According to a recent study, “Stricter college alcohol policies, such as raising the price
of alcohol, or banning alcohol on campus, decrease the number of students who use
marijuana.” On the basis of this information, how would you describe alcohol and
marijuana?
A) The two goods are substitutes in consumption.
B) There is no relationship between the two goods.
C) The two goods are complements in consumption.
D) They are both luxury goods.
Suppose the federal budget deficit for the year was $100 billion and the economy was
in a recession. If the economy had been at potential GDP, it is estimated that tax
revenues would have been $60 billion higher and government spending on transfer
payments $50 billion lower. Using these estimates, the cyclically adjusted budget
A) deficit was $210 billion.
B) deficit was $110 billion.
C) surplus was $10 billion.
D) surplus was $110 billion.
If a commercial dairy farm wants to raise funds to purchase feeding troughs, it does so
in the
A) output market.
B) product market.
C) factor market.
D) dairy products market.
The international trade effect states that a(n) ________ in the price level will ________
net exports.
A) increase; increase
B) increase; decrease
C) decrease; decrease
D) decrease; not affect
Table 10-1
Keegan has $30 to spend on Pita Wraps and Bubble Tea. The price of a Pita Wrap is $6
and the price of a glass of Bubble Tea is $3. Table 10-1 shows his total utility from
different quantities of the two items. What is Keegan’s optimal consumption bundle?
A) 3 pita wraps and 3 bubble teas
B) 3 pita wraps and 4 bubble teas
C) 4 pita wraps and 2 bubble teas
D) 5 pita wraps and 0 bubble teas
Figure 4-4 Figure 4-4 shows the market for tiger
shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80.
Now suppose producers decide to cut output to 40in order to raise the price to $18.
What is the value of producer surplus at the equilibrium price of $15?
A) $80
B) $160
C) $240
D) $400
If a store like hhgregg has higher costs than a comparable Best Buy store, the only way
it can have higher profits is if
A) it has more locations than Best Buy.
B) its marginal revenue is lower than Best Buy’s.
C) the demand for its goods is higher than Best Buy’s.
D) it sells the quantity associated with its minimum average total cost.
Since 1900, real GDP in the United States has grown
A) more rapidly than the population.
B) more slowly than the population.
C) as rapidly as the population.
D) in a random unpredictable manner relative to the population.
Figure 4-1
Figure 4-1 shows Arnold’s demand curve for burritos.
If the market price is $1.00, what is the consumer surplus on the fourth burrito?
A) $0
B) $0.50
C) $1.50
D) $2.25
Figure 2-11
In the circular flow diagram, who are economic agents A and who are economic agents
B?
A) A = firms; B = households
B) A = households; B = firms
C) A = households; B = factor markets
D) A= firms; B = product markets
Which type of business has the least government rules and regulations affecting it?
A) sole proprietorship
B) partnership
C) corporation
D) They all have the same set of rules and regulations affecting them.
What is a market failure?
A) It refers to the inability of the market to allocate resources efficiently up to the point
where marginal social benefit equals marginal social cost.
B) It refers to the inability of the market to allocate resources efficiently up to the point
where marginal social benefit equals marginal private cost.
C) It refers to a situation where an entire sector of the economy (for example, the airline
industry) collapses because of some unforeseen event.
D) It refers to a breakdown in a market economy because of widespread corruption in
government.
An increase in the demand for LED light bulbs due to changes in consumer tastes,
accompanied by an increase in the supply of LED light bulbs as a result of government
subsidies, will result in
A) an increase in the equilibrium quantity of LED light bulbs and no change in the
equilibrium price.
B) an increase in the equilibrium price of LED light bulbs and no change in the
equilibrium quantity.
C) an increase in the equilibrium price of LED light bulbs; the equilibrium quantity
may increase or decrease.
D) an increase in the equilibrium quantity of LED light bulbs; the equilibrium price
may increase or decrease.
Table 2-11
This table shows the number of labor hours required to produce a cell phone and a
board foot of lumber in Estonia and Finland. a. Which country has an absolute
advantage in the production of cell phones?
b. Which country has an absolute advantage in the production of lumber?
c. What is Estonia’s opportunity cost of producing one cell phone?
d. What is Finland’s opportunity cost of producing one cell phone?
e. What is Estonia’s opportunity cost of producing one board foot of lumber?
f. What is Finland’s opportunity cost of producing one board foot of lumber?
g. If each country specializes in the production of the product in which it has a
comparative advantage, who should produce cell phones?
h. If each country specializes in the production of the product in which it has a
comparative advantage, who should produce lumber?
During the Great Depression, cyclical unemployment increased as the recession
continued. This increase in cyclical unemployment
A) increased the natural rate of unemployment.
B) decreased the natural rate of unemployment.
C) had no effect on the natural rate of unemployment.
D) could have increased or decreased the natural rate of unemployment.
If a corporation goes bankrupt, bondholders have ________ on the firm’s assets.
A) no claim
B) third claim, after the IRS and stockholders,
C) second claim, after stockholders,
D) first claim