If the cross-price elasticity of demand for goods A and B is zero, this means the two
goods are unrelated.
The additional cost to a producer of hiring an additional unit of labor is called the
marginal cost.
Lowering the individual income tax will increase household disposable income and
consumption spending.
Competition has driven the economic profits in the video rental business to zero. Surya
Bacha, who owns a video rental business, would be better off leaving the industry for
another alternative.
Lowering the individual income tax will increase household disposable income and
consumption spending.
If consumption is defined as C = 2,000 + 0.8Y, then the marginal propensity to save is
0.8.
The German central bank, the Bundesbank, faced the risk of increased inflation caused
by its actions to support an overvalued deutsche mark in the 1960s.
In the long run, the relevant cost is total cost.
Producing a homogeneous product occurs in which of the following industries?
A) oligopoly, monopolistic competition and perfect competition
B) perfect competition only
C) oligopoly and perfect competition
D) monopolistic competition and perfect competition
Which of the following statements about the economically efficient level of air
pollution is correct?
A) The economically efficient level of pollution is zero.
B) The economically efficient level of pollution occurs where all social costs equal all
social benefits.
C) The economically efficient level of pollution occurs where the marginal cost of
pollution reduction equals the marginal social benefit of reduction.
D) The economically efficient level of pollution occurs where total benefits of pollution
reduction are maximized.
Which of the following would you expect to decrease both interest rates and exchange
rates? (Assume exchange rates are stated in terms of foreign currency per domestic
currency.)
A) contractionary monetary policy
B) expansionary monetary policy
C) contractionary fiscal policy
D) Both B and C will decrease both interest rates and exchange rates.
The period of expansion ends with a ________ and the period of recession ends with a
________.
A) business cycle peak; business cycle trough
B) business cycle trough; business cycle peak
C) business cycle peak; business cycle peak
D) business cycle trough; business cycle trough
Using the Taylor rule, if the current inflation rate equals the target inflation rate and real
GDP is less than potential GDP, then the federal funds target rate ________ the sum of
the current inflation rate plus the real equilibrium federal funds rate.
A) will be greater than
B) will be less than
C) will be the same as
D) may be greater than or less than
Figure 19-7
At what level should the Indian government peg its currency to the dollar to make U.S.
imports cheaper in India?
A) greater than $.02/rupee
B) less than $.02/rupee
C) equal to $.02/rupee
D) $1/rupee
If a firm has excess capacity, it means
A) that the firm expends too much of its resources on advertising its product without
seeing an appreciable increase in sales.
B) that the firm is not producing its minimum efficient scale of output.
C) that the firm’s long-run average cost of producing a given quantity exceeds its
short-run cost of producing that same quantity.
D) that the firm’s quantity supplied exceeds its quantity demanded.
Major League Baseball teams are similar to other firms in that they use factors of
production to produce a product (baseball games). An example of capital used by teams
to produce their products is
A) the money teams earn from television contracts and ticket sales.
B) the land on which baseball games are played.
C) the labor of baseball players.
D) the ballparks where the games are played.
Assume the United States is the “domestic” country and Switzerland is the “foreign”
country. Which of the following might decrease the real exchange rate between the
United States and Switzerland?
A) a depreciation of the franc
B) an appreciation of the dollar
C) a decrease in the price level in the United States
D) a decrease in the price level in Switzerland
Sequential games are used to analyze
A) firms that are subject to the prisoner’s dilemma.
B) cartels.
C) second-price auctions.
D) situations in which one firm acts and other firms respond.
Table 9-11 Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-11 shows the production
and consumption quantities without trade, and the production numbers with trade.
All of the following are terms of trade that could possibly benefit both countries except
A) 1/5 of a hat : 1 clock
B) 1/3 of a hat : 1 clock
C) 1/2 of a hat : 1 clock
D) 3/4 of a hat : 1 clock
Define logrolling. Explain why logrolling often results in legislation that benefits the
economic interests of a few, while harming the interests of a larger group of people.
“Being the only seller in the market, the monopolist can choose any price and quantity
it desires.” Evaluate this statement: is it true or false? Explain your answer.
Describe the structure of the Fed’s Open Market Committee (FOMC). What is this
committee’s primary responsibility?
How is the impact of contractionary monetary policy different in an open economy than
in a closed economy?
What is the difference between imports and exports?