Foreign direct investment declined worldwide during the recession of 2007-2009. The
decline in foreign direct investment in developing countries can make it more difficult
for these countries to break out of the vicious cycle of low economic growth and
A) overpopulation.
B) low saving and investment.
C) a low import/export ratio.
D) low government spending.
Most economists believe that the biases in the consumer price index cause the CPI to
overstate the true inflation rate by about
A) one-half to one percentage point.
B) one to two percentage points.
C) one quarter percentage point.
D) one and one-half percentage points.
An economic principle that explains why countries produce different goods and
services is
A) absolute advantage.
B) trade as a percentage of GDP.
C) comparative advantage.
D) NAFTA.
Figure 2-1
Point C is
A) technically efficient.
B) unattainable with current resources.
C) inefficient in that not all resources are being used.
D) is the equilibrium output combination.
Figure 15-10
What is the area that represents consumer surplus under a monopoly?
A) the triangle P0P1F
B) the triangle P0P2E
C) the trapezium P1P2EF
D) the rectangle P1P3HF
If tax reduction and simplification are effective, then
A) real wages will rise as labor supply and demand increase.
B) saving and investment in new capital will increase.
C) interest rates will rise in financial markets and demand for financial assets falls.
D) fewer new firms will be established, since existing firms will make more profit.
In the medical profession, pediatricians receive lower salaries than cardiologists.
Suppose the government passes comparable worth legislation that requires hospitals to
pay pediatricians the same salaries as cardiologists. Explain the effect of this legislation
and illustrate your answer with demand and supply graphs for the following two
scenarios:
a. Hospitals respond by placing salaries at a level between the two existing salaries.
b. Hospitals respond by placing pediatricians’ salaries at the initial level of
cardiologists.
Which of the following conditions holds in an economically efficient competitive
market equilibrium?
A) The deadweight loss is positive but at a minimum.
B) Producer and consumer surplus are exactly equal in size.
C) There are no positive and no negative external effects from consumption and
production.
D) The marginal benefit of the last unit produced and consumed is maximized.
Figure 4-5
Figure 4-5 shows the market for apartments in
Springfield. Recently, the government imposed a rent ceiling of $1,000 per month.
Suppose that instead of a rent ceiling, the government imposed a price floor of $2,000
per month for apartments. What is the value of the portion of consumer surplus
transferred to producers as a result of the price floor?
A) $40,000
B) $100,000
C) $125,000
D) $140,000
In what ways do economists and policymakers who believe that market-based reforms
are the key to improving the health care system criticize the Patient Protection and
Affordable Care Act (ACA)?
Marsha Murphy complained, “Many jobs that are filled mostly by men offer higher
wages than most jobs that are typically filled by women. In many cases, the jobs men
have require the same education and skills as the jobs women have. This is clearly
unfair. Women should be paid the same wages as men are paid for jobs that are
equivalent in terms of their qualifications.” Which of the following statements describes
Marsha’s position?
A) Marsha believes that women’s wages should include a compensating differential.
B) Marsha believes employers assume that men and women have different job
preferences.
C) Marsha believes that employers are reluctant to hire women for certain jobs because
of cognitive dissonance.
D) Marsha endorses a concept called comparable worth.
In the long run,
A) GDP = potential GDP.
B) unemployment is below its natural rate.
C) LRAS and SRAS lie on the same line.
D) unemployment is above its natural rate.
Part of the spending on the Caldecott Tunnel project in northern California came from
the American Reinvestment and Recovery Act, which is an example of ________ aimed
at increasing real GDP and employment.
A) discretionary fiscal policy
B) an automatic stabilizer
C) contractionary fiscal policy
D) a transfer payment
Table 2-8
Table 2-8 shows the number of labor hours required to produce a digital camera and a
pound of wheat in China and South Korea. What is China’s opportunity cost of
producing one pound of wheat?
A) 0.04 units of a digital camera
B) 4 digital cameras
C) 25 digital cameras
D) 40 digital cameras
When Dr. Goldfinger decides on the companies in which he will invest, a ________
issue is being addressed.
A) microeconomic
B) macroeconomic
C) positive economic
D) normative economic
Table 2-8
Table 2-8 shows the output per month of two people, Wilma and Betty. They can either
devote their time to making marble statues or making marble benches.
What is Betty’s opportunity cost of making a statue?
A) 1/2 bench
B) 2 benches
C) 1/3 bench
D) 1.4 statues
If economists forecast a decrease in aggregate expenditure, which of the following is
likely to occur?
A) GDP will rise.
B) GDP will fall.
C) Wages will rise.
D) Inventories will fall.
Figure 11-12
Which of the following statements about the input combinations shown in the diagram
is false?
A) The firm produces a higher output level when it uses input combination compared to
input combination a.
B) The firm produces a lower output level when it uses input combination d compared
to input combination a.
C) The firm produces the same output level when it uses input combination a or c.
D) The firm incurs the same total cost when it uses input combination a or c to produce
a given quantity of output.