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Figure 11-10
Suppose for the past 8 years the firm has been producing Qdunits per period using plant
size ATC4. Now, following a permanent change in demand, it plans to cut production to
Qc units. What will happen to its average cost of production?
A) In the short run, its average cost falls from $47 to $41, and in the long run, average
cost falls even further to $37.
B) In the short run, its average cost rises from $47 to $55, and in the long run, average
cost falls to $41.
C) In the short run, its average cost falls from $47 to $37, and in the long run, average
cost rises to $41.
D) In the short run, its average cost rises from $47 to $55, and in the long run, average
cost falls to $37.
At the beginning of the recession of 2007-2009, real GDP in the United States was
________ potential GDP, and in June 2009, real GDP was ________ potential GDP.
A) below; above
B) below; below
C) above; below
D) above; above
Let D= demand, S = supply, P = equilibrium price, Q= equilibrium quantity. What
happens in the market for walnuts if the Centers for Disease Control and Prevention
announces that consuming a half cup of walnuts each week helps to lower bad levels of
cholesterol?
A) D increases, S no change, P and Q increase
B) S increases, D no change, P decreases, Q increases
C) D and S increase, P and Q decrease
D) D no change, S increases, P decreases, Q decreases
Stagflation usually results from
A) a supply shock.
B) a decrease in aggregate demand.
C) an increase in aggregate supply.
D) an increase in aggregate demand.
The price elasticity of supply is equal to
A) the value of the slope of the supply curve.
B) the change in quantity supplied divided by the change in price.
C) the percentage change in price divided by the percentage change in quantity
supplied.
D) the percentage change in quantity supplied divided by the percentage change in
price.
Figure 7-1
Suppose the government allows imports of leather footwear into the United States. The
market price falls to $24. What area represents consumer surplus?
A) R + S
B) R + S + T + U
C) V + W + X + Y
D) R + S + V
Monetary policy has a ________ effect on aggregate demand in a(n) ________
economy, and fiscal policy has a ________ effect on aggregate demand in a(n)
________ economy.
A) weaker; open; weaker; open
B) weaker; closed; weaker; closed
C) stronger; open; weaker; open
D) stronger; closed; weaker; open
If the nominal interest rate is 6% and the inflation rate is 2% then the real interest rate is
A) 8%.
B) 4%.
C) 3%.
D) 2%.
E) 1%.
Table 18-6
Table 18-6 shows the income tax brackets and tax rates for single taxpayers in
Calpernia. Sasha is a single taxpayer with an income of $60,000. What is his marginal
tax rate and what is his average tax rate?
A) marginal tax rate = 38%; average tax rate = 23%
B) marginal tax rate = 17%; average tax rate = 21%
C) marginal tax rate = 38%; average tax rate = 24%
D) marginal tax rate = 23%; average tax rate = 38%
Who hires the managers of a corporation?
A) the board of directors
B) stockholders
C) managers
D) employees
When the Fed embarked on a policy known as quantitative easing, they
A) slowly lowered the federal funds rate target until it was equal to zero.
B) reduced the required reserve ration by one-quarter point per month for 12 months.
C) bought longer-term securities than are usually bought in open market operations.
D) opened up lending to primary dealers, commercial banks, and investment banks.
If Abercrombie & Fitch borrows $8 million from a bank to finance the construction of a
new store, this is an example of
A) a stock market transaction.
B) direct finance.
C) a bond market transaction.
D) indirect finance.
Assume you set up a sole proprietorship and your lawyer tells you that as the owner you
will face unlimited liability. What does that mean?
A) You are liable for organizing the business.
B) You could stand to lose your personal wealth if the business goes bankrupt.
C) There is no legal responsibility of the business in case a customer sues, as the
business is legally untouchable.
D) None of these explain what unlimited liability means.
________ behavioral assumption about humans was that people usually act in a
rational, self-interested way.
A) Thomas Malthus's
B) Adam Smith's
C) Karl Marx's
D) Ben Bernanke's
Why might a country raise interest rates in the face of an exchange rate crisis?
What determined the exchange rates among currencies under the gold standard, and
what caused the gold standard to collapse?
What is a circular flow diagram and what does it demonstrate?
Figure 4-7
which shows the market for watermelons. Suppose the government imposes a price
floor of Pw. How will the price floor affect the quantity supplied, quantity demanded
and quantity exchanged?
Explain what potential conflict exists between shareholders in a corporation and the
corporation's managers.
