Other things being equal, the effect of a decrease in the price of grapes would be
illustrated by
a. a rightward shift in the demand curve for grapes.
b. an increase in the quantity demanded for grapes.
c. a leftward shift in the demand curve for grapes.
d. a decrease in the quantity demanded grapes.
Because of the free-rider problem,
a. competitive markets will tend to undersupply public goods.
b. the federal government spends too much on national defense.
c. fireworks displays have become increasingly dangerous.
d. poverty has increased.
Which of the following lists two things that both increase the money supply?
a. make open market purchases and raise the reserve requirement ratio
b. make open market purchases and lower the reserve requirement ratio
c. make open market sales and raise the reserve requirement ratio
d. make open market sales and lower the reserve requirement ratio
The statement, “John buys more of good X as his income increases, ceteris paribus,”
means
a. John’s income is being held constant.
b. John’s purchases of good X are being held constant.
c. John’s income and purchases of this good are being held constant.
d. John’s income is the only influence that is being allowed to change.
e. the price of this good is being allowed to change.
The sum of all past budget deficits and surpluses of the federal government is the
a. budget deficit.
b. budget surplus.
c. national debt.
d. trade deficit.
An increase in per capita income will generally lead to
a. more material goods, but a decline in the quality of the environment.
b. a reduction in life expectancy because working conditions are less desirable.
c. an increase in the number of hours worked by residents.
d. an increase in the living standards of most people.
Use the figure to answer the following question(s).
Figure 10-4
What price should a competitive price-searcher firm with the cost and demand
conditions depicted in Figure 10-4 charge if it wants to maximize its profit?
a. $10
b. $15
c. $20
d. $24
What percent of the privately held national debt was owed to foreign investors in 2012?
a. 1.5 percent
b. approximately 20 percent
c. approximately 60 percent
d. more than 80 percent
Figure 11-4
What output would a monopolist with the demand and cost conditions depicted in
Figure 11-4 produce if ordered by regulators to serve the entire market at average cost?
a. R
b. S
c. T
d. U
Which of the following is true?
a. If the Fed wants to increase the money supply, it should increase the interest rate it
pays banks on their excess reserves.
b. When the Fed reduces the interest rate paid on excess reserves, it increases the
incentive of commercial banks to hold excess reserves.
c. If the Fed wants to reduce the future growth rate of the money supply, it could do so
by increasing the interest rate it pays banks on excess reserves.
d. When the Fed increases the interest rate it pays on excess reserves, this encourages
banks to extend more loans and thereby increase the money supply.
Suppose the demand for tacos decreases. What will happen to producer surplus in the
market for tacos?
a. It increases.
b. It decreases.
c. It remains unchanged.
d. It may increase, decrease, or remain unchanged.
Which of the following provides the strongest evidence that the corporate form of
business structure is relatively efficient, particularly when business firms are large?
a. the fact that almost 90 percent of business revenues are generated by corporations
b. the fact that individual proprietorships are more numerous than corporations
c. the fact that economic theory indicates corporate managers have some leeway to
pursue their own interests at the expense of the owners of the firm
d. the high salaries of many corporate executives, including some managing firms that
are making economic losses
According to the income effect, when the price of automobiles rises, people buy fewer
automobiles because
a. they substitute other forms of transportation for driving.
b. the nominal amount of their paychecks is smaller.
c. the purchasing power of their income is reduced.
d. their demand for automobiles is very elastic.
Figure 15-2
According to the Lorenz curve shown in Figure 15-2, what percentage of total income
is earned by the richest 20 percent of families?
a. 20 percent.
b. 40 percent.
c. 60 percent.
d. 80 percent.
If the economy is experiencing inflationary boom, and the government lowers taxes in
an effort to balance the budget, the Keynesian model indicates the likely effect will be
to
a. counteract inflation.
b. reduce the trade deficit.
c. continue inflationary pressures.
d. increase unemployment.
If the economy is in an inflationary boom, the Fed would most likely
a. increase bank reserves by raising the discount rate.
b. increase bank reserves by buying government securities
c. decrease bank reserves by lowering the discount rate.
d. decrease bank reserves by selling government securities.
e. decrease bank reserves by lowering the legal reserve requirement.
Which of the following indicates the major difference between monopolists and
competitive price searchers?
a. Monopolists will always be able to make economic profit; competitive price
searchers will not.
b. Barriers to entry are high under monopoly but low in competitive price-searcher
markets.
c. Monopolists will face a downward-sloping demand curve; competitive price
searchers will not.
d. Unregulated monopolists will charge prices that exceed marginal cost; competitive
price searchers will not.
Your father tells you he earned $1.50 per hour when he was 16 in 1969. Given that the
CPI was 36.0 in 1969 and 215 in 2008, how much would you have to earn in 2008 in
order to have the same real wage as your father in 1969?
a. $1.50
b. $5.00
c. $8.95
d. $15.00
A firm purchases $400,000 worth of raw materials and pays wages and salaries of
$300,000 and dividends of $100,000. If the firm sells its output for $1 million, the
firm’s value added to GDP is
a. $400,000.
b. $600,000.
c. $800,000.
d. $1,000,000.
