A strike, or the threat of one, is most likely to be effective when
a. demand for the firm’s product is strong.
b. foreign competition for the product is high.
c. the firm has a high product inventory.
d. demand for the product produced by the union workers is highly elastic.
Suppose an airline ticket from Charlotte to Dallas costs $525. A bus ticket is $325.
Traveling by plane will take 5 hours, compared with 25 hours by bus. Thus, the plane
costs $200 more but saves 20 hours of time (Hint: Note how we are “thinking at the
margin” here by looking at the changes). Other things constant, an individual will gain
by choosing air travel if, and only if, each hour of her time is valued at more than
a. $10 per hour.
b. $13 per hour.
c. $20 per hour.
d. $105 per hour.
An increase in real per capita income will generally lead to
a. a cleaner environment and more time for recreation.
b. a reduction in life expectancy because working conditions are less desirable.
c. an increase in the number of hours worked by residents.
d. an increase in real GDP that is less rapid than the increase in population
Suppose the state of Colorado imposes a one dollar per pack tax on cigarettes, which
increases their price by 30 percent, and as a result, the quantity sold declines by 20
percent. The absolute value of the price elasticity of demand for cigarettes is equal to
a. 0.20.
b. 0.67.
c. 1.50.
d. 3.00.
In 1960 the per capita GDP of Hong Kong was substantially less than that of Argentina
and Venezuela. By 2005, the per capita income of Hong Kong was more than three
times the figures for Venezuela and Argentina. This dramatic change occurred because
a. Venezuela and Argentina lacked the natural resources of Hong Kong.
b. the United States provided aid to Hong Kong but not to Argentina and Venezuela.
c. Hong Kong was able to achieve and sustain a high rate of economic growth while the
growth rates of Argentina and Venezuela were exceedingly low.
d. Hong Kong was a developed country in 1960, but Argentina and Venezuela were not.
According to the new classical theory, a $50 billion increase in government
expenditures financed by a $50 billion increase in the budget deficit will
a. cause real output to expand $200 billion if the marginal propensity to consume is
three-fourths.
b. exert little impact on real output because higher real interest rates will crowd out
private spending.
c. stimulate aggregate demand, causing prices to rise (inflation).
d. be largely offset by a reduction in private spending because individuals will
anticipate higher future taxes.
When government gives a subsidy to buyers of good X, the benefits of the subsidy flow
to
a. the buyers of good X only.
b. the sellers of good X only.
c. the buyers and sellers of good x equally.
d. both the buyers and sellers of good x, and the distribution of the benefits will be
dependent on the elasticity of demand and the elasticity of supply.
In 1960, spending on income transfers and health care accounted for 21.5 percent of the
federal budget. In 2012, these two items accounted for
a. less than 15 percent of the federal budget.
b. approximately 25 percent of the federal budget.
c. approximately 37 percent of the federal budget.
d. approximately 57 percent of the federal budget.
Suppose that Starbucks reduces the price of its premium coffee from $2.20 to $1.80 per
cup, and as a result, the quantity sold per day increased from 350 to 450. Over this price
range, the absolute value of the price elasticity of demand for Starbucks coffee is
a. 0.40.
b. 0.80.
c. 1.25.
d. 2.50.
e. 4.
Figure 15-1
As shown in Figure 15-1, the perfect equality line is drawn between points
a. A and B.
b. B and D.
c. A and C along the straight line.
d. A and C along the curve.
Economic analysis indicates that environmental quality
a. is something that people value, and therefore are willing to pay for.
b. should always be regulated by the government.
c. is something people should be forced to pay for no matter what their income levels.
d. is not important to most people.
Use the figure below to answer the following question(s).
Figure 10-5
Figure 10-5 indicates that the output of the economy is
a. greater than the economy’s long-run capacity.
b. equal to the economy’s long-run capacity.
c. less than the economy’s long-run capacity.
d. consistent with long-run equilibrium.
Which of the following is true concerning the national debt?
a. It equals the budget deficit.
b. When the budget deficit is declining, the national debt will fall.
c. A budget deficit will reduce the national debt.
d. A budget surplus will reduce the national debt.
Assume that empirical evidence shows a difference in mean earnings between two
groups, say, majority and minority workers. What conclusion may be drawn?
a. The group with the lower earnings is being discriminated against.
b. The group with the lower earnings is less productive.
c. The group with the lower earnings has less human capital.
d. Any of the above statements could, either partially or entirely, explain this difference.
The nominal salary paid to the president of the United States and the Consumer Price
Index (CPI) are given for various years below.
Table 7-9
Refer to Table 7-9. During which of the above years was the purchasing power of the
president’s salary highest?
a. 1920
b. 1940
c. 1960
d. 1980
e. 2000
In the twentieth century, fluctuations in real GDP were
a. less severe during the last 50 years than was true during the first half of the century.
b. virtually eliminated as the result of the countercyclical application of fiscal policy.
c. more severe during the last 50 years than was true during the first half of the century.
d. primarily the result of a fiscal policy that has persistently balanced the federal
budget.
