A duopoly is
a. a cartel in which all members try to cheat on the cartel.
b. an industry with only two sellers.
c. an industry with only two buyers.
d. a cartel with only two members.
Stabilization policy is the name given to government economic policies designed to
a. stabilize the price level.
b. shorten and/or prevent recessions.
c. diminish unemployment.
d. All of the above are correct.
Figure 22-9
In Figure 22-9, Pestoland at price OA
a. is importing MN pasta from Pastaland.
b. is exporting MN pasta to Pastaland.
c. is exporting XY pasta to Pastaland.
d. is exporting OZ pasta to Pastaland.
What is the principal reason that economists give for the existence of deflationary and
inflationary gaps?
a. Wages are flexible in the short run.
b. Wages are flexible in the long run.
c. Wages are fixed in the long run.
d. Wages are fixed in the short run.
Figure 10-6
In Figure 10-6, which graph best illustrates the effect of the beginning of the Iraq war in
2003?
a. (1)
b. (2)
c. (3)
d. (4)
Although monopoly has lower output than competition, the level of output is efficient.
a. True
b. False
The percentage of the burden of an excise tax that is borne by sellers generally depends
on the
a. size of the tax.
b. relationship between the elasticity of demand and the elasticity of supply.
c. elasticity of demand.
d. elasticity of supply.
The U.S. experience with tax cuts and tax increases since 1975 suggests that
a. tax cuts always stimulate consumption spending.
b. tax changes have a stable and predictable effect on consumption spending.
c. temporary tax changes are less effective than permanent changes.
d. tax changes have no effect on consumption spending.
Black-market prices are below equilibrium prices because sellers want to sell large
quantities.
a. True
b. False
Nominal GDP is calculated by using
a. prices set in a base year.
b. average prices in all major cities.
c. current prices
d. prices charged by initial producers.
The rapid speed with which the stimulus bill passed through both houses of Congress
and was signed by the President could be used as an argument for
a. activist fiscal policy.
b. activist monetary policy.
c. expansionary fiscal policy.
d. contractionary monetary policy.
Critics argue that society is depleting its energy resources far too quickly. The most
likely explanation for this behavior is that
a. firms try to avoid making irreversible decisions about resource depletion.
b. investors expect interest rates to fall continuously in the future.
c. individuals tend to value their own well-being more highly than the well-being of
future generations.
d. people do not have what Pigou called a “defective telescopic faculty.”
According to a recent survey, in 2012, the number of U.S. households that owned
equitites was about:
a. 3 %
b. 27 %
c. 45 %
d. 55 %
Figure 5-3
In Figure 5-3, a decline in price from 3 to 1 will increase market quantity demanded by
a. 30.
b. 40.
c. 50.
d. 60.
The oversimplified formula for the multiplier is misleading because it ignores the
effects of
a. price-level changes.
b. the foreign sector.
c. variable taxes.
d. All of the above are correct.
The derived demand and, consequently, the demand curve for labor are determined by
a. labor’s wage.
b. labor’s marginal revenue.
c. the marginal cost of the input labor.
d. labor’s marginal revenue product.
If profit per unit equals (price – cost per unit) and costs are temporarily fixed, then the
aggregate supply curve will have
a. a basic “U” shape.
b. a negative slope.
c. a positive slope.
d. All of the above could be correct.
A contour map illustrates a cause and effect relationship among three variables.
a. True
b. False
To find its profit-maximizing output level, a firm should operate where
a. AVC = MC.
b. MC = MR.
c. TFC = TVC.
d. AFC = AVC.
Wendy retails motor homes, which she buys for a sum that does not vary with the
number she purchases from the manufacturer. She can sell eleven per week at $40,000.
If she limits sales to ten, she can charge $41,000 each. She will sell eleven per week if
the cost of each vehicle is no more than
a. $20,000.
b. $30,000.
c. $40,000.
d. $41,000.
Marginal, average, and total figures are unrelated.
a. True
b. False
A change in input prices will change the location of the budget line.
a. True
b. False
If labor markets are competitive, discriminating employers
a. will have to pay higher wages since the available labor supply is smaller.
b. will have higher costs and therefore be at a competitive disadvantage.
c. will be driven out of business by nondiscriminators.
d. All of the above are true.
