If a nation wants to maintain a fixed exchange rate at a time when supply and demand
are causing an excess of imports over exports, the nation might
a. shift to a more expansionary monetary policy.
b. shift to a more restrictive monetary policy.
c. reduce its trade barriers (tariffs and quotas).
d. tax exports and subsidize imports.
An increase in the dollar price of the Mexican peso (an appreciation of the peso) would
cause
a. Mexico’s imports to increase and exports to decline.
b. Mexico’s exports to increase and imports to decline.
c. both Mexico’s imports and exports to decline.
d. both Mexico’s imports and exports to rise.
Use the figure to answer the following question(s).
Figure 8-4
Using Figure 8-4, calculate the firm’s total cost of producing four units of output.
a. $4
b. $8
c. $12
d. $16
The Social Security system is currently generating tax revenues that exceed the benefits
paid to recipients. This surplus is
a. being invested in foreign bonds, which will provide Americans with a source of
income when the baby boom generation retires.
b. separated from other government revenue so politicians will not spend the money
during the current period.
c. being channeled into earmarked private savings accounts.
d. invested in government bonds, the redemption of which will require an increase in
taxes (or additional Treasury borrowing).
The Agriculture Adjustment Act of the Roosevelt Administration attempted to boost
prices of agriculture products by
a. increasing the money supply from year to year at a constant rate.
b. decreasing the money supply through a policy of monetary contraction.
c. increasing demand through lower taxes and budget deficits.
d. reducing supply through the planned destruction of agricultural crops and livestock.
Use the figure to answer the following question(s).
Figure 11-8
If the output in the industry is produced by a monopolist, at what price will the good
sell and what quantity will be produced in Figure 11-8?
a. price, $10; quantity produced, 100
b. price, $15; quantity produced, 50
c. price, $15; quantity produced, 75
d. price, $20; quantity produced, 50
Use the figure to answer the following question(s).
Figure 9-4
If the market price of the product in Figure 9-4 rose to $8, indicate the firm’s
profit-maximizing output and total revenue.
a. output, 5 million; total revenue, $30 million
b. output, 5 million; total revenue, $40 million
c. output, 6 million; total revenue, $10 million (approx.)
d. output, 6 million; total revenue, $48 million
Figure 11-19
In the short run, the monopolist depicted in Figure 11-19 should
a. shut down because P < AVC at some output levels.
b. shut down because P < ATC at all output levels.
c. continue producing because P > AVC at some output levels.
d. continue producing because P > ATC at all output levels.
e. continue producing because monopolists never shut down.
As the share of healthcare expenditures paid for by third parties has grown, both
healthcare prices and total expenditures have increased rapidly. Is this surprising?
a. Yes; third-party payments provide healthcare consumers with a strong incentive to
economize, and therefore, the growth of expenditures is particularly surprising.
b. No; third-party payments weaken the incentive of healthcare consumers to
economize, and therefore, the rapid growth of expenditures is an expected result.
c. Yes; the price increases are surprising because healthcare suppliers have a strong
incentive to provide the services at a low price when they are paid for by a third party.
d. No; the growth of third-party payments will reduce the demand for healthcare, which
will lead to both higher prices and expenditure levels.
Generally, the supply of a resource in the short run will be
a. more elastic than in the long run.
b. less elastic than in the long run.
c. equally elastic as the supply of the resource in the long run.
d. directly related to the elasticity of demand for the product that the resource helps
produce.
According to the Keynesian view, if an economy was operating at long-run equilibrium,
an increase in government expenditures (holding taxes constant) would
a. be inflationary.
b. lead to a recession.
c. lower the real rate of interest.
d. reduce the size of the national debt.
An inflow of capital and a trade deficit are more dangerous when
a. the inflow of capital is channeled into private investment.
b. the inflow of capital is used to finance current consumption and/or channeled into
unproductive projects.
c. the unemployment rate of the country is low, because this will mean the capital
inflow will be inflationary.
d. the investment rate is already high and the unemployment rate low.
Use the figure to answer the following question(s).
Figure 12-1
If Figure 12-1 indicated the short-run and long-run supply curves for a resource, which
of the following would probably be the long-run supply curve of the resource?
a. Q2
b. Q3
c. Sb
d. Sa
When total revenue minus total economic cost is equal to zero, the firm is
a. earning above-average economic profit.
b. earning the normal profit rate.
c. losing too much money to stay in business.
d. earning abnormally low profits.
When prices rise, consumers and businesses hold larger money balances. This reduces
the supply of loanable funds, increases the interest rate, and discourages both
consumption and investment. This process is called the
a. interest rate effect.
b. real balance effect.
c. investment effect.
d. disinvestment effect.
