If the U.S. dollar depreciates, it means that
a. the value of the U.S. dollar has increased
b. the value of foreign exchange has decreased
c. fewer U.S. dollars are required to purchase foreign exchange
d. more U.S. dollars are required to purchase foreign exchange
e. exports will immediately fall
In developing nations, the combined rate of urban and rural unemployment or
underemployment is about
a. 1 percent
b. 10 percent
c. 20 percent
d. 30 percent
e. 80 percent
Exhibit 7-6
In Exhibit 7-6, the average variable cost of producing 20 units is
a. $20
b. $25
c. $22
d. $250
e. $350
By itself, the substitution effect of an increase in the wage rate will
a. always lead to an increase in the quantity of labor supplied
b. always lead to a decrease in the quantity of labor supplied
c. lead to an increase in the quantity of labor supplied only if leisure is like a normal
good
d. lead to an increase in the quantity of labor supplied only if leisure is not a normal
good
e. lead to an increase in the quantity of labor supplied only if the income effect works in
the same direction
A natural monopoly exists when, throughout the range of market demand,
a. average cost is increasing
b. there are diseconomies of scale
c. average cost is decreasing
d. average cost is constant
e. marginal cost exceeds average cost
A rise in demand for restaurant meals is likely to cause which of the following in the
long run?
a. economic losses for each restaurant
b. a lower price for each restaurant meal
c. fewer restaurants in the industry
d. more restaurants in the industry
e. economic profit for restaurants
The numerical value of the slope of a line depends in part on the units of measurement
used.
a. True
b. False
When foreign aid is tied to purchases of low-priced food from the donor country, farm
prices can drop in the developing countries, hurting poor farmers.
a. True
b. False
Janis mows the lawn in 1 hour and types a paper in 1 hour. Kristen mows the lawn in 2
hours and types a paper in 2 hours. Which of the following statements is true?
a. Kristen has an absolute advantage in typing and a comparative advantage in mowing.
b. Janis has an absolute advantage in both activities and a comparative advantage in
typing.
c. Janis has an absolute advantage in both activities and a comparative advantage in
mowing.
d. The opportunity cost of mowing the lawn is greater for Kristen than it is for Janis.
e. Neither Janis nor Kristen would gain from specialization.
The capture theory of regulation, espoused by George Stigler, asserts that
a. consumers “capture” regulatory agencies so that regulation favors consumers
b. producers “capture” regulatory agencies so that regulation favors producers
c. regulators “capture” producers and limit their market power
d. consumers “capture” some consumer surplus lost to monopoly
e. consumers and producers work together to “capture” regulatory agencies in order to
achieve more desirable regulation
In reference to welfare recipients, the high effective marginal tax rate on earnings
a. encourages self-sufficiency
b. encourages more labor market activity
c. discourages employment
d. increases total family income if the marginal tax rate exceeds 100 percent
e. tends to increase welfare benefits as more income is earned up to the “means-test”
threshold
People generally view leisure
a. as an inferior good
b. as a normal good
c. as a source of disutility
d. as more valuable per unit the more they have of it
e. as unrelated to utility maximization
The winner’s curse is more likely
a. when there is only one bidder
b. when demand for the good being auctioned is increasing
c. when the value of the good being auctioned is common knowledge
d. when the value of the good being auctioned is uncertain
e. when the marginal cost of information is low
You buy a bond for $1,000 from the federal government, which guarantees that you will
receive $70 a year forever. Thus, 7 percent was the market rate of interest when you
bought the bond. Suppose that immediately after you buy the bond, the market rate of
interest goes to 10 percent. The market value of your bond
a. could be more or less than $1,000
b. will be less than $1,000
c. will be more than $1,000
d. will remain unchanged
e. will be $1,000
Financial intermediaries bring suppliers and demanders together in the market for
a. checks
b. loanable funds
c. saving
d. physical capital
e. income
The difference between positive economic statements and normative economic
statements is that
a. both c and e are true
b. positive statements are based on opinion while normative statements are based on
fact
c. positive statements are true and normative statements are often false
d. positive statements are often false and normative statements are true
e. positive statements are based on fact while normative statements are based on
opinion
Exhibit 5-28
Use the information in Exhibit 5-28 to calculate the value of price elasticity of demand
from point a to b.
