1) The crowding-out effect will be minimal when the economy is in a severe recession.
2) Public regulation rather than public ownership has been the primary means used in
the United States to ensure that the behavior of natural monopolists is socially
acceptable.
3) The oil crises of the 1970s and 1980s can best be illustrated as a shift of the
aggregate demand curve to the left.
4) The greater the MPC, the greater the multiplier.
5) Rational expectations theory assumes that both product and resource markets are
competitive and that wages and prices are flexible.
6) The endowment effect describes when people value a good more when they own it
than when they don’t.
7) Incomes of U.S. farmers are adversely affected by:
A.Very good harvests on farms abroad
B.Economic expansion abroad
C.Less protectionist farm policies abroad
D.Higher prices of farm products
8) The kinked-demand curve model helps to explain price rigidity because:
A.there is a gap in the marginal revenue curve within which changes in marginal cost
will not affect output or price.
B.demand is inelastic above and elastic below the going price.
C.the model assumes firms are engaging in some form of collusion.
D.the associated marginal revenue curve is perfectly elastic at the going price.
9) Which of the following statements is most accurate about welfare utilization by
immigrant and nonimmigrant households (households with minor children) in 2009?
A.Over half of immigrant households received some form of welfare, while less than
half of nonimmigrant households received assistance.
B.Over half of nonimmigrant households received some form of welfare, while less
than half of immigrant households received assistance.
C.Households headed by an illegal immigrant were less likely (as a percentage of
households) to receive some form of welfare than legal immigrant and nonimmigrant
households.
D.Immigrant and nonimmigrant households have similar rates of welfare utilization.
10) The difficulties in managing government in a market economy include the
following, except:
A.The need for complex bureaucracy of various levels
B.The need for detailed paperwork and inflexibility
C.The close resemblance of government to the “invisible hand”
D.The lack of accountability in government
11)
Refer to the figure. Assuming this market is representative of the economy as a whole,
this economy:
A.is highly susceptible to inflation.
B.faces fluctuating output levels whenever there is a demand shock.
C.is capable of always producing at its optimal capacity.
D.is largely immune to business cycles.
12) Assume the atmosphere of an urban area is able to reabsorb 8000 tons of pollutants
per year. The schedule below shows the price polluters would be willing to pay for the
right to dispose of 1 ton of pollutants per year and the total quantity of pollutants they
would wish to dispose of at each price.
(a)If there were no emission fee, how many tons of pollutants would there be and how
much greater would this amount be than the capacity for reabsorption?
(b)What pollution fee should the urban authorities charge to solve the problem?
(c)What would happen in this market for pollution rights if quantity demanded
increased by 1000 tons at each price?
13) A $1 billion increase in investment will cause a:
A.(1/MPS) billion increase in GDP.
B.(MPS) billion increase in GDP.
C.(1 – MPC) billion increase in GDP.
D.(MPC – MPS) billion increase in GDP.
14) Suppose that a monopolist calculates that at present its output level, marginal
revenue is $1.00 and marginal cost is $2.00. He or she could maximize profits or
minimize losses by:
A.Decreasing price and increasing output
B.Increasing price and decreasing output
C.Decreasing price and leaving output unchanged
D.Decreasing output and leaving price unchanged
15) A statement that is often used to describe demand-pull inflation is:
A.”A rising tide lifts all boats”
B.”Money is easily earned, but not easily saved”
C.”Too much money chasing too few goods”
D.”There is no such thing as a free lunch”
16)
Refer to the above graph. If the price is P3, then the total revenue is represented by area:
A.B + C + D
B.E + F + G
C.B + C + D + E + F + G
D.A + B + C + D + E + F + G
17) Of the U.S. Federal debt held by foreigners in 2012, China held roughly:
A.84%
B.67%
C.48%
D.22%
18) Suppose stock A sells for $30 per share and pays dividends of $1 per share per year.
Stock B sells for $40 per share and pays dividends of $2 per share per year. Through the
process of arbitrage, we would expect the price of:
A.stock A to fall and/or the price of stock B to rise.
B.stock A to rise and/or the price of stock B to fall.
C.both stocks to rise or fall together.
D.neither stock to change.
19) Explain how the “Buy American” theme hurts Americans.
20) How do firms incorporate opportunity costs to calculate economic costs? Discuss
and give example using an explicit economic cost and an implicit economic cost.
21) Explain Say’s law.
22)
23) Discuss how trade policies can be used to maintain a fixed exchange rate.
24) Columns 1 through 3 in the table below show the marginal utility which a particular
consumer would get by purchasing various quantities of products A, B, and C.
If the prices of A, B, and C are $2, $3, and $1, respectively, and the consumer has $26
to spend on these three products, what combination of the three products should be
purchased in order to maximize utility?
25) Which took the major brunt of the decline in total demand in the Great Recession,
real output or prices?