Cost-reducing technological advancements allow suppliers to earn more profits but
have no noticeable effect on the supply curve.
a. True
b. False
A common characteristic in oligopolistic markets is
a. consideration of rivals’ reactions.
b. standardized products.
c. high profits.
d. unused capacity.
Which of the following is not a symptom associated with a price floor?
a. Excess of quantity demanded over quantity supplied.
b. Sellers offering discounts in disguised forms.
c. Problem of disposal created by excess supply.
d. Survival of inefficient businesses.
Once a firm’s marginal revenue curve is known, the output level can be determined.
a. True
b. False
The last two decades in the United States have seen
a. a fall in real wages.
b. an increase in labor-force participation.
c. growth in service sector employment.
d. All of the above are correct.
Some costs cannot be varied no matter how long the period in question. These are
called
a. overheads.
b. total costs.
c. fixed costs.
d. variable costs.
Economies of scale are also called increasing returns to scale.
a. True
b. False
All of the following are reasonable explanations of the labor productivity speed-up in
the United States except
a. labor force quality.
b. technological change.
c. investment spending.
d. research and development.
A monopsonist hires labor in a market with perfectly competitive supply. Whenever she
hires an additional worker,
a. she must reduce the wage paid to all workers already hired.
b. she will not change the wage paid to all workers already hired.
c. she must raise the wage paid to all workers already hired.
d. she may or may not choose to change the wage paid to all workers already hired.
The employment effect of a minimum wage increase is greater the
a. more elastic the demand for labor.
b. less elastic the demand for labor.
c. more the wage ceiling shifts the supply curve.
d. more the wage floor shifts the demand curve.
Which of the following would tend to increase the value of officially measured GDP?
a. decriminalization of drugs such as marijuana and cocaine
b. decriminalization of prostitution
c. decriminalization of gambling on basketball and football
d. all of the above
The full employment level of GDP is sometimes referred to as “potential GDP.”
a. True
b. False
If a “conservative” wanted to increase aggregate demand, which of the following would
she tend to favor?
a. An increase in government spending, because it has a larger multiplier than tax
changes.
b. A decrease in transfer payments, because it keeps the public sector small.
c. An increase in transfer payments, because it has a larger multiplier than tax changes.
d. A decrease in taxes, because it makes the public sector smaller.
Under perfect competition, regarding short-run profit, a firm may find itself losing
money. This is true because:
a. the firm was unable to pick the output that maximized profit
b. the market conditions make the highest possible profit a negative number
c. the demand for its product is weak or its costs are high
d. both b and c
Recent studies suggest that a rise in the minimum wage results in a substantial cut in the
demand for teen labor.
a. True
b. False
Money is a concept that has a certain value at a point in time.
a. True
b. False
What factors are held constant along a given demand curve for a good?
a. the price of the good
b. the technology used to produce the good
c. the supply of the good
d. consumer incomes and the prices of other goods
Which of the following ideas of Adam Smith has religious overtones?
a. comparative advantage
b. aggregate demand
c. perfect competition
d. rational expectations
e. invisible hand
The monetary stimulus post-September 11, 2001, achieved some desired effects within
the year.
a. True
b. False
There are about 5 million business firms in the Unites States.
a. True
b. False
Which of the following is an example of a company whose stock showed evidence of a
price bubble?
a. Facebook
b. Google
c. Amazon
d. all of the above
Which of the following might be a goal of a union?
a. increasing the size of the union
b. increasing the income while holding the size of the union constant
c. increasing both the size and income of the union
d. all of the above
What will tend to happen to wages if workers and employers foresee inflation?
a. Both parties will seek to reduce nominal wages and therefore keep real wages the
same.
b. Nominal wages will remain constant but real wages will increase to avoid the effects
of inflation.
c. Inflation erodes purchasing power of workers, and real wages are unchanged.
d. Nominal wages will increase by an amount that keeps real wages constant.
A complicating factor in international trade is that
a. barter is the basis for trade between countries; money is not used.
b. gold is used for payments; there are no international payments without gold.
c. many other countries prefer to use the U.S. dollar as currency, causing monetary
shortage in the United States.
d. trade between countries requires different currencies rather than one currency.
