As the large baby-boom generation moves into the retirement phase of life, this will
a. make it easier for the federal government to finance its budget deficit because the
baby-boomers will be the wealthiest generation of retirees in American history.
b. make it easier for the federal government to reduce spending because senior citizens
do not spend much on consumption.
c. make it more difficult for the federal government to finance its budget deficit because
the retirement of the baby-boomers will mean more expenditures for Social Security
and Medicare.
d. not affect the federal deficit because there is no reason to expect that either federal
spending or tax revenues will be influenced by the retirement of the baby-boomers.
Water, when it is not tradeable among current and potential users, is often kept that way
a. by governments demanding tight control over who gets the water.
b. by nature, as water cannot be easily moved from place to place in large quantities.
c. to protect fish and other wildlife, rather than for any other reason.
d. by monopoly owners in the private sector.
Figure 17-13
In Figure 17-13, if the world price of a baseball is $3 and a tariff of $1 per baseball is
imposed in the United States, how many baseballs will the United States import?
a. 4,000
b. 6,000
c. 8,000
d. 10,000
e. 12,000
An indexed equity mutual fund
a. is directly tied to either the consumer price index or the GDP deflator.
b. is a fund that hires a manager who will try to pick the stocks that will increase most
in value in the future.
c. merely holds stocks in the same proportion as they exist in a broad stock market
index like the Standard & Poor’s 500.
d. will have high operating costs because these funds engage in a substantial amount of
stock trading.
If firms in a competitive price-searcher market are currently earning economic losses,
then in the long run,
a. new firms will enter the market, and the current firms will experience a decrease in
demand for their products until zero economic profit is again restored.
b. new firms will enter the market, and the current firms will experience an increase in
demand for their products until zero economic profit is again restored.
c. some existing firms will exit the market, and the remaining firms will experience an
increase in demand for their products until zero economic profit is again restored.
d. some existing firms will exit the market, and the remaining firms will experience a
decrease in demand for their products until zero economic profit is again restored.
Figure 15-3
As shown in Figure 15-3, the perfect equality line is drawn between points
a. W and Y along the curve.
b. X and Z.
c. W and Y along the straight line.
d. W and X.
If the interest rate is 5 percent, the net present value of $200 to be received two years
from now is
a. $165.29.
b. $181.41.
c. $200.
d. $210.
When private ownership of a resource is clearly defined and enforced, the private
owner
a. has little incentive to consider the wishes of others when deciding how to employ the
resource.
b. has little incentive to use the resource wisely.
c. has a strong incentive to consume the resource during the period rather than
conserving it for the future.
d. has a strong incentive to use the resource wisely.
Which of the following statements about price discrimination is correct?
a. A price discriminating firm will want to charge a higher price to the consumer group
with the more inelastic demand.
b. A firm will always be able to increase its profit by price discriminating rather than
charging the same price to all customers.
c. Price discrimination will be most effective when buyers can easily resell the product
amongst themselves.
d. Each consumer will pay a higher price when a firm is a price discriminator than
would be the case if all customers were charged the same price.
Countries that have a higher degree of economic freedom tend to
a. invest a larger share of their output, but the productivity of that investment is lower
than for economies that are less free.
b. invest a smaller share of their output, but the productivity of that investment is higher
than for economies that are less free.
c. invest a larger share of their output and the productivity of that investment is higher
than for the economies that are less free.
d. invest a smaller share of their output and the productivity of that investment is lower
than for economies that are less free.
Activists believe that
a. the M1 money supply should be increased at a steady rate annually.
b. taxes should be increased during a recession in order to balance the federal budget.
c. the economy’s self-correcting mechanism, if not stifled by perverse policies, will
prevent prolonged periods of high unemployment.
d. discretionary changes in macroeconomic policy can help smooth the business cycle
of a market economy.
The 18th century Scottish philosopher Alexander Tytler argued that democracy
a. would survive indefinitely into the future once it was established.
b. was the only form of government that would be able to control excessive government
spending financed by debt.
c. would tend to collapse from excessive debt once a majority of voters discovered they
could vote themselves benefits at the expense of others.
d. would lead to persistent government surpluses because elected political officials
would find the surpluses attractive relative to budget deficits.
Within the AD/AS model, if consumers and investors become more optimistic about the
future direction of the economy,
a. aggregate demand will decrease.
b. aggregate demand will increase.
c. long-run aggregate supply will increase.
d. long-run aggregate supply will decrease.
When a firm exits a competitive price-searcher market, the individual demand curves
faced by all remaining firms in that market will
a. shift in a direction that is unpredictable without further information.
b. shift to the right.
c. shift to the left.
d. remain unchanged. It is the supply curve that will shift.
Economic analysis implies that one of the most effective ways to deal with potential
damages from environmental pollution is to
a. declare the relevant resources to be public goods, owned by the public.
b. establish and enforce property rights for the resources that are being damaged, if
possible.
c. allow the government to take over and control all natural resources.
d. enact legislation that makes all environmental pollution illegal.
If a price taker in a competitive market is going to maximize profits, he must
a. increase the price of his product.
b. minimize his fixed costs of production.
c. minimize the per-unit cost of producing the good.
d. use the highest valued set of resources to produce his product.
