divorce, and child bearing. (c) racial discrimination. (d) the value of time absorbed in alternative activities. (e) crime and punishment. (f) investments in human capital.

196. Beginning in the 1970s, deregulation of numerous industries was increasingly advocated by both Democrats and Republicans; which represented a shift away from the ideas and ideals of: (a) traditional conservatism. (b) 19^th Century liberalism. (c) avant-garde socialism. (d) supply-side economics. (e) institutionalists who powerfully shaped microeconomic aspects of “New Deal” liberalism. (f) neo-conservatism.

197. Christian socialism could be described as Christianity plus: (a)Utopian socialism plus central control of heavy industry and public works. (b) Fabian socialism plus crusades to propogate the ideas of medieval scholastics. (c) evolutionary socialism plus labor unions and charity and social reform. (d) capitalism plus the proletariat. (e) Marxism plus Robert Owen’s vision of Utopia.

198. David Ricardo believed land rent to depend chiefly on relative fertility. Johann H. von Thünen countered that the most important determinant of rent is: (a) population density. (b) aesthetic attractions. (c) location. (d) subjective individual values.

199. Events that prominent economic thinkers have suggested as causes of business cycles do NOT include how humans adjust to variations across time in: (a) rates of technological progress implemented by entrepreneurs. (b) sunspot activity. (c) environmental and technological constraints on population growth. (d) comparative advantages between trading nations. (e) international relations and wars. (f) the distributions of income and wealth.

200. Early contributions to marginalism were among the numerous significant accomplishments of: (a) Ludwig von Mises. (b) Alfred Marshall. (c) Joseph Schumpeter. (d) Léon Walras. (e) Thomas Robert Malthus.

201. Following the economic analysis of A. Jules E. Dupuit , the marginal social cost of either legal or illegal file sharing (e.g., downloading a song from the internet) is equal to: (a) the marginal revenue that would have otherwise been received by the artist. (b) zero. (c) the price of the corresponding CD. (d) the opportunity cost of the artist.

202. Independent variables in Milton Friedman’s money demand equation include all of the following, except the: (a) expected rate of change in interest rates. (b) actual price level. (c) nominal interest rate. (d) expected rate of change in the price levels.

203. Francois Quesnay (1694-1774) and the rest of the physiocrats believed that: (a) all wealth ultimately derives from land and its cultivation. (b) humans will keep breeding until they reached a desperately overcrowded condition. (c) John Locke correctly identified labor as the foundation for property rights. (d) countries gain economic power by pursuing policies to maximize exports minus imports, thereby acquiring wealth. (e) All of the above.

204. From the perspective of today’s academic standards, Adam Smith should have more clearly acknowledged that many of the insights and analyses for which he took credit in his Wealth of Nations had actually been drawn from the writings of: (a) Aristotle. (b) Richard Cantillon. (c) Albertus Magnus. (d) Sir Richard Petty. (e) Thomas Aquinas.

205. Gary Becker categorized knowledge and skills that are productively valuable to many potential employers, and which consequently generate higher wages, as being derived from investments in: (a) specific human capital. (b) broad human capital. (c) universal human capital. (d) general human capital. (e) fundamental human capital.

206. In addition to the demand for money to consummate predictable transactions, John Maynard Keynes argued that during downturns in the business cycle, individuals were likely to hold increasing proportions of money because of: (a) precautionary and asset [speculative] motives. (b) miserliness. (c) insurance motives. (d) risk and uncertainty motives.

207. John Locke and David Hume outlined an early version of the: (a) circular flow of income. (b) permanent income hypothesis. (c) quantity theory of money. (d) marginal disutility of poverty. (e) backward-bending supply function for capital.

208. Keynesian theory accepts the classical and neoclassical theory that flexible wages, interest rates, and prices, combined with Say’s law, ensure full employment and a maximum value for output: (a) in the short run. (b) as long as government follows laissez faire policies. (c) but only if the government runs deficits to fight inflation and deflation. (d) in the long run, but in the long run we are all dead. (e) on average, but not at every instant in time.

209. In William Shakespeare’s The Merchant of Venice the passionate conflict between Bassanio and Shylock centers over the charging of interest, specifically usury. This subject matter would be of the most interest to a: (a) Benthamite utilitarian. (b) member of the Austrian school. (c) medieval scholastic. (d) modern monetarist. (e) member of the “banking school.”

210. Jean Baptiste Say’s “Law of Markets” is least consistent with the views on general equilibrium, macroeconomic theory, and economic stability expressed by: (a) Adam Smith. (b) Thomas Robert Malthus. (c) David Ricardo. (d) Vilfredo Pareto. (e) Alfred Marshall.

211. Joan Robinson did not focus on building more complete analytical foundations for: (a) the labor theory of value. (b) conscious interdependence of firms in oligopolistic markets. (c) price discrimination. (d) monopoly. (e) monopsony.

212. The Aggregate Supply curve is roughly horizontal or is gently positively sloped up to the point of full employment and then becomes vertical according to: (a) Austrian theory. (b) Eugen von Böhm-Bawerk. (c) the Cambridge equation and classical liberals. (d) A. Jules E. Dupuit. (e) efficient markets theory. (f) Fabian socialists. (g) John Kenneth Galbraith. (h) Friedrich Hayek. (i) institutionalism. (j) William Stanley Jevons. (k) John Maynard Keynes’ The General Theory of Employment, Money, and Interest. (l) libertarians. (m) modern monetarism. (n) neoclassical macroeconomics. (o) Okun’s Law. (p) Arthur Cecil Pigou. (q) quantity theories of money. (r) Ricardian equivalence. (s) supply-side economics. (t) Johann Heinrich von Thünen. (u) utilitarianism. (v) voodoo economics. (w) Friedrich von Wieser. (x) Xenophon. (y) yield to maturity analysis. (z) Zeno.

213. John Stuart Mill’s theory of gold and the supply of money suggests that if the United States used a gold standard to back all printed currency at a 100% rate, then the price level would be controlled primarily by: (a) Alan Greenspan. (b) the Federal Reserve System’s open market operations. (c) the operation of the U.S. Mint. (d) the relative resource costs incurred by gold miners.

214. Joan Robinson was not: (a) a prominent Marxist economist. (b) a friend of John Maynard Keynes and an advocate of Keynesian economic policies. (c) a developer of pricing theories for imperfectly competitive markets. (d) automatically in favor of most laissez faire economic policies. (e) the most renowned female economic theorist throughout most of the 20^th century.

215. John Bates Clark (1847-1938), the first prominent American economic theorist, developed a rebuttal to Karl Marx’s position that surplus values are expropriated [stolen] from labor. He argued that the contribution standard for distributing income is equitable in a market system, because in his model the distribution of income depends on: (a) complete allocations of property rights. (b) surplus value. (c) marginal productivity. (d) circular flows of income. (e) personal effort alone.

216. John Maynard Keynes’ belief that bankruptcy and adverse business conditions would usually follow falling prices led him to conclude that economic depressions could not be corrected quickly by: (a) raising prices. (b) price stability. (c) flexible wages and prices level. (d) wage and price controls.

217. Karl Marx theorized that the ultimate transition from capitalism to communism is an inevitable consequence of: (a) laws of motion. (b) dialectical idealism. (c) path dependency. (d) social homeostasis.

218. Joseph Schumpeter argued that major long run business cycles are triggered by irregularly occurring waves of “creative destruction” that originate in the activities of: (a) military leaders. (b) entrepreneurs. (c) political leaders. (d) labor leaders who challenge the authority of corporate managers. (e) worldly philosophers whose ideas become popular, and then fail to perform, and then eventually reemerge.

219. Key aspects of David Ricardo’s analytic system did NOT include: (a) classical rent theory. (B) Malthusian population S-curves. (c) static levels of capital. (d) the wages-fund doctrine. (e) the labor theory of value. (f) trade according to comparative advantage. (g) divisions of labor in production process. (h) the equivalence of taxes and borrowing as mechanisms to pay for government.

220. Keynes believed that savings, investment, and interest were determined by many factors and there was no guarantee that the two would be equal and produce full employment. This led to his rebuttal of: (a) Say’s Law. (b) dialectical materialism. (c) the law of resource supplies. (d) Marxist theory.

221. Keynesian economics views the cost of holding money as: (a) current interest rates. (b) nothing. (c) goods that could be purchased with the money. (d) hard to determine because of sticky pricing.

222. Leon Walras rejected Alfred Marshall’s notion of “ceteris paribus” as an appropriate engine for economic inquiry, and argued that meaningful economic analysis necessarily entails consideration of (a) comparative partial equilibrium states. (b) general equilibrium. (c) interactions between the political system and the economic system. (d) relationships among all social classes.

223. Some behavioral scientists view human behavior as determined largely by nature – our genetic endowments – but most modern anthropologists believe that behavior depends far more on culture or conditioned reflex (nurture) than on nature. The behavioral theorists whose views are matched with their viewpoints are: (a) Franz Boas and Margaret Meade = nature. (b) Ivan Pavlov and B.F. Skinner = nurture. (c) Abraham Maslow and Francis Crick and James Watson [the discoverers of DNA] = nature. (d) Sigmund Freud and Francis Galton = nurture.

224. Robert Thomas Malthus’s conclusions about long run equilibrium for the mass of humankind echo the words of: (a) Thomas Hobbes that “life … [will be] … ‘nasty, brutish, and short’.” (b) John Locke that “labor is the ultimate source of all value.” (c) an anonymous Frenchman who responded with “laissez nous faire” when asked a question by King Louis XIV. (d) Charles Darwin about “survival of the fittest.” (e) medieval scholastics that our fate is ultimately in the hands of God.

225. Markets as mechanisms for exchange began to significantly outweigh individual trading relatively late in the period that Karl Marx characterized as: (a) prehistory. (b) primitive culture. (c) feudalism. (d) monarchism. (e) the industrial revolution. (f) capitalism.

