An average tax rate is calculated as
A) total taxable income taxes paid.
B) total taxable income · taxes paid.
C) taxes paid · total taxable income.
D) (total taxable income – taxes paid) · taxable income.
Dr. Goldfinger decides to invest in companies which he believes can “improve the
productivity and efficiency” of health care services. How can Dr. Goldfinger strive to
achieve this productive efficiency?
A) by investing in companies that produce goods and services based on consumer
preferences
B) by investing in companies that produce goods and services at the lowest possible
cost
C) by investing in companies that fairly distribute their products and services
D) by investing in companies that produce up to the point where the marginal benefit of
the last unit produced is equal to the marginal cost of producing it
In 2013, the Educational Testing Service (ETS) charged $51 to take the Scholastic
Aptitude Test (SAT) but $150 to take the Graduate Record Exam (GRE). One reason for
this difference in price is
A) more people took the SAT than the GRE in 2013.
B) the GRE is a longer test with more questions.
C) an average, those who take the GRE have higher incomes than those who take the
SAT.
D) the ETS faces competition in the market for the SAT but no competition for the
GRE.
Fiscal policy is defined as changes in federal ________ and ________ to achieve
macroeconomic objectives such as price stability, high rates of economic growth, and
high employment.
A) taxes; interest rates
B) taxes; the money supply
C) interest rates; money supply
D) taxes; expenditures
Economists agree that a monopolistically competitive market structure
A) lowers consumer utility because consumers pay a price higher than the marginal cost
of production.
B) is detrimental to society because it leads to a waste of scarce resources.
C) benefits consumers because firms produce products that appeal to a wide range of
consumer tastes.
D) can eliminate any excess capacity if all firms in the industry devote more funds to
differentiating their products.
Exemptions and deductions are used
A) to add to taxes that must be paid.
B) by taxpayers to reduce the amount of income subject to tax.
C) to determine the type of tax structure.
D) to determine what items are subject to sales taxes.
Both presidents Kennedy and Reagan proposed significant cuts in income taxes because
A) at the time of their proposals the federal government was experiencing budget
surpluses; that is, tax revenue exceeded government expenditures.
B) they wanted to offset their proposals to increase other taxes.
C) state governments had increased their taxes and they believed the tax cuts they
proposed would result in most citizens paying about the same total state and federal
taxes.
D) they believed that the tax cuts would enhance economic efficiency.
Figure 5-10 Chicken pox vaccinations for
toddlers benefit society by protecting young children and by preventing an epidemic of
the disease. Thus, the social benefits of chicken pox vaccinations exceed the private
benefit for any quantity of vaccinations as illustrated in Figure 5-10.
What is the value of the net gain to society as a result of subsidizing chicken pox
vaccinations?
A) (PEQE)
B) (PFQF)
C) value equal to the area of FEG
D) value equal to the area of QFFGQE
If technological change increases the profitability of new investments for firms, then the
________ curve for loanable funds will shift to the ________.
A) supply; right
B) supply; left
C) demand; right
D) demand; left
Typically, a bank’s largest asset is its
A) reserves.
B) holdings of securities.
C) deposits of its customers.
D) loans.
Pookie’s Pinball Palace restores old Pinball machines. Pookie has just spent $300
purchasing and cleaning a 1960s-era machine which he expects to sell for $2,000 once
he is finished with the restoration. After having spent $300, Pookie discovers that he
will need to rewire the entire machine at a cost of $1,100 in order to finish the
restoration. Alternatively, he can sell the machine “as is” now for $1,000. What is his
marginal benefit if he sells the machine “as is” now?
A) $300
B) $900
C) $1,000
D) The marginal benefit cannot be determined.
In analyzing the decision to shut down in the short run we assume that the firm’s fixed
costs are
A) implicit costs.
B) capital costs.
C) nonmonetary opportunity costs.
D) sunk costs.
Table 2-13
Table 2-13 shows the output per day of two pet groomers, Tammi and Horace. They can
either devote their time to grooming dogs or bathing cats.
Which of the following statements istrue?
A) Horace has a comparative advantage in both tasks.
B) Tammi has a comparative advantage in both tasks.
C) Horace has a comparative advantage in grooming dogs and Tammi in bathing cats.
D) Horace has a comparative advantage in bathing cats and Tammi in grooming dogs.
When a proposed merger between two companies is reviewed by the government, the
relevant market is defined by
A) whether or not there are close substitutes for the products of the two firms.
B) how elastic the demand is for each firm’s product.
C) counting the number of firms that produce the same product.
D) how much advertising is done in the industry.
If an increase in income leads to in an increase in the demand for sushi, then sushi is
A) a normal good.
B) a neutral good.
C) a complement.
D) a necessity.
“The price of compact fluorescent light bulbs fell because of improvements in
production technology. As a result, the demand for incandescent light bulbs decreased.
This caused the price of incandescent light bulbs to fall; as the price of incandescent
light bulbs fell, the demand for incandescent light bulbs decreased even further.”
Evaluate this statement.
A) The statement is false. A decrease in the price of compact fluorescent light bulbs
would decrease the demand for incandescent light bulbs, but a decrease in the price of
incandescent light bulbs would not cause the demand for incandescent light bulbs to
decrease.
B) The statement is false because the demand for incandescent light bulbs would
increase as the price of compact fluorescent light bulbs fell.
C) The statement is false because compact fluorescent light bulbs producers would not
reduce their prices as a result of improvements in technology; doing so would reduce
their profits.
D) The statement is false because it confuses the law of demand with the law of supply.
The marginal propensity to save is defined as
A) saving divided by disposable income.
B) disposable income divided by saving.
C) the change in saving divided by the change in disposable income.
D) the change in disposable income divided by the change in saving.
Which of the following tools of monetary policy is used least often?
A) open market operations
B) setting the required reserve ratio
C) setting the discount rate
D) acting as a lender of last resort