The price paid by buyers in a market will decrease if the government
a. increases a binding price floor in that market.
b. increases a binding price ceiling in that market.
c. decreases a tax on the good sold in that market.
d. All of the above are correct.
The nominal interest rate is 4%, the inflation rate is 1% and the tax rate is 20%. Given
U.S. tax laws, how is after-tax real return computed?
a. 3(1-20)
b. 4(1 -20)
c. 4(1 – 20) – 01
d. None of the above is correct.
The price elasticity of demand for eggs
a. is computed as the percentage change in quantity demanded of eggs divided by the
percentage change in price of eggs.
b. will be lower if there is a new invention that is a close substitute for eggs.
c. will be higher if consumers consider eggs to be a necessity.
d. All of the above are correct.
Which of the following is a source of market risk?
a. Holding stocks in many companies carries the risk of a reduced average return.
b. Real GDP varies over time and sales and profits move with real GDP.
c. When a paper producer has declining sales, it is likely that so will other paper
producers.
d. If stockholders become aggravated with the way a CEO runs a company, the price of
that company’s stock might fall in the stock market.
A farmer has the ability to grow either corn or cotton or some combination of the two.
Given no other information, it follows that the farmer’s opportunity cost of a bushel of
corn multiplied by his opportunity cost of a bushel of cotton
a. is equal to 0.
b. is between 0 and 1.
c. is equal to 1.
d. is greater than 1.
Figure 8-3
The vertical distance between points A and C represents a tax in the market.
Refer to Figure 8-3. The loss in producer surplus caused by the tax is measured by the
area
a. ABC.
b. P1P3ABC.
c. P1P2BC.
d. P1C0.
Which of the following statements is correct?
a. Economists almost always find it easy to conduct experiments in order to test their
theories.
b. Economics is not a true science because economists are not usually allowed to
conduct experiments to test their theories.
c. Economics is a social science rather than a true science because it cannot employ the
scientific method.
d. Economists are usually not able to conduct experiments, so they must rely on natural
experiments offered by history.
According to 2009 data on the U.S. population, which of the following groups of
teenagers (ages 16-19) had the highest unemployment rate?
a. white males
b. white females
c. black males
d. black females
Table 13-2
Refer to Table 13-2. Which company had the lowest dollar dividend?
a. Boeing Co.
b. Eli Lilly and Co.
c. H. J. Heinz and Co.
d. Kellog Co.
Which of the following statements is correct?
a. The total income in the economy that remains after paying for consumption and
government purchases is called private saving.
b. The sum of private saving and national saving is called public saving.
c. For a closed economy, the sum of private saving and public saving must equal
investment.
d. For a closed economy, the sum of consumption, national saving, and taxes must
equal GDP.
Table 3-7
Assume that Japan and Korea can switch between producing cars and producing
airplanes at a constant rate.
Hours Needed
to Make 1 Quantity Produced
in 2400 Hours
Refer to Table 3-7. Without trade, Japan produced and consumed 50 cars and 6
airplanes and Korea produced and consumed 27 cars and 7 airplanes. Then, each
country agreed to specialize in the production of the good in which it has a comparative
advantage and trade 28 cars for 8 airplanes. As a result, Japan gained
a. 0 cars and 2 airplanes and Korea gained 1 car and 1 airplane.
b. 2 cars and 2 airplanes and Korea gained 1 car and 1 airplane.
c. 28 cars and 8 airplanes and Korea gained 28 cars and 8 airplanes.
d. 52 cars and 8 airplanes and Korea gained 28 cars and 8 airplanes.
According to the quantity equation, the price level would change less than
proportionately with a rise in the money supply if there were also
a. either a rise in output or a rise in the rate at which money changes hands.
b. either a rise in output or a fall in the rate at which money changes hands.
c. either a fall in output or a rise in the rate at which money changes hands.
d. either a fall in output or a fall in the rate at which money changes hands.
