Essentials of Economics 2nd Edition

66) Which of the following is an example of an activity undertaken by an entrepreneur? 66) A) landscape design for your new home B) running for the president of the United States C) starting your own pet sitting business D) holding a position as the president of a liberal arts college Answer:CExplanation:A)B)C)D) Answer:CExplanation:A)B)C)D) Answer: C Explanation: A) B) C) D) 67) The relationship between sales and revenue is 67) A) independent. B) an inverse relationship. C) a negative

Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) In 2001, Hooverville consumed 205,000 tons of sugar. In 2002, sugar consumption rose to 245,000 tons. Calculate the percentage change in sugar consumption. 1) A) 19.51% B) 11.95% C) 26.33% D) 8.37% Answer:AExplanation:A)B)C)D) Answer:AExplanation:A)B)C)D) Answer: A Explanation: A) B) C) D) 2) Making optimal decisions "at the margin" requires 2) A) weighing the costs and benefits of a decision before

94) If the painting firms in a city sign a contract outlining a pricing plan, they are involved in 94) A) a legal form of business contract in the United States. B) price competition. C) price regulation. D) collusion. Answer:DExplanation:A)B)C)D) Answer:DExplanation:A)B)C)D) Answer: D Explanation: A) B) C) D) 95) Consumers benefit from monopolistic competition by 95) A) being able to choose from products more closely suited to their tastes. B) being able to purchase high quality

Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Economists agree that a monopolistically competitive market structure 1) A) can eliminate any excess capacity if all firms in the industry devote more funds to differentiating their products. B) benefits consumers because firms produce products that appeal to a wide range of

Table 10-5 55) Refer to Table 10-5. Is a situation in which Coke produces a low quantity (Q) and Pepsi produces a high quantity an equilibrium? 55) A) Yes, because each is earning its highest profit. B) No, because Pepsi has an incentive to produce a low quantity. C) Yes, because each is not earning its highest profit. D) No, because Coke

Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The factors of production include 1) A) transfers. B) investment. C) capital. D) wages. Answer:CExplanation:A)B)C)D) Answer:CExplanation:A)B)C)D) Answer: C Explanation: A) B) C) D) Table 11-10 Year Oranges Produced Price of Oranges (Dollars) Shirts Produced Price of Shirts (Dollars) 1998 1,800 $0.90 110 $30 2000 2,000 $1.00 110 $35 The data in Table 11-10 are for a fictional economy that produces only two products: oranges and shirts. 2) Refer to Table

54) Which of the following is not true about the composition of U.S. GDP in 2007? 54) A) Imports are greater than exports. B) Business fixed investment is the largest component of investment. C) The majority of consumer spending is on durable goods. D) Purchases made by state and local governments are greater than purchases made by the federal government. Answer:CExplanation:A)B)C)D) Answer:CExplanation:A)B)C)D) Answer: C Explanation: A) B) C) D) 55) To examine

Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Suppose that homemakers are included as employed in the labor force statistics, rather than being counted as out of the labor force. This would 1) A) increase the measured unemployment rate. B) decrease the number of persons in the labor force. C) decrease the

64) The natural rate of unemployment is the amount of unemployment 64) A) that exists when the economy goes into recession. B) equal to frictional plus structural unemployment. C) that exists when the economy is in an expansion. D) associated with a business cycle recession. Answer:BExplanation:A)B)C)D) Answer:BExplanation:A)B)C)D) Answer: B Explanation: A) B) C) D) 65) Those workers who lost jobs at Alcatel-Lucent because of the decline in demand for telecommunication products experienced 65) A) seasonal

Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Technological advances generally result in 1) A) increased life expectancy. B) decreased incomes. C) increased infant mortality rates. D) increased average number of hours worked per day. Answer:AExplanation:A)B)C)D) Answer:AExplanation:A)B)C)D) Answer: A Explanation: A) B) C) D) 2) Purchases of which of the following goods would be dramatically reduced during a recession? 2) A) refrigerators B) tomatoes C) gasoline D) ink pens Answer:AExplanation:A)B)C)D) Answer:AExplanation:A)B)C)D) Answer: A Explanation: A) B) C) D) 3) Which of the following would

61) What is investment in a closed economy if you have the following economic data? Y = $10 trillion C = $5 trillion TR = $2 trillion G = $2 trillion 61) A) $3 trillion B) $5 trillion C) $2 trillion D) cannot be determined without information on taxes (T) Answer:AExplanation:A)B)C)D) Answer:AExplanation:A)B)C)D) Answer: A Explanation: A) B) C) D) 62) A good measure of the standard of living is 62) A) nominal GDP per capita. B) real GDP per capita. C) total

