Suppose your grandfather earned a salary of $12,000 in 1964. If the CPI is 31 in 1964
and 219 in 2013, then the value of your grandfather’s salary in 2013 dollars is
approximately
A) $84,775.
B) $63,830.
C) $37,200.
D) $26,280.
If foreign holdings of U.S. dollars decrease, holding all else constant,
A) the balance on the U.S. financial account will decrease.
B) the balance on the U.S. current account will decrease.
C) the balance on the U.S. capital account will decrease.
D) the U.S. balance of trade will decrease.
If the Fed orders an expansionary monetary policy, describe what will happen to the
following variables relative to what would have happened without the policy:
a. The money supply
b. Interest rates
c. Investment
d. Consumption
e. Net Exports
f. The aggregate demand curve
g. Real GDP
h. The price level
Workers and firms both expect that prices will be 2.5% higher next year than they are
this year. As a result,
A) workers will be willing to take lower wages next year, but not lower than a 2.5
percent decrease.
B) the purchasing power of wages will rise if wages increase by 2.5%.
C) the short-run aggregate supply curve will shift to the left as wages increase.
D) aggregate demand will increase by 2.5%.
In the United States, consumers usually pay ________ than the true cost of medical
treatment because of ________.
A) more; adverse selection
B) more; rising insurance premiums
C) less; third-party payers
D) less; rising insurance deductibles
Between September 2007 and March 2008 there was a substantial reduction in the
demand for housing. What action did the Fed take in response to the reduction in the
demand for housing?
A) The Federal Reserve decreased the required reserve rate.
B) The Fed conducted open market sales of Treasury securities.
C) The Federal Reserve cut the federal funds rate seven times.
D) The Federal Reserve raised the discount rate by 3 percentage points.
The Congressional Budget Office estimates that the Patient Protection and Affordable
Care Act (ACA) will
A) increase government spending by just under $1 trillion over 10 years.
B) cost the government significantly more than the additional taxes and fees enacted
under the law will bring in.
C) eliminate the budget deficit within 10 years.
D) actually reduce government spending over a 20 year period.
Firms such as Caribou Coffee and Diedrich Coffee operate hundreds of coffeehouses
nationwide while firms such as Dunn Brothers Coffee operate only in four states. How
would you characterize these stores?
A) Caribou Coffee and Diedrich Coffee are oligopolists while Dunn Brothers is a
monopolistic competitor.
B) Caribou Coffee and Diedrich Coffee are duopolists while Dunn Brothers is a
monopolistic competitor.
C) Caribou Coffee and Diedrich Coffee are duopolists while Dunn Brothers is an
oligopolist
D) They are all monopolistic competitors.
The term tax incidence refers to
A) the degree of progression of a tax.
B) the actual division of the burden of a tax between buyers and sellers in a market.
C) the amount of revenue government collects from a tax imposed on a good or service.
D) whether the burden of a tax rests more heavily on those with higher incomes or
those with lower incomes.
Every firm that has the ability to affect the price of the good or service it sells will
A) have a perfectly elastic demand curve.
B) have a marginal revenue curve that lies below its demand curve.
C) earn a short-run profit but break even in the long run.
D) shut down in the short run.
National income is derived from gross domestic product by
A) subtracting retained earnings from gross domestic product.
B) adding personal taxes and depreciation to gross domestic product.
C) subtracting depreciation from gross domestic product.
D) adding personal income and transfer payments to gross domestic product.
The cross-price elasticity of demand measures the
A) absolute change in the quantity demanded of one good divided by the absolute
change in the price of another good.
B) percentage change in the quantity demanded of one good divided by the percentage
change in the price of another good.
C) percentage change in the price of one good divided by the percentage change in the
quantity demanded of another good.
D) percentage change in the quantity demanded of one good in one location divided by
the price of the same good in another location.
Which of the following is an example of a nonexcludable product?
A) college education
B) a public library
C) public transportation
D) internet service for your home computer
If a consumer receives 22 units of marginal utility for consuming the first can of soda,
20 units from consuming the second, and 15 from the third, the total utility of
consuming the three units is
A) 57 utility units.
B) 35 utility units.
C) 15 utility units.
D) unknown as more information is needed to determine the answer.
Which of the following is an example of an economic trade-off that a firm has to make?
A) whether it is cheaper to produce with more machines or with more workers
B) deciding why consumers want its products
C) whether or not consumers will buy its products
D) deciding what profit margin it desires for its products
Figure 9-1
Figure 9-1 shows the U.S. demand and supply for
leather footwear. Suppose the government allows imports of leather footwear into the
United States. The market price falls to $18. What is the value of consumer surplus?
A) $0
B) $270
C) $305
D) $320.
In many business situations one firm will act first, and then other firms will respond. To
help analyze these types of situations economists use
A) retaliation games.
B) follow-the-leader-games.
C) sequential games.
D) bargaining games.
In economics, the practical application of an invention is known as
A) technology.
B) entrepreneurship.
C) physical capital.
D) innovation.
Lou buys an Iron Man 2 poster from Evan for $30 and resells it on eBay for $60. Which
of the following statements is false?
A) Lou has earned some arbitrage profits, assuming that transaction costs are
negligible.
B) The transaction has made Evan worse off because he undersold the poster.
C) Lou has probably incurred some costs in connection with this sale.
D) It is possible that Evan has earned some producer surplus from this transaction.