Suppose that the economy is producing above potential GDP and the Fed implements
the correct change in monetary policy, but not until after the economy has passed the
peak of the boom. Then
A) the Fed’s contractionary policy will result in too large of a decrease in GDP.
B) the Fed’s contractionary policy will result in too small of a decrease in GDP.
C) the Fed’s expansionary policy will result in too small of a decrease in GDP.
D) the Fed’s expansionary policy will result in too large of an increase in GDP.
Vipsana’s Gyros House sells gyros. The cost of ingredients (pita, meat, spices, etc.) to
make a gyro is $2.00. Vipsana pays her employees $60 per day. She also incurs a fixed
cost of $120 per day. Calculate Vipsana’s total cost per day when she produces 50 gyros
using two workers?
A) $100
B) $124.40
C) $220
D) $340
Figure 2-13
Which two arrows in the diagram depict the following transaction: Stanley purchases
the novel, “Night of Sorrows” for his summer reading pleasure.
A) J and M
B) J and G
C) K and M
D) K and G
Table 15-4
Shakti Inc. has been granted a patent for its Arnica toothache balm. Table 15-4 shows
the demand and the total cost schedule for the firm.
What is Shakti’s profit-maximizing output?
A) 4 units
B) 5 units
C) 6 units
D) 7 units
As a form of business, a partnership
A) has limited liability.
B) has only one owner.
C) cannot issue stock.
D) has the most government rules and regulations affecting it.
Which of the following statements is false?
A) When marginal cost equals average total cost, average total cost is at its highest
value.
B) The marginal cost curve intersects the average variable cost curve and the average
total cost curve at their minimum points.
C) The difference between average total cost and average fixed cost is average variable
cost.
D) Firms often refer to the process of lowering average fixed cost as ‘spreading the
overhead.”
For a natural monopoly to exist
A) a firm must continually buy up its rivals.
B) a firm’s long-run average cost curve must exhibit diseconomies of scale beyond the
economically efficient output level.
C) a firm’s long-run average cost curve must exhibit economies of scale throughout the
relevant range of market demand.
D) a firm must have a government-imposed barrier.
Only one of the following statements is correct. The statements compare perfectly
competitive (PC) markets and monopolistically competitive (MC) markets. Which
statement is correct?
A) Productive efficiency is achieved in both PC and MC markets. Allocative efficiency
is achieved only in MC markets.
B) Allocative efficiency is achieved in both PC and MC markets. Productive efficiency
is achieved only in PC markets.
C) Productive efficiency and allocative efficiency are both achieved in PC markets.
Neither is achieved in MC markets.
D) Allocative efficiency is achieved only in PC markets. Productive efficiency is
achieved only in MC markets.
The difference between the highest price a consumer is willing to pay for a good and
the price the consumer actually pays is called
A) producer surplus.
B) the substitution effect.
C) the income effect.
D) consumer surplus.
Article Summary. According to the International Energy Agency (IEA), increased
oil production resulting from U.S. shale oil has invigorated the North American oil
industry and has created a global supply shock. The shale oil and gas industry has
generated tens of billions of dollars in revenues and hundreds of thousands of new
jobs, and could result in the United States changing from being the world’s largest
oil importer to a net exporter within a few years. An IEA forecast predicts that
because of shale oil, the United States will become the world’s largest oil producer
by 2017, with supply growing by 3.9 million barrels per day from 2012-2018.
Source: Denise Roland, and AFP, “US shale energy creates global oil ‘supply
shock’,” Telegraph, May 14, 2013.
The supply shock mentioned in the article summary may well result in a decrease in the
price of oil. When the price of oil falls unexpectedly, the equilibrium price level
________ and the unemployment rate ________ in the short run.
A) rises; falls
B) rises; rises
C) falls; falls
D) falls; rises
An increase in national income could by caused by which of the following?
A) an increase in depreciation
B) an increase in personal taxes
C) a decrease in personal income
D) an increase in gross domestic product
The per-worker production function shows the relationship between ________ per hour
worked and ________ per hour worked, holding ________ constant.
A) labor; real GDP; technology
B) capital; real GDP; technology
C) labor; capital; real GDP
D) capital; labor; real GDP
Replacing employment-based health care with a government-run system could reduce
employers payments for their workers insurance, but the amount that they would have
to pay in overall compensation
A) would remain essentially unchanged.
B) would dramatically increase.
C) would fall to zero.
D) would dramatically decrease.
Which of the following would shift a nation’s production possibilities frontier outward?
A) discovering a more efficient process to desalinate water
B) an increase in the minimum wage
C) a decrease in the unemployment rate
D) more restrictive immigration policies
If inflation increases unexpectedly, then
A) borrowers pay a higher real interest rate than they expected.
B) lenders receive a lower real interest rate than they expected.
C) lenders gain and borrowers gain.
D) neither borrowers nor lenders lose.
If national saving increases, ________. (Assume that the capital account is zero and net
transfers are zero.)
A) the sum of domestic investment and net exports must decrease
B) the sum of domestic investment and foreign investment must increase
C) the sum of domestic investment and foreign investment must decrease
D) foreign investment must decrease to cover the gain
A decrease in the discount rate ________ bank reserves and ________ the money
supply if banks respond appropriately to the change in the rate.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
David Myers, former controller for WorldCom, pleaded guilty to falsely reported costs
for WorldCom that were ________ than they actually were, resulting in reported
accounting profits for WorldCom that were ________ than their actual level.
A) higher; higher
B) lower; higher
C) lower; lower
D) higher; lower
Table 14-5
Ming and Henri each
run one of the two dry cleaning facilities in the town of Scaraby. Both consider offering
free pickup and delivery services. Table 14-5 shows the payoff matrix containing the
expected quarterly profits for each firm. Does Ming have a dominant strategy? If yes,
what is it?
A) Yes, Ming’s dominant strategy is to offer free pickup and delivery.
B) No, Ming does not a dominant strategy – his best outcome depends on what Henri
does.
C) Yes, Ming’s dominant strategy is to not to offer free pickup and delivery.
D) Yes, Ming’s dominant strategy is to wait to see what Henri does first.