Table 7-6 Production and
Consumption Production
Without Trade With Trade
Estonia and Morocco can produce both swords and belts. Table 7-6 shows the
production and consumption quantities without trade, and the production numbers with
trade. Which country has a comparative advantage in producing belts?
A) Estonia
B) Morocco
C) both countries
D) neither country
If the U.S. government implements a tariff on Chinese tire imports all of the following
would be made worse off except
A) U.S. consumers.
B) American tire retailers.
C) Chinese tire manufacturers.
D) American tire manufacturing workers.
Steve Ballmer is the Chief Executive Officer of Microsoft as well as a member of
Microsoft’s board of directors. Ballmer is therefore classified as an
A) inside director.
B) outside director.
C) independent director.
D) unbiased director.
The largest and fastest-growing category of federal government expenditures is
A) grants to state and local governments.
B) interest on the national debt.
C) national park spending.
D) transfer payments.
The level of aggregate supply in the long run is not affected by
A) changes in technology.
B) changes in the capital stock.
C) changes in the price level.
D) changes in the number of workers.
To calculate GDP using the value-added method, one would add up
A) the market value of final goods and services produced during a particular period.
B) only the value added by the underground economy.
C) the value added by each firm involved in the production of final goods and services.
D) the market value of intermediate goods and services produced during a particular
period.
Which of the following is not an example of an efficiency-equity trade-off faced by
economic agents?
A) According to an article by in the American Journal of Public Health by Edward
Kaplan and Michael Merson of Yale University School of Medicine, the federal
government’s current method of allocating HIV-prevention resources is not
cost-effective. Instead of allocating resources to states in proportion to reported AIDS
cases, resources should flow first to those activities that prevent more infections per
dollar and then to less and less effective combinations of programs and populations
until funds are exhausted, even if it means that some populations would be left without
any prevention services.
B) Concerned about the falling birth rate, the French government has pledged more
money for families with three children, in an effort to encourage working women to
have more babies.
C) The growing demand for corn by ethanol producers has led to a surge in the price of
tortillas, a staple in the Mexican diet. To quell public outcry over rising tortilla prices,
the Mexican government released government corn stocks at prices well below the
market, and pressured states to impose price ceilings on tortillas.
D) Some U.S. colleges cut back on merit scholarships since these programs siphon
money from need-based programs, thus harming lower-income students with greater
financial need.
eBay is an online auction site where more than 200 million items are auctioned
annually. What type of auctions are run on eBay?
A) noncooperative auctions
B) second-price auctions
C) cooperative auctions
D) double-blind auctions
The new classical model has as its central idea that
A) wage and price stickiness explains fluctuations in real GDP.
B) workers and firms have rational expectations.
C) the Federal Reserve should adopt a monetary growth rule.
D) shifts in aggregate demand have no impact on real GDP.
In a graph with output on the horizontal axis and total revenue on the vertical axis, what
is the shape of the total revenue curve for a perfectly competitive seller?
A) U-shaped
B) inverted U-shaped
C) a horizontal line
D) a ray from the origin
In the short run, marginal product of labor increases at first and then falls because
A) as more labor is hired, they are not as skilled as the first ones hired.
B) there are fewer opportunities for division of labor and specialization when fewer
workers are hired.
C) managerial inefficiency sets in when a firm gets too large.
D) the new workers do not have as much experience as those who have been with the
firm for a long time and therefore are not as productive.
Figure 12-10
The firm’s short-run supply curve is its
A) marginal cost curve.
B) marginal cost curve from and above.
C) marginal cost curve from c and above.
D) marginal cost curve from d and above.
________ in taxes will decrease consumption spending, and ________ in transfer
payments will increase consumption spending.
A) An increase; an increase
B) A decrease; an increase
C) An increase; a decrease
D) A decrease; a decrease
Article Summary. In an August 2013 speech from the Lincoln Memorial, President
Obama was expected to emphasize that increased economic equality is needed to
improve racial equality. Economic gaps based on race have endured for 50 years,
with the differences in unemployment rates between blacks and whites remaining
virtually unchanged and the gap in wealth actually increasing. “If you look at 50
years after the 1960s civil rights movement, the most stubborn and persistent
challenge when it comes to the nation’s racial challenge remains in the areas of
economics and wealth,” said Marc Morial, president of the National Urban
League.
Source: Zachary A. Goldfarb, “For Obama, 50 years after historic march,
economic equality the path to racial justice,” Washington Post, August 17, 2013.
The article mentions increased economic equality is needed in terms of wealth. How
would a more equal distribution of wealth differ from a more equitable distribution of
wealth?
A) They both mean the same thing, which is a more even distribution of wealth.
B) A more equal distribution of wealth is a more fair distribution, and a more equitable
distribution of wealth is a more even distribution.
C) A more equal distribution of wealth is a more even distribution, and a more equitable
distribution of wealth is a more fair distribution.
D) They both mean the same thing, which is a more fair distribution of wealth.
Which of the following is the best example of a quota?
A) a subsidy from the U.S. government to domestic manufacturers of tires to enable
them to compete more effectively with foreign producers
B) a limit on the quantity of tires that can be imported from a foreign country
C) a 40% fee imposed on all imported tires
D) a tax placed on all tires sold in the domestic market to help offset the impact of lost
jobs in the domestic tire industry.
Wage differences can be explained by all of the following except
A) compensating differentials.
B) differences in marginal revenue products.
C) economic discrimination.
D) comparable worth.
In a graph with output on the horizontal axis and total revenue on the vertical axis, what
is the shape of the total revenue curve for a perfectly competitive seller?
A) U-shaped
B) inverted U-shaped
C) a horizontal line
D) a ray from the origin
Figure 3-8
The graph in this figure illustrates an initial competitive equilibrium in the market for
motorcycles at the intersection of D1 and S1 (point A). If there is an increase in the
wages of motorcycle workers and an increase in the price of motorcycle insurance, a
complement to motorcycles, the equilibrium could move to which point?
A) A
B) B
C) C
D) E
A student who just graduated from college but has not found a job would most likely be
A) frictionally unemployed.
B) structurally unemployed.
C) cyclically unemployed.
D) seasonally unemployed.
Suppose the U.S. government encouraged new teachers to take jobs in underperforming
schools by paying the new teachers a $20,000 bonus. These teachers would be
exemplifying the economic idea that
A) people are rational.
B) people respond to economic incentives.
C) optimal decisions are made at the margin.
D) equity is more important than efficiency.