A Japanese automobile manufacturer building an auto plant in the United States creates
a
a. supply of dollars and demand for yen in the foreign exchange market.
b. demand for dollars and a supply of yen in the foreign exchange market.
c. demand for both dollars and yen in the foreign exchange market.
d. supply of both dollars and yen in the foreign exchange market.
Which of the following most closely approximates the conditions of a competitive
price-searcher market?
a. the market for Grade A eggs, which is characterized by a large number of firms
producing a homogeneous product
b. the restaurant industry, which is characterized by firms producing a differentiated
product in a market with low entry barriers
c. local cable television service, where a licensed supplier competes with firms offering
satellite service
d. the market for jumbo aircraft, where one major domestic firm competes with one
major foreign firm
Compared to those with lower incomes, families with higher incomes are more likely to
be headed by a
a. person age 65 years and older.
b. husband and wife team with one but not the other in the labor force.
c. single-parent.
d. college graduate.
Suppose an economy is operating at its maximum sustainable output rate. Neither
recession nor economic boom are present. Which of the following would be true?
a. The economy would be considered at full employment.
b. Actual GDP would exceed potential GDP.
c. Actual unemployment will be less than the natural rate of unemployment.
d. One hundred percent of the labor force is employed.
Which of the following contributed to the weak recovery from the 2008-2009
recession?
a. Government stimulus spending that was largely temporary and often directed toward
unproductive activities.
b. The restrictive monetary policy followed by the Fed.
c. The tax increases instituted by a Congress intent on balancing the budget.
d. The failure of the Fed to provide the banking system with sufficient reserves for the
extension of new loans.
The burning of fossil fuels may cause global warming. Considering both the science
and the reactions of crops, human health, and other factors across differing climates,
economists generally agree that
a. to protect the interests of future generations, the buildup of carbon dioxide must soon
be stopped.
b. any climate change, if it actually occurs, will be extremely costly.
c. there will be both costs and benefits if the climate warms.
d. all people will be worse off if the climate warms.
Sellers have a strong incentive to lobby government for legal restrictions that would
reduce the intensity of competition in their market because
a. the firms wish to be more efficient than competition will permit.
b. competition tends to result in lower prices and lower profits.
c. legal restrictions that lessen competition in a market generally benefit consumers.
d. the firms fear that intense competition will lead to higher profits that will attract
additional rivals into the market.
If the demand for a good is very price elastic, the imposition of a tax on that good
a. places the largest portion of the burden on the sellers of that product
b. places the burden of the tax equally on buyers and sellers
c. places the largest portion of the tax on consumers
d. will make demand more elastic than it was before the tax
e. will make demand more inelastic than it was before the tax
A firm in a price-taker market
a. must take the price that is determined in the market.
b. must reduce its price if it wants to sell a larger quantity.
c. must be large relative to the total market.
d. can exert a major influence on the market price.
Which of the following is true?
a. The earnings differential between men and women who never married is considerably
smaller than the differential between married men and married women.
b. After adjusting for education, age, language, and location, the earnings of women are
almost identical with the earnings of men.
c. Between 1980 and 2000, the female/male annual earnings ratio of full-time workers
was virtually unchanged.
d. The hourly earnings of women were approximately 60 percent of their male
counterparts in 2009.
Programs that limit the eligibility of transfer recipients to those with low income are
called
a. social security programs.
b. means-tested programs.
c. single-parent family programs.
d. social insurance programs.
Which of the following would most likely increase the demand for peanut butter?
a. a decrease in the price of jelly, a good that is often used with peanut butter
b. the discovery that excessive consumption of peanut butter is harmful to one’s health
c. crop failures that raise the price of peanuts
d. the invention of a new product that consumers think is a good substitute for peanut
butter
Which of the following is true regarding private ownership?
a. Relative to common ownership, private ownership generally leads to less
conservation of resources.
b. With private ownership, owners are held accountable for using their resources in a
manner that harms the resources of others.
c. Private ownership generally gives the owner little incentive to find ways to use the
resource wisely.
d. With private ownership, resource owners have little incentive to consider the
preferences of others when deciding how to employ a resource.
Which of the following is most important for the growth of income and full realization
of an economy’s potential?
a. a positive rate of time preference that motivates a high rate of current consumption
b. low real interest rates
c. the use of central planning to allocate investment funds
d. a mechanism capable of attracting savings and channeling them into investment
projects that create wealth
In economics, the term marginal refers to
a. the change or difference between two alternatives.
b. man-made resources as opposed to natural resources.
c. the satisfaction a consumer receives from a good.
d. holding everything else constant in the analysis.
The price elasticity of demand for gasoline measures the
a. responsiveness of gasoline producers to changes in the quality of gasoline.
b. responsiveness of customers to changes in the price of gasoline.
c. responsiveness of consumer preferences to changes in the quality of gasoline.
d. both a and c above.
Which of the following appropriately applies the law of comparative advantage?
a. Countries with small amounts of labor relative to capital should specialize in
producing labor-intensive commodities.
b. Since Mexican labor is cheaper than American labor, trade between the countries
results in exploitation of American workers.
c. Since workers in countries such as the United States utilize larger amounts of capital
than workers in less developed nations, trade between capital-rich and capital-poor
nations results in the exploitation of labor in the less developed countries.
d. Countries that are low cost producers of agricultural products should trade those
products for goods they can produce only at a high opportunity cost.
