Cassie’s Quilts alters, reconstructs and restores heirloom quilts. Cassie has just spent
$800 purchasing, cleaning and reconstructing an antique quilt which she expects to sell
for $1,500 once she is finished. After having spent $800, Cassie discovers that she
would need some special period fabric that would cost her $200 in material and time in
order to complete the task. Alternatively, she can sell the quilt “as is” now for $900.
What is her marginal benefit if she sells the quilt “as is” now?
A) $100
B) $900
C) She makes a marginal loss of $600, not a marginal benefit.
D) The marginal benefit cannot be determined.
The Bureau of Labor Statistics has taken several steps to reduce the bias in the
consumer price index. Which of the following is not one of the steps taken to reduce the
bias?
A) using statistical methods to reduce the size of the quality bias
B) updating the market basket every two years, rather than every 10 years
C) incorporating substitutions by consumers when prices of specific products rise
rapidly
D) conducting a point-of-purchase survey to track where consumers actually make their
purchases
Countries gain from specializing in producing goods in which they have ________ and
trading for goods in which other countries have ________.
A) a comparative advantage; an absolute advantage
B) an absolute advantage; an absolute advantage
C) a comparative advantage; a comparative advantage
D) an absolute advantage; a comparative advantage
The producer price index measures the prices that firms
A) pay for imported natural resources that go into the production process.
B) receive for the goods and services they export.
C) receive for the goods and services they use at all stages of production.
D) pay for labor, whether or not the labor is foreign or domestic.
Consider the market for opticians. What is likely to happen to the equilibrium wage and
quantity of opticians if more and more people turn to laser eye surgery instead of
wearing glasses or contact lens?
A) The equilibrium wage and the equilibrium quantity of opticians rise.
B) The equilibrium wage and the equilibrium quantity of opticians fall.
C) The equilibrium wage rises and the equilibrium quantity of opticians falls.
D) The equilibrium quantity falls and the equilibrium wage of opticians rises.
Consider a demand curve that has a constant elasticity value of 0. What happens to
quantity demanded and total revenue when price increases?
A) The quantity demanded and total revenue remain the same.
B) The quantity demanded does not change, but total revenue increases.
C) The quantity demanded and total revenue fall to zero.
D) The quantity demanded does not change, but total revenue decreases.
Figure 24-2
Ceteris paribus, a decrease in the expected price of an important natural resource would
be represented by a movement from
A) SRAS1 to SRAS2.
B) SRAS2 to SRAS1.
C) point A to point B.
D) point B to point A.
When the labor market is at full employment
A) there is only cyclical unemployment in the economy.
B) there is only structural unemployment in the economy.
C) the unemployment rate is 0%.
D) there is no cyclical unemployment in the economy.
Suppose you deposit $2,000 into Bank of America and that the required reserve ratio is
10 percent. How does this affect the bank’s balance sheet?
A) Reserves rise by $200.
B) Required reserves rise by $2,000.
C) Deposits rise by $1,000.
D) Excess reserves rise by $1,800.
The Fed
A) always engages in countercyclical policy.
B) always intends to engage in procyclical policy.
C) can engage in procyclical policy if it mistimes its policy response.
D) never intends to engage in countercyclical policy.
Table 2-1 Production choices for Tomaso’s Trattoria
Assume Tomaso’s Trattoria only produces pizzas and calzones. A combination of 24
pizzas and 15 calzones would appear
A) along Tomaso’s production possibilities frontier.
B) inside Tomaso’s production possibilities frontier.
C) outside Tomaso’s production possibilities frontier.
D) at the horizontal intercept of Tomaso’s production possibilities frontier.
The ________ in the United States is best described as a managed float exchange rate
system.
A) earliest used exchange rate system
B) current exchange rate system
C) exchange rate system used prior to the great depression
D) exchange rate system set up at the end of World War II
Economist Steve Landsburg has pointed out that Ebenezer Scrooge’s change in behavior
from miser to spender might actually be detrimental to the economy because
A) Scrooge’s miserly saving helped contribute to the production of investment goods
rather than consumption goods.
B) Scrooge was happiest when he was saving money, and happiness is the key to
economic growth.
C) saving has to be greater than consumption for the economy to grow.
D) Scrooge’s consumption habits were more detrimental to the environment than were
his earlier saving habits.
How will an increase in the government budget surplus as a result of lower government
spending (with no change in net taxes) affect private saving in the economy?
A) Private saving will increase by the amount of increase in the budget surplus.
B) Private saving will decrease by the amount of increase in the budget surplus.
C) Private saving will decrease by less than the amount of increase in the budget
surplus.
D) Private saving will be unaffected by the increase in the budget surplus.
The price of ________ in terms of ________ is referred to as the real exchange rate.
A) foreign goods; foreign services
B) domestic goods; the domestic currency
C) domestic goods; domestic services
D) domestic goods; foreign goods
Increasing opportunity cost along a bowed out production possibilities frontier occurs
because
A) of inefficient production.
B) of ineffective management by entrepreneurs.
C) some factors of production are not equally suited to producing both goods or
services.
D) of the scarcity of factors of production.
A trademark is
A) a legal instrument which grants a firm the right to differentiate its product.
B) a legal right to position a firm’s product in high-traffic public areas such as airports
and post offices.
C) a patent on a firm’s product.
D) a distinguishing attribute such as a sign or logo that allows a firm to uniquely
identify its product.
An increase in the price level will
A) shift the short-run aggregate supply curve to the left.
B) shift the short-run aggregate supply curve to the right.
C) move the economy up along a stationary short-run aggregate supply curve.
D) move the economy down along a stationary short-run aggregate supply curve.
Figure 11-7
Figure 11-7 shows the cost structure for a
firm.When output level is 100, what is the total cost of production?
A) $20
B) $1,000
C) $1,200
D) $2,000