The Fed can directly lower the inflation rate.
Those who favor changes in the market for health care that would make it more like the
markets for other goods and services are generally in favor of universal health care
coverage.
Over time, people in the United States and other high-income countries have, on
average, become taller, which is an indication that their nutritional status has improved.
Inflation rates during the years 1979-1981 were the highest the United States has ever
experienced during peacetime.
If the demand for a product increases and the supply of the product does not change,
equilibrium price and equilibrium quantity will both increase.
If the United States placed an embargo on Swedish products, what would happen in the
U.S. market for Swedish furniture?
A) The supply curve would shift to the left.
B) The supply curve would shift to the right.
C) The demand curve would shift to the right.
D) The demand curve would shift to the left.
Figure 18-5
Figure 18-5 shows the Lorenz curve
for a hypothetical country. The middle 20 percent of households
A) earn 20 percent of the society’s total income.
B) earn 36 percent of the society’s total income.
C) earn 48 percent of the society’s total income.
D) earn 50 percent of the society’s total income.
Which of the following is a necessary condition for successful price discrimination?
A) The seller must possess market power.
B) The buyer must possess market power.
C) Transaction costs must be zero.
D) Buyers must have identical inelastic demands.
Table 20-10
Suppose an economy has only three goods and the typical family purchases the amounts
given in the table above. If 2006 is the base year, then what is the CPI for 2013?
A) 14.3
B) 87.5
C) 114.3
D) 160
Figure 17-7
Consider the Phillips curves depicted in the graph above. The Fed announces its
intention to decrease inflation from 10 percent to 5 percent per year, and it succeeds. If
expectations of inflation are reduced to 8 percent by the Fed’s announcement, the rate of
unemployment will be ________ in the short run.
A) less than 5.5 percent
B) 5.5 percent
C) between 5.5 and 7.5 percent
D) 7.5 percent
Which of the following is the largest category of federal government expenditures?
A) defense spending
B) transfer payments
C) interest on the debt
D) grants to state and local governments
Figure 3-8
The graph in this figure illustrates an initial competitive equilibrium in the market for
apples at the intersection of D1 and S2 (point B). Which of the following changes would
cause the equilibrium to change to point C?
A) A positive change in the technology used to produce apples and decrease in the price
of oranges, a substitute for apples.
B) An increase in the wages of apple workers and an increase in the price of oranges, a
substitute for apples.
C) An increase in the number of apple producers and a decrease in the number of apple
trees as a result of disease.
D) A decrease in the wages of apple workers and an increase in the price of oranges, a
substitute for apples.
Figure 2-12
Figure 2-12 shows the production possibilities frontiers for Pakistan and Indonesia.
Each country produces two goods, cotton and cashews.
Which country has a comparative advantage in the production of cotton?
A) Indonesia
B) They have equal productive abilities.
C) Pakistan
D) neither country
________ marginal opportunity cost implies that the more resources already devoted to
any activity, the payoff from allocating yet more resources to that activity increases by
progressively smaller amounts.
A) Increasing
B) Decreasing
C) Constant
D) Negative
Which of the following is a reason why some firms donot use commission pay?
A) It gives workers incentive to produce more.
B) It increases firm profits.
C) It is difficult to measure the output and attribute output to a particular worker.
D) The best workers stay and less productive workers leave.
Economists generally favor the use of tradable emissions allowances to reduce
pollution. However, the use of these allowances has been criticized by some
environmentalists. Which of the following describes this criticism?
A) Some environmentalists believe the allowances give firms a license to pollute.
B) Some environmentalists believe that the price of allowances is often too high for
consumers to afford.
C) Some environmentalists believe that Pigovian taxes are a more efficient way to
reduce pollution.
D) Some environmentalists oppose allowances on legal grounds; they believe the use of
allowances is unconstitutional.
Figure 11-11
Figure 11-11 illustrates the long-run
average cost curve for a firm that produces picture frames. The graph also includes
short-run average cost curves for three firm sizes: ATCa, ATC and ATCc.
If the firm chooses to produce and sell 25,000 frames per month by operating in the
short run with a scale operation represented by ATCc
A) the firm will not be operating efficiently.
B) the firm will be operating efficiently.
C) the firm would lower its average costs by reducing its scale of operation.
D) the firm will not be able to earn a profit.
Figure 12-9
Figure 12-9 shows cost and demand
curves facing a profit-maximizing, perfectly competitive firm.
Identify the firm’s short-run supply curve.
A) the marginal cost curve
B) the marginal cost curve from a and above
C) the marginal cost curve from and above
D) the marginal cost curve from d and above
Table 14-1
Godrickporter and Star
Connections are the only two airport shuttle and limousine rental service companies in
the mid-sized town of Godrick Hollow. Each firm must decide on whether to increase
its advertising spending to compete for customers. Table 14-1 shows the payoff matrix
for this advertising game. Is there a dominant strategy for Godrickporter and if so, what
is it?
A) No, its outcome depends on what Star Connections does.
B) Yes, Godrickporter should increase its advertising spending.
C) Yes, Godrickporter should reduce its advertising spending.
D) Yes, Godrickporter’s dominant strategy is to collude with Star Connections.
According to the Taylor rule, does the target for the federal funds rate respond
differently for an increase in inflation caused by an increase in aggregate demand and
for an increase in inflation caused by a decrease in short-run aggregate supply? Explain
whether there is or is not a difference in how the target for the federal funds rate
changes.
Write out the expression for the Taylor rule. Use the Taylor rule to explain how a
decline in real GDP below potential GDP will affect the Federal Reserve’s target for the
federal funds rate.
What are the five main determinants of consumption spending? Which of these is the
most important?
Use the money demand and money supply model to show the money market in
equilibrium with an interest rate of 5 percent and the quantity of money of $800 billion.
Suppose the Federal Reserve increases the money supply to $850 billion. At the
previous equilibrium interest rate of 5 percent, will households and firms now be
holding more money or less money than they want to hold, and will they be buying or
selling short-term financial assets? At the new equilibrium interest rate, households and
firms will desire to hold the entire $850 billion of the money supply. What causes
households and firms to want to hold the additional $50 billion of the money supply?
If the unemployment rate in the economy is steady at 4 percent per year, how does the
short-run Phillips curve predict that the inflation rate will be changing, if at all? What
will happen if the unemployment rate now rises to 7 percent per year? Assume there are
no changes to inflation expectations. Provide an appropriate graph to support your
discussion.
Central Grocery in New Orleans is famous for its muffaletta, a large round sandwich
filled with deli meats and topped with a tangy olive salad. Suppose the following table
represents cost and revenue data for Central Grocery. Fill in the columns for TR, MR,
MC, ATC, and profit. If Central Grocery wants to maximize profits, what price should it
charge for a muffaletta, what quantity should it sell, and what will be the amount of its
total profit?
Why does the substitution bias cause the consumer price index to overstate inflation and
the cost of living? Why does the increase in quality bias cause the consumer price index
to overstate inflation and the cost of living?
What is an economic market?
Explain why the monopolist has no supply curve?