Oil is considered to be a non-renewable energy source. Oil
a. is an unlimited resource.
b. is a scarce resource.
c. is not a productive resource.
d. has no opportunity cost.
The market for diamond rings is closely linked to the market for high-quality diamonds.
If a large quantity of high-quality diamonds enters the market, then the
a. supply curve for diamond rings will shift right, which will create a shortage at the
current price. Price will increase, which will decrease quantity demanded and increase
quantity supplied. The new market equilibrium will be at a higher price and higher
quantity.
b. supply curve for diamond rings will shift right, which will create a surplus at the
current price. Price will decrease, which will increase quantity demanded and decrease
quantity supplied. The new market equilibrium will be at a lower price and higher
quantity.
c. demand curve for diamond rings will shift right, which will create a shortage at the
current price. Price will increase, which will decrease quantity demanded and increase
quantity supplied. The new market equilibrium will be at a higher price and higher
quantity.
d. demand curve for diamond rings will shift right, which will create a surplus at the
current price. Price will decrease, which will increase quantity demanded and decrease
quantity supplied. The new market equilibrium will be at a lower price and higher
quantity.
For most students, the largest single cost of a college education is
a. the wages given up to attend school.
b. tuition, fees, and books.
c. room and board.
d. transportation, parking, and entertainment.
The efficiency-wage theory of worker turnover suggests that firms with higher turnover
will have
a. higher production costs and higher profits.
b. higher production costs and lower profits.
c. lower production costs and higher profits.
d. lower production costs and lower profits.
Figure 6-21
Refer to Figure 6-21. The equilibrium price in the market before the tax is imposed is
a. $1.
b. $2.
c. $5.
d. $6.
Figure 6-10
Refer to Figure 6-10. A price ceiling set at
a. $6 will be binding and will result in a shortage of 8 units.
b. $6 will be binding and will result in a shortage of 4 units.
c. $16 will be binding and will result in a shortage of 12 units.
d. $16 will be binding and will result in a shortage of 6 units.
Which of the following by itself is consistent with the directions that the price level and
real GDP changed at the onset of the Great Depression?
a. aggregate demand shifted right
b. aggregate demand shifted left
c. aggregate supply shifted right
d. aggregate supply shifted left
Which of the following actions best illustrates adverse selection?
a. A person adds risky stock to his portfolio.
b. A person who has narrowly avoided many accidents applies for automobile
insurance.
c. A person is unwilling to buy a stock when she believes its price has an equal chance
of rising or falling $10.
d. A person purchases homeowners insurance and then checks his smoke detector
batteries less frequently.
Figure 5-14
Refer to Figure 5-14. Along which of these segments of the supply curve is supply
most elastic?
a. AB
b. CD
c. DH
d. GH
A risk-averse person has
a. utility and marginal utility curves that slope upward.
b. utility and marginal utility curves that slope downward.
c. a utility curve that slopes down and a marginal utility curve that slopes upward.
d. a utility curve that slopes upward and a marginal utility curve that slopes downward.
Figure 8-9
The vertical distance between points A and C represent a tax in the market.
Refer to Figure 8-9. The consumer surplus with the tax is
a. $2,000.
b. $4,000.
c. $6,000.
d. $8,000.
Which of the following is not an explanation for the existence of structural
unemployment?
a. efficiency wages
b. job search
c. minimum-wage laws
d. unions
In the long run, if the Fed decreases the rate at which it increases the money supply,
a. inflation will be lower.
b. unemployment will be higher.
c. real GDP will be lower.
d. All of the above are correct.
If the prices of all goods and services produced in the economy rose while the quantity
of all goods and services stayed the same, which would rise?
a. both real GDP and nominal GDP
b. real GDP but not nominal GDP
c. nominal GDP but not real GDP
d. neither nominal GDP nor real GDP
In which of the following instances is the present value of the future payment the
largest?
a. You will receive $1,000 in 5 years and the annual interest rate is 5 percent.
b. You will receive $1,000 in 10 years and the annual interest rate is 3 percent.
c. You will receive $2,000 in 10 years and the annual interest rate is 10 percent.
d. You will receive $2,400 in 15 years and the annual interest rate is 8 percent.
Which of the following is not included in aggregate demand?
a. purchases of stock and bonds
b. purchases of services such as visits to the doctor
c. purchases of capital goods such as equipment in a factory
d. purchases by foreigners of consumer goods produced in the United States
Suppose that 500 candy bars are demanded at a particular price. If the price of candy
bars rises from that price by 10 percent, the number of candy bars demanded falls to
480. Using the midpoint approach to calculate the price elasticity of demand, it follows
that the
a. demand for candy bars in this price range is unit elastic.
b. price increase will decrease the total revenue of candy bar sellers.
c. price elasticity of demand for candy bars in this price range is about 0.41.
d. price elasticity of demand for candy bars in this price range is about 0.24.
