To offset the effect of households and firms deciding to hold more of their money in
checking account deposits and less in currency, the Federal Reserve could
A) raise bank taxes.
B) sell Treasury securities.
C) raise government spending.
D) lower the required reserve ratio.
According to the saving and investment equation, if net foreign investment rises by $60
million,
A) national saving will increase by $60 million.
B) national saving will fall by $60 million.
C) domestic investment will rise by $60 million.
D) private saving will fall by $60 million.
When production generates a negative externality, the true cost of production is the
A) private cost of production.
B) public cost of production.
C) social cost of production.
D) average cost of production.
If, when a firm doubles all its inputs, its average cost of production increases, then
production displays
A) diminishing returns.
B) economies of scale.
C) diseconomies of scale.
D) declining fixed costs.
The Pre-Existing Condition Insurance Plan is a federally administered part of the
Affordable Care Act, and is designed for people with pre-existing medical conditions to
obtain insurance.By offering health insurance to all U.S. citizens with pre-existing
medical conditions, the Pre-Existing Condition Insurance Plan eliminates ________ for
both the insurer and the insured, and eliminates ________ for the issuer of the insurance
policy.
A) the principal-agent problem; moral hazard
B) asymmetric information; adverse selection
C) adverse selection; the principal-agent problem
D) moral hazard; adverse selection
In a graph of unemployment rates (on the horizontal axis) versus inflation rates (on the
vertical axis), the short-run Phillips Curve is
A) downward sloping.
B) horizontal.
C) vertical.
D) upward sloping.
Excess capacity is a characteristic of monopolistically competitive firms. What does
excess capacity mean?
A) It means that firms do not produce the output level that corresponds to the minimum
point on their average total cost curves.
B) It means that firms hire more than the minimum number of workers needed to
produce the profit-maximizing level of output.
C) It means that firms produce with inefficient combinations of resources.
D) It means that firms build plants that are not large enough to achieve minimum
efficient scale.
Table 12-1
Table 12-1 shows the short-run cost data of a perfectly competitive firm that produces
plastic camera cases. Assume that output can only be increased in batches of 100 units.
The firm will not produce in the short run if the output price falls below
A) $8.
B) $4.
C) $3.20.
D) $2.80.
Figure 13-17
What is the allocatively efficient output for the firm represented in the diagram?
A) Qf units
B) Qg units
C) Qh units
D) Qj units
What do economists call the situation where a hired manager does not have the same
interests as the owners of the business?
A) conquest and control
B) a financial problem
C) a principal-agent problem
D) a financial intermediary problem
The social cost of cutting trees for firewood in a government forest is
A) the increased likelihood of flooding as more trees are cut.
B) the increased likelihood of flooding as more trees are cut plus the private cost of
cutting the trees.
C) opportunity cost to the individual of cutting the wood.
D) the marginal costs of cutting the last tree.
Many colleges and universities practice yield management to maximize the revenue
they receive from tuition and
A) to maximize the amount of aid they receive from the federal government.
B) to maximize the amount of their student loans.
C) to maximize the size of their endowments.
D) to increase the academic quality of the students who enroll in their schools.
Some economists and policymakers who are in favor of government-provided health
care believe that providing health care will generate
A) additional moral hazard.
B) positive externalities.
C) greater asymmetric information.
D) more adverse selection.
Economists refer to the series of induced increases in consumption spending that result
from an initial increase in autonomous expenditures as the ________ effect.
A) multiplier
B) expenditure
C) consumption
D) aggregate demand
Rising prices erode the value of money as a ________ and as a ________.
A) unit of barter; unit of account
B) store of value; unit of liquidity
C) medium of exchange; store of value
D) store of value; unit of barter