An increase in the price level causes a movement down the aggregate demand curve.
An increase in the price of inputs will cause the supply curve for a product to shift to
the right.
The supply of money is easier to control with commodity money than it is with fiat
money.
A decrease in the unemployment rate may be represented as a movement from a point
inside the production possibilities frontier to a point on the frontier.
An economy that grows too slowly fails to raise living standards.
Aggregate expenditure includes consumption spending, unplanned investment
spending, government purchases, and net exports.
If a firm can produce a product at a lower average cost than its competitors, it stands a
better chance of earning economic profit.
As the number of firms in a market decreases, the supply curve will shift to the left and
the equilibrium price will fall.
Marginal benefit is the benefit that your activity provides to someone else.
A bed of oysters is not an example of a factor of production, but the shucked oysters
used to make oyster stew is a factor of production.
A firm that engages in price discrimination must be able to identify the preferences of
every customer it serves.
The short-run aggregate supply curve is vertical.
The budget deficit increases during wars and recessions.
A monopolistically competitive firm chooses
A) both the quantity of output to produce and the price at which it will sell its output.
B) the price of the product it sells, but market forces determine the quantity it will be
able to sell.
C) the quantity of output to produce, but the price of the product it sells is determined
collectively by all firms in the industry.
D) the price of the product it sells, but the quantity of output to produce is agreed upon
by all firms in the industry.
Table 10-2
Table 10-2 above shows Keira’s utility from soup and sandwiches. The price of soup is
$2 per cup and the price of a sandwich is $3. Keira has $18 to spend on these two
goods. Holding prices constant, when Keira’s income changed from $18 to $23, her
utility maximizing bundle changed. Based on your answers to her optimal choices at the
two income levels, what type of goods are soup and sandwiches?
A) Soup is an inferior good and sandwiches are a normal good.
B) Soup is a normal good and sandwiches are an inferior good.
C) Both soup and sandwiches are normal goods.
D) Both soup and sandwiches are inferior goods.
A change in all of the following variables will change the market demand for a product
except
A) the price of the product.
B) population and demographics.
C) income.
D) tastes.
For purposes of monetary policy, the Federal Reserve has targeted the interest rate
known as the
A) federal funds rate.
B) Treasury bill rate.
C) discount rate.
D) prime rate.
Factory incentives on cell phones have encouraged consumers to upgrade their phones.
How does this affect the market for bluetooth headsets?
A) The quantity of bluetooth headsets demanded increases.
B) The quantity of bluetooth headsets demanded decreases.
C) The demand for bluetooth headsets increases.
D) The demand for bluetooth headsets decreases.
Table 13-1
What is the marginal revenue of the 3rd unit?
A) $6.50
B) $5.50
C) $1.83
D) $0.50
Increases in real GDP wouldoverstatethe increase in the well-being of a country over
time if, over that time period, the
A) average hours worked per week increased.
B) amount of pollution decreased.
C) price level increased.
D) crime rate decreased.
Which of the following is a true statement about real and nominal GDP?
A) If nominal GDP increases from one year to the next, we know that production of
goods and services has risen.
B) Nominal GDP is a better measure than real GDP in comparing changes in the
production of goods and service year after year.
C) Increases in average prices do not affect the calculation of nominal GDP.
D) If real GDP increases from one year to the next, we know that production of goods
and services has risen.
Table 4-8
Table 4-8 shows the demand and supply schedules for the low-skilled labor market in
the city of Westover.
What is the equilibrium hourly wage (WXOA) and the equilibrium quantity of labor
(QXOA)?
A) WXOA = $9.00; QXOA = 370,000
B) WXOA = $8.50; QXOA = 380,000
C) WXOA = $8.50; QXOA = 360,000
D) WXOA = $9.00; QXOA = 740,000
Figure 5-3
The size of marginal external benefits can be determined by
A) the demand curve D2.
B) D2+ D1at each output level
C) D2– D1at each output level.
D) the demand curve D1.
Which of the following is a factor of production?
A) an oven in a bakery
B) a share of General Motors’ stock
C) a credit card
D) a $500 Treasury bond
Figure 19-3
At what level should the Thai government peg its currency to the dollar to make Thai
exports cheaper to the United States?
A) greater than $.03/baht
B) less than $.03/baht
C) equal to $.03/baht
D) $1/baht
Which of the following is an example of an economic trade-off that a firm has to make?
A) whether it is cheaper to produce with more machines or with more workers
B) deciding why consumers want its products
C) whether or not consumers will buy its products
D) deciding what profit margin it desires for its products
Table 12-4
Table 12-4 shows the short-run cost data of a perfectly competitive firm. Assume that
output can only be increased in batches of 20 units. If the market price is $45 the firm
will produce
A) 60 units.
B) 80 units.
C) 100 units
D) 120 units
If tax reduction and simplification are effective, then
A) real wages will rise as labor supply and demand increase.
B) saving and investment in new capital will increase.
C) interest rates will rise in financial markets and demand for financial assets falls.
D) fewer new firms will be established, since existing firms will make more profit.
Table 2-12
Table 2-12 shows the number of labor hours required to produce a canoe and a sailboat
in Guatemala and Honduras.
What is Guatemala’s opportunity cost of producing one canoe?
A) 1/6 of a sailboat
B) 2/3 of a sailboat
C) 6 sailboats
D) 7.5 sailboats
The growth rate of real GDP in the United States rises from 4.2% to 4.4%. Explain and
calculate how this increase in the growth rate of real GDP affects the number of years it
will take for real GDP to double.
List four types of government policies which can aid economic growth.
What is the substitution effect of a wage increase? What is the income effect of a wage
increase? Under what conditions will a worker’s labor supply curve become downward
sloping?
What role do well functioning financial markets play in a market economy?
What is a mixed economy?
Use the following supply schedule for cherries to draw a graph of the supply curve. Be
sure to label the supply curve and each axis, and show each point on the supply curve.
Is fiscal policy more or less effective in manipulating aggregate demand in an open
economy?
Will the use of the euro help increase economic growth in countries in the European
Union? Will it help individual countries using the euro in times of recession? Explain.
Explain how the aggregate demand and aggregate supply model can be made more
dynamic.
Why might a young, healthy person choose not to buy health insurance?