Potential GDP in the United States
A) does not change over time.
B) grows as the economy grows.
C) changes over a given business cycle.
D) declines over time.
Figure 2-4
Figure 2-4 shows various points on three different production possibilities frontiers for
a nation. A movement from ________ could occur because of an influx of immigrant
labor.
A) W to V
B) X to W
C) W to Z
D) Y to W
Which of the following would increase public saving?
A) an increase in taxes
B) an increase in transfers
C) an increase in government purchases
D) All of the above would increase public saving.
The coupon rate of a bond is equal to
A) the coupon payment.
B) the interest payment.
C) the interest rate.
D) the face value.
According to the Taylor rule, the Fed should set the target for the federal funds rate
equal to the sum of the equilibrium real federal funds rate, the current inflation rate,
one-half times the ________, and one-half times the ________.
A) interest rate gap; inflation gap
B) interest rate gap; output gap
C) inflation gap; output gap
D) unemployment gap; government-spending gap
Figure 18-6 Figure 18-6
shows the Lorenz curves for Islandia and Syldavia.
If area X = 2,060, area Y = 240, and area Z = 2,700, calculate the Gini coefficient for
Islandia.
A) 0.41
B) 0.45
C) 0.70
D) 0.76
In general, the labor supply curve
A) slopes downward because firms will hire fewer workers at higher wages.
B) slopes upward because as the wage rises the opportunity cost of leisure increases.
C) is vertical at the equilibrium wage rate.
D) is perfectly elastic at the equilibrium wage rate.
Why do convex indifference curve have a negative slope?
A) because consumers take market prices as given
B) because consumers face a budget constraint
C) because to keep utility constant, a consumer must get more of one good if she is to
give up some of the other
D) because scarcity implies that it is not possible to consume more of one good without
giving up some of the other
One reason Starbucks experienced a decline in sales in the late 2000s is because
A) the product they offered was becoming less differentiated from their competitors
products.
B) the coffeehouse market transitioned from being monopolistically competitive to
perfectly competitive.
C) barriers to entry became more restrictive in the coffeehouse market.
D) the number of competitors in the market declined dramatically.
If nominal GDP exceeds real GDP for a specific year, then the GDP deflator must be
A) equal to 100.
B) greater than 100.
C) less than 100.
D) less than 0.
Which of the following is not an advantage of starting a new business as a
proprietorship?
A) The owner has complete control over the business.
B) A proprietorship has few government rules and regulations to comply with.
C) Business profits are only taxed once, not twice.
D) A proprietorship can easily attain additional funding.
What is adverse selection?
A) It refers to the private, self-interested actions people that people pursue, which when
taken collectively leads to a loss in economic surplus.
B) It refers to the actions people take after they have entered into a transaction that
make the other party to the transaction worse off.
C) It refers to the situation in which one party to a transaction takes advantage of
knowing more than the other party to the transaction.
D) It refers to the actions people take before they enter into a transaction so as to
mislead the other party to the transaction.
Economists have used ________ and ________ in experiments designed to determine
whether consumers care about fairness when they make decisions.
A) Giffen goods; luxury goods
B) the income effect; the substitution effect
C) the ultimatum game; the dictator game
D) network externalities; the endowment effect
If we include consideration of potential effects of a proposed tax reduction and
simplification on the labor supply, we would expect crowding out of investment and net
exports brought about by the tax cut to be
A) less than it would be without the supply-side effects.
B) increased as aggregate real income and output rise in the long run.
C) unaffected by the shifting long-run aggregate supply curve.
D) dependent upon the impact of this tax change on consumer disposable income.
Figure 18-3
Consider the market for U.S. dollars against the Japanese yen shown above. An event
which could have caused the changes shown in the graph would be
A) an increase in U.S. real income.
B) speculators expect the dollar to depreciate in value in the near future.
C) an economic expansion in the United States.
D) a decrease in Japanese interest rates.
Figure 18-2
Figure 18-2 shows a demand curve
and two sets of supply curves, one set more elastic than the other. If the government
imposes an excise tax of $1.00 on every unit sold, the consumers burden of the tax
A) is Pa– Pcunder either supply curve.
B) is P- Pcunder either supply curve.
C) is Pa– Pcif the supply curve is S0 and P- Pcif the supply curve is S1.
D) is Pa– Pdif the supply curve is S0 and P- Peif the supply curve is S1.
Figure 2-15 Figure
2-15 shows the production possibilities frontiers for Greenland and Iceland. Each
country produces two goods, snow cones and popsicles. Which country has a
comparative advantage in the production of snow cones?
A) Greenland
B) They have equal productive abilities.
C) Iceland
D) neither country
Assume that the LCD and plasma television sets industry is perfectly competitive.
Suppose a producer develops a successful innovation that enables it to lower its cost of
production. What happens in the short run and in the long run?
A) Initially, the firm will be able to increase its profit significantly, but in the long run
its profits will still be greater than zero but lower than its short-run profits because other
firms would also innovate.
B) The firm will probably incur losses temporarily because of the high cost of the
innovation, but in the long run it will start earning positive profits.
C) This firm will be able to earn above normal profits indefinitely if it obtains a patent
for its innovation.
D) The firm will be able to increase its profits temporarily, but in the long run its profits
will be eliminated as other firms copy the innovation.
A constant-cost industry is an industry in which
A) average costs fall as the industry expands output.
B) average costs rise as the industry expands output.
C) average costs remain constant as the industry expands output.
D) input prices rise at a constant rate as firms in the industry use more inputs.
All of the following statements are true of the minimum efficient scale exceptone.
Which one?
A) All possible economies of scale have been exhausted.
B) The short-run average total cost curves minimum point is equal to the long run
average cost curves minimum point.
C) Any increase in the scale of operation will encounter diseconomies of scale.
D) An increase in the output level will increase profit.