Figure 16-5
In the dynamic model of AD–AS in the figure above, if the economy is at point A in year
1 and is expected to go to point B in year 2, Congress and the president would most
likely
A) decrease government spending.
B) increase government spending.
C) increase oil prices.
D) increase taxes.
E) lower interest rates.
Spending on the war in Afghanistan is essentially categorized as government purchases.
How do increases in spending on the war in Afghanistan affect the aggregate demand
curve?
A) They will move the economy down along a stationary aggregate demand curve.
B) They will move the economy up along a stationary aggregate demand curve.
C) They will shift the aggregate demand curve to the right.
D) They will shift the aggregate demand curve to the left.
Depreciation is
A) the value of worn-out equipment, machinery, and buildings.
B) the value of the decrease in business inventory stocks.
C) the value of the addition to the capital stock.
D) the decline in the value of the stock market, net of dividends.
According to public choice theory, policymakers
A) place the interests of the public above their own self-interest.
B) are likely to pursue their own self-interest, even if their self-interest conflicts with
the public interest.
C) act in ways to maximize economic efficiency.
D) act in ways to bring about an equitable distribution of society’s wealth.
By the height of the housing bubble in 2005 and early 2006, lenders had greatly
loosened the standards for obtaining a mortgage loan, with many mortgages being
granted to sub-prime borrowers ________ and “Alt-A” borrowers ________.
A) with flawed credit histories; who did not document their incomes
B) who borrowed money at rates below the prime interest rate; who had AAA credit
ratings
C) who borrowed more than 120 percent of the value of the house; with no proof of
U.S. citizenship
D) who purchased homes in depressed housing markets; who purchased homes which
were repossessed by government agencies.
With perfect price discrimination, the marginal revenue curve
A) is below the demand curve.
B) is above the demand curve.
C) is equal to the demand curve.
D) is horizontal.
Which government agency publishes four-firm concentration ratios?
A) the Economic Council
B) the Federal Reserve System
C) the U.S. Bureau of the Census
D) the Treasury Department
A decrease in which of the following would decrease the tax wedge?
A) marginal tax rate
B) money supply
C) national debt
D) federal budget deficit
Which of the following is important in determining the extent of competition in an
industry?
A) the minimum level of short-run average total costs of production
B) the minimum efficient scale of production relative to market demand
C) whether or not the industry product is differentiated or standardized
D) the level of market demand for the industry’s product
How will an increase in population affect the labor market?
A) It will shift the market supply curve.
B) It will cause a decrease in the quantity of labor demanded.
C) It will increase the supply of jobs.
D) It will increase the opportunity cost of leisure.
Which of the following is not an example of price discrimination?
A) Adobe Systems offers software at discounted prices to students and faculty at K-12
and university levels.
B) Unlike foreign tourists, citizens of Cambodia are exempted from paying an
admission fee to the temples of Angkor.
C) Senior citizens may purchase special fare tickets for public transportation that are
not available to others.
D) Buyers at an automotive parts store receive a discount for bulk buying because the
store is able to pass on to its customers some of the lower average cost for producing
large quantities.
The price elasticity of supply measures
A) the responsiveness of quantity supplied to changes in input prices.
B) the responsiveness of quantity supplied to changes in technology.
C) the responsiveness of quantity supplied to changes in price.
D) a supplier’s ability to produce a good in the face of scarcity.
David Myers, former controller for WorldCom, pleaded guilty to falsely reported costs
for WorldCom that were ________ than they actually were, resulting in reported
accounting profits for WorldCom that were ________ than their actual level.
A) higher; higher
B) lower; higher
C) lower; lower
D) higher; lower
The largest component of spending in GDP is
A) consumption spending.
B) investment spending.
C) government spending.
D) net export spending.
Figure 15-6 Figure 15-6 shows the
cost and demand curves for a monopolist.
The monopolist’s total revenue is
A) $1,116.
B) $1,488.
C) $1,726.40
D) $1,826.
For most low-wage earners
A) the income effect of a wage rate increase is likely to be larger than the substitution
effect.
B) the substitution effect of a wage rate increase is likely to equal the income effect.
C) the opportunity cost of leisure is high.
D) the substitution effect of a wage rate increase is likely to be larger than the income
effect.
Figure 12-4
Figure 12-4 shows the cost and demand
curves for a profit-maximizing firm in a perfectly competitive market. If the market
price is $30, should the firm represented in the diagram continue to stay in business?
A) No, it should shut down because it is making a loss.
B) No, it should shut down because it cannot cover its variable cost.
C) Yes, because it is covering part of its fixed cost.
D) Yes, because it is making a profit.
Which of the following is an example of spending on factors of production in the
circular flow model?
A) Carolina has her nails done before her 20th high school class reunion.
B) Giorgio buys snow cones for his youth soccer team after each game.
C) Stevie trades in his old cell phone for a newer model.
D) Arlisha purchases a cotton candy machine for her concession stand at the state fair.
If the federal budget has an actual budget deficit of $100 billion and a cyclically
adjusted budget deficit of $75 billion, then the economy
A) must be at potential real GDP.
B) must be below potential real GDP.
C) must be above potential real GDP.
D) could be below or above potential real GDP.