Which of the following illustrates government acting as a referee?
a. taxing high income persons
b. enforcing contract provisions between buyer and seller
c. buying new weapons for defense
d. mailing checks to social security recipients
e. collecting data on imports and exports
In a market system, the most dangerous types of bankruptcies involve
a. industrial monopolies.
b. multinational firms.
c. employment agencies.
d. financial institutions.
At the equilibrium level of income it must be true that total
a. income equals total spending.
b. product equals total output.
c. output equals total inventory.
d. income equals total saving.
When spending falls short of output, additional inventories are created.
a. True
b. False
The monopoly producer
a. sets MU equal to P.
b. sets MR = MC.
c. has MC > MU.
d. sets MR = P.
A tax has an excess burden whenever
a. people are unable to alter their behavior to avoid paying it.
b. government seeks to raise it.
c. it raises a great deal of revenue.
d. it induces people to change their behavior.
The elasticity of demand is determined partly by whether the good is a necessity or a
luxury.
a. True
b. False
Full employment is defined by most economists as the minimization of
a. cyclical unemployment.
b. frictional unemployment.
c. seasonal unemployment.
d. structural unemployment.
Figure 10-9
Figure 10-9 shows supply and demand conditions in a perfectly competitive industry
and for a firm in that industry. Assume the industry initially has supply curve S1 and
demand curve D1. If demand shifts to D2, then in the short run price will
a. rise to A.
b. rise to some level between A and B.
c. remain at B.
d. fall to C.
Compared to the 1948 to 1973 period, the period from 1973 to 1995 can be
characterized as a period of
a. faster real GDP growth.
b. faster labor productivity growth.
c. slower labor productivity growth.
d. lower labor force growth.
Cost minimization is the process of making optimal use of all of the inputs whose
quantities are
a. set in the short run.
b. set in the intermediate run.
c. set in the long run.
d. variable in the short and long run.
Innovation that improves machinery, power sources and other capital equipment will
increase the demand for labor in the short run.
a. True
b. False
Price leadership is a form of
a. tacit collusion.
b. explicit collusion.
c. monopolistic competition.
d. a cartel policing mechanism.
Define the following terms and explain their importance to the study of
macroeconomics:
a. open economy
b. closed economy
c. budget deficits and trade deficits
d. international capital flows
The Bretton Woods agreements in 1944
a. established the International Monetary Fund.
b. sanctioned world trade on the gold-exchange system.
c. allowed nations to devalue their currencies under certain conditions.
d. All of the above are correct.
Displayed below is the payoff matrix of firm B for four different strategies, B1, B2, B3,
and B4, and the potential retaliatory responses of firm A (A1, A2, A3, A4).
Table 12-2
If firm B uses the maximin criterion, which strategy will it choose?
a. B1
b. B2
c. B3
d. B4
Which of the following is the most closed economy?
a. the Netherlands
b. the United States
c. Germany
d. Russia
e. Canada
Which of the following will tend to increase velocity?
a. a decrease in the number of payments
b. a decrease in inflation
c. an increase in interest rates
d. an increase in the money supply
e. All of the above.
Give a complete and concise definition of each of the following terms.
a. deliberately erected entry barriers
b. inefficiency of monopoly
c. price discrimination
d. profit-maximizing equilibrium for a monopolist
A banker motivated by profit maximization may make decisions that destabilize the
banking system.
a. True
b. False
Although economic science can contribute theoretical and factual knowledge on a
particular issue, the final decision on policy questions often depends on:
a. information that is not currently available
b. social values
c. ethical considerations
d. all of these
Modern economists measure how much utility Fred gets from a hot dog by
a. asking Fred how many utils he gets from its consumption.
b. examining the price of the hamburger Fred chose not to buy.
c. asking Fred how much of some other good he would give up to get the hot dog. The
“other good” can be any good except money.
d. asking Fred how much of some other good he would give up to get the hot dog. The
“other good” can be any good, including money.
Economic theory is necessary and extremely important because of its relationship to
economic policy.
a. True
b. False
A decrease in the price of foreign oil will affect the U.S. economy by
a. increasing aggregate demand.
b. decreasing aggregate demand.
c. increasing aggregate supply.
d. decreasing aggregate supply.
The Bretton Woods agreements were ended when the
a. European Common Market was formed.
b. OPEC countries raised the price of oil.
c. United States was forced to devalue its currency.
d. United States recognized Red China.
The rent earned on marginal land is
a. zero.
b. the average of all qualities of land.
c. above the average of all qualities of land.
d. below the average of all qualities of land.
Under a laissez-faire system,
a. government organizes production and distribution of goods.
b. a small bureaucracy of central planners tells firms what to produce and how to
produce it.
c. costs of production and consumers’ demands determine the output mix.
d. firms try to produce the goods that they think are good for consumers.
Economics is generally concerned with
a. the operation of banks and the stock market.
b. business management.
c. how resources are allocated among alternative goals.
d. the right time to start a business.
According to conventional human capital theory, college graduates earn more than high
school graduates because
a. college graduates insist on a financial return on their human investments.
b. college graduates are made more productive by their greater training.
c. jobs that require more education must pay higher wages to attract enough workers.
d. All of the above are correct.
Which of the following is not a source of inequality in incomes?
a. redistribution of income
b. differences in intensity of work
c. differences in ability
d. risk taking
Variable inflation rates may be more costly socially than low but predictable rates of
inflation.
a. True
b. False