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If scientific research produces a technological breakthrough in the production of
computer memory, then
a. business costs will increase, profits will fall, and production will decrease.
b. business costs will fall, but profits will also fall, and production will decrease.
c. business costs will fall, profits will improve, and production will increase.
d. profits will increase because businesses will cut back production.
Use the figure below to answer the following question(s).
Figure 15-2
According to the modern expectational Phillips curve illustrated in Figure 15-2,
unemployment will equal the natural rate of unemployment when
a. inflation turns out to be lower than what people expected.
b. inflation turns out to be higher than what people expected.
c. inflation turns out to be equal to what people expected.
d. all of the above are true.
In markets characterized by oligopoly,
a. the oligopolists earn the highest profit when they cooperate and behave like a
monopolist.
b. collusive agreements will always prevail.
c. collective profits are always lower with cartel arrangements than they are without
cartel arrangements.
d. pursuit of self-interest by profit-maximizing firms always maximizes collective
profits in the market.
Investment in a broad portfolio of stocks is most attractive for
a. short-term investors.
b. long-term investors.
c. investors seeking a steady rate of return.
d. investors who will need the funds for other purposes in about 10 years.
The dynamic process of competition
a. is hindered by the self-interest of business decision makers.
b. puts the profit motive of sellers to work for buyers.
c. conflicts with the interest of consumers when businesses pursue profit rather than the
public interest.
d. will permit business decision makers to earn long-run economic profit unless they are
regulated by government.
The key element in preserving a monopoly is
a. government subsidy of critical enterprises.
b. keeping potential rivals out of the market.
c. guaranteeing availability of substitute products.
d. increased advertising expenditure.
Use the figure below to answer the following question(s).
Figure 3-9
Given the demand (D) and supply (S) for gasoline in Figure 3-9, if the price of gasoline
were $3 per gallon,
a. consumers would wish to purchase more than was being supplied.
b. producers would be supplying more than consumers wished to purchase.
c. the quantity consumers wished to purchase would equal the quantity that producers
wished to supply.
d. there would be a tendency for the price of gasoline to rise.
Compared to the no-trade situation, when a country imports a good,
a. domestic consumers gain, domestic producers lose, and the gains outweigh the
losses.
b. domestic consumers lose, domestic producers gain, and the gains outweigh the
losses.
c. domestic consumers gain, domestic producers lose, and the losses outweigh the
gains.
d. domestic consumers gain, but domestic producers lose an equal amount.
Which of the following about Social Security is true?
a. The regressive nature of the Social Security benefit formula works to the advantage
of groups with below average earnings.
b. Groups with an below average life expectancy gain from Social Security because
they will typically draw retirement benefits over a more lengthy period of time.
c. The life expectancy of Hispanics at age 20 is generally lower than the figures for
whites and blacks.
d. Hispanics derive a higher return from their Social Security taxes than whites, and
substantially higher than blacks.
If a poor country is going to grow rapidly and achieve a high level of per capita income,
which of the following is most important?
a. abundant natural resources
b. substantial aid from rich countries
c. central planning and a high level of government expenditures
d. institutions and policies that encourage productive activities
The view that decision-maker expectations are based on actual outcomes observed
during the recent past is called the
a. rational expectations hypothesis.
b. adaptive expectations hypothesis.
c. permanent income theory.
d. recognition lag.
With regard to environmental programs and regulations, economic analysis indicates
that
a. environmental quality is something that people value and, therefore, are willing to
pay for.
b. people value many other things, but environmental values always come first.
c. income levels exert little impact on the demand for environmental quality.
d. the cost of an environmental policy matters little if the policy provides environmental
health benefits.
The marginal propensity to consume is defined as the
a. fraction of total income not spent on consumption.
b. proportion of any change in income that is spent on consumption.
c. fraction of total income spent on consumption.
d. fraction of a change in income that is saved.
Supply-side economics stresses that
a. budget deficits will stimulate demand, output, and employment.
b. budget deficits will lead to higher interest rates, which will weaken their
expansionary impact.
c. an increase in government expenditures financed by higher tax rates will cause real
income to rise.
d. changes in marginal tax rates exert important effects on real output and employment.
Within the AD/AS model, how does an economy adjust to an output beyond its
long-run capacity as a result of an unanticipated increase in aggregate demand?
a. Wage rates and resource prices will fall, causing a decrease in aggregate demand and
the restoration of equilibrium at a higher price level.
b. Long-run aggregate supply will increase, leading to a new equilibrium at a lower
price level.
c. Resource prices and real interest rates will rise causing output to fall back to its
long-run sustainable rate.
d. Lower real interest rates will stimulate demand and restore equilibrium at the initial
price level.
The persistent U.S. trade deficit with Japan is
a. surprising because one would expect that bilateral trade between two countries with
flexible exchange rates would be in balance.
b. surprising because the Japanese are high cost producers of many goods that are
purchased in large quantities by U.S. consumers.
c. not surprising because there is no reason why bilateral trade between two countries
should be in balance.
d. proof that the trade practices of the Japanese are unfair toward the United States.
