A tax on the buyers of coffee will
a. increase the price of coffee paid by buyers, increase the net price of coffee received
by sellers, and increase the equilibrium quantity of coffee.
b. decrease the price of coffee paid by buyers, increase the net price of coffee received
by sellers, and decrease the equilibrium quantity of coffee.
c. increase the price of coffee paid by buyers, decrease the net price of coffee received
by sellers, and decrease the equilibrium quantity of coffee.
d. increase the price of coffee paid by buyers, decrease the net price of coffee received
by sellers, and increase the equilibrium quantity of coffee.
At the beginning of a year, decision makers expect the general level of prices to
increase at a 6 percent annual rate. The CPI increases from 150 to 154.5 during the
year; this indicates that
a. decision makers underestimated the rate of inflation during the year.
b. decision makers overestimated the rate of inflation during the year.
c. decision makers accurately forecast the rate of inflation during the year.
d. the rate of inflation during the year was 4.5 percent.
Use the figure to answer the following question(s).
Figure 11-14
Using Figure 11-14, determine what quantity these firms would produce, in the short
run, if the firms were engaging in vigorous competition.
a. Q1
b. Q2
c. Q3
d. Q4
Use the figure to answer the following question(s).
Figure 8-1
At what output in Figure 8-1 would the firm’s per-unit cost of production be minimized?
a. 3
b. 4
c. 5
d. 6
Use the figure below to answer the following question(s).
Figure 4-9
Refer to Figure 4-9. The market for gasoline was initially in equilibrium at point b and a
$.40 excise tax is illustrated. How much revenue would the $.40 gasoline tax raise?
a. $18 million
b. $36 million
c. $72 million
d. $100 million
When an entrepreneur introduces a new improved product that is highly valued relative
to cost
a. consumers will be worse off.
b. the demand for the products that are good substitutes for the new product will
increase.
c. some of the existing products will become obsolete and businesses producing those
products will fail.
d. total employment will decline if there are business failures.
A positive nominal interest rate indicates
a. how fast the number of dollars in your savings account is rising over time.
b. how fast the purchasing power of your savings account is rising over time.
c. the number of dollars in your savings account today.
d. the purchasing power in your savings account today.
Producers tend to be better represented in lobbying efforts and other elements of the
political process than consumers because
a. producers are generally more intelligent and, therefore, better informed.
b. producers are generally better organized than consumers.
c. producers are better educated than consumers.
d. the number of producers affected by the outcome of a particular political issue is
usually greater than the number of consumers affected.
Government policies that heavily tax some activities while subsidizing others and that
fix or control interest rates will result in
a. higher productivity of investment.
b. lower productivity of investment.
c. no change in the productivity of investment.
d. a greater level of investment.
What amount must be earned to induce investors to continue to supply the funds
necessary to maintain a firm’s capital assets?
a. stockholder equity
b. the opportunity cost of capital
c. economic profit
d. accounting profit
If the exchange rate between the U.S. dollar and the Russian ruble was 0.04 ($0.04 =
one ruble), what would be the price in dollars of a bottle of Russian wine selling for
2,000 ruble?
a. $50
b. $80
c. $100
d. $500
Public choice analysis indicates
a. most income transfers will be directed toward the poor.
b. rent-seeking activities will improve the efficiency of resource allocation and promote
economic growth.
c. rent seeking will be less attractive if the nation’s legal (or constitutional) structure
makes it difficult to use the political process to take the property or income of others.
d. politicians will consistently oppose programs favored by rent seekers if those
programs reduce the welfare of society.
Which of the following will tend to result in the least variation in the expected real rate
of return from the ownership of stocks?
a. ownership of a single stock for a short period of time
b. ownership of a single stock over a lengthy period of time
c. ownership of stocks from a specific sector (for example, the automobile industry)
over a lengthy period of time
d. ownership of a diverse set of stocks (the Standard & Poor’s 500, for example) over a
lengthy period of time
Resource prices will fall and short-run aggregate supply will increase if
a. current output exceeds the economy’s full-employment level.
b. current output is less than the economy’s full-employment level.
c. the actual rate of unemployment is less than the natural rate of unemployment.
d. exports exceed imports.
The strong demand for housing, rising housing prices, and a construction boom from
2000 to 2005 were a result of
a. market forces that were eventually cut short by the stock market crash of 2008.
b. policy changes that had positive initial effects, but negative long-term effects.
c. tightened mortgage lending standards that reduced the risks of obtaining a home
mortgage.
d. the rising interest rates of that period, which increased the demand for housing.
Legislation that contains a number of projects benefiting local interests at the expense
of the general taxpayer is called
a. balanced-budget legislation.
b. pork-barrel legislation.
c. voucher legislation.
d. public-goods legislation.
Banks are considered a safer place to deposit money now than they were prior to 1933
because
a. gold reserves have increased.
b. reserve requirements are higher.
c. the creation of the FDIC reduced the likelihood of bank runs.
d. the commercial banks are no longer permitted to extend loans to the Federal
Government.
