A monopolist currently sells 18 units of a good. If marginal revenue on the last unit sold
is $117, then the price of the good must be less than $117.
Economist Robert Higgs showed that World War II brought great increase in the
number of consumer goods available to the typical person.
If a state requires all drivers to buy health insurance, the problem of adverse selection is
eliminated.
“Cost disease” refers to the tendency for low productivity in the service sector to lead to
higher costs in those industries.
An oligopolistic industry is characterized by a few large firms acting independently.
When workers are paid on a piece-rate basis, an employer must be able to easily
measure each worker’s output.
Currently, the base year for the CPI is the average of prices in the years 1982 to 1984.
If the absolute value of the price elasticity of demand for gasoline is 0.5, then a 10
percent increase in the price of gasoline leads to a 0.5 percent decrease in the quantity
demanded.
How does a decrease in government spending affect the aggregate expenditure line?
A) It shifts the aggregate expenditure line upward.
B) It shifts the aggregate expenditure line downward.
C) It increases the slope of the aggregate expenditure line.
D) It decreases the slope of the aggregate expenditure line.
On average, people in low-income countries ________ than people in high-income
countries.
A) have a longer life expectancy
B) are subject to a lower infant mortality rate
C) are shorter
D) are exposed to fewer severe diseases
In a competitive market the demand curve shows the ________ received by consumers
and the supply curve shows the ________.
A) utility; average cost.
B) marginal benefit; marginal cost
C) economic surplus; opportunity cost
D) net benefit; net cost
At a price of $8 per dozen, Chuy sells 40 dozen homemade tamales per week. When he
raised her price to $12 per dozen, he still sold 40 dozen per week. Based on this
information, the demand for his tamales is
A) perfectly elastic.
B) inelastic.
C) perfectly inelastic.
D) unit-elastic.
If tolls on a toll road can be raised significantly before commuters will consider using a
free alternative, demand for using the toll road must be
A) inelastic.
B) elastic.
C) unit elastic.
D) perfectly elastic.
What is the natural rate of unemployment?
A) the unemployment rate that exists when the economy is at potential GDP
B) the unemployment rate that exists when the economy is at a trough in a business
cycle
C) an unemployment rate of 0%
D) any unemployment rate that is above the inflation rate
The International Nickel Company of Canada is often cited as an example of monopoly.
What was the source of the barrier to entry that gave this firm monopoly power?
A) It was a public enterprise; therefore, the Canadian government blocked entry into the
market for nickel.
B) There were important network externalities in the production of nickel.
C) Economies of scale resulted in the company becoming a natural monopoly.
D) control of a key resource
If an employee receives health insurance through his or her employer, the employer
A) still withholds contributions for Medicare and Medicaid from the employee’s
paycheck.
B) still withholds contributions for Medicare, but not Medicaid, from the employee’s
paycheck.
C) still withholds contributions for Medicaid, but not Medicare, from the employee’s
paycheck.
D) is no longer required to withhold contributions for Medicare or Medicaid from the
employee’s paycheck.
The World Trade Organization (WTO) promotes foreign trade and investment, or
globalization. In recent years opposition to globalization has led to violent protests at
meetings of the WTO. All of the following are reasons for these anti-globalization
protests except
A) protestors believe the WTO favors the interests of high-income countries at the
expense of lower-income countries.
B) protesters believe that tariffs are needed to protect domestic firms from foreign
competition.
C) protesters believe that free trade destroys the distinctive cultures of many countries.
D) protesters object to the loss of intellectual property (such as software programs and
movies) that results from foreign trade and investment.
Economists agree that a monopolistically competitive market structure
A) lowers consumer utility because consumers pay a price higher than the marginal cost
of production.
B) is detrimental to society because it leads to a waste of scarce resources.
C) benefits consumers because firms produce products that appeal to a wide range of
consumer tastes.
D) can eliminate any excess capacity if all firms in the industry devote more funds to
differentiating their products.
Table 17-2
The firm represented in the diagram
A) has market power in the factor market.
B) has market power in the output market.
C) has market power in both the factor and product market.
D) has no market power in the factor or product market.
Which of the following government policies would most likely result in an increase in
economic growth?
A) a decrease in the life of a patent from 20 years to 15 years
B) a decrease in the interest rate at which the government provides student loans
C) a decrease in government spending on grants issued through the National Institutes
of Health
D) decreased copyright protection on music and movies
What is the central role of financial intermediaries in a market economy?
A) the creation and printing of money
B) keeping the price level stable
C) bringing together savers and borrowers
D) providing safe deposit boxes for people and businesses
Voluntary exchange ________ economic efficiency because neither the buyer nor the
seller would agree to a trade unless ________.
A) increases; they both benefit
B) increases; only one party benefits
C) decreases; neither benefit
D) decreases; they both benefit
To combat inflation, Congress and the president should
A) decrease government spending.
B) decrease taxes.
C) raise interest rates.
D) increase transfer payments.
Figure 5-7 Which of the
following statements is true?
A) At QE the benefits of reducing pollution outweighs the cost of pollution reduction.
B) At QB society is under allocating resources to pollution reduction.
C) The optimal quantity of pollution reduction is QB.
D) The optimal quantity of pollution reduction is QE.
If the economy is currently in equilibrium at a level of GDP that is below potential
GDP, which of the following would move the economy back to potential GDP?
A) an increase in wealth
B) an increase in interest rates
C) a decrease in business confidence
D) an increase in the value of the dollar relative to other currencies
The short-run aggregate supply curve has a
A) negative slope.
B) positive slope.
C) slope equal to infinity.
D) slope equal to zero.
What are the four categories of aggregate expenditure?
Starting at point B in the diagram below, identify which combinations of points
illustrate technological change. Give a brief explanation to support your answer.
Why is the U.S. trade deficit almost always larger than the U.S. current account deficit?
On November 7, 1996, the Distilled Spirits Council of the United States decided to end
its voluntary ban on television and radio liquor advertisement. The ban on hard liquor
advertising had been in effect since 1936 for radio and 1948 for television. Did the
lifting of this ban likely increase or decrease the profits of hard liquor companies?
Briefly explain.
Based on the following information, calculate public saving, net foreign investment,
and national income. Assume that the capital account is zero and net transfers are zero.
private saving = $145 billion
exports = $285 billion
imports = $240 billion
consumption = $600 billion
private investment = $125 billion
government purchases = $75 billion
Suppose Veronica sells teapots in the perfectly competitive teapot market. Her output
per day and her costs are as follows:
Suppose the current equilibrium price in the teapot market is $15. To maximize profit,
how many teapots will Veronica produce, what price will she charge, and how much
profit (or loss) will she make? Draw a graph to illustrate your answer. Your graph
should include Veronica’s demand, ATC, AVC, MC, and MR curves, the price she is
charging, the quantity she is producing, and the area representing her profit (or loss).
State the law of diminishing returns. How do diminishing returns differ from
diseconomies of scale? Be sure to define diseconomies of scale in your answer.
Describe the four determinants of exchange rates in the long run.
Companies often find it to be more profitable to use a commission or piece-rate system
of compensation rather than a salary system, yet many firms continue to pay their
workers salaries. List three reasons why a firm would choose a salary system of
compensation.