When demand is inelastic, an increase in price will cause
a. an increase in total revenue.
b. a decrease in total revenue.
c. no change in total revenue but an increase in quantity demanded.
d. no change in total revenue but a decrease in quantity demanded.
Figure 9-9
Refer to Figure 9-9. The change in total surplus in this market because of trade is
a. D, and this area represents a loss of total surplus because of trade.
b. D, and this area represents a gain in total surplus because of trade.
c. B + D, and this area represents a loss of total surplus because of trade.
d. B + D, and this area represents a gain in total surplus because of trade.
Figure 8-9
The vertical distance between points A and C represent a tax in the market.
Refer to Figure 8-9. The loss of producer surplus as a result of the tax is
a. $3,000.
b. $6,000.
c. $9,000.
d. $12,000.
Figure 4-22
Panel (a) Panel (b)
Panel (c) Panel (d)
Refer to Figure 4-22. Panel (b) shows which of the following?
a. a decrease in demand and a decrease in quantity supplied
b. a decrease in demand and a decrease in supply
c. a decrease in quantity demanded and a decrease in quantity supplied
d. a decrease in quantity demanded and a decrease in supply
If for some reason Americans desired to increase their purchases of foreign assets, then
other things the same
a. both the real exchange rate and the quantity of dollars exchanged in the market for
foreign-currency exchange would fall.
b. both the real exchange rate and the quantity of dollars exchanged in the market for
foreign-currency would rise.
c. the real exchange rate would rise and the quantity of dollars exchanged in the market
for foreign-currency would fall.
d. the real exchange rate would fall and the quantity of dollars exchanged in the market
for foreign-currency would rise.
Figure 3-9
Uzbekistan’s Production Possibilities Frontier Azerbaijan’s Production
Possibilities Frontier
Refer to Figure 3-9. Azerbaijan should specialize in the production of
a. bolts and import nails.
b. nails and import bolts.
c. both goods and import neither good.
d. neither good and import both goods.
Other things the same, if a country’s domestic investment decreases, then
a. net capital outflow rises, so net exports rise.
b. net capital outflow rises, so net exports fall.
c. net capital outflow falls, so net exports rise.
d. net capital outflow falls, so net exports fall.
Anita sharpens knives in her spare time for extra income. Buyers of her service are
willing to pay $3.50 per knife for as many knives as Anita is willing to sharpen. On a
particular day, she is willing to sharpen the first knife for $2.00, the second knife for
$2.50, the third knife for $3.00, and the fourth knife for $3.50. Assume Anita is rational
in deciding how many knives to sharpen. Her producer surplus is
a. $3.50.
b. $3.00.
c. $2.00.
d. $0.50.
Table 16-3.
The First Bank of Fairfield
Refer to Table 16-3. The reserve ratio for this bank is
a. 0 percent.
b. 20 percent.
c. 80 percent.
d. 100 percent.
“Monetary policy can be described either in terms of the money supply or in terms of
the interest rate.” This statement amounts to the assertion that
a. rightward shifts of the money-supply curve cannot occur if the Federal Reserve
decides to target an interest rate.
b. the activities of the Federal Reserve’s bond traders are irrelevant if the Federal
Reserve decides to target an interest rate.
c. changes in monetary policy aimed at expanding aggregate demand can be described
either as increasing the money supply or as increasing the interest rate.
d. our analysis of monetary policy is not fundamentally altered if the Federal Reserve
decides to target an interest rate.
Soon after he became the chairman of the Federal Reserve System in 1979, Paul
Volcker embarked on a course
a. of accommodative monetary policy.
b. of disinflation.
c. that was designed to reduce the unemployment rate.
d. that produced results that were clearly consistent with those predicted by
rational-expectations theorists.
Wealth is redistributed from debtors to creditors when inflation was expected to be
a. high and it turns out to be high.
b. low and it turns out to be low.
c. low and it turns out to be high.
d. high and it turns out to be low.
Figure 22-6
Use the two graphs in the diagram to answer the following questions.
Refer to Figure 22-6. The economy would move from C to B
a. in the short run if money supply growth increased unexpectedly.
b. in the short run if money supply growth decreased unexpectedly.
c. in the long run if money supply growth increases.
d. in the long run if money supply growth decreases.
Table 16-5.
Bank of Pleasantville
Refer to Table 16-5. Assume there is a reserve requirement and the Bank of
Pleasantville is exactly in compliance with that requirement. Assume the same is true
for all other banks. Lastly, assume people hold only deposits and no currency. What is
the money multiplier?
a. 5
b. 10
c. 15
d. 20
What is the future value of $500 one year from today if the interest rate is 6 percent?
a. $515
b. $520
c. $530
d. None of the above is correct.
