Those who favor changes in the market for health care that would make it more like the
markets for other goods and services are generally in favor of universal health care
coverage.
A normal good is a good for which the demanded increases as income decreases,
holding everything else constant.
College education tends to result in a negative externality because the recipient does not
receive the full benefit of the education.
When Javier’s income increases by $5,000, he spends an additional $3,750 dollars. This
implies that his marginal propensity to consume is 0.75.
The short run is the time period during which a firm has at least one input constraint.
Adoption of the euro as both a medium of exchange and unit of account in the EU
countries serves to increase competition among European firms and decrease individual
countries’ monetary policy options when confronted by recessions and booms.
The Fed was founded in 1913 to serve as lender of last resort to bankers during bank
runs and panics.
Buyers will bear the entire burden of a unit tax if the demand curve for a product is
A) horizontal.
B) vertical.
C) downward sloping.
D) upward sloping.
India’s rapid growth can be explained by
A) reduced regulations and market-based reforms.
B) investment in human capital from 1947 through 2013.
C) the movement of workers from the agricultural sector to the manufacturing sector.
D) an increase in labor force participation.
You’re traveling in Japan and are thinking about buying a new kimono. You’ve decided
you’d be willing to pay $175 for a new kimono, but kimonos in Japan are all priced in
yen. If the exchange rate is 89 yen per dollar, what is the highest price in yen you’d be
willing to pay for a kimono? (Assume no taxes or duties are associated with the
purchase.)
A) 1.97 yen
B) 330.75 yen
C) 15,575 yen
D) 19,425 yen
Deadweight loss refers to
A) the opportunity cost to firms from producing the equilibrium quantity in a
competitive market.
B) the sum of consumer and producer surplus.
C) the loss of economic surplus when the marginal benefit equals the marginal cost of
the last unit produced.
D) the reduction in economic surplus resulting from not being in competitive
equilibrium.
If workers and firms expect that inflation will be 3 percent next year, and real wages are
not changing over time, by how much will nominal wages increase?
A) 3 percent
B) more than 3 percent
C) less than 3 percent
D) depends on actual inflation for next year
For how long does a patent give a firm the exclusive legal right to a product?
A) 10 years
B) 17 years
C) 20 years
D) 50 years
If a country’s currency is “pegged” to the dollar, its exchange rate is
A) floating.
B) flexible.
C) fixed.
D) undervalued.
Both monopolistically competitive firms and perfectly competitive firms maximize
profits
A) by producing where price equals average total cost.
B) by producing where marginal revenue equals average revenue.
C) by producing where marginal revenue is equal to marginal cost.
D) by producing where price equals average variable cost.
Following a tax cut by government, domestic investment will ________ and net exports
will ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
Figure 13-7 Figure 13-7 shows
short-run cost and demand curves for a monopolistically competitive firm in the
footwear market. Which of the following is the area that represents the profit or loss
experienced by the firm?
A) a loss represented by the rectangle P2uvP1
B) a loss represented by the rectangle P2uwP0
C) a loss represented by the rectangle P1vwP0
D) an accounting profit equal to P1vwP0
Pricing insurance policies is made difficult because buyers have more information than
sellers. This difficulty is an example of
A) moral hazard.
B) adverse selection.
C) asymmetric information.
D) the free rider problem.
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. All of the following are terms of trade that could possibly benefit both countries
except
A) 2/3 of a belt : 1 sword
B) 3/5 of a belt : 1 sword
C) 7/10 of a belt : 1 sword
D) 1/4 of a belt : 1 sword
If aggregate demand just decreased, which of the following may have caused the
decrease?
A) a decrease in exports
B) a decrease in the interest rate
C) a decrease in the price level
D) a decrease in imports
At a recent faculty meeting, Lorraine Waverly, president of Skywalker College,
announced that enrollment is up by 12 percent over the previous semester. If enrollment
the previous semester was 3,250 students, what is the student enrollment this semester?
A) 390
B) 2,860
C) 3,640
D) 4,030
A change in which variable will change the market demand for a product?
A) the price of the product
B) population
C) technology
D) the prices of substitutes in production
Which of the following is a normative economic statement?
A) The price of gasoline is too high.
B) The current high price of gasoline is the result of strong worldwide demand.
C) When the price of gasoline rises, the quantity of gasoline purchased falls.
D) When the price of gasoline rises, transportation costs rise.
To decrease the money supply, the Federal Reserve could
A) lower the discount rate.
B) raise income taxes.
C) raise the required reserve ratio.
D) conduct an open market purchase of Treasury securities.
Commodity money is a good
A) used as money that has no secondary use.
B) that is designated as money by law.
C) used as money that also has value independent of its use as money.
D) used as money that has no intrinsic value.
Figure 16-5
Suppose the firm represented in the diagram decides to use a two-part pricing strategy
such that it charges a fixed fee and a per-unit price equal to the monopoly price. What is
the per-unit price?
A) $28
B) $24
C) $12
D) $8
As a percentage of GDP, exports are greater than imports for which of the following
countries?
A) the United Kingdom
B) France
C) the United States
D) China
Explain why economics is considered a social science.
Describe how a lender can lose during inflation if the inflation is unanticipated and the
loan is a fixed-interest-rate loan. How would a variable-interest-rate loan (one that
adjusts over the contract period) eliminate these loses?
Suppose the price of gasoline in July 2004 averaged $1.35 a gallon and 15 million
gallons a day were sold. In October 2004, the price averaged $2.15 a gallon and 14
million gallons were sold. If the demand for gasoline did not shift between these two
months, use the midpoint formula to calculate the price elasticity of demand. Indicate
whether demand was elastic or inelastic.
Suppose that the required reserve ratio is 20 percent and you deposit $50,000 of
currency into Comerica Bank. What is the potential increase in deposits in the banking
system brought about by your deposit? What is the potential change in the money
supply?
Explain why selling output at a price below that at which marginal revenue equals
marginal cost (MR = MC) might serve to deter entry of a potential competitor.
Explain whether a monopoly that maximizes profit will also be maximizing revenue
and production.