When earnings differentials are adjusted for such factors as age, education, and marital
status, the
a. differential between the earnings of white males and those of minority males
increases.
b. differential between the earnings of white males and those of minority males
decreases.
c. corrected earnings of minority males are equal to those of similar white men.
d. corrected earnings of minority males are greater than those of similar white men.
The real rate of interest equals the
a. money rate of interest minus the expected inflation rate.
b. money rate of interest plus the expected inflation rate.
c. inflationary premium.
d. nominal rate of interest.
Assume that supply decreases slightly and demand decreases greatly. Which of the
following will happen?
a. Equilibrium price will fall and equilibrium quantity will rise.
b. Equilibrium price will rise and equilibrium quantity will fall.
c. Equilibrium price will rise and equilibrium quantity will rise.
d. Equilibrium price will fall and equilibrium quantity will fall.
e. Neither equilibrium price nor equilibrium quantity will change.
If Mia can either wash 10 cars or wax 2 cars during a day, and Daniel can either wash
17 cars or wax 2 cars during a day, then according to the law of comparative advantage,
a. Daniel’s opportunity cost of waxing a car is less than Mia’s.
b. their total output can be expanded if Mia specializes in waxing and Daniel in
washing.
c. their total output can be expanded if Mia specializes in washing and Daniel in
waxing.
d. it would be impossible for Daniel and Mia to increase their total output through
specialization and mutual exchange.
Figure 9-14
Consider Figure 9-14. At which quantity will this firm maximize profit?
a. point a
b. point b
c. point c
d. point d
e. point e
Which of the following will most likely result from a destruction of half of the Florida
orange crop due to a hard freeze?
a. a decrease in the demand for oranges
b. an increase in the supply of oranges
c. an increase in the quantity of oranges bought and sold
d. an increase in the price of oranges
A decrease in the tariff on foreign-produced automobiles would be most likely to harm
a. steel producers, who supply steel to the domestic automobile industry.
b. foreign producers of automobiles.
c. importers of automobiles.
d. domestic distributors of foreign automobiles.
Positive economics
a. postulates a relationship that is potentially refutable and then seeks to determine
whether the stated relationship is correct.
b. uses value judgments to determine which policy alternatives should be chosen.
c. is of no use to policy makers because it reflects the value judgments of the researcher.
d. is the scientific study of “what ought to be” among economic relationships.
Suppose a change in technology increases the marginal product of labor. The result is
a. a downward movement along the demand for labor curve.
b. a rightward shift in the demand for labor curve.
c. a leftward shift in the demand for labor curve.
d. an upward movement along the demand for labor curve.
Use the figure below to answer the following question(s).
Figure 5-3
Figure 5-3 illustrates the market for a product that generates an external benefit. D1 is
the private market demand curve, while D2 is the demand curve including the external
benefit. Which of the following is true?
a. Point a illustrates the competitive private market outcome, while point b illustrates
the outcome consistent with economic efficiency.
b. Point b illustrates the competitive private market outcome, while point a illustrates
the outcome consistent with economic efficiency.
c. The competitive private market outcome is consistent with the conditions for
economic efficiency.
d. The good will tend to be oversupplied relative to the conditions for economic
efficiency.
Refer to Table 13-2. The reserve requirement is 10 percent and then someone deposits
an additional $50,000 into the bank, then if the bank takes no other action it will
a. have $65,000 in excess reserves.
b. have $55,000 in excess reserves.
c. need to raise an additional $5,000 of reserves to meet the reserve requirement
d. none of the above is correct.
The opportunity cost of an option
a. measures the undesirable aspects of the option.
b. includes only the monetary cost of the option.
c. is the highest-valued alternative that must be given up as the result of choosing the
option.
d. is objective, and it will be the same for all individuals.
Which of the following is the best definition of “physical capital”?
a. the labor utilized in the production process
b. man-made resources used to produce other goods
c. natural resources in their original state
d. the ownership of stock shares issued by a corporation
The Agricultural Adjustment Act, passed in 1933, was an effort to
a. keep agricultural prices high by increasing supply.
b. keep agricultural prices low by increasing supply.
c. keep agricultural prices high by decreasing supply.
d. keep agricultural prices low by decreasing supply.
If the Fed purchases government securities from the public, the
a. money supply will decrease.
b. reserves of commercial banks will decrease.
c. required reserves ratio will increase.
d. monetary base will increase.
Comparisons of the link between the growth of the money supply and inflation indicate
that
a. countries with high rates of monetary growth also experience high inflation.
b. countries with high rates of monetary growth experience low inflation.
c. monetary growth rates and inflation are unrelated.
d. inflation is primarily the result of restrictive monetary policy.
Which of the following is most likely to increase the market wage rate in a job
category?
a. The employer provides a generous pension plan.
b. The work is widely viewed as safe and not stressful.
c. The job is widely viewed as interesting and prestigious.
d. The job requires employees to move from city to city quite often.
