Net worth increases in the same proportion as liabilities increase.
a. True
b. False
Which of the following countries would have the most difficulty raising its level of
average educational attainment?
a. Canada
b. Italy
c. India
d. Sudan
An increase in taxes shifts the
a. aggregate supply curve outward.
b. aggregate demand curve outward.
c. consumption schedule upward.
d. consumption schedule downward.
A company’s annual payment to stockholders is called the
a. dividend.
b. kickback.
c. plowback.
d. retained earnings.
A banker operating under a system of fractional reserves
a. is exposed to potential bank runs.
b. must keep a prudent level of reserves.
c. must lend money carefully.
d. All of the above are correct.
Figure 17-8
In Figure 17-8, which of the following movements reflects the closing of a recessionary
gap with an expansionary monetary and fiscal policy?
a. C to B
b. D to C
c. C to E
d. D to E
Points below the production possibilities frontier are inefficient because it is possible to
make someone better off without making anyone else worse off.
a. True
b. False
The first year of the Bush administration in 2001 could be represented as a(n)
a. increase in the aggregate demand curve.
b. decrease in the aggregate demand curve.
c. increase in the aggregate supply curve.
d. decrease in the aggregate supply curve.
In sophisticated analysis of rent differences
a. quality of land is assumed away.
b. quality of land is recognized and considered.
c. rates of return are assumed away.
d. returns on land and capital are assumed to be similar.
Opportunity cost is the value of the next best alternative to a given choice.
a. True
b. False
Cartels provide uniform management, but none of the advantages of economies of
scale.
a. True
b. False
The marginal cost curve shows the per-unit cost associated with various levels of
output.
a. True
b. False
The composition of demand and supply in various markets is not important to the
question of inflation. .
a. True
b. False
When a corporation needs capital to expand, its choices are:
a. to sell stocks on a stock exchange
b. to sell bonds
c. to reinvest its own earnings
d. all of these
Figure 20-3
Figure 20-3 shows a worker’s backward-bending supply curve of labor. Which of the
following statements is correct?
a. The substitution effect of a change in the wage dominates the income effect at all
points on the curve.
b. The income effect of a change in the wage dominates the substitution effect at all
points on the curve.
c. Above W*, the substitution effect of a change in the wage dominates the income
effect; below W*, the income effect dominates the substitution effect.
d. Above W*, the income effect of a change in the wage dominates the substitution
effect; below W*, the substitution effect dominates the income effect.
Homeowners receive tax benefits that are not available to renters.
a. True
b. False
The number of persons who could become lawyers or surgeons is potentially quite
large, yet these two groups earn fairly high incomes. One of the main reasons why they
do is the
a. return on the investment of many years of training.
b. evening-out of their low income during schooling.
c. rent on their unique and rare talents.
d. scarcity value of their abilities.
A monopolist maximizes profits by producing where which of the following occur?
a. MC = P
b. AC = P
c. MC = MR
d. AC = AR
Tax loopholes in the personal income tax benefit only very rich people.
a. True
b. False
With a negative income tax providing a minimum of $20,000 and a tax rate of 25
percent, what amount of supplement would the government pay to a household earning
$10,000?
a. $5,000
b. $10,000
c. $17,500
d. $20,000
Historically, most harmful bubbles are characterized by
a. investment in stocks.
b. the sale of Treasury bills.
c. heaving borrowing.
d. reliance on technology.
Which of the following indicates an input is being overused relative to the optimal
level?
a. MRP = P of input.
b. MRP > P of input.
c. MRP < P of input.
d. MPP > P of output.
Most innovation comes from universities and governments, which are inherently market
driven.
a. True
b. False
To construct a supply curve, an economist needs data on price and quantity. Each point
on the supply curve is
a. supply of the product.
b. a quantity supplied at that price.
c. the amount that people want to buy.
d. the amount people want to sell to buyers of different incomes.
e. All of the above are correct.
The main reason why the economy’s aggregate supply curve slopes upward is that
a. as the price level rises, businesses incur additional costs.
b. businesses typically purchase labor and other inputs under long-term contracts that
fix the cost of the input in money terms.
c. as the price level rises, workers have higher real wages to spend for additional
consumer goods.
d. All of the above are correct.
In a free market, a given unit of an input will be used by the firm that
a. earns the largest addition to total profit from the use of that unit of input.
b. has the lowest marginal cost of producing another unit of output.
c. sells its output for the highest price.
d. earns the largest total profit.
Carefully define the following terms and explain their importance to the study of
economics.
a. resources
b. rational decision
c. scarcity
d. opportunity cost
A major complication with fiscal policy to control aggregate demand is the
a. inability to agree on macroeconomic goals.
b. accuracy of modern forecasting models.
c. inability to change aggregate demand with fiscal tools.
d. constantly changing investment and net exports because of other events.
How is it possible for the economy to have an inflationary gap?
a. Equilibrium is at a GDP level below full employment.
b. Equilibrium is at a GDP level equal to full employment.
c. Equilibrium is at a GDP level above full employment.
d. GDP is rising at full employment.
e. GDP is falling at full employment.
The Fed carries out monetary policy chiefly by influencing the demand for reserves
schedule.
a. True
b. False
In short-run equilibrium, a perfectly competitive firm
a. may earn a profit or a loss.
b. always earns a profit.
c. never earns a profit.
d. earns a profit only if the firm has no fixed cost.
If the price of hamburger rises, we would expect the demand for steak to shift to the
right.
a. True
b. False