226. Of the following, the thinker most optimistic that an effective government is not inevitably fascistic or totalitarian would be: (a) Thomas Hobbes. (b) Friedrich Nietzsche. (c) Vilfredo Pareto. (d) Roberto Michels. (e) Gaetano Mosca. (f) John Stuart Mill.

227. Neoclassical macroeconomic theory does not rely on an assumption that: (a) “supply creates its own demand,” per Say’s law. (b) nominal prices, wages, and interest rates are all perfectly flexible. (c) the quantity theory of money is valid so that money is neutral in the long run. (d) production possibilities frontiers are “bowed-out” from below. (e) powerful competitive forces quickly eliminate excess demands and excess supplies in all markets.

228. Roberto Michels’ controversial “Iron Law of Oligarchy” is most compatible with the views on organizational rationality and efficiency expressed by: (a) Plato and Aristotle. (b) libertarians. (c) syndicalists. (d) utopian socialists. (e) anarchists.

229. Much of the thrust of modern business regulation, municipal ownership of many public utilities, and price discrimination in utilities’ rate structures, are among the legacies of the economic thinker: (a) Joan Robinson. (b) Thorstein Veblen. (c) John Commons. (d) Sidney Webb. (e) Jean Claude Belmondo.

230. The “Chicago School” of economic theory centers around the idea that: (a) socialism will save society. (b) capitalism is the optimal way to organize economic activity. (c) laws and regulations are needed to offset market failures. (d) economic organizations can best be interpreted through institutional analysis.

231. That the equimarginal principle requires MU_x/P_x = MU_y/P_y for individuals to efficiently allocate their opportunities [total budgets, including time], with the wage rate w as the price of leisure as a good, was identified in the writings of: (a) Adam Smith. (b) William Stanley Jevons. (c) Gary Becker. (d) Carl Menger. (e) Leon Walras.

232. Sociological behavior is almost insignificant when compared to the amount of economic behavior addressed in the in the writings of the thinker: (a) Thorstein Veblen. (b) William Stanley Jevons. (c) Vilfredo Pareto. (d) Gary Becker. (e) Thomas Aquinas.

233. The advantages from the division of labor enumerated by Adam Smith did not include increases in: (a) every worker’s skills as each gained experience through repetition. (b) rates of invention of better machinery. (c) production per time period. (d) dexterity of each worker (e) each worker’s personal job satisfaction.

234. The Black Plague that killed millions of medieval Europeans probably most directly and immediately resulted in: (a) refinements to mercantilist economic theory. (b) improved standards of living for the survivors. (c) more favorable attitudes of early Christian theologians toward capitalism. (d) faster rates of technological advance. (e) the emergence of the enclosure movement and the industrial revolution. (f) development of Thomas Robert Malthus’s theory of population.

235. The “positive liberals” who rejected laissez faire capitalism and sought to use government as an instrument for relieving social problems in England did NOT include: (a) Fabian socialists. (b) John Hobson and Richard Tawney. (c) Sidney and Beatrice Webb. (d) Herbert Spencer and William Graham Sumner.

236. The Austrian School of Economic Thought is widely acknowledged to have been born in the writings of: (a) Joseph Schumpeter. (b) Leon Walras. (c) Carl Menger. (d) Friedrich von Wieser. (e) Otto von Bismark.

237. The analysis of Ronald Coase shows how the root causes of all categories of market failures to operate efficiently are: (a) macroeconomic instability. (b) non-rivalness. (c) transaction costs and incomplete specifications of property rights. (d) inequities in the distribution of income. (e) free ridership.

238. The change in total revenue when a monopolist that does not price discriminate produces an additional unit of output is: (a) a downward-sloping curve below the demand curve. (b) zero if demand is price elastic. (c) an upward-sloping curve above the supply curve. (d) the same as for a perfectly competitive firm. (e) a horizontal line.

239. The economic approach to crime and punishment developed by Gary Becker suggests that: (a) Jeremy Bentham’s argument that “the punishment should fit the crime” would result in excessively cruel punishment. (b) increased probabilities of apprehension, conviction, fines, or imprisonment should optimally result in lower fines or shorter sentences. (c) socio-economic and familial background is the primary determinant of criminal behavior. (d) drug offenses should be viewed as psycho-social problems better treated with therapy than imprisonment.

240. The English poet Samuel Butler’s assertion that “The value of a thing is just as much as it will bring” is most compatible with: (a) Austrian economic theory. (b) German historicism. (c) John Locke’s theory of property rights. (d) Adam Smith’s theory of the invisible hand. (e) Aristotle’s Nichomachean Ethics.

241. The behavioral scientists Franz Boaz, Margaret Mead, and Joseph Campbell believed that: (a) procreation should be limited to only the best human specimens – those endowed with superior genes. (b) culture creates most of the major differences among humans. (c) parental influence is far less important than peer pressure in shaping the attitudes and behavior of adolescents. (d) human behavioral differences depend more on nature than nurture.

242. The theorist who suggested that the a gold standard would yield automatic adjustments to the supply of gold such that when national income grew faster, mining would ensure that the supply of gold available as money would increase, and when national income receded, more gold would be used in dentistry and for jewelry, was: (a) Irving Fisher. (b) Arthur Pigou. (c) John Stuart Mill. (d) David Hume. (e) Milton Friedman.

243. The grouped schools of thought or individuals whose methodologies and/or ideas probably are most mismatched are: (a) sociobiologists, Darwinists, and Malthusians. (b) John Maynard Keynes, Abba Lerner, and Joan Robinson. (c) Gary Becker, Milton Friedman, and George Stigler. (d) medieval scholastics, libertarians, and classical liberals. (e) German historicists, American institutionalists, and Marxists. (f) Ayn Rand, William Graham Sumner, and Herbert Spencer.

244. The idea that in a market economy, many people’s desires to buy certain goods are far more culturally determined than merely price determined is a view shared by: (a) A. Jules E. Dupuit and Antoine Augustin Cournot. (b) John Kenneth Galbraith and Thorstein Veblen. (c) Karl Marx and Cornelius Vanderbilt. (d) Carl Menger and Ludwig von Mises. (e) Irving Fisher and Milton Friedman. (f) Hugo Grotius and John Locke. (g) John Commons and Richard Cantillon.

245. The idea that a virtue of capitalism is its decentralized decision making emerged when: (a) social philosophers looked for alternatives to feudal kings as economic regulators. (b) Russian imperialism fostered anti-communist sentiment after World War I. (c) early Christian philosophers sought to reduce human greed. (d) anarchists tried to overthrow late 19th Century European monarchs.

246. The nineteenth-century economist who argued that certain seemingly humanitarian gestures generate negative externalities (e.g., charity to beggars stimulates more panhandling and sloth) that often significantly outweigh any possible social benefits was: (a) John Bates Clark. (b) Nassau Senior. (c) Thomas Malthus. (d) Simon Newcomb. (e) Knut Wicksell.

247. The Irish thinker Richard Cantillon did not (a) treat population growth as an integral part of the economic process. (b) develop an economic explanation for the location of cities and sites of production. (c) distinguish market price from intrinsic value. (d) describe price adjustment processes of international trade. (e) discuss a “natural par” between land and labor.

248. Normans led by William the Conqueror occupied the British Isles after defeating England’s King Harald at the Battle of Hastings [1066 AD]. Suppose, instead, that King Harald had soundly defeated the Normans and permanently squelched their attempts at invasion. The Greek philosopher whose theories about social and scientific processes effectively asserted that the world today would be, at most, insignificantly different, was: (a) Socrates. (b) Zeno. (c) Plato. (d) Aristotle. (e) Heraclites. (f) Protagoras.

249. Philosophers or schools of thought not correctly matched with the political system they favored would be: (a) libertarians = minimal [laissez-faire] democratic government. (b) Marxism = communism, which would ultimately conform to utopian ideals. (c) anarchy = decentralized democratic government. (d) Plato = a philosopher king with political leadership living in accord with selfless (communistic) ideals. (e) mercantilism = imperial monarchy in accord with “the divine rights of kings.”

250. The notion that property rights are not inherently "inalienable" because they are most directly determined by law (Leviathan or social consensus), is most consistent with the theories of (a) John Locke and Immanuel Kant. (b) Hugo Grotius and Thomas Hobbes. (c) Karl Marx and Friedrich Engels. (d) David Ricardo and Thomas Malthus. (e) St. Thomas Aquinas and St. Augustine.

251. The utilitarianism of Jeremy Bentham is most closely akin to the philosophies of: (a) Epicureanism and hedonism. (b) pragmatism and instrumentalism. (c) asceticism and stoicism. (d) dialecticism and materialism. (e) fundamentalism and predestination.

252. The root cause of all categories of market failure whereby markets operate inefficiently is: (a) macroeconomic instability. (b) non-rivalness and non exclusion. (c) transaction costs, which include information and mobility costs. (d) inequity in the distribution of income. (e) free-riding.

253. The theory that the magnitude of “bezzle” [corporate fraud] and pressure for deregulation are both positively related to the level of prosperity in a country, and that the discovery and prosecution of bezzle and pressure for more regulation emerge during downturns in economic activity was authored by: (a) John Kenneth Galbraith. (b) John Maynard Keynes. (c) Paul Samuelson. (d) Milton Friedman. (e) Myron Scholes.

254. Thomas Malthus’ population theory influenced pre-marginalist classical macrotheory in a manner paralleling the way: (a) Charles Darwin’s theory of evolution influenced the institutionalist interpretation of change. (b) Sigmund Freud’s Interpretation of Dreams shaped core concepts in modern public choice theory. (c) Zeno’s theory of a stable universe influenced German historicists’ views of free trade. (d) Thorstein Veblen’s theory of conspicuous consumption influenced Microsoft marketing strategies developed by Bill Gates. (e) Albert Einstein’s theory of relativity influenced the mathematical economics of Francis Ysidro Edgeworth.

255. The theory that a country exports goods for which production requires intensive use of the resources relatively abundant in the country, and imports goods that intensively use resources that are relatively scarce in the country, is developed in: (a) Adam Smith’s Wealth of Nations. (b) Richard Cantillon’s writings. (c) mercantilism. (d) the Heckscher-Ohlin-Samuelson model. (e) David Ricardo’s theory of comparative advantage.

256. Using an ordinal approach instead of a cardinal approach is most obviously the more reasonable measure when assessing: (a) the respective talents of contestants on American Idol. (b) whether a conventional diet or the Atkins diet is more effective in helping people lose weight. (c) the relative prices of ham, tofu, and turkey. (d) the respective productivities of steelworkers in Japan and Brazil. (e) a student’s percentage scores on this examination.

257. Firms that exercise market power but which lack the ability to price discriminate operate at inefficiently low levels of output because in a profit maximizing equilibrium: (a) P>MC. (b) MR>MC. (c) P>ATC. (d) ATC<MC. (e) maximum profit is not required for monopolies not disciplined by competition.

258. John Stuart Mill’s later views on property rights are a virtual echo of views expressed by: (a) Ayn Rand. (b) Francois Quesnay. (c) Thomas Hobbes. (d) John Locke. (e) Hugo Grotius.

259. “Intellectual imperialism” by economists occurs when: (a) firms in developed nations launch aggressive marketing strategies in less developed countries. (b) economic theory is applied to issues normally examined by practitioners of other disciplines and not previously considered in the domain of economic analysis. (c) capitalism is overthrown by a “revolutionary elite.” (d) multinational firms exert political muscle to take over the government and natural resources of poorer nations.

260. The area under the Marshallian demand curve of an individual but above the current price is known as. (a) producer surplus. (b) consumer surplus. (c) dead weight loss. (d) the unemployment rate

261. Indifference curves landed in modern economist’s toolboxes after first being used to illustrate an ordinal approach (instead of a cardinal approach) to consumer preferences by: (a) Kenneth Arrow and Paul A. Samuelson. (b) Francis Y. Edgeworth and Vilfredo Pareto. (c) Alfred North Whitehead and Bertrand Russell. (d) Alfred E. Newman.

262. A John whose ideas are least consistent with the American institutionalist paradigm was: (a) John Bates Clark. (b) John Maurice Clark. (c) John Kenneth Galbraith. (d) John Commons.

263. Show-offs who flaunt the extravagance of their spending patterns are practicing behavior that Thorstein Veblen condemned as: (a) conspicuous consumption. (b) snob appeal. (c) keeping up with the Joneses. (d) tomfoolery. (e) exploitation.

264. Marginalism and the idea that pricing reflects marginal utility and demand was a movement away from: (a) the quantity theory of money. (b) the labor theory of value. (c) mercantilism. (d) Marx’s business cycle theory. (e) capitalism.

265. In The Modern Corporation and Private Property. (1932), Adolph Berle and Gardiner Means documented the dominant position of the large corporation in the modern economy, the growing dispersion of ownership of common stock, and the separation of ownership from control. These last two developments brought to light a particular sort of moral hazard dilemma called: (a) Pareto efficiency. (b) bureaucratic gambling. (c) adverse selection. (d) the principal-agent problem. (e) regulatory forbearance.

266. The term that is least closely related to the others is: (a) free will. (b) dialectical materialism. (c) path dependency. (d) hysterisis. (e) historicism.

267. After Columbus “discovered” the new world, Spain promptly began plundering it, importing a massive treasure of gold and silver. This triggered inflation in Spain. The consequences of included: (a) the failure of productive capacity of Spain to develop as rapidly as in England and France because the Spanish could import manufactured goods at lower prices than they could produce them. (b) Spain’s hegemony throughout Europe, which likely would have continued to this day had England not defeated the Spanish Armada in 1588. (c) Spanish thinkers to reject mercantilism long before the writings of David Hume and Adam Smith. (d) the prices of goods produced in Spain to fall relative to the prices of goods elsewhere.

268. The thinker whose ideas are least consistent with broad libertarian principles is: (a) Milton Friedman. (b) Ayn Rand. (c) Friedrich Hayek. (d) John Commons. (e) David Ricardo.

269. Majority rule is often inefficient because: (a) issues tend to remain unsettled. (b) voters adopt strategies that disguise their true preference. (c) gains to a majority may fall short of losses to the minority. (d) majorities may treat minorities inequitably.

270. The view that small is both beautiful and necessary is central to the schools of thought known as: (a) nationalism and institutionalism. (b) Buddhist economics and limits to growth. (c) feudalism and monarchism. (d) central planning and command economics.

271. Thomas Malthus’s description of “gluts” is to Keynesian Macroeconomics as: (a) Marshallian partial equilibrium is to Walrasian general equilibrium. (b) Hume’s specie flow mechanism is to Fisher’s Quantity Theory of Money. (c) John Bates Clark’s marginal productivity theory is to Ricardian concepts of land rent. (d) Zeno’s view of the universe is to that of Thorstein Veblen’s.

272. The equation of exchange MV=PQ is most directly useful for describing the monetary theories of: (a) Irving Fisher and Milton Friedman. (b) classical macroeconomics according to Thomas Malthus and David Ricardo. (c) León Walras and Vilfredo Pareto. (d) Ludwig von Mises and Friedrich Hayek. (e) John Maynard Keynes.

273. In Joseph Schumpeter’s The Theory of Economic Development, business cycles and irregular economic growth are described as among the consequences of: (a) technical and financial innovations of entrepreneurs. (b) erratic growth of the money supply. (c) class conflict. (d) overinvestment in capital. (e) underconsumption caused by inequality in the distribution of income.

274. Consider designing a just society from behind a “veil of ignorance.” Individuals would try to structure the best possible society, assuming that we do not know what our personal social, racial, and economic positions will be until after our structure is adopted. This author of The Theory of Justice argued that a rational person trying to optimize from behind this “veil” would arrive at some basic rules of justice that would be heavily egalitarian, and he was: (a) Thorstein Veblen. (b) John Stuart Mill. (c) David Hume. (d) John Rawls. (e) Vilfredo Pareto.

275. David Hume viewed the wealth of all nations as depending on international trade, and asserted “I shall therefore venture to acknowledge that not only as a man, but as a British subject I pray for the flourishing commerce of Germany, Spain, Italy and even France itself.” (Of the Jealousy of Trade). A group that would most strongly disagree with Hume on this issue would have been: (a) neoclassical economists. (b) secular humanists. (c) unorthodox Marxists. (d) mercantilists.

276. When economists say that money promotes efficiency, they mean that money (a) is inexpensive to produce. (b) facilitates divisions of labor and specialization according to comparative advantage. (c) increases transactions costs. (d) generates seignorage profits for the Treasury at lower costs than is true of taxation.

277. In contrast to the “law of markets” attributed to Jean-Baptiste Say, John Maynard Keynes believed that when unemployment rates are high, then: (a) supply creates its own demand. (b) markets were made to be cleared. (c) demand creates its own Supply. (d) wages and prices are excessively flexible.

278. The concept of roundabout production entails: (a) maximization of the production of capital goods during each production period. (b) investing in capital goods by postponing consumption, thereby enabling the production of greater amounts of consumer goods in the future. (c) outsourcing of intermediate goods by a firm that is not fully integrated. (d) maximizing r + i + π = surplus value.

279. Classical economists would rebut the “underconsumptionist” theories of economic downturns (expressed, e.g., by Malthus and Keynes) by stressing that all saving will be invested because of the flexibility of: (a) interest rates. (b) wage rates. (c) relative prices. (d) nominal prices for goods. (e) monetary prices.

280. The “Socialist Calculation Debate” refers to a disagreement between Austrian theorists and advocates of socialism about whether capitalism: (a) must eventually evolve into socialism. (b) or socialism allocates resources more efficiently. (c) or socialism is more compatible with maximizing freedom. (d) is a necessary stage in the long run transition to socialism. (e) yields more rapid economic growth than would socialism.

281. The word “scientism” coined by Friedrich A. Hayek refers to a common practice, disparaged by Austrian theorists, of: (a) integrating biological sciences to facilitate a useful historical framework. (b) applying concepts from the natural sciences to the study of human beings. (c) using supply and demand curves to illustrate equilibrium in markets. (d) applying hedonic or felicific calculus to the theory of value.

282. David Ricardo viewed the gains from trade as derived primarily from: (a) an export surplus. (b) differing utilities of individuals in consumption. (c) comparative advantage. (d) absolute advantage.

283. Rational ignorance occurs when: (a) voting systems require less than 50% of the total votes. (b) individuals have less influence than special interests do on electoral outcomes. (c) planned consumption exceeds planned investment. (d) the expected marginal costs of information exceed its expected marginal benefits

284. The early Quantity Theory of Money was based on assumptions that: (a) prices and real GDP were fixed. (b) real GDP and velocity were constant. (c) prices and real GDP grew as the money supply rose. (d) doubling the money supply would double real GDP.

285. A list of heterodox economists would be least likely to include: (a) John Neville Keynes. (b) John Rogers Commons. (c) Wesley Clair Mitchell. (d) Thorstein Veblen.

286. According to Eugen von Böhm-Bawerk, critical factor determining the market interest rate include: (a) average preferences for goods now over goods in the future. (b) the interest rate on treasury bonds. (c) the FED’s open-market operations. (d) the condition of the stock market.

287. John Maynard Keynes believed that a remedy for underproduction and unemployment would be: (a) mandatory wage increases. (b) decreased government spending. (c) increased government expenditures and lower tax rates. (d) balancing the government budget. (e) adoption of the gold standard for money.

288. The idea that market adjustments automatically cure swings in business cycles is central to: (a) Malthus and his population S-curves. (b) neoclassical macroeconomic theory and its derivatives. (c) Schumpeter long waves. (d) modern business psychology. (e) Marxist cycles of exploitation.

289. The economist who taught at the University of Chicago but who developed theories that were most antithetical to the views of the 20^th Century “Chicago School” of thought was: (a) Joan Robinson. (b) Thorstein Veblen. (c) Irving Fisher. (d) George Stigler. (e) Friedrich Hayek.

290. The dispute between Antoine-Augustin Cournot and Joseph L. F. Bertrand about whether duopolists competing in a market would adjust quantities or prices was later echoed in disagreements between: (a) David Ricardo and Thomas Malthus about the desirability of the British Corn Laws. (b) Alfred Marshall and Leon Walras about whether disequilibria are resolved by quantity adjustments (Marshall) or price adjustments (Walras). (c) Joan Robinson and Edwin Chamberlin, who differed about whether oligopolists adjust prices or compete primarily through product differentiation. (d) John Maynard Keynes and Milton Friedman on whether fiscal policies or monetary policies would more quickly cure a depression. (e) Paul Sweezy and George Stigler on the realism of kinked demand curve models.

291. During most of the 20^th century, the “Chicago School” of economic theory centered around the idea that: (a) socialism will save society. (b) capitalism is the optimal way to organize economic activity. (c) laws and regulations are needed to offset market failures. (d) economic organizations can best be interpreted through institutional analysis.

292. The theorist most likely to agree with the statements: “Wars stimulate technological advance,” and “History favors the bold,” would be: (a) Hermann Gössen. (b) Jules Dupuit. (c) Hans K.E. von Mangoldt. (d) Augustin A. Cournot.

293. Karl Marx’s dialectical materialism theoretically follows a sequence: (a) synthesis à thesis à antithesis. (b) antithesis à synthesis à thesis. (c) thesis à antithesis à synthesis. (d) synthesis à antithesis à thesis. (e) thesis à synthesis à antithesis.

294. John R. Commons’ agenda of reforms for American labor markets did not include laws mandating: (a) overtime pay. (b) worker’s compensation. (c) job safety. (d) unemployment compensation. (e) the permissibility of collective bargaining.

295. Karl Marx’s notion that most people advocate social or legal “reforms” favoring the interests of groups to which they personally belong, and that they then erect ethical arguments to support such positions is known as: (a) self interested opportunism. (b) naïve egoism. (c) class interest or class conflict. (d) dialectical materialism. (e) myopic solipsism.

296. Austrian economics is fundamentally opposed to the measurement concept pioneered by the mercantilist thinker William Petty because, in the Austrian view: (a) aggregated economic statistics are flawed because of biases in reporting, among other difficulties. (b) economic statistics must be used to support good abstract theories. (c) good abstract theories must be consistent with historical events. (d) effective macroeconomic planning depends on solid statistical analysis.

297. Milton Friedman’s controversial description of aspects of the “Chicago Tradition” has the greatest overlap with innovative theory expressed about: (a) the demand for money by John Maynard Keynes. (b) interest rates and capital accumulation by Irving Fisher. (c) “conspicuous consumption” by Thorstein Veblen. (d) the “bezzle” by John Kenneth Galbraith.

298. Limited nationalization of industries or firms within an industry: (a) is increasingly common in the United States. (b) has never been common in any part of Western Europe. (c) never existed outside the Soviet bloc. (d) was among the goals of Fabian socialism.

299. Nobel Prize winner Gary Becker compared the operation of a household to: (a) decentralized communism. (b) a small factory. (c) Utopian socialism. (d) supply and demand curves. (e) a set of laissez faire policies.

300. Antoine Augustin Cournot did not: (a) develop general equilibrium analysis in his model of duopoly long before Leon Walras described his general equilibrium system. (b) mathematically derive the marginal revenue equals marginal cost rule for profit maximization. (c) develop some basics of modern game theory. (d) differentiate changes in demand or supply from changes in the quantities demanded or supplied. (e) derive demand and supply curves by applying partial derivatives to economic functions.

301. The concept of ceteris paribus was a foundation for the partial equilibrium approach to analysis developed by. (a) John Maynard Keynes. (b) John Neville Keynes. (c) Alfred Marshall. (d) Leon Walras.

302. Schools of thought that emphatically reject claims by classical and neoclassical theorists that culture and historical time are irrelevant for useful economic analysis include: (a) American institutionalism and German historicism. (b) utilitarianism and physiocracy. (c) mercantilism and logical positivism. (d) Keynesian theory and democratic socialism. (a) Marxists and members of the Lausanne school.

303. Ludwig von Mises, echoing sentiments expressed by Aristotle, did not cite as a source of the value of money: (a) subjective perceptions of money as having value. (b) the goods it can buy. (c) the interest it can generate. (d) the question is misleading because von Mises did not address the value of money.

304. The economists' label for attempts to divert income streams from others to a special interest group is: (a) profiteering. (b) interest arbitrage. (c) logrolling. (d) rent-seeking. (e) featherbedding.

305. Significant theories of foundations for property rights were not among important contributions to intellectual thought authored by: (a) Hugo Grotius. (b) John Rawls. (c) Robert Nozick. (d) Herbert Spencer. (e) Thomas Hobbes.

306. “Positive liberals” who rejected laissez faire capitalism and sought to use government as an instrument for relieving social problems in England did NOT include: (a) Fabian socialists. (b) John Hobson and Richard Tawney. (c) Sidney and Beatrice Webb. (d) Herbert Spencer and William Graham Sumner.

307. An alternative to the Fisher’s equation of exchange MV=PQ, the equation M_d=kPQ is known as: (a) the law of money demand. (b) the Cambridge equation. (c) Friedman’s equation of monetarism. (d) Fisher’s equation of exchange.

308. The French physiocrats’ view that a specific type of resource is the ultimate source of all value seems most consistent with: (a) Thomas Jefferson’s mild preference for rural agriculture over urban industrialization. (b) Thomas Hobbes’ view that government is the proper arbiter of property rights. (c) free trade policies advocated by Alexander Hamilton and the mercantilists. (d) David Hume’s early version of the quantity theory of money. (e) John Locke’s labor theory of value.

309. Exaggerating a bureaucracy's task to justify a bigger agency budget, more subordinates, and larger salaries for agency heads is a common part of the process known as: (a) empire building. (b) robbing the cradle. (c) featherbedding. (d) budget raiding. (e) logrolling.

310. The early thinker who argued that criminals should be punished proportionally to the harm done to society, without consideration of motive, intent or remorse was: (a) John Stuart Mill. (b) Edwin Chadwick. (c) Jeremy Bentham. (d) Adam Smith. (e) Aristotle.

311. The essayist who condemned economics as “the dismal science” in response to John Stuart Mill’s On Liberty, and who was relatively inclined to espouse racism and view the institution of slavery in a favorable light was: (a) Voltaire. (b) the Marquis de Condorcet. (c) Thomas Carlyle. (d) President John Adams. (e) Adam Smith.

312. The idea that a single tax that absorbed all land rents would provide sufficient funds to alleviate all poverty was advanced by: (a) John Stuart Mill. (b) Henry George. (c) John Hobson. (d) David Ricardo. (e) Johann H. von Thünen.

313. After party primary elections in the United States have been decided, both parties’ candidates tend to: (a) shade their positions to conform to their perceptions of the median voter’s beliefs. (b) develop unique platforms. (c) try to gain total support of their party. (d) move toward the extremes of the bell curve. (e) stress the differences in their basic political philosophies.

314. The idea that capitalism cannot survive in the long run is a central conclusion in the theories of Karl Marx and: (a) Joseph Schumpeter. (b) Carl Menger. (c) Thorstein Veblen. (d) Eugen von Böhm-Bawerk. (e) Friedrich Hayek.

315. According to classical and neoclassical macroeconomics, unemployment indicates that the: (a) level of aggregate demand is inadequate. (b) wage rate of labor is too high relative to other prices. (c) unions need to raise wages to clear labor markets. (d) government needs to stimulate aggregate demand.

316. The most synonymous of the following terms for school of thought would be: (a) ideology. (b) weltanschauung. (c) paradigm. (d) discipline. (e) kindergarten.

317. Thomas Malthus’s population theory did not provide important underpinnings for: (a) Charles Darwin’s theory of evolution. (b) David Ricardo’s “Iron Law of Wages” theory of income distribution. (c) the “Social Darwinism” of William Graham Sumner and Herbert Spencer. (d) John Bates Clark’s marginal productivity theory of income distribution. (e) political policies advocated by “Green” parties around the world.

318. Vilfredo Pareto’s earliest predecessor in describing the concept of efficiency appears to have been: (a) Hesiod. (b) Ibn Khaldun. (c) Guan Zhong. (d) Heraclites. (e) Thomas Mun.

319. Whether an extra dollar would provide more marginal utility to a poor man than to a rich man would have most likely elicited agreement between: (a) Thomas Jefferson and David Ricardo. (b) Jeremy Bentham and John Stuart Mill. (c) Thorstein Veblen and William Stanley Jevons. (d) Ayn Rand and John Kenneth Galbraith. (e) Ludwig von Mises and Alfred Marshall.

320. The absorption equation summarizes the notion that: (a) the income velocity of money depends on the rate that additional monetary base is converted into active spending. (b) government budget deficits [G-T] must be balanced by increased net private domestic saving [S-I] or deficits in international trade [M-X]. (c) gluts [excess supplies] in some markets must be balanced by shortages in other markets, so that ΣXD = ΣXS. (d) government spending [G] must be funded by taxes [T], borrowing that increases national debt [∆B], or printing new monetary base [∆MB], so that G-T = ∆B+∆MB. (d) international trade deficits necessitate offsetting surpluses in the government budget. (e) corporate CEOs are paid only the values of their marginal products [VMPs] in the long run.

