Scenario 25-2 Imagine that Kristy deposits $10,000 of currency into her checking
account deposit at Bank A and that the required reserve ratio is 20%.
As a result of Kristy’s deposit, Bank A’s reserves immediately increase by
A) $2,000.
B) $8,000.
C) $10,000.
D) $50,000.
Which of the following is evidence of a shortage of chocolate?
A) Firms lower the price of chocolate.
B) The price of chocolate is raised in order to increase sales.
C) The equilibrium price of chocolate falls due to a decrease in demand.
D) The quantity of chocolate demanded is greater than the quantity supplied.
In the circular flow model, the value of total production for an economy ________ the
value of total expenditures on final goods and services.
A) equals
B) is greater than
C) is less than
D) may be greater than or less than
If GDP grows at a rate of 3% per year, approximately how long will it take for GDP to
double in size?
A) 12 years
B) 21 years
C) 23 years
D) 35 years
Figure 9-2
Suppose the U.S. government
imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this
tariff. The tariff causes domestic consumption of rice
A) to fall by 27 million pounds.
B) to fall by 11 million pounds.
C) to rise by 6 million pounds.
D) to rise by 16 million pounds.
If your total satisfaction increases when you consume another unit, your marginal utility
must be
A) increasing.
B) decreasing.
C) negative.
D) positive.
A firm cannot control all of the factors that allow it to make economic profits. Which of
the following is an example of an uncontrollable factor?
A) product differentiation
B) input prices
C) producing at a lower average total cost than competing firms
D) hiring competent managers
In a market economy, ________ interact in markets to decide the answers to the
fundamental economic questions.
A) state and local governments
B) large corporations
C) households and firms
D) the judicial and legislative branches of the federal government
Which of the following situations is one in which the Fed will potentially pursue
expansionary monetary policy?
A) Potential GDP is forecasted to be higher than equilibrium GDP.
B) Potential GDP is forecasted to be lower than equilibrium GDP.
C) Aggregate demand is growing too fast to keep the economy at full employment.
D) Aggregate demand is growing too slowly and the economy is in danger of producing
GDP above full employment.
Which of the following countries does not come close to the free market benchmark?
A) the United States
B) Japan
C) Cuba
D) France
The public choice model raises questions about the government’s ability to regulate
economic activity efficiently. Which of the following statements represents the views of
most economists with regard to the role of government?
A) Congress should abolish the Food and Drug Administration, the Environmental
Protection Agency and other agencies and commissions because the costs of their
actions exceed the benefits they provide to the public.
B) Government should do more to regulate markets. The public choice model has
shown that rent seeking and rational ignorance affect more markets than are currently
subject to regulation.
C) U.S. citizens can afford more government regulation if the cost of this regulation is
borne mostly by taxpayers with the highest incomes.
D) Agencies such as the Food and Drug Administration and the Environmental
Protection Agency can serve a useful purpose, but we need to take the costs of
regulation into account along with the benefits.
In 1935, the U.S. Patent and Trademark Office issued Parker Brothers a trademark on
the use of the name Monopoly for a board game. Hasbro bought Parker Brothers in
1991. Which of the following statements is true regarding the trademark on the name
Monopoly for a board game?
A) The original trademark expired well before Hasbro bought Parker Brothers, so they
never had a trademark on Monopoly.
B) Trademarks never expire, so Hasbro continues to have a trademark on the name
Monopoly.
C) The trademark expired in 2011, 20 years after Hasbro’s purchase of Parker Brothers.
D) The trademark expired in 1955, 20 years after the trademark was issued to Parker
Brothers.
If a firm shuts down in the short run it will
A) break even.
B) declare bankruptcy.
C) suffer a loss equal to its variable costs.
D) suffer a loss equal to its fixed costs.