Sales taxes on consumer goods are regressive because poor people consume a larger
proportion of their incomes than do rich people.
The market demand curve for a pure public good shows the total value that all
individuals place on each unit of the good.
If two resources are complementary, an increase in the price of one will increase the
demand for the other.
Prices in oligopolistic industries are predicted to fluctuate widely and frequently
compared to other market structures.
During the past 35 years, the degree of income inequality in the United States has
decreased considerably.
Increased resource productivity will, ceteris paribus, increase a firm’s demand for an
input.
If nominal GDP is $2000 billion and the amount of money demanded for transactions
purposes is $500 billion, then on average each dollar will be spent about four times.
Along the purely competitive firm’s demand curve, average revenue is equal to
marginal revenue.
A firm sells 99 units of output when price equals $10 and 100 units of output when
price equals $9. Its marginal revenue for the 100th unit of output is negative.
Tariffs and import quotas meant to increase domestic employment also eliminate
domestic jobs in export industries.
Economics is the study of the efficient use of scarce resources to achieve maximum
satisfaction of economic wants.
Cost-push inflation can be described as a rightward shift of the aggregate supply curve.
Excludability means that buyers who are willing and able to pay the market price for
the product do not obtain its benefits, but those unable or unwilling to pay that price do
obtain the benefits.
If the total population is 175 million, the labor force is 100 million, and 89 million
workers are employed, then the unemployment rate is 11 percent.
If the marginal benefits are greater than the marginal cost of an activity, then society is
overallocating resources to this activity.
Restricting the supply of labor is a means of increasing wage rates more commonly
used by industrial unions than craft unions.
The key to assessing whether fiscal policy is expansionary is to observe the change in
the cyclically adjusted budget as a percentage of GDP.
Limited liability means all members of a partnership are liable for the debts incurred by
one another.
The shape of a short-run aggregate supply curve basically depends on what happens to
production costs and, therefore, to the prices that businesses must receive to cover costs
and make a profit as real domestic output expands.
Education is a form of human capital if it increases productivity.
Supply factors that shift the economy’s production possibilities curve outward also
cause a rightward shift in its long-run aggregate supply curve.
Net exports are positive when exports are greater than imports.
One of the economic effects of monopoly is income inequality.
Bond prices and interest rates are directly related.
The Lorenz curve is a graph of the percentage of total income obtained by cumulative
percentages of households.
Unemployment that is the result of deregulation, corporate downsizing, and the closure
of military bases is best categorized as frictional unemployment.
The economizing problem arises from the conflict between having relatively unlimited
resources and relatively limited wants.
The trade deficits of the United States from 1997-2007 were caused by more rapid
economic growth in the United States than economic growth in its trading partners.
A major advantage of the corporate form of business organization is the concept of
limited liability.
Average fixed costs diminish continuously as output increases.
Assume that there is a fixed rate of interest on contracts for borrowers and lenders. If
unanticipated inflation occurs in the economy, then:
A. both lenders and borrowers benefit.
B. both lenders and borrowers are hurt.
C. borrowers are hurt, but lenders benefit.
D. lenders are hurt, but borrowers benefit.
If a monopolist is operating at an output level where marginal revenue is positive, the
firm:
A. has maximized total revenues.
B. could raise revenues by raising prices.
C. can always increase profits by lowering its price.
D. is operating on the elastic portion of its demand curve.
Official unemployment rate statistics may:
A. overstate the amount of unemployment by including part-time workers in the
calculations.
B. understate the amount of unemployment by excluding part-time workers from the
calculations.
C. overstate the amount of unemployment because of the presence of “discouraged”
workers who are not actively seeking employment.
D. understate the amount of unemployment because of the presence of “discouraged”
workers who are not actively seeking employment.
A firm produces and sells two goods, A and B. Good A is known to have many close
substitutes; good B makes up a significant portion of most families’ budgets. A price
increase for each good would most likely cause total revenues for good A to:
A. increase, and total revenues for good B to decrease.
B. increase, and total revenues for good B to increase.
C. decrease, and total revenues for good B to increase.
D. decrease, and total revenues for good B to decrease.
Suppose the government imposed a carbon tax on firms that emit pollution. Then
A.the firms’ marginal cost of production would increase, and the supply curves within
the market would shift to the left.
B.the firms’ marginal cost of production would decrease, and the supply curves within
the market would shift to the left.
C.the firms’ marginal cost of production would increase, and the supply curves within
the market would shift to the right.
D.the firms’ marginal cost of production would decrease, and the supply curves within
the market would shift to the right.
Refer to the above diagrams, in which the numbers in parentheses near the AD1, AD2,
and AD3 labels indicate the levels of investment spending associated with each curve.
All figures are in billions. What is the desired level of investment spending in this
economy if it is to achieve a noninflationary full-employment level of real GDP (Qf)?
A. $50.
B. $100.
C. $150.
D. $225.
Other things being equal, the wages of clerical workers would tend to decrease if there
was an increase in:
A. the marginal revenue product of clerical workers.
B. the minimum entry requirements for clerical work.
C. the period of training required for clerical work.
D. nonmonetary benefits available to clerical workers.
One major advantage of the medium of exchange function of money is that it allows
society to:
A. transfer purchasing power from the present to the future.
B. measure the relative worth of products.
C. escape the complications of barter.
D. use credit cards instead of currency.
One of the principal defects of commodity money is that its worth as a:
A. medium of exchange may exceed its worth as a standard of account, causing it to
cease being useful as money.
