Suppose a tax equal to the value of the marginal external cost at the optimal output is
imposed on a pollution generating good. All of the following will result from the tax
except
A) an increase in the equilibrium market price.
B) a decrease in the equilibrium quantity produced and consumed.
C) a decrease in market supply of the good.
D) an increase in the demand for the good.
Table 13-5
Table 13-5 shows the demand and cost data facing a monopolistically competitive
producer of canvas bags. At the profit-maximizing or loss-minimizing output level,
A) the firm makes a profit of $12.
B) the firm incurs a loss equal to its fixed cost.
C) the firm makes a profit of $16.
D) the firm incurs a loss of $14.
The three categories of federal government expenditures, in addition to government
purchases, are
A) interest on the national debt, grants to state and local governments, and transfer
payments.
B) interest on the national debt, defense spending, and transfer payments.
C) defense spending, budgets of federal agencies, and transfer payments.
D) defense spending, Social Security, and Medicare.
Purchasing power parity is the theory that, in the long run, exchange rates move to
equalize
A) nominal interest rates across countries.
B) real GDP across countries.
C) corporate profits across countries.
D) the relative purchasing power of currencies across countries.
________ would be the source of a “real” business cycle.
A) Technology shocks
B) Anticipated changes in monetary policy
C) Unanticipated changes in monetary policy
D) all of the above
Shifts in the supply of oil have caused large changes in price since the 1970s because
A) the supply of oil is very inelastic while the demand for oil is very elastic over short
periods of time.
B) the supply of oil is very elastic while the demand for oil is inelastic over short
periods of time.
C) both the supply of oil and the demand for oil are inelastic over short periods of time.
D) the supply of oil and the demand for oil are perfectly elastic over short periods of
time.
Figure 13-1
Ceteris paribus, an increase in the value of the domestic currency relative to foreign
currencies would be represented by a movement from
A) AD1 to AD2.
B) AD2 to AD1.
C) point A to point B.
D) point B to point A.
In contrast with perfect competition, excess capacity characterizes monopolistic
competition. Excess capacity is due to which of the following?
A) Monopolistically competitive firms produce at the minimum point on their average
total cost curves.
B) Monopolistically competitive firms face downward-sloping demand curves. In the
long run, firms produce where their demand curves are tangent to their long-run
average total cost curves.
C) Monopolistically competitive firms produce where marginal revenue is equal to
marginal cost.
D) Monopolistically competitive markets have low barriers to entry.
The Difference between adverse selection and moral hazard is that
A) moral hazard happens at the time parties enter into a transaction; adverse selection
occurs after the transaction takes place.
B) adverse selection happens at the time parties enter into a transaction; moral hazard
occurs after the transaction takes place.
C) moral hazard is the motive that is behind one party entering into a transaction with
another party. Adverse selection refers to the other party being harmed by the
transaction.
D) moral hazard refers to the likelihood that a transaction will lead one party to be
better off at the expense of the other party to the transaction. Adverse selection refers to
the consequences of the transaction after it has occurred.
Given the equations for C, I, G, and NX below, what is the equilibrium level of GDP? C
= 2,000 + 0.9Y
I = 2,500
G = 3,000
NX = 400 A) $4,333
B) $7,100
C) $8,778
D) $79,000
If a decrease in income leads to in a decrease in the demand for ice cream, then ice
cream is
A) a normal good.
B) a neutral good.
C) a complement.
D) a necessity.
Demand for a luxury item, such as a yacht, is likely to be
A) both income and price inelastic.
B) both income elastic and price elastic.
C) income elastic and price inelastic.
D) income inelastic and price elastic.
Governments can increase the consumption of a product that creates positive
externalities by
A) subsidizing the production of the product so that the supply is increased and market
price is reduced.
B) taxing the production and consumption of the product.
C) convincing everyone to consume the good.
D) assigning property rights to the producers of the product.
The recession of 2007-2009 began in ________, with the end of the economic
expansion that had begun in ________.
A) January 2007; April 1984
B) December 2007; November 2001
C) July 2007; August 2006
D) March 2007; March 1995
If, at the current exchange rate between the dollar and the South African rand of 6.92
rand per dollar, the dollar is “undervalued,” how do you expect demand and supply in
the foreign exchange markets to respond?
A) The demand for the dollar will rise, while the supply of the rand will fall.
B) The demand for the dollar will fall, while the supply of the rand will rise.
C) The supply of the dollar will fall, while the demand for the rand will fall.
D) The supply of the dollar will fall, while the demand for the rand will rise.
The order of the letters along the rows of computer keyboards could be changed to
allow users to type faster, but this would inconvenience the vast majority of people who
learned to type with the current keyboard layout. The costs of switching to a new layout
make this change unlikely. This is an example of
A) path dependency.
B) how social influences overwhelm the substitution effect of a price change.
C) how the elasticity of demand for typewriters has been affected by externalities.
D) how consumers sometimes do not behave rationally.