In economics, man-made resources such as tools, equipment, and structures that are
used to produce other goods and services are referred to as
a. consumer goods.
b. capital.
c. marginal goods.
d. infrastructures.
A reserve requirement of 20 percent implies a potential money deposit multiplier of
a. 4.
b. 5.
c. 20.
d. 25.
In an informed and voluntary exchange,
a. both parties receive something they value more than what they gave up.
b. both parties place an equal value on what they received and what they gave up.
c. neither party can gain more than the other.
d. one trader can gain only at the expense of the other.
The income per person in the quartile of countries with the most economic freedom was
approximately ____ times the figure for the least free group of countries.
a. 2
b. 4
c. 5
d. 8
Which of the following most accurately indicates changes in the size of the union sector
in the United States?
a. As a share of the labor force, union membership grew substantially during 1935
through 1955 but has declined substantially since the mid-1950s.
b. As a share of the labor force, union membership declined substantially during 1935
through 1955 but has grown substantially since the mid-1950s.
c. As a share of the labor force, union membership has steadily grown from less than 10
percent in 1935 to more than 40 percent today.
d. Union membership has been approximately 20 percent of the labor force during the
last five decades.
When the federal government owns parks that are funded by tax dollars
a. park managers receive full information about visitor desires and make decisions
accordingly.
b. the same incentive structure exists for public park managers as private park
managers.
c. park managers devote much time and effort to satisfying political desires instead of
visitor desires.
d. park managers will be less likely to mismanage the park.
After a hurricane in Florida knocked out the regional water supply for several days, the
demand for bottled water increased sharply. In a market economy, how will this
increase in demand affect the equilibrium price and quantity of bottled water?
a. Price will increase, and quantity will decrease.
b. Price will decrease, and quantity will decrease.
c. Price will decrease, and quantity will increase.
d. Price will increase, and quantity will increase.
If domestic producers have a comparative advantage in producing a good,
a. trade restrictions will be required before the producers can benefit from their
comparative advantage.
b. trade restrictions will still be required before the domestic producers can compete
with low-wage producers abroad.
c. they will be able to compete effectively in a competitive world market.
d. the government should subsidize production of the good so the domestic producers
will be able to achieve a larger share of the world market.
(I) Governments that respect property rights and freedom of exchange while following
monetary (and fiscal) policies consistent with relative price stability, establish the
foundation for economic growth.
(II) Governments have often diminished the economic prospects of a nation by levying
high taxes, instituting price controls, and following inflationary monetary policies.
a. I is true; II is false.
b. I is false; II is true.
c. Both I and II are true.
d. Both I and II are false.
Economic profit is
a. total revenues minus variable costs.
b. total revenues minus private costs.
c. total revenues minus explicit costs.
d. total revenues minus total costs.
In order to achieve a high economic freedom rating, a country must
a. provide secure protection of privately owned property and evenhanded enforcement
of contracts.
b. refrain from creating barriers that limit domestic and international trade.
c. rely more fully on markets rather than governments to allocate goods and resources.
d. all of the above.
If the interest rate is 8 percent and an investment undertaken and paid for today is
expected to yield $3,000 per year (to be received at year end) for each of the next three
years, a profit-maximizing decision maker would undertake the investment only as long
as the cost remained less than approximately
a. $5,350.
b. $7,731.
c. $8,109.
d. $9,000.
When an economy is experiencing an economic boom and operating beyond its
long-run capacity,
a. strong demand for investment funds will push interest rates upward.
b. weak demand for resources will push the prices of resources downward.
c. weak demand for investment funds will cause the real interest rate to decline.
d. the unemployment rate will be greater than its natural rate.
Use the figure to answer the following question(s).
Figure 9-9
The average total cost (ATC) and marginal costs (MC) of a firm producing in a
price-taker industry are depicted in Figure 9-9. If the current market price of the firm’s
product is $50, what output should this firm produce per day?
a. 10
b. 15
c. 20
d. 25
Even though a cartel is often profitable for its members, cartel arrangements contain the
seeds of their own disintegration because
a. a price maintained above each cartel member’s marginal cost provides each member
with an incentive to offer secret price reductions to attract additional customers.
b. the profits earned by cartel members will induce others to enter the industry.
c. cartel members will attempt to garner more of the total profit for themselves by
cheating on their agreement with other members.
d. all of the above are correct.
Figure 4-25
Refer to Figure 4-25. Producer surplus before the tax was levied is represented by area
a. A.
b. A + B + C.
c. D + E + F.
d. F.