The term logrolling describes
a. government spending programs financed with user charges.
b. the exchange between legislators of their votes on issues.
c. the actions of legislators who are willing to trade their political votes for campaign
contributions from special interest groups.
d. government spending programs that primarily benefit loggers and other forest
workers.
The Laffer curve indicates that
a. when tax rates are low, a decrease in tax rates is likely to increase tax revenues.
b. when tax rates are high, an increase in tax rates is likely to a decrease in tax revenues.
c. tax revenue will always increase when tax rates are increased.
d. tax revenue will always decrease when tax rates are lowered.
Proved reserves of natural gas and oil
a. will last only another five years at the current worldwide consumption rate.
b. reveal little about whether the world is about to run out of these resources since they
are calculated at present levels of price and technology.
c. are just another way of measuring how many years civilization will continue.
d. indicate that the supply of petroleum will be depleted by the year 2020 unless
governments adopt price controls and energy rationing.
If restrictive monetary policy results in a slowdown in the domestic inflation rate and
higher real interest rates, other things constant, the
a. nation’s currency will appreciate.
b. nation’s currency will depreciate.
c. nation will run a balance of trade surplus.
d. nation will run a capital account deficit.
Under which of the following conditions will a change in government purchases have
the greatest effect on the economy in the short run?
a. The aggregate demand curve is relatively flat.
b. The aggregate demand curve is relatively steep.
c. The short-run aggregate supply curve is relatively flat.
d. The aggregate demand curve is vertical.
e. The short-run aggregate supply curve is vertical.
The poverty threshold income level equals the
a. average income of the bottom one-tenth of all income recipients.
b. cost of an economical and nutritional food plan for a family multiplied by six.
c. cost of an economical and nutritional food plan for a family multiplied by three.
d. average income of a family headed by a worker who has been unemployed for six
months or more.
Under the current structure of Medicare, economic theory indicates that the movement
of the baby boom generation into the retirement phase of life will
a. reduce the share of healthcare services paid for by a third party.
b. push both healthcare prices and expenditures upward.
c. increase the incentive of suppliers to provide healthcare services at a low cost.
d. increase the incentive of consumers to economize on their use of healthcare.
In the competitive price-taker model, individual firms exert no effect on the market
price. Therefore, the firm’s marginal revenue curve is
a. indeterminate.
b. an upward-sloping curve.
c. a downward-sloping curve.
d. the same as the firm’s demand curve.
Figure 3-22
Refer to Figure 3-22. Which of the four graphs illustrates a decrease in quantity
demanded?
a. A
b. B
c. C
d. D
When persistent inflation is present, we would expect
a. borrowers to systematically gain at the expense of lenders.
b. lenders to systematically gain at the expense of borrowers.
c. nominal interest rates to be higher than would be true if prices were stable.
d. nominal interest rates to be lower than real interest rates.
The demand for a resource is generally more
a. elastic in the short run because it takes time to alter the ratio of resources used in
many production processes.
b. inelastic in the short run because it takes time to alter the ratio of resources used in
many production processes.
c. elastic in the short run because an increase in the price of the resource may not be
expected to last.
d. inelastic in the short run because once resource suppliers find out they can charge a
higher price, they will do so in the long run.
If Honda (a Japan-based firm) produces a car in Ohio and exports it to Japan, in which
country’s GDP will the car be counted?
a. Japan’s, because Honda is a Japanese company
b. Japan’s because that is where the car is purchased
c. The GDP of the United States because that is where it was built
d. Both Japan and the United States
Graphically, what impact would an increase in the price of jet fuel have on the market
for air travel?
a. It would shift the supply curve for air travel to the right.
b. It would shift the supply curve for air travel to the left.
c. It would shift the demand curve for air travel to the right.
d. It would shift the demand curve for air travel to the left.
The rational expectations hypothesis assumes that individuals will
a. never make forecasting errors.
b. be as likely to overestimate as to underestimate the future rate of inflation.
c. continually make systematic forecasting errors.
d. ignore past forecasting errors when formulating predictions.
When the 2010 Patient Protection and Affordable Care Act is fully implemented, it will
a. set the prices (reimbursement rates) for more than 7,000 different medical
procedures.
b. increase the supply of doctors and other medical services.
c. increase the supply of doctors and other medical services.
d. reduce the share of health care expenses paid for by a third party, which will increase
the incentive of both consumers and medical providers to economize.
e. All of the above are true.
If the federal government began granting a subsidy of 10 cents per apple to apple
growers and as a result the price of apples to consumers falls by 8 cents,
a. the actual benefit of this subsidy goes mostly to consumers.
b. the actual benefit of this subsidy goes mostly to producers.
c. the actual benefit of this subsidy would be shared equally by producers and
consumers.
d. nobody would benefit from the subsidy.
Given the strict quantity theory of money, if the quantity of money doubled, prices
would
a. fall by half.
b. double.
c. remain constant.
d. increase somewhat but less than double.