Japanese employers tend to hire employees right out of college and train them for a
lifetime job with the company. Over time they found that women often, but not always,
married after a few years and left the company so they were not good training
investments. Based on this experience, and despite the exceptions, firms stopped hiring
any women for jobs that require substantial training. This practice is called
a. economic discrimination.
b. statistical discrimination.
c. compensating differentials.
d. the substitution effect.
Price controls would ordinarily be used to increase rather than decrease prices of
depletable resources.
a. True
b. False
From the demand side, the equilibrium level of GDP is one at which
a. everyone who wants a job has one and firms are not looking for extra workers.
b. the only unemployment is frictional.
c. aggregate demand equals production.
d. the only unemployment is cyclical.
The demand curve of a perfectly competitive firm is vertical.
a. True
b. False
The elasticity of supply is calculated by
a. determining the slope of the supply curve.
b. dividing the absolute change in quantity supplied by the absolute change in price.
c. dividing the percentage change in quantity supplied by the percentage change in
price.
d. dividing the percentage change in price by the percentage change in quantity
demanded.
Basic supply and demand analysis can be used to explain how externalities lead to
environmental problems.
a. True
b. False
A corporation is liable to pay to bondholders the
a. current interest rate in the bond market.
b. current yield on the particular bond.
c. coupon rate on the bond.
d. yield on the bond at maturity.
If the stock market falls by 25 percent next year and remains down, what is most likely
to happen to the consumption function?
a. It will shift upward.
b. It will shift downward.
c. It will not shift, but people will move downward along the consumption function.
d. It will not shift, but people will move upward along the consumption function.
The Army Corps of Engineers has been accused of acting on the basis of a so-called
“edifice complex.”
a. True
b. False
The aggregate supply curve is a fixed point representing potential GDP.
a. True
b. False
Comparative advantage is illustrated by the slopes of production possibilities frontiers.
a. True
b. False
In the 1990s the United States eliminated its budget deficit and expanded the money
supply. This should have led to
a. lower real interest rates and a depreciation of the dollar.
b. lower real interest rates and an appreciation of the dollar.
c. higher real interest rates and a depreciation of the dollar.
d. higher real interest rates and an appreciation of the dollar.
Economists are often perceived as disagreeing with each other. Is this the way things
really are?
a. No, economists agree on much more than is commonly supposed.
b. No, the problem is that some economists are smarter than others.
c. No, economists “stage” disagreements for public amusement.
d. Yes, economists rarely agree on much of anything.
e. Yes, economists are unable to analyze problems dispassionately.
The government’s fiscal policy is its plan to influence aggregate demand by changing
a. the money supply.
b. minimum wage levels.
c. sales taxes.
d. taxation and spending.
A well-known women’s college whose tuition lagged below similar schools found
recruiting difficult and enrollment falling. A substantial tuition increase was
implemented, and dormitories were soon full again. This can be explained by
a. the law of demand.
b. the fact that education at the school was an inferior good.
c. the fact that people sometimes base perceptions of quality on price (snob effect).
d. elastic demand.
What is the appropriate degree of abstraction?
a. The more detail there is, the better.
b. The detail should be minimized in order to avoid all complexity.
c. Abstraction is unnecessary, and should be avoided.
d. Abstraction is the essence of analysis, and is pursued for its own sake.
e. It depends on the objective of the analysis.
The mechanism of supply and demand is
a. a fundamental tool in both microeconomics and macroeconomics.
b. the only real “law” of economics.
c. a fundamental tool only in microeconomics.
d. a fundamental tool only in macroeconomics.
Because resources tend to be specialized, increased production of military goods tends
to
a. decrease the opportunity cost of more military goods.
b. increase the opportunity cost of more non-military goods.
c. increase the opportunity cost of more military goods.
d. change the position of the production possibilities curve.
e. alter the slope of the production possibilities curve.
Imitation as a strategy for acquiring new technology is based on the difference in effort
between
a. creating it and thinking of it.
b. creating it and looking it up.
c. looking it up and writing it down.
d. discovering it and innovating it.
The average total cost curve of a firm is U-shaped.
a. True
b. False
When oligopolists join together in a cartel, they
a. have chosen to ignore interdependence.
b. have admitted that their behavior is interdependent.
c. are planning to violate the law of supply and demand.
d. are trying to behave like perfect competitors.
The investment and capital spending boom of the late 1990s most likely resulted in a(n)
a. increase in aggregate supply.
b. decrease in aggregate supply.
c. steeper aggregate supply curve.
d. flatter aggregate supply curve.
Tariffs are more desirable than quotas if a government wants to increase revenues and
reduce benefits to inefficient exporters.
a. True
b. False
Direct controls have a clear advantage where
a. an emission is so dangerous that it is prohibited altogether.
b. a sudden change in circumstances calls for prompt and substantial change in conduct.
c. effective and dependable metering devices have not been invented or are
prohibitively costly to install and operate.
d. All of the above create an advantage.
A firm that is operating at a loss may continue to operate for a while because of costs
that it will still have to pay even if production ceases.
a. True
b. False
If the U.S. exports passenger jet aircraft, what is the effect in the foreign exchange
market?
a. It will increase demand for U.S. dollars.
b. It will decrease demand for U.S. dollars.
c. It will increase supply of U.S. dollars.
d. It will decrease supply of U.S. dollars.
The growth of the labor force and the growth of labor productivity help determine the
rate of GDP growth.
a. True
b. False
The purchasing power parity theory of exchange rate determination states that
a. in the short run, rates will adjust to parity.
b. in the long run, the rate reflects differences in price levels between the two countries.
c. in the long run, a government agency sets the rate at parity.
d. in the short run, the cost of labor really sets the exchange rate.
Change in the price of a good causes the demand schedule for that good to shift.
a. True
b. False
Define the following terms. Give a complete and precise definition in one sentence.
a. total utility
b. marginal utility
c. consumer’s surplus
d. “law” of demand
An example of rent seeking is
a. lobbying by industrial groups.
b. lawsuits between rival firms.
c. battles over exclusive licenses.
d. All of the above are correct.
Why does the government not have to repay debt, as do private individuals?
a. Because the government can ignore creditors and refuse payment.
b. Because the government, as a dictatorship, is unresponsive to demands for
repayment.
c. Because the government has no debt, it owes it to itself.
d. Because the government does not have a finite life, as do individuals.