Economic analysis indicates that growth in the size of government as a share of the
economy will
a. always reduce economic growth and reduce the living standards of the citizenry.
b. enhance economic growth and lead to higher income levels as it becomes larger and
larger.
c. initially promote growth as the government focuses on core functions, but deter
growth as government becomes larger and larger.
d. initially reduce economic growth, but eventually government will enhance growth as
it becomes larger and larger.
An economy growing at a consistent rate of 5 percent per year will double its income in
a. twenty-five years.
b. twenty-one years.
c. fourteen years.
d. twelve years.
Ordinary commercial banks can expand the supply of money by
a. printing up currency when they need it.
b. buying and selling government bonds to the general public.
c. using a portion of their deposits to extend additional loans.
d. reducing their vault cash and increasing their deposits with the Fed.
The textile industry is composed of a large number of small firms. In recent years, these
firms have suffered economic losses, and many sellers have left the industry. Economic
theory suggests that if technology, imports, and other factors remain constant, these
conditions will
a. shift the market demand curve outward so that price will rise to the level of
production cost.
b. cause the remaining firms to collude so they can produce more efficiently.
c. cause the market supply to decline and the price of textiles to rise.
d. cause firms in the textile industry to suffer long-run economic losses.
A shift to a more expansionary monetary policy will generally _________ in the short
run, but if the rapid monetary expansion persists, the long-run result will be ______.(fill
in the blanks.)
a. expand output and employment; inflation
b. increase the general level of prices; expand output and employment
c. increase the rate of unemployment; reduce the rate of inflation
d. reduce the rate of inflation; increase the rate of unemployment
In a market economy,
a. a larger income for one person means a smaller one for another.
b. the government answers all the basic economic questions.
c. a larger income for one person means it is possible for others to earn more too.
d. economic output shrinks as we discover better ways of doing things.
The current surplus of the Social Security system is expected to become a deficit
sometime around 2018 because the
a. payroll tax rate is scheduled to decline at that time.
b. number of workers relative to the number of Social Security recipients will decline as
the baby boom generation moves into the retirement phase of life.
c. stock market is not expected to perform nearly as well during the next two decades as
was the case during the 1980s and 1990s.
d. growth rate of the U.S. economy is expected to slow during the next two decades.
The figure below illustrates the cost and revenue structure for a monopoly firm.
Figure 11-17
Refer to Figure 11-17. If the monopoly firm is currently producing Q3units of output,
then a decrease in output will necessarily cause profit to
a. remain unchanged.
b. decrease.
c. increase as long as the new level of output is at least Q2.
d. increase as long as the new level of output is at least Q1.
Imposing a restrictive quota on the import of dishwashers will likely
a. increase the price of the dishwashers but decrease the quantity consumed.
b. increase both the price of the dishwashers and the quantity consumed.
c. leave the price of the dishwashers unchanged but decrease the quantity consumed.
d. leave the price of the dishwashers unchanged and also leave the quantity consumed
unchanged.
How does competition from nonunion firms and foreign producers affect the ability of a
union to increase the wages of its members?
a. Such competition reduces the ability of a union to achieve wage increases.
b. Such competition does not affect the ability of a union to achieve wage increases.
c. Such competition will increase the strength of a union if it produces a product sold in
the domestic market but reduce the strength of the union if it produces an export
product.
d. The effect of this type of competition will be entirely dependent on the elasticity of
demand for labor in the domestic market.
Why is trade an important source of economic progress?
a. It allows the trading partners to produce a larger joint output through specialization in
the areas where they have a comparative advantage.
b. It allows the trading partners to produce a larger joint output as the result of greater
realization of cost reductions that accompany the adoption of mass production methods.
c. It makes it possible to realize gains from the discovery and dissemination of
innovative products and production processes.
d. All of the above are correct.
How would the Bureau of Labor Statistics classify a person who is not working and
refuses an offer of employment in order to keep looking for a better job?
a. not in the labor force
b. unemployed
c. employed
d. a discouraged worker
Which of the following best explains why price in competitive price-taker markets will
tend to be driven to the minimum average total cost?
a. homogeneous products.
b. few sellers.
c. firms face downward-sloping demand curves.
d. free entry and exit.
Which of the following is an implication of the law of diminishing returns?
a. Total output will decline as more workers are hired.
b. In the long run, average total cost will eventually decline as output is expanded.
c. In the short run, expansion of output will eventually lead to increases in marginal cost
and average total cost.
d. A doubling of all inputs will lead to more than a doubling of output.
