Consider a country that produces only two goods: bird feeders and binoculars. Suppose
it is possible for this country to increase its production of bird feeders without
producing fewer binoculars. In this case, its current output combination is inefficient.
The division of the burden of a tax between buyers and sellers in a market is called tax
allocation.
Since World War II, the Federal Reserve has not been involved in carrying out
monetary policy.
A change in quantity supplied is represented by a movement along the supply curve.
The lower-income industrial countries are catching up to the higher-income industrial
countries in terms of economic growth.
A fundamental assumption in game theory is that players do not interact with each
other.
An increase in the unemployment rate may be represented as a movement from a point
on the production possibilities frontier to a different point on the frontier.
Table 2-6
Table 2-6 shows the output per week of two jewelers, Serena and Haley. They can either
devote their time to making bracelets or making necklaces.
Which of the following statements istrue?
A) Haley has a comparative advantage in making both products.
B) Serena has a comparative advantage in making both products.
C) Haley has a comparative advantage in making bracelets and Serena in making
necklaces.
D) Haley has a comparative advantage in making necklaces and Serena in making
bracelets.
Which of the following is not a factor of production?
A) an acre of farmland
B) a drill press in a machine shop
C) the manager of the local tire shop
D) $1,000 in cash
Consider the following economic agents:
a. the government
b. consumers
c. producers Who, in a market economy, decides what goods and services will be
produced with the scarce resources available in that economy?
A) the government
B) producers
C) consumers
D) consumers and producers
E) the government, consumers and producers
Which of the following is the best example of a quota?
A) a subsidy from the U.S. government to domestic manufacturers of residential air
conditioners to enable them to compete more effectively with foreign producers
B) a limit on the quantity of residential air conditioners that can be imported from a
foreign country
C) a $150 fee imposed on all imported residential air conditioners
D) a tax placed on all residential air conditioners sold in the domestic market to help
offset the impact of emissions on the environment
The federal government and some state governments levy taxes on specific goods such
as gasoline, cigarettes and beer. These are known as
A) sales taxes.
B) sin taxes.
C) specific taxes.
D) excise taxes.
Which of the following increases labor productivity?
A) an increase in the aggregate hours of work
B) decreases in the availability of computers and factory buildings
C) inventions of new machinery, equipment, or software
D) a decline in the health of the population
Suppose a frost destroys the tomato crop in California but farmers see an increase in
their revenues. Which of the following best explains this?
A) The decrease in supply led to huge price increases.
B) Tomatoes are necessities.
C) The demand for tomatoes is price inelastic.
D) The cross-price elasticity between tomatoes and most other substitute vegetables is
very low.
As predicted by the economic growth model, countries that start with lower levels of
GDP per capita always grow faster than countries that start with higher levels of GDP
per capita.
Figure 12-10
Total revenue at the profit-maximizing level of output is
A) $1,200.
B) $2,500.
C) $4,800.
D) $6,000.
Figure 1-1
Using the information in the figure above, calculate the percentage change in sales of
alcoholic beverages between 2007 and 2011.
A) 30%
B) 50%
C) 66.7%
D) 100%
Table 16-3
Julie plans to start a pet-sitting service. She surveyed her neighborhood to determine the
demand for this service. Assume that each person surveyed demands only one hour of
pet sitting services per period. Table 16-3 above shows a portion of her survey results.
If Julie charges $10 per hour, how many hours of pet sitting services will be purchased
and by whom?
A) 2 hours (1 hour by Cara and 1 hour by Dawn)
B) 1 hour by Cara only
C) 1 hour by Dawn only
D) 3 hours (1 hour each by Arun, Bernice and Cara)
Figure 3-8
The graph in this figure illustrates an initial competitive equilibrium in the market for
motorcycles at the intersection of D1 and S2 (point B). f there is an increase in number
of companies producing motorcycles and a decrease in income (assume motorcycles are
a normal good), the equilibrium could move to which point?
A) A
B) B
C) C
D) E
Figure 12-2
What happens if the firm produces more than Q4 units?
A) Its profit increases.
B) It makes a loss.
C) Its total revenue is increasing faster than its total cost.
D) It could make a profit or a loss depending on what happens to demand.
Table 14-8
Two rival oligopolists in the athletic
supplements industry, the Power Fuel Company and the Brawny Juice Company, have
to decide on their pricing strategy. Each can choose either a high price or a low price.
Table 14-8 shows the payoff matrix with the profits that each firm can expect to earn
depending on the pricing strategy it adopts. If Brawny Juice selects a high price, what is
Power Fuel’s best strategy and what will Power Fuel earn as a result of this strategy?
A) Power Fuel will select a low price and earn $8 million.
B) Power Fuel will select a low price and earn $16 million.
C) Power Fuel will select a high price and earn $12 million.
D) Power Fuel will select a high price and earn $16 million.
Table 9-6
Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-6 shows the production
and consumption quantities without trade, and the production numbers with trade. All
of the following are terms of trade that could possibly benefit both countries except
A) 1/5 of a hat : 1 clock
B) 1/3 of a hat : 1 clock
C) 1/2 of a hat : 1 clock
D) 3/4 of a hat : 1 clock
Figure 11-3
Fancy Footwear manufactures shoes. Figure 11-3 shows Fancy Footwear’s marginal
product of labor and average product of labor curves in the short run.
Which of the following statements correctly describes the curves in the figure?
A) The marginal product of labor curve is represented by curve A and the average
product of labor curve is represented by curve B.
B) The marginal product of labor curve is represented by curve B and the average
product of labor curve is represented by curve A.
C) Curve A could represent either the average product curve or the marginal product
and curve. Curve B represents the total product curve.
D) Curve B could represent either the average product curve or the marginal product
curve. Curve A represents the total product curve.
Table 15-2
The government of a small developing country has granted exclusive rights to Linden
Enterprises for the production of plastic syringes. Table 15-2 shows the cost and
demand data for this government protected monopolist.
What is the amount of profit that the firm earns?
A) $34.50
B) $42
C) $47
D) $49
Price elasticity of supply is used to gauge
A) how responsive suppliers are to price changes.
B) how responsive suppliers are to changes in future prices.
C) how responsive suppliers are to a change in demand.
D) how responsive sales are to a change in input prices
What is productive efficiency?
A) a situation in which resources are allocated to their highest profit use
B) a situation in which resources are allocated such that goods can be produced at their
lowest possible average cost
C) a situation in which resources are allocated such the last unit of output produced
provides a marginal benefit to consumers equal to the marginal cost of producing it
D) a situation in which firms produce as much as possible
Figure 2-10
Figure 2-10 shows the
production possibilities frontiers for Tahiti and Bora Bora. Each country produces two
goods, milk and honey.
Which country has a comparative advantage in the production of milk?
A) Bora Bora
B) They have equal productive abilities.
C) Tahiti
D) neither country
Table 9-21
Source: Energy Information Administration
The table above reports the consumer price index and the average U.S. retail price for
unleaded regular gasoline for four different periods since 1976. Note that the gasoline
prices are in cents per gallon.
Calculate the real average retail price of unleaded regular gasoline in 1982-1984
dollars. In which period were gasoline prices the highest in real terms? Also, calculate
the real average retail price of unleaded regular gasoline in 2011 dollars.
If workers accurately predict the rate of inflation, is there a short-run trade-off between
inflation and unemployment, as predicted by the Phillips curve? Why or why not?
What is meant by allocative efficiency? How does a perfectly competitive firm achieve
allocative efficiency?
Suppose that the bank has the following balance sheet:
If the required reserve ratio is 10 percent, what is the maximum the bank can loan out?
Suppose the bank makes this loan and the borrower spends the money, which is
deposited in a different bank. Show the impact of these transactions on the bank’s
balance sheet.
What is an economic variable? Give an example of an economic variable.
During the 1990s, Japan experienced periods of deflation and very low nominal interest
rates, approaching zero percent. Why would lenders of money agree to a nominal
interest rate of almost zero?
“Buy low and sell high is advice given to people who want to make a profit by buying
and selling shares of stock. Arbitrage is defined as buying a product in one market at a
low price and reselling it in another market at a high price. Therefore, when stock
brokers buy and sell stocks to earn a profit they are engaging in arbitrage.” Evaluate this
statement; state whether it is true or false and explain your answer.
Draw a graph of “catch-up” that shows where you would expect to see a country with
low saving rates and low levels of health and education. How would you expect real
GDP per capita to grow in a country like this? Explain.
