Figure 8-7
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 8-7. Which of the following statements summarizes the incidence of
the tax?
a. For each unit of the good that is sold, buyers bear one-half of the tax burden, and
sellers bear one-half of the tax burden.
b. For each unit of the good that is sold, buyers bear one-third of the tax burden, and
sellers bear two-thirds of the tax burden.
c. For each unit of the good that is sold, buyers bear one-fourth of the tax burden, and
sellers bear three-fourths of the tax burden.
d. For each unit of the good that is sold, buyers bear three-fourths of the tax burden, and
sellers bear one-fourth of the tax burden.
Figure 9-6
Refer to Figure 9-6. The amount of revenue collected by the government from the
tariff is
a. $200.
b. $400.
c. $500.
d. $600.
Table 6-1
Refer to Table 6-1. Which of the following price floors would be binding in this
market?
a. $1
b. $2
c. $3
d. $4
You and your friend work together for 4 hours to produce a total of 12 futons. What is
productivity?
a. 12 futons
b. 24 futons
c. 3 futons per hour of labor
d. 1.5 futons per hour of labor
A tradeoff exists between a clean environment and a higher level of income in that
a. studies show that individuals with higher levels of income pollute less than
low-income individuals.
b. efforts to reduce pollution typically are not completely successful.
c. laws that reduce pollution raise costs of production and reduce incomes.
d. employing individuals to clean up pollution causes increases in employment and
income.
Assume, for Taiwan, that the domestic price of soybeans without international trade is
lower than the world price of soybeans. This suggests that, in the production of
soybeans,
a. Taiwan has a comparative advantage over other countries and Taiwan will import
soybeans.
b. Taiwan has a comparative advantage over other countries and Taiwan will export
soybeans.
c. other countries have a comparative advantage over Taiwan and Taiwan will import
soybeans.
d. other countries have a comparative advantage over Taiwan and Taiwan will export
soybeans.
Table 11-12. Will’s expenditures on food for three consecutive years, along with other
values, are presented in the table below.
Refer to Table 11-12. Suppose Will’s 2010 food expenditures in 2011 dollars amount to
$6,235. Then x, the consumer price index for 2011, has a value of
a. 171.2.
b. 175.0.
c. 177.5.
d. 180.6.
Over the past two centuries, the average annual rates of return were about
a. 5 percent for stocks and about 1.5 percent for short-term government bonds.
b. 6 percent for stocks and about 2.5 percent for short-term government bonds.
c. 8 percent for stocks and about 3 percent for short-term government bonds.
d. None of the above is correct.
Suppose that an economy produces 40,000 units of good A which sells at $4 a unit and
20,000 units of good B which sells at $5 per unit. Production of good A contributes
a. 2 times as much to GDP as the production of good B.
b. 8/5 times as much to GDP as the production of good B.
c. 5/4 times as much to GDP as the production of good B.
d. 4/5 times as much to GDP as production of good B.
To calculate the CPI, the Bureau of Labor Statistics uses
a. the prices of all goods and services produced domestically.
b. the prices of all final goods and services.
c. the prices of all consumer goods.
d. the prices of some consumer goods.
Figure 9-15
Refer to Figure 9-15. For the saddle market, area E represents
a. government’s revenue from the tariff.
b. producer surplus after the tariff becomes effective.
c. the decrease in consumer surplus, relative to the free-trade situation, as a result of the
tariff.
d. the decrease in total surplus, relative to the free-trade situation, as a result of the
tariff.
If a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 10
percent, this action by itself initially makes the money supply
a. and wealth increase by $100.
b. and wealth decrease by $100.
c. increase by $100 while wealth does not change.
d. decrease by $100 while wealth decreases by $100.
If a change in the price of a good results in no change in total revenue, then
a. the demand for the good must be elastic.
b. the demand for the good must be inelastic.
c. the demand for the good must be unit elastic.
d. buyers must not respond very much to a change in price.
In 1949, Sycamore, Illinois built a hospital for about $500,000. In 1987, the county
restored the courthouse for about $2.4 million. A price index for nonresidential
construction was 14 in 1949, 92 in 1987, and 114.5 in 2000. According to these
numbers, the hospital cost about
a. $3.6 million in 2000 dollars, which is less than the cost of the courthouse restoration
in 2000 dollars.
b. $3.6 million in 2000 dollars, which is more than the cost of the courthouse
restoration in 2000 dollars.
c. $4.1 million in 2000 dollars, which is less than the cost of the courthouse restoration
in 2000 dollars.
d. $4.1 million in 2000 dollars, which is more than the cost of the courthouse
restoration in 2000 dollars.
The Federal Open Market Committee meets about
a. every six days.
b. every six weeks.
c. every six months.
d. every sixteen months.
The supply of money is determined by
a. the price level.
b. the Treasury and Congressional Budget Office.
c. the Federal Reserve System.
d. the demand for money.
Suppose that a worker in Agland can produce either 10 units of organic grain or 2 units
of incense per year, and a worker in Zenland can produce either 5 units of organic grain
or 15 units of incense per year. There are 20 workers in Agland and 10 workers in
Zenland. Currently the two countries do not trade. Agland produces and consumes 100
units of grain and 20 units of incense per year. Zenland produces and consumes 50 units
of grain and no incense per year. If each country made the decision to specialize in
producing the good in which it has a comparative advantage, then the combined yearly
output of the two countries would increase by
a. 30 units of grain and 100 units of incense.
b. 30 units of grain and 150 units of incense.
c. 50 units of grain and 90 units of incense.
d. 50 units of grain and 130 units of incense.
Figure 9-1
The figure illustrates the market for wool in Scotland.
