In the short run, if price falls below a firm’s minimum average total cost, the firm
should shut down.
Answer:
Members of management serving on the board of directors of a corporation are referred
to as outside directors.
Answer:
Natural resource cartels such as OPEC are inherently unstable because their members
operate with excess capacity and have an incentive to cheat on their output quotas.
Answer:
Most U.S. currency held outside the U.S. banking system is held by foreigners.
Answer:
Network externalities refer to the situation where the usefulness of a product increases
with the number of consumers who use it.
Answer:
Deadweight loss refers to a loss in revenue resulting from producers having to reduce
their selling price to remain competitive.
Answer:
As output increases, average fixed cost gets smaller and smaller.
Answer:
For a given supply curve, the deadweight loss from the imposition of a tax is smaller if
demand is more elastic.
Answer:
In the United States in 2011, over 50 percent of people without health insurance were
below the age of 34.
Answer:
Decision trees can only be used to analyze sequential games.
Answer:
Consider the following T-account for a bank:
If the required reserve ratio is 10 percent, the bank at this point can make no more
loans.
Answer:
In a two-good, two country world, if one country has a comparative advantage in the
production of one good, it can benefit by trading with other countries.
Answer:
Imports are goods and services bought domestically but produced in other countries.
Answer:
A monopolistically competitive firm can convince buyers that its product has value by
differentiating its product to suit consumers’ preferences.
Answer:
In addition to covering the costs of unpredictable events, health insurance typically
covers many planned expenses, such as routine checkups, annual physicals, and the cost
of vaccinations. Because of this, health insurance
A) discourages overuse of health care services.
B) encourages overuse of health care services.
C) generates an efficient quantity of health care services.
D) is not accepted by most doctors and hospitals.
Answer:
What is the present value of $575 in a one year if the current rate of interest is 4
percent?
A) $410.71
B) $552.88
C) $598
D) $805
Answer:
Blu-ray players were introduced to the market in 2006, and new technology has allowed
for the cost of manufacturing the players to decline significantly since the initial
introduction. How did this change in technology affect the market for Blu-ray players?
A) The new technology caused an increase in the supply of Blu-ray players and a
decrease in price of Blu-ray players.
B) The new technology caused an increase in the supply of Blu-ray players and an
increase in price of Blu-ray players.
C) The new technology caused a decrease in the demand for Blu-ray players.
D) The new technology caused an increase in the quantity of Blu-ray players supplied.
Answer:
In a small Asian country, it is estimated that changing the level of capital from $8
million to $12 million will increase real GDP from $4 million to $6 million. What level
of GDP would you expect the economy to be able to reach if spending on capital
continued to rise to $16 million, assuming no technological change and no change in
the hours of work?
A) GDP would increase further, but by less than $2 million.
B) GDP would increase further by exactly $2 million.
C) GDP would increase further by more than $2 million
D) GDP would increase further by exactly $8 million.
Answer:
When housing prices fall, as they did beginning in 2006 following the housing market
bubble, consumption spending on furniture, appliances, and home improvements
________ as many households found it ________ to borrow against the value of their
homes.
A) declined; easier
B) declined; harder
C) increased; easier
D) increased; harder
Answer:
The Pre-Existing Condition Insurance Plan is a federally administered part of the
Affordable Care Act, and is designed for people with pre-existing medical conditions to
obtain insurance.By offering health insurance to all U.S. citizens with pre-existing
medical conditions, the Pre-Existing Condition Insurance Plan eliminates ________ for
both the insurer and the insured, and eliminates ________ for the issuer of the insurance
policy.
A) the principal-agent problem; moral hazard
B) asymmetric information; adverse selection
C) adverse selection; the principal-agent problem
D) moral hazard; adverse selection
Answer:
Table 15-1
A monopoly producer of foreign language translation software faces a demand and cost
structure as given in Table 15-1. What is the marginal revenue from the sale of the 12th
unit?
A) $75
B) $50
C) $20
D) -$5
Answer:
Nominal GDP is GDP in a given year
A) adjusted for inflation.
