Equilibrium quantity must decrease when demand
a. increases and supply does not change, when demand does not change and supply
decreases, and when both demand and supply decrease.
b. increases and supply does not change, when demand does not change and supply
increases, and when both demand and supply decrease.
c. decreases and supply does not change, when demand does not change and supply
increases, and when both demand and supply decrease.
d. decreases and supply does not change, when demand does not change and supply
decreases, and when both demand and supply decrease.
Another term for factors of production is
a. inputs.
b. output.
c. goods.
d. services.
Suppose that you are a broker and people tell you the following about themselves. What
sort of bond would you recommend to each? Defend your choices.
a. “I am in a high federal income tax bracket and I don’t want to take very much risk.”
b. “I want a high return and I am willing to take a lot of risk to get it.”
c. “I want a decent return and I have enough deductions that I don’t value tax breaks
highly.”
The Federal Reserve
a. is responsible for conducting the nation’s monetary policy, and it plays a role in
regulating banks.
b. is responsible for conducing the nation’s monetary policy, but it plays no role in
regulating banks.
c. is not responsible for conducting the nation’s monetary policy, and it plays a role in
regulating banks.
d. is not responsible for conducing the nation’s monetary policy, and it plays no role in
regulating banks.
Figure 4-19
The diagram below pertains to the demand for turkey in the United States.
Refer to Figure 4-19. All else equal, an increase in the income of buyers who consider
turkey to be an inferior good would cause a move from
a. DA to DB.
b. DB to DA.
c. x to y.
d. y to x.
Economists differ in their views of the role of the government in promoting economic
growth. A controversial idea is that government should
a. lend support to the invisible hand by maintaining property rights and political
stability.
b. lower barriers and impediments to free trade.
c. encourage capital formation.
d. target and subsidize specific industries important for technological progress.
If a country had a trade surplus of $50 billion and then its exports rose by $30 billion
and its imports rose by $20 billion, its net exports would now be
a. $0 billion.
b. $20 billion.
c. $40 billion.
d. $60 billion.
When the money market is drawn with the value of money on the vertical axis, an
increase in the money supply creates an excess
a. supply of money, causing people to spend more.
b. supply of money, causing people to spend less.
c. demand for money, causing people to spend more.
d. demand for money, causing people to spend less.
Figure 9-11
Refer to Figure 9-11. Producer surplus in this market before trade is
a. C.
b. B + C.
c. A + B + D.
d. B + C + D.
In a simple economy, people consume only 2 goods, food and clothing. The market
basket of goods used to compute the CPI consists of 50 units of food and 10 units of
clothing.
Food Clothing
2002 price per unit $4 $10
2003 price per unit $6 $20
a. What are the percentage increases in the price of food and in the price of clothing?
b. What is the percentage increase in the CPI?
c. Do these price changes affect all consumers to the same extent? Explain.
Suppose Haiti has an absolute advantage over other countries in producing oranges, but
other countries have a comparative advantage over Haiti in producing oranges. If trade
in oranges is allowed, Haiti
a. will import oranges.
b. will export oranges.
c. will either export oranges or export oranges, but it is not clear from the given
information.
d. would have nothing to gain either from exporting or importing oranges.
Figure 7-9
Refer to Figure 7-9. If the supply curve is S and the demand curve shifts from D to D”,
what is the increase in producer surplus due to new producers entering the market?
a. $625
b. $2,500
c. $3,125
d. $5,625
An increase in the minimum wage
a. increases both the quantity demanded and the quantity supplied of labor.
b. decreases both the quantity demanded and the quantity supplied of labor.
c. increases the quantity of labor demanded but decreases the quantity of labor supplied.
d. decreases the quantity of labor demanded but increases the quantity of labor supplied.
Which of the following best illustrates moral hazard?
a. After a person obtains life insurance, she takes up skydiving.
b. A person obtains insurance knowing he is in poor health.
c. A person holds stock only in very risky corporations.
d. A person holds stocks from only a few corporations.
What is the present value of a payment of $2,000 to be received two years from today if
the interest rate is 5%?
a. $2205
b. $2200
c. $1818.18
d. $1814.06
When two variables move in the same direction, the curve relating them is
a. upward sloping, and we say the variables are positively related.
b. upward sloping, and we say the variables are negatively related.
c. downward sloping, and we say the variables are positively related.
d. downward sloping, and we say the variables are negatively related.
