Figure 7-18
Refer to Figure 7-18. At the equilibrium price, consumer surplus is
a. $480.
b. $640.
c. $1,120.
d. $1,280.
A rational decisionmaker
a. ignores marginal changes and focuses instead on “the big picture.”
b. ignores the likely effects of government policies when he or she makes choices.
c. takes an action only if the marginal benefit of that action exceeds the marginal cost of
that action.
d. takes an action only if the combined benefits of that action and previous actions
exceed the combined costs of that action and previous actions.
A U.S. citizen buys a tea kettle manufactured in China by a company that is owned and
operated by U.S citizens. In which of the following components of U.S. GDP is this
transaction accounted for?
a. consumption and imports
b. consumption but not imports
c. imports but not consumption
d. neither consumption nor imports
The line that relates the price of a good and the quantity demanded of that good is
called the demand
a. schedule, and it usually slopes upward.
b. schedule, and it usually slopes downward.
c. curve, and it usually slopes upward.
d. curve, and it usually slopes downward.
When a country abandons a no-trade policy, adopts a free-trade policy, and becomes an
exporter of a particular good,
a. consumer surplus increases and total surplus increases in the market for that good.
b. consumer surplus increases and total surplus decreases in the market for that good.
c. consumer surplus decreases and total surplus increases in the market for that good.
d. consumer surplus decreases and total surplus decreases in the market for that good.
Most economists believe that classical macroeconomic theory is a good description of
the economy
a. in neither the short nor long run.
b. in the short run and in the long run.
c. in the short run, but not in the long run.
d. in the long run, but not in the short run.
Which of the following is correct? Inflation
a. impedes financial markets in their role of allocating resources.
b. reduces the purchasing power of the average consumer.
c. generally increases after-tax real interest rates.
d. is most costly when anticipated.
Figure 3-7
Bintu’s Production Possibilities Frontier Juba’s Production Possibilities Frontier
Refer to Figure 3-7. The opportunity cost of 1 bowl for Juba is
a. 1/4 cup.
b. 2/3 cup.
c. 3/2 cups.
d. 4 cups.
When a tax is imposed on the sellers of a good, the
a. demand curve shifts downward by less than the amount of the tax.
b. demand curve shifts downward by the amount of the tax.
c. supply curve shifts upward by less than the amount of the tax.
d. supply curve shifts upward by the amount of the tax.
Which of the following is a cause of the changing role of women in American society
over the past several decades?
a. new technologies that have reduced the amount of time required to complete routine
household tasks
b. improved birth control
c. changing political and social attitudes
d. All of the above are correct.
Suppose that a tax is placed on books. If the sellers pay the majority of the tax, then we
know that the
a. demand is more inelastic than the supply.
b. supply is more inelastic than the demand.
c. government has required that buyers remit the tax payments.
d. government has required that sellers remit the tax payments.
Positive statements are
a. prescriptive.
b. claims about how the world should be.
c. claims about how the world is.
d. made by economists speaking as policy advisers.
Table 11-1
The table below pertains to Pieway, an economy in which the typical consumer’s basket
consists of 10 bushels of peaches and 15 bushels of pecans.
Refer to Table 11-1. If 2006 is the base year, then the CPI for 2005 was
a. 83.3.
b. 100.
c. 120.
d. 200.
Aggregate demand shifts right when the government
a. raises personal income taxes.
b. increases the money supply.
c. repeals an investment tax credit.
d. All of the above are correct.
Relative to a situation in which gasoline is not taxed, the imposition of a tax on gasoline
causes the quantity of gasoline demanded to
a. decrease and the quantity of gasoline supplied to decrease.
b. decrease and the quantity of gasoline supplied to increase.
c. increase and the quantity of gasoline supplied to decrease.
d. increase and the quantity of gasoline supplied to increase.
As the price elasticity of supply approaches infinity, very small changes in price lead to
a. very large changes in quantity supplied.
b. very small changes in quantity supplied.
c. no change in quantity supplied.
d. None of the above is correct.
Table 3-11
Assume that Falda and Varick can switch between producing wheat and producing cloth
at a constant rate.
