When a business is set up as a sole proprietorship, the owner of the business faces
limited liability.
An inferior good is a good for which the quantity demanded decreases as the price
increases, holding everything else constant.
Supply is elastic whenever the elasticity value for supply is positive and greater than 1.
Suppose that to move more people off the wait list for organ donations, surgeons and
hospitals are developing a market for organ swapping. This is an example of a
macroeconomics topic.
The International Monetary Fund was created to facilitate the borrowing and lending of
dollar reserves to central banks of the countries participating in the Bretton Wood
System.
Expansionary fiscal policy involves increasing government purchases or increasing
taxes.
If the firm is producing no output in the short run, then its total costs are zero.
Early adopters are consumers who will pay a high price to be among the first to own
new products.
Because many business situations are repeated games, firms may be able to avoid the
prisoner’s dilemma and implicitly collude to keep prices high.
One reason why McDonald’s charges a single price for its products is that it is difficult
and costly for the company to determine each individual consumer’s willingness to pay.
The NBER’s Business Cycle Dating Committee defines a recession as at least two
consecutive quarters of falling real GDP.
A network externality refers to a situation in which the usefulness of a product
decreases with the number of consumers who use it.
If the demand for a product decreases and the supply of the same product decreases, the
equilibrium price will decrease.
Price ceilings are illegal in the United States.
Technology is defined as
A) the process of developing and revising models.
B) new innovations and creations.
C) the processes used to produce goods and services.
D) the process of recycling products.
Table 15-1
A monopoly producer of foreign language translation software faces a demand and cost
structure as given in Table 15-1.What is the firm’s profit-maximizing output and what is
the price charged to sell this output?
A) P = $85; Q = 10
B) P = $80; Q = 11
C) P = $70; Q = 13
D) P = $65; Q = 14
Which of the following is not an advantage to a country of choosing to fix its exchange
rate against a major currency, rather than choosing a floating exchange rate?
A) Pegging allows the country more flexibility in conducting monetary policy.
B) Pegging helps avoid inflation in imported goods caused by currency depreciation for
countries with significant levels of imports.
C) Pegging insures that interest payments stemming from foreign loans do not fluctuate
with the value of the currency.
D) Pegging reduces the uncertainty caused by currency fluctuations and thereby
simplifies business planning.
Two economists from Northwestern University estimated the benefit households
received from subscribing to broadband Internet service. They found that in the year
they analyzed, 47 million consumers paid an average of $36 per month to subscribe to a
broadband Internet service, and estimated the value of total consumer surplus for these
subscribers was equal to $890.5 million. Based on these numbers, what was the average
monthly consumer surplus per subscriber for broadband Internet service?
A) $0.05
B) $0.77
C) $13.06
D) $18.95
If you want to earn a real interest rate of 3% on money you lend, and you expect that
inflation will be 2%, what nominal rate of interest will you charge?
A) 1%
B) 5%
C) 6%
D) 9%
Explain how each of the following events would affect the aggregate demand curve.
a. Lower interest rates
b. A decrease in net exports
c. A decrease in the price level
d. Slower income growth in other countries
e. A decrease in imports
Which of the following is a source of market failure?
A) unforeseen circumstances which leads to the bankruptcy of many firms
B) a lack of government intervention in a market
C) incomplete property rights or inability to enforce property rights
D) an inequitable income distribution
Which of the following is an example of spending on goods and services in the circular
flow model?
A) Belinda purchases a new computer for her tax-preparation business.
B) Javier buys 800 square feet of wood flooring for his vacation home.
C) Celeste buys fresh herbs at the farmers’ market to use in her restaurant.
D) Timmy purchases a new examination table for use in his veterinary clinic.
Many biologic drug manufacturers are pushing for patent protection to be extended to
12 years before generics are allowed to be introduced to the market. This reflects which
of the following barriers to entry?
A) control of a key resource
B) network externalities
C) entry blocked by government action
D) economies of scale creating a natural monopoly
Increasing marginal opportunity cost implies that
A) the more resources already devoted to any activity, the payoff from allocating yet
more resources to that activity increases by progressively smaller amounts.
B) the more resources already devoted to any activity, the benefits from allocating yet
more resources to that activity decreases by progressively larger amounts.
C) that rising opportunity costs makes it inefficient to produce beyond a certain
quantity.
D) the law of scarcity.
Figure 7-2 Suppose the U.S. government imposes a $0.75 per pound tariff on coffee
imports. Figure 7-2 shows the impact of this tariff. The tariff revenue collected by the
government equals
A) $10 million.
B) $15 million.
C) $19.875 million.
D) $35 million.
Figure 17-4
Which of the following is true if the wage rate increases from W0 to W1?
A) The income effect is larger than the substitution effect.
B) The substitution effect is larger than the income effect.
C) The income effect and the substitution effect are equal.
D) The supply curve is unit-elastic.
The ability of the Federal Reserve to use monetary policy to affect economic variables
such as real GDP ultimately depends upon its ability to affect
A) tax rates.
B) real interest rates.
C) nominal interest rates.
D) foreign exchange rates.
In many corporations, there is ‘separation of ownership from control.” What does this
mean?
A) The shareholders control the corporation, although the board of directors owns the
corporation.
B) The managers of the corporation run the corporation, although the shareholders own
the corporation.
C) The board of directors controls corporate operations, although the managers of the
corporation own the corporation.
D) Top corporate managers only make decisions that have been approved unanimously
by shareholders.
Studies on consumer behavior have found that most people value fairness enough that
they will refuse to participate in transactions they consider unfair, even if they are worse
off as a result. How does this affect a firm’s decision to raise prices in the event of a
temporary increase in demand?
What is a sequential game? How are decision trees used to analyze sequential games?
Suggest two policies the government could pursue to help increase the accumulation of
knowledge.
Should the level of pollution be reduced to zero and if not, then to what level?
What is an economic model?
What is a market economy?
Over the last 50 years, has the ratio of household production to gross domestic product
in the United States increased or decreased? Consider the effect of the increased
number of women working outside the home, and the effect of advances in technology
in household production such as microwaves, coffee makers, power tools, etc.