All else equal, as the price of a product falls, the quantity supplied increases.
Market equilibrium occurs where the quantity supplied is equal to the quantity
demanded.
The additional output a firm produces by hiring one more worker is called the marginal
product of labor.
Contractionary monetary policy should increase foreign financial investment in the
United States.
The double taxation problem occurs because households pay taxes on dividends and
capital gains from stock and corporations pay taxes on corporate profits.
In September 2006, the Food and Drug Administration recommended that Americans
avoid eating bagged raw spinach in the wake of an outbreak of E. coli bacteria.
Following this recommendation, the food industry looked at alternatives and many
turned to arugula. One Chicago distributor claimed, “The sale of the stuff has gone
through the roof.” Based on this information
A) arugula is a normal good while raw spinach is an inferior good.
B) the cross-price elasticity between arugula and spinach is negative.
C) the cross-price elasticity between arugula and spinach is positive
D) the price elasticity of arugula is positive while the price elasticity of spinach falls to
zero.
When a firm charges $4.95 instead of $5.00, what do economists call this pricing
strategy?
A) cost-plus pricing
B) indirect pricing
C) odd pricing
D) unusual pricing
Which of the following is a macroeconomics question?
A) What determines the minimum wage?
B) What determines the production of video game consoles?
C) What factors determine the price of Oreo cookies?
D) What determines the salaries of college professors?
Which of the following is true?
A) The money market model is essentially a model that determines the short-term
nominal rate of interest.
B) The money market model is essentially a model that determines the short-term real
rate of interest.
C) The loanable funds model is essentially a model that determines the short-term real
rate of interest.
D) The loanable funds model is essentially a model that determines the long-term
nominal rate of interest.
A network externality occurs when
A) there is production cost savings from being networked with suppliers.
B) there is production cost savings from being networked with buyers.
C) the usefulness of a good is affected by how many others use the good.
D) the usefulness of a good is affected by celebrities who use the good.
Suppose you deposit $4,000 in currency into your checking account at Bank of
America. Assume that Bank of America has no excess reserves at the time you make
your deposit and that the required reserve ratio is 10 percent.
a. Use a T-account to show the initial effect of this transaction on Bank of America’s
balance sheet.
b. Suppose that Bank of America makes the maximum loan they can from the funds you
deposited. Use a T-account to show the initial effect on Bank of America’s balance sheet
from granting the loan. Also include in this T-account the transaction from question (a.).
c. Now suppose that whoever took out the loan in question (b) writes a check for this
amount and that the person receiving the check deposits it in Bank of Boston. Show the
effect of these transactions on the balance sheet of Bank of America and Bank of
Boston, after the check has been cleared. On the T-account for Bank of America,
include the transactions from questions (a) and (b).
d. What is the maximum increase in checking account deposits that can result from your
$4,000 deposit? What is the maximum increase in the money supply? Explain.
The principal-agent problem is a problem
A) caused by a person (principal) who hires an agent to act on his behalf but is
unwilling to delegate authority to the agent to carry out the task in the best possible
way.
B) caused by agents pursuing their own interests rather than the interests of the
principals who hired them.
C) of the power system of boss and subordinate where the boss (principal) exerts
influence over his subordinates (agents) using punishment or threat.
D) that exists when a person (principal) has more information about the task than the
agent he hires to perform the task.
Which of the following is an example of a long-run adjustment?
A) Your university offers Saturday morning classes next fall.
B) Ford Motor Company lays off 2,000 assembly line workers.
C) A soybean farmer turns on the irrigation system after a month long dry spell.
D) Wal-Mart builds another Supercenter.
Trade that is within a country or between countries is based on the principle of
A) absolute advantage.
B) scarcity.
C) competition.
D) comparative advantage.
Which of the following statements is true?
A) An explicit cost is an actual cost; an implicit cost is a theoretical cost.
B) Economic costs include both explicit costs and implicit costs.
C) An explicit cost is more important, dollar for dollar, than an implicit cost.
D) Explicit costs are accounting costs, not economic costs; implicit costs are economic
costs, not accounting costs.
Which of the following is a reason why some firms donot use commission pay?
A) It gives workers incentive to produce more.
B) It increases firm profits.
C) It is difficult to measure the output and attribute output to a particular worker.
D) The best workers stay and less productive workers leave.
If the balance on the current account is $346 billion and the balance on the financial
account is -$204 billion, what is the balance on the capital account, assuming no
statistical discrepancy?
A) $550 billion
B) $142 billion
C) $0
D) -$142 billion
If taxes are less than transfers plus government spending, then
A) there is positive saving.
B) there is a balanced budget.
C) there is a budget surplus.
D) there is public dissaving.
Figure 29-1
The depreciation of the dollar is represented as a movement from
A) B to A.
B) D to C.
C) B to C.
D) A to C.
E) A to B.
When the price of audio books, a normal good, falls, causing your purchasing power to
rise, you buy more of them due to
A) the substitution effect.
B) the income effect.
C) the deadweight loss effect.
D) the elasticity effect.
Twenty-seven countries in Europe have eliminated all tariffs with each other. This
group of countries is known as the
A) European Union.
B) United Federation of Europe.
C) Gruppo Euro.
D) European Free Trade Association.
If the marginal propensity to save is 0.25, then a $10,000 decrease in disposable income
will
A) increase consumption by $7,500.
B) increase consumption by $2,500.
C) decrease consumption by $7,500.
D) decrease consumption by $2,500.
What is a primary market?
A) a market where primary inputs like steel are sold
B) a market where you can sell any bonds you own as a private investor
C) a market where a newly issued claims are sold to initial buyers by the borrowing
firm
D) a market where you can sell any stocks you own as a private investor
Table 2-5
Table 2-5 shows the number of labor hours required to produce a cell phone and a board
foot of lumber in Estonia and Finland. What is Finland’s opportunity cost of producing
one board foot of lumber?
A) 0.25 cell phones
B) 4 cell phones
C) 12 cell phones
D) 16 cell phones
In August 2013, the U.S. unemployment rate was highest for
A) whites.
B) Hispanics.
C) high school dropouts.
D) African-Americans.
E) Asians.
What is the difference between the voting paradox and the Arrow impossibility
theorem?
Use the saving and investment equation to explain why the United States experienced
large current account deficits in the late 1990s.
Complete the following table.
Define a partnership.
Suppose that if a local McDonald’s restaurant reduces the price of a Big Mac from
$4.00 to $3.25, the number of Big Macs it sells per day will increase from 4 to 5.
Explain the output effect and the price effect resulting from this change. Using a graph,
illustrate both the loss in revenue from selling each of the first 4 Big Macs for $0.75
less and the additional revenue from selling 1 more Big Mac. What is the total change
in revenue received which results from this price decrease?
Calculate the value of the government purchases multiplier if the marginal propensity to
consume equals 0.9, the tax rate equals 0.25, and the marginal propensity to import
equals 0.15.
How does a negative externality in production reduce economic efficiency?
C = 4,000 + 0.5Y
I = 1,500
G=2,250
NX = -150 Given the equations for C, I, G, and NX above, what is the equilibrium level
of GDP (Y)?
Explain why it is more difficult to determine the incidence of the corporate income tax
than it is to determine the incidence of the tax on gasoline.