Figure 7-5
Refer to Figure 7-5. If the government imposes a price floor of $120 in this market,
then consumer surplus will decrease by
a. $75.
b. $125.
c. $225.
d. $300.
Which of the following statements exemplifies a principle of individual
decisionmaking?
a. Trade can make everyone better off.
b. Governments can sometimes improve market outcomes.
c. The cost of something is what you give up to get it.
d. All of the above are correct.
Positive statements are not
a. descriptive.
b. prescriptive.
c. claims about how the world is.
d. made by economists speaking as scientists.
Other things the same, as the price level falls, the real value of a dollar
a. rises, and interest rates rise.
b. rises, and interest rates fall.
c. falls, and interest rates rise.
d. falls, and interest rates fall.
Otherwise legal transactions that go unreported or unrecorded are called
a. the underground economy.
b. the shadow economy.
c. the informal economy.
d. All of the above are correct.
When the money market is drawn with the value of money on the vertical axis, if the
value of money is below the equilibrium level,
a. the price level will rise.
b. the value of money will rise.
c. money demand will shift leftward.
d. money demand will shift rightward.
Figure 3-7
Bintu’s Production Possibilities Frontier Juba’s Production Possibilities Frontier
Refer to Figure 3-7. If the production possibilities frontier shown for Juba is for 2
hours of work, then how long does it take Juba to make one bowl?
a. 1/8 hour
b. 1/2 hour
c. 2 hours
d. 8 hours
The welfare of sellers is measured by
a. consumer surplus.
b. producer surplus.
c. total surplus.
d. price.
Which of the following is a store of value?
a. currency
b. U.S. government bonds
c. fine art
d. All of the above are correct.
If you believe that stock prices follow a random walk, then probably you
a. do not believe that there is positive relationship between risk and return.
b. do not believe that stock prices reflect all available information.
c. believe in the validity of the efficient markets hypothesis.
d. believe that it is a good idea to engage in fundamental analysis.
When you rent a car, you might treat it with less care than you would if it were your
own. This is an example of
a. market risk.
b. moral hazard.
c. adverse selection.
d. risk aversion.
Inventors often obtain patents on new products and processes, thereby turning new
ideas into
a. private goods and increasing the incentive to engage in research.
b. private goods but decreasing the incentive to engage in research.
c. public goods and increasing the incentive to engage in research.
d. public goods but decreasing the incentive to engage in research.
For a horizontal demand curve,
a. the slope is undefined, and the price elasticity of demand is equal to 0.
b. the slope is equal to 0, and the price elasticity of demand is undefined.
c. both the slope and price elasticity of demand are undefined.
d. both the slope and price elasticity of demand are equal to 0.
Max and Maddy charge people to park on their lawn while attending a nearby craft fair.
At the current price of $10, seven people park on their lawn. If they raise the price to
$15, they know that only five people will want to park on their lawn. Whether they have
seven or five cars parked on their lawn does not affect their costs. From this information
it follows that
a. they should leave the price at $10.
b. it does not matter if they charge $10 or $15.
c. they would do better charging $15 than $10.
d. they should raise the price even more.
Danita rescues dogs from her local animal shelter. When Danita’s income rises by 7
percent, her quantity demanded of dog biscuits increases by 12 percent. For Danita, the
income elasticity of demand for dog biscuits is
a. negative, and dog biscuits are a normal good.
b. negative, and dog biscuits are an inferior good.
c. positive, and dog biscuits are an inferior good.
d. positive, and dog biscuits are a normal good.
Which of the following is not correct?
a. Frictional unemployment is inevitable in a dynamic economy.
b. Although the unemployment created by sectoral shifts is unfortunate, in the long run
such changes lead to higher productivity and higher living standards.
c. At least 10 percent of U.S. manufacturing jobs are destroyed every year.
d. More than 13 percent of U.S. workers leave their jobs in a typical month.
