According to Nobel laureate Douglass North, one reason why the Industrial Revolution
occurred in England before many other countries was because the king in England
consistently maintained control over the court system and the government.
In the market for factors of production, firms earn income by selling factors of
production to households.
An economy without money would have no exchanges of goods and services.
In the circular flow model, households supply resources such as labor services in the
factor market.
A tariff is a tax imposed by a government on imports.
If a monopolist’s price is $50 at the output where marginal revenue equals marginal cost
and average total cost is $43, then the average profit is $7.
In the short run, if average product is at its maximum, then average variable cost is at its
minimum.
For most goods and services, the burden of a tax is on the sellers.
If consumers believe the price of tablet computers will increase in the future, this will
cause the demand for tablet computers to decrease now.
Examining the conditions that could lead to a recession in an economy is an example of
macroeconomics topic.
The ability of a firm or country to produce a good or service at a lower opportunity cost
than other producers is called absolute advantage.
The Fed can use contractionary monetary policy in an attempt to keep inflation from
increasing.
If a firm could practice perfect price discrimination, it would
A) allow resale of its product.
B) charge every buyer a different price.
C) charge a price based on the quantity of a product bought.
D) use odd pricing.
Table 9-1
Linda and Sandy own The Preppy Puppy, a dog grooming business. Table 9-1 lists the
number of dogs Linda and Sandy can each bathe and groom in one week. Select the
statement that accurately interprets the data in the table.
A) Linda has an absolute advantage in dog bathing and Sandy has an absolute
advantage in dog grooming.
B) Sandy has an absolute advantage in dog bathing and Linda has an absolute
advantage in dog grooming.
C) Sandy has an absolute advantage in dog bathing and dog grooming.
D) Linda has an absolute advantage in dog bathing and dog grooming.
Table 2-6
Table 2-6 shows the output per week of two people, James and Lucy. They can either
devote their time to making bracelets or making necklaces. What is Lucy’s opportunity
cost of making a wagon?
A) 3/4 of a wagon
B) 3 wagons
C) 1 1/3 tricycles
D) 2 tricycles
Which of the following is not a shortcoming of the concentration ratio as a measure of
the extent of competition in an industry?
A) Concentration ratios do not include sales in the United States by foreign firms.
B) Concentration ratios are calculated for the national market, even though the
competition in some industries is mainly local.
C) Concentration ratios assign weights to only the four largest firms in an industry.
D) Concentration ratios do not address the fact that competition sometimes exists
between firms in different industries.
Actions taken by investors who sell a country’s currency in anticipation of buying it
back later at a lower price is known as
A) purchasing power parity.
B) currency arbitrage.
C) destabilizing speculation.
D) exchange rate manipulation.
A key part of Microsoft’s business strategy in the video game console market has been
A) to wait until competitors introduce new technology in their products before
incorporating the technology in its products.
B) to concentrate on selling its products through large discount retailers like Wal-Mart.
C) the innovation of new products which initially have little to no competition.
D) to dominate the market by offering low-end products and beating its competitors’
prices.
Figure 9-3
Since 1953 the United States
has imposed a quota to limit the imports of peanuts. Figure 9-3 illustrates the impact of
the quota. With a quota in place, what is the quantity consumed in the domestic market?
A) 10 million pounds
B) 28 million pounds
C) 34 million pounds
D) 40 million pounds
Figure 15-12
Figure 15-12 shows the cost and
demand curves for a monopolist. If this industry was organized as a perfectly
competitive industry, the market output and market price would be
A) output = 62; price = $24.
B) output = 83; price = $22.
C) output = 62; price = $18.
D) output = 104; price = $20.80.
Suppose that when the price of hamburgers increases, the Ruiz family increases their
purchases of hot dogs. To the Ruiz family,
A) hamburgers and hot dogs are complements.
B) hamburgers and hot dogs are inferior goods.
C) hamburgers and hot dogs are normal goods.
D) hamburgers and hot dogs are substitutes.
When Americans increase their demand for Japanese goods,
A) the demand for dollars will rise, and the demand for yen will rise.
B) the demand for dollars will fall, and the demand for yen will rise.
C) the supply of dollars will rise, and the demand for yen will rise.
D) the supply of dollars will fall, and the demand for yen will fall.
An increase in government purchases will increase aggregate demand because
A) government expenditures are a component of aggregate demand.
B) consumption expenditures are a component of aggregate demand.
C) the decline in the price level will increase demand.
D) the decline in the interest rate will increase demand.
Economist Kenneth Arrow has shown mathematically that no system of voting will
consistently represent the underlying preferences of voters. This finding is called
A) the Arrow impossibility theorem.
B) Arrow’s median voter model.
C) Arrow’s Amendment to the public choice model.
D) Arrow’s majority vote paradox.
In the United States today, how much gold will the Federal Reserve give you in
exchange for $1?
A) none
B) $1 worth of gold (based on the market price of an ounce of gold at the time you
redeem the gold)
C) 1 ounce of gold
D) 1/35th of an ounce of gold
Adam Smith’s behavioral assumption about humans was that people
A) typically act irrationally.
B) usually act in a rational, self-interested way.
C) are consistently greedy.
D) typically act randomly.
Which of the following is the correct way to describe equilibrium in a market?
A) At equilibrium, demand equals supply.
B) At equilibrium, quantity demanded equals quantity supplied.
C) At equilibrium, market forces no longer apply.
D) At equilibrium, scarcity is eliminated.
The Congressional Budget Office estimates that the Patient Protection and Affordable
Care Act (ACA) will
A) increase government spending by just under $1 trillion over 10 years.
B) cost the government significantly more than the additional taxes and fees enacted
under the law will bring in.
C) eliminate the budget deficit within 10 years.
D) actually reduce government spending over a 20 year period.
The period of time from 1,000,000 B.C. to 1300 A.D. was a period of
A) no sustained economic growth.
B) slow and steady economic growth.
C) moderate economic growth.
D) rapid and sustained economic growth.
When the economy reaches a trough in a business cycle, which of the following will
occur?
A) Income, production, and employment will continue to fall.
B) Income, production, and employment will begin to rise.
C) Income and production will rise, but employment will continue to fall.
D) Employment rises, but income and production will continue to fall.
In the following table, fill in the columns for your return on investment if the price of
your house increased or decreased by 20 percent, based on the down payments
specified in the first column. Return on Your Investment From
Is a typical person likely to gather more information when buying a new computer or
when voting for a member of the U.S. Senate? Why?
What does the word “marginal” mean in economics? What is a marginal benefit? What
is a marginal cost? What is marginal analysis?
Explain how the CPI is constructed.
Suppose the United States experiences a long period of relatively stable prices while
other countries experience long periods of inflation. How will this affect U.S. net
exports?
Present two arguments as to why the Fed should adopt inflation targeting as a
framework for monetary policy.