In an open economy, the current account balance equals ________. (Assume that the
capital account is zero and net transfers are zero.)
A) net foreign investment + domestic investment
B) net capital outflows
C) the financial account balance + net income on investments
D) net foreign investment
Table 14-4
Alistair Luggage and Baine
Baggage are the only firms selling luggage in the upscale town of Montecito. Each firm
must decide on whether to increase its advertising spending to compete for customers.
If one firm increases its advertising budget but the other does not, then the firm with the
higher advertising budget will increase its profit. Table 14-4 shows the payoff matrix
for this advertising game. Does Baine have a dominant strategy and if so, what is it?
A) Yes, Baine should increase its advertising budget.
B) Yes, Baine should keep its advertising budget as is.
C) There are two dominant strategies: if Alistair increases its advertising budget, then
Baine’s best bet is to keep its budget the same but if Alistair does not increase its
spending then Baine should raise its advertising budget
D) No, there is no dominant strategy.
Figure 4-6 Figure 4-6 shows the
demand and supply curves for the coffee market. The government believes that the
equilibrium price is too low and tries to help almond growers by setting a price floor at
$7.00. What is the value of consumer surplus after the imposition of the price floor?
A) $1,500
B) $2,700
C) 4,500
D) $5,700
Suppose that when the price of hamburgers decreases, the Ruiz family increases their
purchases of ketchup. To the Ruiz family,
A) hamburgers and ketchup are complements.
B) hamburgers and ketchup and substitutes.
C) hamburgers and ketchup are normal goods.
D) hamburgers are normal goods and hot dogs are inferior goods.
Congressman Gallstone seeks support from his colleagues for a bill he sponsors that
will establish a new national park in his district. He offers to support Congresswoman
Disrail’s proposal to build a new library in her district in exchange for her vote for his
national park bill. This is an example of
A) regulatory capture.
B) logrolling.
C) rational ignorance.
D) government failure.
Hurricane Katrina destroyed oil and natural gas refining capacity in the Gulf of Mexico
which subsequently drove up natural gas, gasoline, and heating oil prices. Three years
later, once the refining capacity was restored, these prices came back down. The
restoration of refining capacity should
A) shift the short-run aggregate supply curve to the left.
B) shift the short-run aggregate supply curve to the right.
C) move the economy up along a stationary short-run aggregate supply curve.
D) move the economy down along a stationary short-run aggregate supply curve.
Table 14-7
The payoff matrix shown above assumes that Perfect Plants and Florabunda Florist
must decide whether to offer same-day delivery for their products. The matrix shows
how much profit each firm will earn if it does or does not offer same-day delivery. The
amount of profit for one firm depends on whether the other firm offers same-day
delivery.
Which of the following statements is true?
A) Neither Perfect nor Florabunda has a dominant strategy.
B) Perfect’s dominant strategy is to offer same-day delivery; Florabunda’s dominant
strategy is to not offer same-day delivery.
C) Florabunda’s dominant strategy is to offer same-day delivery; Perfect’s dominant
strategy is to not offer same-day delivery.
D) The dominant strategy for both firms is to offer same-day delivery.
By drawing a demand curve with ________ on the vertical axis and ________ on the
horizontal axis, economists assume that the most important determinant of the demand
for a good is the ________ of the good.
A) quantity; price; quantity
B) price; quantity; quantity
C) price; quantity; price
D) quantity; price; price
What is economic profit?
A) gross revenue minus explicit costs
B) gross revenue minus implicit costs
C) gross revenue minus explicit and implicit costs
D) the same as accounting profit
A full-time student who is not working is categorized as
A) unemployed.
B) employed.
C) not in the labor force.
D) a discouraged worker.
E) frictionally unemployed.
The impact of crowding out may be the least
A) during a deep recession.
B) when real GDP is above but close to potential GDP.
C) during an expansion.
D) when real GDP is below but close to potential GDP.
The labor market is considered as one of the more important markets in an economy
because
A) most people typically earn the bulk of their income from wages and salaries.
B) most people are concerned that wages determined in the labor market are unfair.
C) the usual market forces do not hold in the labor market.
D) the labor market does not reach an equilibrium.