Each point on the demand curve indicates
a. the demand for the product.
b. the quantity demanded at that price.
c. the amount that people need.
d. the amount people want to buy at different income levels.
A decrease in the price of leather used to make shoes would cause the
a. demand for shoes to decrease.
b. demand for shoes to increase.
c. supply of shoes to decrease.
d. supply of shoes to increase.
How has the share of the personal income tax paid by the rich (the top 1 percent of
earners) and the not-so-well-off (the bottom half of earners) changed during the last
four decades?
a. The rich now pay a larger share and the not-so-well-off pay a smaller share of the
personal income tax.
b. The rich now pay a smaller share and the not-so-well-off pay a larger share of the
personal income tax.
c. The share of the personal income tax paid by the rich increased between 1960 and
1980, but the share of the revenues collected from the rich has declined sharply since
1980.
d. The relative shares paid by the rich and the not-so-well-off have been virtually
unchanged during the last four decades.
Use the figure to answer the following question(s).
Figure 8-9
Using Figure 8-9, calculate the firm’s approximate average total cost when it produces
50 units.
a. $10
b. $13
c. $15
d. $17
In 2010, the poorest 20 percent of families in the United States population earned
approximately ____ percent of the before-tax total income. (Fill in the blank.)
a. 1
b. 4
c. 9
d. 12
You put money into an account. One year later you see that you have 5 percent more
dollars and that your money will buy 6 percent more goods.
a. The nominal interest rate was 11 percent and the inflation rate was 5 percent.
b. The nominal interest rate was 6 percent and the inflation rate was 5 percent.
c. The nominal interest rate was 5 percent and the inflation rate was 1 percent.
d. None of the above is correct.
Use the figure below to answer the following question(s).
Figure 12-2
Refer to Figure 12-2. If an economy is operating in the short run at point a, Keynesian
analysis indicates that expansionary fiscal policy will
a. increase AD and move the economy toward point b.
b. increase AD and move the economy toward point c.
c. increase SRAS and move the economy toward point b.
d. decrease SRAS and move the economy toward point c.
The growth records of Japan and Hong Kong during the last fifty years indicate that an
economy can grow rapidly without
a. securely defined property rights.
b. abundant domestic natural resources.
c. significant capital formation.
d. adopting modern technology.
Which one of the following factors reduces the likelihood that a cartel agreement will
lead to higher producer profit?
a. significant barriers to entry into the cartelized market
b. the development of substitutes for the good produced by the cartel
c. government restrictions that limit competition from new rivals
d. a small number of sellers involved in the cartel agreement
The demand for Chocolate Chip Cookie Dough ice cream is likely quite elastic because
a. ice cream must be eaten quickly.
b. this particular flavor of ice cream is viewed as a necessity by many ice-cream lovers.
c. the market is broadly defined.
d. other flavors of ice cream are good substitutes for this particular flavor.
For a firm that wants to remain in business, which of the following costs could be
avoided if it halted current production?
a. fixed costs
b. variable costs
c. sunk costs
d. implicit costs
Discuss the following views concerning the impact of monetary policy:
a. classicals
b. Keynesians
c. monetarists
d. “modern view”
The primary cause of frictional unemployment is
a. the low level of the current minimum wages.
b. the lack of and cost of acquiring information about available job opportunities.
c. a mismatch of the skills of unemployed workers with the skills needed for job
openings.
d. discouraged workers who quit looking for a job after extended periods of
unsuccessful job search.
If many people were to suddenly deposit into their checking accounts large sums of
cash previously held in their homes and/or wallets, and there were no offsetting actions
by the Fed or change in institutional policies, this would
a. decrease the M1 money supply but increase the M2 money supply.
b. increase the excess reserves of banks and expand the money supply if these reserves
are used to make additional loans.
c. reduce the excess reserves of banks and indirectly decrease the M1 money supply.
d. reduce the excess reserves of banks and indirectly increase the M1 money supply.
Within the AD/AS model, an increase in capital formation that permits the economy to
achieve a larger output will
a. increase long-run aggregate supply.
b. increase short-run aggregate supply, but long-run aggregate supply will be
unaffected.
c. increase aggregate demand.
d. decrease aggregate demand.
If the dollar price of the euro goes from $1 to 90 cents, the euro has
a. appreciated, and Europeans will find U.S. goods cheaper.
b. appreciated, and Europeans will find U.S. goods more expensive.
c. depreciated, and Europeans will find U.S. goods cheaper.
d. depreciated, and Europeans will find U.S. goods more expensive.
Compared to 1980, the top marginal federal income tax rate today is
a. substantially lower and the rate structure is less progressive than in 1980.
b. substantially lower and the rate structure is more progressive than in 1980.
c. substantially higher and the rate structure is less progressive than in 1980.
d. substantially higher and the rate structure is more progressive than in 1980.
Economic profit
a. does not exist in competitive markets.
b. provides an incentive for investors to undertake risky projects.
c. motivates entrepreneurial innovation.
d. does all of the above.
e. is both b and c.
