If interest rates in the United States fall,
A) the value of the dollar will fall as foreign investors decrease their holdings of U.S.
investments.
B) the value of the dollar will rise as foreign investors increase their holdings of U.S.
investments.
C) the value of the dollar will fall as foreign investors increase their holdings of U.S.
investments.
D) the value of the dollar will rise as foreign investors decrease their holdings of U.S.
investments.
To reassure investors who were unwilling to buy mortgages in the secondary market,
the U.S. Congress used two government sponsored enterprises, Fannie Mae and Freddie
Mac, to stand between investors and banks that grant mortgages. Fannie Mae and
Freddie Mac
A) sell mortgages to investors and use the funds to purchase bonds from banks.
B) sell bonds to investors and use the funds to purchase mortgages from banks.
C) sell bonds to banks and use the funds to purchase mortgages from investors.
D) sell mortgages to banks and use the funds to purchase bonds from investors.
Which of the following economists is best known for exploring the application of
economic analysis to human resources issues?
A) Edward Lazear
B) Claudia Goldin
C) David Hammermesh
D) Alan Krueger
According to Steven Cheung: “Pollination contracts usually include stipulations
regarding the number and strength of …[bee] colonies, the rental fee per hive, the time
of delivery…the protection of bees from pesticides, and the strategic placing of hives.”
Cheung cites this as evidence that
A) the high costs of writing and enforcing complicated written agreements between
owners of beehives and apple orchards prevents economic efficiency from being
achieved in these markets.
B) government intervention is not always necessary to bring about an economically
efficient number of apple trees and beehives.
C) government regulation of contracts between owners of beehives and apple orchards
is necessary to bring about an economically efficient number of apple trees and
beehives.
D) the beekeeping and apple growing businesses have become more complicated and
costly over time due to the legal costs involved.
Sefronia and Bella share an apartment and they are deciding whether or not to purchase
a weekly housecleaning service. The value of the service to each of them is $50 and it
costs $80 to hire a housecleaner. Suppose Bella is lazy and a spendthrift and Sefronia
suspects that Bella will be willing to pay $80. What is Sefronia likely to do, given that
she is as rational as any other person?
A) She will correctly rationalize that Bella’s laziness and spendthrift ways are irrelevant
to the decision at hand.
B) She might claim that she is not willing to pay for a housecleaner, hoping that Bella
would pay the entire $80.
C) She might offer to do Bella’s housecleaning chores if Bella would pay her $50.
D) She will come clean and tell Bella that since Bella is lazy and a spendthrift she
should pay a bigger share of the $80.
Assuming no change in the nominal exchange rate, how will a decrease in the price
level in the United States relative to France affect the real exchange rate between the
two countries? (Assume the United States is the “domestic” country.)
A) The real exchange rate will rise.
B) The real exchange rate will fall.
C) The real exchange rate will be unaffected.
D) The impact on the real exchange rate cannot be predicted.
Suppose that in a market for used cars, there are good used cars and bad used cars
(lemons). Consumers are willing to pay as much as $6,000 for a good used car but only
$1,000 for a lemon. Sellers of good used cars value their cars at $5,000 each and sellers
of lemons value their cars at $800 each. Buyers cannot tell if a used car is reliable or is
a lemon. Based on this information, what is the likely outcome in the market for used
cars?
A) Both good used cars and lemons will sell for $4,500 each.
B) Only lemons will sell, for $800 each.
C) Both good used cars and lemons will sell for $1,000 each.
D) Most used cars offered for sale will be lemons.
Article Summary. According to the International Energy Agency (IEA), increased
oil production resulting from U.S. shale oil has invigorated the North American oil
industry and has created a global supply shock. The shale oil and gas industry has
generated tens of billions of dollars in revenues and hundreds of thousands of new
jobs, and could result in the United States changing from being the world’s largest
oil importer to a net exporter within a few years. An IEA forecast predicts that
because of shale oil, the United States will become the world’s largest oil producer
by 2017, with supply growing by 3.9 million barrels per day from 2012-2018.
Source: Denise Roland, and AFP, “US shale energy creates global oil ‘supply
shock’,” Telegraph, May 14, 2013.
The supply shock mentioned in the article summary may well result in a decrease in the
price of oil. After an unexpected decrease in the price of oil, the long-run adjustment
________ the price level and ________ the unemployment rate as they return to their
original levels.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
We should never assume that an inelastic demand curve is a perfectly inelastic demand
curve because
A) there has never been evidence of a perfectly inelastic demand curve.
B) an inelastic demand curve may be perfectly inelastic at some times but not others.
C) perfectly inelastic demand curves are rare.
D) an inelastic demand curve may be elastic at high prices.
A decrease in interest rates can ________ the demand for stocks as stocks become
relatively ________ attractive investments as compared to bonds.
A) increase; more
B) decrease; less
C) decrease; more
D) increase; less
E) increase; similar
If a typical monopolistically competitive firm is making short-run losses, then
A) other more competitive firms will enter the market.
B) as some firms leave, the remaining firms will experience an increase in the demand
for their products.
C) as some firms leave, the demand for the products of the remaining firms will become
more elastic.
D) the industry will eventually cease to exist.
State whether each of the following goods and services is nonrival, nonexcludable or
both:
a. A toll road
b. A public park
c. A lighthouse
d. An art museum
e. A radio broadcast of “A Prairie Home Companion”
Private producers have no incentive to provide public goods because
A) the government subsidy granted is usually insufficient to enable private producers to
make a profit.
B) production of huge quantities of public goods entails huge fixed costs.
C) they cannot avoid the tragedy of the commons.
D) once produced, it will not be possible to exclude those who do not pay for the good.
Which of the following is not a barrier to entry?
A) an inelastic demand curve
B) economies of scale
C) ownership of a key input
D) a patent
As job opportunities for women and the wages those jobs pay have increased, the
opportunity cost of doing housework has ________, so many families have chosen to
hire specialists in households chores, such as cleaning services and lawn care services,
because the cost of these specialists is ________ than the cost of the wife (or husband)
performing those chores.
A) increased; higher
B) increased; lower
C) decreased; higher
D) decreased; lower
Consider a discount retailer such as Costco which uses a two-part tariff pricing strategy.
The Costco membership fee
A) buys the consumer the right to make future purchases at Costco.
B) is a resalable asset to the consumer.
C) is a resalable asset to the producer.
D) is used by Costco to cover its fixed costs of production.
Health insurance typically pays for most preventive care procedures in all of the
following countries except
A) Canada.
B) Japan.
C) the United Kingdom.
D) the United States.
If the quantity of hearing aids demanded is represented by the equation QD = 40 – P
then the corresponding price of hearing aids is represented by the equation
A) P = 0.5QD + 20.
B) P = 40 – QD.
C) P = 0.25 – 4QD.
D) P = QD + 40.