A decrease in supply is represented by a
a. movement downward and to the left along a supply curve.
b. movement upward and to the right along a supply curve.
c. rightward shift of a supply curve.
d. leftward shift of a supply curve.
Retained earnings are
a. earnings of a company that are not paid out to stockholders.
b. the amount of revenue a corporation receives for the sale of its products minus its
costs of production as measured by its accountants.
c. the single most important piece of information about a stock.
d. computed by multiplying the dividend yield by the price of the stock.
When a country that imported a particular good abandons a free-trade policy and adopts
a no-trade policy,
a. consumer surplus increases and total surplus increases in the market for that good.
b. consumer surplus increases and total surplus decreases in the market for that good.
c. consumer surplus decreases and total surplus increases in the market for that good.
d. consumer surplus decreases and total surplus decreases in the market for that good.
Which of the following is correct concerning a risk-averse person?
a. She would not play games where the probability of winning and losing a dollar are
the same.
b. She might not buy health insurance if she thinks her risks are low.
c. Her marginal utility of wealth decreases as her income increases.
d. All of the above are correct.
In conducting their research, economists face an obstacle that not all scientists face;
specifically, in economics, it is often difficult and sometimes impossible to
a. make use of theory and observation.
b. rely upon the scientific method.
c. conduct laboratory experiments.
d. find articles or books that were written before 1900.
Suppose that autoworkers are unionized in one region of the country but not in the
other. If the unionized workers abolished their unions, employment
a. and wages of autoworkers in that region would rise.
b. of automobile workers in that region would rise, but wages of automobile workers in
that region would fall.
c. and wages of autoworkers in that region would fall.
d. of automobile workers in that region would fall but wages of automobile workers in
that region would rise.
Suppose that Firms A and B each produce high-resolution computer monitors, but Firm
A can do so at a lower cost. Cassie and David each want to purchase a high-resolution
computer monitor, but David is willing to pay more than Cassie. If Firm A produces a
monitor that Cassie buys but David does not, then the market outcome illustrates which
of the following principles?
(i) Free markets allocate the supply of goods to the buyers who value them most highly,
as measured by their willingness to pay.
(ii) Free markets allocate the demand for goods to the sellers who can produce them at
the least cost.
a. (i) only
b. (ii) only
c. both (i) and (ii)
d. neither (i) nor (ii)
The unemployment rate is computed as the number of unemployed
a. divided by the labor force, all times 100.
b. divided by the number of employed, all times 100.
c. divided by the adult population, all times 100.
d. times the labor-force participation rate, all times 100.
Consider the exhibit below for the following questions.
Figure 20-1
Refer to Figure 20-1. In the short run, a favorable shift in aggregate supply would
move the economy from
a. A to B.
b. B to C.
c. C to D.
d. D to A.
If the reserve ratio is 12.5 percent, then $5,600 of money can be generated by
a. $64 of new reserves.
b. $448 of new reserves.
c. $700 of new reserves.
d. $800 of new reserves.
The National Labor Relations Board
a. enforces antitrust laws against unions.
b. enforces workers’ rights to unionize.
c. acts as a union’s representative in collective bargaining.
d. is required to approve all collective bargaining agreements before they can be
enforced.
Which of the following leads to a lower level of unemployment in the long run?
a. both an increase in the size of the money supply and an increase in the money supply
growth rate
b. an increase in the size of the money supply but not an increase in the money supply
growth rate
c. an increase in the money supply growth rate, but not an increase in the size of the
money supply
d. neither an increase in the size of the money supply nor an increase in the money
supply growth rate
Data on the unemployment rate in the U.S. since 1960 show that the unemployment rate
is
a. always zero.
b. sometimes zero.
c. rarely zero.
d. never zero.
Figure 6-3
Panel (a) Panel (b)
Refer to Figure 6-3. In panel (b), there will be
a. a shortage of wheat.
b. equilibrium in the market.
c. a surplus of wheat.
d. lines of people waiting to buy wheat.
Figure 8-9
The vertical distance between points A and C represent a tax in the market.
Refer to Figure 8-9. The consumer surplus without the tax is
a. $2,000.
b. $5,000.
c. $8,000.
d. $16,000.
Table 4-3
Refer to Table 4-3. Whose demand does not obey the law of demand?
a. Bert’s
b. Ernie’s
c. Grover’s
d. Oscar’s
When economists make positive statements, they are
a. speaking as scientists.
b. speaking as policy advisers.
c. making claims about how the world should be.
d. revealing that they are very conservative in their views of how the world works.
Philip wants to create a graph containing the prices of apples and the corresponding
quantities of apples demanded by customers. He should use a(n)
a. pie chart.
b. bar graph.
c. time-series graph
d. coordinate system.
If the government removes a $1 tax on sellers of gasoline and imposes the same $1 tax
on buyers of gasoline, then the price paid by buyers will
a. increase, and the price received by sellers will increase.
b. increase, and the price received by sellers will not change.
c. not change, and the price received by sellers will increase.
d. not change, and the price received by sellers will not change.
To encourage formation of small businesses, the government could provide subsidies;
these subsidies
a. would be included in GDP because they are part of government purchases.
b. would be included in GDP because they are part of investment expenditures.
c. would not be included in GDP because they are transfer payments.
d. would not be included in GDP because the government raises taxes to pay for them.
