Figure 8-1
Refer to Figure 8-1. Suppose the government imposes a tax of P’ – P”’. The area
measured by J+K+I represents
a. consumer surplus after the tax.
b. consumer surplus before the tax.
c. producer surplus after the tax.
d. producer surplus before the tax.
Warrensburg is a small college town in Missouri. At the end of August each year, the
market demand for fast food in Warrensburg
a. increases.
b. decreases.
c. remains constant, but we observe a movement downward and to the right along the
demand curve.
d. remains constant, but we observe a movement upward and to the left along the
demand curve.
If a tax is levied on the sellers of a product, then there will be a(n)
a. downward shift of the supply curve.
b. upward shift of the supply curve.
c. movement up and to the right along the supply curve.
d. movement down and to the left along the supply curve.
Studies have found which of the following economic terms mentioned most often in
U.S. newspapers?
a. Unemployment
b. Productivity
c. Inflation
d. Monetary policy
The misery index is supposed to measure the
a. social cost of unemployment.
b. health of the economy.
c. lost output associated with a particular unemployment rate.
d. short-run tradeoff between inflation and unemployment.
When the money market is drawn with the value of money on the vertical axis, an
increase in the money supply
a. increases the price level and increases the value of money.
b. increases the price level and decreases the value of money.
c. decreases the price level and increases the value of money.
d. decreases the price level and decreases the value of money.
When a government increases its budget deficit, then that country’s
a. supply of loanable funds shifts right.
b. supply of loanable funds shifts left.
c. demand for loanable funds shifts right.
d. demand for loanable funds shifts left.
People will buy more if the price level
a. rises because rising prices increase the real value of a dollar.
b. rises because rising prices decrease the real value of a dollar.
c. falls because falling prices increase the real value of a dollar.
d. falls because falling prices decrease the real value of a dollar.
When the money market is drawn with the value of money on the vertical axis, a
decrease in the price level causes a
a. movement to the right along the money demand curve.
b. movement to the left along the money demand curve.
c. shift to the right of the money supply curve.
d. shift to the left of the money supply curve.
Market power refers to the
a. power of a single person or small group to influence market prices.
b. ability of a person or small group to successfully market new products.
c. power of the government to regulate a market.
d. importance of a certain market in relation to the overall economy.
If the demand curve is linear and downward sloping, which of the following statements
is not correct?
a. Demand is more elastic on the lower part of the demand curve than on the upper part.
b. Different pairs of points on the demand curve can result in different values of the
price elasticity of demand.
c. Different pairs of points on the demand curve result in identical values of the slope of
the demand curve.
d. Starting from a point on the upper part of the demand curve, an increase in price
leads to a decrease in total revenue.
If the government removes a binding price ceiling from a market, then the price paid by
buyers will
a. increase, and the quantity sold in the market will increase.
b. increase, and the quantity sold in the market will decrease.
c. decrease, and the quantity sold in the market will increase.
d. decrease, and the quantity sold in the market will decrease.
Which of the following is included in U.S. GDP?
a. the value of production by a Singaporean working in the U.S.
b. the value of production by an American working in Singapore
c. Both (a) and (b) are correct.
d. Neither (a) nor (b) is correct.
Historically, the change in real GDP during recessions has been
a. mostly a change in investment spending.
b. mostly a change in consumption spending.
c. about equally divided between consumption and investment spending.
d. sometimes mostly a change in consumption and sometimes mostly a change in
investment.
Which of the following is not a determinant of the price elasticity of demand for a
good?
a. the time horizon
b. the steepness or flatness of the supply curve for the good
c. the definition of the market for the good
d. the availability of substitutes for the good
If the price of a good is low,
a. firms would increase profit by increasing output.
b. the quantity supplied of the good could be zero.
c. the supply curve for the good will shift to the left.
d. firms can and should raise the price of the product.
If an unemployed person quits looking for work, then, eventually the unemployment
rate
a. decreases and the labor-force participation rate is unaffected.
b. and the labor-force participation rate both decrease.
c. is unaffected and the labor-force participation rate decreases.
d. and the labor-force participation rate are both unaffected.
Table 4-1
Refer to Table 4-1. Which of the following illustrates the market demand curve?
a. c.
b. d.
Figure 9-12
Refer to Figure 9-12. With trade, the domestic price and domestic quantity demanded
are
a. $27 and 400.
b. $27 and 800.
c. $21 and 400.
d. $21 and 600.
Consider the exhibit below for the following questions.
Figure 20-1
Refer to Figure 20-1. The economy would be moving to long-run equilibrium if it
started at
a. A and moved to B.
b. C and moved to B.
c. D and moved to C.
d. None of the above is correct.
People who buy stock in a corporation such as General Electric become
a. creditors of General Electric, so the benefits of holding the stock depend on General
Electric’s profits.
b. creditors of General Electric, but the benefits of holding the stock do not depend on
General Electric’s profits.
c. part owners of General Electric, so the benefits of holding the stock depend on
General Electric’s profits.
d. part owners of General Electric, but the benefits of holding the stock do not depend
on General Electric’s profits.