When two variables move in opposite directions, the curve relating them is
a. upward sloping, and we say the variables are positively related.
b. upward sloping, and we say the variables are negatively related.
c. downward sloping, and we say the variables are positively related.
d. downward sloping, and we say the variables are negatively related.
When economists are trying to explain the world, they are
a. scientists.
b. policy advisers.
c. in the realm of microeconomics rather than macroeconomics.
d. in the realm of normative economics rather than positive economics.
Which of the following is correct?
a. Short run fluctuations in economic activity happen only in developing countries.
b. During economic contractions most firms experience rising sales.
c. Recessions come at regular intervals and are easy to predict.
d. When real GDP falls, the rate of unemployment rises.
In a market economy, we know that a resource has become scarcer when
a. its price rises relative to other prices.
b. it is non-renewable and some of it is used.
c. people search for substitutes.
d. All of the above are correct.
In 1991, the Federal Reserve lowered the reserve requirement from 12 percent to 10
percent. Other things the same this should have
a. increased both the money multiplier and the money supply.
b. decreased both the money multiplier and the money supply.
c. increased the money multiplier and decreased the money supply.
d. decreased the money multiplier and increased the money supply.
The long-run response to a decrease in the money supply growth rate is shown by
shifting
a. the short-run and long-run Phillips curves left.
b. the short-run and long-run Phillips curves right.
c. only the short-run Phillips curve left.
d. only the short-run Phillips curve right.
With the value of money on the vertical axis, the money supply curve is
a. upward-sloping.
b. downward-sloping.
c. horizontal.
d. vertical.
Which of the following equations represents GDP for an open economy?
a. Y = C + I + G + NX
b. NX = I – G
c. I = Y – C + G +NX
d. Y = C + I + G
You lose your job and, as a result, you buy fewer iTunes music downloads. This shows
that you consider iTunes music downloads to be a(n)
a. luxury good.
b. inferior good.
c. normal good.
d. complementary good.
Figure 3-9
Uzbekistan’s Production Possibilities Frontier Azerbaijan’s Production
Possibilities Frontier
Refer to Figure 3-9. Azerbaijan has an absolute advantage in the production of
a. bolts and a comparative advantage in the production of bolts.
b. bolts and a comparative advantage in the production of nails.
c. nails and a comparative advantage in the production of bolts.
d. nails and a comparative advantage in the production of nails.
Table 3-2
Assume that Aruba and Iceland can switch between producing coolers and producing
radios at a constant rate.
Labor Hours
Needed to Make 1
Refer to Table 3-2. Suppose Aruba decides to increase its production of radios by 10.
What is the opportunity cost of this decision?
a. 0.25 coolers
b. 2.5 coolers
c. 4 coolers
d. 25 coolers
If in some year nominal GDP was $28 trillion and real GDP was $32 trillion, what was
the GDP deflator ?
a. 87.5
b. 114.3
c. 400
d. 896
Scenario 5-3
Milk has an inelastic demand, and beef has an elastic demand. Suppose that a
mysterious increase in bovine infertility decreases both the population of dairy cows
and the population of beef cattle by 50 percent.
Refer to Scenario 5-3. The change in equilibrium price will be
a. greater in the milk market than in the beef market.
b. greater in the beef market than in the milk market.
c. the same in the milk and beef markets.
d. Any of the above could be correct.
A typical society strives to get the most it can from its scarce resources. At the same
time, the society attempts to distribute the benefits of those resources to the members of
the society in a fair manner. In other words, the society faces a tradeoff between
a. guns and butter.
b. efficiency and equality.
c. inflation and unemployment.
d. work and leisure.
Ann, a U.S. citizen, uses some previously obtained euros to purchase a bond issued by a
Spanish company. This transaction
a. increases U.S. net capital outflow by more than the value of the bond.
b. increases U.S. net capital outflow by the value of the bond.
c. does not change U.S. net capital outflow.
d. decreases U.S. net capital outflow.