Country A has real GDP per person of 10,000 while country B has real GDP per person
of 20,000. All else constant, country A will eventually have a higher standard of living
than country B if
a. the level of saving per person is 500 in country A and 750 in country B.
b. the level of saving per person is 1,000 in country A and 1,800 in country B.
c. Both of the above are correct.
d. None of the above are correct.
Which of the following is an example of using the scientific method with a natural
experiment?
a. Measuring how long it takes a marble to fall from a ten story building.
b. Comparing plant growth with and without a soil additive.
c. Tracking the price of oil when a war in the Middle East interrupts the flow of crude
oil.
d. Observing the reaction when two chemicals are mixed together.
If you are vacationing in France and the dollar depreciates relative to the euro, then
a. the dollar buys more euros. It will take fewer dollars to buy a good that costs 50
euros.
b. the dollar buys more euros. It will take more dollars to buy a good that costs 50
euros.
c. the dollar buys fewer euros. It will take fewer dollars to buy a good that costs 50
euros.
d. the dollar buys fewer euros. It will take more dollars to buy a good that costs 50
euros.
If business opportunities in a country become relatively less attractive relative to those
of other countries, then
a. both its net exports and net capital outflows fall.
b. both its net exports and net capital outflows rise.
c. its net exports fall and its net capital outflows fall.
d. its net exports rise and its net capital outflows fall
Sophia is planning her activities for a hot summer day. She would like to go to the local
swimming pool and see the latest blockbuster movie, but because she can only get
tickets to the movie for the same time that the pool is open she can only choose one
activity. This illustrates the basic principle that
a. people respond to incentives.
b. rational people think at the margin.
c. people face tradeoffs.
d. improvements in efficiency sometimes come at the expense of equality.
Figure 3-9
Uzbekistan’s Production Possibilities Frontier Azerbaijan’s Production
Possibilities Frontier
Refer to Figure 3-9. Suppose Azerbaijan decides to increase its production of nails by
What is the opportunity cost of this decision?
a. 1/4 bolt
b. 4 bolts
c. 5 bolts
d. 80 bolts
Figure 14-2. The figure shows a utility function for Mary Ann.
Refer to Figure 14-2. From the appearance of the utility function, we know that
a. Mary Ann is risk averse.
b. Mary Ann gains less satisfaction when her wealth increases by X dollars than she
loses in satisfaction when her wealth decreases by X dollars.
c. the property of diminishing marginal utility applies to Mary Ann.
d. All of the above are correct.
Which of the following statements is correct?
a. A general, persistent decline in stock prices may signal that the economy is about to
enter a boom period because people will be able to buy stock for less money.
b. A general, persistent decline in stock prices may signal that the economy is about to
enter a recession because low stock prices may mean that people are expecting low
corporate profits.
c. A general, persistent decline in stock prices may signal that the economy is about to
enter a recession because low stock prices mean that corporations have had low profits
in the past.
d. Expectations about the business cycle have no impact on stock prices.
Figure 9-17
Refer to Figure 9-17. Relative to the free-trade outcome, the imposition of the tariff
a. decreases imports of the good by 16 units and increases domestic production of the
good by 8 units.
b. decreases imports of the good by 16 units and increases domestic production of the
good by 16 units.
c. decreases imports of the good by 24 units and increases domestic production of the
good by 8 units.
d. decreases imports of the good by 24 units and increases domestic production of the
good by 24 units.
Figure 5-10
Refer to Figure 5-10. An increase in price from $30 to $35 would
a. increase total revenue by $250
b. decrease total revenue by $250.
c. increase total revenue by $500.
d. decrease total revenue by $500.
One of the differences between the GDP deflator and the consumer price index is
a. the GDP deflator includes income earned by American citizens working in foreign
countries and the consumer price index is based solely on purchases made in the U.S.
b. the consumer price index basket of goods is updated constantly by the Bureau of
Labor Statistics whereas the GDP deflator is updated only occasionally.
c. the consumer price index includes items not included in the GDP deflator such as
airplanes purchased by the Air Force.
d. the GDP deflator reflects prices for all goods and services produced domestically and
the consumer price index reflects prices for some goods and services bought by
consumers.
