When a country allows trade and becomes an importer of steel,
a. the losses of the domestic producers of steel exceed the gains of the domestic
consumers of steel.
b. the losses of the domestic consumers of steel exceed the gains of the domestic
producers of steel.
c. the gains of the domestic producers of steel exceed the losses of the domestic
consumers of steel.
d. the gains of the domestic consumers of steel exceed the losses of the domestic
producers of steel.
After the ban on the production and sale of alcohol ended in 1933,
a. the quality of alcohol sold declined.
b. the murder rate declined.
c. the profit rate for bootleg sellers of alcohol increased.
d. all of the above occurred.
The crowding-out effect stresses that increased government borrowing to cover a
budget deficit will cause
a. a higher interest rate and depreciation of the U.S. dollar.
b. a higher interest rate and appreciation of the U.S. dollar.
c. a lower interest rate and depreciation of the U.S. dollar.
d. a lower interest rate and appreciation of the U.S. dollar.
e. no change in the interest rate and depreciation of the U.S. dollar.
At a discount rate of 6 percent, what is the net present value of an investment project
expected to yield $1,000 per year (to be received at year end) for the next three years?
a. $3,000
b. $2,829
c. $2,673
d. There is insufficient information to determine whether the project should be
undertaken.
As the War on Poverty programs were instituted and transfer payments expanded in the
last half of the 1960s, what happened to the poverty rate?
a. After rising for several decades, the official poverty rate has been declining since
1968.
b. After falling for several decades, the official poverty rate leveled off in the 1970s,
and it has been relatively stable since that time.
c. The poverty rate declined prior to the War on Poverty period, and it has continued to
decline.
d. The poverty rate rose prior to the War on Poverty period and has continued to rise.
The height of the supply curve at a quantity of 100 represents the
a. total value of all 100 units to consumers.
b. minimum price required to induce a producer to supply the hundredth unit.
c. equilibrium price of the good regardless of the position of the demand curve.
d. profit derived by producers from the sale of the hundredth unit.
Which of the following reforms would reduce the likelihood of a future financial crisis?
a. increased regulations that would make it more difficult for lenders to foreclose on
borrowers who are delinquent on mortgage payments
b. expansion of government-sponsored lending in order to make loanable funds more
readily available to sub-prime borrowers
c. institutional changes that would strengthen the property rights of shareholders and
provide financial managers with a stronger incentive to pursue long-run objectives
d. frequent regulatory changes in order to search for and find the combination that
would be most effective
The type of unemployment resulting from the fact that labor market information is less
than perfect is called
a. frictional unemployment.
b. natural unemployment.
c. cyclical unemployment.
d. structural unemployment.
Under a fixed-rate unified currency regime, each country belonging to the system
a. may pursue an independent monetary policy.
b. gives up its monetary policy independence to one central bank with the power to
expand and contract the money supply.
c. is committed to conducting highly expansionary monetary policy in order to maintain
the convertibility of its currency.
d. must fix its domestic interest rates in order to maintain the convertibility of its
currency.
The best definition of inflation is
a. a temporary increase in prices.
b. an increase in the price of one important commodity such as food.
c. a persistent increase in the general level of prices as measured by a price index.
d. an increase in the purchasing power of the dollar.
An increase in incomes in other countries, other things equal, would tend to cause U.S.
a. exports to decrease and imports to increase.
b. exports to increase and imports to increase.
c. imports to decrease and exports to decrease.
d. imports to increase and exports would remain unchanged.
e. imports to remain unchanged and exports to increase.
Use the figure below to answer the following question(s).
Figure 4-12
Refer to Figure 4-12. The supply curve S and the demand curve D1 indicate initial
conditions in the market for college textbooks. A new government program is
implemented that grants students a $30 per textbook subsidy on every textbook they
purchase, shifting the demand curve from D1 to D2. Which of the following is true for
this subsidy given the information provided in the exhibit?
a. Textbook buyers will receive an actual benefit of $10 from the subsidy, while
textbook sellers will receive an actual benefit of $20 from the subsidy.
b. Textbook buyers will receive an actual benefit of $20 from the subsidy, while
textbook sellers will receive an actual benefit of $10 from the subsidy.
c. Textbook buyers will receive the full $30 benefit from the subsidy.
d. Textbook sellers will receive the full $30 benefit from the subsidy.
Which of the following will most likely increase long-run aggregate supply?
a. an increase in the rate of investment
b. an increase in resource prices
c. an increase in the minimum wage
d. an increase in the expected inflation rate
A tradeoff exists between a clean environment and a higher level of income in that
a. studies show that individuals with higher levels of income actually pollute less than
low-income individuals.
b. efforts to reduce pollution typically are not completely successful.
c. laws that reduce pollution raise costs of production and reduce incomes.
d. by employing individuals to clean up pollution, employment and income both rise.