When a tax is imposed on the buyers of a good, the demand curve shifts
a. downward by the amount of the tax.
b. upward by the amount of the tax.
c. downward by less than the amount of the tax.
d. upward by more than the amount of the tax.
Which of the following is adverse selection?
a. the risk associated with selecting stocks in only a few specific companies
b. the risk that a person will become overconfident in his ability to select stocks
c. a high-risk person being more likely to apply for insurance
d. after obtaining insurance a person having less incentive to be careful
Strike Out Bowling Balls produces 800 bowling balls per day using 2 workers who
each work 8 hours per day. What is Strike Out’s productivity?
a. 800 bowling balls
b. 100 bowling balls per hour
c. 50 bowling balls per hour
d. None of the above is correct.
Which of the following policies would be advocated by proponents of stabilization
policy when the economy is experiencing severe unemployment?
a. a decrease in the money supply
b. a reduction in tax rates
c. a decrease in government purchases
d. None of the above is correct.
A deadweight loss is a consequence of a tax on a good because the tax
a. induces the government to increase its expenditures.
b. induces buyers to consume less, and sellers to produce less.
c. increases the equilibrium price in the market.
d. imposes a loss on buyers that is greater than the loss to sellers.
In Ireland, a pint of beer costs 3 euros. In Australia, a pint of beer costs 4 Australian
dollars. If the exchange rate is .8 euros per Australian dollar, what is the real exchange
rate?
a. 4/2.4 pints of Irish beer per pint of Australian beer
b. 3/3.2 pint of Irish beer per pint of Australian beer
c. 3.2/3 pints of Irish beer per pint of Australian beer
d. 2.4/4 pints of Irish beer per pint of Australian beer
Which of the Ten Principles of Economics does welfare economics explain more fully?
a. The cost of something is what you give up to get it.
b. Markets are usually a good way to organize economic activity.
c. Trade can make everyone better off.
d. A country’s standard of living depends on its ability to produce goods and services.
Figure 9-19. On the diagram below, Q represents the quantity of textiles and P
represents the price of textiles.
Refer to Figure 9-19. With free trade, consumer surplus in the textile market amounts
to
a. $210.
b. $320.
c. $405.
d. $910.
Based on the quantity equation, if M = 100, V = 3, and Y = 200, then P =
a. 1.
b. 1.5.
c. 2.
d. None of the above is correct.
If the reserve ratio is 12.5 percent, then $2,000 of additional reserves can create up to
a. $8,000 of new money.
b. $16,000 of new money.
c. $32,000 of new money.
d. None of the above is correct.
In the open-economy macroeconomic model, the demand for dollars shifts right if at
any given exchange rate
a. foreign residents want to buy more U.S. goods and services.
b. U.S. residents want to buy fewer foreign goods and services.
c. Both A and B are correct.
d. None of the above is correct.
What you give up to obtain an item is called your
a. opportunity cost.
b. explicit cost.
c. monetary cost.
d. direct cost.
Table 11-5
The table below pertains to Napandsnack, an economy in which the typical consumer’s
basket consists of 2 pillows and 15 hotdogs.
Refer to Table 11-5. If the base year is 2011, then the CPI
a. increased from 2009 to 2010 and increased from 2010 to 2011.
b. increased from 2009 to 2010 and decreased from 2010 to 2011.
c. decreased from 2009 to 2010 and increased from 2010 to 2011.
d. decreased from 2009 to 2010 and decreased from 2010 to 2011.
In an economy in which decisions are guided by prices and individual self-interest,
there is
a. the potential to achieve efficiency in production.
b. a strong need for government intervention in the market.
c. less efficiency than would be observed in a centrally-planned economy.
d. more need for a strong legal system to control individual greed than would be needed
in a centrally-planned economy.
Figure 7-3
Refer to Figure 7-3. When the price falls from P1 to P2, which area represents the
increase in consumer surplus to new buyers entering the market?
a. ABD
b. ACG
c. BCDF
d. DFG
Figure 4-21
Refer to Figure 4-21. Which of the following movements would illustrate the effect in
the market for Ramen noodles of a decrease in the incomes of young adults, assuming
that Ramen noodles are an inferior good?
a. Point A to Point B
b. Point C to Point B
c. Point C to Point D
d. Point A to Point D
When a country that imports a particular good imposes a tariff on that good,
a. consumer surplus increases and total surplus increases in the market for that good.
b. consumer surplus increases and total surplus decreases in the market for that good.
c. consumer surplus decreases and total surplus increases in the market for that good.
d. consumer surplus decreases and total surplus decreases in the market for that good.