The minimum wage was instituted to ensure workers
a. a middle-class standard of living.
b. employment.
c. a minimally adequate standard of living.
d. unemployment compensation.
Which of the following shifts aggregate supply to the right?
a. a decline in the price of imported natural resources
b. a technological advance
c. an older labor force that leaves jobs less frequently
d. All of the above are correct.
Some poor countries appear to be falling behind rather than catching up with rich
countries. Which of the following could explain the failure of a poor county to catch
up?
a. The poor country has outward-oriented trade policies.
b. The poor country allows foreign direct investment.
c. The poor country has poorly developed property rights.
d. All of the above are correct.
In a particular country in 1998, the average worker needed to work 25 hours to produce
40 units of output. In that same country in 2008, the average worker needed to work 40
hours to produce 68 units of output. In that country, the productivity of the average
worker
a. decreased by 1.7 percent between 1998 and 2008.
b. remained unchanged between 1998 and 2008.
c. increased by 4.75 percent between 1998 and 2008.
d. increased by 6.25 percent between 1998 and 2008.
When two variables have a positive correlation,
a. when the x-variable increases, the y-variable decreases.
b. when the x-variable decreases, the y-variable increases.
c. when the x-variable increases, the y-variable increases.
d. More than one of the above is correct.
Suppose you are deciding whether to buy a particular bond. If you buy the bond and
hold it for 4 years, then at that time you will receive a payment of $10,000. If the
interest rate is 6 percent, you will buy the bond if its price today is no greater than
a. $8,225.06.
b. $7,920.94.
c. $7,672.58.
d. $6,998.98.
Juan lives in Ecuador and purchases a motorcycle manufactured in the United States.
The motorcycle is
a. both a U.S. and Ecuadorian export.
b. both a U.S. and Ecuadorian import.
c. a U.S. import and an Ecuadorian export.
d. a U.S. export and an Ecuadorian import.
Which of the following lists contains, in this order, natural resources, human capital,
and physical capital?
a. For a shoe factory: leather, hand tools, the managers’ knowledge of shoe making.
b. For a steel mill: the blast furnaces, the workers, iron ore.
c. For an airline: oil used to make jet fuel, the pilots’ knowledge of flying, jets.
d. None of the above is correct.
A country with a relatively low level of real GDP per person is considering adopting
two policies to promote economic growth. The first is to increase barriers to trade. The
second is to restrict foreign portfolio investment. Which of these policies would most
economist think would promote growth?
a. both the first and the second
b. the first but not the second
c. the second but not the first
d. neither the first nor the second
Quality Motors is a Japanese-owned company that produces automobiles; all of its
automobiles are produced in American plants. In 2010 Quality Motors produced $30
million worth of automobiles, with $17 million in sales to Americans, $9 million in
sales to Canadians, and $4 million worth of automobiles added to Quality Motors’
inventory. The transactions just described contribute how much to U.S. GDP for 2010?
a. $17 million
b. $21 million
c. $26 million
d. $30 million
Betty’s Bakery bakes fresh bread every morning. Any bread not sold by the end of the
day is thrown away. A loaf of bread costs Betty $2.00 to produce, and she prices loaves
of bread at $3.50 per loaf. Suppose near the end of one day Betty still has 12 loaves of
bread on hand. Which of the following is correct?
a. Betty should only sell the remaining bread for $3.50 per loaf since that is the regular
price.
b. Betty should only sell the remaining bread for $2.00 per loaf or more since that is
what the bread costs to make.
c. Betty should be willing to sell the remaining bread for any price above $0 per loaf
since she will have to throw it away if she does not sell it for something.
d. Betty should just throw the bread away and change the price of her bread starting
tomorrow to make sure she sells all of her bread each day.