A good will tend to be more price elastic if it
a. is a luxury good.
b. has no close substitutes.
c. is a small part of the household budget.
d. is a necessity.
A government currently uses price controls to hold down the price of zinc, an
exhaustible resource. If price controls are removed,
a. production of zinc will probably fall.
b. zinc mines with high marginal cost of production will probably stop producing.
c. consumers of zinc will probably want substitutes for zinc.
d. income will probably be redistributed from zinc producers to zinc consumers.
The entry of new firms into a perfectly competitive market shifts the demand curve
outward.
a. True
b. False
A reduction in net exports shifts the aggregate
a. demand curve inward.
b. demand curve outward.
c. supply curve outward.
d. supply curve inward.
The introduction of a tax in a perfectly competitive marketplace that is originally in
equilibrium will lower total surplus.
a. True
b. False
The labor productivity speed-up in the United States could be explained by a delayed
a. educational benefit.
b. technology benefit.
c. military spending benefit.
d. baby boom benefit.
Each C + I + G + (X − IM) expenditure schedule is drawn assuming a specific
a. income level.
b. spending level.
c. production level.
d. price level.
The payments to owners of capital include
a. interest and profits.
b. debt and taxes.
c. wages and salaries.
d. expenses and bonuses.
e. All of the above are correct.
All players have dominant strategies.
a. True
b. False
Barter transactions typically take place between two individuals with the same goods to
supply.
a. True
b. False
Profit is maximized at the output at which marginal revenue equals marginal cost.
a. True
b. False
The law of comparative advantages explains why
a. advanced nations will not trade with less-developed countries.
b. an advanced nation will not trade with other countries.
c. less-developed countries only trade among themselves.
d. nations trade with each other, regardless of their relative levels of economic
development.
e. nations erect trade barriers.
When price falls, demand rises.
a. True
b. False
College graduates looking for jobs were less fortunate in 2007 than graduates in 2009.
a. True
b. False
The velocity of circulation is the number of times per year a dollar is spent.
a. True
b. False
The aggregate supply curve normally
a. slopes downward and to the right due to higher resource prices.
b. has a horizontal slope equal to zero.
c. is very steep in the lower portion and flatter in the upper portion.
d. slopes upward to the right due to short-run fixed costs of production.
A consumer will go to a point on the highest attainable indifference curve.
a. True
b. False
Tax reductions should also reduce the amount of consumer expenditures.
a. True
b. False
Marginal utility can fall even as total utility from the consumption of a good is rising.
a. True
b. False
When economies of scale exist,
a. production costs per unit increase as output expands.
b. production costs per unit decline as output expands.
c. total production costs decrease.
d. total production costs increase.
Monetarists maintain that
a. the best way to study the economy is with the expenditure schedule.
b. control over the money supply implies control over real GDP.
c. velocity is not constant, but is fairly predictable.
d. All of the above are correct.
Following an expansionary monetary policy, we would expect lower interest rates,
dollar
a. depreciation, and an increase in the current account deficit.
b. depreciation, and a decrease in the current account deficit.
c. appreciation, and an increase in the current account deficit.
d. appreciation, and a decrease in the current account deficit.
A graph conveys information about a cause-and-effect relationship.
a. True
b. False
Spending on an education is considered an investment because it involves a sacrifice of
current income for higher expected future income.
a. True
b. False
Under perfect competition, the lure of profits makes producers try to equate marginal
cost and price.
a. True
b. False
A monopolist will maximize profits by producing a quantity specified by setting
marginal revenue equal to marginal cost.
a. True
b. False
The second largest source of revenue for the federal government is the
a. import tax.
b. payroll tax.
c. export tax.
d. federal property tax.
A market is contestable if
a. the number of firms is larger than oligopoly.
b. firms spend a lot on advertising.
c. there is free entry and exit.
d. firms have kinked demand curves.
A tax on polluting firms
a. would shift the LRAC curve upward.
b. would shift the LRAC curve downward.
c. would have the same impact on the firm as a subsidy.
d. tends to have the perverse effect of increasing pollution.
The nationality of a company and a product is easily determined.
a. True
b. False
Regarding the causes of pollution, economists believe that:
a. the pricing system has failed.
b. the public interest requires that pollution to be reduced below its market level.
c. a firm pollutes the air and water because they are free.
d. All of the above are correct.