If the Fed attempts to reach and maintain very low rates of unemployment, we would
expect the rate of inflation to rise.
A supply shock causes the long-run aggregate supply curve to shift left, decreasing the
price level.
If the market for a product is narrowly defined, then there are likely to be many
substitutes for the product and the demand for the product is relatively elastic.
The social benefit of a given level of a public good is the vertical sum of all private
benefits for that level.
New firms are able to enter monopolistically competitive markets because there are low
barriers to entry.
Your income will increase if the Federal Reserve buys a Treasury bill from you and
pays you with a check from the Fed.
Higher interest rates increase both consumption and investment spending.
Hyperinflations occur because governments want to spend more than they raise in
taxes, and they pay for the extra purchases by printing money.
If there is pollution in producing a product, then the market equilibrium price is too
high and equilibrium quantity is too low.
Scarcity is a problem that will eventually disappear as technology advances.
Unemployment caused by a business cycle recession is called cyclical unemployment.
A vertical merger is one that takes place between two companies producing different
goods or services for one specific finished product.
Necessities tend to have more inelastic demands than luxuries.
The natural rate of unemployment is fixed and unchanging.
Chips and salsa are complements. If the price of salsa decreases, the demand for chips
will increase.
Which of the following is a source of market failure?
A) unforeseen circumstances which leads to the bankruptcy of many firms
B) a lack of government intervention in a market
C) incomplete property rights or inability to enforce property rights
D) an inequitable income distribution
Table 9-6
Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-6 shows the production
and consumption quantities without trade, and the production numbers with trade. Prior
to trade, what was the opportunity cost to produce 1 clock in Belize?
A) 1/6 of a hat
B) 2/3 of a hat
C) 1.5 hats
D) 6 hats
If the average variable cost curve is above the marginal cost curve, then
A) marginal costs must be decreasing.
B) average variable costs must be increasing.
C) marginal costs must be increasing.
D) marginal costs can be either increasing or decreasing.
The Congressional Budget Office estimates that the payments to settle malpractice
lawsuits and the premiums doctors pay for malpractice insurance account for ________
of health care costs in the United States.
A) between 20 and 30 percent
B) roughly half
C) less than 1 percent
D) a vast majority
Assume that China has a comparative advantage in producing corn and exports corn to
Japan. We can conclude that
A) China also has an absolute advantage in producing corn relative to Japan.
B) China has a lower opportunity cost of producing corn relative to Japan.
C) Japan has an absolute disadvantage in producing corn relative to China.
D) labor costs are higher for corn producers in Japan than in China.
From an initial long-run macroeconomic equilibrium, if the Federal Reserve anticipated
that next year aggregate demand would grow significantly faster than long-run
aggregate supply, then the Federal Reserve would most likely
A) increase income tax rates.
B) decrease income tax rates.
C) increase interest rates.
D) decrease interest rates.
Figure 2-14
Figure 2-14 shows the production possibilities frontiers for Costa Rica and Guatemala.
Each country produces two goods, pineapples and coconuts. Which country has a
comparative advantage in the production of coconuts?
A) Guatemala
B) They have equal productive abilities.
C) Costa Rica
D) neither country
The Bureau of Labor Statistics would categorize a person as ________ if they were
temporarily away from their job because they were ill.
A) employed
B) unemployed
C) a discouraged worker
D) out of the labor force
A one-time tax rebate, which is not expected to be extended in future years, will
A) have a small positive effect on consumption and aggregate demand.
B) have no effect on consumption and aggregate demand.
C) have a significant positive effect on consumption and aggregate demand, with
aggregate demand growing by a multiple of the tax rebate.
D) increase aggregate supply and aggregate demand.
Which of the following will not shift the demand for the euro to the right?
A) an increase in interest rates in the European Union
B) an increase in incomes in countries that buy goods from the European Union
C) expectations among speculators that the price of the euro will rise in the future
D) a decrease in the demand for European goods
Figure 11-16
The figure above illustrates a series of isoquants. Which of the following statements is
true?
A) Points x, z, and y all represent the same output.
B) Points z and y represent the same output; this output is produced with more capital at
z than at y.
C) Point x and y represent the same output but the cost of production at y is greater than
the cost of production at x.
D) Point z represents a greater output than point x or point y.
Which of the following are primarily macroeconomic topics and which are primarily
microeconomic topics? a. college tuition rates
b. farm subsidies
c. national income
d. automobile prices
e. air traffic congestion
f. economic recession
Table 2-16
Table 2-16 shows the number of labor hours required to produce a cell phone and a
board foot of lumber in Estonia and Finland. What is Finland’s opportunity cost of
producing one cell phone?
A) 0.25 board feet of lumber
B) 4 board feet of lumber
C) 12 board feet of lumber
D) 16 board feet of lumber
Consider the following pairs of items:
a. shampoo and conditioner
b. iPhones and earbuds
c. a laptop computer and a desktop computer
d. beef and pork
e. air-travel and weed killer Which of the pairs listed will have a positive cross-price
elasticity?
A) a and b only
B) c and d only
C) e only
D) a, b, and c only
Figure 12-2
Suppose that the level of GDP associated with point N is potential GDP. If the U.S.
economy is currently at point K,
A) firms are operating above capacity.
B) the economy is at full employment.
C) the economy is in recession.
D) the level of unemployment is equal to the natural rate.
Dr. Goldfinger decides to invest in companies which he believes can “improve the
productivity and efficiency” of health care services. How can Dr. Goldfinger strive to
achieve this productive efficiency?
A) by investing in companies that produce goods and services based on consumer
preferences
B) by investing in companies that produce goods and services at the lowest possible
cost
C) by investing in companies that fairly distribute their products and services
D) by investing in companies that produce up to the point where the marginal benefit of
the last unit produced is equal to the marginal cost of producing it
How does Adam Smith’s idea of the “invisible hand” apply to the various parts, made
by many Different manufacturers in many Different countries, that are used by Apple to
produce an iPad?
Using the money demand and money supply model, show and explain why the Federal
Reserve cannot achieve a target for both the money supply and an interest rate.
Vaccinations tend to result in a positive externality. Draw a graph showing the market
for vaccinations, including both the marginal private benefit curve and the marginal
social benefit curve. Identify the market equilibrium price and quantity, the efficient
equilibrium price and quantity, and the deadweight loss.
Some environmentalists have criticized tradable emissions allowances on the grounds
that they give permit holders a license to pollute. Furthermore, environmentalists argue
that those who sell their permits receive a monetary benefit from their contribution to
polluting the environment. Use economic reasoning to evaluate this criticism.
Explain the difference between Gross Domestic Product and Gross National Product.
Give an example of each.