In Figure 5-3, the price elasticity of demand between points T and U is the same as
between points V and W.
If the prices of domestic consumer goods increased while the prices of imported
consumer goods decreased, and the demand for each remained the same, which of the
following would most likely occur?
a. The GDP price index would decrease while the CPI would increase.
b. Both the GDP price index and the CPI would decrease.
c. The GDP price index would increase more than the CPI.
d. The CPI would increase more than the GDP price index.
e. Both the GDP price index and the CPI would increase by the same amount.
William quits his job where he earns an annual salary of $75,000 and opens a
management consulting business, charging an hourly rate of $120. He works out of his
home, converting a storeroom into an office. (Zoning restrictions prevent William from
renting out the room.) Start-up costs are financed by selling $15,000 worth of bonds he
inherited that were earning annual interest payments of $900. During his first year,
William incurs expenses for supplies and utilities that total $3,500. The total cost of
production in the first year equals
A government program would impose a 25-cent tax on each pack of cigarettes in order
to fund welfare programs. Such a policy
How do people in a market economy obtain income that is used to buy goods and
services?
a. Supplying labor and other resources to firms
b. Trading goods and services in a barter system
c. Selling goods and services to each other
d. None of the above
e. b and c
Figure 4-3 shows the supply and demand for socks. If a price floor of $10 is imposed,
the quantity of socks actually purchased will be
Consider a firm that needs one day to hire more labor, one week to increase its
purchases of raw materials, and three months to change the amount of its capital. This
firm’s long run is
The term investment, in the language of economists, refers to the purchases of stocks,
bonds, and other financial instruments.
Many economists thought the Fed should have lowered the federal funds rate less
aggressively in late 2007 and throughout 2008.
Bill can cook dinner in 45 minutes and mow the lawn in 1.5 hours. Eileen can cook
dinner in 1.5 hours and mow the lawn in 2 hours. Bill’s opportunity cost of mowing the
lawn is
A good is nonexcludable if the benefits derived from consuming it cannot be easily
denied to those who do not purchase it.