Horatio can produce either a combination of 15 bird houses and 25 wind chimes or a
combination of 30 bird houses and 15 wind chimes. If he now produces 30 bird houses
and 15 wind chimes, what is the opportunity cost of producing an additional 10 wind
chimes?
A) 2 bird houses
B) 15 bird houses
C) 30 bird houses
D) 45 bird houses
Because consumers who have insurance provided by their employers usually only pay a
deductible for a visit to the doctor’s office,
A) employers have more incentive to allow employees time off for doctor visits.
B) doctors have less incentive to control their costs.
C) insurance companies have more incentive to approve medical procedures for their
policy holders.
D) consumers have less incentive to visit the doctor’s office on a more frequent basis.
In early 2007, Pioneer and JVC, two Japanese electronics firms, each announced that
their profits were going to be lower than expected because they both had to cut prices
for LCD and plasma television sets. Which of the following could explain why these
firms did not simply raise their prices and increase their profits?
A) The move to cut prices is probably just a temporary one to gain market share. In the
long run the firms will raise prices and be able to increase their profits.
B) Most likely, intense competition between these two major producers probably
pushed prices down. Thereafter, each feared that it would lose its customers to the other
if it raised its prices.
C) In perfect competition, prices are determined by the market and firms will keep
lowering prices until there are no profits to be earned.
D) The firms are still making profits, just not as high as expected so there is room to
lower prices until one can force the other out of business.
Suppose the value of the price elasticity of demand is -3. What does this mean?
A) A 1 percent increase in the price of the good causes quantity demanded to increase
by 3 percent.
B) A 1 percent increase in the price of the good causes quantity demanded to decrease
by 3 percent.
C) A 3 percent increase in the price of the good causes quantity demanded to decrease
by 1 percent.
D) A 1 increase in price causes quantity demanded to fall by 3 units.
Suppose a 4 percent increase in price results in a 2 percent increase in the quantity
supplied of a good. Calculate the price elasticity of supply and characterize the product.
A) 2; The product is elastic.
B) 0.2; The product is inelastic.
C) 0.5; The product is inelastic.
D) 50%; The product is inelastic.
From the beginning of 1973 until August 2013, the value of the dollar has ________
relative to the Canadian dollar and ________ relative to the Japanese yen.
A) appreciated; appreciated
B) appreciated; depreciated
C) depreciated; appreciated
D) depreciated; depreciated
In 1995 ________, which was established in 1948, was replaced by ________.
A) the GATT; the WTO
B) the WTO; NAFTA
C) the Smoot-Hawley Tariff; the GATT
D) NAFTA; the Smoot-Hawley Tariff
Concerned that its dependence on sales of microprocessors to computer firms would
make it vulnerable to sharp sales declines during the recession of 2007-2009, Intel
began to develop memory chips that could be used in portable consumer electronic
devices such as tablets and smartphones. One reason that Intel chose to branch out from
producing microprocessors for computers is that
A) sales of computers have been declining over the past decade.
B) technology with respect to microprocessor production was no longer advancing at a
rate where Intel’s new products were still wanted by computer manufacturers.
C) Intel had lost a majority of its market share in microprocessor production to foreign
competition.
D) computers are durable goods and spending on computers follows the business cycle.
The statement, “My iPhone is worth $300” represents money’s function as
A) a medium of exchange.
B) a unit of account.
C) a store of value.
D) a standard of deferred payment.
“Because Coke and Pepsi are substitutes, a decrease in the price of Pepsi will cause the
demand for Coke to decrease. This initial shift in demand for Coke results in a lower
price for Coke; this lower price will cause the demand curve for Coke to shift to the
left.” Which of the following correctly comments on this statement?
A) The statement will be true if consumer tastes for Coke and Pepsi do not change.
B) The statement is false because a change in the price of Coke would not change the
demand for Coke.
C) The statement is false because Pepsi is an inferior good; Coke is a normal good.
D) The statement is false because one cannot assume that Coke and Pepsi are
substitutes for all consumers.
The U.S. unemployment insurance program
A) increases the amount of time the unemployed spend searching for a job.
B) decreases the level of frictional unemployment.
C) pays the unemployed a benefit equal to twice the average wage.
D) eliminates structural unemployment.
Which of the following can explain why some countries have not experienced relatively
high growth rates in real GDP per capita despite relatively low initial levels of real GDP
per capita?
A) Many of these developing countries do not have a functioning court system that can
enforce laws.
B) Countries that are relatively poor are more likely to experience wars and revolutions.
C) Countries that are relatively poor are likely to have a lower quality of health care.
D) all of the above