Suppose the extra cost for a doctor to keep his office open for one extra hour is $200.
Then, the doctor should stay open for the extra hour even if he can generate additional
revenue of $200 for that hour.
The substitution effect explains why there is a direct relationship between the price of a
product and the quantity of the product demanded.
An increase in the level of structural unemployment will shift the long-run Phillips
curve.
Price floors are illegal in the United States.
A virtuous cycle refers to the development of new products that follows when a
monopoly earns economic profits.
The sales revenue a seller receives from the sale of an additional unit of goods is called
the marginal benefit.
Any output combination outside a production possibility frontier is associated with
unused or underutilized resources.
Ceteris paribus, a real depreciation of the dollar will decrease net exports in the United
States.
The Fed can use expansionary monetary policy to lower interest rates to stimulate
aggregate demand.
When firms exit a perfectly competitive industry, the market supply curve shifts to the
left.
If a country is producing efficiently and is on the production possibilities frontier, the
only way to produce more of one good is with an advance in technology.
An increase in the tax wedge associated with a given economic activity will decrease
the level of that activity.
Expansionary fiscal policy should raise the exchange rate of the dollar.
An increase in net foreign investment is possible through a decrease in national saving
or a decrease in domestic investment.
Suppose the government grants child care subsidies to mothers entering the labor
force.What is likely to happen to the equilibrium wage and quantity of labor?
A) The equilibrium wage and the equilibrium quantity of labor rise.
B) The equilibrium wage and the equilibrium quantity of labor fall.
C) The equilibrium wage falls and the equilibrium quantity of labor rises.
D) The equilibrium wage rises and the equilibrium quantity of labor falls.
Figure 13-4
Figure 13-4 shows short-run cost
and demand curves for a monopolistically competitive firm in the market for designer
watches.
Should the firm represented in the diagram continue to stay in business despite its
losses?
A) No, it should shut down.
B) Yes, its total revenue covers its variable cost.
C) No, it is not able to cover its fixed cost.
D) Yes, it should increase its revenue by raising its price.
It is necessary for all economic systems to provide people with goods and services and
also restrict them from getting as much of these goods and services as they wish,
because failure to do this could ________ the efficiency of the system by producing
some goods and services that are ________.
A) reduce; not as highly valued as others
B) increase; not as highly valued as others
C) reduce; valued more than others
D) increase; valued more than others
Suppose that in a market for used cars, there are good used cars and bad used cars
(lemons). Consumers are willing to pay as much as $9,000 for a good used car but only
$3,000 for a lemon. Sellers of good used cars value their cars at $7,500 each and sellers
of lemons value their cars at $1,500 each. Buyers cannot tell if a used car is reliable or
is a lemon. Based on this information, what is the likely outcome in the market for used
cars?
A) Sellers of good used cars will drop out of the market.
B) Sellers of good used cars will incur losses.
C) Sellers of lemons will drop out of the market.
D) Used cars will sell for $6,000.
If changes in inflation are higher than expected,
A) the short-run Phillips curve will be positively sloped, but not vertical.
B) the short-run Phillips curve will be negatively sloped.
C) the short-run Phillips curve will be vertical.
D) the long-run Phillips curve will be negatively sloped.
Suppose the government cuts taxes. We would expect interest rates to ________ and the
dollar to ________ in foreign exchange markets.
A) rise; appreciate
B) rise; depreciate
C) fall; depreciate
D) fall; appreciate
What are the three main kinds of unemployment?
A) frictional, seasonal, and cyclical
B) temporary, permanent, and volunteer
C) cyclical, structural, and temporary
D) structural, frictional, and cyclical
Which of the following is an example of a federal mandate?
A) an excise tax
B) the Medicaid program
C) the personal tax exemption
D) the Food and Drug Administration (FDA)
A significant downside to network externalities is that
A) there may be large switching costs to consumers of changing products so that
consumers end up using products with inferior technologies.
B) firms may network with unethical suppliers or distributors.
C) the costs of hiring celebrity endorsements may be very high.
D) there may be large switching costs to firms changing technologies.
The costs to firms of changing prices are called
A) redistribution costs.
B) menu costs.
C) anticipation costs.
D) money illusion costs.
What is consumer surplus? Why would policy makers be interested in consumer
surplus?
The following table contains the actual prices charged by four Websites for the
PlayStation 3 game The Last of Us in October 2013.
Explain whether the information in this table contradicts the law of one price.
What is the difference between a devaluation and a revaluation of a currency?
How can a sole proprietorship raise funds needed for firm expansion?
Explain the economic assumption that “people are rational.”
Explain why the timing of fiscal policy may be more difficult than the timing of
monetary policy.
How will a government-imposed minimum wage affect the equilibrium level of
employment in a competitive labor market and in a monopsony labor market?
Given Table 12-9 below, fill in the values of the marginal propensity to save (MPS) and
the marginal propensity to consume (MPC). Show that MPC + MPS = 1. Table 12-9