B) adjusted for anticipated inflation.
C) valued in the prices of that year.
D) valued in the prices of the base year.
Answer:
Using the money demand and money supply model, an open market sale of Treasury
securities by the Federal Reserve would cause the equilibrium interest rate to
A) increase.
B) decrease.
C) not change.
D) increase, then decrease.
Answer:
If the minimum wage is set above the market wage,
A) the quantity of labor supplied will be below the quantity of labor demanded.
B) unemployment will rise.
C) highly-skilled workers will have a harder time finding jobs.
D) All of the above are correct.
Answer:
A ________ curve shows the marginal cost of producing one more unit of a good or
service.
A) demand
B) supply
C) production possibilities
D) marginal benefit
Answer:
Figure 4-5
Figure 4-5 shows the market for apartments in
Springfield. Recently, the government imposed a rent ceiling of $1,000 per month.
With rent control, the quantity supplied is 200 apartments. Suppose apartment owners
ignore the law and rent this quantity for the highest rent they can get. What is the
highest rent they can get per month?
A) $1,000
B) $1,500
C) $2,000
D) $2,300
Answer:
Gross national product is defined as
A) the value of final goods and services produced within the United States.
B) the value of final goods and services produced outside of the United States.
C) the value of final goods and services produced by residents of the United States even
if the production takes place outside of the United States.
D) the value of final goods and services produced within the United States, by United
States residents.
Answer:
Figure 3-1
An increase in population would be represented by a movement from
A) A to B.
B) B to A.
C) D1 to D2.
D) D2 to D1.
Answer:
For each of the following pairs of products state which are complements, which are
substitutes, and which are unrelated.
a. Digital camera and memory stick
b. 7Up and Mountain Dew
c. Swimsuits and flip-flops
d. Tylenol and cat food
e. Photocopier and paper
Answer:
What can the Federal Reserve do to reduce the natural rate of unemployment?
A) nothing
B) follow expansionary monetary policy that will increase inflation
C) follow expansionary monetary policy that will reduce inflation
D) follow contractionary monetary policy that will increase inflation
Answer:
Congress passed the Clean Air Act in 1970. Since this act was passed, emissions of the
six main air pollutants
A) have fallen by more than one-half.
B) have increased significantly due to the growth of the U.S. economy.
C) cannot be measured since Congress failed to appropriate money to monitor the level
of emissions.
D) have remained essentially constant, even though significant economic growth has
occurred in the United States since 1970.
Answer:
If a 5 percent increase in income leads to a 10 percent increase in quantity demanded
for airline travel, then airline travel is
A) a necessity.
B) a substitute for another good.
C) a luxury.
D) an inferior good.
Answer:
Figure 4-4
The figure above represents the market for iced tea. Assume that this is a competitive
market. Which of the following is true?
A) If the price of iced tea is $3 the output will be economically efficient but there will
be a deadweight loss.
B) If the price of iced tea is $3 consumers will purchase more than the economically
efficient output.
C) Both 10,000 and 30,000 are economically inefficient rates of output.
D) If the price of iced tea is $3 producers will sell 30,000 units of iced tea but this
output will be economically inefficient.
Answer:
Describe each of the principles governments consider when deciding which taxes to
use.
Answer:
The following table contains the actual prices charged by four Web sites for a Blu-ray
disc of the movie The Twilight Saga: Breaking Dawn – Part 2 in October 2013.
Explain whether the information in this table contradicts the law of one price.
Answer:
Explain what happens to inflation during the business cycle. Give an intuitive
explanation as to why inflation changes the way it does over the business cycle.
Answer:
Fill in the columns in the following table and use the values in the table to determine
the profit-maximizing level of output.
Answer:
Table 11-7
Consider the statistics in the table above in describing the following industrialized and
developing countries. Are these consistent with the economic growth model? Briefly
explain.
Answer:
If the labor supply curve shifts to the right and the labor demand curve remains
unchanged, what will happen to the equilibrium wage and the equilibrium level of
employment? Illustrate your answer with a graph.
Answer: