ISBN 13: 978-1305280595

When a teacher in a private school points out to her high school principal that since there are empty seats in all classrooms, the cost of additional students is really zero, she is using the a. law of comparative advantage. […]

Figure 7-10 In Figure 7-10, the curve labeled C is a. average fixed cost. b. average total cost. c. average variable cost. d. marginal cost. Under perfect competition the price of a depletable resource whose cost of extraction is not […]

Which of the following is an imperfection of market economies? a. They produce inexpensive services but expensive manufactured goods. b. They place undue importance on the needs of future generations. c. They cannot provide certain goods such as national defense. […]

A tax is progressive if it raises a greater fraction of total tax revenue every year. a. True b. False Society benefits from monopolistic competition because the firms are allocatively efficient. a. True b. False Answer: False In an attempt […]

All two-dimensional graphs must have an origin, a horizontal axis, and a vertical axis. a. True b. False A depreciation of the U.S. dollar has the same effect on aggregate supply as an increase in foreign prices. a. True b. […]

Compared to a perfectly competitive firm, a monopolist a. is less likely to advertise. b. will, according to Schumpeter, invest fewer resources in research and development. c. usually produces an inefficiently small level of output. d. is less likely to […]

If aggregate quantity demanded exceeds aggregate quantity supplied, we can expect an unplanned a. depletion of inventories, causing firms to raise prices. b. depletion of inventories, causing firms to lower prices. c. accumulation of inventories, causing firms to raise prices. […]

Railroads have received significant attention from regulators because a. railroads enjoy significant economies of scale. b. conditions in the railroad industry are conducive to destructive competition. c. regulators would like to ensure universal service to all potential railroad customers. d. […]

Environmental damage a. cannot be reduced to zero. b. is inevitable where humans exist. c. tends to increase as long as benefits outweigh the costs to the damagers. d. All of the above are correct. Explain why it makes a […]

In reality, commercial banks function most like ____ of the district Federal Reserve Banks. a. stockholders b. regulators c. customers d. competitors Politicians and citizens may often choose policies that reduce economic efficiency because they are perceived as “fairer.” a. […]

The aggregate supply curve shows the relationship between ____ and ____, holding all other factors constant. a. price level; quantity of real GDP supplied b. price level; supply of nominal GDP c. nominal GDP; price level of real GDP d. […]

The successes of the 1960s were ascribed to the effects of a. classical policies from the 1800s. b. classical policies from the 1930s. c. classical policies from the 1950s. d. Keynesian policies from the 1930s. e. Keynesian policies from the […]

Cost-reducing technological advancements allow suppliers to earn more profits but have no noticeable effect on the supply curve. a. True b. False A common characteristic in oligopolistic markets is a. consideration of rivals’ reactions. b. standardized products. c. high profits. […]

Figure 12-2 In Figure 12-2, which of the graphs represents a monopolistic competitor in long-run equilibrium? a. 1 b. 2 c. 3 d. 4 Under the Bretton Woods system of fixed exchange rates, a. devaluations were frequent and small. b. […]

A duopoly is a. a cartel in which all members try to cheat on the cartel. b. an industry with only two sellers. c. an industry with only two buyers. d. a cartel with only two members. Stabilization policy is […]

Average cost curves have the same shape as a. total cost curves. b. marginal cost curves. c. total fixed cost curves. d. average fixed cost curves. Taxes are either a. regressive, proportional, or degressive. b. regressive, proportional, or progressive. c. […]

If the aggregate supply curve is vertical, then the short-run Phillips curve will a. be horizontal. b. also be vertical. c. slope upward. d. slope downward. Which of the following acts prohibited false advertising? a. Sherman Act b. Clayton Act […]

If the favorable supply shocks of the 1990s were reversed in the future, we should expect a(n) a. increase in inflation and unemployment. b. decrease in inflation and unemployment. c. increase in inflation and a decrease in unemployment. d. decrease […]

The Industrial Revolution refers to the period 1950-1970, which was characterized by rapid manufacturing sector growth in the United States. a. True b. False The appropriate fiscal policy stance depends, at least partly, on the a. stance of trade policy. […]

Jason considers a crystal bowl, a silver dish, and a pewter figurine, each priced $45 at the local gift shop. He chooses the silver dish because, according to economic theory a. his marginal utility per dollar is greatest. b. his […]

One major fault with factor pricing analysis is that marginal productivity theory merely attempts to justify the income distribution that the capitalist system yields. a. True b. False A recessionary gap exists when potential GDP a. falls short of equilibrium […]

The elasticity of a straight-line demand curve is the same as its slope. a. True b. False The marginal revenue curve for a monopolist is the same as its demand curve. a. True b. False Answer: False Table 22-2 Using […]