Harold Brown runs a company that sells encyclopedia sets for $250. The following
schedule indicates the number of sets per week that are sold as employment increases.
If Brown’s costs increase by $1,300 per week as additional workers are employed, how
many workers should be employed in order to maximize profit?
a. five
b. six
c. seven
d. eight
If the Fed wanted to use all four of its major monetary control tools to decrease the
money supply, it would
a. buy bonds, reduce the discount rate, reduce reserve requirements, and reduce the
interest rate paid on excess reserves.
b. sell bonds, reduce the discount rate, reduce reserve requirements, and reduce the
interest rate paid on excess reserves.
c. sell bonds, increase the discount rate, increase reserve requirements, and increase the
interest rate paid on excess reserves.
d. buy bonds, increase the discount rate, increase reserve requirements, and increase the
interest rate paid on excess reserves.
Melanie decided to sleep in today rather than attend her 9 a.m. economics class.
According to economic analysis, her choice was
a. irrational, because economic analysis suggests you should always attend classes that
you have already paid for.
b. irrational, because oversleeping is not in Melanie’s self-interest.
c. rational if Melanie has not missed any other classes.
d. rational if Melanie values sleep more highly than the benefit she expects to receive
from attending the class.
Countries that have adopted liberal reforms and substantially increased their economic
freedom rating in recent years
a. experienced falling income levels per capita during 1995-2009.
b. grew slowly during 1995-2009.
c. achieved impressive growth rates of real GDP per person during 1995-2009.
d. have grown less rapidly than high income industrial economies.
In the natural gas industry, recent technological improvements and the use of fracking
have
a. increased the demand for natural gas, causing its price to rise.
b. increased the supply of natural gas, causing its price to decline.
c. reduced the demand for natural gas even though the proved reserves of the resource
have fallen.
d. resulted in sharply higher natural gas prices because of the dangers that accompany
fracking.
Economists generally use gross domestic product to measure a nation’s total output
because it
a. equals the sales value of all transactions conducted during a period and, thus, can be
easily calculated.
b. is the best available measure of the market value of all final goods and services
produced during a period.
c. is unaffected by changes in the prices of products over time.
d. is a reliable indicator of the social progress of a nation over time.
The long-run supply curve for a product differs from the short-run supply curve in that
the long-run supply curve is usually
a. vertical.
b. more inelastic.
c. more elastic.
d. of unitary elasticity.
Which of the following would be expected if the tariff on foreign-produced automobiles
were increased?
a. The domestic price of automobiles would fall.
b. The supply of foreign automobiles to the domestic market would decline, causing
auto prices to rise.
c. The number of unemployed workers in the domestic automobile industry would rise.
d. The demand for foreign-produced automobiles would increase, causing the price of
automobiles to increase in other nations.
The coefficient that represents the average number of times a dollar is used to buy
goods and services is called
a. the demand for money.
b. the quantity theory of money.
c. the price level.
d. the velocity of money.
Under a system of flexible exchange rates, which of the following will most likely
cause a nation’s currency to appreciate on the foreign exchange market?
a. a decrease in domestic interest rates
b. an increase in foreign interest rates
c. domestic inflation of 10 percent while the nation’s trading partners are experiencing
stable prices
d. stable domestic prices while the nation’s trading partners are experiencing 10 percent
inflation
If a government-imposed price floor legally sets the price of milk above market
equilibrium, which of the following will most likely happen?
a. The quantity of milk demanded will increase.
b. The quantity of milk supplied will decrease.
c. There will be a surplus of milk.
d. There will be a shortage of milk.
Figure 4-24
Refer to Figure 4-24. The per-unit burden of the tax on sellers is
a. P3 P1.
b. P3 P2.
c. P2 P1.
d. Q2 Q1.
How will an increase in lumber prices influence the home construction market?
a. The demand for newly constructed homes will increase.
b. The demand for newly constructed homes will decrease.
c. The supply of newly constructed homes will increase.
d. The supply of newly constructed homes will decrease.
Which of the following will be an obstacle to oligopolistic collusion in a market?
a. government regulations restricting entry
b. a relatively small number of oligopolistic firms
c. unstable demand conditions
d. uniform products
Figure 15-3
As shown in Figure 15-3, if people behave according to rational expectations theory, an
increase in the aggregate demand curve from AD1 to AD2 will cause the economy to
move
a. directly from E1 to E3 and then remain at E3.
b. directly from E1 to E2 and then remain at E2.
c. from E1 to E2 initially and then eventually move back to E1.
d. from E1 to E2 initially and then eventually move to E3.
Each month, the Bureau of Labor Statistics calculates unemployment by
a. surveying all workers in the economy.
b. surveying a random sample of households.
c. making projections based on census data.
d. surveying large business and government employers.
When we say that a firm is a price taker, we are indicating that the
a. firm takes the price established in the market then tries to increase that price through
advertising.
b. firm can change output levels without having any significant effect on price.
c. demand curve faced by the firm is perfectly inelastic.
d. firm will have to take a lower price if it wants to increase the number of units that it
sells.