65) If technological change occurs in the economy, 65) A) we will move up along the long-run aggregate supply curve. B) the long-run aggregate supply curve will shift to the left. C) we will move down along the long-run aggregate supply curve. D) the long-run aggregate supply curve will shift to the right. Answer:DExplanation:A)B)C)D) Answer:DExplanation:A)B)C)D) Answer: D Explanation: A) B) C) D) Figure 14-1 66) Refer to Figure 14-1. Suppose the economy

Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) An increase in the price level will 1) A) move the economy down along a stationary aggregate demand curve. B) shift the aggregate demand curve to the left. C) move the economy up along a stationary aggregate demand curve. D) shift the aggregate demand curve

Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Dollar bills in the modern economy serve as money because 1) A) people have confidence that others will accept them as money. B) they have value as a commodity independent of their use as money. C) they are backed by the gold stored

60) The purchase of $1 million of Treasury securities by the Federal Reserve, if there is no change in the quantity of currency, will cause reserves at banks to 60) A) increase by less than $1 million. B) decrease by $1 million. C) decrease by less than $1 million. D) increase by $1 million. Answer:DExplanation:A)B)C)D) Answer:DExplanation:A)B)C)D) Answer: D Explanation: A) B) C) D) 61) The required reserves of a bank equal its

Figure 16-4 62) Refer to Figure 16-4. Suppose the Fed sells Treasury Bills in pursuit of contractionary monetary policy. Using the static AD-AS model in the figure above, this situation would be depicted as a movement from 62) A) A to B. B) C to B. C) B to A. D) C to D. E) B to C. Answer:BExplanation:A)B)C)D)E) Answer:BExplanation:A)B)C)D)E) Answer: B Explanation: A) B) C) D) E) 63) The interest rate that banks charge other banks

93) The Federal Reserve's two main monetary policy targets are 93) A) price stability and the money supply. B) interest rates and high employment. C) the money supply and interest rates. D) price stability and high employment. Answer:CExplanation:A)B)C)D) Answer:CExplanation:A)B)C)D) Answer: C Explanation: A) B) C) D) 94) Monetary policy could be procyclical if the Federal Reserve 94) A) is quick to recognize that a recession has begun and conducts expansionary monetary policy. B) is late recognizing

Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The top policy goal for Paul Volker when he became chairman of the Federal Reserve's Board of Governors in 1979 was 1) A) a low current account deficit. B) increasing regulation of commercial banks. C) increasing employment. D) fighting inflation. E) increasing economic growth. Answer:DExplanation:A)B)C)D)E) Answer:DExplanation:A)B)C)D)E) Answer: D Explanation: A) B) C) D) E) Table 16-1 Year Potential Real GDP

57) Economists refer to the series of induced increases in consumption spending that result from an initial increase in autonomous expenditures as the ________ effect. 57) A) expenditure B) consumption C) aggregate demand D) multiplier Answer:DExplanation:A)B)C)D) Answer:DExplanation:A)B)C)D) Answer: D Explanation: A) B) C) D) 58) The aggregate demand curve will shift to the right ________ the initial increase in government purchases. 58) A) by less than B) sometimes by more than and other times by less than C) by the

Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The aggregate demand curve will shift to the right ________ the initial decrease in taxes. 1) A) by more than B) by less than C) by the same amount D) sometimes by more than and other times by less than Answer:AExplanation:A)B)C)D) Answer:AExplanation:A)B)C)D) Answer: A Explanation: A) B) C) D) 2) Suppose the government spending multiplier is

102) In 1930 the U.S. government attempted to help domestic firms that were harmed by the Great Depression by 102) A) establishing the World Trade Organization (WTO). B) passing the North American Free Trade Agreement (NAFTA). C) establishing the General Agreement on Tariffs and Trade (GATT). D) passing the Smoot-Hawley Tariff. Answer:DExplanation:A)B)C)D) Answer:DExplanation:A)B)C)D) Answer: D Explanation: A) B) C) D) 103) The terms of trade refers to 103) A) the ratio at which a country

Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) NAFTA refers to a 1994 agreement that eliminated most tariffs among which countries? 1) A) the United States, the United Kingdom and Mexico B) Canada, the United Kingdom and Mexico C) the United States, Canada and Mexico D) the United States, Mexico and Cuba Answer:CExplanation:A)B)C)D) Answer:CExplanation:A)B)C)D) Answer: C Explanation: A) B) C) D) 2) Trade between

Figure 18-3 Since 1953 the U.S. has imposed a quota to limit the imports of peanuts. Figure 18-3 illustrates the impact of the quota. 60) Refer to Figure 18-3. What is the area that represents revenue to foreign producers who are granted permission to sell in the U.S. market when there is a quota? 60) A) I

Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) According to the production possibilities frontier model, if more resources are allocated to the production of physical and human capital, then all of the following are likely to happen except 1) A) the production possibilities frontier will be shift outward

92) An example of a factor of production is 92) A) the automobiles exported by an auto manufacturer. B) a loan granted to an auto manufacturer. C) a worker hired by an auto manufacturer. D) a car produced by an auto manufacturer. Answer:CExplanation:A)B)C)D)Figure 2-3 Answer:CExplanation:A)B)C)D)Figure 2-3 Answer: C Explanation: A) B) C) D) Figure 2-3 93) Refer to Figure 2-3. Carlos Vanya grows tomatoes and strawberries on his land.

54) Consider the following items: a. the novel The DaVinci Code by Dan Brown b. the "The Spirited Shipper", an innovative wine shipping box c. a Swiss chef's award-winning recipe d. an original fabric design, for example, the fabric used for "Coach" bags and luggage Which of the items listed is an example of intellectual

59) Although it is a popular product, Apple makes little profit from each song downloaded through iTunes. Why does Apple charge only $0.99 to download a song? 59) A) Apple cannot raise the price above $0.99 per song because consumers can download songs at even lower prices from Apple's competitors. B) Apple plans to increase the price of

Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) In January, buyers of gold expect that the price of gold will fall in February. What happens in the gold market in January, holding everything else constant? 1) A) The quantity demanded increases. B) The demand curve shifts to the right. C) The quantity

Figure 3-5 92) Refer to Figure 3-5. Assume that the graphs in this figure represent the demand and supply curves for potatoes and that steak and potatoes are complements. What panel describes what happens in this market when the price of steak rises? 92) A) Panel (a) B) Panel (b) C) Panel (c) D) Panel (d) Answer:DExplanation:A)B)C)D) Answer:DExplanation:A)B)C)D) Answer: D Explanation: A) B) C) D) 93) If a firm expects that the price

Figure 4-12 Figure 4-12 shows a market with a negative externality. 39) Refer to Figure 4-12. The efficient output level is 39) A) Qa. B) Qd. C) Qb- Qd. D) Qb. Answer:AExplanation:A)B)C)D) Answer:AExplanation:A)B)C)D) Answer: A Explanation: A) B) C) D) 40) Which of the following is an example of a positive externality? 40) A) banning the sale of candy in elementary schools B) forbidding the use of cell phones in public C) planting trees along a sidewalk which add beauty

Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Figure 4-6 Figure 4-6 shows the market for apartments in Bay City. Recently, the government imposed a rent ceiling at R0. 1) Refer to Figure 4-6. What is the area that represents the producer surplus after the imposition of the

89) In order to be binding a price floor 89) A) must lie below the free market equilibrium price. B) must coincide with the free market equilibrium price. C) must be high enough for firms to earn a profit. D) must lie above the free market equilibrium price. Answer:DExplanation:A)B)C)D) Answer:DExplanation:A)B)C)D) Answer: D Explanation: A) B) C) D) 90) What is the rationale behind a tradable emissions allowance scheme? 90) A) to raise revenue for

134) What does the phrase "internalizing an external cost" mean? 134) A) limiting the extent to which domestic firms can outsource production B) prohibiting economic activities that create externalities C) finding a way to address cross-border pollution D) forcing producers to factor into their production costs, the cost of the externalities created in the production of their output Answer:DExplanation:A)B)C)D) Answer:DExplanation:A)B)C)D) Answer: D Explanation: A) B) C) D) Figure 4-6 Figure 4-6 shows

Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following is an example of an implicit cost a firm might incur? 1) A) the rental value of the office space the company owns and uses for itself B) the revenue a firm generates in using its resources C) taxes

