If marginal benefit is less than marginal cost, output is inefficiently high.
A decrease in liabilities will reduce a firm’s net worth.
Holding all else constant, an economic expansion in Mexico should decrease the
demand for U.S. dollars.
The developing countries have been catching up to the lower-income industrial
countries in terms of economic growth.
The market price of a factor of production that is in fixed supply is determined only by
demand.
Once a country has a comparative advantage in producing a product, it cannot lose that
advantage.
An appropriate fiscal policy response when aggregate demand is growing at a faster rate
than aggregate supply is to decrease the money supply.
A majority of people in the United States do not have private health insurance.
The absolute value of the price elasticity of demand for telescopes is 1.5. Therefore,
telescopes can be classified as a luxury.
If the market for a product begins as perfectly competitive and then becomes a
monopoly, there will be a reduction in economic efficiency and a deadweight loss.
In a centrally planned economy, the government decides how economic resources will
be allocated.
A firm that engages in price discrimination must be able to identify the preferences of
every
customer it serves.
Suppose a monopoly is producing its profit-maximizing output level. Now suppose the
government imposes a lump-sum tax on the monopoly, independent of its output. As a
result the monopoly’s profit will fall.
If Sanjaya can shuck more oysters in one hour than Tatiana, then Sanjaya has a
comparative advantage in shucking oysters.
If the Federal Reserve raises or lowers interest rates too late, it could result in a
________ policy that destabilizes the economy.
A) fiscal
B) budgetary
C) procyclical
D) countercyclical
The health care system in Japan is referred to as ________, under which every resident
of Japan is required to enroll in either a private or the government-provided health
insurance program.
A) an out-of-pocket system
B) a single-payer health care system
C) a universal health insurance system
D) socialized medicine
Potential GDP is estimated to grow at a rate of 3.2% in the United States. Actual GDP
in the U.S.
A) always grows at a slower rate than potential GDP.
B) always grows at a faster rate than potential GDP.
C) always grows at the same rate as potential GDP.
D) is the same as potential GDP if all firms in the economy were working at capacity.
Under the gold standard, to increase the money supply in the country, the government
must
A) simply print more currency.
B) have enough gold to back up the increase in the money supply.
C) buy foreign currencies with dollars to increase foreign currency reserves.
D) increase the value of the country’s currency on foreign exchange markets.
Economists often analyze the interaction of individuals and firms in markets.
Economists also examine the actions of individuals and firms as they attempt to use
government to make themselves better off at the expense of others, a process that is
referred to as
A) rent seeking.
B) logrolling.
C) government failure.
D) the public choice initiative.
Ford Motor Company started producing the Model A at plants scattered around the
United States
A) to save on transport costs.
B) because diseconomies of scale at its initial River Rouge plant resulted in high
production costs.
C) to locate its production centers closer to its customers.
D) because it was not able to attract skilled workers in Michigan (where its first plant
was located).
Net exports usually ________ when the U.S. economy is in a recession and ________
when the U.S. economy is expanding.
A) increase; increase
B) decrease; increase
C) increase; decrease
D) decrease; decrease
Figure 6-4
The inelastic segment of the demand curve
A) is coincident with the horizontal axis.
B) is coincident with the vertical axis.
C) lies below the midpoint of the curve.
D) lies above the midpoint of the curve.
The federal government debt ________ when the federal government runs a deficit and
________ when the federal government runs a surplus.
A) increases; increases
B) decreases; increases
C) increases; decreases
D) decreases; decreases
Congressman Murphy made the following proposal: “We should establish policies that
completely eliminate air pollution. This is the only way to ensure that none of our
citizens suffers the negative effects of air pollution.” If Congressman Murphy’s proposal
was adopted and all forms of air pollution were eliminated, which of the following
would be true?
A) The total cost of pollution reductions would equal the total benefit to society.
B) Economic efficiency would be maximized
C) The total benefit to society from reductions in air pollution would be maximized.
D) The marginal cost from pollution reductions would exceed the marginal benefit.
The most liquid measure of money supply is
A) M0.
B) M1.
C) M2.
D) M3.
Suppose that real GDP for 2012 was $10,000 billion and real GDP for 2013 was $9,500
billion. What is the rate of growth of real GDP between 2012 and 2013?
A) -10%
B) -5%
C) -2%
D) -1%
Based on the following information, what is the balance on the financial account?
Exports of goods and services = $12 billion
Imports of goods and services = $14 billion
Net income on investments = -$4 billion
Net transfers = -$1 billion
Increase in foreign holdings of assets in the United States = $5 billion
Increase in U.S. holdings of assets in foreign countries = -$3 billion A) $8 billion
B) $2 billion
C) $1 billion
D) -$1 billion
A corporation is the type of business has ________ government rules and regulations
affecting it.
A) no
B) the fewest
C) the most
D) only federal
Average total cost is equal to
A) average fixed cost minus average variable cost.
B) total cost divided by the level of output.
C) marginal cost plus variable cost.
D) total cost divided by the number of workers.
Figure 4-6
Figure 4-6 shows the demand and supply curves for the almond market. The
government believes that the equilibrium price is too low and tries to help almond
growers by setting a price floor at Pf. What area represents the deadweight loss after the
imposition of the price floor?
A) C + D + G
B) F + G
C) C + D
D) C + D + F + G
Traditionally, Wall Street investment banks had been organized as partnerships, but by
2000 they had converted to being publicly traded corporations. As partnerships, the
principle-agent problem is ________, but as publicly traded corporations, the
principal-agent problem is often ________.
A) increased; more severe
B) increased; less severe
C) reduced; more severe
D) reduced; less severe
A Nash equilibrium is
A) reached when an oligopoly’s market demand and supply intersect.
B) reached when each player chooses the best strategy for himself and for the group.
C) reached when each player chooses the best strategy for himself, given the other
strategies chosen by the other players in the group.
D) an equilibrium comprising non-dominant strategies only.
Which of the following is an example of a “how much” decision?
A) Dinah’s Diner is only open for breakfast and lunch. Dinah is trying to decide
whether to open for dinner as well.
B) Zander has torn up his front yard and is debating whether to plant grass or install a
rock garden.
C) You received a nice birthday check from your grandmother and are deciding on
whether to spend it on a trip to New York or a trip to San Francisco.
D) Sergio quit his job to go back to school full time.
How is economic profit found?
What are the key differences between how we illustrate a contractionary fiscal policy in
the basic aggregate demand and aggregate supply model and in the dynamic aggregate
demand and aggregate supply model?
How can improvements in health increase a country’s total income?
Why do we not count the value of intermediate goods and services in gross domestic
product? Does the value of intermediate goods and services show up in gross domestic
product? If so, how?
What was the source of the problems encountered by many financial firms during the
late 2000s?
In the long run, perfectly competitive firms earn zero economic profit. Why do firms
enter an industry when they know that in the long run, they will not earn any profit?
Consider the following statement, “The Federal Reserve fights recessions by increasing
the money supply so people will have more money to spend.” What is wrong with the
statement and how can it be corrected?
C = 3,600 + (MPC)Y
I = 1,200
G = 1,400
NX = -200 If the equilibrium level of GDP is $30,000, using the equations for C, I, G,
and NX shown above, find the value of the marginal propensity to consume.