If policy makers are concerned that the economy is in danger of rising inflation because
aggregate demand is increasing faster than aggregate supply, the appropriate fiscal
policy response is to
A) increase taxes.
B) increase government spending.
C) use expansionary fiscal policy.
D) increase interest rates.
Behavioral economics refers to the study of situations
A) where consumers and firms appear to make choices that are appropriate to reach
their goals.
B) where consumers and firms appear to value fairness when they make choices.
C) where consumers and firms disobey the laws of demand and supply.
D) where consumers and firms do not appear to be making choices that are
economically rational.
An expansion path shows
A) the level of sales necessary for a firm if it wants to expand.
B) the level of long-run average cost at different scales of operation.
C) the least-cost combination of inputs for each level of output.
D) the returns to scale at each level of output.
A quota is
A) a limit placed on the quantity of goods that can be imported into a country.
B) a tax imposed by a government on goods imported into a country.
C) a subsidy granted to importers of a vital input.
D) a health and safety restriction imposed on an imported product.
If 50 units are sold at a price of $20 and 80 units are sold at a price of $15, what is the
absolute value of the price elasticity of demand? Use the midpoint formula.
A) 0.17
B) 0.62
C) 1.62
D) 5
Suppose in Belgium, the opportunity cost of producing a trombone is 8 clarinets. In
Denmark, the opportunity cost of producing a trombone is 6 clarinets.
a. What is the opportunity cost of producing a clarinet for Belgium?
b. What is the opportunity cost of producing a clarinet for Denmark?
c. Which country has a comparative advantage in the production of clarinets?
d. Which country has a comparative advantage in the production of trombones?
If a consumer receives 22 units of marginal utility for consuming the first can of soda,
20 units from consuming the second, and 15 from the third, the total utility of
consuming the three units is
A) 57 utility units.
B) 35 utility units.
C) 15 utility units.
D) unknown, as more information is needed to determine the answer.
According to Marx, which of the following factors of production did not contribute
anything of value to production?
A) labor
B) capital
C) natural resources
D) entrepreneurship
What type of business is the easiest to set up?
A) sole proprietorship
B) partnership
C) corporation
D) There is no Difference in the ease of establishment.
Which policy tool allows the Federal Reserve the greatest control over monetary
policy?
A) the discount rate
B) open market operations
C) the reserve requirement
D) lender of last resort
Table 11-3
The table above refers to the relationship between the quantity of workers employed
and the number of cardboard boxes produced per day by Manny’s House of Boxes. The
capital used to produce the boxes is fixed. The highest value of the average product is
labor is ________ when Manny hires ________ workers.
A) 80; 3
B) 100; 3
C) 100; 2
D) 80; 4
If the cross-price elasticity of demand between Breeze Detergent and Faber Detergent is
a relatively large positive number, then it indicates that
A) the two brands are probably made by the same company.
B) the two brands of detergent are close substitutes.
C) consumers have a distinct preference for one brand versus the other.
D) detergents are necessities.
China’s current rate of GDP growth is quite rapid. Its current growth rate is probably
three times that of the United States. However, the levels of pollution are much higher
in China. Would you consider China to be better off than the United States given this
information? Why or why not?
Figure 4-17
Suppose the market is initially in equilibrium at price P1 and then the government
imposes a tax on every unit sold. Which of the following statements best describes the
impact of the tax?
A) The consumer will bear a greater share of the tax burden if the demand curve is D1.
B) The consumer’s share of the tax burden is the same whether the demand curve is D1
or D2.
C) The consumer will bear a greater share of the tax burden if the demand curve is D2.
D) The consumer will bear the entire burden of the tax if the demand curve is D1 and
the producer will bear the entire burden of the tax if the demand curve is D2.
The term “market” in economics refers to
A) a place where money changes hands.
B) a legal institution where exchange can take place.
C) a group of buyers and sellers of a product and the arrangement by which they come
together to trade.
D) an organization which sells goods and services.
All of the following are part of the ‘state health exchanges” provision of the Patient
Protection and Affordable Care Act (ACA) except
A) each state is required to establish an Affordable Insurance Exchange by 2014.
B) small businesses with fewer than 50 employees will be exempt from being required
to participate in the program.
C) low-income individuals will be eligible for tax credits to offset the costs of buying
health insurance.
D) health insurance policies that meet certain specified requirements will be offered by
state-run agencies, by non-profit firms, or by the federal government.
Table 12-3
Given the consumption schedule in the table above, the marginal propensity to save is
A) 0.1.
B) 0.4.
C) 0.7.
D) 0.9.
Which of the following statements about an entrepreneur is true?
A) purchases other factors of production in the output market
B) develops the vision for the firm and funds the producing unit
C) sells his entrepreneurial services in the output market
D) does not face personal risk
Which of the following will not cause the labor demand curve to shift to the right?
A) an increase in the price of the firm’s product
B) a technological improvement that increases labor productivity
C) an increase in human capital in the labor force
D) an increase in the market wage rate