If demand is elastic, an increase in price will decrease total revenue.
a. True
b. False
A typical American family sends about _____% of its budget on services.
a. 20%
b. 32%
c. 66%
d. 70%
It might be useful to think of macroeconomics as a study of ____ and microeconomics
as a study of ____.
a. big corporations, small businesses
b. oceans, fish
c. the long run, the short run
d. abstract, concrete
e. theory, reality
If the U.S. government starts to sell off its stockpile of cheese,
a. consumers will be less willing to purchase cheese.
b. the equilibrium quantity demanded will rise.
c. farmers will hoard the cheese they produce.
d. the quantity of cheese that spoils before sale will rise.
Table 11-1
Y = C + I + G
C = 500 + .8(Y − T)
I = 300
G = 700
T = .25Y
Refer to Table 11-1. What is the level of saving in this model?
a. 92.5
b. 72.5
c. 62.5
d. 52.5
e. 42.5
The law of demand states that a lower price increases the amount of a commodity that
people are willing to buy.
a. True
b. False
Which of the following is an example of an undesirable side effect of the operation of
the market mechanism?
a. negative externalities
b. comparative advantages
c. abstractions
d. productivity growth
If the price of one input changes, generally the firm will change its use of both inputs.
a. True
b. False
Crowding in can be defined as
a. an increase in the budget deficit increases demand so that investment increases.
b. tax incentives on investment encourage capital formation, an increase in aggregate
supply.
c. consumption rises in a recovery, which increases demand for investment.
d. the budget deficit falls enough to lower interest rates to stimulate investment.
For a perfectly competitive firm, the long-run supply curve is the long-run average cost
curve.
a. True
b. False
The largest single portion of the federal budget is devoted to
a. National defense.
b. Medicare and Medicaid.
c. Social Security and unemployment compensation.
d. Education.
e. Interest payments on the national debt.
Figure 20-8
Which of the graphs in Figure 20-8 illustrates the AD-AS shifts induced by the foreign
sector following an increase in the U.S. federal deficit?
a. 1
b. 2
c. 3
d. 4
Exhibit 10-1
A perfectly competitive producer has the following short-run average cost curve and
marginal cost curve:
SR AC = 2Q + 3
MC = 4Q + 3
where costs are measured in dollars and Q represents the firm’s output in units.
If the market price of wangdoodles is $15 each, the profit-maximizing producer whose
short-run cost curves are given in Exhibit 10-1 should produce ____ wangdoodles.
a. 0
b. 3
c. 6
d. 15
Figure 20-4
In Figure 20-4, which panel shows the impact of union efforts to have goods produced
in Asia excluded from the U.S. market?
a. 1
b. 2
c. 3
d. 4
An oligopolist’s effective demand curve will be kinked if the firm
a. is acting as a price leader in the industry.
b. expects other firms to match price cuts but not price increases.
c. expects other firms to match all price changes.
d. fears new entry into the industry.
Excise taxes are a form of sales tax.
a. True
b. False
When saving leaks out of the circular flow of income and spending,
a. total income necessarily falls.
b. it leaks out of the financial system.
c. it flows to borrowers.
d. it increases the size of the spending flow.
The principal goal of the Treaty of Maastricht was the creation of a
a. fixed exchange rate system.
b. floating exchange rate system.
c. gold-exchange system.
d. monetary union.
According to the text, the government can use aggregate demand management policies
to reduce unemployment rates. A byproduct of this policy will be
a. an increase in the price level.
b. a decrease in real GDP.
c. a decrease in the price level.
d. an increase in the budget surplus.
A company succumbs to a wage increase demand without any changes in the
productivity of labor, price of the product, and the total output sold. Which of the
following would happen?
a. Total revenue of the company will fall.
b. Investment by the company will increase.
c. Profit per unit of the product will fall.
d. Average profit per unit will increase.
The price elasticity of a vertical demand curve is always
a. infinitely large.
b. zero.
c. one.
d. increasing as price increases.
To eliminate an inflationary gap, the aggregate demand curve should
a. shift outward.
b. become vertical.
c. become horizontal.
d. shift inward.
If the price of oil, a close substitute for coal, increases then the
a. supply curve for coal will shift to the right.
b. demand curve for coal will shift to the right.
c. equilibrium price and quantity of coal will not change.
d. demand curve for coal will shift to the left.
e. supply curve of coal will shift to the left.
A nation’s supply of capital refers to its level of
a. common stocks and corporate bonds.
b. financial wealth.
c. production equipment.
d. monetary balances.
Payroll taxes are used to collect revenue for the Social Security program.
a. True
b. False
Decision making that seeks only solutions that are acceptable is called
a. optimizing.
b. satisficing.
c. benchmarking.
d. maximizing.
Models are used to describe cause-and-effect relationships.
a. True
b. False
When the price of the product falls
a. consumer’s surplus remains the same.
b. producers’ surplus increases.
c. consumer’s surplus falls.
d. producer’s surplus falls.
Compared to perfect competition, monopoly
a. provides less output.
b. charges a higher price.
c. results in higher cost (inefficient) production.
d. All of the above are correct.
Consumer spending accounts for about 70 percent of GDP.
a. True
b. False