A demand curve that is horizontal indicates that the commodity
A) has few substitutes.
B) must be very cheap.
C) is a necessity.
D) has a large number of substitutes.
Figure 12-7 Figure
12-7 illustrates the cost curves of a perfectly competitive firm.
If the market price is P2,the firm
A) will break even and produce a quantity of Q2.
B) will make a profit and produce a quantity of Q2.
C) will make a profit and produce a quantity of Q1.
D) will make a profit and produce a quantity of Q3.
Consumption spending is $4.5 billion, gross private domestic investment is $3 billion,
and government expenditures are $2 billion. If GDP is $14 billion, which of the
following could be true regarding exports and imports in the economy?
A) Exports are $4.5 billion, and imports are $2 billion.
B) Exports are $6 billion, and imports are $8.5 billion.
C) Exports are $9 billion, and imports are $6 billion.
D) Exports are $15 billion, and imports are $10.5 billion.
The substitution effect of a decrease in the price of movie tickets results in
A) an increase in the quantity demanded of movie tickets.
B) a decrease in the quantity demanded of movie tickets.
C) an increase in the demand for movie tickets.
D) a decrease in the demand for movie tickets.
The cost of producing cigarettes in the U.S. has increased and at the same time, more
and more Americans are choosing to not smoke cigarettes. Which of the following best
explains the effect of these events in the cigarette market?
A) The supply curve has shifted to the right and the demand curve has shifted to the
left. As a result there has been an increase in the equilibrium quantity and an uncertain
effect on the equilibrium price.
B) Both the supply and demand curves have shifted to the right. As a result, there has
been an increase in the equilibrium quantity and an uncertain effect on the equilibrium
price.
C) Both the supply and demand curves have shifted to the left. As a result, there has
been a decrease in the equilibrium quantity and an uncertain effect on the equilibrium
price.
D) The supply curve has shifted to the right and the demand curve has shifted to the
left. As a result, there has been an increase in the equilibrium price and an uncertain
effect on the equilibrium quantity.
The major assets on a bank’s balance sheet are its
A) checking and savings account deposits.
B) loans, and checking and savings account deposits.
C) reserves, loans, and holdings of securities.
D) reserves, checking and savings account deposits.
E) reserves, loans, and checking account deposits.
When a monopolistically competitive firm cuts its price to increase its sales, it
experiences a loss in revenue due to the
A) substitution effect.
B) income effect.
C) price effect.
D) output effect.
Zane’s Vanes is a service that restores old weather vanes. Zane has just spent $125
purchasing a 1920s era weather vane which he expects to restore and sell for $500 once
the work is completed. After having spent $125, Zane realizes that he will need to spend
an additional $200 on materials to complete the restoration. Alternatively, he can sell
the weather vane without restoring it for $200. What is his marginal benefit if he sells
the weather vane without restoring it?
A) $75
B) $125
C) $200
D) $300
A currency pegged at a value above the market equilibrium exchange rate is
A) overvalued.
B) undervalued.
C) achieving purchasing power parity.
D) depreciating in value relative to its pegged currency.
Figure 2-16
In the circular flow diagram, market K represents
A) households.
B) product markets.
C) firms.
D) factor markets.
The natural rate of unemployment is made up of
A) frictional, cyclical, and structural unemployment.
B) frictional and cyclical unemployment.
C) cyclical and structural unemployment.
D) frictional and structural unemployment.
E) seasonal and structural unemployment.
Negative externalities and the tragedy of the commons are problems that have a
common source. What is this common source?
A) self-interest motives of producers and consumers
B) a lack of concern for human rights
C) a lack of competition
D) a lack of clearly defined and enforced property rights
The ________ is a measure of the price level and is calculated by dividing ________ by
________ and multiplying by 100.
A) CPI; real GDP; nominal GDP
B) GDP deflator; real GDP; nominal GDP
C) GDP deflator; nominal GDP; real GDP
D) PPI; nominal GDP; real GDP
E) PPI; real GDP; nominal GDP
If the demand for cell phone service is inelastic, then
A) the percentage change in quantity demanded is greater than the percentage change in
price (in absolute value).
B) the percentage change in quantity demanded is equal to the percentage change in
price.
C) the quantity demanded does not change in response to changes in price.
D) the percentage change in quantity demanded is less than the percentage change in
price (in absolute value).