Most food products have low income and price elasticities of demand.
Monopolistically competitive firms achieve allocative efficiency but not productive
efficiency.
In face of a negative supply shock, the Fed may avoid a rise in unemployment only if it
is willing to increase the rate of inflation.
A welding machine is an example of a factor of production if it is being used to produce
automobiles.
“The distribution of income should be determined by the government” is an example of
a normative economic statement.
The Sarbanes-Oxley Act of 2002 requires that CEOs personally certify the accuracy of
financial reports.
New Keynesian macroeconomic theory emphasizes the role of ‘sticky” prices in the
economy.
The labor productivity slowdown in the United States in the 1970s was due to declining
quality of education in the United States, because no other industrialized country
experienced the same labor productivity slowdown at the same time.
The demand for most farm products is relatively inelastic. A drought that reduces the
supply of farm products will also cause farm revenues to fall.
The short-run aggregate supply curve is vertical.
When there are few substitutes available for a good, demand tends to be relatively
inelastic.
If buyers of a monopolistically competitive product feel the products of different sellers
have little differences between them, then the demand for each seller’s product is
relatively elastic.
Which of the following characteristics isnot common to monopolistic competition and
perfect competition?
A) Firms act to maximize profit.
B) Entry barriers into the industry are low.
C) The market demand curve is downward -sloping.
D) Firms take market prices as given.
Figure 17-4
Which of the following is true at W0?
A) The income effect is larger than the substitution effect.
B) The substitution effect is larger than the income effect.
C) The income effect and the substitution effect are equal.
D) The supply curve is positively sloped.
Figure 28-5
Consider the Phillips curves shown in the above graph. We can conclude from this
graph that
A) the natural rate of unemployment in this economy is 5.5 percent.
B) the expected rate of inflation in this economy is 10 percent.
C) ceteris paribus, a fall in the rate of inflation to 5 percent will increase unemployment
to 7.5 percent in the short run.
D) All of the above are correct.
Which of the following is not one of the five competitive forces?
A) the threat from potential entrants
B) the bargaining power of buyers
C) the firm’s ability to differentiate its product
D) the bargaining power of suppliers
Suppose that American firms claim that protectionism in Canada is on the rise as the
Canadian government attempts to protect its infant industries with a “Buy Canadian”
provision. This policy, similar to the original “Buy American” provision in the 2009
U.S. stimulus bill, is likely to cause
A) exporting countries to retaliate by placing trade barriers on Canadian imports.
B) Canadian manufacturers to become more efficient.
C) Canadian companies to pay lower prices for protected products.
D) most countries to reduce their own trade barriers to be able to better compete with
Canadian imports at home.
Studies have shown links between calcium consumption and a reduction in
osteoporosis. How does this affect the market for calcium?
A) The calcium supply curve shifts to the right because of a change in tastes in favor of
calcium.
B) The calcium demand curve shifts to the right because of a change in tastes in favor
of calcium.
C) The calcium demand curve shifts to the left because this new information will
increase the price of calcium.
D) The calcium supply curve shifts to the left because this new information will
increase the price of calcium.
Which of the following is the best example of a tariff?
A) a subsidy from the U.S. government to domestic manufacturers of residential air
conditioners to enable them to compete more effectively with foreign producers
B) a limit on the quantity of residential air conditioners that can be imported from a
foreign country
C) a $150 fee imposed on all imported residential air conditioners
D) a tax placed on all residential air conditioners sold in the domestic market to help
offset the impact of emissions on the environment
The resource income earned by those who supply ________ is called wages.
A) labor
B) capital
C) natural resources
D) entrepreneurship
An open economy is an economy that has
A) interactions in trade or finance with other economies.
B) its own stock market.
C) governmental regulations regarding public information that is included in corporate
finance reports.
D) governmental regulations regarding the number of hours retail establishments must
remain open on a daily basis.
A service station owner in Staten Island, New York, was worried that raising the price
of gasoline would cause the quantity demanded to fall by so much that he would be in a
worse situation than if he did not raise the price. If raising the price of gasoline would
cause the owner to receive less total revenue from the sale of gasoline, the demand for
gasoline is
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly inelastic.
Table 4-8
Table 4-8 shows the demand and supply schedules for the low-skilled labor market in
the city of Westover.
If a minimum wage of $10.50 is mandated there will be a
A) shortage of 30,000 units of labor.
B) surplus of 30,000 units of labor.
C) shortage of 60,000 units of labor.
D) surplus of 60,000 units of labor.
In 1913, Congress established the Federal Reserve system with the intention of putting
an end to
A) high interest rates.
B) high unemployment rates.
C) inflation.
D) bank panics.
In the past the federal government often employed what is called a “command and
control” approach to the reduction of pollution emissions. Many economists are critical
of this approach because
A) it does not lead to significant reductions in pollution.
B) they believe a market-based approach will reduce pollution more efficiently.
C) the “command and control” approach is designed to help firms at the expense of
consumers.
D) the “command and control” approach leads to negative externalities.
The existence of the principal-agent problem
A) increases the risk of buying stock in a corporation.
B) increases the risk of becoming the sole proprietor of a business.
C) implies that managers that have the same incentives as the board of directors.
D) does all of the above.
Figure 3-6
The figure above represents the market for canvas tote bags. Assume that the price of
tote bags is $15. At this price:
A) the quantity demanded exceeds the quantity supplied of tote bags by 75. The price
will eventually rise to $25 where quantity demanded will equal quantity supplied.
B) the demand exceeds the supply of tote bags by 55. Some consumers will have an
incentive to offer to buy tote bags at a higher price.
C) there is a shortage, equal to 55 tote bags, that will be eliminated when the price rises
to $25.
D) there is a shortage equal to 55 tote bags; the price of tote bags will rise until demand
is equal to supply.
What is comparative advantage? What is absolute advantage?
Explain how mandatory seat belt laws may reduce the negative externalities of risky
behavior.
Table 18-3
The table above outlines the rankings of three members of the U.S. Senate on three
spending alternatives. Assume that Congress can spend additional revenue on only one
of the three spending alternatives and that Bart, Lisa, and Maggie, all members of the
Senate, participate in a series of votes in which they are to determine which of the
spending alternatives should receive funding. Three votes will be taken: (1)
Immigration Reform and Unemployment Benefits (2) Immigration Reform and Social
Security Reform and (3) Unemployment Benefits and Social Security Reform. Show
the results of each vote and determine whether the voting paradox will occur as a result
of these votes.
Debbie makes porcelain plates in her home and sells them to the Opus gallery. She
spent $400 last month on supplies and made 50 plates. She sold the plates to the gallery
at $25 per plate. The gallery sells all the plates for $40 each. For all of the 50 plates,
what is Debbie’s total value added? For all the 50 plates, what is the gallery’s total value
added?
Central Grocery in New Orleans is famous for its muffaletta, a large round sandwich
filled with deli meats and topped with a tangy olive salad. Suppose the following table
represents cost and revenue data for Central Grocery. Fill in the columns for TR, MR,
MC, ATC, and profit. If Central Grocery wants to maximize profits, what price should it
charge for a muffaletta, what quantity should it sell, and what will be the amount of its
total profit?
