If the aggregate supply curve is vertical, then the short-run Phillips curve will
a. be horizontal.
b. also be vertical.
c. slope upward.
d. slope downward.
Which of the following acts prohibited false advertising?
a. Sherman Act
b. Clayton Act
c. Federal Trade Commission Act
d. Celler-Kefauver Act
A country can gain by importing a good that it can make itself if
a. this enables the country to make another good in which it is extremely efficient.
b. it has an absolute disadvantage in the good.
c. this permits the country to establish comparative advantage in the good.
d. All of the above are correct.
The following are common errors students make when discussing supply and demand.
What is the mistake in each?
a. At equilibrium, demand equals supply.
b. The quantity of demand is greater than the quantity of supply.
c. They move along the line from both ends to an equilibrium in the middle.
d. The increase in demand causes an increase in supply.
For a given technology, a higher capital stock will decrease labor productivity.
a. True
b. False
“Budget deficits are inflationary.” The truth of this statement depends on
a. aggregate demand in the economy.
b. the shape of the aggregate supply curve.
c. the size of the national debt.
d. existing debt as a percentage of GDP.
Most Americans would voluntarily support defense without required taxation.
a. True
b. False
Do markets solve all of society’s problems?
a. Yes, markets are efficient and work well under nearly all circumstances.
b. Yes, markets solve the problems of production and distribution.
c. No, they do not solve problems such as unemployment and inflation.
d. No, they hardly solve any problems at all.
e. Uncertain, economic theory has no answer to this question.
The federal government’s principal tool in altering consumer spending is changing
a. corporate income taxes.
b. federal sales taxes.
c. unemployment insurance benefits.
d. personal income tax rates.
Advocates of discretionary policy make these criticisms of the economy’s
“self-correcting” mechanism:
a. it is slow
b. it is not very reliable
c. it works only when supplemented by automatic stabilizers
d. All of the above are correct.
e. a and b only are correct.
The drug maker Pfizer enjoyed a monopoly of the antibiotic Lipitor because of patent
rights.
a. True
b. False
Figure 7-7
In Figure 7-7 at 100 units, FC equals
a. 1,000.
b. 1,800.
c. 800.
d. 80.
Figure 14-1
In Figure 14-1, a change in consumer tastes favoring calculators will lead to which
movement?
a. A to C
b. A to D
c. A to B
d. A to E
Elasticity is a measure of the responsiveness of change in quantity demanded to a
change in price.
a. True
b. False
Figure 17-6
Figure 17-6 (b) illustrates that
a. in the short run, it is possible to “ride the Phillips curve” down toward lower rates of
inflation.
b. in the short run, it is possible to “ride the Phillips curve” up toward lower
unemployment by stimulating aggregate demand.
c. the Phillips curve connecting points g, e, and r is not a menu of policy choices.
d. All of the above are correct.
Whenever average cost exceeds marginal cost,
a. average cost is rising.
b. average cost is falling.
c. marginal cost is rising.
d. marginal cost is falling.
One important role for government as referee is in defining and enforcing property
rights.
a. True
b. False
If a 10-year Treasury bond pays 1.5% and a 10-year corporate bond pays 4.4%, then the
spread on this particular corporate bond is 5.9%.
a. True
b. False
A once-and-for-all jump in the price level would initially cause a(n)
a. upward shift in the consumption function.
b. upward movement along the consumption function.
c. downward shift in the consumption function.
d. downward movement along the consumption function.
An increase in wages in the public sector is always accompanied by an increase in labor
productivity.
a. True
b. False
As a general rule, consumers have
a. limited income.
b. unlimited desires for goods.
c. many choices of goods facing them.
d. All of the above are correct.
e. None of the above are correct.
The principal result of the rising value of the U.S. dollar in the mid-1990s was a(n)
a. balance of payments deficit.
b. balance of payments surplus.
c. increase in the rate of inflation.
d. increase in the unemployment rate.
When interdiction efforts manage to stem the flow of illegal drugs into the United
States, assuming no change in demand, the price of these substances rises. This price
increase leads to more crime as addicts attempt to maintain their now more-expensive
habits. Economists call this side-effect of the drug business
a. the illusion of rationality.
b. an externality.
c. the cost disease of personal services.
d. inflation.
e. unemployment.
The quantity of Blu-Ray players purchased declined in spite of a decline in price. This
implies that the
a. supply curve for Blu-Ray players shifted to the left.
b. demand curve for Blu-Ray players shifted to the right.
c. demand curve for Blu-Ray players shifted to the left.
d. supply curve for Blu-Ray players shifted to the right.
