The principle that “as one input increases while the other inputs are held fixed, output
beyond some point will exhibit increases at a decreasing rate” is known as the:
A) marginal principle.
B) principle of opportunity cost.
C) principle of diminishing returns.
D) spillover principle.
A possible reason to impose a protectionist policy such as a tariff is to:
A) increase the welfare of domestic consumers.
B) slow domestic production.
C) aid other nations in developing their own industries.
D) protect domestic workers from foreign competition.
Table 2.3
Refer to Table 2.3. The principle of diminishing returns first occurs when how many
workers are hired?
A) 2
B) 3
C) 4
D) 5
Figure 9.6 Refer to Figure 9.6. In the short run, a large decrease in oil prices will would
move the equilibrium to:
A) point D.
B) point E.
C) point F.
D) point H.
Recall Application 3, “Oil Supply Disruptions, Speculation and Supply Shocks,” to
answer the following questions:
According to the Application, will the speculators benefit if their incorrect assessment
of oil future prices causes the oil prices to fluctuate more?
A) No.
B) Yes, but only in the short run.
C) Yes, if they did not expect the oil prices to fluctuate wildly.
D) Yes, always.
Raising the personal income tax rate rotates the consumption function ________ and
________ the tax-adjusted MPC.
A) upward; lowers
B) downward; lowers
C) downward; raises
D) upward; raises
Figure 7.2 Refer to Figure 7.2. At wage rate $12, there is a ________ of labor equal to
________ million people.
A) surplus; 40
B) shortage; 90
C) shortage; 40
D) surplus; 90
Which of the following is a topic under microeconomics?
A) money supply
B) exchange rates
C) why the price of gold is rising
D) All of the above are topics in microeconomics.
Recall the Application about unwanted commercial e-mail, or spam, to answer the
following question(s).
According to the Application, the economic approach to spam is to
A) establish a price for commercial e-mail.
B) ignore the spam issue because it has no economic implications.
C) have it legislated on the local level since it is a microeconomic issue.
D) ban all e-mail from international servers.
Suppose the government has a $1.2 trillion budget deficit. If the government borrows
$1.2 trillion to finance this deficit and finances the rest by printing money, the amount
of new money created will be
A) $0.
B) $600 billion.
C) $1.2 trillion.
D) $2.4 trillion.
When the economy is in a boom, the interest rates ________ and the bond prices
________.
A) increase; decrease
B) decrease; decrease
C) increase; increase
D) decrease; increase
Suppose that nominal GDP in year 1 is 200 and nominal GDP in year 2 is 242. Assume
that inflation is ten percent per year. How fast did the economy grow between these two
years?
A) 10 percent
B) 12 percent
C) 21 percent
D) 42 percent