A tariff is a limitation on the amount of a good that can be imported. a. True b. False When new farmers enter the wheat industry, the equilibrium price of wheat a. always falls. b. falls only if existing firms […]

The demand for reserves depends on income and the price level. a. True b. False The negative slope of a production possibilities frontier is a graphic representation of opportunity cost. a. True b. False Answer: True All of the following […]

At a profit-maximizing output level, a. marginal revenue minus marginal cost equals zero. b. marginal profit equals zero. c. the slope of the total profit curve is zero. d. All of the above are true. Economists generally consider the use […]

Technological change, such as the information technology revolution of the 1990s can shift the aggregate supply curve outward. If, at the same time, the government is decreasing spending, the most likely outcome of these two factors is a(n) a. increase […]

In an open economy, aggregate supply consists of domestic production plus imports. a. True b. False For each of the following, how would they be included in the national income accounts? a. The University of California buys a new computer. […]

The law of diminishing marginal utility is consistent with the consumer behavior that produces a negatively sloped demand curve. a. True b. False Increasing scarcity of a resource causes new supplies to become more and more costly. a. True b. […]

A severe freeze has once again damaged the Florida orange crop. The impact on the market for oranges will be a leftward shift in a. demand as consumers try to economize because of the shortage. b. both the supply and […]

Economists disagree on most economic issues facing an economy. a. True b. False When income rises, total expenditures remain constant. a. True b. False Answer: False In hindsight, mortgage-backed securities implied very limited risk because the underlying mortgages were spread […]

“Rate averaging” is only possible if a. the firm is protected from price competition and new entry. b. the firm is protected from losses resulting from unsuccessful innovation. c. the firm can choose the level of service it wishes to […]

Suppose that a nation has adopted a fixed exchange rate with another country, and has a persistent trade deficit. What is most likely to happen? a. a gradual increase in the value of its currency b. a gradual decrease in […]

An empirical study determines that price exceeds marginal cost at the levels of output of firms in long-run equilibrium in the widget industry. The widget industry may therefore a. be monopolistically competitive. b. have firms whose goal is sales maximization. […]

Mercantilist policy is to do everything it can to promote exports and to discourage imports. a. True b. False To maximize sales revenue, an oligopoly will expand output until the price is zero. a. True b. False Answer: False In […]

The theory of the kinked demand curve is that a. although the firm sells a differentiated product, too many competitors exist to make it worthwhile speculating on responses to the firm’s behavior. b. freedom of entry will reduce profits to […]

The market allocates goods to individuals according to the individuals’ a. desire for the good. b. ability to pay for the good. c. desire and ability to pay for the good. d. political influence. In a perfectly contestable market in […]

The “War on Poverty” was declared by President Ronald Reagan in 1982. a. True b. False Define the following terms and explain their importance to the study of economics. a. minimum wage law b. income and substitution effects c. backward-bending […]

Define the following terms and explain their importance to the study of economics: a. regressive tax b. proportional tax c. progressive tax d. direct tax e. indirect tax When it is cheaper for one firm to produce a particular product, […]

Society definitely benefits by reducing the number of monopolistically competitive firms. a. True b. False In a simple, private economy, suppose that the MPC is .8 and investment rises by $20 million. At the new equilibrium, how much will saving […]

The supply curve for a perfectly competitive industry is obtained by a. making an empirical study of historical data. b. vertically summing the supply curves of firms in the industry. c. horizontally summing the average cost curves of firms in […]

The principle of “comparable worth” asserts that people with comparable, if not identical, skills and responsibilities should receive the same pay. If this principle were to become law, it would tend to a. reduce the problem of the “cost disease […]

Fixed exchange rates are determined in free markets by the forces of demand and supply. a. True b. False Figure 18-2 Figure 18-2 shows the widget market before and after an excise tax is imposed. The tax per widget equals […]

Many economists think that, in the long run, the Phillips curve is a. a horizontal line. b. a vertical line. c. the same as the short-run curve. d. a 45-degree line from the origin. The recent experience in Greece, Portugal, […]

Cross-subsidization implies that a loss from one product’s sales will be made up by the profit from another product’s sales. a. True b. False In the second quarter of 1995, the following values were observed: real GDP = 4,359.3 billion; […]

When the Art Institute of Chicago purchases a painting by Mary Cassatt that she produced in Paris in 1885, this would not be included in the U.S. GDP for 2015. a. True b. False The macroeconomic conditions during the mid-1990s […]

Figure 21-1 In Figure 21-1, if the existing antipoverty program were replaced by a negative income tax, most economists believe that it would result in a move like which of the following? a. C to F b. A to B […]

“A producer wanting to employ optimal quantity of inputs should choose the point where diminishing returns sets in.” True or false? “Assuming the long-run average cost curve is U-shaped, a firm will always seek to operate at the lowest point […]