The demand curve for any input is the MP curve.
a. True
b. False
The way in which a country benefits from trade is that it can
a. obtain goods at lower opportunity cost than producing them itself.
b. exploit economies of scale in production and lower the cost of goods it produces.
c. obtain a wider range of goods than it can produce for itself.
d. All of the above are benefits.
Define the following terms and explain their importance to the study of economics:
a. antitrust policy
b. economies of scale
c. economies of scope
Wage increases are resisted by firms because they decrease profits.
a. True
b. False
The reduction of structural unemployment in the United States’ economy may require
a. an increase in the minimum wage.
b. a reduction in government spending.
c. an decrease in interest rates.
d. increased spending on worker retraining.
The argument that budget deficits are inflationary is
a. always correct.
b. correct only when the deficit is monetized.
c. correct only when the aggregate supply curve is horizontal.
d. correct only when the aggregate supply curve is upward sloping.
One reason why nations trade is because
a. trading provides opportunities to earn profits.
b. the rate of interest is not the same in all countries.
c. resources are not equally distributed to all nations.
d. some nations like to build one thing while others like to build another.
Which of the following is correct?
a. IM + X = G − T
b. I + G + T = S + X − M
c. I + G + X = S + T + IM
d. I + T + G = S − X − IM
Total expenditure equals price times elasticity.
a. True
b. False
When the Fed wants to expand the money supply, it
a. buys government securities.
b. sells government securities.
c. buys common stock.
d. sells common stock.
At the equilibrium point in a perfectly competitive industry, the total surplus (the sum
of the consumer surplus and producer surplus) will be at its maximum.
a. True
b. False
Which of the following would indicate that the dollar amount being analyzed is money?
a. M1 money stock of $1.4 trillion at the end of 2010
b. Microsoft profits of $500 billion in 2010
c. The first quarter of 2002
d. Nominal GDP in 2010 of $14.7 trillion
A market will experience a ____ when the price is above equilibrium and a ____ when
the price is below equilibrium.
a. shortage, shortage
b. surplus, surplus
c. shortage, surplus
d. surplus, shortage
Which of the following is not one of the three pillars of productivity growth?
a. rate of capacity utilization
b. rate of technological improvement
c. rate of improvement in workforce quality
d. rate of capital expansion
If a “liberal” wanted to increase aggregate demand, which of the following would she
tend to favor?
a. An increase in government spending, because it will increase the size of the public
sector.
b. A decrease in transfer payments, because it keeps the public sector small.
c. An increase in transfer payments, because it has a larger multiplier than tax changes.
d. A decrease in taxes, because it makes the public sector smaller.
The price elasticity of demand measure is generally stated as an absolute value.
a. True
b. False
A change in the price of one good, such as staples, may affect the quantity demanded of
another good, such as rubber bands.
a. True
b. False
Monopolies can misallocate resources by restricting output in an attempt to raise prices
and profits.
a. True
b. False
“Correlation” is a measure of how one variable causes another to change.
a. True
b. False
In 2013, interest payments were about ____ percent of national income.
a. 0.51/2
b. 1.29
c. 3.2
d. 4.0
The income of Lebron James above the minimum payment needed to acquire the type
of service he performs is
a. pure profit.
b. economic rent.
c. marginal rent.
d. competitive rent.
The alternatives of the active versus passive view of stabilization policy are usually
expressed as
a. fiscal versus monetary policy.
b. internal versus external.
c. present value versus future value.
d. discretion versus rules.
Roughly what was the median level of household income in the U.S. in 2012?
a. 50,000
b. 60,000
c. 70,000
d. 80,000
Economists do not agree on why wages are more rigid now than they were before
World War II.
a. True
b. False
A recession is a period during which
a. aggregate demand, production, and unemployment rises.
b. aggregate demand, production, and unemployment falls.
c. aggregate demand, production, and unemployment remain the same.
d. aggregate demand and production rises while unemployment remains the same.
e. aggregate demand and production falls while unemployment rises.
Resolving Adam Smith’s diamond-water puzzle involves
a. realizing that price is not directly related to total utility.
b. knowing that at optimal purchase, price will tend to equal marginal utility.
c. knowing that, as increasing quantities of a good are consumed, marginal utility
diminishes and, conversely, consuming a small quantity of a good produces high
marginal utility.
d. All of the above are correct.
Unions became much less effective in the 1990s because of
a. greater competition in domestic markets.
b. increased foreign competition.
c. downsizing by American firms.
d. All of the above are correct.
A natural monopoly is one that deliberately erects entry barriers.
a. True
b. False
Under fractional banking, when a bank lends to a customer
a. the money supply increases.
b. bank profitability is decreased.
c. the bank is protected from a run.
d. bank credit decreases.
The more specialized and highly valued a worker’s skills are,
a. the lower is her stock of human capital.
b. the more likely she is to earn economic rent.
c. the less likely she is to sell her skills on the primary labor market.
d. the more likely she is to be directly affected by minimum wage legislation.