If a local community has only one doctor, the monopoly power of the physician will
a. be small if entry barriers into the local market are high.
b. depend on how many other physicians there are in the national market.
c. be total since there are not any other providers of the same service in the local
market.
d. be minimal if the entry barriers restricting competition from other physicians are low.
The incentive to consume tax-deductible goods, instead of nondeductible goods,
increases when
a. marginal tax rates are high.
b. marginal tax rates are low.
c. the inflation rate is low and relatively stable.
d. This is a trick question: the consumption of tax-deductible goods is not affected by
marginal tax rates.
Why did the monetary base increase rapidly during the economic crisis of 2008?
a. The Fed purchased more assets and extended more loans.
b. The Fed sold financial assets and extended fewer loans.
c. The Fed purchased more assets, but extended fewer loans.
d. The Fed sold financial assets, but extended more loans.
Under a system of flexible exchange rates, which of the following would be most likely
to cause a nation’s currency to appreciate on the foreign exchange market?
a. stable domestic prices while the nation’s trading partners are experiencing inflation
b. a decrease in domestic interest rates
c. an increase in foreign interest rates
d. a domestic inflation rate of 10 percent while the nation’s trading partners are
experiencing stable prices
Use the figure below to answer the following question(s).
Figure 4-13
Refer to Figure 4-13. The supply curve S and the demand curve D1 indicate initial
conditions in the market for flu shots. A new government program is implemented that
grants buyers a $25 subsidy when they buy a flu shot, shifting the demand curve from
D1 to D2. Which of the following is true for this subsidy given the information provided
in the exhibit?
a. Buyers of flu shots will receive an actual benefit of $10 from the subsidy, while
sellers of flu shots will receive an actual benefit of $15 from the subsidy.
b. Buyers of flu shots will receive an actual benefit of $15 from the subsidy, while
sellers of flu shots will receive an actual benefit of $10 from the subsidy.
c. Buyers of flu shots will receive the full $25 benefit from the subsidy.
d. Sellers of flu shots will receive the full $25 benefit from the subsidy.
Why is it NOT surprising that men make up the minority of college graduates?
a. Because of discrimination against women, men are able to get good jobs with only a
high school degree.
b. Men are smarter than women and they do not need a higher education to be attractive
to employers.
c. Given their greater physical strength, many men accept high-paying but physically
demanding jobs instead of going to college.
d. Many men decide to pursue jobs in professional sports and this significantly reduces
the number of males who go to college.
Which of the following best explains why productive workers can command high
wages?
a. the bargaining power of labor unions.
b. the presence of minimum wage legislation.
c. wage and price controls that reflect the political power of labor organizations.
d. competition among employers for productive workers.
Which of the following is characteristic of the corporate form of ownership?
a. unlimited liability
b. easy transferability of ownership rights
c. no divisible ownership rights
d. absence of the principal-agent problem
If you wanted to compare the quantity of output of a country across time periods, which
of the following would you use?
a. the consumer price index
b. nominal GDP
c. the GDP deflator
d. real GDP
Under the rational expectations hypothesis, which of the following is the most likely
short-run effect of a move to a more expansionary monetary policy?
a. higher prices and no change in real output
b. higher prices and expansion in real output
c. no change in prices but an expansion in real output
d. no change in either prices or real output
Use the figure to answer the following question(s).
Figure 9-7
The average total cost (ATC) and marginal costs (MC) of a firm producing in a
price-taker industry are depicted in Figure 9-7. If the current market price of the firm’s
product is $3, what output should this firm produce per week?
a. 5,000
b. 7,500
c. 10,000
d. 12,500
The modern view of the Phillips curve suggests that
a. when inflation is less than anticipated, unemployment will rise above the natural rate.
b. monetary policy will be unable to affect inflation.
c. when people accurately anticipate inflation, expansionary monetary policy will
reduce unemployment.
d. when inflation exceeds what was anticipated, the natural rate of unemployment will
rise.
Other things constant, an increase in the real interest rate will
a. cause consumers to reduce their purchases of durable items like appliances and
automobiles.
b. induce businesses to increase their level of investment.
c. make borrowing money more attractive.
d. increase the natural rate of unemployment.
The net present value of $1,000 received at a time in the future would
a. decline if the $1,000 were received sooner.
b. increase if the delivery date for the $1,000 were set farther into the future.
c. increase if the interest rate rose.
d. increase if the interest rate fell.
(I) A monetary policy that results in price stability will encourage the realization of
gains from trade and thereby help promote economic growth.
(II) High tariffs and restrictive quotas will encourage rapid economic growth.
a. I is true; II is false.
b. II is true; I is false.
c. Both I and II are true.
d. Both I and II are false.
Sellers in competitive price-searcher markets
a. face competition both from existing firms and potential new entrants.
b. face competition from existing firms but not from potential new entrants.
c. face competition only from potential new entrants and only in the long run.
d. can compete only by product quality since product prices are set by market forces.