Figure 6-1
Panel (a) Panel (b)
Refer to Figure 6-1. The price ceiling shown in panel (b)
a. is not binding.
b. creates a surplus.
c. creates a shortage.
d. Both a) and b) are correct.
Figure 8-13
Refer to Figure 8-13. Panel (a) and Panel (b) each illustrate a $4 tax placed on a
market. In comparison to Panel (a), Panel (b) illustrates which of the following
statements?
a. When demand is relatively inelastic, the deadweight loss of a tax is smaller than
when demand is relatively elastic.
b. When demand is relatively elastic, the deadweight loss of a tax is larger than when
demand is relatively inelastic.
c. When supply is relatively inelastic, the deadweight loss of a tax is smaller than when
supply is relatively elastic.
d. When supply is relatively elastic, the deadweight loss of a tax is larger than when
supply is relatively inelastic.
Table 7-4
The numbers in Table 7-1 reveal the maximum willingness to pay for a ticket to a
Chicago Cubs vs. St. Louis Cardinal’s baseball game at Wrigley Field.
Refer to Table 7-4. If tickets sell for $25 each, then what is the total consumer surplus
in the market?
a. $25
b. $35
c. $60
d. $110
A supply schedule is a table that shows the relationship between
a. price and quantity supplied.
b. input costs and quantity supplied.
c. quantity demanded and quantity supplied.
d. profit and quantity supplied.
If policymakers decrease aggregate demand, then in the short run the price level
a. falls and unemployment rises.
b. and unemployment fall.
c. and unemployment rise.
d. rises and unemployment falls.
Figure 6-23
Refer to Figure 6-23. The amount of the tax per unit is
a. $4.
b. $5.
c. $6.
d. $10.
The reserve requirement is 4%, banks hold no excess reserves and people hold no
currency. If the Fed sells $10,000 of bonds what happens to the money supply?
a. it increases by $250,000
b. it increases by $200,000
c. it decreases by $200,000
d. it decreases by $250,000
Figure 6-14
The vertical distance between points A and B represents the tax in the market.
Refer to Figure 6-14. The amount of the tax per unit is
a. $6.
b. $8.
c. $14.
d. $18.
Table 7-5
For each of three potential buyers of oranges, the table displays the willingness to pay
for the first three oranges of the day. Assume Alex, Barb, and Carlos are the only three
buyers of oranges, and only three oranges can be supplied per day.
Refer to Table 7-5. If the market price of an orange is $1.20, then consumer surplus
amounts to
a. $0.70.
b. $1.10.
c. $1.40.
d. $5.00.
Fundamental analysis shows that stock in Garske Software Corporation has a present
value that is higher than its price.
a. This stock is overvalued; you should consider adding it to your portfolio.
b. This stock is overvalued; you shouldn’t consider adding it to your portfolio.
c. This stock is undervalued; you should consider adding it to your portfolio.
d. This stock is undervalued; you shouldn’t consider adding it to your portfolio.
Waldo works eight hours and produces 7 units of goods per hour. Emerson works six
hours and produces 10 units of goods per hour.
a. Waldo’s productivity and output are greater than Emerson’s.
b. Waldo’s productivity is greater than Emerson’s but his output is less.
c. Emerson’s productivity and output are greater than Waldo’s.
d. Emerson’s productivity is greater than Waldo’s but his output is less.
When a country suffers from capital flight, the exchange rate
a. depreciates, because demand in the market for foreign-currency exchange shifts left.
b. depreciates, because supply in the market for foreign-currency exchange shifts right.
c. appreciates, because demand in the market for foreign-currency exchange shifts right.
d. None of the above is correct.
The long-run aggregate supply curve would shift right if the government were to
a. increase the minimum-wage.
b. make unemployment benefits more generous.
c. raise taxes on investment spending.
d. None of the above is correct.
Which of the following is correct concerning the open-economy macroeconomic
model?
a. The net-capital-outflow curve slopes downward.
b. The key determinant of net capital outflow is the real exchange rate.
c. The supply of dollars in the market for foreign-currency exchange is horizontal.
d. None of the above is correct.
Credit card limits are included in
a. M1 but not M2.
b. M2 but not M1.
c. M1 and M2.
d. neither M1 nor M2.
During the third quarter of this year a firm produces consumer goods and adds some of
those goods to its inventory. During the fourth quarter of this year, the firm sells the
goods at a retail outlet, with the result that the value of its inventory at the end of the
fourth quarter is smaller than the value of its inventory at the end of the third quarter.
