Industrial machinery is an example of
a. a factor of production that in the past was an output from the production process.
b. technological knowledge.
c. a production function.
d. an item which always has the property called constant returns to scale.
The gains from trade are
a. evident in economic models, but seldom observed in the real world.
b. evident in the real world, but impossible to capture in economic models.
c. a result of more efficient resource allocation than would be observed in the absence
of trade.
d. based on the principle of absolute advantage.
Scenario 5-3
Milk has an inelastic demand, and beef has an elastic demand. Suppose that a
mysterious increase in bovine infertility decreases both the population of dairy cows
and the population of beef cattle by 50 percent.
Refer to Scenario 5-3. Total consumer spending on milk will
a. increase, and total consumer spending on beef will increase.
b. increase, and total consumer spending on beef will decrease.
c. decrease, and total consumer spending on beef will increase.
d. decrease, and total consumer spending on beef will decrease.
Assume the price of gasoline is $2.00 per gallon, and the equilibrium quantity of
gasoline is 10 million gallons per day with no tax on gasoline. Starting from this initial
situation, which of the following scenarios would result in the largest deadweight loss?
a. The price elasticity of demand for gasoline is 0.1; the price elasticity of supply for
gasoline is 6; and the gasoline tax amounts to $0.20 per gallon.
b. The price elasticity of demand for gasoline is 0.1; the price elasticity of supply for
gasoline is 4; and the gasoline tax amounts to $0.20 per gallon.
c. The price elasticity of demand for gasoline is 0.2; the price elasticity of supply for
gasoline is 6; and the gasoline tax amounts to $0.30 per gallon.
d. There is insufficient information to make this determination.
The use of the coordinate system allows
a. for the display of the flows of dollars, goods and services, and factors of production
in an economic system.
b. for the display of how labor and other resources are organized in the production
process.
c. for the display of two variables on a single graph.
d. for the creation of pie charts and bar graphs.
The goal of rent control is to
a. facilitate controlled economic experiments in urban areas.
b. help landlords by assuring them a low vacancy rate for their apartments.
c. help the poor by assuring them an adequate supply of apartments.
d. help the poor by making housing more affordable.
In which cases were tax cuts followed by robust growth?
a. the ones of the Kennedy administration in 1964 and the ones of the Reagan
administration in 1981
b. the ones of the Kennedy administration in 1964 but not the ones of the Reagan
administration in 1981
c. the ones of the Reagan administration in 1981 but not the ones of the Kennedy
administration in 1964
d. neither the ones of the Kennedy administration in 1964 nor the ones of the Reagan
administration in 1981
Last year, Joan bought 50 pounds of hamburger when her household’s income was
$40,000. This year, her household income was only $30,000 and Joan bought 60 pounds
of hamburger. All else constant, Joan’s income elasticity of demand for hamburger is
a. positive, so Joan considers hamburger to be an inferior good.
b. positive, so Joan considers hamburger to be a normal good and a necessity.
c. negative, so Joan considers hamburger to be an inferior good.
d. negative, so Joan considers hamburger to be a normal good but not a necessity.
Table 3-6
Assume that Maya and Miguel can switch between producing mixers and producing
toasters at a constant rate.
Hours Needed
To Make 1 Amount Produced
in 40 Hours
Refer to Table 3-6. The opportunity cost of 1 toaster for Miguel is
a. 1/2 mixer.
b. 2 hours of labor.
c. 2 mixers.
d. 20 hours of labor.
In the long run, policy that changes aggregate demand changes
a. both unemployment and the price level.
b. neither unemployment nor the price level.
c. only unemployment.
d. only the price level.
An organization that tries to encourage the flow of investment to poor countries is the
a. World Bank.
b. Organization of Less Developed Countries.
c. Alliance of Developing Countries.
d. International Development Alliance.
An economy has a current inflation rate of 12%. If the central bank wants to reduce
inflation to 4% and the sacrifice ratio is 2, how much annual output must be sacrificed
in the transition?
a. 16%
b. 8%
c. 4%
d. None of the above is correct.
Frictional unemployment can be the consequence of
a. workers leaving existing jobs to find ones they like better.
b. one industry declining while another is growing.
c. changes in the working conditions offered by competing firms.
d. All of the above are correct.
Other things the same, if the U.S. real exchange rate depreciated, then U.S. net exports
would
a. fall and the quantity of dollars demanded in the market for foreign-currency
exchange would fall.
b. fall and the quantity of dollars demanded in the market for foreign-currency
exchange would rise.
c. rise and the quantity of dollars demanded in the market for foreign-currency
exchange would fall.
d. rise and the quantity of dollars demanded in the market for foreign-currency
exchange would rise.
Figure 8-3
The vertical distance between points A and C represents a tax in the market.
Refer to Figure 8-3. The equilibrium price before the tax is imposed is
a. P1.
b. P2.
c. P3.
d. P4.
If Ireland’s domestic investment exceeds national saving, then Ireland has
a. positive net capital outflows and negative net exports.
b. positive net capital outflows and positive net exports.
c. negative net capital outflows and negative net exports.
d. negative net capital outflows and positive net exports.
Figure 9-17
Refer to Figure 9-17. When the country moves from free trade to trade and a tariff,
consumer surplus
a. decreases by $576 and producer surplus does not change.
b. decreases by $576 and producer surplus increases by $192.
c. decreases by $792 and producer surplus does not change.
d. decreases by $792 and producer surplus increases by $192.
You go to the movieplex where movies ordinarily cost $10. You are intending to see a
movie for which you have a $3 off coupon good for only that movie at that time.
