The labor force participation rates of men have gradually increased since 1948.
Answer:
The difference between consumer surplus and producer surplus in a market is equal to
the deadweight loss.
Answer:
All consumption bundles along a given indifference curve are equally desirable.
Answer:
Competitive market equilibrium is a market equilibrium with many buyers and sellers.
Answer:
In a market with positive externalities, the market equilibrium price will be less than the
efficient equilibrium price.
Answer:
The minimum point on the average variable cost curve is called the loss-minimizing
point.
Answer:
The rising cost of uninsured patients receiving treatment at hospital emergency rooms is
one of the leading causes of the increase in health care spending as a percentage of GDP
in the United States.
Answer:
One reason why many low-income countries experience low rates of growth is because
of low rates of saving and investment in those countries.
Answer:
While labor unions tend to negotiate above-equilibrium wage rates for their members,
they also tend to reduce the quantity of labor hired.
Answer:
Ceteris paribus, in the short run following a decrease in the rate of growth in Aggregate
Demand, we would expect to see an increase in the rate of unemployment and a
decrease in the rate of inflation.
Answer:
A perfectly competitive firm has to charge the same price as every other firm in the
market. Therefore, the firm
A) faces a perfectly inelastic demand curve.
B) is not able to make a profit in the short run.
C) is a price taker.
D) faces a perfectly elastic supply curve.
Answer:
Figure 13-1
Ceteris paribus, a decrease in households’ expectations of their future income would be
represented by a movement from
A) AD1 to AD2.
B) AD2 to AD1.
C) point A to point B.
D) point B to point A.
Answer:
The Federal Reserve responded to the 2008 financial crisis in several ways. Which of
the following is one of the ways the Fed responded?
A) The Fed banned investment banks from obtaining discount loans.
B) The Fed lent investment banks Treasury securities in exchange for mortgage-backed
securities.
C) The Fed lowered the required reserve ratio on demand deposit accounts in order to
increase the amount of bank reserves.
D) The Fed helped Citibank to acquire General Motors and Chrysler.
Answer:
The slope of a demand curve is not used to measure the price elasticity of demand
because
A) the slope of a linear demand curve is not constant.
B) the slope of a line cannot have a negative value.
C) the measurement of slope is sensitive to the units chosen for price and quantity.
D) the slope of the demand curve does not tell us how much quantity changes as price
changes.
Answer:
Buyers scrambled to secure stocks of Australian wool following a forecast of an 11
percent decline in wool production. What happens in the Australian wool market as a
result of this announcement?
A) The demand curve for Australian wool shifts to the left in anticipation of higher
prices in the future.
B) The demand curve for Australian wool shifts to the right in anticipation of higher
prices in the future.
C) The quantity of Australian wool demanded increases in anticipation of higher prices
in the future.
D) The quantity of Australian wool demanded decreases in anticipation of lower
quantities in the future.
Answer:
What happens to the absolute value of marginal rate of substitution as you move down a
convex (bowed toward the origin) indifference curve?
A) increases
B) decreases
C) remains constant
D) could increase or decrease
Answer:
Why is price discrimination legal but not discrimination based on race or gender?
A) because price discrimination increases profits and therefore tax revenues for the
government, but discrimination based on race or gender reduces tax revenues
B) because price discrimination reduces deadweight loss, but discrimination based on
race or gender increases deadweight loss
C) because price discrimination involves charging people different prices based on their
willingness to pay rather than on the basis of arbitrary characteristics
D) because price discrimination enables firms to increase output and employment, but
race or gender based discrimination reduces employment
Answer:
Figure 13-1
Ceteris paribus, an increase in government spending would be represented by a
movement from
A) AD1 to AD2.
B) AD2 to AD1.
C) point A to point B.
D) point B to point A.
Answer:
Trade restrictions tend to preserve ________ in the protected industries and lead to
________ in other industries.
A) almost all jobs; economic growth
B) well over half of the jobs; price decreases
C) relatively few jobs; job losses
D) no jobs; increased productivity
Answer:
An increase in aggregate demand causes an increase in ________ only in the short run,
but causes an increase in ________ in both the short run and the long run.
A) the price level; real GDP
B) real GDP; real GDP
C) the price level; the price level
D) real GDP; the price level
Answer:
The difference between GDP and disposable income is
A) national income.
B) actual investment spending.
C) net taxes.
D) unplanned investment spending.
