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A tax on interest income
A) decreases the demand for loanable funds but does not change the real interest rate.
B) increases the demand for loanable funds and raises the real interest rate.
C) increases the supply of loanable funds and lowers the real interest rate.
D) decreases the supply of loanable funds and has no influence on the real interest rate.
E) has no effect on the demand for loanable funds.
The demand curve for dollars shifts rightward if
A) the Canadian exchange rate falls.
B) the price of Canadian goods and services increases.
C) Canadian interest rates rise.
D) foreign interest rates rise.
E) the expected future value of the dollar falls.
Which of the following statements is true?
A) Marginal utility theory predicts that an increase in a consumer's income increases
consumption of all goods.
B) It is possible to derive the law of demand that a higher price decreases the quantity
demanded using marginal utility theory.
C) Marginal utility theory makes no prediction about a consumer's responses to hikes in
the prices of the goods and services he or she consumes.
D) Marginal utility theory predicts that all goods are normal goods and that all goods
are substitutes for each other.
E) It is possible to derive the law of demand that a higher price decreases demand using
marginal utility theory.
International evidence shows us that
A) there is a general tendency for money growth and inflation to be correlated, but the
quantity theory does not predict inflation precisely.
B) in the long run a 1 percent increase in the growth rate of money causes a 1 percent
increase in inflation.
C) there is a general tendency for money growth and inflation to be inversely related,
and the quantity theory is a poor predictor of inflation.
D) money growth and inflation are always rising, and the quantity theory predicts
inflation accurately.
E) there is a general tendency for money growth and inflation to be correlated, and the
quantity theory predicts inflation precisely.
Refer to Figure 19.1.2. What is curve A called?
A) market distribution line
B) line of equality
C) fairness line
D) low-income cut-off line
E) after-tax income
Lin's fortune cookies are identical to the fortune cookies made by dozens of other firms,
and there is free entry in the fortune cookie market. Buyers and sellers are well
informed about prices. Lin's fortune cookies operates in a ________ market.
A) challenging
B) monopolistic
C) perfectly competitive
D) noncompetitive
E) perfectly competent
Which one of the following is not a function of money?
A) medium of exchange
B) means of payment
C) store of value
D) measure of liquidity
E) unit of account
A firm's goal is to
A) maximize revenue.
B) maximize cost while minimizing revenue.
C) maximize profit.
D) minimize costs.
E) minimize risk.
In a country with a working-age population of 30 million, 18 million are employed, 2
million are unemployed, and 2 million of the employed are working part-time, half of
whom wish to work full-time. The labour force participation rate is
A) 73.3 percent.
B) 66.7 percent.
C) 60 percent.
D) 53.3 percent.
E) 20 percent.
Harold can consume apples and oranges. He likes them equally well and currently is in
consumer equilibrium. Then the price of oranges rises, while his income remains the
same. What will happen to his consumption?
A) Consumption of oranges increases; consumption of apples decreases.
B) Consumption of oranges increases; consumption of apples increases.
C) Consumption of oranges decreases; consumption of apples decreases.
D) Consumption of oranges decreases; consumption of apples increases.
E) Consumption of oranges decreases; consumption of apples could either increase or
decrease.
Choose the correct statement.
A) The long run is a period of time in which the quantity of at least one input is fixed.
B) The short run is a period of time in which the firm has sufficient time to change all
its inputs.
C) The long run is a time frame that lasts for 10 years.
D) In the short run, the firm's plant is fixed.
E) A firm always has plenty of time to make decisions about changing its inputs no
matter if it is in a short run or long run position.
Tina and Brian work for the same recording company. Tina claims they would be better
off by raising the price of their CDs, while Brian claims they would be better off by
lowering the price. Choose the correct statement.
A) Tina thinks the demand for CDs has price elasticity of demand equal to zero, and
Brian thinks price elasticity of demand equals 1.
B) Tina thinks the demand for CDs has price elasticity of demand equal to 1, and Brian
thinks price elasticity of demand equals zero.
C) Tina thinks the demand for CDs is price elastic, and Brian thinks it is price inelastic.
D) Tina thinks the demand for CDs is price inelastic, and Brian thinks it is price elastic.
E) Tina and Brian should stick to singing and forget about economics.
Which of the following illustrates the concept of external cost?
A) Bad weather reduces the size of the wheat crop.
B) A reduction in the size of the wheat crop causes income of wheat farmers to fall.
C) Smoking harms the health of the smoker.
D) Smoking harms the health of nearby nonsmokers.
E) Public health services reduce the transmission of disease.
The government of Greece is running a large budget deficit. With no Ricardo-Barro
effect, which of the following events will occur?
I. The supply curve of loanable funds will shift leftward.
II. A higher real interest rate crowds out investment.
III. Saving increases.
A) I only
B) II only
C) III only
D) I and II only
E) I, II, and III
Refer to Fact 2.4.1. Which one of the following statements is true?
A) Andy has an absolute advantage in butter production.
B) Rolfe has an absolute advantage in butter production.
C) Andy has a comparative advantage in bread production.
