In order to support an undervalued euro, the European Central Bank must ________
dollars. Over time, this action will cause the rate of inflation in the EU to ________.
A) buy; decrease
B) buy; increase
C) sell; increase
D) sell; decrease
If the consumption function is defined as C = 7,250 + 0.8Y, what is the marginal
propensity to save?
A) 0.2
B) 0.8
C) 5.8
D) 7.25
Figure 2-4 Figure 2-4 shows
various points on three different production possibilities frontiers for a nation. A
movement from ________ is the result of advancements in plastic production
technology.
A) V to X
B) W to X
C) Z to W
D) Y to Z
What does the term “marginal” mean in economics?
A) the edge of a market
B) an additional or extra
C) illegal
D) secondary
E) trivial
If the slope of the per-worker production function is 1/2 in a given range, how will a
$10,000 increase in capital per hour worked affect real GDP per hour worked in the
same given range?
A) Real GDP per hour worked will increase by $5,000.
B) Real GDP per hour worked will increase by $20,000.
C) Real GDP per hour worked will increase by $10,000.
D) Real GDP per hour worked will decrease by $20,000.
Total utility is maximized in the consumption of two goods by
A) equating the marginal utility for each good consumed.
B) equating the marginal utility per dollar for each good consumed.
C) equating the total utility of each good divided by its price.
D) maximizing expenditure on each good.
Suppose consumer preference for beef starts to rise while the cost of raising beef
continues to rise. In the market for beef, this would be represented by the equilibrium
price ________ and the equilibrium quantity ________.
A) increasing; increasing or decreasing
B) decreasing; increasing or decreasing
C) increasing or decreasing; increasing
D) increasing or decreasing; decreasing
A reason why a perfectly competitive firm’s demand for labor curve slopes downward is
that
A) each additional unit of labor hired is less efficient than previously hired units.
B) in the short run, as more labor is hired, labor’s marginal product falls because of the
law of diminishing returns.
C) the extra cost of hiring additional units of labor increases as a firm hires more units
of labor.
D) the firm’s demand curve for the product that uses labor is downward sloping.
Though large firms have the knowledge and resources to utilize a better pricing
strategy, many choose to use cost-plus pricing. One reason for this is that
A) large firms do not have to maximize their profits because they face little competition
from other firms.
B) there is less risk of violating antitrust laws if a cost-plus pricing strategy is used
rather than a profit-maximizing pricing strategy.
C) the additional revenue that would result from a profit-maximizing pricing strategy is
an insignificant fraction of the firms’ revenues.
D) firms often adjust the markup they charge to reflect current demand.
The increase in government spending on unemployment insurance payments to workers
who lose their jobs during a recession and the decrease in government spending on
unemployment insurance payments to workers during an expansion is an example of
A) automatic stabilizers.
B) discretionary fiscal policy.
C) discretionary monetary policy.
D) automatic monetary policy.
Hovnanain Enterprises, a residential home builder based in New Jersey, did well during
the mid-2000s but did not do so well in during and immediately after the recession of
2007-2009. The reason for this is
A) the Fed kept low interest rates in the mid-2000s but raised interest rates in 2007 to
help fight inflation.
B) the Fed kept low interest rates in the mid-2000s but by 2007 the housing bubble had
burst.
C) the Fed raised interest rates in the mid-2000s but lowered interest rates in 2007 to
revive the housing market.
D) the Fed raised interest rates in the mid-2000s and raised interest rates in 2007 to help
fight inflation.
If the purchasing power of the dollar is less than the purchasing power of the British
pound, purchasing power parity predicts that the exchange rate will
A) increase if the exchange rate is greater than 1 pound per dollar.
B) decrease if the exchange rate is less than 1 pound per dollar.
C) be equal to the relative purchasing power across the currencies in the long run.
D) All of the above are correct.
Figure 13-3
Which of the points in the above graph are possible short-run equilibria but not
long-run equilibria? Assume that Y1 represents potential GDP.
A) A and B
B) A and C
C) C and D
D) B and D
Increases in the minimum wage are intended to raise the incomes of low-income
workers. Many economists favor a different policy to achieve this goal, a policy that
avoids the deadweight losses that result from the minimum wage. What is this policy?
A) distribution of food stamps to low-income consumers
B) distribution of vouchers that can be used for rent or mortgage payments
C) the Alternative Minimum Tax
D) the earned income tax credit
Donnie’s Donuts incurs $450,000 per year in explicit costs and $200,000 in implicit
costs. The bakery earns $800,000 in revenues and has $2 million in net worth. Based on
this information, what is the economic profit for Donnie’s Donuts?
A) $150,000
B) $350,000
C) $600,000
D) $1.2 million
If the Fed pursues expansionary monetary policy,
A) aggregate demand will rise, and the price level will rise.
B) aggregate demand will fall, and the price level will fall.
C) aggregate demand will rise, and the price level will fall.
D) aggregate demand will fall, and the price level will rise.
A market economy benefits from market power
A) if the majority of the population are entrepreneurs.
B) if firms with market power do research and development with the profits earned.
C) if market power gets so bad the government creates public enterprises.
D) under no circumstances.
A Gini coefficient of ________ means that an income distribution is perfectly equal,
and a Gini coefficient of ________ means the income distribution is perfectly unequal.
A) 0; 1
B) 1; 0
C) 0, 100
D) 100, 0