In September 2007 the British bank Northern Rock which specialized in home
mortgages experienced a noteworthy bank run.
a. True
b. False
In the short-run, the lowest price that a perfectly competitive firm will accept without
closing its doors is found by examining the average variable cost curve.
a. True
b. False
Creative destruction by innovation means
a. destruction of an innovative product once it fails in the market.
b. introduction of an innovative product makes older substitute goods obsolete.
c. substitute goods make innovative goods less competitive in the market.
d. introduction of innovative goods increase the competition in the market
The least costly combination of inputs is influenced by the relative prices of inputs.
a. True
b. False
Usury laws are often politically popular because
a. few people sympathize with banks and other lenders who are suspected of price
gouging.
b. consumers are in favor of the lower lending rates.
c. those concerned with affordable housing for the poor favor ceilings on mortgage
rates.
d. All of the above are correct.
The economic problem of scarcity
a. is unique to a capitalist economy.
b. requires that choices be made among alternatives.
c. disappears as technology advances.
d. affects only less-developed countries.
The major contribution of goldsmiths to the development of modern banking was
a. local banking.
b. market banking.
c. fractional reserve banking.
d. gold standard banking.
Which of the following conditions distinguishes monopolistic competition from perfect
competition?
a. number of sellers
b. freedom of entry and exit
c. perfect information
d. homogeneity of the product
Which of the following suggests that the “laws” of supply and demand are being
disobeyed?
a. outside forces disturbing an equilibrium
b. persistent shortages or surpluses
c. the market never moving from an equilibrium
d. “other things” not always being equal
Figure 17-6
If Figure 17-6 (a) illustrates the elimination of a recessionary gap, then the economy
should move to what point on the curves shown in Figure 17-6 (b)?
a. from e to r
b. from g to j
c. from r to j
d. from r to m
Human capital differs from physical capital in that
a. human capital is intangible.
b. human capital is tangible.
c. physical capital is intangible.
d. human capital has no cost to acquire.
In the DuPont cellophane case, rivals accused DuPont of monopolizing cellophane.
DuPont claimed that the relevant market was flexible wrapping material, such as wax
paper and aluminum foil, rather than just cellophane. DuPont won the case. What type
of evidence constituted DuPont’s defense?
What are the properties of indifference curves?
“As long as total revenue slopes up, marginal revenue must slope up also.” Explain
whether this statement is true or false.
The total cost of producing one unit of output is $200; two units cost $300, three units
$450, and four units $800. Fixed cost is $50. Draw the associated total cost, average
cost, and marginal cost curves, placing total cost on one graph and marginal and
average cost on a second graph.
Why are credit cards not considered part of the money supply?
Why is it misleading to argue that emissions permits are a “license to pollute”?
Explain how the short-run supply curve of the competitive firm is derived.
What are some examples of the unconventional monetary policy from the Federal
Reserve in response to the 2007-2009? Why were opponents concerned about these
measures?
Several writers have helped to popularize the notion that stock prices follow no
discernible pattern. What is meant by a random walk, and how can you explain why
people continue to invest in stocks if the random walk theory is correct?
Why is a period of stagflation part of the normal aftermath of a period of excessive
aggregate demand?
Why do most economists favor emissions taxes over direct controls as a pollution
deterrent?
Advocates of stabilization policy prefer quick medicine for economic ills. This leads
some observers to favor fiscal policy while others endorse monetary policy. Describe
the positions of each side in the debate and what seems to be the current consensus.
Between 1960 and 2013 U.S. GDP, measured in dollars of constant purchasing power,
expanded about 5.0 times. However, the standard of living only increased by 4 times
over this period. Explain the difference.
The economy’s self-correcting mechanism tends to push the unemployment rate back to
a specific rate of unemployment. How?
If the typical firm’s minimum average variable cost is $10 at an output of 50 units, if
marginal cost is $20 at 70 units, and there are 1,000 firms in the industry, sketch supply
curves for the typical firm and for the industry as a whole.
A monopolist sets price at $10 and sells 100 units. The corresponding marginal revenue
is $5 and marginal cost $3. What recommendation regarding price and quantity would
you give this monopolist? Use a graph if you wish.
Many believe that fairness calls for higher income taxes on the wealthy. Using one of
the “Ideas for Beyond the Final Exam,” explain how higher taxes on the wealthy will
affect output.
Discuss the major determinants of net exports.
Aunt Rose owned a dress shop on 81st Street and Broadway in Manhattan, selling
limited-edition dresses to wealthy clients. One day, her landlord tripled her rent. What
effect would this have on her dress price in the short run, assuming she is following the
rules of profit maximization?