Marginal cost is the additional cost to a firm of producing one more unit of a good or
service.
The dynamic aggregate demand and aggregate supply model assumes that potential
GDP increases over time.
When net exports equal zero, the economy is in macroeconomic equilibrium.
The total amount of consumer surplus in a market is equal to the below above the
market demand curve and above the market price.
It is not possible to have an absolute advantage in producing a good or service without
having a comparative advantage.
A college must decide if it wants to offer more Internet-based classes. This decision
involves answering the economic question of “what to produce.”
Auctions in recent years have resulted in higher prices paid for letters written by John
Wilkes Booth than those written by Abraham Lincoln. Which of the following events
would cause the price differences in these letters to get smaller?
A) The demand for Booth letters decreases.
B) The supply of Lincoln letters increases.
C) The demand for Lincoln letters increases and the supply of Booth letters increases.
D) The demand for Lincoln letters decreases and the demand for Booth letters
increases.
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.
Figure 26-1
In the figure above, the money demand curve would move from Money demand1 to
Money demand2 if
A) real GDP decreased.
B) the price level increased.
C) the interest rate decreased.
D) the Federal Reserve sold Treasury securities.
Which of the following pairs of goods is likely to have a negative cross-price elasticity
of demand?
A) pancakes and syrup
B) hot dogs and hamburgers
C) orange juice and grapefruit juice
D) peanuts and cat food
Table 13-2
Eco Energy is a monopolistically competitive producer of a sports beverage called
Power On. Table 13-2 shows the firm’s demand and cost schedules. What is likely to
happen to the product’s price in the long run?
A) It will fall.
B) It will increase.
C) It will remain constant.
D) This cannot be determined without information on its long-run demand curve.
There is public dissaving if
A) G + TR > T.
B) G + TR < T.
C) TR > G + T.
D) TR < G + T.
By the 2000s, an important change in the mortgage market had occurred when
________ became significant participants in the secondary market for mortgages.
A) investment banks
B) Federal Reserve Banks
C) commercial banks
D) savings banks
In many business situations one firm will act first, and then other firms will respond. To
help analyze these types of situations, economists use
A) retaliation games.
B) follow-the-leader-games.
C) sequential games.
D) bargaining games.
If real GDP per capita measured in 2009 dollars was $6,000 in 1950 and $48,000 in
2013, we would say that in the year 2013, the average American could buy ________
times as many goods and services as the average American in 1950.
A) 1/8
B) 4
C) 8
D) 12
Which of the following would cause an increase in the equilibrium price and decrease
in the equilibrium quantity of watermelon?
A) a decrease in demand and an increase in supply
B) a decrease in supply
C) an increase in demand and an increase in supply greater than the increase in demand
D) an increase in demand and an increase in supply
Figure 1-2
Calculate the area of the triangle A.
A) $1.3 million
B) $2.6 million
C) $3.4 million
D) $5.2 million
Government imposed quantitative limits on the amount of pollution firms are allowed
to produce is an example of
A) the Pigovian method of pollution control.
B) command and control approach to pollution reduction.
C) Coasian solution to pollution reduction.
D) a tradable emission allowance system of pollution control.
Which of the following statements is true?
A) Anytime you have to decide which action to take you are experiencing economic
equity.
B) Trade-offs do not apply when the consumers purchase a product for which there is
excess supply, such as a stock clearance sale.
C) Every individual, no matter how rich or poor, is faced with making trade-offs.
D) Economics is a social science that studies the trade-offs we are forced to make
because resources are unlimited.
In game theory, the three key characteristics of a game are
A) rules, strategies, and payoffs.
B) rules, regulations, and payoffs.
C) winners, losers, and rules.
D) risks, rewards, and penalties.
How can a firm have a negative valued added, as supposedly some state-owned
businesses did in the former Soviet Union? What has to be true for value added to be
negative?
Table 11-6
Consider the statistics in the table above in describing the developing countries. Are
these consistent with the economic growth model? Briefly explain.
Define a sole proprietorship.
Define productive efficiency. Does productive efficiency imply allocative efficiency?
Explain.
What is comparative advantage? What is absolute advantage?
How do government policies that enforce property rights affect economic growth?
If real GDP is $300 billion below potential GDP and the tax multiplier equals -1.5, then
how much would the government need to change taxes to bring the economy to
equilibrium at potential?
To maximize profit, a firm will produce the level of output where MR = MC. If a firm
actually makes a profit depends on the relationship of price to average total cost. What
are the three possible relationships between price and average total cost that determine
if a firm will make a profit, experience a loss, or break even?
Explain the relationship between net exports and net foreign investment.
List the competitive forces in the five competitive forces model.