Capital investment becomes more profitable for a business firm as the real interest rate
decreases.
a. True
b. False
John Amaker owns orange groves and hires pickers for a two-week period as shown in
Table 7-3.
Table 7-3
In Table 7-3, negative returns set in with picker
a. 6.
b. 7.
c. 8.
d. 9.
e. There are no negative returns in this table.
The demand for euros would come from
a. American exports to Europe.
b. European demand for U.S. government bonds.
c. American demand for European real estate.
d. All of the above are correct.
The net worth of a bank is defined as the difference between
a. income and expenses.
b. assets and liabilities.
c. loans and deposits.
d. loans and reserves.
Define the following terms and explain why they are important in the study of
economics.
a. efficient allocation
b. laissez faire
c. peak pricing
d. input-output analysis
e. coordination tasks
Technological change in modern societies is most likely the result of increases in
a. machine building.
b. more natural resource use.
c. education.
d. the labor force.
Figure 22-3
In Figure 22-3, the solid lines represent the respective production possibilities curves
for the United States and Mexico. Which graphs show the correct consumption
possibilities curves (dashed lines) after an agreement is reached to trade 1 unit of wheat
for 1 unit of petroleum?
a. (1) and (4)
b. (1) and (2)
c. (2) and (3)
d. (3) and (4)
A proponent of supply-side economics would advocate
a. reducing income taxes on saving.
b. reducing tax credits for research and development.
c. eliminating the depreciation allowance.
d. increasing the corporate income tax.
The incidence of a tax refers to
a. who actually collects the tax.
b. how frequently the tax is collected.
c. who bears the economic burden of the tax.
d. how the tax affects prices or wages.
Suppose the price of butter falls because milk price supports are removed. Will people’s
tastes shift away from margarine and toward butter?
Explain why a monopolist does not have a supply curve.
What are the policies usually advocated by supply side economists? How do they
justify these proposals?
What are the reasons for preferring competition to monopoly?
What is the “cost disease of personal services” phenomenon and why does it help
explain why tuition rates keep going up so fast?
Assume Jean-Claude purchased real estate for $500,000 using $50,000 of which is his
own money and $450,000 which he borrowed at an 8% interest rate. If the value
increased by 10% in one year and he sold the property, what was Joe’s rate of return on
his investment? If the value of the property had declined by 2%, what would have been
the rate of return on his investment?
Few bother to think about what makes Florida oranges show up daily in South Dakota
supermarkets, but the people of South Dakota are likely to think a great deal about this.
Why does someone take the time and energy to assure that oranges which are grown in
Florida move more than 1,000 miles before they appear on grocery shelves?
Consider an industry consisting of four firms with market shares of 30 percent, 25
percent, 25 percent, and 20 percent. Calculate the Herfindahl Hirschman Index and
interpret your result.
During World War II, Hitler would often order his army to hold a particular town or
river “at all costs.” Was this rational? If so, explain. If not, indicate which economic
idea it violated.
The marketing division of a firm has measured demand for its product and reports that
it is 2Q = 24 − P, where Q is units and P is price per unit in dollars. The cost is given in
the table below. Complete the table and determine the profit-maximizing level of output
for this firm.
A country can gain by importing a good from abroad even if that good can be produced
more efficiently at home. Is this statement true?
Why is oligopoly more difficult to model than competition or monopoly?
Why is investment spending a highly volatile component?
What is the flypaper theory of tax incidence? This theory is typically wrong. Why?
Michael Jordan averaged 35 points per game over a 100-game season. During the
playoff round of 10 games, he averaged 50 points, and in the five-game championship
series, he led the Chicago Bulls to victory, averaging 40 points. For the entire season,
how many points did Jordan score, what was his average, and did the championship
series pull his previous average up or down?
Figure 14-3
In Figure 14-3, if person 1 and person 2 have the indicated quantities of cheese and
crackers, and are on the indicated indifference curves, is there the possibility of
mutually beneficial trade? Explain.