Answer:
Suppose the equilibrium price in a perfectly competitive industry is $10 and a firm in
the industry charges $12. Which of the following will happen?
A) The firm will sell more output than its competitors.
B) The firm’s revenue will increase.
C) The firm will not sell any output.
D) The firm’s profits will increase.
Answer:
What is the main difference between a consumption tax and an income tax?
A) A consumption tax requires households to pay taxes only on the income they have
left after consumption, while an income tax requires households pay taxes on all earned
income before consumption.
B) A consumption tax requires households to pay taxes only on the income they spend,
while an income tax requires households pay taxes on all earned income.
C) A consumption tax always generates less revenue than an income tax.
D) There is no difference between a consumption tax and an income tax.
Answer:
Jewelry manufacturers produce a range of products such as rings, necklaces, bracelets,
and brooches. What fundamental economic question are they addressing by offering
this range of items?
A) How to produce goods that consumers want?
B) Why produce a variety of items?
C) What to produce?
D) Who to produce the items for?
Answer:
Which type of business has the most government rules and regulations affecting it?
A) sole proprietorship
B) partnership
C) corporation
D) They all have the same set of rules and regulations affecting them.
Answer:
Figure 12-13
Suppose the prevailing price is P1 and the firm is currently producing its
loss-minimizing quantity. If the firm represented in the diagram continues to stay in
business, in the long-run equilibrium,
A) it will reduce its output to Q0 and face a price of P0.
B) it will continue to produce Q1 but faces the higher price of P2.
C) it will expand its output to Q2 and face a price of P2.
D) it will expand its output to Q3 and face a price of P1.
Answer:
Consumption spending is $5 million, planned investment spending is $8 million, actual
investment spending is $8 million, government purchases are $10 million, and net
export spending is $2 million. Based on this information, which of the following is
true?
A) There was an unplanned change in inventories.
B) Aggregate expenditure is equal to GDP.
C) Aggregate expenditure is greater than GDP.
D) Aggregate expenditure is less than GDP.
Answer:
Which of the following would you expect to increase the equilibrium interest rate?
A) an increase in the percentage of income after net taxes that households save
B) an increase in the budget deficit
C) a decrease in the profitability of investment projects firms are considering
D) a change from an income tax to a consumption tax
Answer:
Zane’s Vanes is a service that restores old weather vanes. Zane has just spent $125
purchasing a 1920s era weather vane which he expects to restore and sell for $500 once
the work is completed. After having spent $125, Zane realizes that he will need to spend
an additional $200 on materials to complete the restoration. Alternatively, he can sell
the weather vane without restoring it for $200. What is his marginal benefit if he sells
the weather vane without restoring it?
A) $75
B) $125
C) $200
D) $300
Answer:
What is marginal cost? Which curve is also referred to as the marginal cost curve?
Answer:
Arturo runs a Taco Bell franchise. He is selling 250 Gordita Supremes per week at a
price of $2.75. If he lowers the price to $2.70, he will sell 251 Gordita Supremes. What
is the marginal revenue of the 251st Gordita Supreme? If selling the extra Gordita
Supreme adds $0.20 to Arturo’s costs, what will be the effect on his profit from selling
251 Gordita Supremes instead of 250?
Answer:
Explain why economies with financial account surpluses usually have current account
deficits.
Answer:
Identify four reasons for high entry barriers. Briefly explain each reason.
Answer:
Use the money demand and money supply model to show graphically and explain the
effect on interest rates of the Federal Reserve’s open market sale of Treasury securities.
Answer:
Explain the relationships between a corporation’s shareholders, its board of directors,
and its top managers.
Answer:
The “Big Mac Theory of Exchange Rates” tests the accuracy of the purchasing power
parity theory. In July 2013, the Economist reported that the average price of a Big Mac
in the United States was $4.56. In Mexico, the average price of a Big Mac at that time
was 37 pesos. If the exchange rate between the dollar and the peso was 13.60 pesos per
dollar, explain how it would be profitable to buy Big Macs in Mexico instead of in the
United States.
Answer:
Describe how the Fed uses open market operations to change short-term and long-term
interest rates.
Answer:
The federal budget exhibited a $128.7 billion surplus in 2001 but moved to a deficit of
$157.8 billion in 2002. Some argued the deficit was opened up because of the Bush
2001 tax cuts, but others argued that the deficit grew because of the recession suffered
in 2001. Evaluate the validity of the second argument.
Answer:
Explain why increasing the government budget deficit can decrease investment
spending.
Answer: