Figure 7-20
Refer to Figure 7-20. If 10 units of the good are produced and sold, then
a. the marginal cost to sellers exceeds the marginal value to buyers.
b. producer surplus is maximized.
c. total surplus is minimized.
d. the marginal value to buyers exceeds the marginal cost to sellers.
Suppose sellers of perfume are required to send $1.00 to the government for every
bottle of perfume they sell. Further, suppose this tax causes the price paid by buyers of
perfume to rise by $0.60 per bottle. Which of the following statements is correct?
a. The effective price received by sellers is $0.40 per bottle less than it was before the
tax.
b. Sixty percent of the burden of the tax falls on sellers.
c. This tax causes the demand curve for perfume to shift downward by $1.00 at each
quantity of perfume.
d. All of the above are correct.
Figure 2-6
Refer to Figure 2-6. This economy cannot produce at which point(s)?
a. A, B, D
b. C, D, F, G
c. C, F, G
d. D
In which of the following cases would there be an effect on the value of the U.S.
consumer price index, but not on the value of the U.S. GDP deflator?
a. All of the truck tires that are produced by a certain company in South Korea are sold
to the U.S. military, and the price of these tires decreases.
b. All of the truck tires that are produced by a certain company in California are sold to
the U.S. military, and the price of these tires decreases.
c. Most of the bananas that are produced by a certain company in Honduras end up in
U.S. grocery stores, and the price of these bananas increases.
d. Most of the earth-moving machines that are produced by a certain company in
Illinois are exported to other countries, and the price of these machines increases.
If the Fed increases the growth rate of the money supply, in the long run which of the
following is unchanged?
a. the unemployment rate and inflation
b. the unemployment rate but not inflation
c. inflation but not the unemployment rate
d. neither inflation nor the unemployment rate
Workers searching for jobs that best suit them is most closely associated with
a. cyclical unemployment.
b. frictional unemployment.
c. seasonal unemployment.
d. structural unemployment.
In the long run, if the Fed increases the rate at which it increases the money supply,
a. inflation will be higher.
b. unemployment will be lower.
c. real GDP will be higher.
d. All of the above are correct.
Figure 3-3
Arturo’s Production Possibilities Frontier Dina’s Production Possibilities Frontier
Refer to Figure 3-3. If the production possibilities frontiers shown are each for one day
of production, then which of the following combinations of tacos and burritos could
Arturo and Dina together not produce in a given day?
a. 200 tacos and 400 burritos
b. 300 tacos and 350 burritos
c. 400 tacos and 300 burritos
d. 600 tacos and 250 burritos
Figure 22-1. The left-hand graph shows a short-run aggregate-supply (SRAS) curve
and two aggregate-demand (AD) curves. On the right-hand diagram, U represents the
unemployment rate.
Refer to Figure 22-1. The curve that is depicted on the right-hand graph offers
policymakers a “menu” of combinations
a. that applies both in the short run and in the long run.
b. that is relevant to choices involving fiscal policy, but not to choices involving
monetary policy.
c. of inflation and unemployment.
d. All of the above are correct.
For purposes of calculating the CPI, the apparel category of consumer spending
includes the cost of
a. clothing, but not footwear or jewelry.
b. clothing and footwear, but not jewelry.
c. clothing and jewelry, but not footwear.
d. clothing, footwear, and jewelry.
A relatively flat demand curve indicates that
a. quantity demanded will adjust only slightly to a price change.
b. quantity demanded will adjust significantly to a price change.
c. quantity demanded will not adjust to a price change.
d. the change in quantity demanded will exactly equal a change in price.
The principle of comparative advantage does not provide answers to certain questions.
One of those questions is
a. Is it possible for specialization and trade to benefit more than one party to a trade?
b. Is it possible for specialization and trade to increase total output of traded goods?
c. Do opportunity costs play a role in people’s decisions to specialize in certain
activities?
d. What determines the price at which trade takes place?
If the U.S. put an import quota on clothing, it would
a. raise U.S. net exports of clothing and raise net exports of other U.S. goods.
b. raise U.S. net exports of clothing and lower net exports of other U.S. goods.
c. lower U.S. net exports of clothing and raise net exports of other U.S. goods.
d. lower U.S. net exports of clothing and lower net exports of other U.S. goods.
Figure 2-3
Refer to Figure 2-3. This economy has the ability to produce at which point(s)?
a. J, K, M, N
b. K, M, N
c. K, N
d. M
If the quantity supplied responds only slightly to changes in price, then
a. supply is said to be elastic.
b. supply is said to be inelastic.
c. an increase in price will not shift the supply curve very much.
d. even a large decrease in demand will change the equilibrium price only slightly.
As a student, Anne spends 40 hours per week writing term papers and completing
homework assignments. On one axis of her production possibilities frontier is measured
the number of term papers written per week. On the other axis is measured the number
of homework assignments completed per week. Anne’s production possibilities frontier
is a straight line if
a. she faces no trade-off between writing term papers and completing homework
assignments.
b. she can switch between writing term papers and completing homework assignments
at a constant rate.
c. the rate at which she can switch between homework assignments and term papers
depends on the number of homework assignments she is completing and on the number
of term papers she is writing.
d. she is required by her professors to spend half of her time on term papers and the
other half of her time on homework assignments.
