1) A decrease in the supply of loanable funds would tend to lower the interest rate.
2) Being a “jack-of-all-trades” implies reducing the reliance on the division of labor.
3) In the short run, firms are more likely to respond to demand shocks by altering
inventory levels than by changing how much they produce.
4) The U.S. steel industry is an example of homogeneous oligopoly.
5) The lower the marginal propensity to consume, the larger is the multiplier.
6) Domestic farm subsidies improve world trade and contribute to greater efficiency in
the international allocation of agricultural resources.
7) An effective price ceiling will lower the equilibrium price and cause a surplus.
8) Minimum wage laws have contributed to higher unemployment levels among
teenagers and minorities.
9) In the long run for a purely competitive market, firms may enter or exit the industry
but the firms that stay in the industry will maintain their initial plant sizes.
10) Marginal utility is the accumulation of the total utility from successive units of a
good or service consumed.
11) If the MPC in the economy is 0.7 and aggregate expenditures fall by $10 billion,
then real GDP will fall by $17 billion.
12) In the dollar/yen market, if the supply of yen increases other things being equal, the
dollar will appreciate.
13) In a zero-sum game, the gains by one player will be exactly offset by the losses of
the other.
14) Suppose that goods A and B are close substitutes. If the price of good A falls, then
we would expect an:
A.Increase in the demand for A and an increase in the quantity of B demanded
B.Increase in the demand for A and a decrease in the quantity of B demanded
C.Increase in the quantity of A demanded and a decrease in the demand for B
D.Increase in the demand for good A as well as for good B
15) A purely competitive firm is producing at the point where its marginal cost equals
the price of its product. If the firm increases its output, then total revenue will:
A.Increase and profits will increase
B.Decrease and profits will increase
C.Increase and profits will decrease
D.Decrease and profits will decrease
16) Supply-side policies can be described in terms of the aggregate demand and
aggregate supply model as an attempt to shift:
A.The aggregate demand curve to the right
B.The aggregate supply curve to the right
C.Both the aggregate supply curve and the aggregate demand curve to the right
D.The aggregate supply curve to the right and the aggregate demand curve to the left
17) When the Federal Reserve raises the target Federal funds rate, it:
A.Sells government securities to increase the excess reserves available for overnight
loan
B.Buys government securities to increase the excess reserves available for overnight
loan
C.Sells government securities to decrease the excess reserves available for overnight
loan
D.Buys government securities to decrease the excess reserves available for overnight
loan
18) Heuristics:
A.are rules of thumb that generate decisions that generally maximize net benefits.
B.take a long time to develop and are therefore avoided by rational decision makers.
C.are shortcuts that save time and energy in decision making.
D.always waste mental resources by leading people to suboptimal outcomes.
19) There is a shortage in a market for a product when:
A.The current price is higher than the equilibrium price
B.Supply is less than demand
C.Quantity demanded is less than quantity supplied
D.Quantity demanded is greater than quantity supplied
20) The Federal payroll (Social Security) tax:
A.Increases the progressivity of the Federal tax system
B.Offsets some of the progressivity of the Federal tax system
C.Offsets some of the regressivity of the Federal tax system
D.Decreases the proportionality of the Federal tax system
21) Medicare and Medicaid set their payment rates for medical services above marginal
cost, but below average total cost. The rationale for doing this includes the following,
except:
A.To save taxpayers money
B.To induce health-care providers to serve Medicare and Medicaid patients
C.To make hospitals and other providers become more profitable
D.To put downward pressure on health-care costs
22) Which of the following statements best describes the relationship between asset
prices and average expected returns?
A.More risky assets will have similar prices as less risky assets
B.Less risky assets will have lower prices than more risky assets
C.Less risky assets will have higher prices than more risky assets
D.More risky assets will have higher prices than less risky assets
23) A required element for specialization to lead to an increase in the satisfaction of
society’s wants is:
A.A capitalist economy
B.Exchange and trade
C.The use of money
D.A central plan
24) What concept is associated with the notion that employers can get greater effort
from workers by paying them a relatively high, above-equilibrium wage?
A.Profit sharing
B.Efficiency wages
C.Piece rate wages
D.Bonus or commissions
25) How is the most-valued or optimal point on the production possibilities curve
determined?
26) “Competition is the mechanism that brings order out of potential chaos in a
price-directed economy.” Explain.
27) What is NAFTA? What have critics and defenders said about it?
28) Evaluate the benefits and cons of deregulating a governed industry.
29) Doggy Treats is selling dog treats in a purely competitive market. Its output is 800
treats, which it sells for $10 a treat. At the 800-treat level of output, the marginal cost is
$11, the average variable cost is $9.00, and the average variable cost is $8.00. Should
the firm increase output, decrease output, or not produce? Why? How should the firm
determine that optimal level of output?
30)
31) Describe the major spending categories and percentage for health care spending.