Policies based on normative economic ideas tend to increase economic efficiency and
improve equity.
Entrepreneurs bring together the factors of production to produce goods and services.
The slope of an isoquant is equal to the ratio of the price of the input on the horizontal
axis divided by the price of the input on the vertical axis, multiplied by -1.
If the actual rate of inflation exceeds the expected rate of inflation, the actual real wage
is greater than the expected real wage and unemployment falls.
If a monopolist’s price is $50 at the output where marginal revenue equals marginal cost
and average total cost is $43, then the incremental profit from the last unit sold is $7.
The supply curve of a uniquely talented actor or superstar athlete will be perfectly
inelastic.
If you purchase a share of stock from your friend who initially purchased the stock
three years ago, your purchase of the stock represents a transaction in the primary
financial market
Corporate managers and shareholders always have the same goals.
Under current U.S. tax laws individuals do not pay taxes on health insurance benefits
they receive from their employers.
Black markets only exist in developing nations.
The situation in which one party to a transaction takes advantage of knowing more than
the other party to the transaction is known as asymmetric information.
An increase in exports decreases aggregate demand.
Empirical evidence shows that the short-run Phillips curve was vertical during the
1950s and 1960s.
The multiplier effect following an increase in expenditure is generated by induced
increases in consumption expenditure as income rises.
An externality is an example of a market failure.
When consumers pay only a fraction of the true cost of medical services, their demand
increases. The marginal cost of producing these extra services
A) is greater than the marginal benefit consumers receive from them.
B) is less than the marginal benefit consumers receive from them.
C) is equal to the marginal benefit consumers receive from them.
D) is zero due to the insurance payments.
Which of the following countries had the highest GDP per capita in 2012?
A) Qatar
B) United States
C) Japan
D) Norway
How does the long run equilibrium of a monopolistically competitive industry differ
from that of a perfectly competitive industry?
A) A firm in monopolistic competition will earn economic profits but a firm in perfect
competition earns zero profit.
B) A firm in monopolistic competition will charge a price higher than the average cost
of production but a firm in perfect competition charges a price equal to the average cost
of production.
C) A firm in monopolistic competition does not take full advantage of its economies of
scale but a firm in perfect competition produces at the lowest average cost possible.
D) A firm in monopolistic competition produces an allocatively efficient output level
while a firm in perfect competition produces a productively efficient output level.
Figure 4-2
What area represents the increase in producer surplus when the market price rises from
P1to P2?
A) B + D
B) A + C + E
C) C + E
D) A + B
The expansionary monetary and fiscal policies of the 1960s resulted in
A) high inflation rates and high rates of unemployment.
B) low inflation rates and low rates of unemployment.
C) low inflation rates and high rates of unemployment.
D) high inflation rates and low rates of unemployment.
The federal budget deficit and the trade balance are often referred to as the
A) balance of payments.
B) dueling depreciators.
C) twin deficits.
D) national debt.
If the Phillips curve represents a “________ relationship,” then the trade-off between
unemployment and inflation is permanent.
A) structural
B) frictional
C) cyclical
D) dynamic
Anything of value owned by a person or a firm is
A) an asset.
B) a liability.
C) wealth.
D) owner’s yield.
Economists have long debated whether there is a significant loss of well-being to
society in markets that are monopolistically competitive rather than perfectly
competitive. Which of the following offers the best reason why some economists
believe that monopolistically competitive markets benefit consumers despite any loss of
well-being?
A) Although consumers may pay a price greater than marginal cost for a product, the
product is produced at the minimum average total cost.
B) Although consumers may pay a price greater than marginal cost and the product is
not produced at minimum average total cost, they benefit from being able to buy a
differentiated product more closely suited to their tastes.
C) Consumers pay a price equal to the marginal cost of producing a product, even
though it is not produced at the minimum average total cost.
D) Consumers are better off choosing from a variety of differentiated products, even
though product differentiation causes barriers that restrict entry into monopolistically
competitive markets.
In international exchange markets, a rise in interest rates in the United States will cause
the demand for dollars to ________ and the supply of dollars to ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
The basic cause of deadweight losses from the existence of common resources and
externalities is
A) a lack of clearly defined and enforceable property rights.
B) the self interested rationality of human beings.
C) the use of a market system to deal with scarcity.
D) the absence of government intervention.
Automobiles and many other products are differentiated. As a result
A) different countries may each have a comparative advantage in producing different
types of automobiles.
B) consumers of automobiles have difficulty deciding what type of imported
automobile to buy.
C) the quality of imported automobiles is less than it could be.
D) we see countries specializing completely in the production of automobiles.
Using a supply and demand graph, illustrate the market for rent-controlled apartments
with the following data: Equilibrium rent without rent control: $1,500
Rent with rent control: $700
Quantity of apartments demanded with rent control: 50,000
Quantity of apartments supplied with rent control: 20,000 What is the value of the
initial shortage of apartments with rent control? Now assume rent control leads to a
reduction in the supply of apartments, and the new quantity supplied is now 15,000.
Illustrate this on your graph. What is the value of the shortage of apartments following
the decrease in supply?
What are economies of scale? What are diseconomies of scale?
Suppose the United States experiences a long period of relatively stable prices while
other countries experience long periods of inflation. How will this affect U.S. net
exports?
Table 15-7
Figure 4-7
which shows the market for vitamins. Suppose the government imposes a price ceiling
of Pv. How will the price ceiling affect the quantity supplied, quantity demanded and
quantity exchanged?
Figure 13-6
Suppose the above graph represents the relationship between the average total cost of
producing notebook computers and the quantity of notebook computers produced by
Dell. On a graph, illustrate the demand, MR, MC, and ATC curves which would
represent Dell maximizing profits at a quantity of 100,000 per month and identify the
area on the graph which represents the profit.
Use the rule of 70 to illustrate how small differences in growth rates can have a large
impact on how rapidly the standard of living in a country increases.