Transfer payments are
a. included in GDP because they represent income to individuals.
b. included in GDP because they eventually will be spent on consumption.
c. not included in GDP because they are not payments for currently produced goods or
services.
d. not included in GDP because taxes will have to be raised to pay for them.
Suppose that a country has an inflation rate of about 2 percent per year and a real GDP
growth rate of about 3 percent per year. Then the government can have a deficit of
about
a. 6 percent of GDP without raising the debt-to-income ratio.
b. 5 percent of GDP without raising the debt-to-income ratio.
c. 1.5 percent of GDP without raising the debt-to-income ratio.
d. 1 percent of GDP without raising the debt-to-income ratio.
Figure 6-16
Refer to Figure 6-16. Suppose a tax of $5 per unit is imposed on this market. How
much will buyers pay per unit after the tax is imposed?
a. $5
b. between $5 and $10
c. between $10 and $14
d. $14
Table 3-6
Assume that Maya and Miguel can switch between producing mixers and producing
toasters at a constant rate.
Hours Needed
To Make 1 Amount Produced
in 40 Hours
Refer to Table 3-6. Maya should specialize in the production of
a. mixers and Miguel should specialize in the production of toasters.
b. toasters and Miguel should specialize in the production of mixers.
c. both goods and Miguel should specialize in the production of neither good.
d. neither good and Miguel should specialize in the production of both goods.
Any policy change that reduced the natural rate of unemployment
a. would shift the long-run Phillips curve to the right.
b. would shift the long-run aggregate-supply curve to the right.
c. would be a policy change that impeded the functioning of the labor market.
d. All of the above are correct.
Table 11-2
The table below pertains to Iowan, an economy in which the typical consumer’s basket
consists of 3 pounds of pork and 4 bushels of corn.
Refer to Table 11-2. If 2008 is the base year, then the CPI for 2008 was
a. 73.5.
b. 100.
c. 108.
d. 136.1.
If total spending rises from one year to the next, then which of the following could not
be true?
a. the economy is producing a smaller output of goods and services, and goods and
services are selling at higher prices
b. the economy is producing a larger output of goods and services, and goods and
services are selling at lower prices
c. the economy is producing a larger output of goods and services, and goods and
services are selling at higher prices
d. the economy is producing a smaller output of goods and services, and goods and
services are selling at lower prices
Figure 4-14
Refer to Figure 4-14. At a price of
a. $2, there is a shortage of 6 units.
b. $5, there is a surplus of 25 units.
c. $5, there is a shortage of $25.
d. $7, there is a shortage of 4 units.
In December 1999 people feared that there might be computer problems at banks as the
century changed. Consequently, people wanted to hold relatively more in currency and
relatively less in deposits. In anticipation banks raised their reserve ratios to have
enough cash on hand to meet depositors’ demands. These actions by the public
a. would increase the multiplier. If the Fed wanted to offset the effect of this on the size
of the money supply, it could have sold bonds.
b. would increase the multiplier. If the Fed wanted to offset the effect of this on the size
of the money supply, it could have bought bonds.
c. would reduce the multiplier. If the Fed wanted to offset the effect of this on the size
of the money supply, it could have sold bonds.
d. would reduce the multiplier. If the Fed wanted to offset the effect of this on the size
of the money supply, it could have bought bonds.
A Swiss company sells chocolates to a retailer in the United States. These sales by
themselves
a. decrease U.S. net export and Swiss net exports.
b. decrease U.S. net exports and increase Swiss net exports.
c. increase U.S. and Swiss net exports.
d. increase U.S. net exports and decrease Swiss net exports.
If the nominal interest rate is 5 percent and the rate of inflation is 2 percent, then the
real interest rate is
a. 7 percent.
b. 3 percent.
c. 2.5 percent.
d. .4 percent.
Suppose that in a particular market, the demand curve is highly elastic, and the supply
curve is highly inelastic. If a tax is imposed in this market, then the
a. buyers will bear a greater burden of the tax than the sellers.
b. sellers will bear a greater burden of the tax than the buyers.
c. buyers and sellers are likely to share the burden of the tax equally.
d. buyers and sellers will not share the burden equally, but it is impossible to determine
who will bear the greater burden of the tax without more information.
Figure 9-9
Refer to Figure 9-9. Total surplus in this market after trade is
a. A + B.
b. A + B + C.
c. A + B + C + D.
d. B + C + D.
Suppose the budget deficit is rising 3 percent per year and nominal GDP is rising 5
percent per year. The debt created by these continuing deficits is
a. sustainable, but the future burden on your children cannot be offset.
b. sustainable, and the future burden on your children can be offset if you save for them.
c. not sustainable, and the future burden on your children cannot be offset.
d. not sustainable, but the future burden on your children can be offset if you save for
them.
Figure 5-18
Refer to Figure 5-18. Which supply curve represents perfectly inelastic supply?
a. S1
b. S2
c. S3
d. None of the supply curves is perfectly inelastic.
Table 7-10
Refer to Table 7-10. You and your best friend want to hire a professional photographer
to take pictures of your two families. The table shows the costs of the four potential
sellers in the local photography market. You and your friend take bids from the sellers.
Who offers the two winning bids, and what do they offer to charge for the photography
sessions?
a. LeBron and Kobe; more than $450 but less than $600
b. Kevin and Steve; more than $450 but less than $600
c. LeBron and Kobe; more than $700
d. Kevin and Steve; less than $400