Society definitely benefits by reducing the number of monopolistically competitive
firms.
a. True
b. False
In a simple, private economy, suppose that the MPC is .8 and investment rises by $20
million. At the new equilibrium, how much will saving have increased?
a. $8 million
b. $16 million
c. $20 million
d. $80 million
e. $100 million
In the short-run, only a limited number of new firms may enter a perfectly competitive
market.
a. True
b. False
Per capita GDP can be defined as
a. GDP per working person.
b. GDP per unit of capital.
c. GDP per person.
d. GDP per unit of unemployment.
According to Baumol and Blinder, does the U.S. economy have a self-correcting
mechanism?
a. No, there is no such thing in reality.
b. Yes, and it works very rapidly.
c. Yes, and it works very slowly.
d. No, unless the aggregate supply curve is perfectly flat.
When inflation occurs, net exports will
a. increase as imports decrease.
b. increase as exports increase.
c. decrease as imports decrease.
d. decrease as imports increase.
A program of protection that results in preserving jobs in certain industries
a. maintains full employment at lower cost than any other program or policy.
b. lowers average pay in the protected industries.
c. improves living standards for the average person in that country.
d. often does so at a cost that is much higher than the average income of persons in
those industries.
One of the effects of a change in disposable income could not be a(n)
a. movement up along the consumption function.
b. movement down along the consumption function.
c. change in the amount of consumption expenditures.
d. upward shift of the consumption function.
Figure 4-6
Grapes can be used for wine or for raisins. Which graph in Figure 4-6 best depicts the
effects on the U.S. raisin market of a decrease in purchases of domestic wines?
a. 1
b. 2
c. 3
d. 4
Teenage unemployment rates have consistently been much higher than the overall
unemployment rate and black teenagers have fared worse than white teenagers.
a. True
b. False
Countries experiencing balance of payments surpluses are usually eager to inflate their
economies.
a. True
b. False
More goods are available to the average American today than two hundred years ago,
but today an American has to work more hours to earn the money to purchase most
items.
a. True
b. False
Economic rents are earned whenever
a. demand for a factor is perfectly inelastic.
b. a factor receives a reward that exceeds its cost.
c. a factor earns a reward that is greater than the amount needed to keep the factor in its
present employment.
d. a factor’s supply curve intersects its demand curve at a point where demand is
inelastic.
In utilizing unconventional monetary policy in 2010, the Federal Reserve purchased
a. real estate worth more than $2 trillion.
b. $800 billion in Treasury bills.
c. over $1 trillion in mortgage backed securities.
d. $600 billion in long-term Treasury bonds.
What are the two characteristics that are essential to economic analysis of invention?
a. fixed-costs and public goods
b. fixed-costs and private goods
c. variable-costs and public goods
d. variable-costs and private goods
Serious concern for deregulation began to appear in Congress in the 1970s.
a. True
b. False
In order for barter trades to occur, there must be a
a. singularity of interests.
b. bargaining intermediary.
c. double coincidence of wants.
d. sufficient supply of cash.
An oligopolist who sets the price for the industry is a price leader.
a. True
b. False
Which of the following is not a barrier to entry?
a. Legal restrictions
b. Patents
c. Large sunk costs
d. Survivor rights
Displayed below is the payoff matrix of firm A for four different strategies, A1, A2, A3,
and A4, and the potential retaliatory responses of firm B (B1, B2, B3, B4).
Table 12-1
If firm A uses the maximin criterion, which strategy will it choose?
a. A1
b. A2
c. A3
d. A4
Pay as you go financing for the Social Security System was abandoned in 1983.
a. True
b. False
Oligopolists
a. are price takers.
b. rarely advertise.
c. must take rivals’ reactions into account.
d. offer homogeneous products.
Individuals play ____ in causing pollution.
a. almost no role
b. a large but decreasing role
c. a major role
d. a reconstructive role
Table 11-1
Table 11-1 shows demand and total cost schedules for Monopoliteria. At the
profit-maximizing output, what quantity is Monopoliteria producing?
a. 10
b. 12
c. 14
d. 16
Because technology has automated so many functions, personal services have become
cheaper in order to compete.
a. True
b. False
Figure 10-8
In the long run, the perfectly competitive firm in Figure 10-8 will leave the industry if
the price falls below
a. $10.
b. $9.
c. $5.
d. $2.
