If short-run equilibrium GDP is above potential GDP, prices will eventually rise.
a. True
b. False
At any given moment there is one exchange rate
a. for currencies in the free world.
b. between every pair of currencies.
c. for all the world’s currencies.
d. established by the Federal Reserve Board.
At his profit-maximizing level of output, a monopolist’s average total cost curve is
tangent to his demand curve. The monopolist
a. is earning a negative economic profit.
b. may or may not be earning a negative economic profit.
c. is earning zero economic profit.
d. is earning a positive economic profit.
An increase in price will decrease demand.
a. True
b. False
Who of the following has been prominently accused of acting on the basis of the
“edifice complex?”
a. the Environmental Protection Agency?
b. A. C. Pigou
c. the Army Corps of Engineers
d. environmental activists
The reason that the Fed does not actively use discount rate policy to control the money
supply is because the Fed
a. acts when a majority of member banks agree on policy and the banks rarely agree.
b. earns interest on discounting and cannot afford to lose the revenue.
c. does not know how banks will respond to discount rate changes.
d. has been directed by Congress to set the discount rate at a permanent level.
The price level effects consumer spending through changes in real
a. disposable income.
b. interest rates.
c. wealth.
d. GDP.
A consumer will consume the combination of goods at the point of tangency between
the budget line and the indifference curve.
a. True
b. False
If England uses one week’s time to produce ten yards of cloth or two barrels of wine
and Portugal uses one week’s time to produce twelve yards of cloth or six barrels of
wine, then England has a comparative advantage in the production of cloth.
a. True
b. False
When taxes are decreased, disposable income increases even though GDP is unchanged.
a. True
b. False
Critics of Fed independence argue that
a. monetary policy and fiscal policy are necessarily inconsistent.
b. political control ensures low rates of inflation.
c. monetary policy run by specialists is inherently inflationary.
d. unelected officials are undemocratic.
According to William Safire, “helpfulism” is basically protectionism.
a. True
b. False
The market mechanism provides a financial incentive for firms to minimize the
pollution they create.
a. True
b. False
The elasticity formula solves the units problem because percentages are unaffected by
the units of measure.
a. True
b. False
Price leadership works only if there is a single, dominant firm in the oligopoly.
a. True
b. False
The addition to total revenue resulting from one more unit of output is called marginal
revenue.
a. True
b. False
On a traditional supply and demand diagram,
a. price is measured along the horizontal axis and quantity along the vertical axis.
b. price is measured along the vertical axis and quantity along the horizontal axis.
c. quantity demanded is measured along the horizontal axis, quantity supplied is
measured along the vertical axis, and price is indicated on the contour lines.
d. quantity is measured along both axes and price is indicated on the contour lines.
Increases in stock market wealth have caused Americans to increase their saving rate.
a. True
b. False
Which of the following observations is true?
a. Environmental damage can be reduced to zero.
b. Pollution results from a price mechanism malfunction.
c. Charging those who emit pollution is not a way of dealing with pollution problems.
d. Public interest requires pollution be maintained at its free-market level.
In a competitive market economy, a resource in short supply will be allocated
a. so that each firm gets enough to keep producing some portion of its output.
b. according to how much each firm purchased before the shortage.
c. to those firms that can make the most profitable use of it.
d. by government fiat.
The market demand curve
a. and the individual demand curve are synonymous.
b. is calculated by multiplying the number of consumers by the individual demand
curve.
c. shows how the total quantity demanded of some good changes as price changes,
other things held constant.
d. can be calculated even if individual demand curves are unknown.
Which of the following observations is true?
a. In the long run, more costs become variable.
b. Fixed costs can be completely varied if the time period is sufficient.
c. Fixed costs arise when some types of inputs can be bought only in big batches.
d. Variable costs arise when inputs have a large productive capacity.
Economists favor a negative income tax because they believe
a. that it will create more jobs for economists to monitor the program.
b. the current welfare programs have excessively high work incentives, which result in
less total work.
c. it is more efficient than the existing welfare system because NIT provides better work
incentives.
d. All of the above are true.
A decrease in the price of rice from 50 cents to 40 cents a pound increases consumption
from 16 to 20 tons a week in Gainesville and from 160 to 200 tons in the larger city of
Miami. The elasticity of demand for rice is
a. greater in Miami than in Gainesville, even taking into account the population
difference.
b. greater in Gainesville than in Miami in spite of the population difference.
c. equal in Gainesville and Miami regardless of the population difference.
d. impossible to compare because of the population difference.
Assume an economy with an upward-sloping aggregate supply curve and an MPC of .
80. An increase in investment spending of $50 billion will most likely increase total
income by
a. $200 billion.
b. $40 billion.
c. more than $200 billion.
d. more than $50 billion but less than $250 billion.
Aggregate demand is a ____ rather than a ____.
a. fixed number, concept
b. schedule, fixed number
c. set number, concept
d. government aggregate, private aggregate
In computing GDP, new home construction adds to
a. consumption.
b. investment.
c. government spending.
d. net exports.
The growth rate of potential GDP depends, among other factors, on the
a. rate of technological progress.
b. unemployment rate.
c. size of the labor force.
d. rate of capital stock depreciation.
Prohibiting the use of “dirty” fuels by industry is an example of
a. voluntarism.
b. direct controls.
c. taxes on emissions.
d. none of the above.
A tariff is a tax on imports imposed by the country that is importing the goods.
a. True
b. False
A dominant strategy is one that is best for one player regardless of the strategy chosen
by the other player.
a. True
b. False