B. unit of account may exceed its worth as a store of value, causing it to cease being
useful as money.
C. medium of exchange may exceed its worth as a store of value, causing it to cease
being useful as money.
D. commodity may exceed its worth as money, causing it to cease functioning as a
medium of exchange.
Refer to the above graphs. Which of the above pairs of budget constraint lines
illustrates a decrease in the price of good X and an increase in the price of good Y?
A. Graph A
B. Graph B
C. Graph C
D. Graph D
Refer to the above graph. What will shift D1 to D2?
A. A decrease in productivity.
B. An increase in product demand.
C. An increase in the price of complementary input.
D. A decrease in the price of a substitute input (if the substitution effect is greater than
the output effect).
The characteristic most closely associated with oligopoly is:
A. easy entry into the industry.
B. a few large producers.
C. product standardization.
D. no control over price.
Exports less imports may be defined as:
A. net imports.
B. net exports.
C. net investment.
D. foreign exchange.
A change in a factor’s price will have a greater effect on the quantity of the factor
demanded the:
A. smaller the change in the factor’s price.
B. smaller the factor’s share of total cost of production.
C. more elastic is the demand for the product the factor helps to make.
D. more inelastic is the demand for the product the factor helps to make.
Assume, in a competitive market, price is initially above the equilibrium level. We
predict that price will:
A. decrease, quantity demanded will decrease, and quantity supplied will increase.
B. decrease and quantity demanded and quantity supplied will both decrease.
C. decrease, quantity demanded will increase, and quantity supplied will decrease.
D. increase, quantity demanded will decrease, and quantity supplied will increase.
What is the current level of FDIC deposit insurance per account as of 2012?
A. $50,000
B. $100,000
C. $250,000
D. $500,000
One reason why the aggregate supply curve might shift to the left is that:
A. consumer incomes have increased.
B. per-unit production costs have increased.
C. government spending has increased.
D. businesses have become more optimistic.
The practice of price discrimination is associated with pure monopoly because:
A. it can be practiced whenever a firm’s demand curve is downsloping.
B. monopolists have the ability to control both output and price.
C. monopolists usually realize economies of scale.
D. most monopolists sell differentiated products.
Government programs that pay benefits to those who are unable to earn income because
of permanent disabilities or to those who have very low incomes are called:
A. public assistance programs.
B. social insurance programs.
C. affirmative action programs.
D. entitlement programs.
Economists use the term “demand” to refer to:
A. a particular price-quantity combination on a stable demand curve.
B. the total amount spent on a particular commodity over a stipulated time period.
C. an upsloping line on a graph that relates consumer purchases and product price.
D. a schedule of various combinations of market prices and amounts demanded.
Which statement best describes a capitalist economy?
A. The production of goods and services is determined primarily by markets, but the
allocation of goods and services is determined primarily by government.
B. The production of goods and services is determined primarily by government, but
the allocation of goods and services is determined primarily by markets.
C. The production and allocation of goods and services is determined primarily through
markets.
D. The production and allocation of goods and services is determined primarily through
government.
Refer to the above diagram. If there is a movement away from the full employment of
resources in an economy with production possibilities curve AB, this can be shown by:
A. a shift of the curve from AB to CD.
B. a movement from point 3 to point 1.
C. a movement from point 2 to point 4.
D. point 5 in the diagram.
Since 1950, the U.S. data show that the average annual rate of growth was greater for
real GDP than for real GDP per capita.
Nation Alpha has a comparative advantage in product X and nation Beta has a
comparative advantage in product Y. Trade in the two products will only benefit the two
nations if:
A. the exchange ratio of X for Y is fixed.
B. the terms of trade increase in both nations.
C. there is excess capacity in both economies.
D. the prices charged for X and Y reflect their domestic opportunity costs.
When diseconomies of scale occur:
A. the long-run average total cost curve falls.
B. marginal cost intersects average total cost.
C. the long-run average total cost curve rises.
D. average fixed costs will rise.
In an aggregate demand and aggregate supply graph, an expansionary fiscal policy can
be best illustrated by a:
A. leftward shift in the aggregate demand curve.
B. rightward shift in the aggregate demand curve.
C. leftward shift in the aggregate supply curve.
D. change in the price level.
Craft unions typically attempt to increase wage rates by:
A. imposing an above-equilibrium wage rate on employers.
B. increasing the demand for labor.
C. decreasing the supply of labor.
D. forming a bilateral monopoly.
The movement of workers from lower productivity jobs to higher productivity jobs
would be an example of:
A. technological advance.
B. network effects.
C. simultaneous consumption.
D. improved resource allocation.
Which would be a significant cause of income inequality in the United States?
A. Housing
B. Discrimination
C. In-kind transfers
D. Social Security
In monopolistic competition, we usually observe:
A. significant diseconomies of scale.
B. more reliance on misleading advertising than in monopoly or oligopoly.
C. slower rates of technological advance and product development due to higher
advertising costs.
D. a large number of firms, each operating with excess capacity.