Suppose there has been an increase in investment. As a result, real GDP will ________
in the short run, and ________ in the long run.
A) increase; increase further
B) increase; decrease to its initial value
C) decrease; decrease further
D) decrease; increase to its initial level
The average total cost of production
A) is the extra cost required to produce one more unit.
B) equals the explicit cost of production.
C) equals total cost of production divided by the level of output.
D) equals total cost of production multiplied times the level of output.
Table 2-9
Table 2-9 shows the number of labor hours required to produce a wristwatch and a
pound of rice in Japan and Thailand. If the two countries specialize and trade, who
should export rice?
A) There is no basis for trade between the two countries.
B) Japan
C) Thailand
D) They should both be exporting rice.
Is a monopolistically competitive firm allocatively efficient?
A) No, because it does not produce at minimum average total cost.
B) Yes, because it produces where marginal cost equals marginal revenue.
C) No, because price is greater than marginal cost.
D) Yes, because price equals average total cost.
Suppose the government wants to finance housing for low-income families by placing a
tax on the purchase of luxury homes. Assume the government defines a luxury home as
a home that is purchased for at least $1 million. This tax is consistent with the
A) benefits-received principle.
B) social equity principle.
C) ability-to-pay principle.
D) horizontal-equity principle.
In the United States, over the past 40 years federal revenues as a share of gross
domestic product have
A) risen steadily and now are about 40 percent.
B) ranged between 17 and 19 percent.
C) fallen below 10 because of rapid economic growth.
D) been limited by law to no more than 20 percent.
The ability of a firm to charge a price greater than marginal cost is called
A) monopoly power.
B) price-making power.
C) cost-plus pricing.
D) market power.
Suppose in 2014, you purchase a house built in 2003. Which of the following would be
included in the gross domestic product for 2014?
A) the value of the house in 2014
B) the value of the house in 2003
C) the value of the house in 2014 minus depreciation
D) the value of the services of the real estate agent
According to new growth theory, the accumulation of ________ capital is subject to
diminishing returns at the ________ level, but not at the level of the economy as a
whole.
A) physical; firm
B) technological; personal
C) knowledge; firm
D) physical; production
Many airlines have not reduced or eliminated fuel surcharges despite the price of oil
dropping. A logical reason for this is that the decline in fuel prices ________ the supply
of airline tickets while at the same time the demand for airline tickets ________, so
airline ticket prices still increased.
A) decreased; increased
B) decreased; decreased
C) increased; increased
D) increased; decreased
A study conducted by Alberto Alesina and Lawrence Summers concluded that countries
with highly independent central banks had ________ than countries whose central
banks had little independence.
A) higher unemployment rates
B) lower unemployment rates
C) higher inflation rates
D) lower inflation rates
All of the following represent differences between stocks and bonds except
A) a stock can possibly pay dividends forever, but bonds have a fixed number of
payments.
B) differences of opinion about a stock’s future may vary considerably but there is less
difference about a bond’s future.
C) the future growth of a stock is more uncertain than the payments of a bond.
D) bonds represent partial ownership in a firm but stocks do not.
According to the World Bank, in 2006, China’s GDP was approximately $2.7 trillion (or
$2,700 billion). That same year, India’s GDP was approximately $906.3 billion. With
which of the following populations would China’s standard of living have been
considered higher than India’s that year?
A) China’s population = 1.3 billion; India’s population = 1.1 billion
B) China’s population = 8.3 billion; India’s population = 1.1 billion
C) China’s population = 500 million; India’s population = 125 million
D) China’s population = 3.5 billion; India’s population = 1.1 billion