If a price floor is a binding constraint on a market, then
a. the equilibrium price must be above the price floor.
b. the quantity demanded must exceed the quantity supplied.
c. sellers cannot sell all they want to sell at the price floor.
d. buyers cannot buy all they want to buy at the price floor.
Figure 4-19
The diagram below pertains to the demand for turkey in the United States.
Refer to Figure 4-19. All else equal, a large number of people becoming vegetarians
would cause a move from
a. DA to DB.
b. DB to DA.
c. x to y.
d. y to x.
Total surplus is represented by the area below the
a. demand curve and above the price.
b. price and up to the point of equilibrium.
c. demand curve and above the supply curve, up to the equilibrium quantity.
d. demand curve and above the horizontal axis, up to the equilibrium quantity.
Suppose a tax of $0.50 per unit on a good creates a deadweight loss of $100. If the tax
is increased to $2.50 per unit, the deadweight loss from the new tax would be
a. $200.
b. $250.
c. $500.
d. $2,500.
Anger over British taxes played a significant role in bringing about the
a. election of John Adams as the second American president.
b. American Revolution.
c. War of 1812.
d. “no new taxes” clause in the U.S. Constitution.
Using the midpoint method, the price elasticity of demand for a good is computed to be
approximately 0.75. Which of the following events is consistent with a 10 percent
decrease in the quantity of the good demanded?
a. a 7.5 increase in the price of the good
b. a 13.33 percent increase in the price of the good
c. an increase in the price of the good from $7.50 to $10
d. an increase in the price of the good from $10 to $17.50
If inflation is higher than what was expected,
a. creditors receive a lower real interest rate than they had anticipated.
b. creditors pay a lower real interest rate than they had anticipated.
c. debtors receive a higher real interest rate than they had anticipated.
d. debtors pay a higher real interest rate than they had anticipated.
Figure 5-3
Refer to Figure 5-3. The demand curve representing the demand for a luxury good
with several close substitutes is
a. A.
b. B.
c. C.
d. D.
Every month, the Bureau of Labor Statistics surveys 160,000 business establishments to
help determine
a. the number of people unemployed.
b. the number of jobs the economy has gained or lost.
c. the size of the labor force.
d. the number of people who own their own businesses.
After a corporation issues stock, the stock
a. can not be resold.
b. can be resold only if the corporation wants to buy it back.
c. can be resold on exchanges; the resale will raise additional funds for the corporation.
d. None of the above are correct.
The collapse of communism in the Soviet Union and Eastern Europe took place mainly
in the
a. 1960s.
b. 1970s.
c. 1980s.
d. 1990s.
Deadweight loss is the
a. decline in total surplus that results from a tax.
b. decline in government revenue when taxes are reduced in a market.
c. decline in consumer surplus when a tax is placed on buyers.
d. loss of profits to business firms when a tax is imposed.
The quantity sold in a market will decrease if the government decreases a
a. binding price floor in that market.
b. binding price ceiling in that market.
c. tax on the good sold in that market.
d. All of the above are correct.
If the economy unexpectedly went from inflation to deflation,
a. both debtors and creditors would have reduced real wealth.
b. both debtors and creditors would have increased real wealth.
c. debtors would gain at the expense of creditors.
d. creditors would gain at the expense of debtors.
Table 11-3
The table below pertains to Studious, an economy in which the typical consumer’s
basket consists of 5 books and 10 calculators.
Refer to Table 11-3. The inflation rate was
a. 22.6 percent in 2007 and 12.9 percent in 2008.
b. 25.9 percent in 2007 and 14.8 percent in 2008.
c. 35 percent in 2007 and 14.8 percent in 2008.
d. 35 percent in 2007 and 20 percent in 2008.
Which of the following are financial intermediaries?
a. both banks and mutual funds
b. banks but not mutual funds
c. mutual funds but not banks
d. neither banks or mutual funds
During a certain year, the consumer price index increased from 150 to 159 and the
purchasing power of a person’s bank account increased by 3.5 percent. For that year,
a. the nominal interest rate was 6 percent.
b. the nominal interest rate was 9.5 percent.
c. the inflation rate was 3.5 percent.
d. the inflation rate was 9.5 percent.