Quantity Produced in 1 Hour
Refer to Table 3-11. Falda has a comparative advantage in the production of
a. wheat.
b. cloth.
c. both goods.
d. neither good.
Total surplus is
a. equal to producer surplus plus consumer surplus.
b. equal to the total cost to sellers minus the total value to buyers.
c. equal to consumers’ willingness to pay plus producers’ cost.
d. greater than the sum of consumer surplus plus producer surplus.
If the nominal interest rate is 10 percent and the inflation rate is 4 percent, then the real
interest rate is
a. 14 percent.
b. 6 percent.
c. 2.5 percent.
d. .4 percent.
According to Arthur Laffer, the graph that represents the amount of tax revenue
(measured on the vertical axis) as a function of the size of the tax (measured on the
horizontal axis) looks like
a. a U.
b. an upside-down U.
c. a horizontal straight line.
d. an upward-sloping line or curve.
Which of the following could explain an increase in the interest rate and the equilibrium
quantity of loanable funds?
a. The demand for loanable funds shifted rightward.
b. The demand for loanable funds shifted leftward.
c. The supply of loanable funds shifted rightward.
d. The supply of loanable funds shifted leftward.
Figure 3-9
Uzbekistan’s Production Possibilities Frontier Azerbaijan’s Production
Possibilities Frontier
Refer to Figure 3-9. If Uzbekistan and Azerbaijan each spends all its time producing
the good in which it has a comparative advantage and trade takes place at a price of 12
bolts for 36 nails, then
a. neither Uzbekistan nor Azerbaijan will gain from this trade.
b. Uzbekistan will gain from this trade, but Azerbaijan will not.
c. Azerbaijan will gain from this trade, but Uzbekistan will not.
d. both Uzbekistan and Azerbaijan will gain from this trade.
Table 7-11
Refer to Table 7-11. The equilibrium price is
a. $10.00.
b. $8.00.
c. $6.00.
d. $4.00.
Which of the three functions of money are commonly met by each of the following
assets in the U.S. economy?
a. paper dollar
b. precious metals
c. collectibles such as baseball cards, stamps, and antiques
At Nick’s Bakery, the cost to make homemade chocolate cake is $4 per cake. As a result
of selling five cakes, Nick experiences a producer surplus in the amount of $17.50.
Nick must be selling his cakes for
a. $6.50 each.
b. $7.50 each.
c. $9.50 each.
d. $10.50 each.
Figure 21-2. On the left-hand graph, MS represents the supply of money and MD
represents the demand for money; on the right-hand graph, AD represents aggregate
demand. The usual quantities are measured along the axes of both graphs.
.
Refer to Figure 21-2. Which of the following quantities is held constant as we move
from one point to another on either graph?
a. the nominal interest rate
b. the quantity of money demanded
c. investment
d. the expected rate of inflation
Changes in the GDP deflator reflect
a. only changes in prices.
b. only changes in the amounts being produced.
c. both changes in prices and changes in the amounts being produced.
d. neither changes in prices nor changes in the amounts being produced.
Suppose you like to make, from scratch, pies filled with banana cream and vanilla
pudding. You notice that the price of bananas has increased. As a result, your demand
for vanilla pudding would
a. decrease.
b. increase.
c. be unaffected.
d. There is insufficient information given to answer the question.
If velocity and output were nearly constant, then
a. the inflation rate would be much higher than the money supply growth rate.
b. the inflation rate would be about the same as the money supply growth rate.
c. the inflation rate would be much lower than the money supply growth rate.
d. any of the above would be possible.
The Bureau of Labor Statistics defines the unemployment rate as the percentage of
a. those unemployed relative to those employed.
b. the labor force that is unemployed.
c. the adult population that is unemployed.
d. the adult population that is unemployed or not in the labor force.
Figure 2-12
Refer to Figure 2-12. One difference between points A and B is that
a. Point B is unattainable with current resources, but point A is attainable.
b. All resources are fully employed at point A but there is unemployment at point B.
c. More output can be produced at point A but no additional output can be produced at
point B.
d. This economy produces more blankets at point B than at point A.
On a given short-run Phillips curve which of the following is held constant?
a. the level of GDP
b. the unemployment rate
c. expected inflation
d. employment