The public choice model asserts that the self-interest of policymakers is likely to cause
them to take actions that are inconsistent with the preferences of voters, even where
those preferences are clear.
Your checking account balance is included in your bank’s assets.
A shortage is defined as the situation that exists when the quantity of a good supplied is
greater than the quantity demanded.
If a country has a comparative advantage in producing a product, it must also have an
absolute advantage in producing that product.
If, after hiring the 6th worker, a firm’s output falls, then the marginal product of the 6th
worker is negative.
Direct finance includes the sale by a corporation of stocks or bonds, but does not
include borrowing money from a bank.
In an open economy, the government purchases multiplier will be smaller the
A) smaller the marginal propensity to import.
B) larger the tax rate.
C) larger the marginal propensity to consume.
D) All of the above are correct.
Following a tax cut by government, domestic investment will ________ and net exports
will ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
Pegging a country’s exchange rate to the dollar can be advantageous in all of the
following situations except
A) if the country has extensive trade with the United States.
B) if investors believe the dollar to be more stable than the domestic country’s currency.
C) if a country wishes to conduct independent monetary policy.
D) if imports are a significant fraction of the goods the country’s consumers buy.
Ranchers can raise either cattle or sheep on their land. Which of the following would
cause the supply of sheep to increase?
A) an increase in the price of sheep
B) a decrease in the price of cattle
C) an increase in the demand for cattle
D) an increase in the price of sheep feed
Figure 16-5
Consider the following two pricing strategies:
a. a fixed fee and a per-unit price equal to the monopoly price
b. a fixed fee and a per-unit price equal to the competitive price The firm represented in
the diagram earns a higher profit under strategy ________ and deadweight loss is
eliminated under ________.
A) b; b
B) a; b
C) a; neither strategy
D) b; neither strategy
In a small economy, consumption spending in 2013 is $6,000, government spending is
$1,200, gross investment is $1,500, exports are $2,000, and imports are $1,000. What is
gross domestic product in 2013?
A) $9,700
B) $9,800
C) $10,800
D) $11,700
Figure 13-13
Economies of scale are exhausted at which output level?
A) Q1 units
B) Q2 units
C) Q3 units
D) more than Q1units
The most widely used measure of inflation is based on which of the following price
indices?
A) the producer price index
B) the consumer price index
C) the GDP deflator
D) the wholesale price index
The 2005, 24 European Union nations established a cap-and-trade system which was
designed to
A) eliminate air pollution and greenhouse gases by the year 2020.
B) reduce carbon dioxide emissions.
C) provide fast growing developing countries with the technology to reduce their
carbon emissions.
D) remove all taxes from polluting industries.
If relative purchasing power between the United States and Argentina is 3.22 pesos per
dollar, under which circumstances would we say that the dollar is “overvalued”?
A) if the actual exchange rate between the dollar and the Argentinean peso is 3.22 pesos
per dollar
B) if the actual exchange rate between the dollar and the Argentinean peso is 4 pesos
per dollar
C) if the actual exchange rate between the dollar and the Argentinean peso is 0.22 pesos
per dollar
D) if the actual exchange rate between the dollar and the Argentinean peso is 3 pesos
per dollar
A currency pegged at a value above the market equilibrium exchange rate is
A) overvalued.
B) undervalued.
C) achieving purchasing power parity.
D) depreciating in value relative to its pegged currency.
Government spending ________ is included in gross domestic product.
A) at federal, state, and local levels of government
B) at the federal level of government only
C) at state and local levels of government only
D) on defense goods only
Avner is maximizing total utility by buying sports magazines and protein supplements.
For him to buy more sports magazines,
A) the price of protein supplements has to fall.
B) the price of sports magazines has to fall.
C) the price of sports magazines has to rise.
D) Since Avner is maximizing his utility, nothing can change the consumption of sports
magazines.
The consumer price index (CPI), the personal consumption expenditures price index
(PCE), and the core PCE have over the last 10 years
A) moved roughly together with the CPI being the most stable.
B) moved roughly together with the PCE being the most stable.
C) moved roughly together with the core PCE being the most stable.
D) not moved together, with the CPI being the most stable.
Figure 13-4 Figure 13-4 shows
short-run cost and demand curves for a monopolistically competitive firm in the market
for designer watches. If the firm represented in the diagram is currently producing and
selling Qa units, what is the price charged?
A) P0
B) P1
C) P2
D) P3
Contractionary monetary policy will result in
A) higher interest rates.
B) increased rates of inflation.
C) an upward shift in the short-run Phillips curve.
D) a leftward shift in the long-run Phillips curve.
A restaurant sells a large soft drink at a fixed price of $1.79. A term used by economists
to describe the money received from the sale of an additional large soft drink is
A) marginal revenue.
B) gross earnings.
C) pure profit.
D) net benefit.
What is the difference between zero accounting profit and zero economic profit?
What is meant by crowding out? Explain the difference between crowding out in the
short run and in the long run.
Is the value of U.S. exports is typically larger or smaller than the value of U.S. imports.
State the law of diminishing marginal returns.
In economics, what is the difference between the short run and the long run?
The four-firm concentration ratio in the breakfast cereal industry is 78 percent. How
does the five competitive forces model provide better insight into the degree of
competition in the breakfast cereal industry than just observing the concentration ratio?