The producer price index tracks the prices firms receive for goods and services at all
stages of production.
If you purchase a share of stock from your friend who initially purchased the stock
three years ago, your purchase of the stock represents a transaction in the primary
financial market.
As population declines, scarcity eventually disappears.
Occupational licensing is an example of an entry barrier that improves a country’s
standard of living.
“An increase in the price of oranges will increase the demand for grapefruits.” This
statement is an example of a normative economic statement.
A decrease in the amount of human capital acquired by workers will lead to decrease in
the supply of labor.
Inflation is generally the result of total spending growing faster than total production.
Which of the following statements is false?
A) Anytime you have to decide which action to take you are facing an economic
trade-off.
B) Trade-offs do not apply when the consumers purchase a product for which there is
excess supply, such as a stock clearance sale.
C) Every individual, no matter how rich or poor, is faced with making trade-offs.
D) Economics is a social science that studies the trade-offs we are forced to make
because of scarcity.
Figure 4-1 Figure 4-1 shows Kendra’s
demand curve for ice-cream cones.
If the market price is $4.00, what is the maximum number of ice cream cones that
Kendra will buy?
A) 0
B) 2
C) 3
D) 4
Suppose there has been an increase in investment. As a result, real GDP will ________
in the short run, and ________ in the long run.
A) increase; increase further
B) increase; decrease to its initial value
C) decrease; decrease further
D) decrease; increase to its initial level
Monetary policy could be procyclical if the Federal Reserve
A) is late recognizing that a recession has begun and conducts expansionary monetary
policy.
B) is quick to recognize that a recession has begun and conducts expansionary
monetary policy.
C) is late recognizing that a recession has begun and does not conduct expansionary
monetary policy.
D) is quick to recognize that a recession has begun and does not conduct expansionary
monetary policy.
Economies of scale will create a barrier to entry in an oligopoly industry when
A) a firm’s minimum efficient scale occurs where long-run average total costs are
constant.
B) the typical firm’s long-run average total cost curve reaches a minimum at a level of
output that is a large fraction of total industry sales.
C) the typical firm’s long-run average total cost curve reaches a minimum at a level of
output that is a small fraction of total industry sales.
D) the industry’s four-firm concentration ratio is less than 40 percent.
Why does the short-run aggregate supply curve shift to the right in the long run,
following a decrease in aggregate demand?
A) Workers and firms adjust their expectations of wages and prices downward and they
accept lower wages and prices.
B) Workers and firms adjust their expectations of wages and prices downward and they
push for higher wages and prices.
C) Workers and firms adjust their expectations of wages and prices upward and they
push for higher wages and prices.
D) Workers and firms adjust their expectations of wages and prices upward and they
accept lower wages and prices.
Comparative advantage means
A) the ability to produce more of a product with the same amount of resources than any
other producer.
B) the ability to produce a good or service at a lower opportunity cost than any other
producer.
C) the ability to produce a good or service at a higher opportunity cost than any other
producer.
D) compared to others you are better at producing a product.
If the price of grapefruit rises, the substitution effect due to the price change will cause
A) a decrease in the demand for grapefruit.
B) a decrease in the demand for oranges, a substitute for grapefruit.
C) a decrease in the quantity demanded of grapefruit.
D) a decrease in the quantity supplied of grapefruit.
If the Federal Open Market Committee wants to decrease the money supply through
open market operations it will
A) buy U.S. Treasury Securities.
B) sell U.S. Treasury Securities.
C) increase the discount rate.
D) decrease the discount rate.
If firms in a monopolistically competitive industry are making profits in the short run
A) barriers to entry will be erected to keep out rivals.
B) some firms will ultimately exit the industry.
C) they will resort to advertising wars to help sustain these profits.
D) new firms will enter the market.
Economists Cade Massey and Richard Thaler analyzed whether teams in the National
Football League distributed salaries efficiently. Massey and Thaler found that
A) the first few players selected in first round of the NFL draft are paid much higher
salaries relative to their marginal products than players drafted later in the first round.