GDP is not a perfect measure of welfare because it
a. treats a dollar spent on candy bars the same as a dollar spent on education
b. treats a dollar spent on exports the same as a dollar spent on imports
c. double counts the value of leisure time
d. double counts depreciation
e. counts illegal activities in the underground economy
Are outstanding credit card balances counted as part of the money supply?
a. No; credit card balances reflect funds that have been borrowed. Unlike money, they
cannot be used as a means of payment.
b. Yes; they are used to purchase things and therefore they are included in the money
supply figures.
c. They are included in the M1 money supply, but not the M2 figures.
d. They are included in the M2 money supply, but not the M1 figures.
Which of the following is true?
a. Competitive forces are stronger in markets with high entry barriers than in those
where entry barriers are low.
b. Quality competition is an important element of the competitive process.
c. If the production of a good is highly profitable, the development of substitute
products will be discouraged.
d. High barriers to entry are only the result of natural factors not artificial factors like
government regulations.
If this year the CPI is 110 and last year it was 100, then
a. the cost of the CPI basket of goods and services has increased this year by 110
percent.
b. the price level as measured by the CPI has increased by 10 percent.
c. the inflation rate for this year has increased by 10 percent over last year’s inflation
rate.
d. All of the above are correct.
When an economy is temporarily operating at an output that is beyond its
full-employment rate,
a. excess supply in resource markets will eventually lead to lower resource prices,
which will decrease costs and direct the economy toward full employment.
b. excess demand in resource markets will lead to higher resource prices, which will
increase costs and direct the economy toward full employment.
c. lower wages and prices will quickly restore full employment.
d. only restrictive fiscal policy will direct the economy back to full employment.
Figure 3-19
Refer to Figure 3-19. Buyers who value this good more than price are represented by
which line segment?
a. AC
b. CE
c. BC
d. CD
Ethan washes and irons his own shirts. Sophia, his boss, sends her clothes to a laundry.
Which is the most plausible economic explanation for this difference?
a. Ethan must enjoy ironing more than Sophia does.
b. Ethan must be better at ironing than Sophia is.
c. The opportunity cost of ironing is greater for Ethan.
d. Sophia has a higher opportunity cost of laundering her clothes than Ethan does.
Keynesian economists believed that the prolonged unemployment of the 1930s was the
result of
a. the sharp reduction in the supply of money during 1929-1933 and another monetary
contraction in 1938.
b. the high interest rates of the 1930s.
c. the double-digit inflation of the 1930s.
d. insufficient aggregate demand and the failure of market forces to direct the economy
back to full employment.
Other things constant, if the cost of labor goes down, the profits of firms will
a. increase, and short-run aggregate supply will shift to the right.
b. fall, and short-run aggregate supply will shift to the left.
c. increase, and long-run aggregate supply will shift to the right.
d. fall, and long-run aggregate supply will shift to the left.
The index of leading indicators is
a. an alphabetical listing of the most popular indicators in the economy for a given
month.
b. a composite index of indicators that provides information on the future direction of
the economy.
c. a measure of the level of aggregate output.
d. a composite index designed to measure inflation.
To say that people make marginal decisions means that
a. they usually wait until the last minute before making a decision to buy
b. they weigh the additional costs and additional benefits of various activities before
they make a decision
c. most people just barely get by on the incomes they earn and live from day to day on
the very edge of subsistence
d. they consider the total cost and benefit of various activities before they make a
purchase
The experience of the Teamsters in the late 1970s and early 1980s suggests that
a. there are few restraints on the ability of a strong union to increase the wages of its
members.
b. product market competition with goods made from (or services provided by)
nonunion labor significantly limits the ability of a union to get increased wages for its
members.
c. higher wages tend to stimulate aggregate demand, which makes it easier for a union
to gain still higher wages.
d. wages are established by the relative skill of union and management negotiators,
independent of market conditions.
Which of the following provides the best explanation for diseconomies of scale?
a. the firm is too small to take advantage of specialization.
b. large management structures may be bureaucratic and inefficient.
c. if there are too many employees, the work place becomes crowded and people
become less productive.
d. average fixed costs are rising.
Which of the following best describes the relationship between the velocity of money
and the demand for money?
a. The demand for money is not related to the velocity of money.
b. When the demand for money increases, the velocity of money increases.
c. The demand for money must be stable for the velocity of money to increase.
d. When the demand for money declines, the velocity of money increases.
If a government price control succeeds in affecting price, it can be expected to lead to a
corresponding
a. decrease in the quantity of sales only if the price is forced down.
b. decrease in the quantity of sales if the price is forced down and an increase in the
volume of sales if the price is forced up.
c. decrease in the quantity of sales whether the price is forced up or down.
d. increase in the quantity of sales whether the price is forced up or down.
What is the economically efficient level of emissions from a particular source?
a. zero
b. the quantity at which the marginal cost to achieve lower emissions equals the
additional value of reducing pollution
c. the level determined by EPA (Environmental Protection Agency) scientists that will
save the most lives
d. the level emitted when markets are allowed to function with no government
regulation