Figure 8-11
Refer to Figure 8-11. The size of the tax is represented by the
a. length of the line segment connecting points A and B.
b. length of the line segment connecting points A and C.
c. length of the line segment connecting points B and C.
d. area of the triangle bounded by the points A, B, and C.
Each of the following is a determinant of demand except
a. tastes.
b. production technology.
c. expectations.
d. the prices of related goods.
Table 11-9
The table below relates to the economy of Mainland, where the typical consumer’s
market basket consists of 2 iPhones and 3 hamburgers.
Refer to Table 11-9. If the base year is 2007, then the economy’s inflation rate in 2008
is
a. -24 percent.
b. -17 percent.
c. 9.2 percent.
d. 24 percent.
The opportunity cost of obtaining more of one good is shown on the production
possibilities frontier as the
a. amount of the other good that must be given up.
b. market price of the additional amount produced.
c. amount of resources that must be devoted to its production.
d. number of dollars that must be spent to produce it.
A price floor is binding when it is set
a. above the equilibrium price, causing a shortage.
b. above the equilibrium price, causing a surplus.
c. below the equilibrium price, causing a shortage.
d. below the equilibrium price, causing a surplus.
Use the graph to answer the following questions about CDs.
a. What is the equilibrium price of CDs before trade?
b. What is the equilibrium quantity of CDs before trade?
c. What is the price of CDs after trade is allowed?
d. What is the quantity of CDs exported after trade is allowed?
e. What is the amount of consumer surplus before trade?
f. What is the amount of consumer surplus after trade?
g. What is the amount of producer surplus before trade?
h. What is the amount of producer surplus after trade?
i. What is the amount of total surplus before trade?
j. What is the amount of total surplus after trade?
k. What is the change in total surplus because of trade?
A bakery would be willing to supply 500 bagels per day at a price of $0.50 each. At a
price of $0.80, the bakery would be willing to supply 1,100 bagels. Using the midpoint
method, the price elasticity of supply for bagels is about
a. 0.62.
b. 0.77.
c. 1.24.
d. 1.63.
Figure 9-15
Refer to Figure 9-15. Consumer surplus with trade and without a tariff is
a. A.
b. A + B.
c. A + C + G.
d. A + B + C + D + E + F.
Figure 7-20
Refer to Figure 7-20. The equilibrium allocation of resources is
a. efficient because total surplus is maximized at the equilibrium.
b. efficient because consumer surplus is maximized at the equilibrium.
c. inefficient because consumer surplus is larger than producer surplus at the
equilibrium.
d. inefficient because total surplus is maximized when 10 units of output are produced
and sold.
Which of the following statements is correct?
a. A tax levied on buyers will never be partially paid by sellers.
b. Who actually pays a tax depends on the price elasticities of supply and demand.
c. Government can decide who actually pays a tax.
d. A tax levied on sellers always will be passed on completely to buyers.
Most of the change from 2000 to 2006 in U.S. net capital outflow as a percent of GDP
was due to a(n)
a. decrease in U.S. investment.
b. decrease in U.S. national saving.
c. increase in U.S. investment.
d. increase in U.S. national saving.
Table 4-1
Refer to Table 4-1. If the market consists of Michelle and Laura only and the price falls
by $1, the quantity demanded in the market increases by
a. 2 units.
b. 3 units.
c. 4 units.
d. 5 units.
When inflation falls, people
a. make less frequent trips to the bank and firms make less frequent price changes.
b. make less frequent trips to the bank while firms make more frequent price changes.
c. make more frequent trips to the bank while firms make less frequent price changes.
d. make more frequent trips to the bank and firms make more frequent price changes.
Figure 3-3
Arturo’s Production Possibilities Frontier Dina’s Production Possibilities Frontier
Refer to Figure 3-3. Arturo has an absolute advantage in the production of
a. burritos and a comparative advantage in the production of tacos.
b. burritos and a comparative advantage in the production of burritos.
c. neither good and a comparative advantage in the production of tacos.
d. neither good and a comparative advantage in the production of burritos.
The banking system currently has $10 billion of reserves, none of which are excess.
People hold only deposits and no currency, and the reserve requirement is 10 percent. If
the Fed raises the reserve requirement to 20 percent and at the same time buys $1
billion worth of bonds, then by how much does the money supply change?
a. It falls by $45 billion.
b. It falls by $52 billion.
c. It falls by $55 billion.
d. None of the above is correct.
The price elasticities of supply and demand affect
a. both the size of the deadweight loss from a tax and the tax incidence.
b. the size of the deadweight loss from a tax but not the tax incidence.
c. the tax incidence but not the size of the deadweight loss from a tax.
d. neither the size of the deadweight loss from a tax nor the tax incidence.
Figure 8-11
Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then,
when the tax is imposed,
a. the government collects $28 in tax revenue.
b. producer surplus decreases by $13.
c. consumer surplus decreases by $11.
d. the deadweight loss amounts to $9.
Gross domestic product includes all
a. legal and illegal final goods, but it excludes all legal and illegal final services.
b. legal and illegal final goods and all legal and illegal final services.
c. legal final goods and services, but it excludes illegal final goods and services.
d. legal and illegal final goods and legal final services, but it excludes illegal final
services.
Which of the following statements is correct?
a. As a group, economists see no purpose in distinguishing between the nominal interest
rate and the real interest rate.
b. The interest rate that is usually reported is the nominal interest rate.
c. If the nominal interest rate increases and the inflation rate remains unchanged, then
the real interest rate decreases.
d. All of the above are correct.
Market power refers to the
a. side effects that may occur in a market.
b. government regulations imposed on the sellers in a market.
c. ability of market participants to influence price.
d. forces of supply and demand in determining equilibrium price.
As more people become self-employed, which allows them to determine how many
hours they work per week, we would expect the deadweight loss from the Social
Security tax to
a. increase, and the revenue generated from the tax to increase.
b. increase, and the revenue generated from the tax to decrease.
c. decrease, and the revenue generated from the tax to increase.
d. decrease, and the revenue generated from the tax to decrease.
Sirius has just finished high school and started looking for his first job, but has not yet
found one. Other things the same, the unemployment rate
a. and the labor-force participation rate both increase.
b. increases and the labor-force participation rate is unaffected.
c. is unaffected and the labor-force participation rate increases.
d. and the labor-force participation rate are both unaffected.
Which group within the Federal Reserve System meets to discuss changes in the
economy and determine monetary policy?
a. the Board of Governors
b. the FOMC
c. the regional Federal Reserve Bank presidents
d. the Central Bank Policy Commission
Unions contribute to
a. frictional unemployment but not the natural rate of unemployment.
b. the natural rate of unemployment but not frictional unemployment.
c. both frictional unemployment and the natural rate of unemployment.
d. neither frictional unemployment nor the natural rate of unemployment.
The Economic Development Minister of a country has a list of things she thinks may
explain her country’s low growth of real GDP per person relative to other countries. She
asks you to pick the one you think most likely explains her country’s low growth.
Which of the following contributes to low growth?
a. poorly enforced property rights
b. outward-oriented trade policies
c. policies that permit foreign investment
d. All of the above are correct.
Absolute advantage is found by comparing different producers’
a. opportunity costs.
b. payments to land, labor, and capital.
c. input requirements per unit of output.
d. locational and logistical circumstances.
Identify each of the following as nominal or real variables.
a. the physical output of goods and services
b. the overall price level
c. the dollar price of apples
d. the price of apples relative to the price of oranges
e. the unemployment rate
f. the amount that shows up on your paycheck after taxes
g. the amount of goods you can purchase with the wage you get each hour
h. the taxes that you pay the government
Table 4-6
Refer to Table 4-6. Which combination would produce an increase in equilibrium price
and an indeterminate change in equilibrium quantity?
a. A
b. B
c. C
d. D
Figure 5-17
Refer to Figure 5-17. Which of the following statements is not correct?
a. Supply curve A is perfectly inelastic.
b. Supply curve B is perfectly elastic.
c. Supply curve C is unit elastic.
d. Supply curve D is more elastic than supply curve C.
Most economists believe that a tradeoff between inflation and unemployment exists
a. only in the short run.
b. only in the long run.
c. in both the short and long run.
d. in neither the short nor long run.
Which of the following is true when the price of a good or service rises?
a. Buyers who were already buying the good or service are better off.
b. Some buyers exit the market.
c. The total consumer surplus in the market increases.
d. The total value of purchases before and after the price change is the same.
Which of the following is correct?
a. A higher price level shifts money demand rightward.
b. When money demand shifts rightward, the interest rate rises.
c. A higher interest rate reduces the quantity of goods and services demanded.
d. All of the above are correct.
Table 3-1
Assume that Andia and Zardia can switch between producing wheat and producing beef
at a constant rate.
Minutes Needed to Make 1
Refer to Table 3-1. What is Andia’s opportunity cost of producing one pound of beef?
a. 3/5 bushel of wheat
b. 6/5 bushels of wheat
c. 4/3 bushels of wheat
d. 5/3 bushels of wheat
People’s skepticism about central bankers’ announcements of their intentions stems
from the fact that policymakers may act in a fashion that is time inconsistent.
In United States history there were long periods when most prices fell.
When the value of money is on the vertical axis, an increase in the price level shifts
money demand to the right.
In the late 1800’s deflation caused farmers to suffer as the fall in crop prices reduced
their income and thus their ability to pay off their debts.
Henry Ford paid his workers $5 a day in 1914, when the CPI was Today, with the price
index at 177, the $5 a day is worth $88.50.
In a market, the price of any good adjusts until quantity demanded equals quantity
supplied.
At the equilibrium price, the quantity that buyers want to buy exactly equals the
quantity that sellers want to sell.
Market failure refers to a situation in which the market does not allocate resources
efficiently.
U.S. GDP was almost $14 billion in 2009.
Some economists, called supply-siders, argue that changes in the money supply exert a
strong influence on aggregate supply.
The nation of Spritzland used to prohibit international trade, but now trade is allowed,
and Spritzland is exporting wristwatches. Relative to the previous no-trade situation,
total surplus in the market for wristwatches in Spritzland has increased.
Give two conditions that are important to the efficient market theory. List one
implication of the efficient market theory.
A price ceiling is a legal minimum on the price at which a good or service can be sold.
According to the theory of efficiency wages, it may be profitable for firms to keep
wages high even in the presence of a surplus of labor.
If a country has the comparative advantage in producing a product, then that country
must also have the absolute advantage in producing that product.