If the opportunity cost of producing more of one good remains the same as more of that
good is produced, then the production method is inefficient.
The problem with inflation is that as prices rise, consumers can no longer afford to buy
as many goods and services.
If a firm’s goal is to maximize revenue, it will price its product to correspond to the
unit-elastic segment of its demand curve.
If the federal budget has an actual budget surplus of $75 billion, but a cyclically
adjusted budget surplus of $50 billion, then the economy must be above potential real
GDP.
The government purchases multiplier will be larger if the marginal income tax rate
decreases.
If a perfectly competitive firm maximizes short-run profits, its marginal revenue will be
positive and less than its price.
In the market for factors of production, firms earn income by selling goods and services
to households.
In what ways do economists and policymakers who believe that the federal government
should have a larger role in the health care system criticize the Patient Protection and
Affordable Care Act (ACA)?
The basic aggregate demand and aggregate supply curve model helps explain ________
fluctuations in real GDP and the price level.
A) short-term
B) long-term
C) both short-term and long-term
D) unrelated
Figure 11-5
Curve Gapproaches curve F because
A) marginal cost is above average variable costs.
B) average fixed cost falls as output rises.
C) fixed cost falls as capacity rises.
D) total cost falls as more and more is produced.
The per-worker production function has a ________ slope, indicating that increases in
capital per hour worked ________ real GDP.
A) negative; increase
B) positive; increase
C) negative; decrease
D) positive; decrease
An increase in United States net foreign direct investment would occur if
A) United States citizens have increased the value of foreign stocks and bonds they
own.
B) United States citizens have increased their building or purchasing of facilities in
foreign countries.
C) net foreign investment increases.
D) net capital flows decrease.
Which of the following goods would see the largest decline in demand during a
recession?
A) automobiles
B) food
C) clothing
D) haircuts
Suppose Warren Buffet withdraws $1 million from his checking account at Chase
Manhattan Bank. If the required reserve ratio is 20 percent, what is the maximum
change in deposits in the banking system?
A) -$5 million
B) -$4 million
C) -$200,000
D) $1 million
E) $5 million
The best measure of a country’s standard of living is
A) GDP per labor hour.
B) GDP per unit of capital.
C) GDP per capita.
D) total nominal GDP.
Figure 5-15 Figure 5-15 shows
the market for Atlantic salmon, a common resource. The current market equilibrium
output of Q1 is not the economically efficient output. The economically efficient output
is Q2. Identify the area that shows the deadweight loss from overfishing.
A) egh
B) ekh
C) efh
D) eghk
Which of the following is a reason why airline yield management is an effective method
to increase revenue?
A) because airlines have invested heavily in developing computer models that identify
optimal pricing strategies in the various market segments
B) because airlines have successfully induced customers to reveal their resources and
preferences by offering them different versions of the product such as business class
and coach plane tickets
C) because a ticket is a contract to transport a specific person, and is not transferable
D) because airlines have a monopoly in long-distance carriage
Consider a tax cut which affects not only consumer disposable income, but also
after-tax earnings from labor supplied to labor markets and from financial assets
acquired through saving. In the long run we would expect this tax cut to
A) decrease both the price level and increase real GDP.
B) increase both the price level and the level of real GDP.
C) increase the level of real GDP.
D) increase the price level.
Two-dimensional graphs have a horizontal and a vertical axis and are used in
economics to illustrate
A) relationships between two economic variables.
B) one variable.
C) a flow chart.
D) a pie chart.
A negative supply shock in the short run causes
A) the aggregate supply curve to shift to the left.
B) the price level to fall.
C) unemployment to fall.
D) equilibrium real GDP to rise.
Before the Great Depression of the 1930s, the majority of government spending took
place at the ________ and after the Great Depression the majority of government
spending took place at the ________.
A) state and local levels; federal level
B) local level; federal level
C) federal level; state and local levels
D) federal level; state level
In a competitive market equilibrium the ________ equals the ________ of the last unit
sold.
A) total profit; marginal benefit
B) total cost; marginal cost
C) profit; selling price
D) marginal benefit; marginal cost
Explain how a stock market crash has the potential to lead to a recession in an economy.
Your text refers to airlines as “The Kings of Price Discrimination.” Why is price
discrimination common in the airline industry?
Use the information below to explain adjustments that move the economy to a long-run
equilibrium. Assume that firms and workers have adaptive expectations. The current
unemployment rate = 7%.
The natural rate of unemployment = 5.5%.
Last year’s inflation rate = 5%.
This year’s inflation rate = 4%.
A firm’s labor demand curve is also its marginal revenue product curve. For both the
perfectly competitive firm and the output price maker, the labor demand curve slopes
downwards. However, there is a difference in the reasons why the labor demand curve
slopes downwards. What is this difference?
Define a sole proprietorship.
If you own a bond with a seven percent coupon rate and new bonds are paying five
percent, what will happen to your bond’s market price?
What is the difference between economic efficiency and equity?