Railroads have received significant attention from regulators because
a. railroads enjoy significant economies of scale.
b. conditions in the railroad industry are conducive to destructive competition.
c. regulators would like to ensure universal service to all potential railroad customers.
d. All of the above are correct.
Tacit collusion is
a. collusion which is carried out without any explicit agreement among firms.
b. collusion about tacits, rather than strategy.
c. agreements which are sponsored by government.
d. similar to pure competition.
If the Fed buys more bonds from the public, and increases the price it is willing to pay
for the bonds, what will happen to interest rates?
a. They will rise.
b. They will fall.
c. They will remain unchanged.
d. The relationship between bond prices and interest rates is unclear.
A free market may produce a misallocation of resources over time because
a. the Fed manipulates interest rates.
b. people have a “defective telescopic faculty.”
c. private risk usually exceeds social risk.
d. All of the above are correct.
High prices do not occur in laissez-faire markets.
a. True
b. False
If workers always see inflation coming, and if they demand wage increases in advance
so that inflation does not erode real wages, then the economy’s aggregate supply curve
on the AD-AS diagram will
a. be a vertical line corresponding to potential GDP.
b. be a horizontal line corresponding to potential GDP.
c. slope downward.
d. slope upward.
Bank regulators are concerned about the safety of depositors because
a. bank failures were common throughout most of U.S. history and have even occurred
in recent decades.
b. in the absence of federal insurance, depositors would lose their money if a bank
failed.
c. nervous depositors may rush to withdraw their accounts and produce a “run” that
could threaten even a sound bank.
d. All of the above are correct.
A Keynesian economist would propose strong actions to prevent or reduce inflation.
a. True
b. False
The total physical product of an input is the same thing as its
a. total revenue product.
b. marginal physical product times output.
c. output.
d. total consumer’s surplus.
By 2007 the deficit
a. was out of control and increased substantially soon thereafter.
b. seemed under control but increased substantially soon thereafter.
c. was out of control but decreased substantially soon thereafter.
d. seemed under control and decreased substantially soon thereafter.
The demand for French Roast coffee is likely to be
a. elastic.
b. inelastic.
c. unit elastic.
d. perfectly inelastic.
Rising labor productivity means that less labor is needed to produce the same level of
output.
a. True
b. False
An effective craft union acts as a monopoly
a. demander of labor.
b. seller of labor.
c. demander of capital.
d. seller of capital.
In 2013, new bond issues and other forms of debt totaled ____ in corporate financing.
a. $650 billion
b. $783 tillion
c. $1 trillion
d. −$2 billion
Firms often seek to borrow money to expand their capital stock, and the price they pay
for that money is the interest rate. What happens to quantity of money demanded if the
interest rate increases?
a. It increases.
b. It decreases.
c. It does not change.
d. Uncertain-the law of demand does not apply to money.
Many of the new pollutants to which the world has been subjected are
a. less visible.
b. less malodorous.
c. far more dangerous.
d. All of the above are correct.
How will an increase in the efficiency of the payments mechanism effect velocity?
a. It will decrease.
b. It will increase.
c. It will remain constant.
d. Velocity is unrelated to payments.
Fighting inflation by slowing the growth of aggregate demand is
a. endorsed by most politicians.
b. a convenient way to reduce inflation.
c. unpopular with politicians.
d. always easily accepted by firms and workers.
If a balanced budget were required in 2008, the government would have been required
to cut spending and increase taxes.
a. True
b. False
When the housing bubble burst, prices fellparticularly severely in all of these states
except:
a. Arizona.
b. California.
c. Nevada.
d. Florida
e. Prices fell severely in all of the above states.
A change in the price of hamburgers will change the supply of hot dogs.
a. True
b. False
In each of the following scenarios, explain why the euro will appreciate or depreciate in
a system of floating exchange rates. A) A recession in Germany cuts German purchases
of American goods. B) American investors are attracted by prospects for profit on the
Frankfurt Stock Exchange. C) Interest rates on government bonds rise in the U.S. but
remain stable in Germany.
The goal of the manager of a firm is sales maximization. The firm will produce
a. the output level at which MR = 0.
b. as much output as it can.
c. the same output that it would if the goal was profit maximization.
d. the same output that it would if the goal was cost minimization.
The prospect of a recession in the United States would probably cause the dollar to
a. depreciate because interest rates would be expected to rise.
b. depreciate because imports would be expected to rise.
c. appreciate because imports would be expected to fall.
d. appreciate because interest rates would be expected to decrease.
The cost of processors and memory has decreased dramatically in the past twenty-five
years. As a result, we have seen
a. an increase in demand.
b. an increase in supply.
c. a decrease in demand.
d. a decrease in supply.
Since it is a centrally planned economy, China does not face opportunity costs when
economic decisions are made.
a. True
b. False
A tax must be progressive if an individual with a higher income pays more dollars in
taxes than an individual with a lower income.
a. True
b. False
Which of the following could trigger supply-side inflation?
a. a decrease in the wage rate for all workers
b. an increase in raw materials’ prices
c. an increase in productivity of capital
d. an increase in the labor force
Pat Robertson, a TV evangelist and former Republican Party candidate for president,
once said that “debt is an affront to God,” so good Christians should not spend beyond
their incomes. Indeed, Robertson wants Christians to save more. If more Americans,
Christians as well as others, took his message seriously, how would we represent the
result using a Keynesian macroeconomic model?
a. a downward movement along the consumption function
b. an upward movement along the consumption function
c. a downward shift of the consumption function
d. an upward shift of the consumption function
If parking spaces on a college campus are scarce, with quantity demanded during the
“peak” hours, from 8 a.m. to 11 a.m., far greater than the number of spaces, an
economist would propose as an efficient solution,
a. lowering the parking fees during those hours to compensate students for the longer
search time.
b. charging the same parking fees during all hours of the school day.
c. raising parking fees during the peak hours to encourage some students to schedule
classes during other hours when parking fees are lower.
d. hiring more security guards to patrol for illegal parkers.
A technique that can be employed to make a portfolio less risky than any of its
individual securities is
a. plowback.
b. diversification.
c. programmed trading.
d. speculation.
The United States produces ____ of what it consumes, and consumes ____ of what it
produces.
a. little, little
b. little, most
c. most, little
d. most, most