Which of the following will tend to lower the ability of a union to increase the wages of
its members?
a. strong competition from nonunion labor
b. threat of a strike
c. increased demand for union labor
d. all of the above
Suppose U.S. consumers start buying more English shoes and fewer U.S. shoes. What
impact will this trend have on the foreign exchange market?
a. The U.S. overall demand for foreign exchange, and British pounds, in particular, will
increase.
b. The U.S. overall demand for foreign exchange, and British pounds, in particular, will
decrease.
c. The U.S. demand for British pounds will increase, but the overall demand for foreign
exchange will probably decrease.
d. The U.S. demand for British pounds will decrease, but the overall demand for foreign
exchange will probably increase.
Compared to the situation during the first 125 years of the United States (1790-1915),
today total government expenditures are ____ share of the economy, and a greater
proportion of those expenditures take place at the ____ level(s).
a. a smaller; federal
b. about the same; federal
c. a larger; federal
d. a larger; state and local
Relative to a mobile factor of production, economic theory suggests that the price
elasticity of supply for a highly immobile factor of production (for example, land) will
be
a. more elastic.
b. less elastic.
c. of unitary elasticity.
d. this is a trick question; the price elasticity of supply for factors of production is not
affected by factor mobility.
Even when there are only a few firms in a market, the market can still be competitive as
long as barriers to entry are low. Markets of this type are called
a. monopolistic markets.
b. price-taker markets.
c. contestable markets.
d. convertible markets.
A regulatory agency that imposes a price ceiling in order to limit monopoly profits to a
“fair rate of return” is forcing the monopolist to sell at a price equal to
a. average fixed cost.
b. average total cost.
c. marginal cost.
d. average variable cost.
When the required reserve ratio is lowered,
a. the money multiplier increases, and the amount of excess reserves increases in the
banking system.
b. the money multiplier decreases, and the amount of excess reserves increases in the
banking system.
c. the money multiplier decreases, and the amount of excess reserves decreases in the
banking system.
d. the money multiplier increases, and the amount of excess reserves decreases in the
banking system.
e. there is no change in either the money multiplier or the amount of excess reserves in
the banking system.
During an economic expansion, housing and stock prices generally
a. fall, leading to a reduction in aggregate demand.
b. fall, leading to an increase in aggregate demand.
c. rise, leading to a reduction in aggregate demand.
d. rise, leading to an increase in aggregate demand.
If the federal government fails to reduce the nation’s debt relative to income,
a. it will become easier to borrow in the global credit markets.
b. the interest expenses on the outstanding debt will increase.
c. the cost of holding outstanding debt will decrease.
d. it will be easier to cover the interest on outstanding debt with tax revenues.
As conventionally measured, budget deficit and surplus calculations include the
revenues and expenditures of
a. only current government operations; government trust funds are omitted.
b. all government trust funds except Social Security.
c. the Social Security Trust Fund, but other government trust funds are omitted.
d. all government trust funds, including Social Security.
Figure 11-18
The total cost for the firm in Figure 11-18, a monopolist that maximizes profit while
charging all customers the same price, is
a. $3,300
b. $3,400
c. $2,808
d. $2,340
e. $1,638
Economic theory indicates that as a larger share of medical services are paid for by a
third party (for example, insurance companies or the government) rather than directly
by the consumer,
a. consumers will have a stronger incentive to economize.
b. consumers will have a weaker incentive to economize and the prices of medical
services will rise more rapidly than would otherwise be the case.
c. consumers will have a weaker incentive to economize, but medical service suppliers
will have a stronger incentive to keep prices low.
d. the suppliers of medical services will have more incentive to economize.
Suppose the CPI was 104 in 1967, and suppose currently the CPI is 390. According to
the CPI, $10 in 1967 purchased the same number of goods and services as
a. $28.88 purchases today.
b. $37.50 purchases today.
c. $42.64 purchases today.
d. $104.00 purchases today.
Which of the following events will reduce GDP?
a. A hurricane destroys your house.
b. You lose $500 playing poker.
c. You pay $500 to repair the damage done to your house by a hurricane.
d. You work 15 hours less this month so that you can repair the damage done to your
home by a hurricane.
Which of the following adopted reforms that have substantially improved their
economic freedom rating since 1980?
a. Ireland
b. Zimbabwe
c. Venezuela
d. Republic of Congo
If the United States is viewed by foreigners as a great nation in which to invest,
generating a large inflow of foreign investment, this will cause the United States to run
a
a. deficit on the current account.
b. surplus on the current account.
c. deficit on the capital account.
d. deficit on the official reserve account.
Which of the following is true of sub-Saharan Africa?
a. The poverty rate in the region is low.
b. Most of the sub-Saharan African countries rank among the freest economies in the
world.
c. The poverty rate in sub-Saharan Africa is the highest of any region in the world, and
the reduction in the rate during the past quarter of a century has been modest.
d. The poverty rate in sub-Saharan Africa is the lowest of any region in the world, and
the rate has declined sharply during the past quarter of a century.
Which of the following is the most accurate definition of a worker’s “marginal revenue
product”?
a. the change in the firm’s profits as the result of hiring an additional worker
b. the change in the firm’s total revenue as the result of hiring an additional worker
c. the change in the firm’s output as the result of hiring an additional worker
d. the change in the firm’s cost as the result of hiring an additional worker
When entry barriers into a market are low, firms will tend to earn zero economic profit
in the long run because
a. low entry barriers lead to rising costs.
b. profit-seeking entrepreneurs will not enter a market when entry barriers are low.
c. short-run profit attracts additional suppliers and drives down the market price.
d. consumers will refuse to pay more than the cost of producing a good once they find
out the producer’s per-unit costs.
In his book The Road to Serfdom, Friedrich Hayek argued that the growth of
government
a. was essential if the ups and downs of the business cycle were going to be controlled.
b. must be increased if western democracies were going to survive.
c. could only be achieved if monetary policy-makers were willing to expand the supply
of money more rapidly.
d. endangered freedom and moved Western democracies toward tyranny, just as it had
done in Nazi Germany and the Soviet Union.
Which of the following activities describes the opportunity cost of attending an
economics class?
a. the value of the time it takes to get to campus every day
b. the cost of the gasoline needed to drive a car to campus
c. the value of the highest valued alternative that must be forgone because of attending
the class
d. transportation costs plus the cost of tuition and textbooks for the course
If the price of apples decreases by 2 percent and causes apple consumption to increase
by 4 percent, the price elasticity of demand is ____, indicating the demand is ____.
a. 2; elastic
b. 2; inelastic
c. 0.5; elastic
d. 0.5; inelastic
Why do oligopolists (or cartel members) have an incentive to cheat on collusive
agreements designed to maximize the joint profits of the firms in the industry?
a. Individual firms could gain if they charged a price greater than the industry’s
profit-maximizing price.
b. The industry demand curve is more elastic than the demand curve confronting each
of the firms in the industry.
c. The firms would like to see the industry produce a larger output and charge a lower
price.
d. The demand curve confronting the individual firms is more elastic than the market
demand curve for the product.
Which of the following is the primary tool the Fed uses to control the supply of money?
a. the discount rate
b. the reserve requirements
c. open market operations
d. the 30-year home-mortgage interest rate
If the economy were at its potential output level, which of the following is not true?
a. The actual unemployment rate would equal the natural rate.
b. There would be some cyclical unemployment.
c. There would be some frictional unemployment.
d. There would be some structural unemployment.
Which of the following is true?
a. In 1916, the per person real government expenditures were approximately 60 times
greater than in 1800.
b. Prior to 1929, government expenditures at the state and local levels were
substantially smaller than federal expenditures.
c. Real federal spending per person was approximately 80 times greater in 2012 than in
1916.
d. All of the above are true.
Long-run diseconomies of scale exist over the range of output for which the long-run
average total cost curve
a. rises.
b. remains constant.
c. falls.
d. does not exist.
A Wisconsin farmer sells her crops in a competitive price-taker market. If she produces
500 bushels for total revenue of $2,500 and if harvesting the 501st bushel would raise
her total cost from $2,500 to $2,505, her
a. revenue will increase by $10 if she harvests the 501st bushel
b. revenue will fall by $5 if she harvests the 501st bushel
c. average fixed cost will rise if she harvests the 501st bushel
d. profit will fall by $10 if she harvests the 501st bushel
e. profit will remain unchanged if she harvests the 501st bushel
If the underground economy is sizable, then GDP will
a. understate the economy’s performance.
b. overstate the economy’s performance.
c. fluctuate unpredictably.
d. accurately reflect this subterranean activity.
If nominal GDP increases by 4 percent, then
a. real output has increased by 4 percent
b. the price level has increased by 4 percent
c. consumer spending must have increased by 4 percent
d. it is possible that all of the increase was caused by an increase in the price level
e. net exports increased by 4 percent
If price is above average variable cost and below average total cost, a
profit-maximizing price taker should
a. immediately shut down; failing to do so is contrary to the idea of profit maximization
in a competitive market.
b. continue producing as long as it expects the market price to rise above average total
cost in the near future.
c. attempt to push price upward by slowly reducing output.
d. cut price so more units can be sold.
Andrea would be considered unemployed if she is
a. working at a part-time job but is looking for a full-time job.
b. absent from her regular job as the result of illness.
c. working at a full-time job but is looking for a part-time job.
d. not working and is looking for a part-time job.
The market that coordinates the exchange of productive inputs between the household
and business sectors is the
a. stock market.
b. goods and services market.
c. resource market.
d. loanable funds market.
The influence of agricultural technologies on farm land in the United States has been
a. very little up until now.
b. substantial, as greater productivity per acre reduced the need for farmland.
c. substantial; the productivity of much farm land has been destroyed by new
technologies and may never be useful again.
d. to make farmland less productive over time as the minerals In the soil are used up.