During what period of time did the United States most consistently adhere to the gold
standard?
A) from the nineteenth century until the 1930s
B) from the eighteenth century until the nineteenth century
C) from 1914 until 1929
D) from 1944 until 1980
Arthur buys a new cell phone for $150. He receives consumer surplus of $150 from the
purchase. How much does Arthur value his cell phone?
A) $0
B) $150
C) $225
D) $300
Consider the following methods of taxing a corporation’s income:
a. A flat tax, as opposed to a progressive tax, is levied on corporate profits.
b. A system whereby a corporation calculates its annual profit and notifies each
shareholder of her portion of the profits. The shareholder would then be required to
include this amount as taxable income for her personal income tax. The corporation
does not pay a tax.
c. A system where the federal government continues to tax corporate income through
the corporate income tax but allows individual taxpayers to receive, tax free, corporate
dividends and capital gains. Which of the methods above would avoid double taxation?
A) a, b, and c
B) a and b only
C) a and c only
D) b and c only
Following the September 11, 2001, terrorist attacks, the managers of many hotels
expected a prolonged period of reduced travel and responded by laying off workers and
postponing or canceling new construction. Isadore Sharp, the chairman and CEO of
Four Seasons Hotels, decided to
A) continue expanding and was able to maintain or enhance the company’s market
share.
B) continue expanding and the company ended up losing significant market share.
C) curtail expansion plans, and by significantly cutting back on expansion was able to
maintain the company’s market share.
D) curtail expansion plans and the company ended up losing significant market share.
The key characteristics of a monopolistically competitive market structure include
A) few sellers.
B) sellers selling similar but differentiated products.
C) high barriers to entry.
D) sellers acting to maximize revenue.
A balance sheet
A) measures flows of income and expenditure over a given period of time.
B) measures assets, liabilities, and net worth at a giving instance in time.
C) equates flows of revenue with flows of expenditure.
D) None of the above are correct.
Max Shreck, an accountant, quit his $80,000-a-year job and bought an existing tattoo
parlor from its previous owner, Sylvia Sidney. The lease has five years remaining and
requires a monthly payment of $4,000. Max’s explicit cost amounts to $3,000 per month
more than his revenue. Should Max continue operating his business?
A) Max’s explicit cost exceeds his total revenue. He should shut down his tattoo parlor.
B) Max should continue to run the tattoo parlor until his lease runs out.
C) If Max’s marginal revenue is greater than or equal to his marginal cost, then he
should stay in business.
D) This cannot be determined without information on his revenue.
What is meant by the term “rational ignorance”?
A) It refers to the absence of a negative incentive, for example, a fine for not voting,
which results in a low voter turnout.
B) It refers to a situation where one policymaker deliberately approves a bill he does
not support in exchange for a future favorable vote for his own cause.
C) It means the lack an economic incentive for voters to become informed about a
pending legislation.
D) It refers to the fact that policymakers and their constituents have different ideas of
what it means to behave rationally and each party deliberately ignores the other’s view.
Figure 4-1
Figure 4-1 shows Arnold’s demand curve for burritos.
If the market price is $3.00, what is the maximum number of burritos that Arnold will
buy?
A) 0
B) 2
C) 3
D) 4
If disposable income increases by $500 million, and consumption increases by $400
million, then the marginal propensity to consume is
A) 1.25.
B) 0.8.
C) 0.6.
D) 0.4.
Figure 3-1
If the product represented is an inferior good, an increase in income would be
represented by a movement from
A) A to B.
B) B to A.
C) D1 to D2.
D) D2 to D1.
“An Inquiry into the Nature and Causes of the Wealth of Nations” published in 1776
was written by
A) John Maynard Keynes.
B) Karl Marx.
C) Alfred Marshall.
D) Adam Smith.
As a measure of competition in an industry, concentration ratios have several flaws.
One of these flaws is that concentration ratios
A) assume that all industries have low barriers to entry.
B) assume that a ratio less than 40 percent means an industry is perfectly competitive.
C) assume there are only four firms in an industry.
D) are calculated for the national market, even though competition in some industries is
mainly local.
Policies to promote growth by increasing saving and investment work through
A) decreasing the supply of loanable funds, lowering the interest rate, raising the level
of investment in physical capital.
B) increasing the supply of loanable funds, increasing the interest rate, raising the level
of investment in physical capital.
C) increasing the supply of loanable funds, lowering the interest rate, lowering the level
of investment in physical capital.
D) increasing the supply of loanable funds, lowering the interest rate, raising the level
of investment in physical capital.
Jill Johnson owns a pizzeria. She currently produces 10,000 pizzas per month at a total
cost of $500. If she produced one more pizza her total cost rises to $500.11. What does
this tell us about Jill’s marginal cost of producing pizzas?
A) The marginal cost of producing pizzas is constant.
B) The marginal cost of producing pizzas is falling.
C) The marginal cost of producing pizzas cannot be determined without more
information.
D) The marginal cost of producing pizzas is rising.
Steve Ballmer is the Chief Executive Officer of Microsoft as well as a member of
Microsoft’s board of directors. Ballmer is therefore classified as an
A) inside director.
B) outside director.
C) independent director.
D) unbiased director.
Table 2-14
Table 2-14 shows the number of labor hours required to produce a motorcycle and a
guitar in Ireland and Scotland.
If the two countries specialize and trade, who should export motorcycles?
A) There is no basis for trade between the two countries.
B) Ireland
C) Scotland
D) They should both be importing motorcycles.
Prices of California Merlot wine (assume that this is a normal good) have risen steadily
in recent years. Over this same period, prices for French oak barrels used for wine
storage have dropped and consumer incomes have risen. Which of the following best
explains the rising prices of California Merlots?
A) The supply curve for Merlot has shifted to the right while the demand curve for
Merlot has shifted to the left.
B) The demand curve for Merlot has shifted to the right more than the supply curve has
shifted to the right.
C) The demand curve and the supply curve for Merlot have both shifted to the left.
D) The supply curve for Merlot has shifted to the right more than the demand curve has
shifted to the right.