Figure 17-13
In Figure 17-13, if the world price of a baseball is $3 and a tariff of $1 per baseball is
imposed in the United States, how much tariff revenue will the United States
government collect?
a. $4,000
b. $16,000
c. $20,000
d. $24,000
e. $48,000
If the index of leading indicators and other forecasting devices suggested that the
economy is moving into an inflationary boom, activists’ economic policy would call for
a. a decrease in money supply growth and a tax increase.
b. an increase in money supply growth and a shift toward a budget deficit.
c. an increase in money supply growth and a tax decrease.
d. a continuation of the policies already in place.
Some low-income countries generally remain poor because
a. their institutional arrangements and policies often discourage productive activity and
reduce the potential gains from specialization and exchange.
b. they are oppressed by developed nations that benefit from the cheap goods available
from countries with low wage rates.
c. they are poorly endowed with natural resources, which are essential for long-term
growth.
d. when the average income level is low, workers have little incentive to earn higher
incomes.
Other things constant, if both the benefits and costs of a public-sector activity are
widespread among voters, the political process will generally result in the
a. rejection of productive activities and acceptance of unproductive activities.
b. acceptance of both productive and unproductive activities.
c. rejection of both productive and unproductive activities.
d. acceptance of productive activities and rejection of unproductive activities.
Which of the following refers to when legislators trade votes on legislation?
a. the shortsightedness effect
b. the special-interest effect
c. rational-ignorance effect
d. logrolling
The costs of a firm indicate the desire of consumers for
a. the product produced by the firm.
b. other goods that might have been produced with the same resources.
c. goods that can be easily substituted for the good produced by the firm.
d. goods that are complementary with the good produced by the firm.
If the consumer price index (CPI) at the end of year one was 100 and was 108 at the end
of year two, the inflation rate during year two was
a. zero; the CPI of 100 indicates that prices were stable.
b. 8 percent.
c. 5 percent.
d. 108 percent.
Use the figure to answer the following question(s).
Figure 11-7
The demand and cost conditions in an industry are as depicted in Figure 11-7. In the
viewpoint of economic efficiency, what would the ideal price and output be?
a. price, $7; quantity produced, 100
b. price, $10; quantity produced, 170
c. price, $14; quantity produced, 100
d. price, $7; quantity produced, 200
Figure 4-3
Figure 4-3 indicates the demand (D) and supply (S) for the rental housing market in a
large city. If the government imposed a price ceiling of a, which of the following would
be true?
a. The quantity of rental housing demanded would be t.
b. The quantity of rental housing supplied would be r.
c. There would be a shortage of rental housing.
d. All of the above are true.
As the Fed shifted to a highly expansionary monetary policy during the second half of
2008, why were banks reluctant to extend loans and make investments?
a. Banks did not have enough excess reserves to extend loans and make investments.
b. The demand for loans was weak and the business climate was uncertain.
c. The rate of return on short-term investments was high, so banks were reluctant to
make long-term investments.
d. The interest rate that the Fed pays on excess reserves was maintained at a high rate.
A monopoly is most likely to emerge in a market when
a. the producers in the market have U-shaped average total cost curves.
b. the price elasticity of demand for the product is high.
c. the cost of entry and exit into the market is low.
d. economies of scale are large relative to market demand.
The Phillips curve illustrates the relationship between
a. change in the money supply and change in unemployment.
b. tax rates and tax revenues.
c. the equilibrium level of income and the employment rate.
d. inflation and unemployment.
Public choice theory indicates that representative government yields outcomes more
consistent with economic efficiency when a close relationship exists between the
benefits received and the costs borne by each voter. Which of the following methods of
financing a government program will most likely result in a close relationship between
voter benefits and costs?
a. progressive income tax
b. retail sales tax
c. property tax
d. user charges
Measured as a share of the labor force, union membership was at its highest level in the
United States during the
a. 1930s
b. 1950s
c. 1970s
d. 1990s
Figure 12-3
Refer to Figure 12-3. This figure depicts labor demand and supply in a nonunionized
labor market. The original equilibrium is at point A. If a labor union subsequently
establishes a union shop and negotiates an hourly wage of $20, then the employment
level
a. increases from 6,000 to 10,000.
b. increases from 3,000 to 10,000.
c. decreases from 10,000 to 3,000.
d. decreases from 6,000 to 3,000.
A good is considered nonexcludable if
a. many individuals can share in the consumption of the same unit of the good.
b. the consumption of the good by one individual lowers the amount available for
others.
c. it is impossible or very costly to exclude nonpaying customers from receiving the
good.
d. its production is financed through tax revenue rather than market prices.
Which of the following about Social Security is true?
a. The regressive nature of the Social Security benefit formula works to the
disadvantage of blacks and other groups with below-average earnings.
b. Social Security works to the disadvantage of blacks and other groups with
below-average life expectancy.
c. Blacks derive a higher rate of return from their Social Security taxes than whites.
d. Hispanics derive a lower rate of return from their Social Security taxes than both
whites and blacks.