321. Violent revolution against capitalism would be most likely to be advocated by: (a) Christian socialists. (b) Fabian socialists. (c) syndicalists. (d) Utopian socialists. (e) democratic socialists.

322. The economic philosophy BEST matched with a normative standard for distributing income is: (a) Libertarianism à Contribution system. (b) Marxismà Contribution system. (c) Anarchyà Need based. (d) Christian Socialism à Egalitarianism.

323. The economist who introduced the idea of transaction cost minimization as the root problem of economic, firm, and market coordination is: (a) Kelvin Lancaster. (b) Ronald Coase. (c) Armen Alchian. (d) Gary Becker.

324. John Maynard Keynes differed with his neoclassicist predecessors in the belief that: (a) demand creates its own supply when an economy is depressed. (b) wages are sticky. (c) prices are sticky. (d) neoclassical macroeconomics is correct only in the long run, and in the long run we are all dead. (e) all of the above are true.

325. The growth of government was called The Road to Serfdom in a book by: (a) Eugen von Böhm-Bawerk. (b) Ludwig von Mises. (c) Milton Friedman. (d) Friedrich Hayek. (e) Oskar Morgenstern.

326. According to Edwin Chamberlin, monopolistically competitive firms cannot realize economic profits in the long run because these markets are characterized by: (a) unnecessarily costly advertising and inefficient product differentiation. (b) freedom of entry and exit. (c) conscious parallelism of action. (d) close scrutiny by the Antitrust Division of the Department of Justice. (e) extreme vulnerability to swings in the business cycle.

327. Models of perfect competition do not include an assumption of: (a) freedom of entry and exit in the long run. (b) large number of buyers and sellers. (c) heterogeneous products. (d) symmetric and reasonably complete information on the parts of all market participants.

328. Game theorists would view a civil war where both parties involved would have been better off if they had compromised instead of fighting as an example of a: (a) positive sum game. (b) negative sum game. (c) zero sum game. (d) conquest game.

329. Mao Zedong attempted to mold a "New Economic Man in China" by: (a) intensive training in modern technology. (b) effective democratic rule. (c) decentralized communal decision making and central economic planning. (d) emphasizing nonmaterial incentives.

330. Which of the following works was least influential in the development of modern economic theory as it is understood today? (a) Adam Smith: “Wealth of Nations”. (b) Karl Marx: “Capital”. (c) John Maynard Keynes: “The General Theory of Employment, Interest and Money”. (d) Thorstein Veblen: “The Theory of the Leisure Class”.

331. The slogan "Small is Beautiful" is most compatible with the concepts of: (a) Leninism, Stalinism, and Maoism. (b) feudalism, capitalism, and class struggle. (c) a dictatorship of the proletariat and pure communism. (d) Mohandas Gandhi, Buddhist economics, and limits to growth. (e) Aristotle and the medieval scholastics.

332. The intensity of Keynesian-style fiscal policies would most reasonably be reflected in the state of the federal government’s: (a) cyclical budget deficit or surplus, measured at the current level of GDP. (b) rate of monetary growth. (c) interest rate policies. (d) structural budget deficit or surplus, which would be estimated as if the economy were at full-employment GDP. (e) laws limiting or encouraging free international trade.

333. Consider a special type of auction for, say, a $20 bill in which the highest bidder gets the $20, but the second highest bidder also must pay the amount he or she bid. If at least two bidders pursue dominant strategies, then such a “game” lacks a: (a) partial disequilibrium solution. (b) Nash equilibrium. (c) von Neumann solution. (d) Walrasian partial equilibrium. (e) neutral solution.

334. Policies prescribed by John Maynard Keynes to enable a country to remedy financial depression and excessive unemployment include: (a) raising interest rates to induce saving that could be used for investment. (b) increasing government spending to provide more jobs and inject more money into the economy. (c) raising taxes to increase government revenue for spending projects. (d) printing more money to increase velocity and the overall wealth of the citizenry.

335. A major difference between Thorstein Veblen and the orthodox economists who were his contemporaries is his view that the modes of production, consumption and distribution in a society depend relatively little on individual tastes and production technologies and far more strongly on a blend of: (a) countless factors that cannot be specified scientifically. (b) biological and psychological factors. (c) cultural, institutional, and ceremonial factors. (d) global interdependencies between class, status, and power. (e) demographic trends and population dynamics.

336. People tend to be most rationally ignorant and are LEAST likely to gain personally from better information guiding their choices when they: (a) vote for their favorite candidates in a national election. (b) marry their high school sweetheart. (c) buy a restored 1939 Packard convertible limousine at an antique car auction. (d) eat a tasty, fast-food hamburger loaded with cholesterol. (e) invest in mutual fund shares in the stock market. (f) consider career paths and occupations.

337. A 20th century debate between John Maynard Keynes and Joseph Schumpeter about desirable roles for government echoed positions from earlier schools of thought. Keynes’ perception of a need for government stabilization reflected calls for market management voiced earlier by __________. Similarly, Schumpeter’s reliance on freedom and entrepreneurship (although he recognized its dangers) is reflected in __________.: (a) classical economics / institutionalists. (b) historicists / Ancient Greeks. (c) classical economics / scholastics. (d) scholastics / socialists. (e) the Ancient Greeks / neoclassical economics.

338. Virtues of the price system cited by capitalism's defenders include: (a) freedom and efficiency. (b) inequitable income distributions. (c) cooperation replacing competition. (d) encouragement of selflessness.

339. The standard economic assumption that people are self-interested is probably LEAST applicable for: (a) heads of business firms. (b) heads of government agencies. (c) heads of households. (d) heads of nonprofit corporations. (e) people covered by headstones.

340. Focusing on the inefficiencies and inequities spawned by government, libertarians encourage reliance on the market system in its place. They seek the elimination of welfare programs and most laws. Legislation most libertarians would not abolish would include: (a) laws regulating drugs, consensual sex between private individuals, and pornography. (b) a military draft. (c) wage and price controls. (d) government protection of private property rights.

341. David Hume, Arthur Cecil Pigou, and Irving Fisher were among prominent economic theorists who helped build the early Quantity Theory of Money, which concluded that, in equilibrium, the price level is: (a) negatively related to the money supply. (b) independent of movements in the money supply. (c) exactly proportional to the money supply. (d) higher when the economy experiences excess capacity.

342. Thorstein Veblen viewed human behavior as dominated by: (a) perfectionism. (b) the quest for wealth. (c) instinctive behavior and learned habits. (d) charitable needs to help one another. (e) desires to procreate.

343. Governmental allocations are most likely to tend to self-correct more easily than market allocations where: (a) goods are nonrival and nonexclusive. (b) an organization's functions are obsolete. (c) new technology is being introduced. (d) diseconomies of scale are present.

344. According to Roberto Michel’s Iron Law of Oligarchy, the management structures and operations of a modern major government agency and a giant business corporation will tend to be: (a) so different that comparisons are impossible. (b) consistently maximized in efficiency. (c) similarly bureaucratic and autocratic. (d) directed at maximizing total profit.

345. Policies from which most people gain, but far less in total than a minority loses, are an indication that majority rule voting may often be economically: (a) inefficient. (b) unstable. (c) a good technique for correcting inequity. (d) preferable to a dictatorship. (e) progressive.

346. Explorations of the concepts of partial equilibrium analysis, elasticity calculation, consumer surplus, and producer surplus all originated in works that summarized neoclassical theories. These elegant concepts were authored by: (a) Arthur Cecil Pigou. (b) John Maynard Keynes. (c) Alfred Marshall. (d) William Stanley Jevons. (e) Thorstein Veblen.

347. Economic theories that stress coping with scarcity from the supply side and which support market solutions to problems and laissez-faire government policies include: (a) neoclassical macroeconomic theory. (b) Keynesian macroeconomic theory. (c) institutionalism. (d) historicism. (e) rational voter apathy theory.

348. Thorstein Veblen launched a detailed inquiry into the practice of consumption and the formation of tastes in his: (a) The Theory of Liquidity Preference. (b) The Theory of the Leisure Class. (c) The Theory of Value. (d) Inconsistencies Between The Theory of Money and Human Values. (e) The Real Wealth of Nations.

349. The price discrimination that Jules Dupuit elaborated as a cure for the natural monopoly problem was generalized to apply to any situation in which a firm charges different prices for identical goods, or pays different prices for identical resources, by: (a) Antoine-Augustin Cournot. (b) Joan Robinson. (c) John Kenneth Galbraith. (d) George Stigler.

350. Economic issues incapable of scientific verification as to correctness or falsity, such as why, when and how to prosecute and execute alleged murderers, or to whom income should be redistributed, falls into the category of: (a) do unto others as you would want done unto you economics. (b) negative economics. (c) neutral economics. (d) positive economics. (e) normative economics.

351. A laissez-faire government is limited to determining: (a) property rights in a simple fashion and to enforcing private contracts. (b) market prices that guarantee equitable resource allocations. (c) how resources will be allocated efficiently. (d) the money supply and providing a strong national defense. (e) how public goods should be provided.

352. Markets will tend to operate more efficiently if: (a) highly profitable opportunities are so widespread that all investors can gain higher incomes. (b) large numbers of profit-seekers compete vigorously for ideas or information that might prove profitable. (c) competition causes any predictable abnormal gain from an investment to be exploited only after a lengthy lag. (d) real interest rates are biased upwards. (e) all prices and wages are rigid.

353. Rational ignorance is the idea that: (a) people are inherently ignorant. (b) those without rational thought are ignorant. (c) people quit seeking information when they view the marginal costs of more information as outweighing its marginal benefits. (d) thinking your vote actually counts is ignorant.

354. John von Neumann followed in the footsteps of A.A. Cournot when he developed: (a) the prisoner’s postulate. (b) game theory. (c) input-output analysis. (d) linear programming. (e) activity analysis.

355. A clearly mistaken reason for voting in a major election would be a belief that: (a) it is your duty to vote. (b) you will feel guilty if you don’t vote. (c) your vote is likely to affect the outcome of the election. (d) voting is fun.