Table 5-6
Supply is Demand is
Scenario A elastic elastic
Scenario B elastic inelastic
Scenario C inelastic elastic
Scenario D inelastic inelastic
Refer to Table 5-6. Which scenario describes the market for oil in the short run in
comparison to the long run?
a. Scenario A describes both the short run and the long run.
b. Scenario D describes both the short run and the long run.
c. Scenario D describes the short run, whereas scenario A describes the long run.
d. Scenario C describes the short run, whereas scenario B describes the long run.
If foreigners want to buy more U.S. bonds, then in the market for foreign-currency
exchange the exchange rate
a. and the quantity of dollars traded rises.
b. rises and the quantity of dollars traded falls.
c. falls and the quantity of dollars traded rises.
d. and the quantity of dollars traded falls.
By diversifying, the risk of holding stock
a. can be eliminated. On average over the past two centuries stocks paid a higher
average real return than bonds.
b. can be eliminated. On average over the past two centuries stocks paid a lower
average real return than bonds.
c. can be reduced but not eliminated. On average over the past two centuries stocks paid
a higher average real return than bonds.
d. can be reduced but not eliminated. On average over the past two centuries stocks paid
a lower average real return than bonds.
A perfectly elastic demand implies that
a. buyers will not respond to any change in price.
b. any rise in price above that represented by the demand curve will result in a quantity
demanded of zero.
c. quantity demanded and price change by the same percent as we move along the
demand curve.
d. price will rise by an infinite amount when there is a change in quantity demanded.
Foreign saving is used for domestic investment when foreigners engage in
a. foreign direct investment.
b. foreign portfolio investment.
c. either foreign direct investment or foreign portfolio investment.
d. None of the above is correct.
Figure 6-6
Refer to Figure 6-6. Which of the following price ceilings would be binding in this
market?
a. $8
b. $10
c. $12
d. $14
Suppose that the money supply decreases. In the short run, this increases prices
according to
a. both the short-run Phillips curve and the aggregate demand and aggregate supply
model.
b. neither the short-run Phillips curve nor the aggregate demand and aggregate supply
model.
c. the short-run Phillips curve, but not the aggregate demand and aggregate supply
model.
d. the aggregate demand and aggregate supply model but not the short-run Phillips
curve.
Other things the same, an increase in velocity means that
a. transactions per dollar increase so the price level rises.
b. transactions per dollar increase so the price level falls.
c. transactions per dollar decrease so the price level rises.
d. transactions per dollar decrease so the price level falls.
The dictator of Turan has recently begun to arbitrarily seize farms belonging to his
political opponents, and he has given the farms to his friends. His friends don’t know
much about farming. The courts in Turan have ruled that the seizures are illegal, but the
dictator has ignored the rulings. Other things equal, we would expect that the growth
rate in Turan will
a. fall temporarily, but will return to where it was when the new owners learn how to
farm.
b. increase because the total amount of human capital in the country will increase as the
new owners learn how to farm.
c. fall and remain lower for a long time.
d. not be affected unless widespread civil disorder or civil war results.
According to the classical dichotomy, when the money supply doubles, which of the
following also doubles?
a. the price level and nominal wages
b. the price level, but not the nominal wage
c. the nominal wage, but not the price level
d. neither the nominal wage nor the price level
If the price elasticity of demand for a good is 6, then a 3 percent decrease in price
results in
a. a 20 percent increase in the quantity demanded.
b. an 18 percent increase in the quantity demanded.
c. a 2 percent increase in the quantity demanded.
d. a 1.8 percent increase in the quantity demanded.
In the markets for factors of production in the circular-flow diagram,
a. households provide firms with labor, land, and capital.
b. households provide firms with savings for investment.
c. firms provide households with goods and services.
d. firms provide households with profit.
Which of the following statements is true?
a. Free trade benefits a country when it exports but harms it when it imports.
b. “Voluntary” limits on Canadian exports of hogs are better for the United States than
U.S. tariffs placed on Canadian hog exports.
c. Tariffs and quotas differ in that tariffs work like a tax and therefore impose
deadweight losses, whereas quotas do not impose deadweight losses.
d. Free trade benefits a country both when it exports and when it imports.
The study of how the allocation of resources affects economic well-being is called
a. consumer economics.
b. macroeconomics.
c. willingness-to-pay economics.
d. welfare economics.
Table 3-3
Assume that Zimbabwe and Portugal can switch between producing toothbrushes and
producing hairbrushes at a constant rate.
Machine Minutes
Needed to Make 1
Refer to Table 3-3. Zimbabwe and Portugal would not be able to gain from trade if
Zimbabwe’s opportunity cost of one toothbrush changed to
a. 0 hairbrushes.
b. 5/6 hairbrushes.
c. 6/5 hairbrushes.
d. Zimbabwe and Portugal can always gain from trade regardless of their opportunity
costs.