The quantity theory of money implies that the price level will be stable (no inflation or
deflation) when the growth rate of the money supply equals
A) 0.
B) the growth rate of the price level.
C) the growth rate of the velocity of money.
D) the growth rate of real GDP.
Article Summary. Administrative overhead costs resulting from insurance
companies handling reimbursement claims is in large part the reason that health
care in the United States is much more expensive than in other countries. An
analysis on the administration costs of health care in the United States found that
roughly 30 percent of the costs of health care are administrative and that more
than 25 percent of health-sector employees work in administration. Health
insurance companies are often paid a fixed percentage of the claims they
administer, which gives them little to no impetus to increase efficiency and keep
costs down. Source: Jeffrey Pfeffer, “The Reason Health Care Is So Expensive:
Insurance Companies,” Bloomberg Businessweek, April 10, 2013.
Even if insurance companies were more efficient and brought administrative costs
down, consumers would still pay less than the full cost of medical treatment. This
would result in the market equilibrium price of medical services being ________ than
the efficient equilibrium price, and the market equilibrium quantity of medical services
being ________ than the efficient equilibrium quantity.
A) greater; greater
B) greater; less
C) less; greater
D) less; less
When the price of summer tank tops falls and you buy more of them because they are
relatively less expensive, this is called
A) the substitution effect.
B) the income effect.
C) the deadweight loss effect.
D) the elasticity effect.
Economist Jerry Hausman estimated the price elasticity of demand for breakfast cereal.
He found that
A) the price elasticity for a particular brand of raisin bran was the same as the elasticity
of demand for all family cereals.
B) the price elasticity of demand for Post Raisin Bran is less than the price elasticity of
demand for Kellogg’s Raisin Bran.
C) the price elasticity of all family breakfast cereals is greater than the price elasticity of
demand for Post Raisin Bran or Kellogg’s Raisin Bran.
D) the price elasticity of demand for a particular brand of raisin bran was larger in
absolute value than the elasticity for all family cereals.
Figure 5-4 Suppose there are several paper
mills producing paper for a market. These mills, located upstream from a fishing
village, discharge a large amount of wastewater into the river. The waste material
affects the number of fish in the river, and the use of the river for recreation and as a
public water supply source. Figure 5-4 shows the paper market. Use this Figure to
answer the following question(s).What does S1 represent?
A) the market supply curve that reflects social cost
B) the market supply curve that reflects only external cost
C) the market supply curve that reflects only private benefit
D) the market supply curve that reflects private cost
Figure 4-6 Figure 4-6 shows the market for
granola. The market is initially in equilibrium at a price of P1 and a quantity of Q1.
Now suppose producers decide to cut output to Q2 in order to raise the price to P2.
What area represents the deadweight loss at the equilibrium price of P1?
A) C + E + H
B) G + H
C) C + E
D) There is no deadweight loss at the price of P1.
Figure 3-4
At a price of $20, how many units will be sold?
A) 400
B) 500
C) 600
D) 800
Which of the following is not directly counted in GDP?
A) investment expenditures
B) government purchases
C) intermediate goods
D) consumer goods
The owners of a ________ have a separate legal distinction from the business.
A) corporation
B) partnership
C) sole proprietorship
D) All of the above are correct.
Assume you set up a sole proprietorship and your lawyer tells you that as the owner,
you could stand to lose your personal wealth if the business goes bankrupt. This means
a sole proprietorship
A) faces limited liability.
B) faces unlimited liability.
C) has little chance of succeeding.
D) is not a good type of business to set up.
Figure 4-4
The figure above represents the market for pecans. Assume that this is a competitive
market. If 4,000 pounds of pecans are sold
A) the deadweight loss is equal to $12,000.
B) consumer surplus equals zero.
C) the marginal benefit of each of the 4,000 pounds of pecans equals $3.
D) marginal benefit is equal to marginal cost.
A positive externality results when
A) economists are sure that a good or service provides benefits to consumers.
B) someone pays for a good or service even though she is not directly affected by the
production or consumption of it.
C) people who live in one country benefit from the production of a good or service that
occurs in another country.
D) people who are not directly involved in producing or paying for a good or service
benefit from it.
Figure 5-6 Figure 5-6 shows the market for
measles vaccinations, a product whose use generates positive externalities.What is the
deadweight loss resulting from producing at the market equilibrium?
A) B + C
B) E + C
C) F
D) C
An increase in government purchases of $200 billion will shift the aggregate demand
curve to the right by
A) $200 billion.
B) less than $200 billion.
C) more than $200 billion.
D) None of the above are correct. This policy shifts the long-run aggregate supply
curve.
An increase in aggregate demand results in a(n) ________ in the ________.
A) recession; long run
B) expansion; long run
C) expansion; short run
D) recession; short run
A decrease in the tax rate will ________ the disposable income of households and
________ the size of the multiplier effect.
A) increase; increase
B) decrease; increase
C) increase; decrease
D) decrease; decrease
E) increase; not change
Compared to a situation in which there is no change in the value of the dollar relative to
the peso, in which of the following situations would you be worse off?
A) you borrow 10,000 pesos, you earn income in dollars, the dollar appreciates against
the peso, you must pay back the loan in pesos
B) you borrow $10,000, you earn income in pesos, the dollar depreciates against the
peso, you must pay back the loan in dollars
C) you borrow $10,000, you earn income in pesos, the dollar appreciates against the
peso, you must pay back the loan in dollars
D) you borrow 10,000 pesos, you earn income in pesos, the dollar depreciates against
the peso, you must pay back the loan in pesos