356. Any large task-oriented organization is commonly called a: (a) non-profit. (b) bureaucracy. (c) theocracy. (d) democracy. (e) plurality.

357. Differences in methodological foundations between the ancient Greek philosophers Zeno and Heraclites revolved around whether: (a) assorted atoms are the building blocks of the universe as opposed to earth, wind, and fire. (b) humans are innately acquisitive and self-interested, or are primarily social and cooperative. (c) material goods or ideas are the primary determinants of historical change. (d) democratic governments or enlightened “philosopher kings” would set more optimal social policies. (e) the universe is essentially static, with only relatively superficial change, or dynamic, with few constants and significant and recurring disruptions.

358. The concept of hedonism deals with the pursuit of pleasure and the avoidance of pain. The idea that humans procrastinate to avoid pain while seeking more immediate pleasure is most associated with the ideas of: (a) Zeno and Thomas Malthus. (b) Epicurus, Xenophon and Jeremy Bentham. (c) Aristotle and David Ricardo. (d) Demosthenes and Plato. (e) Groucho Marx and John Lennon.

359. Abraham Maslow developed a hierarchy of needs, but recognized that regardless of how far people progress up that hierarchy; individuals constantly adjust how they accommodate their specific needs for: [1] survival; [2] security; [3] love; [4] recognition and esteem, and [5] self actualization. Most mainstream economists would contend that how much specific needs are emphasized at specific times depends most strongly on: (a) the person’s age along an income-consumption-investment cycle. (b) how individuals weigh risks and uncertainty. (c) the relative prices of available opportunities. (d) the extent of interdependence in utility functions. (e) balances between public and private decisionmaking.

360. Government projects that are nationally funded despite benefits that are primarily local are examples of: (a) pure public goods. (b) empire building. (c) reciprocal trade. (d) pork-barrel legislation.

361. An economist who followed a tradition started by Richard Cantillon and H.K.E. von Mangoldt in glorifying entrepreneurs as the driving force in economic development, and who also suggested that as democracy increases, socialism will tend to displace capitalism, was: (a) Ludwig von Mises. (c) Oskar Morgenstern. (b) Werner von Braun. (d) Jon von Neumann. (e) Friedrich Hayek. (f) Claudius von Disputandum. (g) Joseph Schumpeter. (h) Johann H. von Thünen.

362. Leon Walras’ general equilibrium analysis gained significantly increased acceptance when it was clarified somewhat by his immediate successor at Lausanne: (a) John Stuart Mill. (b) Alfred Marshall. (c) Thorstein Veblen. (d) Vilfredo Pareto. (e) William Stanley Jevons.

363. The statement that in a depression or recession, “demand creates its own supply,” is most frequently called: (a) Keynes’ law. (b) the law of demand. (c) Say’s law. (d) Stigler’s law. (e) the law of markets.The most synonymous of the following terms for school of thought would be: (a) ideology. (b) weltschmerz. (c) paradigm. (d) discipline. (e) kindergarten.

364. A theory of oligopoly developed during the 1930s by Paul Sweezy and expanded upon by Joan Robinson that focused on explaining “sticky” wages and prices was the: (a) prisoners dilemma model. (b) kinked demand curve model. (c) wage-price duopoly model. (d) transaction cost model. (e) implicit collusion model. (f) Sherman-Clayton Antitrust model.

365. The theory that increases in the money stock do not affect the economy uniformly, but instead cause prices to inefficiently and unstably rise at uneven rates across different sectors of the economy, has become an article of faith among: (a) modern Austrian macroeconomic theorists. (b) American institutionalists. (c) neoKeynesian economists. (d) modern monetarists such as Milton Freidman. (e) “real business cycle” theorists. (f) rational expectationists.

366. The process wherein legislators trade votes to obtain passage of proposals they favor is known as: (a) pork-barrel legislation. (b) point voting. (c) logrolling. (d) rent-seeking. (e) empire building.

367. According to these Lerner wage-price reaction functions: (a) labor markets adjust to shocks less rapidly than would commodity markets subjected to similar shocks. (b) the Keynesian model of adjustment to declining Aggregate Demand is incorrect. (c) markets are strongly efficient if new information is rapidly converted into equilibrium prices. (d) excess supply yields more rapid price adjustment than does comparable excess demand. (e) commodity markets yield faster quantity adjustments in response to disruptions than do labor markets.

368. This pair of Lerner wage–price reaction functions is consistent with the idea(s) that: (a) wages and prices do not instantaneously adjust to clear markets when demands or supplies change. (b) wages are “stickier” than prices. (c) reduced demands in labor markets yield unemployment in the short run. (d) a short-run Phillips curve may exist. (e) all of the above.

369. Empirical estimates that income elasticity is negative would be least likely when considering the market demand for: (a) goods subject to weak but consistently positive “Veblen” effects. (b) children. (c) goods based on pollution-generating technologies. (d) starchy or fatty foods. (e) used car parts.

370. Brand names, copyrights, trademarks, and economic space [geographic advantages in a particular market] were quite interesting to Edwin H. Chamberlin because they are all: (a) characteristics of economically mature consumer goods markets. (b) mechanisms enabling monopolistically competitive firms to gain some control over prices. (c) advertising gimmicks that sustain and enrich big business at the expense of society. . (d) major characteristics of an “affluent society.”

371. Gordon Tullock and Anna Schwartz independently described how special interests expend scarce resources to capture a pure transfer by influencing government policies. This inefficient allocative process is known as: (a) monopolization. (b) vertical integration. (c) franchising. (d) dead weight losses.(e) rent-seeking.

372. Keynesian Aggregate Expenditures are the sum of: (a) Aggregate Demand + Aggregate Supply. (b) income + borrowing. (c) C + S + T and depend primarily on expectations. (d) C + I + G + (X–M) as these planned spendings relate to income. (e) consumer purchases + household saving + imports.

373. Milton Friedman has blamed the length and severity of the Great Depression primarily on: (a) inept policies of the Federal Reserve System. (b) lagging aggregate demand. (c) the Stock Market Crash of 1929. (d) European hyperinflation. (e) the fiscal policies of President Herbert Hoover. (f) the Treaty of Versailles.

374. In The Nature of Scientific Revolutions, Thomas Kuhn hypothesizes that, for long periods in history: (a) practitioners of such “hard” sciences as math, chemistry or physics have had a much more powerful analytical framework [paradigm] than have such “soft” scientists as historians, economists, or psychologists. (b) most scientists accept a fairly static paradigm that limits focus, and that explosive growth in human knowledge follows adoption of a new paradigm that departs radically from the older paradigm. (c) scientific understanding has improved linearly. (d) scientific advances are proportional to the sophistication of quantitative techniques. (e) the most creative scientists have been atheists.

375. The idea that the value of a product depends primarily on the amount a consumer is willing to pay for it was first described in detail by: (a) Adam Smith, a Scot. (b) Friedrich List, a pioneer of both marginalism and “Austrian economics.” (c) Francois Quesnay, a Frenchman. (d) Richard Cantillon, an Irishman who also held French citizenship. (e) Aristotle and other early Greek philosophers.

376. The Tableau Économique was developed by: (a) Richard Cantillon and is a tax schedule. (b) Leon Walras as a first approximation for general equilibrium analysis. (c) Francois Quesnay and is an early and crude circular flow model. (d) Boisguillebert to trace the workings of the market. (e) Sir Richard Petty to highlight the working of the monetary system.

377. Some analysts argue that anti-trust laws are misguided and that monopolization itself is not especially harmful because: (a) average annual “dead weight” losses attributable to monopolization are estimated to be only a tiny fraction of total GDP. (b) predatory strategies are not an adequate reason for a firm to be unfairly penalized. (c) most monopolies maintain stable prices after a monopoly is achieved, preferring instead to keep their customers happy. (d) perfect competition is a goal that can never logically be achieved in the real world.

378. Many public choice theorists view the government bureaucrat as similar to the entrepreneurial suppliers of private goods in the economic system. The key difference between the two is that: (a) private entrepreneurs can legally maximize profits, but government bureaucrats cannot. (b) private entrepreneurs cannot control their profits, but bureaucrats do control their profits. (c) private entrepreneurs act selfishly and government bureaucrats do not. (d) there is no difference between the two.

379. The first economic thinkers to discuss gains in production derived from a division of labor were: (a) Richard Cantillon and Adam Smith. (b) Thomas Aquinas and other medieval scholastics. (c) Xenophon and other ancient Greeks. (d) Francois Quesnay and other physiocrats. (e) Thomas Munn and other mercantilists. (f) Confucius, Lao Tzu, and other fifth century philosophers in China.

380. The marginal productivity theory of income distribution was developed by John Bates Clark in the1890s in part as: (a) a refutation of Karl Max’s view that surplus value, which is the sum of interest, rent and profit, represents exploitation of labor. (b) an attempt to provide a ethical foundation for the establishment of socialism. (c) a proposal to amend the US Constitution to permit the progressive taxation of income. (d) an endorsement of John Locke’s theory that property rights are grounded in the labor theory of value.

381. Adjustments of prices and quantities to rectify disequilibria were a part of a process that Leon Walras termed: (a) tátonnement. (b) mutatis mutandi. (c) ceteris parebus. (d) maximum maximorum. (e) cogito ergo sum. (f) fiat justitia, ruat coeum.

382. Keynesian theory suggests that a recession in the U.S. would be most likely to abate quickly in response to: (a) revelation of even bigger corporate scandals. (b) hiring of tens of thousands of new federal workers to hide plastic eggs filled with $10 bills in the desert. (c) increasing trade and tariff barriers in hopes that foreign countries would retaliate with a trade war. (d) raising the minimum wage. (e) increased desires to save by households.