However, when you get there you see a friend who asks if you would rather see a new
release. Both movies start and end at the same time. If you decide to see the new release
with your friend, what is your opportunity cost?
a. the amount you value the first movie + $3
b. the amount you value the first movie + $10
c. $3
d. $10
A U.S. firm buys apples from New Zealand with New Zealand dollars it got in
exchange for U.S. dollars. New Zealand residents then use these dollars to purchase
oranges from the U.S. Which of the following increases?
a. New Zeland’s net capital outflow and New Zeland’s net exports
b. only New Zeland’s net exports
c. only New Zeland’s net capital outflow
d. neither New Zeland’s net exports nor New Zeland’s capital outflow
An adverse supply shock causes output to
a. rise. To counter this a central bank would increase the money supply.
b. rise. To counter this a central bank would decrease the money supply.
c. fall. To counter this a central bank would increase the money supply.
d. fall. To counter this a central bank would decrease the money supply.
Which of the following statements is true?
a. The quantity of natural resources per worker can influence productivity.
b. Technological knowledge and human capital are closely related.
c. Over long periods of time, the prices of most natural resources are stable or falling,
relative to other prices.
d. All of the above are correct.
Suppose there is currently a tax of $50 per ticket on airline tickets. Buyers of airline
tickets are required to pay the tax to the government. If the tax is reduced from $50 per
ticket to $30 per ticket, then the
a. demand curve will shift upward by $20, and the effective price received by sellers
will increase by $20.
b. demand curve will shift upward by $20, and the effective price received by sellers
will increase by less than $20.
c. supply curve will shift downward by $20, and the price paid by buyers will decrease
by $20.
d. supply curve will shift downward by $20, and the price paid by buyers will decrease
by less than $20.
Figure 9-9
Refer to Figure 9-9. Total surplus in this market before trade is
a. A + B.
b. A + B + C.
c. A + B + C + D.
d. B + C + D.
If the public decides to hold less currency and more deposits in banks, bank reserves
a. decrease and the money supply eventually decreases.
b. decrease but the money supply does not change.
c. increase and the money supply eventually increases.
d. increase but the money supply does not change.
Table 13-2
Refer to Table 13-2. For which company’s stock is the P/E ratio closest to what is
historically typical?
a. Boeing Co.
b. Eli Lilly and Co.
c. H. J. Heinz and Co.
d. Kellog Co.
If the world price of sugar is lower than Brazil’s domestic price of sugar without trade,
then Brazil
a. should import sugar.
b. has a comparative advantage in sugar.
c. should produce just enough sugar to satisfy domestic demand.
d. should produce no sugar domestically.
When government imposes a price ceiling or a price floor on a market,
a. price no longer serves as a rationing device.
b. efficiency in the market is enhanced.
c. shortages and surpluses are eliminated.
d. both buyers and sellers become better off.
Table 15-3
2010 Labor Data for Adults (age 16 and older) in Meditor
Refer to Table 15-3. What is the adult labor-force participation rate in Meditor?
a. 37.5 percent
b. 62.5 percent
c. 66.7 percent
d. 95.8 percent
Table 3-7
Assume that Japan and Korea can switch between producing cars and producing
airplanes at a constant rate.
Hours Needed
to Make 1 Quantity Produced
in 2400 Hours
Refer to Table 3-7. Assume that Japan and Korea each has 2400 hours available. If
each country divides its time equally between the production of cars and airplanes, then
total production is
a. 40 cars and 8 airplanes.
b. 64 cars and 16 airplanes.
c. 80 cars and 16 airplanes.
d. 128 cars and 32 airplanes.
Who is included in the labor force by the Bureau of Labor Statistics?
a. Chris, an unpaid homemaker not looking for other work
b. Marcus, a full-time student not looking for work
c. Gabe, who does not have a job, but is looking for work
d. None of the above is correct.
Figure 6-16
Refer to Figure 6-16. Suppose a tax of $5 per unit is imposed on this market. Which of
the following is correct?
a. Buyers and sellers will share the burden of the tax equally.
b. Buyers will bear more of the burden of the tax than sellers will.
c. Sellers will bear more of the burden of the tax than buyers will.
d. Any of the above is possible.
A production possibilities frontier has a bowed shape if the opportunity cost is constant
at all levels of output.
Taxes cause deadweight losses because they prevent buyers and sellers from realizing
some of the gains from trade.
Producer surplus is the amount a seller is paid minus the cost of production.
A decrease in supply shifts the supply curve to the left.
A nation with a trade surplus will necessarily have domestic investment that is greater
than domestic saving.
Points outside the production possibilities frontier represent infeasible levels of
production.
One way that governments can improve market outcomes is to ensure that individuals
are able to own and exercise control over their scarce resources.
Unemployment generated by the existence of labor unions is structural unemployment
and so contributes to the natural rate of unemployment.
When a country imposes a trade restriction, the real exchange rate of that country’s
currency appreciates.
If people who report being unemployed are not, in fact, trying hard to find a job, then
the reported unemployment rate will be baised upward.
While the production possibilities frontier is a useful model, it cannot be used to
illustrate economic growth.
Although monetary policy cannot reduce the natural rate of unemployment, other types
of government policies can.
A union is a type of cartel.
Suppose that the government goes into deficit in order to help local school districts
build better schools. Does this burden future generations?
An increase in the money supply shifts the aggregate-supply curve to the right.
The Bureau of labor statistics divides the adult population into two categorizes, those
who are employed and those who are unemployed.
In the U.S., it is illegal for employers to interfere when workers try to organize unions.
According to the principle of comparative advantage, all countries can benefit from
trading with one another because trade allows each country to specialize in doing what
it does best.