51) Which of the following is an advantage of starting a new business as a corporation? 51) A) ability to share work B) double taxation of income C) low cost to organize D) greater ability to raise funds Answer:DExplanation:A)B)C)D) Answer:DExplanation:A)B)C)D) Answer: D Explanation: A) B) C) D) 52) In 2002, the Enron corporation was accused of falsifying information regarding liabilities on Enron's balance sheets, thereby 52) A) increasing Enron's assets on the balance sheet. B) reducing Enron's

Table 6-2 Quantity of Soup (cups) Total Utility Quantity of Sandwiches Total Utility 140 145 260 275 372 3102 482 4120 588 5135 690 6145 Table 6-2 shows Keira's utility from soup and sandwiches. The price of soup is $2 per cup and the price of a sandwich is $3. Keira has $18 to spend on these two goods. 113) Refer to Table

75) If the market for a product is broadly defined, then 75) A) the good has many complements. B) there are few substitutes for the product and the demand for the product is relatively inelastic. C) the expenditure on the good is likely to make up a large share of one's budget. D) there are many substitutes for the product and

Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Table 6-1 Quantity of Pita Wraps Total Utility Quantity of Bubble Tea Total Utility 160 140 2102 270 3132 391 4144 4106 5144 5112 6138 6115 7128 7115 Keegan has $30 to spend on Pita Wraps and Bubble Tea. The price of a Pita Wrap is $6

Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Suppose you have just opened a store to sell espresso machines. Both you and a competing store buy this machine from a manufacturer for $130 each. Your competitor who has a store of the same size as yours

53) If average total cost is $50 and average fixed cost is $15 when output is 20 units, then the firm's total variable cost at that level of output is 53) A) $1,000. B) $700. C) $300. D) impossible to determine without additional information. Answer:BExplanation:A)B)C)D) Answer:BExplanation:A)B)C)D) Answer: B Explanation: A) B) C) D) 54) If, when a firm doubles all its inputs, its average cost of production increases then production displays 54) A) economies of scale. B) diminishing

Figure 8-4 Figure 8-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market. 83) Refer to Figure 8-4. If the market price is $30, should the firm represented in the diagram continue to stay in business? 83) A) No, it should shut down because it is making a loss. B) Yes, because it

Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) What is productive efficiency? 1) A) A situation in which resources are allocated to their highest profit use. B) A situation in which firms produce as much as possible. C) A situation in which a good or service is produced at the

Figure 8-7 48) Refer to Figure 8-7. If this is a constant cost industry, what is the market price in the long run equilibrium? 48) A) $20 B) $14 C) $5 D) $15 Answer:BExplanation:A)B)C)D) Answer:BExplanation:A)B)C)D) Answer: B Explanation: A) B) C) D) 49) Refer to Figure 8-7. Suppose the prevailing price is $20 and the firm is currently producing 1,350 units. In the long run equilibrium, the firm represented in the diagram 49) A) will reduce its

Figure 9-1 Figure 9-1 above shows the demand and cost curves facing a monopolist. 76) Refer to Figure 9-1. The firm's profit maximizing price is 76) A) P1. B) P2. C) P3. D) P4. Answer:CExplanation:A)B)C)D) Answer:CExplanation:A)B)C)D) Answer: C Explanation: A) B) C) D) 77) What is a network externality? 77) A) It refers to a product that requires connection to a network for it to be useful. B) It refers to a situation in which a product's

Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Figure 9-3 Figure 9-3 shows the demand and cost curves for a monopolist. 1) Refer to Figure 9-3. What is likely to happen to this monopoly in the long run? 1) A) As long as there are entry barriers this firm will

47) A merger between U.S. Steel and General Motors would be an example of a 47) A) horizontal merger. B) vertical merger. C) conglomerate merger. D) conspiracy in restraint of trade. Answer:BExplanation:A)B)C)D) Answer:BExplanation:A)B)C)D) Answer: B Explanation: A) B) C) D) Figure 9-3 Figure 9-3 shows the demand and cost curves for a monopolist. 48) Refer to Figure 9-3. What is the monopoly's profit? 48) A) $4,200 B) $10,400 C) $12,600 D) $2,700 Answer:DExplanation:A)B)C)D) Answer:DExplanation:A)B)C)D) Answer: D Explanation: A) B) C) D) 49) A United States government patent lasts 49) A) forever. B) 7 years. C) 20 years. D) 50 years. Answer:CExplanation:A)B)C)D)21 Answer:CExplanation:A)B)C)D)21 Answer: C Explanation: A) B) C) D) 21 50) Microsoft thought that