Productivity in manufacturing sectors has risen faster than in service sectors.
a. True
b. False
Cross elasticity of demand for
a. substitutes will normally be positive.
b. complements will normally be positive.
c. substitutes will normally be negative.
d. complements will normally be infinite.
Oligopolists behave independently of each other.
a. True
b. False
When Johanna cut prices in her jewelry store by 20 percent, the dollar value of her sales
fell by 20 percent. This indicates that
a. demand was elastic.
b. demand was inelastic.
c. demand was unit elastic.
d. the demand curve was vertical.
An article in a recent economics periodical asks the question: “Is low inflation worth
it?” By “it,” the article probably means
a. the loss of comparative advantage.
b. enduring externalities.
c. unemployment.
d. repealing the law of supply and demand.
e. the opportunity cost of higher interest rates.
Figure 10-8
Figure 10-8 displays the cost curves of a perfectly competitive firm. Profits at a price of
$10 would be approximately
a. $1 per unit.
b. $3 per unit.
c. $5 per unit.
d. $10 per unit.
How do you calculate consumer’s surplus? What happens to consumer’s surplus when
the price of a commodity rises?
Are there ever exceptions to the law of demand?
Why does the numerical value of the multiplier fall when an income tax is added to the
income-expenditure model?
Why is plowback the overwhelming favorite among choices of sources of funds for
financing corporate investment?
Using the general concept of elasticity, would you expect the elasticity of demand for
advertising to be positive or negative? Explain.
Draw individual demands for caviar for Al, Barbara, Chuck, and Denise where Al’s
demand is relatively inelastic, Barbara’s is elastic, Chuck’s is upward sloping, and
Denise refuses to eat caviar at any price. Then draw the corresponding market demand.
Sun City’s public bus line has been operating at a deficit. The city decides to raise the
fare from 50 cents to 75 cents, anticipating enough additional revenue to cover the
deficit. What assumption is the city making about price elasticity?
Using marginal analysis, explain why many restaurants and coffee shops offer low-cost
refills on beverages (for example, a shop may charge $1.50 for a cup of coffee and only
$.50 for a refill).
What are the four types of industry structures? Compare and contrast them with the
number of firms in the industry, whether firms produce homogeneous or heterogeneous
products, whether there are economic profits in long-run equilibrium, and how
frequently the model appears in the real world.
Suppose a presidential candidate campaigns on the need to improve U.S. infrastructure,
a term for capital goods like bridges, highways, and technology (much of it publicly
owned). Which would lead to faster growth: government expenditure on capital goods
or expenditure on consumption goods such as sports stadiums? Illustrate your answer,
drawing appropriate production possibilities frontiers accompanied by an explanation.
Demand for a firm has been reliably measured as P = 100 − 5Q where Q is output and P
is price in dollars. Total cost is in the table below. Complete the table and indicate the
level of output and price which a profit-maximizing firm would select and indicate the
same for a sales-maximizing firm.
The state is considering adding a satellite campus to its major university. How can
marginal analysis assist, even though the university does not attempt to maximize
profits?
A firm sells in a competitive market in which price is $10. Its marginal cost is 2 + .5Q.
Determine the profit-maximizing level of output.
Explain why a change in income tax rates causes the consumption schedule to change
slope.
The rule for efficient output selection is stated as MC = MU. Explain how the rule
results in economic efficiency.
In what sense can it be said that money is a social invention? How does a barter system
of trade compare to the invention of money?
Compare market price and quantity of steel to socially optimal price and quantity if
steel producers ignore soot emitted from their smokestacks. Use a graph to assist your
explanation.
Are property taxes progressive or regressive?
If a small firm wishes to pay cash in one year for a $10,000 machine, how much must
the firm currently place in savings at 5 percent in order to have the necessary total cash
in one year?
Describe the main explanations for the downward rigidity of wages in the modern
macroeconomy. Evaluate their probability of being correct and important.