383. Pre-World War I syndicalist radicals who sought to take over U.S. industry were members of the: (a) Fabian Society. (b) International Workers of the World, aka wobblies. (c) Abraham Lincoln Brigade. (d) American Federation of Labor.

384. Robert Frank conducted a prisoners’ dilemma experiment on three separate groups: [1] college students who had never taken any economics. [2] students who had taken one economics course. [3] graduate students in economics. His surprising results may be interpreted as evidence that: (a) studying economics causes many people to become overly suspicious of other people’s motives. (b) greedy behavior facilitates technological innovations. (c) individuals are as rational as economists assume. (d) markets never achieve equilibrium.

385. The personal losses from rational ignorance tend to be lowest when individuals make decisions about: (a) buying frequently purchased items. (b) voting. (c) whom to marry. (d) major financial investments. (e) career paths and occupations.

386. Abba Lerner’s wage-price reaction functions illustrate the Keynesian belief that, in the short run for a market economy: (a) surpluses are resolved faster than shortages. (b) full employment is achieved automatically. (c) shortages resolve more quickly than surpluses. (d) wages and prices adjust more quickly downward than upward. (e) the distribution of income becomes less equal during recessions.

387. NOT one of the five major points that distinguish Austrian economics from mainstream neoclassical analysis is: (a) radical subjectivism. (b) methodological essentialism. (c) casual-eugenics. (d) methodological individualism. (e) societal purpose.

388. Individual bureaucrats' salaries tend to be MOST positively related to the: (a) social losses incurred if their positions were vacated. (b) number of employees supervised and the budget managed. (c) swings in the business cycle. (d) total government spending relative to national income. (e) rates of return on government investments.

389. Massive government regulation is often termed: (a) bureaucratic red tape. (b) legislative logrolling. (c) gerrymandering. (d) nepotism.

390. The “John” who predicted the economic and political turmoil stemming from the harsh punishment of Germany in the Treaty of Versailles (which facilitated Hitler’s rise to power) was John: (a) Bates Clark. (b) Neville Keynes. (c) Maynard Keynes. (d) Rogers Commons. (e) Kenneth Galbraith.

391. Hysterisis as a process in which history unfolds in a manner that is path-dependent is least consistent with the methodologies and views of: (a) Heraclites, in his debate with Zeno about the forces of nature. (b) historicists, in their debates with analytical determinists. (c) the followers of Auguste Comte. (d) neoclassical economic theorists. (e) Thomas Malthus. (f) American institutionalism. (g) dialectical materialists. (h) Marxists.

392. Most nonhuman resources should be owned jointly by everyone, with government acting as a trustee, according to the ideals of: (a) laissez-faire philosophy. (b) socialism. (c) anarchism. (d) environmentalism.

393. A term used to describe the process wherein current production is diverted into the accumulation of economic capital, thereby delaying the possibility of consuming goods now, is: (a) roundabout production. (b) capitalistic exploitation. (c) circular flow. (d) specie flow. (e) articulation.

394. According to the neo-classical macroeconomic model developed at Cambridge University, the: (a) demand for nominal money can be written as Md = kPQ. (b) rate of inflation depends primarily on the velocity of money. (c) income velocity of money determines real output. (d) money supply determines real output. (e) government should run deficits to reduce unemployment.

395. Profit-sharing plans in modern U.S. corporations may partially trace their origins back to some ideas imbedded in: (a) syndicalism. (b) Buddhist economics. (c) "limits to growth.". (d) laissez faire capitalism.

396. Of the following thinkers, the one whose ideas are least inconsistent with broad libertarian principles is: (a) John Stuart Mill. (b) Plato. (c) Mao Zedong. (d) Thomas Aquinas. (e) Thomas Malthus. [Hint: beware the double negative. This could be tricky.].

397. Pork barrel legislation is viewed by critics as undesirable because: (a) it overuses pork barrels as incentives. (b) it relies too heavily on line-item vetoes. (c) agricultural needs of today have changed from what they were of years ago. (d) it unevenly redistributes public spending relative to tax revenues across specific regions, so that projects that are not efficient tend to be adopted anyway.

398. John Stuart Mill expected that any inflation resulting when the growth rate of the stock of gold in a country exceeded the rate of expansions of potential real national income would result in: (a) surpluses in that country’s balance of trade. (b) decreases in the real wages of labor. (c) more gold ornamentation and dentists using more gold in dental work. (d) immigration of labor into the country. (e) increases in attempts to discover and produce gold.

399. The Nobel Prize winning economist who introduced the idea of transaction cost minimization as the root problem of economic, firm, and market coordination is: (a) Kelvin Lancaster. (b) Ronald Coase. (c) Armen Alchian. (d) Gary Becker.

400. An American institutionalist coined numerous terms, including: [1] acquisitive society [to explain systematic “underfunding” of government projects and the expansion of private “conspicuous consumption;” [2] conventional wisdom [for incorrect but popular theories]; [3] bezzle [for the monetary amount of bookkeeping mischief within big business]; [4] countervailing power (for the idea that social welfare is enhanced by competition between such power blocs as big labor and big business); and [5] technostructure [for managerial and other professionals who dominate decisions in huge bureaucracies]. This very tall (6’9”) economist was: (a) Thorstein Veblen. (b) Wesley Clair Mitchell. (c) John Commons. (d) John Kenneth Galbraith. (e) Clarence Ayres.

401. The Marxist term for differences between wages and labor's average marginal productivity is: (a) wage deficit. (b) surplus value. (c) exploitation quotient. (d) monopoly profit. (e) contingency fee.

402. The intensities of individuals' preferences are especially hard to ascertain under a system that relies heavily on: (a) lobbying and logrolling. (b) nonstrategic point voting. (c) simple majority rule voting. (d) competitive markets.

403. The consumer surplus derived from a specific good is zero when a buyer: (a) faces a vertical supply curve. (b) views some identically-priced goods as perfect substitutes for the good. (c) can only shop in a market that is in disequilibrium. (d) has already purchased a strong complement for the good being purchased. (e) has a perfectly inelastic (vertical) demand curve for the good.

404. The violent overthrow of capitalism by workers would be opposed by: (a) Marxists. (b) syndicalists. (c) liberation theologians. (d) libertarians. (e) anarchists.

405. According to Karl Marx, the “bust” in capitalist boom-bust business cycles are a consequence of: (a) automation and the substitution of capital for labor. (b) shifts in production possibility frontiers resulting from such events as war, famine, etc. (c) capital accumulation by the rich bourgeoisie and inadequate purchasing power in the hands of the working-class proletariat. (d) ever-increasing unemployment rates among the proletariat.

406. The idea that if transaction costs are zero, negotiation will eliminate any inefficiency associated with “externalities” is known as the: (a) Coase theorem. (b) law of markets. (c) frictionless exchange model. (d) Walrasian solution. (e) model of perfect competition.

407. Adopting a proposal to allow individual taxpayers to specify the programs for which their taxes will be spent would be UNLIKELY to precisely reflect the taxpayers' preferences because: (a) legislators are uniformly better judges of national priorities. (b) this form of "point voting with dollars" would promote strategic behavior. (c) logrolling would become even more prevalent. (d) the rights of special interest groups would tend to be ignored.

408. The analytical case for unfettered international trade was made most strongly by: (a) Rev. Robert Thomas Malthus. (b) Heraclites. (c) mercantilists. (d) David Ricardo. (e) Cornelius Vanderbilt. (f) Alexander Hamilton.

409. The most notable distinction between classical economics and neoclassical economics was incorporation of calculus into analyses, which revealed that optimality and efficiency require conformity with the: (a) laws of supply and demand. (b) equimarginal principle. (c) scholastic tradition. (d) thesis-antithesis-synthesis pathway.

410. The welfare loss triangles that economists sometimes identify as arising from market failures or inefficient government policies are ways to graphically depict a: (a) contrapositive burden. (b) negative-sum game. (c) dead-weight loss. (d) negative-sum loss. (e) dead-weight gain. (f) consumer deficit. (g) producer deficit.

411. That some people would prefer extremely costly real fur coats to even higher quality, but much cheaper, visually indistinguishable faux (polyester?) fur coats is most reasonably an example of: (a) Adam Smith’s theory of self-interest. (b) the snob (or Veblen) effect. (c) a Utopian socialist distribution mechanisms. (d) John Stuart Mill’s social theory. (e) Austrian “roundabout” theory.

412. A technique for simultaneous consideration of price and quantity adjustments in all markets for goods and resources is termed: (a) Walrasian general equilibrium analysis. (b) matrix analysis. (c) Keynesian macroeconomics. (d) Marshallian analyses of price adjustments. (e) multi-sector analysis.

413. The thinker least likely to defend the fairness of the marginal productivity theory of income distribution would have been: (a) Herbert Spencer. (b) John Bates Clark. (c) Ayn Rand. (d) John Kenneth Galbraith. (e) H.K.E. von Mangoldt. (f) Richard Cantillon. (g) Adam Smith.

414. The distinction between market price and intrinsic value was the key issue addressed in: (a) Karl Marx’s revision of the John Locke’s labor theory of value. (b) Aristotle’s “diamond-water” paradox. (c) the Austrian emphasis on the subjective nature of value. (d) Augustine’s inquiry into differences between value in use and value in exchange. (e) debates between Thomas Malthus and David Ricardo over the merits of the British “corn laws.”

415. John Maynard Keynes’s precautionary demand for money reflects the notion that people hold money balances in part because: (a) investing is uncertain; your investment can be lost or lose value. (b) money is often needed to fund unexpected expenditures. (c) in periods of low interest rates, it’s not worth the time to invest. (d) banks are unscrupulous institutions. (e) the Midas effect is powerful.

416. The idea that a tradeoff exists between unemployment and inflation is known as the: (a) liquidity trap. (b) unemployment curve. (c) inflation-employment curve. (d) Friedman curve. (e) the Phillips curve.

