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"The distribution of income should be determined by the government" is an example of
a positive economic statement.
Answer:
In monopolistic competition, if a firm produces a highly desirable product relative to its
competitors, the firm will be able to raise its price without losing any customers.
Answer:
The producer price index tracks the prices firms receive for goods and services at all
stages of production.
Answer:
In a sequential game, one firm will act first and then other firms will respond.
Answer:
A Giffen good could be either a normal good or an inferior good.
Answer:
The substitution effect of a wage decrease examines the effect of the decrease in wage
income on a worker's ability to consume goods and services.
Answer:
Government intervention in agriculture began in the United States in the 1890s.
Answer:
If an increase in crime causes households to spend money on police and security
systems, GDP will rise.
Answer:
Rent control is an example of a price floor.
Answer:
Economic rent refers to the price of a factor of production which is fixed in supply.
Answer:
A rise in the dollar price of the Chinese yuan signals an appreciation of the yuan and a
depreciation of the dollar.
Answer:
If more insurance companies decide to cover part of the price of voluntary laser eye
surgery and more doctors decide to enter the field of laser eye surgery, what will happen
in the market for laser eye surgery as a result of these two factors?
A) Demand will increase, but these two factors will not shift the supply curve.
B) Supply will increase, but these two factors will not shift the demand curve.
C) Demand and supply will both increase.
D) Demand will increase and supply will decrease.
Answer:
Along an upward sloping labor supply curve, as the wage rate increases, the opportunity
cost of leisure ________, causing individuals to supply a ________ quantity of labor.
A) increases; greater
B) increases; lower
C) decreases; greater
D) remains constant, constant
Answer:
The unattainable points in a production possibilities diagram are
A) the points within the production possibilities frontier.
B) the points along the production possibilities frontier.
C) the points of the horizontal and vertical intercepts.
D) the points outside the production possibilities frontier.
Answer:
The labor supply curve
A) shows the relationship between the wage rate and the quantity of labor supplied.
B) shows the quantity of jobs supplied at various wage rates.
C) is unit-elastic.
D) is U-shaped.
Answer:
In a typical year, ________ of new jobs are created by small firms.
A) less than 5 percent
B) 10 percent
C) 40 percent
D) 75 percent
Answer:
Globalization is positively associated with
A) poverty.
B) declining rates of investment.
C) declining standards of living.
D) economic growth.
Answer:
Workers expect inflation to rise from 3% to 5% next year. As a result, this should
A) shift the short-run aggregate supply curve to the left.
B) shift the short-run aggregate supply curve to the right.
C) move the economy up along a stationary short-run aggregate supply curve.
D) move the economy down along a stationary short-run aggregate supply curve.
Answer:
Suppose the economy is at a short-run equilibrium GDP that lies above potential GDP.
Which of the following will occur because of the automatic mechanism adjusting the
economy back to potential GDP?
A) Output will increase.
B) Prices will decline.
C) Unemployment will decline.
D) Short-run aggregate supply will shift to the left.
Answer:
Use the figure above to answer the following questions.
a. How can you determine that the figure represents a graph of a perfectly competitive
firm? Be specific; indicate which curve gives you the information and how you use this
information to arrive at your conclusion.
b. What is the market price?
c. What is the profit-maximizing output?
d. What is total revenue at the profit-maximizing output?
e. What is the total cost at the profit-maximizing output?
f. What is the profit or loss at the profit-maximizing output?
g. What is the firm's total fixed cost?
h. What is the total variable cost?
i. Identify the firm's short-run supply curve.
j. Is the industry in a long-run equilibrium?
k. If it is not in long-run equilibrium, what will happen in this industry to restore
long-run equilibrium?
l. In long-run equilibrium, what is the firm's profit maximizing quantity?
Answer:
The quantity equation states that the
A) money supply divided by the velocity of money equals the price level divided by
real output.
B) money supply times the velocity of money equals the price level times real output.
C) money supply times the price level equals real output divided by the velocity of
money.
D) money supply times the price level equals real output times the velocity of money.
Answer:
Table 13-2
Eco Energy is a monopolistically competitive producer of a sports beverage called
Power On. Table 13-2 shows the firm's demand and cost schedules. What is Eco
Energy's profit?
A) $125
B) $140
C) $145
D) $150
Answer:
Which of the following would reduce the labor force participation rate, all else equal?
A) an increase in the number of people in the labor force
B) an increase in the unemployment rate
C) a decrease in the unemployment rate
D) an increase in the working-age population
Answer:
If firms do not earn economic profits in a competitive equilibrium, why would the firms
choose to stay in business?
Answer:
What was the GATT, why was it established, and why and with what was it replaced?
Answer:
Suppose that the bank has the following balance sheet:
If the required reserve ratio is 10 percent, what is the maximum the bank can loan out?
Suppose the bank makes this loan and the borrower spends the money, which is
deposited in a different bank. Show the impact of these transactions on the bank's
balance sheet.
Answer:
What is an oligopoly? Give two examples of oligopolistic industries in the United
States.
Answer:
Table 12-10
Using the table above, calculate the unplanned change in inventories for each level of
GDP, and explain what will happen to GDP?
Answer:
Draw a graph that shows the impact on a firm's profit when it increases spending on
advertising and the increased advertising has no effect on the demand for a firm's
product.
Answer:
Explain how it would be possible for the equilibrium price and equilibrium quantity to
both increase in the market for motorcycles if consumer preference for motorcycles
increases and the number of motorcycle manufacturers decreases.
Answer:
Table 8-21
Consider the following data for a simple economy: Calculate nominal GDP and real
GDP for 2013, using 2011 as the base year. Show your work.
Answer:
Explain and show graphically how a decrease in household saving affects the
equilibrium interest rate and the equilibrium quantity of loanable funds.
Answer:
How does an increase in government purchases financed by an increase in the deficit
affect exchange rates? Support your answer with graphs of the loanable funds market
and the foreign exchange market.
Answer:
