Since the mid-1980s, the debt-to-income ratio of American households
a. has remained about the same as the previous 25 years.
b. has been slowly declining.
c. has fluctuated between about 55 and 70 percent of after-tax income.
d. has rapidly increased.
The main purpose of the Fed is to
a. serve as the bankers’ bank for member banks.
b. regulate interest rates.
c. print Federal Reserve Notes.
d. regulate financial institutions.
e. maintain the proper functioning of our money system.
Spending programs that substantially alter the composition of aggregate demand will
tend to
a. decrease the rate of unemployment.
b. increase the rate of unemployment.
c. promote a more rapid recovery.
d. reduce structural unemployment.
In Africa, which of the following policies has been most successful at increasing
elephant populations?
a. Banning the ivory trade by making the buying and selling of ivory illegal.
b. Making elephants the common property of the people of the country through
government ownership and control and making the killing of elephants illegal
c. Allowing private ownership of elephants and making the ivory trade legal
d. When used together, the policies in a and b have been more successful than the
policy in c.
Darryl would like to work as an accountant full time. A full-time position is not
available, however, so he must accept a part-time job working 15 hours per week. The
Bureau of Labor Statistics would categorize Darryl as
a. employed.
b. unemployed.
c. both employed and unemployed.
d. not in the labor force.
The present value of $1 million to be received 10 years from now will
a. decrease if the interest rate rises.
b. be greater if the funds were going to be received 15 years from now.
c. be greater than $1 million.
d. increase if the interest rate were to rise from 4 percent to 8 percent.
Suppose the consumer price index (CPI) for Year X is 130. This means the average
price of goods and services is
a. currently $130.
b. 130 percent more in Year X than in the base year.
c. 130 percent more in the base year than in Year X.
d. priced at 30 percent more in Year X than in the base year.
Which of the following limits the ability of the current system of transfer programs to
increase the incomes of the able-bodied poor?
a. The high implicit marginal tax rates that accompany the current income transfer
programs reduce the incentive of the poor to earn.
b. The transfer programs encourage the poor to marry and form dual-earner families.
c. The transfer programs tend to increase the wages that employers are required by law
to pay for low-skill labor.
d. The transfer programs reduce the likelihood of single-parent families.
Table 3-2
Refer to Table 3-2. If the price is $775, who would be willing to supply the product?
a. Dale and Jill
b. Dale, Jill and Denise
c. Denise, Catherine and Jackson
d. Catherine and Jackson
Assume that eggnog and cookies are complements. If the price of eggnog goes up, what
happens to the demand for cookies?
a. demand for cookies increases
b. demand for cookies decreases
c. demand for cookies remains unchanged
d. the shift in demand will depend on the original price of cookies
Which of the following reflects diseconomies of scale?
a. Marginal product decreases as output increases.
b. Short-run marginal cost increases as output increases.
c. Long-run marginal cost increases as output increases.
d. Short-run average cost increases as output increases.
e. As output doubles, long-run total cost more than doubles.
Figure 17-9
Refer to Figure 17-9. With trade and without a tariff,
a. the domestic price is equal to the world price.
b. carnations are sold at $8 in this market.
c. there is a shortage of 400 carnations in this market.
d. this country imports 200 carnations.
Table 12-3
Refer to Table 12-3. Suppose that the firm pays its workers $55 per day. Each unit of
output sells for $12. How many days of labor should the firm hire?
a. 3
b. 4
c. 5
d. 6
Figure 11-21
The welfare loss associated with the unregulated natural monopoly in Figure 11-21 is
shown by the area
a. cef
b. abc
c. adf
d. dfeg
e. bcfd
The change in the aggregate quantity of goods and services demanded in the U.S. is
based on the logic that as the price level falls,
a. real wealth falls, interest rates rise, and net exports fall.
b. real wealth falls, interest rates rise, and net exports rise.
c. real wealth rises, interest rates fall, and net exports fall.
d. real wealth rises, interest rates fall, and net exports rise.
A point inside the production possibilities curve represents a combination of goods that
is
a. inefficient.
b. efficient.
c. unattainable.
d. attainable.
The change in the total revenue of a firm that results from employing one additional
unit of a factor of production is defined as the
a. total revenue product of the resource.
b. marginal product of the resource.
c. marginal revenue product of the resource.
d. average revenue product of the resource.