The annual rate of inflation is
a. a change in real income of workers from one year to the next.
b. the percentage change in the general level of prices from one year to the next.
c. the increase in the purchasing power of the dollar from one year to the next.
d. the percentage increase in the total value of the goods and services produced from
one year to the next.
Which of the following best explains why high marginal tax rates retard output?
a. High marginal tax rates reduce the incentive to earn, invest, and use resources
efficiently.
b. High marginal tax rates will encourage foreign investment.
c. High marginal tax rates will reduce budget deficits and lower interest rates.
d. High marginal tax rates encourage people to substitute more-desired nondeductible
goods for less-desired tax-deductible goods.
Larger firms will often have lower minimum per-unit costs than smaller firms because
a. employee shirking is less of a problem.
b. large-scale output allows greater specialization for both labor and machines in the
production process.
c. mass production techniques, with high setup and development costs, are appropriate
only when a small output is planned.
d. all of the above are correct.
Figure 3-22
Refer to Figure 3-22. Which of the four graphs represents the market for winter coats as
we progress from winter to spring?
a. A
b. B
c. C
d. D
This year, Abigail earned $15,000 and she paid 15 percent in income and payroll taxes.
She qualified for Medicaid and food stamps. For every $100 that she earns, Abigail
loses $35 in Medicaid benefits and $15 in food stamps. Abigail faces an effective
marginal tax rate of
a. 15 percent.
b. 35 percent.
c. 50 percent.
d. 65 percent.
The opportunity cost of production differs from an accounting definition of a firm’s
costs because it includes
a. expenditures the firm undertakes for research and development.
b. the opportunity cost of assets and financial resources owned by the firm.
c. the direct monetary cost of purchasing resources.
d. the firm’s revenue as a cost.
Business owners who care only about maximizing profits are
a. likely to discriminate against certain groups of workers.
b. likely to be replaced by discriminating businesses.
c. more concerned about racial discrimination than gender discrimination.
d. at an advantage when competing against those who practice employment
discrimination.
The price of chicken increases as the result of higher beef prices. This indicates that
a. chicken and beef are substitutes.
b. chicken and beef are complements.
c. the market demand for beef is inelastic.
d. the market demand for chicken is elastic.
Compared to the no-trade situation, when a country exports a good,
a. domestic consumers gain, domestic producers lose, and the gains outweigh the
losses.
b. domestic producers gain, domestic consumers lose, and the gains outweigh the
losses.
c. domestic consumers gain, domestic producers lose, and the losses outweigh the
gains.
d. domestic producers gain, but domestic consumers lose an equal amount.
Which of the following is true under natural monopoly?
a. the monopolist will ignore consumers’ desires.
b. the marginal cost curve will lie below the average total cost curve.
c. the monopolist will set price equal to marginal cost and will earn economic profits.
d. output is produced under conditions of constant cost.
If a country was operating well below its long-run capacity (potential GDP), the initial
impact of an unanticipated increase in the money supply would most likely result in an
increase in
a. prices with little change in output.
b. output with little change in prices.
c. output and a decline in prices.
d. prices and a decline in output.
Subsidizing coal mining and orange growing have both been found to be economically
inefficient in that the costs outweigh the benefits. However, a subsidy on coal mining
would help the coal producers in West Virginia and a subsidy on orange growing would
help the orange farmers in Florida. So the senator from West Virginia approaches the
senator from Florida and says that he will vote for the orange subsidy if the Florida
senator votes for the coal-mining subsidy. The Florida senator agrees. Which term best
describes what just happened?
a. the shortsightedness effect
b. logrolling
c. the use of user charges
d. the political voter theory
Economic analysis suggests that patent laws that can often be used to limit the entry of
potential competitors into an industry
a. redistribute income from consumers to business decision makers without affecting
the allocation of resources.
b. may be a source of business monopoly power, but they may also encourage
innovation in the long run.
c. encourage product development and the adoption of cost-reducing technologies in the
short run but in the long run generally lead to business monopoly.
d. help inventors at the expense of consumers in the long run.
When considering the impact of institutions and policies on economic performance, it is
most important to focus on
a. long-term economic growth.
b. short-term economic growth.
c. business cycle fluctuations.
d. the labor force participation rate of married women.
Which of the following is an example of a transfer payment?
a. wages and salaries paid to the employees of the Internal Revenue Service
b. purchase of automobiles by a local police department
c. agriculture subsidies paid to farmers
d. salaries paid to the college professors of state-operated universities
In the new classical model, a $100 billion increase in government purchases financed
by borrowing will
a. increase the real interest rate, which will crowd out private spending.
b. lead to a $100 billion increase in real GDP.
c. lead to a $400 billion increase in real GDP if the marginal propensity to consume is
three-fourths.
d. leave the interest rate, aggregate demand, and real output unchanged.
Graphically, the marginal revenue curve of a monopolist
a. will sometimes lie below the demand curve of the monopolist.
b. will always lie below the demand curve of the monopolist.
c. is the same as the demand curve of the monopolist.
d. will equal 1 when the elasticity of demand is unitary.