An increase in the unemployment rate may be represented as a movement from a point
on the production possibilities frontier to a point inside the frontier.
Nominal GDP measures the value of all final goods and services at base-year prices.
In the highly competitive fast-food restaurant market, brand name restaurants have a
strong profit incentive to maintain high sanitary conditions and avoid any negative
consequences.
Using “chain-weighted” prices to calculate real GDP remedies the distortions causes by
changes in relative prices over time.
The inflation rate measures the percentage increase in the price level from one year to
the next.
For a person to have a comparative advantage in producing a product, she must be able
to produce that product at a lower opportunity cost than her competitors.
If a firm’s fixed cost exceeds its total revenue, the firm should stop production by
shutting down temporarily.
Since 1981, deaths from cardiovascular diseases have decreased in the United States.
In an oligopoly, minimum efficient scale is likely to occur at a level of output that is a
large fraction of industry sales.
If the rate of productivity growth in the United States exceeds the rate of productivity
growth in Great Britain we would expect the U.S. dollar to depreciate in value against
the British pound.
According to the real business cycle model,
A) increases in aggregate demand raise GDP.
B) increases in aggregate demand lower GDP.
C) increases in aggregate demand do not affect GDP.
D) increases in aggregate demand lower the price level.
Economic decline (negative growth) is represented on a production possibilities frontier
model by the production possibility frontier
A) shifting outward.
B) shifting inward.
C) becoming steeper.
D) becoming flatter.
Adam Smith’s ________ refers to the process by which individuals acting in their own
self-interest bring about a market outcome that benefits society as a whole.
A) Utopian society
B) comparative advantage model
C) invisible hand
D) survival of the fittest theory
In what ways do economists and policymakers who believe that market-based reforms
are the key to improving the health care system criticize the Patient Protection and
Affordable Care Act (ACA)?
After Suzie, owner of Suzie’s Sweet Shop, hires her 8th worker the average product of
labor declines. Which of the following statements must be true?
A) The marginal product of the 8th worker is negative.
B) The marginal product of the 8th worker is less than the average product of labor
before the 8th worker was hired.
C) Suzie’s profits would be greater if she did not hire the 8th worker.
D) The average product of labor is negative.
In the long run which of the following is true?
A) Total cost = fixed cost + variable cost.
B) The size of a firm’s physical plant can be changed but the firm cannot adopt new
technology.
C) There are no fixed costs.
D) The firm can vary its explicit costs but not its implicit costs.
Economists assume that individuals
A) behave in unpredictable ways.
B) will never take actions to help others.
C) prefer to live in a society that values fairness above all else.
D) are rational and respond to incentives.
If Californians increase their purchases of Italian wine, assuming all else remains
constant, this will ________ of the United States.
A) decrease the balance of trade
B) increase net exports
C) increase the current account balance
D) decrease the trade deficit
E) decrease the balance of payments
A sole proprietorship is
A) the easiest type of business to set up.
B) the most difficult type of business to set up.
C) the most expensive type of business to set up.
D) the least profitable type of business to set up.
Figure 14-2
The
government of a developing country plans to award two firms, Gigacom and
Xenophone, the exclusive rights to share the market for high speed Internet service.
Gigacom and Xenophone can both provide the service either via television cable lines
or via direct subscriber line (dbl). Suppose the government is considering a proposal to
delay one firm’s entry into the market on the grounds that it wants to prevent “harmful”
competition. Figure 14-2 shows the decision tree for this game.Now suppose that the
government delays Xenophone’s entry and Gigacom moves first, what is the likely
outcome in the market?
A) Both offer Internet service via cable line; Xenophone earns a profit of $6 million,
and Gigacom earns a profit of $9 million.
B) Both offer DSL Internet service; Xenophone earns a profit of $8 million, and
Gigacom earns a profit of $7 million.
C) Xenophone offers DSL Internet service and earns a profit of $5 million, while
Gigacom offer Internet service via cable line and earns a profit of $6.5 million.
D) Xenophone offers Internet service via cable line and earns a profit of $4 million,
while Gigacom offers DSL Internet service and earns a profit of $4.5 million.
Figure 4-8 Figure 4-8 shows the market for
apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000
per month. Suppose that instead of a rent ceiling, the government imposed a price floor
of $2,000 per month for apartments. What is the value of producer surplus after the
imposition of the price floor?
A) $40,000
B) $240,000
C) $270,000
D) $290,000
Eighty-five percent of all firms employ ________ workers.
A) only one or two
B) fewer than 20
C) 50 or more
D) over 100
Figure 13-2
Ceteris paribus, a decrease in the price level would be represented by a movement from
A) SRAS1 to SRAS2.
B) SRAS2 to SRAS1.
C) point A to point B.
D) point B to point A.
If the quantity of sunglasses supplied is represented by the equation QS = -60 + 4P, then
the corresponding price of sunglasses is represented by the equation
A) P = 0.25QS + 15.
B) P = 15QS + 240.
C) P = QS – 7.5.
D) P = 12 – 0.4QS.
Forecasts by the Congressional Budget Office show spending on Social Security,
Medicare, and Medicaid rising from 9.9 percent of GDP in 2013 to ________ percent of
GDP in 2087, and by 2087 the federal government will be spending, as a fraction of
GDP, ________ on these three programs as it currently spends on all its programs.
A) 12.3 percent; more
B) 12.3 percent; half as much
C) 23.4 percent; more
D) 23.4 percent; half as much
All of the following contributed to the downfall of the Soviet Union in 1991 except
A) public dissatisfaction with low living standards and political repression.
B) an inability to produce low-cost consumer goods that households wanted.
C) lack of high-quality goods and services.
D) lack of a strong dictator who can coordinate economic activities.
Which of the following is not one of the key services provided by the financial system?
A) decreasing taxes
B) risk sharing
C) liquidity
D) generating information
A member of a cartel like OPEC has an incentive to
A) argue for larger production quotas for each member of the cartel.
B) agree to a low cartel production level and then produce more than its quota.
C) abide by its individual production quota.
D) support equal production quotas for each member.
Which of the following is true for a firm with a downward-sloping demand curve for its
product?
A) Price, average revenue, and marginal revenue are all equal.
B) Price, average revenue, and marginal revenue are all different.
C) Price equals average revenue but is greater than marginal revenue.
D) Price equals average revenue but is less than marginal revenue.
During 2007, many ‘subprime” and “Alt-A” borrowers began to default on their
mortgages. Describe ‘subprime” and “Alt-A” borrowers.
What is a black market?
Describe the structure of the Fed’s Open Market Committee (FOMC). What is this
committee’s primary responsibility?
Suppose you buy a house for $250,000. One year later, the market price for the house
has fallen to $200,000. What is the return on your investment in the house if you made
a down payment of 10 percent and took out a mortgage loan for the other 90 percent?
What is producer surplus? What does producer surplus measure?