Which of the following is NOT true of opportunity cost?
a. Opportunity costs are subjective because they depend upon how the decision-maker
values his or her options.
b. Opportunity costs are only the monetary costs of lost options.
c. Opportunity costs are the highest-valued alternative sacrificed in order to choose an
option.
d. Only the decision-maker can determine his or her opportunity costs for any particular
action.
Which of the following is true for a price-searcher firm?
a. Its marginal revenue curve will lie below its demand curve.
b. Its marginal revenue curve will lie above its demand curve.
c. Its marginal revenue curve is equal to its demand curve.
d. Its marginal revenue curve is horizontal at the market equilibrium price.
An increase in the demand for a product will cause
a. both the demand for and prices of the resources used to produce the product to
decline.
b. both the demand for and prices of the resources used to produce the product to
increase.
c. the demand for the resources used to produce the product to increase and their prices
to decline.
d. the demand for the resources used to produce the product to decline and their prices
to increase.
If air travel and bus travel are substitutes,
a. an increase in the price of bus travel will decrease the demand for air travel.
b. a decrease in the price of bus travel will decrease the demand for air travel.
c. an increase in the price of bus travel will generally have no effect on the demand for
air travel.
d. an increase in the price of bus travel will shift the demand curve for air travel to the
left.
Figure 4-20
Refer to Figure 4-20. The burden of the tax on buyers is
a. $1.00 per unit.
b. $1.50 per unit.
c. $2.00 per unit.
d. $3.00 per unit.
If Alexander has a positive rate of time preference, he will
a. prefer to have goods now rather than two years from now.
b. prefer to have goods two years from now rather than during the current period.
c. prefer apples to oranges.
d. be unwilling to pay an interest rate in order to acquire purchasing power now.
Which of the following would cause the money supply in the United States to decrease?
a. an increase in reserve requirements
b. a decrease in the discount rate
c. a purchase of bonds by the Federal Reserve
d. an increase in the world supply of gold
Which of the following is part of the economic way of thinking?
a. The accuracy of the assumptions is the best test of an economic theory.
b. When an option becomes more expensive, people will be less likely to choose it.
c. The value of a good can be determined objectively by measuring the amount of labor
required for its production.
d. All of the above.
In the aggregate demand-aggregate supply model, the short-run effects of an
unanticipated increase in the money supply will be
a. lower real interest rates and an increase in aggregate demand.
b. higher real interest rates and an increase in aggregate demand.
c. lower real interest rates and a reduction in aggregate demand.
d. higher real interest rates and a reduction in aggregate demand.
Which of the following is true of marginal revenue for a monopolist that charges a
single price?
a. P = MR because there are no close substitutes for the monopolist’s product.
b. P > MR because the monopolist must decrease price on all units sold in order to sell
an additional unit.
c. P < MR because the monopolist must decrease price on all units sold in order to sell
an additional unit.
d. P = MR only at the profit-maximizing quantity.
Marginal revenue product is the
a. additional revenue from one additional dollar increase in price.
b. change in the revenue product resulting from one additional unit of input.
c. additional revenue from one additional unit of input.
d. change in revenue resulting in one additional dollar in price.
Which one of the following factors would reduce the quantity of money balances that
households would want to hold?
a. higher prices
b. a rise in inflation
c. higher nominal interest rates
d. an expansion in nominal income (nominal GDP)
A competitive price-searcher firm is currently producing 10 units of output. At this level
of output the firm is charging a price equal to $10, has marginal revenue equal to $6,
has marginal cost equal to $6, and has average total cost equal to $12. From this
information we can conclude that
a. the firm is currently maximizing its profit.
b. the profits of the firm are positive.
c. firms are likely to enter this market in the long run.
d. the firm would earn more profit by expanding output
Monetary policy can be most accurately described as
a. the use of government taxation and expenditures to achieve macroeconomic goals.
b. the use of the government’s regulatory powers to improve economic efficiency.
c. the government provision of goods to improve economic efficiency.
d. the deliberate control of the money supply to achieve macroeconomic goals.
Markets may have difficulty providing the proper quantity of a public good because
a. individuals will tend to become free riders, and private firms will have difficulty
generating enough revenue to produce an efficient quantity of the good.
b. the good generally has a very large value to consumers relative to its cost of
production.
c. the good is one that tends to benefit a large number of people.
d. the large profit involved in the production of a public good is generally too much for
private firms to effectively pay out to shareholders.
In the long run, neither competitive price takers nor competitive price searchers will be
able to earn economic profits because
a. entry barriers into these markets are high, raising the costs of each firm.
b. the government will dictate moderate prices for these firms.
c. competition will force prices down to the level of per-unit production costs.
d. marginal revenue is always less than marginal cost when barriers to entry are low.