The maximum level of real GDP that can be produced while avoiding shortages of
labour, capital, land, and entrepreneurial ability that would bring rising inflation is
A) real GDP.
B) nominal GDP.
C) actual GDP.
D) potential GDP.
E) productive GDP.
At price P2 in Figure 3.4.1, which one of the following is not true?
A) This market is in equilibrium.
B) The quantity demanded is equal to the quantity supplied.
C) The quantity demanded is Q1.
D) There is no surplus.
E) The quantity supplied is Q3.
If the value of marginal product of capital decreases as more capital is employed, then
the
A) supply curve of capital is upward sloping.
B) supply curve of capital is downward sloping.
C) demand curve for capital is horizontal.
D) demand curve for capital is downward sloping.
E) demand curve for capital is upward sloping.
Refer to Figure 20.3.1. In the figure, the distance between points T and U represents
A) an expansion.
B) a trough.
C) a peak.
D) a recession.
E) a business cycle.
Consider the natural monopoly depicted in Figure 13.5.2. What area in the graph
represents the deadweight loss arising from an average cost pricing rule?
A) ABD
B) DGF
C) DEF
D) ACF
E) CBDE
We observe an increase in the price level and a decrease in real GDP. Which of the
following is a possible explanation?
A) an increase in expected future profits
B) an increase in expected future income
C) an increase in factor prices
D) an increase in the quantity of capital
E) an increase in the quantity of money
A creditor nation is a country
A) that has contributed money for the advancement of health care in less developed
countries.
B) that does not borrow money from foreign nations.
C) that during its entire history has invested more in the rest of the world than other
countries have invested in it.
D) that has active monetary policy to ensure adequate loans for housing of the poor.
E) whose official settlements account is rising in value.
Which of the following quotations correctly describes the impact of monetary policy on
the economy?
A) “House sales are down lots, due to the higher money growth.”
B) “The extra money pumped into the economy by the central bank is creating more
exports.”
C) “The tightening of money growth is helping sell goods abroad.”
D) “Businesses are investing more, now that monetary policy has become less
expansionary.”
E) “The extra money pumped into the economy by the central bank is creating fewer
jobs.”
A subsidy is a
A) tax imposed by the government on imported goods.
B) payment made by the government to a producer.
C) tax imposed by the government on a producer.
D) payment made by a consumer to a producer.
E) payment made by foreign governments to domestic farmers.
If Hamburger Helper is an inferior good, then, ceteris paribus, a decrease in income
will lead to
A) a leftward shift of the demand curve for Hamburger Helper.
B) a rightward shift of the demand curve for Hamburger Helper.
C) a movement up along the demand curve for Hamburger Helper.
D) a movement down along the demand curve for Hamburger Helper.
E) an initial movement up and then down along the demand curve for Hamburger
Helper.
If the CPI was 128 at the end of 2013 and 136 and the end of 2014, what was the
inflation rate in 2014?
A) 4.2 percent
B) 5.9 percent
C) 6.25 percent
D) 8 percent
E) 9.4 percent
Refer to Table 16.3.1. The table shows marginal private benefit and the marginal social
benefit from the consumption of chemical fertilizer and the marginal social cost of the
production of fertilizer. If production is left to the private market, then
A) an efficient quantity is produced.
B) imposing a tax leads to production of the efficient quantity.
C) too much fertilizer is produced.
D) a system of pollution permits leads to production of the efficient quantity.
E) an inefficient quantity is produced.
Jane produces only corn and cloth. If her preferences for corn and cloth change, then
A) her PPF becomes steeper.
B) her PPF becomes flatter.
C) her PPF becomes straighter.
D) the world PPF shifts outward.
E) her PPF does not change.
In an unregulated housing market with no rent ceiling, the rent is determined by the
A) landlords only.
B) tenants only.
C) government only.
D) market.
E) landlords, tenants, and the government.
Complete the following sentence. Knowledge
A) generates external benefits.
B) generates external costs.
C) displays diminishing marginal benefit.
D) is encouraged by intellectual property rights.
E) A and D are correct.
In the absence of government policies to redistribute income, the income distribution
will be the
A) market distribution.
B) unfair distribution.
C) capitalist distribution.
D) efficient distribution.
E) line of equality.
A tariff imposed by Canada on Japanese cars ________ the price of cars in Canada and
________ the quantity of Japanese cars imported into Canada.
A) raises; increases
B) raises; decreases
C) lowers; increases
D) lowers; decreases
E) raises; does not change
When a perfectly competitive market is in long-run equilibrium,
A) at least one firm makes an economic profit.
B) all firms make zero economic profit.
C) firms enter the market if other firms are making an economic profit.