B) rookies are paid salaries greater than their marginal products; veteran players are
paid salaries less than their marginal products.
C) veteran players who sign as free agents are paid more relative to their marginal
products than rookie players selected in the first round of the draft.
D) both rookie players and veteran players are paid less than the value of their marginal
products because of the lack of competition among teams.
Research has shown that most economic profits from selling a prescription drug are
eliminated 20 years after the drug is first offered for sale. The main reason for the
elimination of profits is
A) after 20 years most people who have taken the drug have passed away or are cured
of the illness the drug was intended to treat.
B) firms sell their patent rights to other firms so that they can concentrate on finding
drugs to treat new illnesses.
C) the quantity demanded of the drug has increased enough that the demand becomes
inelastic and revenue falls.
D) after 20 years patent protection is ended and other firms can produce less expensive
generic versions of the drug.
Table 11-5
Suzette’s Fancy Packaging subcontracts with Sunshineland Pecans to box dried fruit and
nuts for Suzette’s mail order business. Suzette rents space for her factory for $400 a
week in a nearby strip mall. She can hire temporary workers for $200 a week. Table
11-5 above shows her output and cost data. Use the table to answer questions a-e.
a. Complete the table.
b. In the last week of summer Suzette closes her business to go on a family vacation.
What are her costs during that week?
c. In one week Suzette exactly breaks even. If her revenue for the week is $1,200, how
many boxes of fruit and nuts did she produce?
d. Judging from the marginal product of labor data, would you say that Suzette had to
settle for increasingly unproductive workers? Explain your answer.
e. Suzette has received an order for 1,500 boxes of nuts per week for the next 3 months.
If she expects the trend in the marginal product of labor will continue in the same
direction, what do you think she should do? Should she not commit until she can move
to a larger space or should she just hire more workers? Explain your answer.
Table 8-4
Consider the data above (in billions of dollars) for an economy: Gross domestic product
(in billions of dollars) for this economy equals
A) $2,200.
B) $2,100.
C) $1,600.
D) $1,400.
Investment spending increases during ________, and decreases during ________.
A) an expansion; a recession
B) a recession; an expansion
C) a recession; a depression
D) a deflation; an inflation
Table 1-1
Lydia runs a small nail salon in the town of New Hope. She is debating whether she
should extend her hours of operation. Lydia figures that her sales revenue will depend
on the number of hours the nail salon is open as shown in the table above. She would
have to hire a worker for those hours at a wage rate of $10 per hour. Using marginal
analysis, how many hours should Lydia extend her nail salon’s hours of operations?
A) 2 hours
B) 3 hours
C) 4 hours
D) 5 hours
E) 6 hours
The price of admission to Walt Disney World
A) can vary by your age and address.
B) is the same for everyone.
C) is kept low to attract customers, but Disney earns most of its profits by selling tickets
to rides and attractions inside the park.
D) is kept low to attract customers, but prices of rides and attractions inside the park
vary by your age, address and other factors.
The market price for coffee is $2.25 per cup. Austin is willing to pay $5.00 per cup,
Colin is willing to pay $4.00 per cup, Lucy is willing to pay $3.00 per cup, and Ike is
willing to pay $2.00 per cup. Construct a graph showing the consumer surplus for each
cup of coffee purchased. How many cups of coffee will be purchased? What is the
value of the consumer surplus each of the four consumers receives from their coffee
purchases?
If net taxes rise by $150 billion, would you expect household saving to fall by $150
billion, by more than $150 billion, or by less than $150 billion?
What is a monopsony?
Briefly explain how the miserliness of Ebenezer Scrooge might actually be beneficial
for economic growth.
Suppose you withdraw $1,000 from your savings account and put it in your checking
account. Briefly explain how this will affect M1 and M2.
Briefly describe the most important Differences between the market for health care and
the market for other goods and services.
Suppose that you decide that you no longer want to hold currency, and deposit all of
your currency holdings to your checking account. What is the immediate or initial
impact of this transaction on M1 and M2?
How does government support of health and education programs foster economic
growth?