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Figure 7-20
Refer to Figure 7-20. At equilibrium, producer surplus is measured by the area
a. ACG.
b. AFG.
c. KBG.
d. CFG.
Following the implementation of laws requiring automobiles to have seat belts, which
of the following occurred?
a. An individual's probability of surviving an auto accident rose.
b. There was an increase in pedestrian deaths.
c. There was an increase in automobile accidents.
d. All of the above are correct.
Which of the following statements is correct for an open economy with a trade surplus?
a. The trade surplus cannot last for very many years.
b. The trade surplus must be offset by negative net capital outflow.
c. The trade surplus implies that the country's national saving is greater than domestic
investment.
d. None of the above is correct.
Among economic models, the circular-flow diagram is unusual in that it
a. drastically simplifies the real world.
b. features more than one type of market.
c. features flows of dollars.
d. does not involve mathematics.
When a country allows trade and becomes an exporter of a good,
a. domestic producers gain and domestic consumers lose.
b. domestic producers lose and domestic consumers gain.
c. domestic producers and domestic consumers both gain.
d. domestic producers and domestic consumers both lose.
If a 30 percent change in price causes a 15 percent change in quantity supplied, then the
price elasticity of supply is about
a. 0.5, and supply is elastic.
b. 0.5, and supply is inelastic.
c. 2, and supply is inelastic.
d. 2, and supply is elastic.
Assume the bonds below have the same term and principal and that the state or local
government that issues the municipal bond has a good credit rating. Which list has
bonds correctly ordered from the one that pays the highest interest rate to the one that
pays the lowest interest rate?
a. corporate bond, municipal bond, U.S. government bond
b. corporate bond, U.S. government bond, municipal bond
c. municipal bond, U.S. government bond, corporate bond
d. U.S. government bond, municipal bond, corporate bond
According to economist John Maynard Keynes, a great economist must also be a(n)
a. mathematician.
b. historian.
c. philosopher.
d. All of the above are correct.
In 1970, Professor Plum earned $12,000; in 1980, he earned $24,000; and in 1990, he
earned $36,000. If the CPI was 40 in 1970, 60 in 1980, and 100 in 1990, then in real
terms, Professor Plum's salary was highest in
a. 1980 and lowest in 1970.
b. 1980 and lowest in 1990.
c. 1990 and lowest in 1970.
d. 1990 and lowest in 1980.
Figure 4-6
Refer to Figure 4-6. The movement from D" to D in the market for potato chips could
be caused by a(n)
a. decrease in the price of potato chips.
b. decrease in income, assuming that potato chips are a normal good.
c. announcement by the FDA that potato chips cause cancer.
d. increase in the price of a pretzels.
Scenario 9-2
For a small country called Boxland, the equation of the domestic demand curve for
cardboard is
,
where represents the domestic quantity of cardboard demanded, in tons, and
represents the price of a ton of cardboard.
For Boxland, the equation of the domestic supply curve for cardboard is
,
where represents the domestic quantity of cardboard supplied, in tons, and again
represents the price of a ton of cardboard.
Refer to Scenario 9-2. Suppose the world price of cardboard is $45. Then, if Boxland
goes from prohibiting international trade in cardboard to allowing international trade in
cardboard,
a. domestic producers of cardboard become better off and domestic consumers of
cardboard become better off.
b. domestic producers of cardboard become better off and domestic consumers of
cardboard become worse off.
c. domestic producers of cardboard become worse off and domestic consumers of
cardboard become better off.
d. domestic producers of cardboard become worse off and domestic consumers of
cardboard become worse off.
According to the classical model, which of the following would double if the quantity
of money doubled?
a. prices but not nominal income
b. nominal income but not prices
c. both prices and nominal income
d. neither prices nor nominal income
In the United States in the late 1970s, nominal interest rates were high and inflation
rates were very high. As a result, real interest rates were
a. very high.
b. high.
c. low, but never negative.
d. low, and in some years they were negative.
Figure 6-7
Refer to Figure 6-7. Suppose a price ceiling of $5 is imposed on this market. As a
result,
a. the quantity of the good supplied decreases by 20 units.
b. the demand curve shifts to the left so as to now pass through the point (quantity = 40,
price = $5).
c. buyers' total expenditure on the good decreases by $100.
d. the price of the good continues to serve as the rationing mechanism.
Table 7-9
The numbers reveal the opportunity costs of providing 10 piano lessons of equal
quality.
Refer to Table 7-9. You wish to purchase 10 piano lessons, so you take bids from each
of the sellers. The bids are required to be rounded to the nearest dollar. You will not
accept a bid below a seller's cost because you are concerned that the seller will not
provide all 10 lessons. Your parents have given you $450 to spend on piano lessons.
You believe that the sellers with higher opportunity costs offer higher quality lessons.
You want the highest quality lessons that you can afford, but you can spend any
remaining money on dinner with friends. From whom will you take lessons, and how
much money will you spend?
a. Peter; $450
b. Cindy; $450
c. Greg; $401
d. Cindy; $401
In a December 2007 New York Times column Paul Krugman argued in favor of
a. protectionism based on the national-security argument.
b. protectionism based on the infant-industry argument.
c. protectionism based on the unfair-competition argument.
d. keeping world markets relatively open.
Figure 13-4. On the horizontal axis of the graph, L represents the quantity of loanable
funds in billions of dollars.
