Firms in perfect competition produce the productively efficient output level in the short
run and in the long run.
An increase in the real interest rate will decrease consumption and investment.
A two-part tariff refers to a pricing schedule under which a buyer must pay a fixed fee
for the right to purchase the product, in addition to a per-unit price.
Fed Chairman Alan Greenspan managed to keep the rate of inflation low as the
economy was growing at a brisk pace by setting and hitting low money supply growth
rate targets.
A monopolistically competitive industry that earns economic profits in the short run
will face a more elastic demand curve in the long run.
If consumers believe the price of LCD televisions will decrease in the future, this will
cause the demand for LCD televisions to increase now.
The rate of growth of productivity in the United States was positive during the 20th
century.
Over the last three decades in the United States, services have become a smaller
fraction of GDP relative to goods.
Assume that in recent years the cost of producing microbrew beer in the U.S. has
decreased largely due to technological improvements. At the same time, more and more
Americans prefer microbrew beer over wine. Which of the following best explains the
effect of these events in the microbrew beer market?
A) The supply curve has shifted to the right and the demand curve has shifted to the
left. As a result there has been a decrease in the equilibrium quantity and an uncertain
effect on the equilibrium price.
B) Both the supply and demand curves have shifted to the right. As a result, there has
been an increase in the equilibrium quantity and an uncertain effect on the equilibrium
price.
C) Both the supply and demand curves have shifted to the right. As a result, there has
been an increase in both the equilibrium price and the equilibrium quantity.
D) The supply curve has shifted to the left and the demand curve has shifted to the
right. As a result, there has been an increase in the equilibrium price and an uncertain
effect on the equilibrium quantity.
According to the Centers for Disease Control and Prevention, ________ in 2013 in
which less than 20 percent of the population was considered obese.
A) Colorado was the only state
B) there were only 5 states
C) there were more than 25 states
D) there were no states
Net foreign investment minus net foreign portfolio investment is equal to
A) capital outflows.
B) net foreign financial investment.
C) the balance of trade.
D) net foreign direct investment.
An increase in a perfectly competitive firm’s demand for labor could be caused by
A) a decrease in the market wage rate.
B) an increase in the market demand for the firm’s product.
C) a decrease in the marginal product of workers.
D) an increase in the quantity of labor supplied.
If the exchange rate between the U.S. dollar and the Mexican peso (pesos per dollar) is
less than the relative purchasing power between the two countries, which of the
following would be true?
A) There are opportunities for profit by purchasing goods in the United States and then
selling them in Mexico.
B) Purchasing power parity predicts that the value of the dollar will fall as traders take
advantage of arbitrage opportunities.
C) Purchasing power parity predicts that the dollar is overvalued as traders take
advantage of arbitrage opportunities.
D) There are no arbitrage opportunities for which traders can take advantage.
When the economy reaches a trough in a business cycle, which of the following will
occur?
A) Income, production, and employment will continue to fall.
B) Income, production, and employment will begin to rise.
C) Income and production will rise, but employment will continue to fall.
D) Employment rises, but income and production will continue to fall.
Which of the following is considered a durable good?
A) medical care
B) clothing
C) food
D) a washing machine
Figure 5-16 Amit and Bree are the
only two homeowners on an isolated private road. Both agree that installing street lights
along the road would be beneficial and want to do so. Figure 5-16 shows their
willingness to pay for Different quantities of street lights, the market demand for street
lights and the marginal cost of installing the street lights. Suppose Amit and Bree know
each other’s preferences so that it is not possible for one to deceive the other. Which of
the following statements best describes the circumstances under which the optimal
quantity of street lights could be achieved?
A) The optimal quantity will be installed only if the two parties agree to pay according
to their willingness to pay as indicated by their respective demand curves.
B) Because there are only two consumers, it is likely that private bargaining will result
in the optimal quantity being installed.
C) The optimal quantity will be installed only if the two parties split the cost of
installation equally.
