How will an interest rate increase in the United States affect equilibrium in the market
for dollars against foreign currencies? (Assume the exchange rate is stated in terms of
foreign currency per U.S. dollar.)
A) The equilibrium exchange rate will increase, and the equilibrium quantity of dollars
traded cannot be determined.
B) The equilibrium exchange rate will decrease, and the equilibrium quantity of dollars
traded cannot be determined.
C) The equilibrium exchange rate cannot be determined, and the equilibrium quantity of
dollars traded will increase.
D) The equilibrium exchange rate will increase, and the equilibrium quantity of dollars
traded will increase.
Figure 3-2
A decrease in the number of firms in the market would be represented by a movement
from
A) A to B.
B) B to A.
C) S1 to S2.
D) S2 to S1.
Zane’s Vanes is a service that restores old weather vanes. Zane has just spent $125
purchasing a 1920s era weather vane which he expects to restore and sell for $500 once
the work is completed. After having spent $125, Zane realizes that he will need to spend
an additional $200 on materials to complete the restoration. Alternatively, he can sell
the weather vane without restoring it for $200. What is his marginal cost to complete
the restoration?
A) $75
B) $125
C) $200
D) $300
Academic book publishers hire editors, designers, and production and marketing
managers who help prepare books for publication. Because these employees work on
several books simultaneously, the number of people the company hires will not go up
and down with the quantity of books the company publishes during any particular year.
The salaries and benefits of people in these job categories will be included in
A) fixed cost and marginal cost but not variable cost.
B) fixed cost but not variable cost and total cost.
C) marginal cost and total cost but not fixed cost.
D) fixed cost and total cost but not variable cost.
Table 2-4
Table 2-4 shows the output per day of two gardeners, George and Jack. They can either
devote their time to mowing lawns or cultivating gardens.
Which of the following statements istrue?
A) Jack has a comparative advantage in both tasks.
B) George has a comparative advantage in both tasks.
C) Jack has a comparative advantage in lawn mowing and George in garden cultivating.
D) Jack has a comparative advantage in garden cultivating and George in lawn mowing.
Scenario 1-2 Suppose a hat manufacturer currently sells 2,000 hats per week and makes
a profit of $5,000 per week. The plant owner observes, “Although the last 300 hats we
produced and sold increased our revenue by $1,000 and our costs by $1,100, we are still
making an overall profit of $5,000 per week so I think we’re on the right track. We are
producing the optimal number of hats.”
Using marginal analysis terminology, another economic term for the incremental cost of
producing the last 300 hats is
A) marginal cost.
B) operating cost.
C) explicit cost.
D) Any of the above terms are correct.
If an 8 percent decrease in the price of lobster leads to a 15 percent decrease in the
quantity supplied of lobster, then the supply of lobster is
A) unit-elastic.
B) unitarily elastic.
C) elastic.
D) perfectly inelastic.
If potential GDP is equal to $600 billion, what does the long-run aggregate supply
curve look like?
A) It is a horizontal line at $600 billion of GDP.
B) It is a vertical line at a level of GDP below $600 billion.
C) It is a vertical line at $600 billion of GDP.
D) It is a vertical line at a level of GDP above $600 billion.
Fast food restaurants produce a range of menu items such as hamburgers, chicken
sandwiches, salads, and french fries. What fundamental economic question are they
addressing by offering this range of items?
A) How to produce goods that consumers want?
B) Why produce a variety of menu items?
C) What to produce?
D) Who to produce the menu items for?
If a perfectly competitive firm’s price is above its average total cost, the firm
A) is earning a profit.
B) should shut down.
C) is incurring a loss.
D) is breaking even.
The demand curve for the monopoly’s product is
A) the market demand for the product.
B) more elastic than the market demand for the product.
C) more inelastic than the market demand for the product.
D) undefined.
Which of the following is an appropriate policy for the Fed to pursue if it wants to
increase the money supply?
A) raise the reserve requirement
B) raise the discount rate
C) buy U.S. Treasury bills
D) lower taxes
Figure 11-11
Figure 11-11 illustrates the long-run
average cost curve for a firm that produces picture frames. The graph also includes
short-run average cost curves for three firm sizes: ATCa, ATC and ATCc.
Constant returns to scale
A) occur for output rates greater than 5,000 picture frames.
B) occur between 5,000 and 20,000 picture frames per month.
C) occur between 10,000 and 20,000 pictures frames per month.
D) will shift the long-run average cost curve downward.
China began pegging its currency, the yuan, to the dollar in 1994. Because the yuan was
________ at the pegged exchange rate, the Chinese government increased its reserves
of ________ as the government purchased more ________ to maintain the pegged
exchange rate.
A) undervalued; dollars; dollars
B) undervalued; yuan; yuan
C) overvalued; yuan; yuan
D) overvalued; dollars; dollars
Figure 15-14
From the monopoly graph above, identify the following:
a. The profit maximizing price
b. The profit maximizing quantity
c. The area representing deadweight loss
d. The area representing the transfer of consumer surplus to the monopoly
A member of a cartel like OPEC has an incentive to
A) argue for larger production quotas for each member of the cartel.
B) agree to a low cartel production level and then produce more than its quota.
C) abide by its individual production quota.
D) support equal production quotas for each member.