The marginal cost curve is U-shaped because of the law of increasing opportunity costs.
The Sarbanes-Oxley Act of 2002 requires that each member of the board of directors
personally certify the accuracy of financial reports.
If demand is inelastic, the absolute value of the price elasticity coefficient is greater
than one.
One factor which brought on the recession of 2007-2009 was the end of the housing
bubble.
The income effect explains why there is a direct relationship between the price of a
product and the quantity of the product demanded.
If the population increases and input prices increase, the equilibrium price of a product
will definitely increase.
Purchasing a firm’s stock in an IPO can be risky because financial information may not
be fully disclosed.
A public good that is a good that is both rival and excludable.
In a free market there are virtually no restrictions, or at best few restrictions, on how
factors of production can be employed.
In a two-good, two country world, if one country has a comparative advantage in the
production of one good, it can benefit by trading with other countries.
If households in the economy decide to take money out of checking account deposits
and hold it as currency, this will initially
A) not change M1 and increase M2.
B) decrease M1 and decrease M2.
C) decrease M1 and not change M2.
D) not change M1 and not change M2.
At the beginning of the recession of 2007-2009, real GDP in the United States was
________ potential GDP, and in June 2009, real GDP was ________ potential GDP.
A) below; above
B) below; below
C) above; below
D) above; above
If inflation in the United States is lower than inflation in other countries, what will be
the effect on net exports for the United States?
A) Net exports will rise as U.S. exports increase.
B) Net exports will rise as U.S. imports increase.
C) Net exports will decrease as U.S. exports decrease.
D) Net exports will decrease as U.S. imports decrease.
Protection in the form of tariffs create winners and losers. Winners include ________
and losers include ________.
A) U.S. consumers and taxpayers; foreign firms that rely on U.S. exports
B) firms sheltered from foreign competition; U.S. consumers and taxpayers
C) U.S. firms that rely on exports to foreign countries; foreign manufacturers
D) the U.S. government; firms sheltered from foreign competition
Figure 12-4
Figure 12-4 shows the cost and demand
curves for a profit-maximizing firm in a perfectly competitive market. If the market
price is $30, the firm’s profit-maximizing output level is
A) 0.
B) 130.
C) 180.
D) 240.
Of the following, which is the best example of good with a perfectly inelastic demand?
A) the demand for tickets in New York City when the Mets or Yankees are in the World
Series
B) the demand for gasoline
C) a diabetic’s demand for insulin
D) the demand for a college education by a student who has a full scholarship to an Ivy
League school
Figure 7-5
Fenwick currently both produces and imports pistachios. The government of Fenwick
decides to restrict international trade in pistachios by imposing a quota that allows
imports of only 5 million pounds each year. Figure 7-5 shows the estimated demand and
supply curves for pistachios in Fenwick and the results of imposing the quota. Answer
questions a-j using the figure.
a. If there is no quota what is the domestic price of pistachios and what is the quantity
of pistachios demanded by consumers?
b. If there is no quota how many pounds of pistachios would domestic producers supply
and what quantity would be imported?
c. If there is no quota what is the dollar value of consumer surplus?
d. If there is no quota what is the dollar value of producer surplus received by producers
in Fenwick?
e. If there is no quota what is the revenue received by foreign producers who supply
pistachios to Fenwick?
f. With a quota in place what is the price that consumers of Fenwick must now pay and
what is the quantity demanded?
g. With a quota in place what is the dollar value of consumer surplus? Are consumers
better off?
h. With a quota in place what is the dollar value of producer surplus received by
producers in Fenwick? Are domestic producers better off?
i. Calculate the revenue to foreign producers who are granted permission to sell in
Fenwick after the imposition of the quota.
j. Calculate the deadweight loss as a result of the quota.
When unemployment is below its natural rate, the inflation rate will eventually
A) increase.
B) decrease.
C) move to its natural rate.
D) become equal to the natural rate of unemployment.
Let D = demand, S = supply, P = equilibrium price, Q = equilibrium quantity. What
happens in the market for electric vehicles if the government offers incentives to
manufacturers to produce more electric vehicles?