417. Joan Robinson defined exploitation of workers as occurring when: (a) workers are hired based on something other than productivity. (b) profit is kept by entrepreneur. (c) unemployment exists. (d) the economy is at less that full employment. (e) workers are paid less than the values of their marginal products.

418. NOT standard nomenclature for a phase in a typical business cycle would be: (a) recovery. (b) recession. (c) depression. (d) surplus. (e) peak.

419. If Wal-Mart cut prices below cost in an attempt to drive competitors out of business with an expectation that after its competitors were kaput, Wal-Mart could then extract very high prices, then Wal-Mart would be practicing: (a) price fixing. (b) trust busting. (c) collusion. (d) predatory pricing. (e) cartelization.

420. New policies are said to be “strictly Pareto moves” when a legal or regulatory change harms no one but helps at least one individual. The voting system most certain to yield only such efficient moves would be one requiring: (a) a strong plurality. (b) a simple majority. (c) the largest total under point voting. (d) unanimity. (e) laissez faire economic policies.

421. Important works by Joseph Alois Schumpeter do not include: (a) Capitalism, Socialism, and Democracy. (b) The General Theory of Employment, Interest and Money. (c) The Theory of Economic Development. (d) A History of Economic Analysis. (e) Business Cycles.

422. The realization that consumers actually demand jointly produced attributes of goods and services and not the products or services themselves is a contribution to consumer theory developed by: (a) Alfred Marshall. (b) Edwin Hastings Chamberlin. (c) Karl Marx. (d) Carl Menger. (e) Kelvin Lancaster.

423. The theoretical attack launched by Austrian economists in the 1920s against central planning and socialism in the USSR was initially spearheaded by: (a) Friedrich Hayek. (b) H. L. Mencken. (c) Ludwig von Mises. (d) Iosif Djugashvili. (e) Lev Davidovitch Bronstein. (f) Vladimir Ilyich Ulyanov.

424. The groups most likely to favor government economic planning would be: (a) bureaucrats and, at least for the short run (following the revolution), orthodox Marxists. (b) anarchists and syndicalists. (c) libertarians. and capitalists. (d) Buddhists and utopian socialists.

425. Among other noteworthy accomplishments, Knut Wicksell [Sweden, 1851-1926]: (a) showed that, in a unanimity voting system, no initiative will succeed unless the change proposed is expected to be efficiency enhancing. (b) was a strong advocate of the modern Scandinavian welfare state. (c) anticipated Irving Fisher and Milton Friedman in addressing the possibility that a central bank’s expansionary monetary policies to drive the real interest rate below its natural rate are self defeating. (d) arguably elaborated the operations of price adjustment mechanisms better than had any of his predecessors. (e) He did all of the above.

426. John Maynard Keynes theorized that in addition to expectations about the amounts of transactions individuals expect to consummate, the demand for money depends on the prevailing interest rate and expectations about economic conditions. This notion is known as: (a) rent-seeking. (b) liquidity preference. (c) hysterisis. (d) rational expectations. (e) precautionary balances.

427. Politicians and parties can be expected to cluster around moderate positions according to the: (a) modern voter apathy poll. (b) median voter model. (c) unanimity/consensus approach. (d) majority voting principle.

428. The cornerstone of classical economic theory derived from the work of Jeremy Bentham was the concept of: (a) the wages fund. (b) natural checks on population. (c) increasing cost. (d) utility. (e) surplus value.

429. Reliance on faith and authority to find answers to most philosophical questions is the engine of inquiry used in: (a) econometric theory. (b) logical positivism. (c) pragmatic empiricism. (d) inductive. reasoning. (e) the scholastic method.

430. Of all the many topics Irving Fisher addressed, he dealt at the greatest length with issues surrounding: (a) Pareto efficiency and Rawlsian equity. (b) trade-offs between structural unemployment and hyperinflation. (c) economic growth in less developed nations. (d) marginal utility and business cycles. (e) nominal and real interest rates, and the quantity theory of money.

431. The student of Eugen Böhm-Bawerk who became finance minister of the Austria while quite young, immigrated to the United States to avoid Hitler, and who wrote prolifically on topics ranging from business cycles to the key role of the entrepreneur in economic development to the intellectual history of economics was: (a) Joseph Schumpeter. (b) Max Weber. (c) Ernst Rohm. (d) Arthur C. Pigou.

432. Marx predicted that, over time: (a) capital would become increasingly concentrated. (b) over-consumption would cause declining rates of profits. (c) revolutions would occur first in the less-developed countries. (d) socialist and capitalist economies would peacefully converge.

433. Charles Darwin’s theory of evolution was most heavily influenced by: (a) Adam Smith’s concept of “the invisible hand.” (b) Thomas Malthus’s theory that population growth creates pressure that causes people to live a razor’s edge existence. (c) Jeremy Bentham’s advocacy of capital punishment to reduce serious crime. (d) David Hume’s early version of the Quantity Theory of Money. (e) Isaac Newton’s Second Law of Thermodynamics.

434. Ayn Rand would readily have subscribed to the notions of Herbert Spencer and William Graham Sumner in their view that Charles Darwin’s findings in Origin of Species provide strong support for the ‘inevitable’ forces of: (a) socialism. (b) the labor theory of value. (c) the equimarginal principle. (d) laissez faire economic policies. (e) syndicalism.

435. Antoine Augustin Cournot applied the equimarginal principle to illustrate why profit maximization requires: (a) MR = MC. (b) MPPk = MPPL = w = r. (c) charging desperate buyers the highest price possible. (d) MR = ATC. (e) P = MR.

436. A Keynesian consumption function relates the consumption of all private goods and services to: (a) free trade. (b) surplus values. (c) the aggregate level of income. (d) the theory of money supply. (e) the equality of supply and demand.

437. According to Kenneth Boulding and other thinkers skeptical of uncontrolled economic growth, a "cowboy mentality" may be inappropriate on "spaceship earth" primarily because: (a) many productive processes generate pollution, and finite resources may make ever higher consumption impossible unless technology improves more rapidly than population. (b) assembly line industrial processes are dehumanizing. (c) economic growth and crass materialism produce moral decay. (d) cows are sacred according to Buddhists and Hindus. (e) spiritual enlightenment is more important than worldly riches.

438. A minority's political preferences are MOST likely to be reflected in public policies as a consequence of: (a) the median voter model. (b) the "lumpiness" inherent in majority rule voting. (c) empire building by ambitious bureaucrats. (d) lobbying by powerful special interest groups.

439. "Liberation theology" blends the ideas of: (a) Buddhism and Hinduism. (b) capitalism and socialism. (c) anarchism and syndicalism. (d) Utopian and Fabian socialism. (e) Marxism and Christian socialism.

440. The branch of mathematical analysis developed to study interdependent decision making between two or more parties in conflict situations is: (a) bipolar derivations. (b) duopoly algorithms. (c) game theory. (d) integral bi-calculus. (e) duopsony.

441. A stagnant economy also plagued by high rates of inflation is suffering from: (a) recession. (b) stagflation. (c) stagnant. (d) a boom period.

442. From the vantage points of society as a whole, examples of positive sum games would include: (a) international trade and happy marriages. (b) profit maximization by a monopolistic entrepreneur. (c) industrial espionage and technological innovation. (d) use of the draft to procure military personnel. (e) profits from buying stocks based on insider information obtained through bribery.

443. “In the long run, we are all dead.” The economist whose Depression-era writings noted that interest rates and wages are downwardly “sticky,” making neoclassical macroeconomics valid only in the long run was: (a) an economic advisor to the British government at the Treaty of Paris. (b) married to Joan Robinson. (c) the Marquis of Bloomsbury. (d) John Maynard Keynes. (e) All of the above.

444. A Constitutional amendment requiring all adults to vote would reduce the: (a) ability of citizens to vote or not vote as a way to register the intensity of their preferences. (b) amount of rational political ignorance. (c) political apathy of voters. (d) growth of government.

Section 2: True-False

1. Joan Robinson and Edwin H. Chamberlin were most famous for their independent developments of theories of imperfect competition.

2. Thorstein Veblen used American pragmatism to supplement Adam Smith's philosophy when he launched the Utilitarian Revolution.

3. Modern monetarists urge increased reliance on countercyclical fiscal policy.

4. Keynes viewed investment spending as based primarily on expectations of future net profit from that investment.

5. One of the basic rules of economics seems to be "if prices don't adjust, quantities will".

6. To the neoclassical macroeconomist, there can be no long run involuntary unemployment in a laissez faire market economy.

Section 3: Matching

Use capital letters to match these economic thinkers with the schools of thought with whom they would be closest and most uniquely associated.

John Baptiste Say	A. utilitarianism
Thomas Aquinas	B. “high” theory
Milton Friedman	C. general equilibrium analysis
Veblen, Ayres, Commons, and Galbraith	D. public choice theory
Akerlof, Spence, and Stiglitz	E. medieval scholasticism
Leon Walras and Vilfredo Pareto	F. Austrian economics
Paul Samuelson and Kenneth Arrow	G. classical macroeconomics
James Mill and John Stuart Mill	H. quantity theory of money
Eugen von Böhm-Bawerk and Friedrich Hayek	I. American Institutionalism
James Buchanan and Gordon Tulloch	J. economics of information

Section 4: Essay

1. Suppose there are two economic agents (X and Y), two goods (A and B), and two factors of production, (K and L). Use this graph as a foundation for explaining how Vilfredo Pareto’s concept of economic efficiency applies to a general equilibrium under conditions of pure competition, as elaborated by Oskar Lange (1904-1965) and Abba P. Lerner (1903-1982).

2. Draw market demands and supplies, and describe how these curves translate into a Lerner Asymmetric Wage-Price Reaction Function.

3. Explain the differences on views about interest rates between (a) John Maynard Keynes. (b) Irving Fisher and Eugen von Böhm-Bawerk. (c) Aristotle and Thomas Aquinas.

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