A given income-expenditure diagram always assumes a variable price level.
a. True
b. False
As more of a good is produced, its opportunity cost tends to increase because resources
are not equally efficient at producing all goods.
a. True
b. False
What is the term used for the process by which an entrepreneur creates or recognizes a
new and better product, acquires it, and brings it to market, making older substitutes
obsolete?
a. creative destruction
b. innovation
c. the substitution effect
d. backward-bending innovation
If marginal cost is rising, then average cost must be rising.
a. True
b. False
If expectations are rational, the difference between the actual rate of inflation and the
expected rate of inflation will be zero.
a. True
b. False
Which of the following would be classified as an innovation?
a. Edwin H. Land perfects the single-step photographic process in 1947.
b. Polaroid markets the single-step film in 1948.
c. Thomas Alva Edison perfects the incandescent lamp with carbon filament in 1879.
d. In 1803, Robert Fulton constructs his first small steamboat in Paris.
What is defined as the ability of a firm to earn high profits by raising and keeping the
prices of its products substantially above the levels at which those products would be
priced in competitive markets?
a. Economies of scope
b. Tacit collusion
c. Monopoly power
d. Perfect competition
Keynesian belief that the aggregate supply curve is relatively flat in the short run means
that they expect their policies to cause
a. small increases in output and much inflation.
b. small increases in output and little inflation.
c. large increases in output and little inflation.
d. large increases in output and much inflation.
President Clinton, at the beginning of his administration, increased personal income
taxes on individuals with relatively high incomes. How will this change the
consumption schedule?
a. It will shift and become steeper.
b. It will shift and become flatter.
c. It will shift in a parallel manner.
d. It will remain fixed as the economy moves along the schedule.
Using prices to promote efficiency in the utilization of bridges,
a. higher prices should be charged for the use of the most crowded bridges.
b. lower prices should be charged for the use of the uncrowded bridges.
c. traffic would be equalized among the bridges where space is a scarce resource.
d. All of the above are correct.
In 1964, the poverty line for a family stood at about which of the following figures?
a. $2,100
b. $3,000
c. $4,500
d. $7,500
Gross Domestic Product represents the money value of all final goods and services
produced in the domestic economy within the year.
a. True
b. False
If the short-run Phillips curve has a very flat slope, the
a. structural deficit will grow during inflation.
b. structural deficit will fall during recession.
c. inflation costs of reducing unemployment are relatively low.
d. inflation costs of reducing unemployment are relatively high.
The growth rate in potential GDP is equal to the growth rate in the population.
a. True
b. False
When comparing the Keynesian and monetarist approaches, the only substantive
difference is that
a. the Keynesian equation leads to a prediction of real GDP; the monetarist equation
leads to a prediction of nominal GDP.
b. Keynesians concentrate on aggregate demand and monetarists concentrate on
aggregate supply.
c. Keynesians approach aggregate demand by multiplying the money supply by
velocity, while monetarists use the equilibrium conditions of the expenditure schedule.
d. Keynesian analysis suggests that money affects consumption first while monetarist
analysis suggests that money affects investment spending first.
Reserves demanded varies
a. inversely with both prices and output.
b. inversely with prices and directly with output.
c. directly with prices and inversely with output.
d. directly with both prices and output.
Given total cost and the quantity of output, marginal cost and average cost can be
determined.
a. True
b. False
Economics is a social science in the sense that it
a. rigorously examines human behavior.
b. is not as scientific as physics.
c. relies on historical data instead of mathematical data.
d. relies on statistics instead of mathematics.
e. All of the above are correct.
Which of the following do most economists consider to be the most basic measure of a
nation’s international transactions?
a. balance on current account
b. balance on capital account
c. balance of merchandise trade
d. balance on long-term capital
An important effect of fractional reserve banking is that bankers have
a. little control over total reserves.
b. total control over the amount of lending in the economy.
c. no control over the amount of reserves in the banking system.
d. some discretion over the money supply.
The chief cause of short-run changes in exchange rates is
a. the world’s political situation.
b. “hot money” chasing high interest rates.
c. changes in consumer tastes.
d. central bank interventions.
Economic rent is paid only to land, and not to other resources.
a. True
b. False
Everything else equal, the more rivals a firm has, the
a. less kinked is its demand curve.
b. closer is its equilibrium price to its average variable costs.
c. more differentiated is its product from rivals’ products.
d. more elastic is its demand curve.
If the United States experiences an economic boom, compared to other countries, how
will this affect the value of the U.S. dollar?
a. It will fall because other nations would be forced to raise their interest rates.
b. It will fall because the United States will import more goods and services, leading to
an increased supply of dollars.
c. It will rise because U.S. GDP would be rising faster than other countries.
d. It will rise because the Fed will have to lower U.S. interest rates.
The productivity growth rates of richer countries tend to be ____ than those of poorer
countries.
a. higher
b. lower
c. increasing faster
d. decreasing faster
Goods produced that go into inventories are
a. not counted in GDP.
b. only counted in GDP when they are ultimately sold.
c. counted in GDP even though they are not sold.
d. counted if they completely depreciate within the calendar year.
Goods are distributed efficiently if everyone gets an equal share of each good.
a. True
b. False
Regarding taxation and efficiency, which of the following statements is not true?
a. Many inefficiencies arise from taxation.
b. Many burdens arise from taxation.
c. Some taxes lead to greater efficiency.
d. All of the above statements are true.
An example of overt collusion is
a. a cartel.
b. price leadership.
c. tacit collusion.
d. a perfectly contestable market.
Table 7-2
Table 7-2 contains information on widget production. The marginal physical product of
the sixth pound of plastic is ____.
a. (19/7) − (17/6)
b. 1/3
c. 2
d. 3
Repeated games can lead to tacit collusion.
a. True
b. False