Scenario 1-3 Suppose a t-shirt manufacturer currently sells 5,000 t-shirts per week and
makes a profit of $10,000 per week. A manager at the plant observes, “Although the last
400 t-shirts we produced and sold increased our revenue by $4,000 and our costs by
$4,800, we are still making an overall profit of $10,000 per week so I think we’re on the
right track. We are producing the optimal number of t-shirts.”
Using marginal analysis terminology, what is another economic term for the
incremental cost of producing the last 400 t-shirts?
A) marginal cost
B) operating cost
C) explicit cost
D) Any of the above terms are correct.
Figure 2-9
Figure 2-9 shows the production possibilities frontiers for Pakistan and Indonesia. Each
country produces two goods, cotton and cashews. What is the opportunity cost of
producing 1 pound of cashews in Pakistan?
A) 3/8 of a bolt of cotton
B) 5/8 of a bolt of cotton
C) 1 3/5 bolts of cotton
D) 240 bolts of cotton
Figure 24-2
Ceteris paribus, an increase in the labor force would be represented by a movement
from
A) SRAS1 to SRAS2.
B) SRAS2 to SRAS1.
C) point A to point B.
D) point B to point A.
What is the “omitted variable” problem in determining cause and effect?
A) It is a problem that arises when an insignificant variable is given too much weight in
an economic analysis leading to skewed conclusions about cause and effect.
B) It is a problem that arises when a significant variable is not given enough weight in
an economic experiment leading to skewed conclusions about cause and effect.
C) It is a problem that arises when an insignificant economic variable that should have
been omitted is included in an economic experiment leading to false conclusions about
cause and effect.
D) It is a problem that arises when an economic variable that affects other variables is
omitted from an analysis and its omission leads to false conclusions about cause and
effect.
While many analysts defended the actions taken by the Fed and the Treasury to respond
to the financial crisis in 2008, others were critical of these actions. The critics were
concerned that by not allowing large firms to fail,
A) smaller firms will resent not receiving similar assistance.
B) stockholders and bondholders of these firms were not allowed to receive the
proceeds from the sale of assets that would have occurred if the firms had declared
bankruptcy.
C) there is an increased likelihood that other firms will engage in risky behavior in the
future with the expectation that they will also not be allowed to fail.
D) there will be less competition in the U.S. economy, which could led to higher prices
for consumers.
To calculate GDP using the value-added method, one would add up
A) the market value of final goods and services produced during a particular period.
B) only the value added by the underground economy.
C) the value added by each firm involved in the production of final goods and services.
D) the market value of intermediate goods and services produced during a particular
period.
Of all barriers to entry, the most important are those that are due to
A) ownership of a key input.
B) economies of scale.
C) government-imposed barriers.
D) the Herfindahl-Hirschman Index.
Which of the following is a result of a market economy?
A) environmental protection
B) an equal income distribution
C) agreement on equity
D) voluntary exchange
A final good is one that
A) is used in the production of another good.
B) is a natural resource used to produce a good.
C) is purchased as an input in the production process.
D) is purchased by its final user.
Growth in real GDP per hour worked in the United States was slowest during what
period of time?
A) 1900-1949
B) 1950-1973
C) 1974-1995
D) 1996-2012
Which of the following is a reason why increases in the price level result in a decline in
aggregate expenditure?
A) Price level increases raise real wealth, which causes consumption spending and
aggregate expenditure to decline.
B) Price level increases cause firms and consumers to hold more money, which raises
the interest rate. Higher interest rates lower consumption and planned investment
expenditures, which lowers aggregate expenditure.
C) Price level increases in the United States relative to other countries raise net exports,
which lowers aggregate expenditure.
D) As the price level rises, government spending falls, which lowers aggregate
expenditure.
A virtuous cycle occurs
A) when lobbyists petition members of Congress to grant a public franchise; the
lobbyist then raise money for those Congress members who granted the franchise.
B) when monopoly profits are used to create new products for additional monopoly
profits.
C) when a firm can attract enough buyers initially to increase a product’s usefulness to
attract even more buyers.
D) when a firm’s sales volume reaches a level where the firm can take advantage of
economies of scale, thereby reducing the price of the product to further boost its sales.
Figure 22-2
Assuming no technological change, if the United States increases capital per hour
worked by $40,000 every year between 2010 and 2014, we would expect to see
A) real GDP per hour worked will increase by the same increment each year between
2010 and 2014.
B) real GDP per hour worked will be lower in 2014 than it was in 2010.
C) the per-worker production function will get flatter over time.
D) the per-worker production function will shift up every year there is increase in
capital per hour worked.
Beginning in 1965, the head of the Antitrust Division of the U.S. Department of Justice
began to change antitrust policy. How did antitrust policy change?
A) For the first time, horizontal mergers were allowed€with government approval€and
vertical mergers were allowed without need for approval from the government.
B) For the first time, concentration ratios were used to evaluate the degree of
competition in the industries of firms that proposed mergers.
C) The Division began to systematically consider the economic consequences of
proposed mergers.
D) Proposed mergers no longer needed the approval of the Federal Trade Commission
or the court system.
Which of the following is a transfer payment?
A) the food stamp program
B) a tax deduction
C) Social Security payments
D) an income tax credit
Table 4-4
Table 4-4 shows the demand and supply schedules for the low-skilled labor market in
the city of Westover.
If a minimum wage of $10.50 an hour is mandated, what is the quantity of labor
supplied?
A) 400,000
B) 370,000
C) 340,000
D) 60,000