The experience of Ireland in the last four decades indicates that in order to achieve high
rates of economic growth countries must
a. hold free (democratic) elections
b. maintain a government expenditure/GDP ratio of at least 40 percent.
c. restrain the growth of government, keep taxes low, remove trade barriers, and follow
a monetary policy consistent with price stability.
d. obtain financial aid from foreign governments in order to get the growth process
started.
The difference between the amount consumers would be willing to pay and the amount
they actually pay for a good is called
a. price elasticity of demand.
b. consumer surplus.
c. the substitution effect.
d. income elasticity of demand.
As the size of a nation’s outstanding debt gets larger and larger relative to the size of the
economy,
a. eventually it will become difficult for the country to borrow in global credit markets.
b. the country will have to pay higher real interest rates in order to induce investors to
purchase its bonds.
c. at some point, the country will be more or less forced to bring spending into line with
revenues in order to maintain the confidence of investors.
d. all of the above are correct.
If we observe an increase in the price of a good and a decrease in the amount of the
good bought and sold, this could be explained by
a. an increase in the supply of the good.
b. an increase in the demand for the good.
c. a decrease in the demand for the good.
d. a decrease in the supply of the good.
Corn and soybeans are alternatives that could be grown by most farmers. If government
subsidies for ethanol lead to higher corn prices, this will
a. increase the supply of corn.
b. increase the supply of soybeans.
c. decrease the supply of soybeans.
d. decrease the supply of corn.
e. have no effect on the supplies of corn and soybeans.
Suppose the population (age 16 and over) of Panama is 50 million; 4 million are
unemployed, and 36 million hold jobs. What are the rates of unemployment and labor
force participation of Panama?
a. Unemployment is 10 percent, and labor force participation is 80 percent.
b. Unemployment is 10 percent, and labor force participation is 75 percent.
c. Unemployment is 11 percent, and labor force participation is 80 percent.
d. Unemployment is 11 percent, and labor force participation is 90 percent.
The two most severe recessions of the post-World War II era occurred in 1981-1982 and
2008-2009. The policy responses to the two recessions were
a. very similar; expansionary fiscal policy promoted a strong recovery in both cases
b. very similar, but the recovery was nonetheless weak in both cases
c. dramatically different; tax rates were cut and monetary policy was restrictive during
the earlier recession, while government spending was increased sharply and monetary
policy highly expansionary during the more recent recession
d. dramatically different; tax rates were increased and monetary policy was highly
expansionary during the earlier recession, while tax rates were cut and monetary policy
was restrictive during the more recent recession
Marginal cost is best defined as
a. a cost that does not vary with the rate of output.
b. the difference between fixed and variable cost at any level of output.
c. the amount added to total cost when one more unit of output is produced.
d. the difference between price and average total cost at the profit-maximizing level of
output.
When overall production is taken into account, trade restrictions, such as those enacted
by the Smoot-Hawley trade bill,
a. save good paying jobs.
b. neither create nor destroy jobs; they reallocate them.
c. increase employment in the domestic industries that are most productive.
d. reduce imports, without affecting the volume of exports.
Other things the same, a decrease in the price level makes the dollars people hold worth
a. more, so they are willing to spend more.
b. more, so they are willing to spend less.
c. less, so they are willing to spend more.
d. less, so they are willing to spend less.
Use the figure below to answer the following question(s).
Figure 12-2
Refer to Figure 12-2. When the economy is operating at point a, reliance on the
self-correcting mechanism will
a. result in higher resource prices and a shift to the left in the SRAS curve.
b. result in lower resource prices and a shift to the right in the SRAS curve.
c. lead to lower interest rates and a shift to the right in the AD curve.
d. lead to higher interest rates and a shift to the left in the AD curve.
e. do both b and c.
Within the Keynesian model, the multiplier effect tends to
a. smooth out the up- and down- swings of the business cycle.
b. promote price stability.
c. magnify small changes in spending into much larger changes in output and
employment.
d. reduce the impact of an increase in investment on output and employment.
Which of the following is a source of information that helps consumers acquire
information about the quality of a good or service?
a. brand names
b. franchising
c. consumer ratings magazines
d. all of the above
Which of the following is true?
a. The proportion of college degrees earned by women has been virtually unchanged
during the last four decades.
b. There was a substantial increase in the earnings of women relative to men in the
1960s and 1970s following the passage of legislation prohibiting employment
discrimination against women.
c. The number of women preparing for careers as professionals has declined during the
last two decades.
d. In 2010, 57 percent of those completing college degrees were women.
When economists say the supply of a product has increased, they mean the
a. supply curve has shifted to the right.
b. price of the product has risen, and consequently, suppliers are producing more of it.
c. supply curve has shifted to the left.
d. amount of the product that consumers are willing to purchase at various prices has
increased.