Collaborative research is especially important in high-technology sectors because a
single firm might not have the resources to develop a significant innovation.
a. True
b. False
The main international repercussion of either a fiscal expansion or monetary contraction
is to
a. raise interest rates and the exchange rate, thereby crowding out net exports.
b. raise interest rates and lower the exchange rate, thereby crowding in net exports.
c. lower interest rates and the exchange rate, thereby crowding in net exports.
d. lower interest rates and raise the exchange rate, thereby crowding out net exports.
Using graphs to illustrate the concepts, absolute advantage
a. is shown with differences in slope of a production possibilities curve; comparative
advantage is shown with a lower curve.
b. requires a very steep curve; comparative advantage requires a curve with a shallow
slope.
c. on one good requires that the slope of the production possibilities curve be steeper for
that good.
d. is shown with a higher production possibilities curve; comparative advantage is
shown with differences in slope of the curves.
The U.S. trade deficits of the 1980s and 1990s may represent a problem because they
will require
a. higher consumption in the future in order to increase imports.
b. lower consumption in the future in order to repay interest and principal to foreigners.
c. lower consumption in the future in order to finance increased investment.
d. higher budget deficits in the future in order to increase the trade surplus.
Voluntarism as an approach to environmental problems
a. has no place at all in solving the problems.
b. is quite successful in reducing pollution.
c. is more effective than first meets the eye.
d. often has proved weak and unreliable.
The “greenhouse effect” is predicted to
a. lead to the next ice age.
b. raise global temperature.
c. pollute the oceans.
d. break the edifice complex by the turn of the century.
Figure 11-2
In Figure 11-2, at what quantity would the monopolist maximize profit?
a. A
b. B
c. C
d. D
In the monetarist view, the money supply affects the economy
a. through investment spending and government spending.
b. indirectly through interest rates.
c. directly, apart from interest rates.
d. by altering the size of the money multiplier.
Tax loopholes serve to
a. improve the incomes of the poor.
b. erode the progressivity of the income tax.
c. increase the progressivity of the income tax.
d. decrease work incentives for the poor.
Individual banks always respond quickly and significantly to changes in the discount
rate.
a. True
b. False
If inventory levels are decreasing, then we should expect business firms to
a. decrease prices.
b. decrease output.
c. lay off workers.
d. increase output.
The distribution of income in a market economy is determined by
a. the level of employment and prices of the factors of production.
b. the prices of factors of production.
c. largely unknown forces which economists seek to discover.
d. decisions of government offices related to distribution.
The substitution effect of a decrease in the wage rate would lead most people to
a. supply less labor and demand less leisure.
b. supply less labor and demand more leisure.
c. supply more labor and demand less leisure.
d. supply more labor and demand more leisure.
The concept of economic rent would be more applicable to the earnings of
a. a secretary.
b. Peyton Manning.
c. a doctor or a lawyer.
d. only a landowner.
Define the following terms and explain their importance to the study of economics.
a. demand
b. surplus
c. equilibrium
d. law of supply and demand
e. quantity demanded
Figure 20-6
In Figure 20-6, which of the following will cause a movement from equilibrium at point
D to equilibrium at point B?
a. an appreciation of the dollar
b. a depreciation of the dollar
c. a depreciation of the Japanese yen
d. an increase in the U.S. price level
A serious burden of a budget deficit and an increase in the national debt comes on the
supply side because large budget deficits
a. discourage consumption and therefore lead to production cutbacks.
b. lead to lower interest rates and therefore to excessive optimism by consumers and
businesspeople.
c. discourage investment and therefore may reduce the growth of the nation’s capital
stock.
d. discourage foreign investment and therefore limit employment opportunities.
If demand for a seller’s product is elastic, a price increase will decrease total revenue.
a. True
b. False
The short-run supply curve for the perfectly competitive firm is that part of the marginal
cost curve that lies above the average fixed cost curve.
a. True
b. False
Which of the following is not a loan of funds?
a. home mortgage
b. government bond
c. corporate stock
d. corporate bond
Producers will change their prices when GDP is at the equilibrium level.
a. True
b. False
The Fed frequently uses the discount rate and the required reserve ratio as instruments
of monetary policy.
a. True
b. False
The international organization most responsible for rising prices during the 1970s was
a. the WTO.
b. OPEC.
c. the CIA.
d. the World Bank.
e. the Trilateral Commission.
The marginal revenue product of an hour of labor used in steel production is equal to
a. its marginal physical product times the hourly wage rate.
b. its marginal physical product times the price of steel.
c. the hourly wage rate.
d. its marginal physical product divided by the price of steel.
The purchase of a new house is included in government spending.
a. True
b. False
Full employment implies which of the following is reduced to zero?
a. cyclical unemployment only
b. frictional unemployment only
c. frictional and structural unemployment only
d. frictional, structural, and cyclical unemployment
A demand curve is described as perfectly inelastic if
a. the same quantity is purchased regardless of price.
b. the same price is charged regardless of quantity sold.
c. neither price nor quantity demanded ever change.
d. only quantity demanded can change.
The term “unemployed” includes all people who want a job, but don’t have one.
a. True
b. False
For a major country with extensive capital flows, what is the effect of a decrease in
interest rates?
a. a currency depreciation and increased net exports
b. a currency depreciation and reduced net exports
c. a currency appreciation and increased net exports
d. a currency appreciation and reduced net exports
The total burden of a tax equals tax collections minus excess burdens.
a. True
b. False
A regressive tax is one in which the average tax rate falls as income rises.
a. True
b. False