Which one of the following factors contributed to the decline in real output during the
Great Depression?
a. deflation, which changed the terms of long-term contracts and discouraged long-term
exchange
b. inflation, which reduced the value of the dollar and eroded the savings of the elderly
c. stable monetary policy, which caused business decision makers to lose confidence in
the Fed’s ability to fine-tune the economy
d. establishment of the Federal Deposit Insurance Corporation
Which of the following helps low income countries grow rapidly relative to high
income countries?
a. Low income countries are in a better position to save a larger share of their income.
b. Low income countries can copy (or borrow at a low cost) technologies and practices
that have been successful in high income countries.
c. Low income countries generally have legal systems that protect property rights and
enforce contracts in a more evenhanded manner.
d. Low income countries generally have more favorable weather
Consider the following information for the U.S. economy (figures in billions).
Table 7-6
Refer to Table 7-6. What was the value of national income?
a. $7,123
b. $7,666
c. $8,841
d. $11,004
Marquis borrowed $1,000 from Ayana for a year and agreed to repay her $1,050 at the
end of the year. If the inflation rate was 3 percent, what is the real rate of interest Ayana
received?
a. 10 percent
b. 5 percent
c. 3 percent
d. 2 percent
e. 2 percent
Use the figure below to answer the following question(s).
Figure 10-2
At which point in Figure 10-2 is the economy experiencing an economic recession?
a. J
b. I
c. F
d. H
When the quantity demanded and quantity supplied in a market are equal, the market is
said to be in
a. fixation.
b. excess supply.
c. equilibrium.
d. excess demand.
Figure 11-16
Refer to Figure 11-16. To maximize its profit, a monopolist would choose which of the
following outcomes?
a. 100 units of output and a price of $10 per unit
b. 100 units of output and a price of $20 per unit
c. 150 units of output and a price of $15 per unit
d. 200 units of output and a price of $20 per unit
After the adoption of the North American Free Trade Agreement (NAFTA), trade
between the United States and Mexico____, and trade between the United States and
Canada ____.
a. rose; fell
b. rose; rose
c. fell; fell
d. fell; rose
Some low-income countries generally remain poor because
a. their institutional arrangements and policies often discourage productive activity and
reduce the potential gains from specialization and exchange.
b. they are oppressed by developed nations that benefit from the cheap goods available
from countries with low wage rates.
c. they are poorly endowed with natural resources, which are essential for long-term
growth.
d. when the average income level is low, workers have little incentive to earn higher
incomes.
Figure 17-12
In Figure 17-12, with a tariff of $0.50 per unit and a world price of $1.00,
a. 25 units will be exported
b. 25 units will be imported
c. 50 units will be exported
d. 50 units will be imported
e. 10 units will be exported
If an economy is operating at a point inside the production possibilities curve,
a. its resources are not being used efficiently.
b. the curve will begin to shift inward.
c. the curve will begin to shift outward.
d. This is a trick question because an economy cannot produce at a point inside the
curve.
During 1980 through 2010,
a. the per capita income of high-income industrial countries declined.
b. the fastest growing economies in the world were LDCs.
c. almost all LDCs grew more rapidly than the high-income industrial economies.
d. most of the countries with rapid growth rates during the last two decades were
located in South America.
If the price elasticity of demand for opera tickets is estimated to be 4.5, then a 10
percent increase in opera ticket prices would be expected to cause a
a. 4.5 percent decrease in quantity demanded.
b. 4.5 percent increase in quantity demanded.
c. 45 percent decrease in quantity demanded.
d. 45 percent increase in quantity demanded.
e. 450 percent increase in quantity demanded
During the 1950s and 1960s, the national debt as a percent of GDP in the United States
a. soared to an all-time high.
b. declined.
c. increased.
d. was virtually unchanged.
When an investment project generates output that is valued more highly than the value
of the resources required for its production,
a. undertaking the project will create wealth.
b. it will generally be profitable to undertake the project if property rights are securely
defined and enforced .
c. entrepreneurs seeking profit will have little incentive to undertake such projects.
d. both a and b are correct.
Under which one of the following market structures are sellers most likely to consider
the reaction of rival sellers when they set the price of their product?
a. price-taker firms
b. pure monopoly
c. price searchers with low entry barriers
d. oligopoly
The short-run effects of a favorable supply shock will include
a. an increase in the general level of prices and a decrease in real output.
b. an increase in the general level of prices and an increase in real output.
c. a decrease in the general level of prices and a decrease in real output.
d. a decrease in the general level of prices and an increase in real output.