If an American-based firm opens and operates a service call center in Bulgaria, then it is
engaging in
a. foreign portfolio investment.
b. foreign financial investment.
c. foreign direct investment.
d. indirect foreign investment.
Senator Green argues that replacing the income tax with a national sales tax would
increase the level of output. Senator Brown objects that this policy would benefit the
rich at the expense of the poor.
a. Both Senators’ arguments are primarily about equality.
b. Both Senators’ arguments are primarily about efficiency.
c. Senator Green’s argument is primarily about equality, while Senator Brown’s
argument is primarily about efficiency.
d. Senator Green’s argument is primarily about efficiency, while Senator Brown’s
argument is primarily about equality.
Laissez-faire is a French expression which literally means
a. to make do.
b. to get involved.
c. whatever works.
d. allow them to do.
The prices of stock traded on exchanges are determined by
a. the Corporate Stock Administration.
b. the administrators of NASDAQ.
c. the supply of, and demand for, the stock.
d. All of the above are correct.
Suppose Congress institutes an investment tax credit. What would happen in the market
for loanable funds?
a. The interest rate and investment would fall.
b. The interest rate and investment would rise.
c. The interest rate would rise and investment would fall.
d. None of the above is necessarily correct.
Figure 2-2
Refer to Figure 2-2. If the owners of land, labor, and capital are represented by Box B
of this circular-flow diagram, then
a. households are represented by Box A.
b. firms are represented by Box C.
c. firms are represented by Box A.
d. firms are sellers in Box B.
The minimum wage, if it is binding, raises the incomes of
a. no workers.
b. only those workers who cannot find jobs.
c. only those workers whose jobs would pay less than the minimum wage if it didn’t
exist.
d. all workers.
If the nominal interest rate is 7 percent and the real interest rate is -2.5 percent, then the
inflation rate is
a. -9.5 percent.
b. -4.5 percent.
c. 4.5 percent.
d. 9.5 percent.
Some time ago, the nation of Republica opened up its paper market to international
trade. Which of the following results of this policy change is consistent with the notion
that Republica has a comparative advantage over other countries in producing paper?
a. The price of paper in Republica decreased as a result of the policy change.
b. Republica began exporting paper as a result of the policy change.
c. The domestic demand curve for paper shifted to the right as a result of the policy
change.
d. The domestic quantity of paper demanded increased as a result of the policy change.
The existence of money leads to
a. greater specialization in production, but not to a higher standard of living.
b. a higher standard of living, but not to greater specialization.
c. greater specialization and to a higher standard of living.
d. neither greater specialization nor to a higher standard of living.
Figure 8-3
The vertical distance between points A and C represents a tax in the market.
Refer to Figure 8-3. The price that buyers effectively pay after the tax is imposed is
a. P1.
b. P2.
c. P3.
d. P4.
During recessions
a. workers are laid off.
b. factories are idle.
c. firms may find they are unable to sell all they produce.
d. All of the above are correct.
A tax on the buyers of personal computer external hard drives encourages
a. sellers to supply a smaller quantity at every price.
b. buyers to demand a smaller quantity at every price.
c. buyers to demand a larger quantity at every price.
d. Both a) and b) are correct.
Joel has a 1966 Mustang, which he sells to Susie, an avid car collector. Susie is pleased
since she paid $8,000 for the car but would have been willing to pay $11,000 for the
car. Susie’s consumer surplus is $2,000.
Proponents of rational expectations argue that failing to account for peoples’ revised
inflation expectations led to estimates of the sacrifice ratio that were too high.
Figure 6-27
Refer to Figure 6-27. If the government places a $2 tax in the market, the seller
receives $6.
When a supply curve or a demand curve shifts, the equilibrium price and equilibrium
quantity change.
A binding price floor causes quantity supplied to be less than quantity demanded.
Historical trends in the prices of most natural resources compared to prices of other
goods indicate that most natural resources have become scarcer over time.
Characterize the two different approaches a nation can take to achieve free trade. Does
one approach have an advantage over the other?
Every adult who was not employed during the previous 4 weeks is included in the
Bureau of Labor Statistics’ “unemployed” category.
Use the money market to explain the interest-rate effect and its relation to the slope of
the aggregate demand curve.
Producing a soccer ball costs Jake $5. He sells it to Darby for $35. Darby values the
soccer ball at $50. For this transaction, the total surplus in the market is $40.
The money supply curve is downward sloping because as the value of money falls
people desire to hold a larger quantity of money.
If a country’s trade surplus falls, its net capital outflow rises.
Changes in the consumer price index are useful in predicting changes in the producer
price index.
What does purchasing-power parity imply about the real exchange rate?
The trade-off between the production of one good and the production of another good
can change over time because of technological advances.
Suppose that there are no crowding-out effects and the MPC is . By how much must the
government increase expenditures to shift the aggregate demand curve right by $10
billion?
International trade can make some individuals within a country worse off, even as it
makes the country as a whole better off.
Figure 2-14
Refer to Figure 2-14. Points B and C represent infeasible outcomes for this economy.
States in the U.S. may mandate minimum wages above the federal level.
A tax on sellers and an increase in input prices affect the supply curve in the same way.