If an improvement in the quality of education in the United States increases the
productivity of labor, this will
a. increase aggregate demand and decrease aggregate supply.
b. increase short-run aggregate supply and reduce aggregate demand.
c. decrease aggregate demand and increase short-run aggregate supply.
d. increase both long-run and short-run aggregate supply.
When there is only a weak link between work effort and reward
a. individuals will undertake fewer projects that create income.
b. taxing the rich and distributing the money to the poor becomes the best way to
increase the size of the economic pie.
c. corporations will profit more.
d. individuals have a strong incentive to undertake projects that generate income.
A Minnesota farmer buys a new tractor made in Iowa by a German company. As a
result,
a. U.S. investment and GDP increase, but German GDP is unaffected.
b. U.S. investment and German GDP increase, but U.S. GDP is unaffected.
c. U.S. investment, U.S. GDP, and German GDP are unaffected, because tractors are
intermediate goods.
d. U.S. investment, U.S. GDP, and German GDP all increase.
One-third of the world's population live in China and India. How did the growth rate of
these two countries compare with the growth of high income industrial countries during
1980-2009?
a. Per capita GDP increased less rapidly in China and India than in the high income
industrial countries.
b. Per capita GDP increased more rapidly in China and India than in the high income
industrial countries.
c. China grew more rapidly than the high income industrial countries, but India grew
less rapidly.
d. India grew more rapidly than the high income industrial countries, but China grew
less.
Figure 17-12
If the country illustrated in Figure 17-12 is initially trading without restrictions at a
world price of $1.00, the government revenue from a tariff of $0.50 per unit is
represented by area
a. c
b. e + g
c. i + e + f
d. d + e
e. e
When a firm is operating in a price-taker market, marginal revenue will always equal
a. average total cost.
b. one minus the elasticity of the market demand curve.
c. total revenue.
d. price.
Which of the following would help control the future growth of healthcare prices and
expenditures?
a. greater reliance on government financed healthcare reimbursement plans
b. an increase in the share of healthcare expenditures financed with low co-payment
insurance
c. an increase in the share of healthcare cost paid for either directly or from personal
medical savings accounts
d. the finance of prescription drugs for the elderly with a low co-payment insurance
plan under Medicare
Use the figure below to answer the following question(s).
Figure 10-4
Starting from long-run equilibrium at point F in Figure 10-4, at which of the following
points would short-run equilibrium occur following a decrease in resource prices?
a. I
b. F
c. G
d. H
Collusion among sellers will be less attractive when
a. it is difficult to determine if some firms are providing secret price cuts.
b. there are a small number of firms in the industry that are easily monitored.
c. the demand for the product is relatively stable.
d. the demand for the product is highly inelastic.
Which of the following groups is most likely to derive substantial benefits from the
Patient Protection and Affordable Care Act?
a. Healthy young people.
b. Individuals and families with incomes of more than 400 percent of the poverty level.
c. Individuals with pre-existing health problems.
d. The elderly.
Figure 3-17
Refer to Figure 3-17. When the price rises from P1 to P2, consumer surplus
a. increases by an amount equal to A.
b. decreases by an amount equal to B + C.
c. increases by an amount equal to B + C.
d. decreases by an amount equal to C.
Figure 3-23
Refer to Figure 3-23. It is apparent from the figure that
a. the good is inferior.
b. the demand for the good decreases as income increases.
c. the demand for the good conforms to the law of demand.
d. All of the above are correct.
Which of the following is responsible for decision making regarding the purchase and
sale of bonds by the Fed?
a. the chairman of the Board of Governors of the Federal Reserve System
b. the Federal Open Market Operations Committee
c. the U.S. Secretary of Treasury
d. the president, with the advice and consent of the chairman of the Council of
Economic Advisers.
Which of the following would most likely decrease the current demand for DVD
players?
a. an increase in consumer income
b. an increase in the prices of television sets, a complement for DVD players
c. an expectation that the price of DVD players would rise sharply in the near future
d. an increase in the price of VCRs, a substitute for DVD players
Traditionally, men have been more willing to accept jobs that
a. required continuous employment in the labor force.
b. require relocation if necessary to get a higher paying job.
c. have long working hours.
d. All of the above are correct.
If heavy federal borrowing pushes up real interest rates in the United States, which of
the following will most likely result?
a. an inflow of capital and an appreciation in the foreign exchange value of the dollar
b. an outflow of capital and a depreciation in the foreign exchange value of the dollar
c. an inflow of capital and a depreciation in the foreign exchange value of the dollar
d. an outflow of capital and an appreciation in the foreign exchange value of the dollar
Which of the following is the best example of a health-care service with a large public
good component?
a. a hair-growing treatment provided to a twenty-five year-old single man
b. heart bypass surgery provided to an employee and paid for by employer-funded
insurance
c. a vaccine that reduces the incidence of a communicable disease
d. a hip replacement provided to a senior citizen
