Contestable markets improve the performance of imperfect markets with
a. government regulations.
b. the threat of entry.
c. advertising.
d. tacit collusion.
Long-run average cost of the perfectly competitive firm includes the
a. cost of raw materials per unit of output.
b. opportunity cost of labor per unit of output.
c. opportunity cost of capital per unit of output.
d. All of the above are correct.
The new $20 bills are being introduced by the U.S. Treasury primarily to diminish
a. inflation.
b. poverty.
c. counterfeiting.
d. bank failures.
An externality is an event which
a. is external to economics.
b. always brings harm to someone in the economy.
c. is incidental to some market activity.
d. harms the economy as a whole rather than a particular person.
Rent-seeking behavior refers to
a. the offering of goods on a for-rent rather than for-sale basis.
b. profit maximization by producers.
c. unproductive activity in the pursuit of economic profit.
d. illegal manipulation of prices.
Cost-plus pricing and guaranteed profit regulation give the same results.
a. True
b. False
Which of the following is the order of fastest to slowest acting policy, once enacted, in
affecting aggregate demand?
a. taxes, money, government spending
b. taxes, government spending, money
c. government spending, taxes, money
d. government spending, money, taxes
Evidence indicates that the average economic profits of invention are
a. well above zero.
b. slightly above zero.
c. equal to zero.
d. less than zero.
The Red Jacket Mountain View Inn in New Hampshire charges $159 per room in the
winter ski season and $114 during the summer months. The number of rooms and
operating costs are constant year round. These prices indicate
a. rightward shifts in the demand curve in the summer.
b. a rightward shift in demand in the winter.
c. leftward shifts in the supply curve in the summer.
d. a leftward shift in demand in the winter.
The share of GDP taken by taxes has increased dramatically since the 1960s.
a. True
b. False
A firm that is earning zero economic profit should go out of business.
a. True
b. False
Table 5-1B
If a graph of Robinson’s marginal utility were constructed from Table 5-1B, it would
a. illustrate the “law” of diminishing marginal utility.
b. be a negatively sloped curve.
c. illustrate a typical consumer’s satisfaction derived from consumption of consecutive
units of a good.
d. All of the above are correct.
Wages are comparatively low in markets where demand for labor is low and supply is
high.
a. True
b. False
An increase in consumer income will shift both the supply and demand curves.
a. True
b. False
When the Fed increases the money supply, interest rates
a. rise, causing velocity to fall.
b. fall, causing velocity to fall.
c. rise, causing velocity to rise.
d. fall, causing velocity to rise.
In 2012, the poverty line for a family of four was approximately
a. $10,075
b. $13,100.
c. $15,700.
d. $23,250.
If aggregate demand keeps shifting rightward month after month and aggregate supply
remains constant, the economy will experience a recession.
a. True
b. False
The relative concept of poverty is based on how far a family falls behind the
a. average family income.
b. top 20 percent of families.
c. minimum in wages.
d. any of the above.
If nations begin to specialize in production for the purpose of trade,
a. the utility from consumption will increase, but not the total output.
b. total world output will increase, as well as well being from consumption.
c. total world output will increase, but well being from consumption will not.
d. neither total output nor well being from consumption will change.
e. the impact on total output and well being cannot be predicted.
If income in Austria decreases by 30 million euros and consumption decreases by 24
euros, then the MPC equals
a. 0.90.
b. 0.80.
c. 0.60
d. −0.60.
A mathematical formula for the deficit would be
a. C + I + G − Transfers + Taxes
b. C + I + G + Transfers − Taxes
c. I + G + Transfers − Taxes
d. G + Transfers − Taxes
The Federal Reserve System was established
a. at the request of farmers to keep down interest rates.
b. because Americans believe in centralization of authority.
c. after four severe bank panics between 1873 and 1907.
d. as part of the Treasury Department.
If the supply curve for housing has the normal positive slope, rent controls will likely
a. increase the amount of housing.
b. improve the quality of housing.
c. aggravate the housing shortage.
d. help low-income families find suitable housing.
e. increase the demand for housing.
If an industry consists of five firms each with a 20% market share, then the
Herfindahl-Hirschman index would equal 1,600.
a. True
b. False
A budget deficit will be least inflationary if the aggregate
a. demand curve is very steep.
b. demand curve is very flat.
c. supply curve is very flat.
d. supply curve is very steep.
Probably the most important source of efficiency in production is
a. investing in more capital goods.
b. consuming rationally.
c. expanding the production possibilities frontier.
d. increasing inputs of energy and raw materials.
e. the specialization of labor.
For liberals, the United States has a(n)
a. public sector that is too large.
b. private sector that is too small.
c. economy that is too heavily regulated.
d. public sector that is too small.
Elasticity
a. deals with percentage changes in price and quantity demanded.
b. employs percentage changes calculated in terms of average values of the prices and
quantities at issue.
c. is generally stated in absolute value.
d. All of the above are correct.
Figure 11-1
In Figure 11-1, to achieve equilibrium at potential GDP the government could
a. increase taxes.
b. decrease transfer payments.
c. increase government purchases.
d. None of the above is correct.
A head tax is
a. always regressive.
b. an indirect tax on the value of property.
c. the primary tax used by U.S. municipalities to raise revenue.
d. All of the above are correct.
Workers in a nearby pizza restaurant may indirectly enjoy income increases from a
nearby construction process.
a. True
b. False
Political factors influence international trade because
a. foreign trade always involves at least two governments.
b. foreign governments are much less concerned with the welfare of citizens in other
countries.
c. foreign governments often establish impediments to free international trade.
d. All of the above are correct.
The only factor that can cause movement along the aggregate supply curve is the
a. labor force.
b. capital stock.
c. availability of resources.
d. price level.
e. All of the above are correct.