a. -5/4
b. -4/5
c. -13/18
d. -18/13
e. 0
Which of the following is the best example of the ownership of the resource called
capital
a. John Smith’s ownership of 10 shares of a manufacturer of farm tractors
b. Pogo O”Reilly’s ownership of 10 shares of a natural gas extraction company
c. Helen Restock’s ownership of a $10,000 savings bond
d. Abe Hawthorne’s college degree in marketing
e. Ann Stump’s creative, risk-taking personality
In the short run, which of the following is likely to be a variable cost to a physician?
a. office space
b. computers
c. liability insurance
d. insurance forms
e. examining table
If a firm is using a resource hired in a perfectly competitive market, and if the marginal
resource cost is less than its marginal revenue product,
a. more of the resource should be used
b. less of the resource should be used
c. the firm should pay a lower price for the resource
d. the firm should pay a higher price for the resource
e. the firm is using the optimal amount of the resource
By integrating vertically,
a. firms trade with one another through markets
b. firms trade with one another through government intermediation
c. firm and market processes are connected to produce a good or service most
efficiently
d. the various procedures involved in producing a good are collected within one firm
e. the various procedures involved in producing a good are parceled out among various
contractors
The equilibrium wage
a. is the same in all labor markets
b. occurs where the supply of labor curve begins to bend backward
c. cannot be calculated because there are so many labor markets
d. is determined by the market demand for labor and the market supply of labor
e. is irrelevant because of unions
If ten cases of spring water are sold at a price of $6 each in a perfectly competitive
output market and the marginal product of the last unit of labor is 5, then the marginal
revenue product of that last unit of labor is
a. $60
b. $30
c. $50
d. $2
e. 60 cents
Eligibility for income assistance benefits requires a prior financial contribution from the
individual covered; eligibility for social insurance programs does not.
a. True
b. False
According to the search model, we should expect greater price dispersion for a given
good
a. if the good is a luxury
b. if the good is inferior
c. if there is much common knowledge about the good
d. during a recession
e. if a computerized search service is offered
Exhibit 7-8
In Exhibit 7-8, curve B represents
a. marginal cost
b. average total cost
c. average variable cost
d. average fixed cost
e. average marginal cost
Exhibit 13-9
In the market for loanable funds depicted in Exhibit 13-9, what is the equilibrium
interest rate?
a. 50%
b. 40%
c. 30%
d. 20%
e. 10%
The balance of payments can be thought of as the balance of economic transactions.
a. True
b. False
All of the following are examples of negative externalities except one. Which is the
exception?
a. water pollution
b. your roommate going on a diet
c. second-hand smoke
d. loud conversation in the workplace
e. your neighbor building a bomb shelter on her front lawn
Monopolistic competition is similar to
a. perfect competition, in that firms face downward-sloping demand curves and earn
zero long-run economic profit
b. pure monopoly, in that firms face downward-sloping demand curves and can earn
economic profits both in the short run and in the long run
c. perfect competition, in that firms face perfectly elastic demand curves and earn zero
long-run economic profit
d. pure monopoly, in that firms can earn economic profits both in the short run and in
the long run, and similar to perfect competition, in that firms face perfectly elastic
demand curves
e. pure monopoly, in that firms face downward-sloping demand curves, and similar to
perfect competition, in that long-run economic profit is zero
In determining the exchange rate between the Canadian dollar and British pound, if
Canadian income increases, then
a. the Canadian demand for pounds increases
b. the price of pounds decreases
c. the Canadian demand for pounds decreases
d. the Canadian supply of pounds increases
e. the supply of Canadian dollars decreases