D) firms exit the market if other firms are incurring an economic loss.
E) marginal revenue equals minimum average variable cost.
As the ________ rises, the quantity of loanable funds supplied ________, other things
remaining the same.
A) nominal interest rate; increases
B) real interest rate; increases
C) inflation rate; increases
D) real interest rate; decreases
E) inflation rate; decreases
Why is the Human Development Index thought to be a better measure of economic
well-being than real GDP per person?
A) It includes a measure of resource depletion.
B) It ignores health, which is hard to measure.
C) It includes leisure time and household production.
D) It includes health and education measures, as well as real GDP per person.
E) It includes only health and education measures, ignoring real GDP per person.
Canada Post has a monopoly on residential mail delivery. Pfizer Inc. makes LIPITOR, a
prescription drug that lowers cholesterol. Rogers Communications is the sole provider
of cable television service in some parts of Ontario. The monopolies which are legal
monopolies are
A) only Pfizer.
B) Canada Post, Pfizer, and Rogers Communications.
C) Canada Post and Pfizer.
D) only Canada Post.
E) only Rogers Communications.
Equilibrium occurs in the market for oil when the
A) price of the oil equals the interest rate.
B) increase in the price of oil equals the expected increase in the interest rate.
C) expected increase in the price of oil over time is equal to the interest rate.
D) stock of oil is eventually depleted.
E) price of oil today equals the expected future price.
Suppose the government introduces a ceiling on the fees that lawyers are permitted to
charge. This fee ceiling
A) is always inefficient.
B) results in an inefficient use of resources when the ceiling is above the equilibrium
fee.
C) results in an efficient use of resources when the ceiling is above the equilibrium fee.
D) results in an efficient use of resources when the ceiling is below the equilibrium fee.
E) is always efficient.
The government of Ricardia’s budget lists the following projected revenues and outlays:
$25 million in personal income taxes, $15 million in corporate income taxes, $5 million
in indirect taxes, $2 million in investment income, $30 million in transfer payments,
$12 million in government expenditure, and $8 million in debt interest. Ricardia has a
government budget
A) surplus of $3 million.
B) surplus of $57 million.
C) surplus of $13 million.
D) deficit of $13 million.
E) deficit of $3 million.
The “tragedy of the commons” refers to
A) the inability of lower income groups to achieve a higher level of education.
B) the absence of incentives to prevent the overuse of a common resource that arises
when its users have no incentive to conserve it and use it sustainably.
C) the acceptance of deplorable working conditions by those who lack the human
capital to obtain a better job.
D) the tendency for bureaucrats to maximize their budget.
E) farmers who allow their livestock to overgraze their fields.
A turnip is an inferior good if
A) an increase in the price of a turnip decreases the quantity of turnips that consumers
want to buy.
B) an increase in income decreases the demand for turnips.
C) an increase in income increases the demand for turnips.
D) turnips violate the law of demand.
E) turnips are a low quality good.
A trigger strategy can be used
A) in a single-play game or a repeated game.
B) in a single-play game but not a repeated game.
C) in a repeated game but not a single-play game.
D) in neither a single-play game nor a repeated game.
E) only when there is no Nash equilibrium.
Which one of the following does not occur in perfect competition?
A) No single firm can exert a significant influence on the market price of the good.
B) There are many buyers.
C) There are significant restrictions on entry into the market.
D) Sellers and buyers are well informed about prices.
E) Established firms have no advantage over new ones.
The main reason that wealth inequality persists across generations is that
A) people tend to marry within their own socioeconomic class.
B) intergenerational transfers can only increase wealth inequality.
C) there are differences between households in their degree of specialization.
D) rich families have equal wealth over the life cycle.
E) taxes are too high for the lower quintiles.
Zarina can afford to buy 3 tomatoes and no toothbrushes, or 2 toothbrushes and no
tomatoes. The relative price of a toothbrush is
A) 2/3 of a tomato.
B) 3/2 tomatoes.
C) 6 tomatoes.
D) 1/6 of a tomato.
E) impossible to calculate without additional information.
Refer to Figure 27.3.1. At equilibrium induced expenditure equals
A) $200 billion.
B) $50 billion.
C) $25 billion.
D) $100 billion.
E) $150 billion.
When the market achieves allocative efficiency,
A) marginal benefit equals marginal cost.
B) marginal benefit is at its maximum.
C) marginal benefit exceeds marginal cost by as much as possible.
D) marginal cost exceeds marginal benefit by as much as possible.
E) marginal cost is at its minimum.
The consumption function shows the relationship between consumption expenditure
and
A) the interest rate.
B) the price level.
C) disposable income.
D) saving.
E) nominal income.