A) D increases, S no change, P and Q increase
B) S increases, D no change, P decreases, Q increases
C) D and S increase, P and Q decrease
D) D no change, S increases, P decreases, Q decreases
Table 7-4 Output Per Hour of Work
Table 7-4 shows the output per hour of work for light bulbs and flash drives in Mexico
and in Canada.
a. Which country has an absolute advantage in the production of light bulbs and flash
drives?
b. Which country has a comparative advantage in the production of light bulbs?
c. Which country has a comparative advantage in the production of flash drives?
The late Hugo Chavez, Venezuela’s former president, proposed that the independence of
the Venezuelan central bank be eliminated. Given the research on the relationship
between central bank independence and inflation, we should expect this event to cause
inflation to ________ and the real exchange rate to ________ between the two counties.
(Assume the nominal exchange does not change, and that the United States is the
domestic country).
A) rise in Venezuela relative to the United States; fall
B) fall in Venezuela relative to the United States; fall
C) rise in Venezuela relative to the United States; rise
D) fall in Venezuela relative to the United States; rise
The Brooks Appliance Store and the Lefingwell Appliance Store (both are located in the
same city) each sell an identical washer-dryer. The owner of each store considered
offering the washer-dryer for $700, but decided on a price of $500. If this is a Nash
equilibrium we can conclude that
A) each store owner feared charging the higher price would result in being undercut by
the other store charging the lower price.
B) the owners of the stores feared that charging $700 could be used as evidence of
collusion.
C) charging $500 was the most profitable strategy for each store, regardless of what
price was charged by the other store.
D) the stores were less concerned about making a profit from the washer-dryers than
they were with attracting customers who would also buy other appliances.
Figure 17-3
InPanel A, at low wages (segment i)
A) the substitution effect outweighs the income effect.
B) the income effect outweighs the substitution effect.
C) the substitution effect offsets the income effect.
D) labor suppliers demand more leisure as wages increase.
Table 2-5
Table 2-5 shows the number of labor hours required to produce a cell phone and a board
foot of lumber in Estonia and Finland. Estonia has a comparative advantage in the
production of
A) both products.
B) lumber.
C) cell phones.
D) neither product.
Global warming refers to the effect of global pollutants such as carbon dioxide on
climates on the earth. Climate-induced changes in temperatures affect, among other
things, agriculture. Which of the following is a reason why policymakers are still
debating if this problem should be addressed and how it should be addressed?
A) Scientists agree about the damage caused by carbon emissions but disagree about the
methods of reducing emissions.
B) The marginal cost of reducing carbon emissions is known with certainly, but the
marginal benefit from reduction is not known with certainty.
C) The marginal cost of reducing carbon emissions is not known with certainly, but the
marginal benefit from reduction is known with certainty.
D) There is much disagreement about all aspects of the problem: how much carbon
emissions contribute to damage from climate change, which in turn informs the benefits
from reduction, and what methods to use which in turn determines the cost of reduction.
What type of consumer goods are most affected by the business cycle: durable goods or
nondurable goods? Why?
The “Big Mac Theory of Exchange Rates” tests the accuracy of purchasing power
parity theory. In July 2013, The Economist reported that the average price of a Big Mac
in the United States was $4.56. In Switzerland, the average price of a Big Mac at that
time was 6.50 Swiss francs. If the exchange rate between the dollar and the Swiss franc
was 0.93 Swiss francs per dollar, how would purchasing power parity predict the
exchange rate will change in the long run? Support your answer graphically.
What is “human capital,” and how does human capital affect labor productivity and
economic growth?
Use the equations for public and private saving to demonstrate how total saving in the
economy equals investment.
Describe how the Fed uses open market operations to change short-term and long-term
interest rates.
What is meant by crowding out? Explain the difference between crowding out in the
short run and in the long run.
Are restaurant coupons a form of price discrimination? Why or why not?
Briefly explain the economic concept of elasticity.
Table 9-10
Table 9-10 shows the output per week for pens and pencils by Tran and Farah. Fill in
the following table with the opportunity costs of producing bows and arrows for Tran
and Farah.