Cars produced by General Motors in Mexico would be included in U.S. Gross Domestic
Product.
a. True
b. False
Aggregate demand is defined as the total spending
a. of all consumers, business firms, government agencies, and foreigners on final goods
and services produced in the United States.
b. by all consumers, business firms, government agencies, and foreigners in the United
States.
c. consumers, businesses, government agencies, and foreigners wish to make in one
year.
d. of consumers, businesses, and government agencies on final output.
Average hours worked per week have ____ since the early 1900s.
a. declined by almost 7 percent
b. risen by almost 15 percent
c. risen by almost 7 percent
d. declined by almost 35 percent
The monetary stimulus enacted in the fall of 2001 provides support for those
economists who favor
a. stable money supply growth.
b. activist monetary policy.
c. rules-governed monetary policy.
d. fixed rates of growth for the money supply.
The intent of indexing is to
a. raise tax revenue automatically during inflation.
b. shift the short-run Phillips curve to the right.
c. take most of the sting out of inflation.
d. reduce inflation gradually.
The price of gasoline has risen and the quantity sold has fallen. This was likely caused
by
a. a rise in the price of crude oil.
b. a seasonal rise in the demand for gasoline.
c. use of a new public transit system.
d. the discovery of crude oil in New Jersey.
The fact that invention is based largely on fixed costs and is a public good means that
which of the following is not relevant to the process?
a. average total cost
b. marginal cost
c. external cost
d. average variable cost
Most power in the Federal Reserve System is held by the
a. president and Congress.
b. Secretary of the Treasury, who appoints the members of the Board of Governors.
c. Board of Governors of the system.
d. member banks of the system.
Investors must rely on stockbrokers to give detailed, day-to-day reports on stocks and
bonds.
a. True
b. False
The main purpose of expansionary monetary policy is to
a. expand Treasury borrowing.
b. increase reserve requirements.
c. insure deposits.
d. reduce interest rates.
The price of a depletable natural resource last year rose more than expected. The most
likely explanation is that
a. interest rates fell.
b. an unexpected discovery of reserves was made.
c. the major suppliers formed a cartel.
d. price ceilings were established.
Differentiate between “off-budget” deficit and the “on-budget” deficit.
Describe how the labor force, the nation’s capital stock, and the rate of technical
progress contribute to potential GDP growth and labor productivity.
A student was heard to remark, “Even though I am certain to fail this course, I cannot
withdraw from it since it is too late to get back my tuition.” Use one or more “Ideas for
Beyond the Final Exam” to analyze this reasoning.
Is wage discrimination more likely in competitive or monopolistic markets?
The following table contains information regarding price and output for a firm. For
each point except the first, calculate the elasticity between it and the point above.
Using the concepts of aggregate demand and aggregate supply, explain how the
economy reaches an equilibrium level of real GDP and price level.
A sum of money received at a future date is worth less than the same sum of money
received today. Why? Explain this with an example.
Explain how exchange rate changes affect aggregate demand.
Explain what is meant by “derived demand” as it relates to factors of production.
Figure 14-4
In Figure 14-4, if the cheese industry and the cracker industry have the indicated
quantities of capital and labor and are on the indicated production indifference curves,
is there the possibility of mutually beneficial trade in inputs? Explain.
There are currently 1,000 firms in a competitive industry. Minimum long-run average
cost is $80 and price $100. Explain what will happen to price, profit, and the number of
firms in this industry over time.
Does the existence of unemployment insurance eliminate the economic costs of
unemployment?
Explain the purpose of payroll taxes. Is it a proportional form of tax?
What is the criticism leveled against deposit insurance by the FDIC?
What are the tools available to governments to mitigate cycles of boom and bust? Why
do these tools fail?
What are the assumptions of the kinked demand curve model? What is its main
conclusion about oligopoly behavior?
Bob values the utility of a single scoop of Baskin-Robbins ice cream at $1.50. A double
scoop gives total utility of $2.25, while a triple scoop yields $2.60. Baskin-Robbins
charges $1.35 for a single, $1.95 for a double, and $2.35 for a triple. How many scoops
will Bob buy?
What are private goods? Mention two important attributes of private goods.
If the income of buyers increases and a company maintains the same price, what is the
most likely impact on quantity sold? Explain. Draw a graphical display of the result.
Changes in the value of stocks may play a big role in the consumption decisions of
individuals. How would changes in the stock market affect the consumption function?