D) The optimal quantity will be installed only if Bree pays for the entire installation
cost.
Table 10-1
Keegan has $30 to spend on Pita Wraps and Bubble Tea. The price of a Pita Wrap is $6
and the price of a glass of Bubble Tea is $3. Table 10-1 shows his total utility from
different quantities of the two items. What is Keegan’s optimal consumption bundle?
A) 3 pita wraps and 3 bubble teas
B) 3 pita wraps and 4 bubble teas
C) 4 pita wraps and 2 bubble teas
D) 5 pita wraps and 0 bubble teas
Which of the following provides health-care coverage to people age 65 and over?
A) Medicaid
B) Medicare
C) Social Security
D) Health-Aid
Traditionally, Wall Street investment banks had been organized as partnerships, but by
2000 they had converted to being publicly traded companies. As partnerships, the
principal-agent problem is ________ because there is ________ separation of
ownership from control.
A) reduced; much
B) reduced; little
C) increased; much
D) increased; little
Figure 9-5 Suppose the U.S. government
imposes a $0.75 per pound tariff on coffee imports. Figure 9-5 shows the impact of this
tariff. As a result of the tariff, domestic producers increase their quantity supplied by
A) 6 million pounds of coffee.
B) 18 million pounds of coffee.
C) 26 million pounds of coffee.
D) 38 million pounds of coffee.
Government transfer payments include which of the following?
A) interest on the national debt
B) grants to state and local governments
C) Social Security and Medicare programs
D) national defense
A study of the effects of the minimum wage on employment of low-skilled workers
estimated the price elasticity of demand for low-skilled workers is -0.75. Suppose that
the government is considering raising the minimum wage from $7.25 per hour to $7.75
per hour. Based on this information, calculate the percentage change in the employment
of low skilled workers. Use the midpoint formula.
A monopolistically competitive firm that is earning profits will, in the long run,
experience all of the following except
A) new rivals entering the market.
B) a decrease in demand for its product.
C) demand for the firm’s product becomes more elastic.
D) a decrease in the number of rival products.
Hurricane Katrina damaged a large portion of refining and pipeline capacity when it
swept through the Gulf coast states in August 2005. As a result of this, many gasoline
distributors were not able to maintain normal deliveries. At the pre-hurricane
equilibrium price (i.e., at the initial equilibrium price), we would expect to see
A) a surplus of gasoline.
B) the quantity demanded equal to the quantity supplied.
C) a shortage of gasoline.
D) an increase in the demand for gasoline.
If prices are rising on average, then
A) real GDP will always be equal to nominal GDP.
B) real GDP will be greater than nominal GDP in the years after the base year.
C) real GDP will be less than nominal GDP in the years before the base year.
D) real GDP will be greater than nominal GDP in the years before the base year.
One reason why, in the short run, the marginal product of labor might increase initially
as more workers are hired is that
A) the first workers hired get to use the best equipment.
B) specialization allows a worker to focus on one task, thereby increasing her
proficiency at that task.
C) the best workers are hired first and later hires are not as skillful.
D) beyond some point, a firm has hired too many workers.
What impact does a higher price level have on interest rates, wealth, and investment
spending?
Explain how both renters and landlords could be either winners or losers with the
imposition of rent control.
What are the four main sources of comparative advantage? Briefly explain each source
and provide examples.
What is economic surplus? When is economic surplus at a maximum?
What is meant by the term “internalizing an externality”? How does a Pigovian tax or
subsidy internalize an externality?
How can a firm have a negative valued added, as supposedly some state-owned
businesses did in the former Soviet Union? What has to be true for value added to be
negative?
Explain how the market for opticians is affected as a result of the development of laser
technology which reduces the demand for glasses and contact lenses. In your
explanation be sure to show the connection between the market for glasses and contact
lenses and the market for opticians.
What is the difference between fiscal policy and monetary policy?
Why is the balance of payments always zero?