If consumers believe the price of LCD televisions will decrease in the future, this will
cause the demand for LCD televisions to increase now.
Members of management serving on the board of directors of a corporation are referred
to as outside directors.
If a country has an absolute advantage in producing a product, it must also have a
comparative advantage in producing that product.
A monopolistic competitor does not earn profits in the long run unless it can
successfully differentiate its product in the minds of its consumers.
The idea underlying Adam Smith’s “invisible hand” is that people tend to behave in
ways that go unnoticed in society.
In the market for gasoline, an increase in the federal excise tax on gasoline would shift
the supply curve up.
Inflation is generally the result of total spending growing faster than total production.
Scenario 21-1 Consider the following data for a closed economy: Y = $12 trillion
C = $8 trillion
I= $2 trillion
G = $2 trillion
TR = $2 trillion
T = $3 trillion
Based on the information above, what is the level of private saving in the economy?
A) $3 trillion
B) $4 trillion
C) $5 trillion
D) $8 trillion
A bank’s assets are
A) things owned by or owed to the bank.
B) things the bank owes to someone else.
C) a measure of the bank’s net worth.
D) always greater than the bank’s liabilities.
The following equations represent the demand and supply for silver pendants.
QD = 50 – 2P
QS = -10 + 2P What is the equilibrium price (P) and quantity (Q – in thousands) of
pendants?
A) P = $15; Q = 20 thousand
B) P = $50; Q = 10 thousand
C) P = $20; Q = 15 thousand
D) P = $10; Q = 30 thousand
Studies have shown that smoking cigarettes can cause heart disease. Assume this is true,
and favorable weather has increased the tobacco harvest in North Carolina. In the
market for cigarettes, these two developments would
A) decrease demand and decrease supply, resulting in an increase in the equilibrium
quantity and a decrease in the equilibrium price of cigarettes.
B) increase demand and increase supply, resulting in an increase in the equilibrium
quantity and an uncertain effect on the equilibrium price of cigarettes.
C) decrease demand and increase supply, resulting in a decrease in the equilibrium price
and an uncertain effect on the equilibrium quantity of cigarettes.
D) decrease demand and increase supply, resulting in an increase in both the
equilibrium price and the equilibrium quantity of cigarettes.
Suppose the demand curve for a product is vertical and the supply curve is upward
sloping. If a unit tax is imposed in the market for this product,
A) sellers bear the entire burden of the tax.
B) buyers bear the entire burden of the tax.
C) the tax burden will be shared equally between buyers and sellers.
D) buyers share the burden of the tax with government.
The major assets on a bank’s balance sheet are its
A) checking and savings account deposits.
B) loans, and checking and savings account deposits.
C) reserves, loans, and holdings of securities.
D) reserves, checking and savings account deposits.
E) reserves, loans, and checking account deposits.
If your nominal wage rises faster than the price level, we can say your real wage has
________ and the purchasing power of your income has ________.
A) fallen; fallen
B) fallen; risen
C) risen; risen
D) risen; fallen
An inward shift of a nation’s production possibilities frontier can occur due to
A) a reduction in unemployment.
B) a natural disaster like a hurricane or bad earthquake.
C) a change in the amounts of one good desired.
D) an increase in the labor force.
Suppose that in a market for used cars, there are good used cars and bad used cars
(lemons). Consumers are willing to pay as much as $9,000 for a good used car but only
$3,000 for a lemon. Sellers of good used cars value their cars at $7,500 each and sellers
of lemons value their cars at $1,500 each. Buyers cannot tell if a used car is reliable or
is a lemon. Based on this information, what is the likely outcome in the market for used
cars?
A) Sellers of good used cars will drop out of the market.
B) Sellers of good used cars will incur losses.
C) Sellers of lemons will drop out of the market.
D) Used cars will sell for $6,000.
When the United States sends money to the Philippines to help typhoon survivors, the
transaction is recorded in
A) the capital account.
B) the current account.
C) the financial account.
D) the foreign exchange account.
When the price of tortilla chips rose by 10 percent, the quantity of tortilla chips sold fell
4 percent, and the sale of dips (like salsa and bean dip) fell 8 percent. This set of facts
indicates that
A) the cross-price elasticity between tortilla chips and dips is 0.8, so the two are
substitutes.
B) the cross-price elasticity between tortilla chips and dips is -0.4, so the two are
complements.
C) the cross-price elasticity between tortilla chips and dips is -0.8, so the two are
complements.
D) the cross-price elasticity between tortilla chips and dips is 0.4, so the two are
substitutes.
Table 2-18
Table 2-18 shows the output per week of two people, Minnie and Mickey. They can
either devote their time to making hats or making umbrellas. Which of the following
statements istrue?
A) Mickey has an absolute advantage in making both products.
B) Minnie has an absolute advantage in making both products.
C) Minnie has an absolute advantage in making hats and Mickey in making umbrellas.
D) Minnie has an absolute advantage in making umbrellas and Mickey in making hats.
How much is a bond that pays $20 in coupon payments for 4 years and $1,000 at the
end of the fourth year worth if the interest rate is 5%?
A) $822.70
B) $893.62
C) $1,070.92
D) $1,080
According to the short-run Phillips curve, if unemployment is 2.4% and inflation is
3.7%, a decrease in the inflation rate might result in which of the following?
A) an increase in the unemployment rate to 3.4%
B) a decrease in the unemployment rate to 3.0%
C) a decrease in the demand for labor in the economy
D) Both A and C are correct answers.
Table 23-12
Using the table above, answer the following questions. The numbers in the table are in
billions of dollars.
a. What is the equilibrium level of real GDP?
b. What is the MPC?
c. If potential GDP is $7,000 billion, is the economy at full employment? If not, what is
the condition of the economy?
d. If the economy is not at full employment, by how much should government spending
increase so that the economy can move to the full employment level of GDP?
Why would an organization as large as the National Football League (NFL) incur large
legal expenses to try to prevent bars and restaurants from using their trademarked term
“Super Bowl” in their advertising?
Arturo runs a Taco Bell franchise. He is selling 250 Gordita Supremes per week at a
price of $2.75. If he lowers the price to $2.70, he will sell 251 Gordita Supremes. What
is the marginal revenue of the 251st Gordita Supreme? If selling the extra Gordita
Supreme adds $0.20 to Arturo’s costs, what will be the effect on his profit from selling
251 Gordita Supremes instead of 250?
The underground economy € the informal sector € can be a significant drag on the
economies of developing countries. Why are firms in the informal sector often less
efficient than firms in the formal sector?
In which types of business do owners have unlimited personal liability and in which do
owners have limited personal liability?
What are some reasons why the unemployment rate is typically lower in the United
States as compared to Canada and some Western European countries?
In 2004, hurricanes destroyed a large portion of Florida’s grapefruit crop. How did this
affect the market price and market quantity of grapefruit?
The “Big Mac Theory of Exchange Rates” tests the accuracy of purchasing power
parity theory. In July 2013, The Economist reported that the average price of a Big Mac
in the United States was $4.56. In Switzerland, the average price of a Big Mac at that
time was 6.50 Swiss francs. If the exchange rate between the dollar and the Swiss franc
was 0.93 Swiss francs per dollar, how would purchasing power parity predict the
exchange rate will change in the long run? Support your answer graphically.
What is economic growth?
Explain the three reasons the aggregate demand curve slopes downward.