Ceteris paribus, a decrease in the government’s budget deficit will increase domestic
investment and net foreign investment.
As the number of firms in a market decreases, the supply curve will shift to the left and
the equilibrium price will rise.
When a monopolistically competitive firm breaks even in the long run, this is
equivalent to earning a zero accounting profit.
A fundamental assumption in game theory is that players do not interact with each
other.
The total amount of producer surplus in a market is equal to the area below the supply
curve.
A change in supply is represented by a shift of the supply curve.
An economic model is a simplified version of reality used to analyze real-world
economic situations.
If by purchasing more apples and fewer oranges you increase your total utility, then
apples must be cheaper than oranges.
Suppose the extra cost to a doctor of keeping her office open on Saturdays is $800.
Then, the doctor should not stay open on Saturdays if keeping the office open can only
bring in additional revenue of $800.
In a two-good, two country world, if one country has an absolute advantage in the
production of both goods, it cannot benefit by trading with the other country.
If marginal benefit is greater than marginal cost, output is inefficiently high.
The Soviet Union’s economic growth rate slowed despite rapid increases in capital per
hour worked.
When potential GDP increases, short-run aggregate supply also increases, but long-run
aggregate supply does not change.
Which of the following questions or statements regarding medical school is normative?
A) How do changes in expected future incomes affect the decisions of medical students
about which specialty to choose?
B) Medical students who enter specialized fields make a larger contribution to society
than do student who enter primary care.
C) What role does tuition play in a student’s decision about whether to attend medical
school?
D) Have tuition increases had a large effect or a small effect on the number of
applications to medical school?
In 1973, the Club of Rome published a book titled The Limits to Growth, which
predicted that economic growth would likely end in high-income countries because of
A) declining populations.
B) rapid increases in government debt.
C) increases in outsourcing of the production of goods and services to low-income
countries.
D) increasing pollution and the depletion of natural resources.
If Callum is consuming his utility maximizing bundle and the price of one good rises,
what happens to the marginal utility per dollar spent on this good (MU/P), and what
should Callum do?
A) MU/P has increased, and Callum should buy more of this good.
B) MU/P has increased, and Callum should buy less of this good.
C) MU/P has decreased, and Callum should buy more of this good.
D) MU/P has decreased, and Callum should buy less of this good.
The existence of ________ increases the risk of buying stock in a corporation.
A) the principal-agent problem
B) corporate governance
C) unlimited personal liability
D) employee-owned corporations
Assume that you had a ticket for a basketball playoff game that you bought for $50, the
maximum price you were willing to pay. If a friend of yours offers to buy the ticket for
$100 but you decide not to sell it, how can your decision be explained?
A) You expect to receive greater utility from attending the playoff game than you
received from buying the ticket.
B) by the endowment effect
C) by the law of diminishing marginal utility
D) The income effect from the increase in the price of the ticket from $50 to $100 was
greater than the substitution effect.
The five competitive forces model was developed by
A) Michael Porter.
B) John Nash.
C) Michael Spence.
D) Porter Smith.
Figure 13-11
What is the amount of excess capacity?
A) Q4 – Q3 units
B) Q4 – Q2 units
C) Q3 – Q2 units
D) Q3 – Q1 units
When people became less concerned with the underlying value of their houses and
instead focused on the expectations of the prices of their houses increasing, ________
occurred.
A) stagflation
B) an automatic destabilizer
C) a housing bubble
D) a supply shock
The drawback to calculating real GDP using base-year prices is that
A) real GDP in one year is not comparable to real GDP in another year.
B) relative prices change over time and these are not reflected in base-year prices, and
this distorts GDP.
C) relative prices change over time and these changes are reflected in base-year prices.
D) quality changes are reflected in base-year prices.
Table 16-2
Neem Products sells its Ayurvedic Neem toothpaste in two completely isolated markets
with demand schedules as shown in Table 16-2. The average cost of production is
constant at $2 per tube.
What are the total profits from both markets combined?
A) $50
B) $48
C) $18
D) $15
An isocost line shows
A) combinations of two inputs that result in the same total cost for a firm.
B) combinations of two inputs that result in the same total output for a firm.
C) combinations of the two inputs that result in the same profit for a firm.
D) the different levels of total cost that result from various combinations of two inputs.
In calculating gross domestic product, the Bureau of Economic Analysis uses the sum
of the market value of final goods and services produced. This means that the BEA
A) simply counts the total number of goods produced in the market place and then adds
them up.
B) values goods at their market prices, multiplies them by the quantity produced, and
then adds them up.
C) simply counts the total number of goods and services produced in the marketplace
and then adds them up.
D) values goods and services at their market prices, multiplies them by the quantity
produced, and then adds them up.
What features made England in the eighteenth century the place where the Industrial
Revolution occurred?
A negative externality is an example of market failure. The root of the problem lies in
the definition and enforcement of property rights. Explain.
Since real GDP is adjusted for inflation and nominal GDP is not, nominal GDP must
always be higher than real GDP. Do you agree or disagree? Why?
If the rate of inflation in the economy is steady at 5 percent per year, how does the
short-run Phillips curve predict that the unemployment rate will be changing, if at all?
Does your answer change if inflation in the economy is 0 percent? Illustrate your
answer with a Phillips curve.
Assume that a doctor can earn an additional $20,000 of revenue each year from keeping
his office open for one additional hour per week. What must the additional cost of
keeping the office open this additional hour per week be to make staying open for the
extra hour economically rational?
What is a surplus? What is a shortage?
The following table contains the actual prices charged by four Websites for the
PlayStation 3 game The Last of Us in October 2013.
Explain whether the information in this table contradicts the law of one price.
If the value added of a firm is positive, will the firm necessarily have positive profits?