Figure 26-10
In the figure above, suppose the economy is initially at point A. The movement of the
economy to point B as shown in the graph illustrates the effect of which of the
following policy actions by the Federal Reserve?
A) an increase in income taxes
B) a decrease in the required reserve ratio
C) an open market purchase of Treasury bills
D) an open market sale of Treasury bills
Which of the following are examples of a firm experiencing a positive technological
change?
a. A firm is able to reduce its inputs by 15 percent and still produce the same level of
output.
b. A seminar attended by the firm’s workers makes them more productive.
c. A firm adds 5 percent to its workforce and is able to maintain its initial level of
output.
d. A firm restructures its distribution system and is able to save on its shipping times.
e. A firm rearranges its warehouse and finds that it can use fewer workers to maintain
its productivity level.
Patents, tariffs and quotas are all examples of
A) government-imposed barriers.
B) economic regulations that increase efficiency.
C) entry barriers that improve a country’s standard of living.
D) entry barriers that protect consumers.
For certain public projects such as building a dam on a river or a bridge to an island,
what procedure is a government likely to use to determine what quantity of a public
good should be supplied?
A) It conducts public surveys to determine if consumers want the product.
B) It hires economists to estimate the market demand for the product.
C) It takes a vote in Congress.
D) It evaluates the costs and benefits of producing the good.
Which of the following information about fiat money is false? Fiat money
A) is backed by gold.
B) serves as a medium of exchange.
C) has little to no value except as money.
D) is authorized by a central bank or governmental body.
If GDP calculations included measurements of pollution and environmental damage,
GDP values would most likely be
A) greater than their values without these measurements.
B) less than their values without these measurements.
C) unchanged from their values without these measurements.
D) meaningless, since GDP values without these measurements would no longer be of
value.
Assume that the medical screening industry is perfectly competitive. Consider a typical
firm that is making short-run losses. Suppose the medical screening industry runs an
effective advertising campaign which convinces a large number of people that yearly
CT scans are critical for good health. How will this affect a typical firm that remains in
the industry?
A) The firm’s supply curve shifts right and its marginal revenue curve shifts upward as
the market price rises and ultimately the firm starts making profits.
B) The firm’s marginal revenue curve and average cost curve shift upward in response
to the increase in market price and advertising expenditure. The firm increases output
until it starts breaking even.
C) The marginal revenue curve shifts upward, the firm’s output increases along its
marginal cost curve, it expands production and eventually starts making profits.
D) The marginal revenue curve shifts upward, the firm’s output increases along its
marginal cost curve, it expands production until it breaks even.
Comparative advantage means
A) the ability to produce more of a product with the same amount of resources than any
other producer.
B) the ability to produce a good or service at a lower opportunity cost than any other
producer.
C) the ability to produce a good or service at a higher opportunity cost than any other
producer.
D) compared to others, you are better at producing a product.
If total revenue exceeds fixed cost, a firm
A) should produce in the short run.
B) has covered its variable cost.
C) is making short-run profits.
D) may or may not produce in the short run, depending on whether total revenue covers
variable cost.
Many economists are critical of proposals to pass comparable worth legislation. Which
of the following is the best explanation for this criticism?
A) Comparable worth legislation will only lead to efficient market outcomes if women
in low-paying jobs suffer from cognitive dissonance.
B) Proposals for comparable worth legislation assume that wages for low-paying
women’s jobs should include compensating differentials. Economists believe that
compensating differentials should be part of the wages for all jobs held by women.
C) Proposals for comparable worth legislation call for increases in the wages of jobs
held predominantly by women. Economists believe that this legislation should be used
to increase the wages of all workers.
D) Many economists believe that allowing markets to determine wages, rather than the
rules required by comparable worth legislation, results in more efficient outcomes.
Table 8-2
Suppose that a simple economy produces only four goods and services: shoes, DVDs,
tomatoes, and ketchup. Assume one half of the tomatoes are used in making the ketchup
and the other half of the tomatoes are purchased by households. Using the information
in the above table, nominal GDP for this simple economy equals
A) $7,400.
B) $6,400.
C) $5,800.
D) 2,440 units.
Which of the following is a consequence of minimum wage laws?
A) Low skilled workers benefit because minimum wage increases the number of jobs
providing low skilled workers with training.
B) Employers will be reluctant to offer low-skill workers jobs with training.
C) Producers have an incentive to offer workers non-wage benefits such as health care
benefits and convenient working hours rather than a higher wage.
D) All workers benefit when the minimum wage is increased.
Table 4-3
The table above lists the marginal cost of polo shirts by Marko’s, a firm that specializes
in producing men’s clothing. If the market price of Marko’s polo shirts is $30, producer
surplus is
A) $0.
B) $16.
C) $52.
D) $68.