Refer to Figure 13-4. The position and/or slope of the Supply curve are influenced by
a. the level of public saving.
b. the level of national saving.
c. decisions made by people who have extra income they want to save and lend out.
d. All of the above are correct.
Figure 3-7
Bintu's Production Possibilities Frontier Juba's Production Possibilities Frontier
Refer to Figure 3-7. If the production possibilities frontiers shown are each for 4 hours
of work, then which of the following combinations of bowls and cups could Bintu and
Juba together not make in a given 4-hour production period?
a. 3 bowls and 9.5 cups
b. 4.5 bowls and 6 cups
c. 5 bowls and 4 cups
d. 6 bowls and 1 cups
A macroeconomist as opposed to a microeconomist might study
a. the effect of agricultural price support programs on the cotton industry
b. the effect on U.S. steel producers of an import quota imposed on foreign steel
c. the effect of an increasing inflation rate on national living standards
d. the effect of an increase in the price of imported coffee beans on the U.S. coffee
industry
The traditional view of the production process is that capital is subject to
a. constant returns.
b. increasing returns.
c. diminishing returns.
d. diminishing returns for low levels of capital, and increasing returns for high levels of
capital.
Figure 9-1
The figure illustrates the market for wool in Scotland.
Refer to Figure 9-1. From the figure it is apparent that
a. Scotland will export wool if trade is allowed.
b. Scotland will import wool if trade is allowed.
c. Scotland has nothing to gain either by importing or exporting wool.
d. the world price will fall if Scotland begins to allow its citizens to trade with other
countries.
When the money market is drawn with the value of money on the vertical axis, if the
Fed sells bonds then
a. the money supply and the price level increase.
b. the money supply and the price level decrease.
c. the money supply increases and the price level decreases.
d. the money supply increases and the price level increases.
The government builds a new water-treatment plant. The owner of the company that
builds the plant pays her workers. The workers increase their spending. Firms from
which the workers buy goods increase their output. This type of effect on spending
illustrates
a. the multiplier effect.
b. the crowding-out effect.
c. the Fisher effect.
d. the wealth effect.
According to liquidity preference theory, a decrease in the price level shifts the
a. money demand curve rightward, so the interest rate increases.
b. money demand curve rightward, so the interest rate decreases.
c. money demand curve leftward, so the interest rate decreases.
d. money demand curve leftward, so the interest rate increases.
Suppose the market for loanable funds is in equilibrium. What would happen in the
market for loanable funds, other things the same, if the Congress and President
increased the maximum contribution limits to 401(k) and 403(b) tax-deferred retirement
accounts?
a. the interest rate and quantity of loanable funds would increase
b. the interest rate and quantity of loanable funds would decrease.
c. the interest rate would increase and the quantity of loanable funds would decrease.
d. the interest rate would decrease and the quantity of loanable funds would increase.
The willingness of citizens to pay for vaccinations does not include the benefit society
receives from having vaccinated citizens who cannot transmit an illness to others. This
extra benefit society gets from vaccinating its citizens is known as
a. productivity.
b. an externality.
c. market power.
d. property rights.
Under rent control, landlords cease to be responsive to tenants' concerns about the
quality of the housing because
a. with rent control, the government guarantees landlords a minimum level of profit.
b. they become resigned to the fact that many of their apartments are going to be vacant
at any given time.
c. with shortages and waiting lists, they have no incentive to maintain and improve their
property.
d. with rent control, it becomes the government's responsibility to maintain rental
housing.
The primary difference between commodity money and fiat money is that
a. commodity money is a medium of exchange but fiat money is not.
b. fiat money is a medium of exchange but commodity money is not.
c. commodity money has intrinsic value but fiat money does not.
d. fiat money has intrinsic value but commodity money does not.
Suppose the government imposes a $40 tax on the buyers of refrigerators. The tax
would
a. shift the demand curve downward by less than $40.
b. raise the equilibrium price by $40.
c. create a $20 tax burden each for buyers and sellers.
d. discourage market activity.
According to purchasing power parity, if two countries have the same price level
because they have the same prices for all goods and services, then which of the
following would equal 1?
a. the real exchange rate, but not the nominal exchange rate
b. the nominal exchange rate, but not the real exchange rate
c. the real exchange rate and the nominal exchange rate
d. neither the real exchange rate nor the nominal exchange rate
Consider the following pairs of goods. For which of the two goods would you expect
the demand to be more price elastic? Why?
a. water or diamonds
b. insulin or nasal decongestant spray
c. food in general or breakfast cereal
d. gasoline over the course of a week or gasoline over the course of a year
e. personal computers or IBM personal computers
People who hold well-diversified portfolios of stocks have greatly reduced or
eliminated
a. firm-specific risk, and so they do not need to worry about their wealth decreasing as a
result of recessions.
b. market risk, and so they do not need to worry about their wealth decreasing as a
result of recessions.
c. firm-specific risk, but still they have reason to worry about their wealth decreasing as
a result of recessions.
d. market risk, but still they have reason to worry about their wealth decreasing as a
result of recessions.
A $0.50 tax levied on the buyers of pomegranate juice will shift the demand curve
a. upward by exactly $0.50.
b. upward by less than $0.50.
c. downward by exactly $0.50.
d. downward by less than $0.50.
