A severe freeze has once again damaged the Florida orange crop. The impact on the
market for oranges will be a leftward shift in
a. demand as consumers try to economize because of the shortage.
b. both the supply and demand curves.
c. the supply curve.
d. the supply curve and a rightward shift in the demand curve, which will result in a
higher price.
The primary source of corporate financing in the United States is
a. the sale of stock.
b. the sale of bonds.
c. retained earnings.
d. lending from commercial banks.
As a result of the Fed’s unconventional purchase of over $1 trillion of mortgage-backed
securities in 2009, interest rates on both mortgage-backed securities and home
mortgages increased.
a. True
b. False
Figure 6-3
In Figure 6-3(b), as price falls from $15 to $6, total expenditure
a. falls.
b. increases.
c. remains constant.
d. first falls and then increases.
The structural deficit/surplus budget
a. measures the federal budget deficit/surplus as if the economy were at full
employment.
b. measures the federal budget deficit/surplus as if the economy were in recession.
c. measures the federal budget deficit/surplus as if the economy were suffering from
high inflation.
d. is used when structural unemployment is at a peak.
If a state government reduces property taxes for residents at the same time that it
increases the state income tax, what will happen to the expenditures schedule of the
residents of this state?
a. It shifts upward.
b. It shifts downward.
c. It becomes less steep.
d. It becomes steeper.
e. It does not change.
Briefly and concisely define the following concepts and terms.
a. marginal social cost
b. detrimental externalities
c. free-rider problem
d. cost disease
e. “defective telescopic faculty”
In recent decades, other countries have caught up to the U.S. and even surpassed it in
some important economic arenas.
a. True
b. False
Increases in the price of imported oil in 2011 led to a leftward shift of the aggregate
supply curve.
a. True
b. False
Economists are often required to make unrealistic assumptions concerning the problems
they are investigating.
a. True
b. False
What is Jim’s opportunity cost of operating his own business?
a. the total amount of money he puts into capital equipment
b. the value of his labor that is put into the business
c. the cost of hiring his laborers
d. All of the above are correct.
The relationship between professional basketball players and the owners’ association is
an example of a bilateral monopoly.
a. True
b. False
All externalities are detrimental.
a. True
b. False
To an economist, theory can be thought of as
a. abstraction for the sake of argument.
b. one person’s opinion, which is just as good as another’s.
c. another term for the description of a situation.
d. beliefs which cannot necessarily be verified.
e. explanation of mechanisms behind observed phenomena.
Part of the pollution problem is due to
a. the absence of markets for goods like clean air and clean water.
b. the lack of well-defined property rights to clean air and clean water.
c. the unreliability of voluntary programs to cut pollution.
d. All of the above are correct.
Subsidizing firms that pollute will reduce pollution in the long run.
a. True
b. False
The most common estimate of the value of transactions used to estimate velocity is
a. real GDP.
b. total sales.
c. nominal GDP.
d. cash balances.
In retaliation for U.S. support for Israel during the Arab-Israeli War, OPEC countries
stopped selling oil to the United States. For the United States, this embargo caused the
a. demand curve for oil to shift out.
b. demand curve for oil to shift in.
c. supply curve of oil to shift out.
d. supply curve of oil to shift in.
Direct controls on polluting activity
a. have never been tried as an instrument of environmental policy.
b. have been the chief instrument of environmental policy.
c. have been rejected as a tool of environmental policy.
d. are the tool of future environmental policy, based on 1993 legislation.
The marginal tax rate has less effect on economic incentives than does the average tax
rate.
a. True
b. False
The production function shows the volume of output that can be produced from given
inputs.
a. True
b. False
The more firms that are attracted to an industry, the greater will be the quantity of
product supplied at any given price.
a. True
b. False
The official fiscal year budget deficits disappeared from 1998 to 2001.
a. True
b. False
Which is the correct order of importance in terms of revenue collected among the
following federal taxes?
a. (1) corporate income taxes (2) value-added taxes (3) excise taxes
b. (1) personal income taxes (2) corporate income taxes (3) sales taxes
c. (1) payroll taxes (2) personal income taxes (3) federal excise taxes
d. (1) personal income taxes (2) payroll taxes (3) corporate income taxes
Vertical equity refers to the notion that individuals at all levels should be taxed equally.
a. True
b. False
Society can produce at a point outside the production possibilities frontier, but only if it
is using all of its resources efficiently.
a. True
b. False
Innovation in the U.S. was spurred by:
a. a free high school education in the U.S.
b. an influx of capable immigrants
c. an inexpensive patent system
d. All of the above are correct.
Innovation refers to the introduction of new products and processes into the market.
a. True
b. False
Which of the following was a result of the Dodd-Frank Act?
a. restricted bank activities
b. established a new consumer protection agency
c. tougher regulations for banks
d. All of the above
Macroeconomists pay little attention to the composition of aggregate output.
a. True
b. False
Successful advertising by a monopolist will
a. reduce the gap between the monopoly and competitive output.
b. increase the gap between the monopoly and competitive output.
c. cause the monopolist to overproduce.
d. cause the monopolist to decrease output.
Suppose that a negative income tax was created that set a minimum income for a family
of $5,000 per year and had a marginal tax rate of 33 percent. What is the break-even
level of income? If a person earned $5,000, what would the after-tax income level be?
If the earnings were $10,000, what would the after-tax income be?
According to the text, when management selects a price or quantity, it also selects the
other. Explain why this is true.
How does an open market purchase by the Fed affect the level of bank reserves and the
interest rate? Illustrate the interest rate effect by drawing the appropriate graph.
When price level is considered, the value of the multiplier will be less than that
suggested by the oversimplified version of multiplier. Why?
“I oppose a free trade agreement with Mexico because American workers will lose jobs
to low-paid Mexican workers.” Explain whether you agree or disagree with this
statement.
An economy produces only two goods, paper and scissors. Dyes from paper production
pollute a nearby river. Use a production possibilities curve to illustrate your explanation
of how the unfettered market would fail to provide the efficient mix of paper and
scissors.
How does government expenditure discourage some private investment?
Why is the advent of monopoly likely to shift cost curves?
It has been said that “economics is the science of common sense.” Is economics
synonymous with common sense?
Can positive economic profits persist under monopolistic competition in the long run.
Why?
What are tax loopholes and what are their effects?
Suppose that the government decided to increase interest rates in order to encourage
saving. Would this likely lead to an increase in investment and higher future economic
growth rates? Explain.
The banking system of the United States is a fractional reserve system. What dangers
does this pose for the safety of the banking system?
Why do many economists rate the income tax high in efficiency and equity terms?
Describe the three pillars of productivity growth.
What is strategic trade policy? What are the pros and cons of such a policy by a nation
in its dealings with other nations?