The term “trust” in antitrust refers to a board of trustees that has collusive control over
different companies.
Economists believe that cost-plus pricing may be the best way for a firm to determine
its optimal product price when the firm’s marginal cost and average cost are about the
same and when it is difficult to estimate the product’s demand curve.
The large budget deficits of the early 1990s resulted in large current account deficits.
One reason a country does not specialize completely in production is that production of
most goods involves increasing opportunity costs.
Under the Bretton Woods system, the World Trade Organization (WTO) provided
foreign currency loans to central banks and approved adjustments to the agreed upon
fixed exchange rates.
Public saving equals taxes minus government spending minus transfer payments.
A positive technological change will cause the supply of a good to increase.
An increase in the government budget deficit will not lead to a current account deficit if
domestic investment declines.
Changes in the health of the average person are relatively unimportant as an indicator of
changes in the standard of living.
Local or state offices of the Department of Justice usually set prices for natural
monopolies in their jurisdictions.
By 2013, spending on federal health care programs such as Medicare and Medicaid had
grown to 6 percent of GDP.
The household survey asks adults about their employment status and is used to compile
the monthly unemployment rate.
Table 4-4
Table 4-4 shows the demand and supply schedules for labor market in the city of Pixley.
What is the equilibrium hourly wage (W*) and the equilibrium quantity of labor (Q*)?
A) W* = $10.50; Q* = 590,000
B) W* = $11.50; Q* = 570,000
C) W* = $9.50; Q* = 570,000
D) W* = $10.50; Q* = 1,200,000
Figure 11-3
Technological change is shown in the figure above by the movement from
A) B to C.
B) B to D.
C) B to E.
D) B to A.
Suppose a bank has $100,000 in checking account deposits with no excess reserves and
the required reserve ratio is 10 percent. If the Federal Reserve raises the required
reserve ratio to 12 percent, then the bank will now have excess reserves of
A) $12,000.
B) $0.
C) -$2,000.
D) -$12,000.
Figure 12-4 Figure 12-4 shows the cost
and demand curves for a profit-maximizing firm in a perfectly competitive market. If
the market price is $30 and if the firm is producing output, what is the amount of its
total variable cost?
A) $7,200
B) $6,480
C) $5,400
D) $3,960
If a country passes a labor law limiting the number of hours of work per week, GDP
would ________ and leisure would ________.
A) decrease; increase
B) increase; increase
C) decrease; decrease
D) increase; decrease
At the state and local levels in the United States, the largest source of tax revenue is
A) individual income taxes.
B) property tax on real estate.
C) sales tax.
D) grants from the federal government.
Figure 12-3
Suppose that government spending increases, shifting up the aggregate expenditure
line. GDP increases from GDP1 to GDP2, and this amount is $200 billion. If the MPC
is 0.8, then what is the distance between N and L or by how much did government
spending change?
A) $16 billion
B) $40 billion
C) $200 billion
D) $1,000 billion
Which of the following costs will not change as output changes?
A) marginal cost
B) total variable cost
C) average variable cost
D) average fixed cost
E) total fixed cost
If a monopolist practices perfect price discrimination
A) the firm will break even in the long run.
B) consumers surplus will be equal to the deadweight loss.
C) producer surplus will equal consumer surplus.
D) consumer surplus will be zero.
A(n) ________ comes to an end with a business cycle ________.
A) recession; peak
B) recession; trough
C) expansion; trough
D) expansion; bubble
Table 4-4
Table 4-4 shows the demand and supply schedules for labor market in the city of Pixley.
Suppose that the quantity of labor demanded decreases by 80,000 at each wage level.
What are the new free market equilibrium hourly wage and the new equilibrium
quantity of labor?
A) W = $8.50; Q = 550,000
B) W = $12.50; Q = 630,000
C) W = $9.50; Q = 570,000
D) W = $9.50; Q = 590,000
Figure 15-7
Suppose the economy is in a recession and the Fed pursues an expansionary monetary
policy. Using the static AD–AS model in the figure above, this would be depicted as a
movement from
A) A to B.
B) B to C.
C) C to B.
D) A to E.
E) C to D.
Figure 7-5 Figure 7-5 represents the market for
medical services with and without insurance, and the effect of a third-party payer
system on the demand for medical services. With insurance and a third-party payer
system, what price do doctors receive for medical services?
A) $40
B) $55
C) $65
D) >$65
Many golf courses charge members an annual membership fee as well as a fee each
time they golf. One reason for this is
A) golf courses do not want their members to overuse their fairways. Charging for each
round of golf played reduces fairway maintenance costs.
B) charging both fees allows the courses to transfer more consumer surplus into profit
than charging only an admission fee.
C) charging both fees allows the courses to transfer more producer surplus into profit
than charging only an admission fee.
D) research has shown that charging both fees increases the likelihood that golfers will
renew their memberships.
The “underground economy” is also referred to as
A) the informal sector.
B) the formal sector.
C) the halfway economy.
D) the net domestic product economy.
Monetarism is a school of thought put forth by ________, who argued that the economy
would most likely be at potential GDP.
A) Karl Marx
B) Milton Friedman
C) Finn Kydland and Edward Prescott
D) Robert Lucas and Thomas Sargent
A farm worker gets paid today in money, but plans to spend the money next week. This
illustrates which function of money?
A) medium of exchange
B) unit of account
C) store of value
D) standard of deferred payment
In the United States in 2013, the Bureau of Economic Analysis began counting
spending by firms and individuals on developing entertainment products as investment.
This change will
A) take away from GDP.
B) add to GDP.
C) not change GDP.
D) only change GDP if the development occurs within the borders of the United States.
Explain how unemployment changes over the business cycle. Why do these changes
occur?
Why might a developing country choose to peg the value of its currency to the dollar?
Assume a country is required by law to balance the budget every year. Suppose
aggregate demand falls, causing a recession and a budget deficit. To balance the budget,
what would the government need to do with the level of government spending and
taxes? How would these changes in government spending and taxes affect aggregate
demand and the economy?
What is yield management? How is yield management being used in the airline
industry?
What problems can high inflation rates cause for the economy?
What role do well functioning financial markets play in a market economy?
The breakfast cereal industry has a four-firm concentration ratio of 78 percent. Is this
enough information to classify the industry as an oligopoly? Is a high concentration
ratio evidence that an industry is not competitive?
Table 8-9
Suppose that the above table represents the goods and services produced in a very
simple economy in 2013. Assume that steel is used as an input in the production of
autos. Using that information, calculate GDP for the year 2013.
Explain the Difference between substitutes and complements.
Is fiscal policy more or less effective in manipulating aggregate demand in an open
economy?