Which of the following factors weakens the case for private-sector provision of goods
and services as opposed to public-sector provision?
a. weak incentives for operational efficiency
b. rent-seeking
c. the shortsightedness effect
d. externalities
Economic analysis indicates that the increasing government expenditures and growth of
third-party payments accompanying the Medicare and Medicaid programs
a. reduced the demand for healthcare services.
b. reduced the incentive of consumers to economize on their use of healthcare.
c. increased the incentive of consumers to economize on their use of healthcare.
d. placed downward pressure on the prices of healthcare services.
Figure 3-20
Refer to Figure 3-20. If the price decreases from $22 to $16, consumer surplus
increases by
a. $120.
b. $360.
c. $480.
d. $600.
An expansionary monetary policy is most likely to increase real output
a. when the economy is operating at less than full-employment capacity.
b. when the economy is at full employment.
c. when actual output is beyond the economy’s long-run capacity.
d. when the inflationary side effects are fully anticipated by decision makers.
Which of the following is true?
a. Investment in the stock market is a relatively foolproof method for an investor to earn
a high rate of return during the next five years.
b. Current stock prices already reflect information that is known with a high degree of
certainty.
c. Experts are able to predict changes in the direction of the broad stock market indexes
with a high degree of accuracy.
d. While changes in the prices of specific stocks are difficult to predict, it is relatively
easy to predict the future direction of the broad stock market.
e. Both c and d are true.
Which of the following accurately describes a major difference between a monopolist
and firms in competitive price-searcher markets?
a. A monopolist will maximize profit, while firms in competitive price-searcher markets
will maximize sales.
b. A monopolist may be able to earn long-run economic profit, but firms in competitive
price-searcher markets will not be able to do so.
c. A monopolist will charge a price that is greater than its marginal cost, but competitive
price searchers will charge prices that are just equal to their marginal cost.
d. A monopolist will charge a price that is just equal to its marginal cost, but
competitive price searchers will charge prices that are greater than their marginal cost.
Other things constant, an increase in resource prices will
a. increase the demand for goods and services.
b. increase the cost of producing goods and services, which will lead to a higher price
level.
c. reduce costs and improve profit margins, which will lead to an increase in aggregate
supply in the goods and services market.
d. cause the natural rate of unemployment to rise.
Which of the following is the most likely side effect of an increase in the relative size of
the underground economy with the passage of time?
a. The growth rate of real GDP will tend to understate the growth rate of total output.
b. The growth rate of real GDP will tend to overstate the growth rate of total output.
c. The GDP deflator will tend to overstate any increase in inflation.
d. The GDP deflator will tend to understate any increase in inflation.
How would a decrease in consumer income affect the market for lawn mowers?
a. Demand would decrease, leading to an increase in price and a reduction in quantity
sold.
b. Demand would decrease, leading to a reduction in price and a reduction in quantity
sold.
c. Demand would increase, leading to an increase in price and an increase in quantity
sold.
d. Demand would increase, leading to a reduction in price and an increase in quantity
sold.
In the short run, if average variable costs equal $45, average total costs equal $50, and
output equals 100, the total fixed costs will equal
a. $5.
b. $500.
c. $1,000.
d. $5,000.
Use the production possibilities data below for Austria and Italy to answer the following
question(s).
Table 2-1
Refer to Table 2-1. Which of the following is true?
a. Austria has the comparative advantage in both goods.
b. Austria has the comparative advantage in food.
c. Italy has the comparative advantage in food.
d. It would be impossible for Austria and Italy to gain from trade.
In the long run the prices charged by a firm in a competitive price-searcher market will
be
a. high enough to provide profits to the firm.
b. so low that many firms will drop out of the industry.
c. equal to marginal cost.
d. equal to average cost, including the opportunity cost of capital.
Prices in resource markets
a. provide users with information concerning the relative scarcity of resources.
b. encourage the use of a resource now if its price is expected to rise in the future.
c. provide suppliers with little incentive to develop more of those resources that are
intensely demanded by users.
d. have little impact on productive decisions unless they are closely regulated by the
government.
According to the Keynesian view, capitalism
a. is a highly productive form of economic organization that works best when
government intervention is least.
b. experiences booms and busts because of the instability of private investment that is
driven by fickle changes in business optimism.
c. experiences booms and busts that are primarily the result of inappropriate monetary
policy.
d. experiences fluctuations in aggregate demand that cannot be controlled with fiscal
policy.