D) Andy has a comparative advantage in butter production.
E) Rolfe has a comparative advantage in bread production.
Refer to Table 27.1.1. Based on the information in the table, saving would be $125 if
YD were
A) $1,000.
B) $1,100.
C) $1,200.
D) $1,300.
E) $900.
The Hotelling Principle states that
A) hotels will tend to be built next to major highways.
B) equilibrium in natural resource markets occurs when the expected increase in the
price of the resource over time is equal to the interest rate.
C) the resource will be depleted at a rate equal to the rate of interest.
D) natural resources should be depleted only for the production of goods that would
help maintain environmental quality.
E) we should conserve nonrenewable natural resources.
The average product of labour is
A) the inverse of the average product of capital.
B) the slope of the marginal product of labour curve.
C) the slope of the total product curve.
D) greater than the average product of labour.
E) calculated as total product divided by the total quantity of labour employed.
A generation that is wealthy and leaves assets to another generation that is not wealthy
A) increases the inequality of the income distribution.
B) decreases the inequality of the income distribution.
C) does not change the distribution of income.
D) proves that inheritance taxes are needed.
E) is improving efficiency.
Refer to Fact 5.3.1. A free world market in water ________ achieve an efficient use of
the world's water resources because ________.
A) would not; it is not profitable for the water-rich countries to ship water to the
water-poor countries
B) would; people in water-rich countries want to help people in water-poor countries
C) would not; water-poor countries are not willing to pay market price for water
D) would; the invisible hand leads the equilibrium price to equal the quantity at which
marginal social benefit equals marginal social cost
E) would not; water is vital for life so it must be allocated by a method other than
market price
If the demand for good Z is perfectly inelastic, then the demand curve for good Z is
A) vertical.
B) horizontal.
C) upward sloping.
D) downward sloping.
E) initially upward sloping and then downward sloping.
The cross elasticity of demand between any two goods is defined as the
A) percentage change in the quantity demanded of one good divided by the percentage
change in the price of the other good.
B) change in the price elasticity of demand for one good divided by the change in the
price elasticity of demand for the other good.
C) percentage change in the quantity of a good demanded divided by the percentage
change in its price.
D) percentage change in the quantity of a good demanded divided by the percentage
change in income.
E) percentage change in the price of one good divided by the percentage change in the
price of the other good.
William Gregg owned a mill in South Carolina. In December 1862, he placed a notice
in the Edgehill Advertiser announcing his willingness to exchange cloth for food and
other items. Here is an extract:
1 yard of cloth for 1 pound of bacon
2 yards of cloth for 1 pound of butter
4 yards of cloth for 1 pound of wool
8 yards of cloth for 1 bushel of salt
If the money price of bacon was 20 a pound and the money price of salt was $2.00 a
bushel, people would
A) buy bacon and trade it for cloth because they could buy 8 yards of cloth for only
$1.60, and use that cloth to obtain a bushel of salt.
B) not buy bacon and trade it for cloth because they would have to buy 8 yards of cloth
for $1.60 and then give Mr. Gregg an extra $0.40 to buy a bushel of salt.
C) buy bacon and trade it for cloth and then trade the cloth for salt because salt is more
important for life than either cloth or bacon.
D) not buy bacon and trade it for cloth because the relative price of 1 bushel of salt is
only 1/8 yard of cloth.
E) buy bacon and trade it for cloth because cloth is more expensive than bacon.
In developing countries, there is more reliance on ________ as opposed to ________
for government revenue.
A) tariffs; tax collection
B) import quotas; tariffs
C) tax collection; tariffs
D) tariffs; import quotas
E) import quotas; tax collection
A firm with two or more owners who have unlimited liability is
A) a sole proprietorship.
B) a partnership.
C) a conglomerate.
D) a corporation.
E) a public company.
Which of the following are valid reasons advanced by almost all economists?
Protection
A) saves jobs.
B) prevents rich countries from exploiting developing countries.
C) is a good way for governments in developed nations to raise revenue.
D) penalizes lax environmental standards.
E) Economists would not support any of the above reasons.
Which one of the following is always true of the income effect?
A) It leads to a positive income effect.
B) It is positive.
C) It decreases consumption.
D) It leads to a negative income effect.
E) None of the above
If the total product of four workers is 156 units, calculate the average product of each
worker.
A) 39 units
B) 19.5 units
C) 78 units
D) 152 units
E) 624 units
In a country with a working-age population of 22 million, 16 million are employed, 2
million are unemployed, and 1 million of the employed are working part-time, half of
whom wish to work full-time. The employment-to-population ratio is
A) 72.7 percent.
B) 65 percent.
C) 75.5 percent.
D) 57.5 percent.
E) 16 percent.
Sarah can consume either pizzas or hamburgers. The price of a hamburger is $1 and the
price of a pizza is $5. Let MUh be the marginal utility of hamburgers and MUp be the
marginal utility of pizzas. In consumer equilibrium, what must the ratio MUh/MUp
equal?
A) 1/5
B) 5/1
C) 1/1
D) 1/6
E) 4
