Increases in real GDP would understate the well-being of a country over time if, over
that time period, the
A) crime rate increased.
B) percentage of people addicted to illegal drugs increased.
C) amount of pollution decreased.
D) average hours worked per week decreased.
A decrease in the equilibrium price for a product will result
A) when the quantity demanded for the product exceeds the quantity supplied.
B) when there is a decrease in supply and a decrease in demand for the product.
C) when there is an increase in supply and a decrease in demand for the product.
D) when there is a decrease in demand and a decrease in the number of firms producing
the product.
Suppose two firms in a duopoly implicitly collude and charge a high price. How might
each firm benefit from advertising that it will match the lowest price offered by its
competitor?
A) The offer to match prices is a way of deterring entry by other large firms, thereby
keeping the market share of the existing firms intact.
B) The advertisement ensures that the other firm does not cheat. If a firm cheats on the
agreement and charges the lower price, the rival firm will retaliate by doing the same.
C) The offer to match prices is a way of signaling to antitrust authorities that the firms
are not engaged in illegal collusion.
D) The advertisement is meant to suggest to consumers that the offered price is actually
the lowest price available.
Which of the following characterizes the market that Starbucks competes in?
A) All coffeehouses face horizontal demand curves.
B) Coffeehouses sell identical products.
C) Barriers to entry are low.
D) There are a small number of firms.
Which of the following statements describes the experiences of the Whirlpool
Corporation since it was established in 1911?
A) strong uninterrupted growth in demand
B) long-run growth interrupted by periods of business cycle recession
C) little or no growth in the long run, and unaffected by the business cycle
D) little or no growth in the long run, but very vulnerable to the business cycle
Suppose the equilibrium real federal funds rate is 2 percent, the target rate of inflation is
2 percent, the current inflation rate is 4 percent, and real GDP is 2 percent above
potential real GDP. If the weights for the inflation gap and the output gap are both 1/2,
then according to the Taylor rule the federal funds target rate equals
A) 4 percent.
B) 6 percent.
C) 8 percent.
D) 10 percent.
One criticism of the Fed’s quantitative easing policy is that a prolonged period of low
interest rates could lead to speculative bubbles. Some economists argued that as interest
rates fell and prices of long-term Treasury bonds rose, financial markets were
experiencing a “Treasury bubble.” These economists
worried that investors, banks, other financial firms, and pension funds were
underestimating the likelihood that long-term interest rates would eventually ________,
causing substantial ________ in the prices of Treasury bonds.
A) rise; declines
B) rise; increases
C) fall; declines
D) fall; increases
If a significant number of smokers switch from smoking tobacco cigarettes to
e-cigarettes, a company like NJOY will likely find its demand curve shifting to the
________ and its marginal revenue curve shifting to the ________ as more competitors
enter the market.
A) right; right
B) right; left
C) left; right
D) left; left
Figure 5-6 Figure 5-6 shows the market for
measles vaccinations, a product whose use generates positive externalities.Why is there
a deadweight loss?
A) because the marginal private benefit for each additional unit between Q1 and Q2
exceeds the marginal cost
B) because the marginal private cost for each additional unit between Q1 and Q2
exceeds the marginal private benefit
C) because the marginal social cost for each additional unit between Q1 and Q2 exceeds
the marginal social benefit
D) because the marginal social benefit for each additional unit between Q1 and Q2
exceeds the marginal cost
Figure 15-9
What is the difference between the monopoly’s price and perfectly competitive
industry’s price?
A) The monopoly’s price is higher by $9.50.
B) The monopoly’s price is higher by $13.
C) The monopoly’s price is higher by $3.50.
D) The monopoly’s price is higher by $21.
Figure 18-6 Figure 18-6
shows the Lorenz curves for Islandia and Syldavia.
If area X = 2,060, area Y = 240, and area Z= 2,700, calculate the Gini coefficient for
Syldavia.
A) 0.05
B) 0.12
C) 0.46
D) 0.85
Suppose the value of the price elasticity of supply is 4. What does this mean?
A) A 4 percent increase in the price of the good causes quantity supplied to increase by
1 percent.
B) A 1 percent increase in the price of the good causes the supply curve to shift upward
by 4 percent.
C) A 1 percent increase in the price of the good causes quantity supplied to increase by
4 percent.
D) For every $1 increase in price, quantity supplied increases by 4 units.
A reason why a perfectly competitive firm’s demand for labor curve slopes downward is
that
A) each additional unit of labor hired is less efficient than previously hired units.
B) in the short run, as more labor is hired, labor’s marginal product falls because of the
law of diminishing returns.
C) the extra cost of hiring additional units of labor increases as a firm hires more units
of labor.
D) the firm’s demand curve for the product that uses labor is downward sloping.
Figure 2-13 Figure 2-13
shows the production possibilities frontiers for Tahiti and Bora Bora. Each country
produces two goods, milk and honey.
What is the opportunity cost of producing one gallon of milk in Tahiti?
A) 1/2 gallon of honey
B) 5/6 gallon of honey
C) 1.2 gallons of honey
D) 1.5 gallons of honey
In the medical profession, pediatricians receive lower salaries than cardiologists.
Suppose the government passes comparable worth legislation that requires hospitals to
pay pediatricians the same salaries as cardiologists. Explain the effect of this legislation
and illustrate your answer with demand and supply graphs for the following two
scenarios:
a. hospitals respond by placing salaries at a level between the two existing salaries
b. hospitals respond by placing pediatricians’ salaries at the initial level of cardiologists.
The aging of the U.S. population has tended to ________ spending on health care, and
the development of new drugs and medical equipment has tended to ________
spending on health care.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
A corporation is owned by its
A) board of directors.
B) stockholders.
C) employees.
D) CEO.
Pookie’s Pinball Palace restores old Pinball machines. Pookie has just spent $300
purchasing and cleaning a 1960s-era machine which he expects to sell for $2,000 once
he is finished with the restoration. After having spent $300, Pookie discovers that he
will need to rewire the entire machine at a cost of $1,100 in order to finish the
restoration. Alternatively, he can sell the machine “as is” now for $1,000. What is his
marginal benefit if he sells the machine “as is” now?
A) $300
B) $900
C) $1,000
D) The marginal benefit cannot be determined.