Use the figure to answer the following question(s).
Figure 11-14
What quantity would the industry depicted in Figure 11-14 produce if member firms
were successfully colluding?
a. Q1
b. Q2
c. Q3
d. Q4
Researcher Indur Goklany has estimated that if traditional technologies, like those used
in 1961, were still in use, other things equal, wildlife habitat
a. would be more abundant and far healthier today.
b. would have increased, benefiting wildlife substantially.
c. would have declined substantially, as the need for farmland would not have declined
as it did.
d. would have been unaffected.
Which of the following types of unemployment can exist in an economy that is at its
potential output level?
a. cyclical unemployment only
b. structural unemployment only
c. frictional, cyclical, and seasonal unemployment only
d. frictional, seasonal, and structural unemployment only
e. there will be no unemployment in an economy that is at the potential output level
When a monopolist is maximizing profit, which of the following conditions will always
be satisfied?
a. P = MC
b. MR = AVC
c. P = ATC
d. MR = MC
When economies of scale are important, imposing competition by splitting a
monopolistic firm into many rival units will
a. lead to an increase in the per-unit cost of production in the industry.
b. not affect per-unit costs but will affect demand conditions.
c. generally increase the social efficiency of production.
d. cause the industry demand curve to increase (shift to the right).
The 1930s were a period of
a. strong economic expansion and rapid growth of real output.
b. high rates of inflation coupled with a low rate of unemployment.
c. depressed economic conditions and prolonged high rates of unemployment.
d. strong growth of real output even though the general level of prices was declining.
Resource prices that are fixed by long-term contracts help explain why, in the short run,
firms will
a. increase output when product prices increase.
b. keep production levels constant when product prices decrease.
c. keep their product prices constant even if the demand for their good increases.
d. keep their product prices constant even if the demand for their good decreases.
Use the figure to answer the following question(s).
Figure 9-3
Figure 9-3 depicts the cost curves of a firm in a price-taker industry. At what output
would the firm’s per-unit cost be at a minimum?
a. 100
b. 125
c. 150
d. an output greater than 150
On average, persons with more education tend to draw Social Security benefits for a
a. longer period of time than average
b. shorter period of time than average
c. period of time that is comparable to the U.S. average
d. longer period of time if they have a master’s degree but a shorter period of time if
they have a Ph.D.
Which of the following is true regarding government expenditures in the United States?
a. As a share of GDP, government expenditures were higher in 1950 than 2012.
b. Government expenditures were more than 30 percent of GDP in 1930.
c. Government expenditures as a share of GDP grew rapidly between 1930 and 1980.
d. In 2012, government expenditures at all levels summed to approximately 10 percent
of GDP.
Which of the following is a true statement?
a. The concept of potential output might be thought of as the maximum sustainable
output of the economy under normal circumstances.
b. Actual output cannot exceed potential output, even during a boom.
c. When the actual rate of unemployment exceeds the natural rate, the actual output of
the economy will rise above its potential.
d. Potential output represents the absolute maximum level of production.
Which of the following is true of America’s millionaires?
a. Most millionaires inherited at least half of their wealth.
b. Millionaires are far more likely than others to be self-employed entrepreneurs.
c. It is virtually impossible to achieve this status by saving and investing over a lengthy
period of time.
d. Only about 20 percent of the millionaires in the United States have college degrees.
In the short run, a profit-maximizing firm in a price-taker market will definitely stop
production if
a. economic profit is zero.
b. price falls below average total cost.
c. price is less than average variable cost.
d. it cannot completely cover its fixed costs.
The poverty threshold income level is
a. adjusted annually for increases in real per capita income.
b. adjusted annually for changes in prices.
c. invariant to differences in the size and composition of families.
d. the highest income level that would leave one in the bottom quintile of income
recipients.
Which of the following generalizations about the burden of an excise tax is correct?
a. The more inelastic the supply of a product, the larger the portion of an excise tax will
be paid by buyers.
b. The more inelastic the demand for a product, the larger the portion of an excise tax
will be paid by buyers.
c. The more elastic the supply of a product, the smaller the portion of an excise tax will
be paid by buyers.
d. The burden of an excise tax on a product is independent of the elasticity of the supply
and demand for the product on which the tax is levied.
Use the figure below to answer the following question(s).
Figure 4-13
Refer to Figure 4-13. The exhibit illustrates the impact of granting a subsidy on a
particular good. Which of the following is true for this subsidy given the information
provided in the exhibit?
a. The subsidy has been statutorily (legally) paid to sellers.
b. The subsidy results in a decrease in the market selling price of the good.
c. Sellers will receive a larger proportion of the benefit from this subsidy than buyers.
d. The subsidy results in a reduction in the quantity purchased.