As the economy becomes more technologically sophisticated, the wage premium can be
expected to
a. continue rising.
b. continue falling.
c. rise.
d. fall.
Figure 18-1
According to the graph in Figure 18-1, the increase in the amount that consumers pay as
a result of the tax is
a. 1000
b. 600
c. 400
d. indeterminate
Economies of scale lead to declining long-run average cost curves.
a. True
b. False
How does imperfect information affect market decisions?
a. It doesn’t, because information is generally excellent.
b. It leads to inefficient outcomes in which expected benefits and actual benefits
diverge.
c. It leads to wasteful attempts to improve information.
d. It leads to exploitation of sellers by buyers.
If new manufacturers enter the computer industry, then, holding all other things
constant,
a. each “old” manufacturer must sell fewer computers than before.
b. some “old” manufacturers must exit the industry.
c. the equilibrium price of computers must rise.
d. the equilibrium quantity demanded of computers must rise.
The most important way in which inefficiency occurs is
a. producing more military goods instead of civilian goods.
b. limiting economic growth by limiting capital spending.
c. unemployment of labor and other resources.
d. producing outside the production possibilities frontier.
e. All of the above are correct.
Table 8-1
To maximize its profits, the firm described in Table 8-1 should produce ____ unit(s) of
output.
a. 1
b. 2
c. 3
d. 4
Economies of scope are savings acquired by
a. producing many goods simultaneously.
b. producing enough of one good to reach the minimum efficient scale of production.
c. selling one product at a loss but selling other products at a profit.
d. decreasing the regulation of an industry.
Which of the following countries has gone so far as to adopt the U.S. dollar as its
domestic currency?
a. Panama
b. Ecuador
c. Zimbabwe
d. all of the above
If the demand for money is insensitive to the interest rate, then the most effective
expansionary policy would be
a. fiscal policy.
b. monetary policy.
c. neither fiscal nor monetary policy.
d. both fiscal and monetary policy.
The rate of interest that the Fed charges banks on loans is called the reserve rate.
a. True
b. False
Which of the following could be called a virtue of raising prices of depletable
resources?
a. It would discourage consumption and waste.
b. It would stimulate more efficient use of resources.
c. It would encourage innovation and discovery of alternatives.
d. All of the above are true.
The definition of Gross Domestic Product is
a. the total value of all sales in the economy.
b. the total value of production in the domestic economy plus the production of
domestic firms in foreign countries.
c. the total value of all sales of final and intermediate goods in the domestic economy.
d. the total of the money values of all final goods and services produced in the domestic
economy within a specific time period.
A currency depreciation
a. reduces aggregate demand and increases aggregate supply.
b. reduces aggregate demand and aggregate supply.
c. increases aggregate demand and reduces aggregate supply.
d. increases aggregate demand and aggregate supply.
A monopolist’s cost curves will
a. be identical to those of a competitive firm.
b. be higher than a competitive firm’s cost curves.
c. be peculiar to the individual producer since there is only one.
d. drop more steeply as output increases.
The rate of interest is the price at which money is borrowed and loaned.
a. True
b. False
Adam Smith believed that monopoly is the most efficient market structure.
a. True
b. False
For a monopoly, MC = MR < P so that MC < MU.
a. True
b. False
The increase in world oil prices during the 1970s was
a. the result of depletion of world reserves of oil.
b. artificially created by OPEC.
c. the result of extremely high growth rates in industrialized countries.
d. fully reversed by 1982.
Vicki consumes meatloaf and pizza. To keep her utility constant, you must give her
more of one good if you take some of the other away. This information implies that
a. Vicki’s marginal rate of substitution must be constant along her indifference curve.
b. Vicki’s indifference curve must have a negative slope.
c. the prices Vicki must pay for meatloaf and pizza are always the same.
d. Vicki’s marginal utility from each good must be constant along her indifference
curve.
In 1973, the U.S. experienced a decline in output and high inflation.
a. True
b. False
____ is the rate that applies when banks borrow and lend reserves to one another.
a. The repo rate
b. The discount rate
c. The coupon rate
d. The federal fund rate
If the government puts price controls on medical care, this will increase the supply of
affordable care in the United States.
a. True
b. False
Price leadership may sometimes be an example of covert collusive behavior by
oligopolies.
a. True
b. False
Drawing the supply curve and the demand curve on the same graph helps show how
price is determined.
a. True
b. False
The Fed has control over bank reserves and complete control over the money supply.
a. True
b. False
The United Automobile Workers union can select the most favorable point on the
demand curve for labor and the auto manufacturing companies can do nothing in
response.
a. True
b. False
In 2005-2006, the Fed increased interest rates in an attempt to halt inflation. What was
the most likely effect of raising interest rates on velocity?
a. It will decrease.
b. It will increase.
c. It will remain constant.
d. Velocity is unrelated to saving accounts.
The multiplier principle explains how
a. any change in the economy will be magnified.
b. $1 invested will increase GDP by more than $1.
c. expenditures and incomes increase as investment increases.
d. All of the above are correct.
During the real estate boom of the early 2000s, some banks operated with leverage
ratios in excess of 30-to-1.
a. True
b. False
Abstraction is used in economics to omit unnecessary details and focus on the essence
of the problem being studied.
a. True
b. False
People are often heard saying, “She makes good money.” An economic interpretation of
this statement would be that
a. she has an honest job.
b. she makes money that is not counterfeit.
c. she has a high income.
d. there is little inflation.
A public good has the quality of excludability but not the quality of depletability.
a. True
b. False
The deregulation of oil pricing will
a. increase our dependence on foreign oil.
b. make the United States energy-independent by the year 2000.
c. decrease domestic production.
d. decrease the extent of the nation’s dependence on foreign oil.
When a firm’s earnings rise, its stock prices will tend to fall.
a. True
b. False