Refer to Figure 9-1. When trade is allowed,
a. Scotland producers of wool become better off and Scotland consumers of wool
become worse off.
b. Scotland consumers of wool become better off and Scotland producers of wool
become worse off.
c. both Scotland producers and consumers of wool become better off.
d. both Scotland producers and consumers of wool become worse off.
Figure 2-7
Refer to Figure 2-7. Point K represents an outcome in which
a. production is inefficient.
b. some of the economy’s resources are unemployed.
c. the economy is using all of its resources to produce hammers.
d. the economy is using all of its nails to produce hammers.
When there is a technological advance in the pork industry, consumer surplus in that
market will
a. increase.
b. decrease.
c. not change, since technology affects producers and not consumers.
d. not change, since consumers’ willingness to pay is unaffected by the technological
advance.
In the markets for goods and services in the circular-flow diagram,
a. households provide firms with savings for investment.
b. households provide firms with labor, land, and capital.
c. firms provide households with output.
d. firms provide households with profit.
A circular-flow model and production possibilities frontier are similar in that
a. neither allows economic analysis to occur.
b. neither can be represented visually on a graph.
c. both make use of assumptions.
d. both make use of complex equations to arrive at solutions.
An added benefit of inflation is that it allows for the possibility of
a. menu costs.
b. aggregate supply shocks.
c. negative real interest rates.
d. recessions.
In a market economy, economic activity is guided by
a. the government.
b. corporations.
c. central planners.
d. self-interest and prices.
Suppose the interest rate is 7 percent. Consider four payment options:
Option A: $500 today.
Option B: $550 one year from today.
Option C: $575 two years from today.
Option D: $600 three years from today.
Which of the payments has the highest present value today?
a. Option A
b. Option B
c. Option C
d. Option D
When a country suffers from capital flight, the demand for loanable funds in that
country shifts
a. right, which increases interest rates in that country.
b. right, which decreases interest rates in that country.
c. left, which increases interest rates in that country.
d. left, which decreases interest rates in that country.
Figure 5-14
Refer to Figure 5-14. Using the midpoint method, what is the price elasticity of supply
between points A and B?
a. 2.33
b. 1.0
c. 0.43
d. 0.1
Which of the following statements is correct?
a. The expected future profitability of a corporation influences the demand for that
corporation’s stock.
b. When a corporation sells stock as a means of raising funds it is engaging in debt
finance.
c. The owners of bonds sold by the Microsoft Corporation are part owners of that
corporation.
d. All bonds are, by definition, perpetuities.
Bill, a U.S. citizen, pays a Spanish architect to design a metal casting factory. Which
country’s exports increase?
a. Spain’s
b. the U.S.’s
c. Spain’s and the U.S.’s
d. neither Spain’s nor the U.S.’s
If the money multiplier is 2 and the Fed wants to increase the money supply by
$900,000, it could
a. buy $300,000 worth of bonds.
b. buy $450,000 worth of bonds.
c. sell $300,000 worth of bonds.
d. sell $450,000 worth of bonds.
When a certain nation abandoned a policy of prohibiting international trade in
automobiles in favor of a free-tree policy, the result was that the country began to
import automobiles. The change in policy improved the well-being of that nation in the
sense that
a. both producers of automobiles and consumers of automobiles in that nation became
better off as a result.
b. the gains to automobile producers in that nation exceeded the losses of the
automobile consumers in that nation.
c. the gains to automobile consumers in that nation exceeded the losses of the
automobile producers in that nation.
d. even though total surplus in that nation decreased, it was still true that consumer
surplus and producer surplus increased.
If a tax is levied on the buyers of a product, then there will be a(n)
a. upward shift of the demand curve.
b. downward shift of the demand curve.
c. movement up and to the left along the demand curve.
d. movement down and to the right along the demand curve.
Henry is willing to pay 45 cents, and Janine is willing to pay 55 cents, for 1 pound of
bananas. When the price of bananas falls from 50 cents a pound to 40 cents a pound,
a. Henry experiences an increase in consumer surplus, but Janine does not.
b. Janine experiences an increase in consumer surplus, but Henry does not.
c. both Janine and Henry experience an increase in consumer surplus.
d. neither Janine nor Henry experiences an increase in consumer surplus.
Changes in one variable on a graph might be caused by the other variable on the graph
or by a third omitted variable.
Fiscal policy cannot be used to move the economy along the short-run Phillips curve.
Jake can complete an oil change in 45 minutes and he can write a poem in 90 minutes.
Ming-la can complete an oil change in 30 minutes and she can write a poem in 90
minutes. Jake’s opportunity cost of writing a poem is lower than Ming-la’s opportunity
cost of writing a poem.
Without free trade, the domestic price of a good must be equal to the world price of a
good.
In the open-economy macroeconomic model, the real exchange rate does not affect net
capital outflow.
If the GDP deflator in 2009 was 160 and the GDP deflator in 2010 was 180, then the
inflation rate in 2010 was 12.5%.
Some degree of unemployment is inevitable in a complex economy.
A binding minimum wage creates unemployment.
The chair of the Board of Governors regularly testifies to Congress about Fed policy.
Suppose that a country has $120 billion of national saving, and $80 billion of domestic
investment. Is this possible? Where did the other $40 billion of national savings go?
For an economy as a whole, net exports must equal minus one times net capital outflow.
If a country’s imports exceed its exports it has a trade surplus.
If aggregate demand shifts right, then eventually price level expectations rise. This
increase in price level expectations causes the aggregate demand curve to shift to the
left back to its original position.
In the U.S., the National Labor Relations Board is the government agency that enforces
workers’ right to unionize.
Unemployment insurance increases frictional unemployment.