These actions affect which component(s) of fourth-quarter GDP?
a. they increase consumption and have no affect on investment
b. they increase consumption and decrease investment
c. they have no affect on either consumption or investment
d. they have no affect on consumption and decrease investment
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 sale on chicken would cause a move from
a. DA to DB.
b. DB to DA.
c. x to y.
d. y to x.
Most labor economists believe that the supply of labor is
a. less elastic than the demand, and, therefore, firms bear most of the burden of the
payroll tax.
b. less elastic than the demand, and, therefore, workers bear most of the burden of the
payroll tax.
c. more elastic than the demand, and, therefore, workers bear most of the burden of the
payroll tax.
d. more elastic than the demand, and, therefore, firms bear most of the burden of the
payroll tax.
If an externality is present in a market, economic efficiency may be enhanced by
a. government intervention.
b. a decrease in foreign competition.
c. fewer market participants.
d. weaker property rights.
When a tax is placed on the sellers of cell phones, the size of the cell phone market
a. and the price paid by buyers both increase.
b. increases, but the price paid by buyers decreases.
c. decreases, but the price paid by buyers increases.
d. and the price paid by buyers both decrease.
Adam Smith suggested that an invisible had guides market economies. In this analogy,
what is the baton that the invisible hand uses to conduct the economic orchestra?
a. the government
b. prices
c. subsidies
d. the Federal Reserve
Table 15-4
Refer to Table 15-4. What is the U-3 measure of labor underutilization?
a. 4.7 percent
b. 6.2 percent
c. 7.0 percent
d. 10.9 percent
In order to display information on two variables, an economist must use
a. a bar graph.
b. a pie chart.
c. the coordinate system.
d. a time-series graph.
During some year a country had exports of $50 billion, imports of $70 billion, and
domestic investment of $100 billion. What was its saving during the year?
a. $80 billion
b. $100 billion
c. $120 billion
d. $150 billion
Total revenue
a. always increases as price increases.
b. increases as price increases, as long as demand is elastic.
c. decreases as price increases, as long as demand is inelastic.
d. remains unchanged as price increases when demand is unit elastic.
When the nation of Worldova allows trade and becomes an exporter of silk,
a. residents of Worldova who produce silk become worse off; residents of Worldova
who buy silk become better off; and the economic well-being of Worldova rises.
b. residents of Worldova who produce silk become worse off; residents of Worldova
who buy silk become better off; and the economic well-being of Worldova falls.
c. residents of Worldova who produce silk become better off; residents of Worldova
who buy silk become worse off; and the economic well-being of Worldova rises.
d. residents of Worldova who produce silk become better off; residents of Worldova
who buy silk become worse off; and the economic well-being of Worldova falls.
Consider the exhibit below for the following questions.
Figure 20-1
Refer to Figure 20-1. If the economy starts at A and there is a fall in aggregate
demand, the economy moves
a. back to A in the long run.
b. to B in the long run.
c. to C in the long run.
d. to D in the long run.
When the nation of Brownland first permitted trade with other nations, domestic
producers of wheat experienced an increase in producer surplus of $4 million and total
surplus in Brownland’s wheat market increased by $1 million. We can conclude that
a. Brownland became an exporter of wheat.
b. consumer surplus in Brownland increased by $3 million.
c. the opening of trade caused the domestic supply curve for wheat in Brownland to
shift to the left.
d. this example is inconsistent with the economic theory of international trade.
Figure 6-17
Refer to Figure 6-17. What is the amount of the tax per unit?
a. $1
b. $2
c. $3
d. $4
When economists are trying to help improve the world, they are
a. in the realm of positive economics rather than normative economics.
b. in the realm of macroeconomics rather than microeconomics.
c. scientists.
d. policy advisers.
Which of the following best states economists’ understanding of the facts concerning
the relationship between natural resources and economic growth?
a. A country with no or few domestic natural resources is destined to be poor.
b. Differences in natural resources have virtually no role in explaining differences in
standards of living.
c. Some countries can be rich mostly because of their natural resources and countries
without natural resources need not be poor, but can never have very high standards of
living.
d. Abundant domestic natural resources may help make a country rich, but even
countries with few natural resources can have high standards of living.
In 2008, the Los Angeles Times asked members of the American public whether free
international trade has helped or hurt the economy. Of those surveyed,
a. 57 percent said free international trade helped the economy.
b. 26 percent said free international trade helped the economy.
c. 30 percent said free international trade hurt the economy.
d. 16 percent said free international trade hurt the economy.