Economists define “efficiency” as the absence of waste.
a. True
b. False
With regard to the characteristics of production indifference curves, which of the
following statements is/are NOT true?
a. Higher curves correspond to larger outputs.
b. An indifference curve will generally have a negative slope.
c. An indifference curve is typically assumed to curve inward toward the origin near its
middle.
d. All of the above are true for production indifference curves, but not for isoquants.
e. b and c
If MPPa/Pa > MPPb/Pb, then the proportions of these two inputs is optimal.
a. True
b. False
When equilibrium real GDP falls short of potential GDP, there is a(n)
a. inflationary gap.
b. potential gap.
c. recessionary gap.
d. precautionary gap.
Asymmetric information generally leads to efficient resource allocation.
a. True
b. False
All of the points inside a production possibilities frontier are ____; all of the points
outside the production possibilities frontier are ____.
a. efficient, inefficient
b. optimal, irrational
c. attainable, unattainable
d. rational, zero-cost
e. unattainable, efficient
Pollution taxes are more efficient in cleaning up the environment than direct controls.
What role is there for direct controls?
a. They are useful standby mechanisms.
b. They are useful if it is decided to prohibit the substance altogether.
c. They are useful where dependable metering devices are not available or prohibitively
costly to install.
d. All of the above are true.
A demand schedule shows the time over which different quantities will be demanded.
a. True
b. False
A natural monopoly is defined as an industry in which one firm
a. can produce the entire industry output at a lower average cost than a larger number of
firms could.
b. can produce the entire industry output at a lower marginal cost than a larger number
of firms could.
c. is very large relative to other firms that could enter the industry.
d. can earn higher profits if it is the only firm in the industry rather than if other firms
also enter the industry.
Opportunity cost can best be defined as the
a. value of what must be given up in order to acquire an item.
b. money cost to the buyer to acquire a good or service.
c. total value of all the other items that otherwise could be acquired.
d. cost to the seller to produce an item.
e. time cost to obtain the money to buy an item.
Which of the following countries has the highest level of average educational
attainment?
a. Canada
b. Italy
c. India
d. Sudan
The desirable level of output in a perfectly competitive market if there exists a
detrimental externality is
a. the point at which MSC curve intersects the marginal revenue curve.
b. the point at which MSC intersects the MPC.
c. the point at which MSC intersects MPC.
d. the point at which marginal revenue curve intersects the MPC.
If Japan is twice as good at producing cameras and three times as good at producing TV
sets as the United States, Japan is said to have a comparative advantage in TV sets and
the United States has a comparative advantage in cameras.
a. True
b. False
A scatter diagram of the position of the U.S. economy from 1972 through 2007 with the
price level on the vertical axis and real GDP on the horizontal axis would show a
movement generally toward the
a. northwest.
b. northeast.
c. southwest.
d. southeast.
When budget deficits take place in a high-employment economy, the effect is an
increase in capital stock.
a. True
b. False
The exchange rate states the price, in terms of one currency, at which another currency
can be bought.
a. True
b. False
Major firms charged with predatory pricing defend by saying that their prices are low
because of superior efficiency.
a. True
b. False
A recession abroad would cause U.S. net exports to rise.
a. True
b. False
The use of tax penalties to control pollution represents a
a. price-based market approach to the pollution problem.
b. non-market approach to the pollution problem.
c. major source of current federal revenues.
d. pollution-rights solution to the pollution problem.
Writing during the Great Depression, Keynes naturally focused on problems of
a. hyperinflation.
b. budget deficits.
c. trade deficits.
d. unemployment.
If both matches and automobile prices increase by 10 percent, consumers will likely
buy
a. fewer matches and approximately the same quantity of automobiles.
b. approximately the same quantity of matches and fewer automobiles.
c. fewer matches and fewer automobiles.
d. approximately the same quantity of both matches and automobiles.
If the MPC in the U.S. was low, it would increase the value of the multiplier.
a. True
b. False
In recent years, established U.S. stock markets have faced significant competition from:
a. new start ups
b. small, regional stock markets
c. foreign stock markets
d. people buying & selling stocks online
A vocal minority of economists, believers in the theory of rational expectations, insist
that
a. the Phillips curve is downward sloping even in the short run.
b. the Phillips curve is vertical even in the short run.
c. a trade-off exists between inflation and unemployment even in the long run.
d. expansionary fiscal and monetary policy can reduce unemployment without creating
inflation.
Figure 4-4
Assume that Figure 4-4 shows demand for steak. An increase in income of buyers will
change demand from
a. D1 to D2.
b. D2 to D1.
c. D3 to D2.
d. D3 to D1.
Economists and accountants use the same definition of profit.
a. True
b. False
Which of the following are accurate arguments suggesting that the fiscal stimulus did
work?
a. Real GDP growth moved from negative to positive in 2009.
b. Employment increased in 2009.
c. The economy has natural self-correcting mechanisms.
d. The return on bailout assets reduced the deficit.
Most economists today believe that the Phillips curve is
a. vertical in the short run but downward sloping in the long run.
b. upward sloping in the short run but vertical in the long run.
c. downward sloping in the short run but vertical in the long run.
d. vertical in the short run but upward sloping in the long run.
Mutually beneficial trade is impossible when different persons have different
preferences about goods and services.
a. True
b. False
To promote rapid economic growth, the new growth theory would argue for increased
scholarships in
a. women’s studies.
b. deconstructionist literature.
c. post-modern sociology.
d. biology.
Figure 19-2
Of the graphs in Figure 19-2, which one shows Japan practicing “dirty” floating to keep
an undervalued currency?
a. 1
b. 2
c. 3
d. 4
Sugar price supports ensure an abundance of sugar, and hence reasonable prices for
consumers.
a. True
b. False
Which of the following holds true in a market when the invisible hand functions
properly?
a. MC = MU = P
b. P = MRS
c. P = MC but not P = MU
d. P = MU but not P = MC
The marginal utility of a unit of good X
a. is always greater than the total utility of X.
b. is always less than the average utility of X.
c. generally depends on how much X the consumer already has.
d. is always equal to the price of X.
What mechanism assures that firms produce outputs that consumers actually desire?
a. governmental regulations on the mix of outputs
b. altruism
c. the desire for profit
d. a desire to serve others without thought of reward
e. All of the above are correct.