Figure 19-4
Refer to Figure 19-4. Suppose that U.S. firms desire to purchase more capital in the
U.S. The effects of this could be illustrated by
a. shifting the demand curve in panel a to the right and the demand curve in panel c to
the left.
b. shifting the demand curve in panel a to the right and the supply curve in panel c to
the left.
c. shifting the supply curve in panel a to the right and the demand curve in panel c to
the left.
d. shifting the supply curve in panel a to the right and the supply curve in panel c to the
right.
Dawn’s bridal boutique is having a sale on evening dresses. The increase in consumer
surplus comes from the benefit of the lower prices to
a. only existing customers who now get lower prices on the gowns they were already
planning to purchase.
b. only new customers who enter the market because of the lower prices.
c. both existing customers who now get lower prices on the gowns they were already
planning to purchase and new customers who enter the market because of the lower
prices.
d. Consumer surplus does not increase; it decreases.
An increase in capital will increase real GNP per person
a. more in a poor country than a rich country. The increase in real GNP per person will
be larger if the addition to capital is from domestic rather than foreign investment.
b. more in a poor country than a rich country. The increase in real GNP per person will
be larger if the addition to capital is foreign rather than from domestic investment.
c. less in a poor country than a rich country. The increase in real GNP per person will be
larger if the addition to capital is from domestic rather than foreign investment.
d. less in a poor country than a rich country. The increase in real GNP per person will be
larger if the addition to capital is foreign rather than from domestic investment.
Figure 7-18
Refer to Figure 7-18. At the equilibrium price, total surplus is
a. $480.
b. $640.
c. $1,120.
d. $1,280.
A linear, upward-sloping supply curve has
a. a constant slope and a changing price elasticity of supply.
b. a changing slope and a constant price elasticity of supply.
c. both a constant slope and a constant price elasticity of supply.
d. both a changing slope and a changing price elasticity of supply.
In the open-economy macroeconomic model, the supply of dollars in the market for
foreign-currency exchange comes from
a. net exports
b. net capital outflow
c. net exports + net capital outflow
d. net exports – net capital outflow
When the money supply increases
a. interest rates fall and so aggregate demand shifts right.
b. interest rates fall and so aggregate demand shifts left.
c. interest rates rise and so aggregate demand shifts right.
d. interest rates rise and so aggregate demand shifts left.
Figure 6-7
Refer to Figure 6-7. For a price ceiling to be binding in this market, it would have to
be set at
a. any price below $6.
b. a price between $3 and $6.
c. a price between $6 and $9.
d. any price above $6.
Which of the following effects provide incentives for consumers to spend less when the
price level rises?
a. the wealth effect and the interest-rate effect
b. the wealth effect but not the interest-rate effect
c. the interest-rate effect but not the wealth effect
d. neither the wealth-effect nor the interest rate effect
After adjusting for inflation, over time the prices of most natural resources have been
a. steady or falling, meaning that our ability to conserve them is growing more rapidly
than their supplies are dwindling.
b. steady or falling, meaning that their supplies are dwindling more rapidly than our
ability to conserve them is growing.
c. rising, meaning that our ability to conserve them is growing more rapidly than their
supplies are dwindling.
d. rising, meaning that their supplies are dwindling more rapidly than our ability to
conserve them is growing.
Economic models are built with
a. recommendations concerning public policies.
b. facts about the legal system.
c. assumptions.
d. statistical forecasts.
When the quality of a good improves while its price remains the same, the purchasing
power of the dollar
a. increases, so the CPI overstates the change in the cost of living if the quality change
is not accounted for.
b. increases, so the CPI understates the change in the cost of living if the quality change
is not accounted for.
c. decreases, so the CPI overstates the change in the cost of living if the quality change
is not accounted for.
d. decreases, so the CPI understates the change in the cost of living if the quality change
is not accounted for.
An increase in the demand for loanable funds increases the equilibrium interest rate and
decreases the equilibrium level of saving.
The Bureau of Labor Statistics determines which prices are most important to the
typical consumer by surveying consumers.
What is the logic behind the theory of purchasing-power parity?
The more inelastic are demand and supply, the greater is the deadweight loss of a tax.
The fact that we observe a trade-off between risk and return is puzzling to economists,
because that observation conflicts with the notion that most people are risk averse.
The larger the deadweight loss from taxation, the larger the cost of government
programs.
GDP excludes the value of intermediate goods because their value is included in the
value of final goods.
Skeptics of government policy to reduce taxes on saving argue that it would primarily
benefit the rich.
What is the difference between monetary policy and fiscal policy?
Suppose a lobster supper in Maine costs fewer dollars than a Lobster supper in Paris,
France. Explain why this is inconsistent with purchasing-power parity and explain why
the inconsistency may exist.
Permanent tax cuts have a larger impact on consumption spending than temporary ones.
In a period of inflation real interest rates will be greater than nominal interest rates.
Economic growth causes a production possibilities frontier to shift outward.
Because the price level does not affect the long-run determinants of real GDP, the
long-run aggregate-supply is vertical.
Suppose one county in Missouri decides it wants to reduce alcohol consumption, so the
county passes a law that raises the price of a bottle of beer by $1. As a result, people
drive to other counties to drink alcohol, which results in an increase in drunk driving.
This illustrates the principle that people respond to incentives.