1) consumer sovereignty means that legislation now protects the rights of consumers to
dispose of their incomes as they see fit.
2) an economic model is an ideal or utopian type of economy that society should strive
to obtain through economic policy.
3) Exports are added to, and imports are subtracted from, aggregate expenditures in
moving from a closed to an open economy.
4) A total fertility rate of approximately 1.0 will cause each generation to be half as
large as the preceding generation.
5) average fixed costs diminish continuously as output increases.
6) The public debt is held as Treasury bills, Treasury notes, Treasury bonds, and U.S.
savings bonds.
7) if economic theories are solidly based on relevant facts, then appropriate economic
policy becomes obvious and uncontroversial.
8) The following production possibilities tables for two countries, Latalia and
Trombonia:
Refer to the above tables. In Latalia the domestic real cost of 1 ton of pork:
A.is 3 tons of beans.
B.diminishes with the level of pork production.
C.is 5 tons of beans.
D.is 1/5 of a ton of beans.
9) As used in strategic trade policy, tariffs are a variation of the:
A.military self-sufficiency argument for tariffs.
B.increased-domestic-employment argument for tariffs.
C.diversification-for-stability argument for tariffs.
D.infant-industry argument for tariffs.
10) if l and m are complementary goods, an increase in the price of l will result in:
a.an increase in the sales of l.
b.no change in either the price or sales of m.
c.a decrease in the sales of m.
d.an increase in the sales of m.
11)
Refer to the diagram above, representing Slippery Slope Oil Company. What price of
oil would make 15 million barrels the optimal quantity to extract and sell this year?
A.$50.
B.$70.
C.$90.
D.$110.
12) The Coase theorem states that:
A.government should levy excise taxes on firms that generate spillover or external
costs.
B.taxes should be levied such that they change private behavior as little as possible.
C.bargaining between private parties will remedy externality problems where property
rights are clearly defined, the number of people involved are few, and bargaining costs
are small.
D.trading of votes to secure favorable voting outcomes may increase efficiency.
13)
Refer to the above graphs. Curve AB is a:
A.production possibilities curve and curve X is a long-run aggregate supply curve.
B.consumer demand curve and curve X is a long-run aggregate supply curve.
C.long-run aggregate supply curve and Y is potential real GDP curve.
D.long-run aggregate supply curve and X is a production possibilities curve.
14) which of the following is an implication of the circular flow model?
a.negative events in one part of the economy are isolated in their effect.
b.adverse effects in one market can spill over into other markets, magnifying the effect
on the economy.
c.prices of goods and services will tend to remain stable over time.
d.the shares of total resource income going to wages, rent, interest, and profit will tend
to equalize.
15) An expansionary monetary policy may be frustrated if the:
A.demand-for-money curve shifts to the left.
B.investment-demand curve shifts to the left.
C.saving schedule shifts downward.
D investment-demand curve shifts to the right.
16) A market in which the money of one nation is exchanged for the money of another
nation is a:
A.resource market.
B.bond market.
C.stock market.
D.foreign exchange market.
17) Suppose a firm anticipates that a particular R&D expenditure of $20 million will
result in a new product and thus create a one-time added profit of $22 million a year
later. The firm will:
A.not undertake the R&D expenditure if its interest-rate-cost of borrowing is 8 percent.
B.undertake the R&D expenditure if its interest-rate-cost of borrowing is 12 percent.
C.undertake the R&D expenditure if its interest-rate-cost of borrowing is 20 percent.
D.undertake the R&D expenditure if its interest-rate-cost of borrowing is 9 percent.
18) Economic rent refers to the price paid for land and other natural resources that:
A.are fixed in total supply.
B.vary directly with their market prices.
C.vary inversely with their market prices.
D.are available in nearly unlimited quantities.
19) (last word) a study found that the incidence of skin cancer increases along with the
amount of time people work under fluorescent light, leading some people to conclude
that fluorescent lighting is a cause of skin cancer. but further analysis found that people
who work in offices, where fluorescent light is common, suffer more sunburn on their
vacations than other workers. the sunburns, not the fluorescent light, were the cause of
the higher incidence of skin cancer. the original conclusion illustrates:
a.the fallacy of composition.
b.confusion of correlation and causation.
c.identifying marginal costs and marginal benefits.
d.biases and loaded terminology.
20)
Refer to the table above. If the current tax rate is 60 percent, supply-side economists
would advocate:
A.lowering tax rates to 20 percent, or lower if possible.
B.lowering tax rates to 40 percent.
C.keeping tax rates at 60 percent.
D.raising tax rates to 80 percent.
21) Which of the following is a correct statement of the impacts of a lump-sum tax?
A.Disposable income will increase by the amount of the tax and consumption at each
level of GDP will decline by the amount of the tax multiplied by the MPC.
B.Disposable income will decline by the amount of the tax and consumption at each
level of GDP will decline by the amount of the tax multiplied by the multiplier.
C.Disposable income will decline by the amount of the tax and consumption at each
level of GDP will also decline by the amount of the tax.
D.Disposable income will decline by the amount of the tax and consumption at each
level of GDP will decline by the amount of the tax multiplied by the MPC.
22)
refer to the above diagram. a decrease in supply is depicted by a:
a.move from point x to point y.
b.shift from s1 to s2.
c.shift from s2 to s1.
d.move from point y to point x.
23) answer the next question(s) on the basis of the following information about a
hypothetical economy:
refer to the above information. the unemployment rate is:
a.18.8 percent.
b.12.5 percent.
c.16.7 percent.
d.25 percent.
24) Consider the following situations. Evaluate how they would affect the level of
productivity of labor.
(a)The cost of health care skyrockets.
(b)Trade barriers with other countries are reduced.
(c)An energy shortage develops.
(d)Vast improvements are made in production technology.
25) The following 2006 balance of payments data (+ and -) for the hypothetical nation
of Zabella. All figures are in billions of dollars.
Refer to the above data. Zabella’s balance on capital and financial account shows a:
A.deficit of $5 billion.
B.surplus of $10 billion.
C.deficit of $10 billion.
D.surplus of $5 billion.
26) Critics of industrial regulation say that such regulation:
A.contributes to X-inefficiency.
B.benefits small firms at the expense of large firms.
C.creates insurmountable principal-agent problems.
D.suffers from the free-rider problem.
27) in 2007, trailblazer bicycle company produced a mountain bike that was delivered
to a retail outlet in november of 2007. the bicycle was sold to e.z. ryder in march of
2008. this bicycle is counted as:
a.consumption in 2007 and as disinvestment in 2008.
b.disinvestment in 2007 and as consumption in 2008.
c.disinvestment in 2007 and as investment in 2008.
d.investment in 2007 and as disinvestment in 2008.
28) What does it mean that innovators try to anticipate the future? What are the
economics consequences of this effort?
29) What are four types of labor market discrimination?
30) Why arent the tools of product market analysis directly applicable to the resource
market?
31) What is stagflation and what was one of its causes in the 1970s and early 1980s?
32) Whenever there is change in spending, there will be a change in real GDP. Explain
why this is so.
33) Cite three important reasons why nations trade.