The current empirical evidence indicates that
a. changes in the earth’s cloud cover will clearly enhance the warming effects of carbon
dioxide.
b. the increase in carbon dioxide, over thousands of years, is definitely the cause of
global warming.
c. if global warming continues as most models predict, then in the next 100 years the
sea levels clearly will rise by more than 10 feet.
d. none of the above is true.
Which of the following is a characteristic of a contestable market?
a. long-run economic profit
b. many firms that are small relative to the market
c. high costs for entry and exit
d. minimum-cost production methods
Suppose that workers immigrate to Minnesota from Canada. Which of the following
correctly describes what would happen in the market for labor in Minnesota?
a. The equilibrium wage would increase, as would the quantity of labor. With more
workers, the added output from an extra worker is larger.
b. The equilibrium wage would decrease, as would the quantity of labor. With fewer
workers, the added output from an extra worker is smaller.
c. The equilibrium wage would decrease, and the quantity of labor would increase. With
more workers, the added output from an extra worker is smaller.
d. The equilibrium wage would decrease, and the quantity of labor would increase. With
more workers, the added output from an extra worker is larger.
If the United Auto Workers’ Union obtained a 15 percent increase in the wages of its
workers, employment in the auto industry would most likely fall if
a. the demand for American-made automobiles was highly inelastic.
b. American consumers considered foreign automobiles a poor substitute for
American-made automobiles.
c. the demand for American-made automobiles was highly elastic.
d. the demand for American-made automobiles was increasing.
Under which of the following conditions will the actual rate of unemployment tend to
rise above the natural rate of unemployment?
a. Prices are stable and have been for the last four years.
b. Inflation is 3 percent and was widely anticipated more than a year ago.
c. Expansionary monetary policies lead to an unexpected increase in inflation from 3
percent to 7 percent.
d. Restrictive monetary policies lead to an unexpected reduction in inflation from 6
percent to 2 percent.
Which of the following is necessary for the presence of competition in a market?
a. Government regulations that assure firms will make excess profits.
b. Suppliers that offer a homogeneous product.
c. A price that always equals per-unit production costs.
d. Low barriers to entry into the market.
An increase in the general level of prices in the goods and services market that is
accompanied by a short-run reduction in real GDP is most likely caused by
a. an unanticipated decrease in aggregate demand.
b. an unanticipated increase in aggregate demand.
c. a favorable supply shock that shifts SRAS to the right.
d. an unfavorable supply shock that shifts SRAS to the left.
The money interest rate may be a misleading indicator of real borrowing costs when
a. the unemployment rate is high.
b. the actual rate of unemployment exceeds the natural rate of unemployment.
c. the inflation rate is high.
d. real output is declining.
Suppose the annual rate of inflation has been 3 percent and the annual growth rate of
the money supply has been 5 percent during the last few years. In the last twelve
months, however, the monetary authorities have increased the money supply at a 12
percent annual rate. The expected inflation rate for the next period will be:
a. lower than 3 percent under both the adaptive and rational expectations hypotheses.
b. 3 percent under the adaptive expectations hypothesis.
c. 3 percent under the rational expectations hypothesis.
d. higher than 3 percent under both the adaptive and rational expectations hypotheses.
The actual benefit of a government subsidy is determined primarily by
a. the elasticities of demand and supply.
b. the legal (or statutory) assignment of the subsidy
c. the number of exchanges that are made possible as a result of the subsidy.
d. whether the subsidy is paid by cash or check.
What happens to a resource as it becomes scarcer?
a. The price rises and this increases the future supply relative to demand.
b. The price rises and this increases the future demand relative to supply.
c. The price falls and this increases the future supply relative to demand.
d. The price falls and this increases the future demand relative to supply.
Which of the following is true?
a. Employers who discriminate against women will have lower costs than rival firms
that hire employees strictly on the basis of merit (productivity).
b. On average, the number of hours worked per year by women in the labor force is
greater than the hours worked by men in the labor force.
c. The female/male earnings ratio is substantially higher for never married persons than
for those married with a spouse present.
d. As the proportion of women preparing for careers as professionals has increased in
recent decades, the earnings of women have declined relative to those for men.
If the demand for a good decreased, what would be the effect on the equilibrium price
and quantity?
a. Price would increase, and quantity would decrease.
b. Price would decrease, and quantity would decrease.
c. Price would increase, and quantity would increase.
d. Price would decrease, and quantity would increase.
The economic way of thinking stresses that
a. changes in personal costs and benefits generally do not influence human behavior.
b. incentives matter–when an option becomes less costly, people will be more likely to
choose it.
c. if one individual gains from an economic activity, then someone else must lose.
d. goods provided by government do not consume valuable scarce resources since
government activity is not part of the market economy.