A decrease in aggregate demand and the subsequent cutbacks in production lead to
a. frictional unemployment.
b. cyclical unemployment.
c. cost-push unemployment.
d. structural unemployment.
e. transitory unemployment.
If firms in a competitive price-searcher market are incurring economic losses, which of
the following scenarios would best describe the change existing firms (who are able to
stay in the market) would face as the market adjusts to long-run equilibrium?
a. An increase in demand for each firm and lower prices.
b. A decrease in demand for each firm and lower prices.
c. An increase in demand for each firm and higher prices.
d. A decrease in demand for each firm and higher prices.
Other things constant, which of the following would you expect to increase the output
growth rate of a country?
a. an increase in the rate of taxation on personal income
b. an increase in the rate of investment as a share of total output
c. passage of regulations restricting international trade
d. passage of regulations restricting domestic trade
Which of the following is most likely to result from a rising household debt/income
ratio?
a. Household income will rise rapidly.
b. Household consumption will fall as a share of income.
c. Households will be in a better position to deal with unexpected events that force
major adjustments.
d. A larger share of household income will be required to meet interest payments on
debt.
If coffee and cream are complements, an increase in the price of coffee will cause
a. the demand for cream to increase.
b. the demand for cream to fall.
c. the demand for coffee to fall.
d. no change in the demand for cream; only quantity demanded would be affected.
Which of the following is true?
a. The best distribution of income can be determined objectively.
b. The transfer of income from one group to another is costly; it will generally reduce
total output.
c. Positive economics can determine the variation in incomes that would be best for an
economy.
d. The fairness of an income distribution is determined by its pattern (the measured
degree of income inequality).
e. All of the above are true.
Because the benefits derived from an activity decline as it is expanded, it is generally
wise to
a. undertake all actions that generate benefits.
b. expend the smallest possible amount of resources on this type of activity.
c. avoid any activity with this characteristic.
d. stop the activity before perfection is reached..
When it comes to environmental policy,
a. choices are influenced by the costs and benefits that decision makers expect.
b. values are subjective, as in other areas of the economy.
c. policy choices often have unintended secondary effects.
d. all of the above are true.
The figure below depicts a production function for a firm that produces cookies.
Figure 12-4
Refer to Figure 12-4. With regard to cookie production, the figure implies
a. diminishing marginal product of workers.
b. diminishing marginal cost of cookie production.
c. decreasing cost of cookie production.
d. increasing marginal product of workers.
Analysis of the Great Depression indicates that
a. even though monetary and fiscal policies were highly expansionary, they were unable
to offset the economic downturn.
b. even though monetary policy was expansionary, restrictive fiscal policy dominated
during the 1930s.
c. a reduction in tax rates could not prevent the economic downturn from spiraling into
a depression.
d. the depth of the economic plunge, if not its onset, was the result of monetary, fiscal,
and regulatory policies.
The opportunity cost of slowing global warming by reducing carbon dioxide emissions
is
a. extremely high because policies that would significantly reduce emissions will
adversely affect economic growth.
b. insignificant compared to the probable impact of warming from those emissions.
c. irrelevant because each aspect of the environment is important enough to justify full
protection from environmental change, at whatever cost is necessary.
d. zero because fuel cost savings alone will offset all opportunity costs.
Which of the following is true of sub-Saharan Africa?
a. The poverty rate in the region is low.
b. The region has received more foreign aid than any other area of the world.
c. Most of the countries in the region rank among the freest economies in the world.
d. The poverty rate in the region is the lowest of any region in the world, and the rate
has declined sharply during the past quarter of a century.
Use the table of expected cost and revenue data for the Tuckers Tomato Farm below to
answer the following question(s). The Tuckers produce tomatoes in a greenhouse and
sell them wholesale in a competitive price-taker market.
Table 9-1
Refer to Table 9-1. After the increase in the market price to $570, what is the maximum
profit per month the Tuckers can earn?
a. $560
b. $580
c. $630
d. $1,130
The demand curve for a human resource will be more elastic when
a. there are more and better substitutes are available for it.
b. it is more difficult to substitute other resources for it.
c. the demand for the product the resource is used to produce becomes more inelastic.
d. the time period under consideration is shorter.
Which of the following is not a necessary condition for effective price discrimination?
a. The firm must face a downward-sloping demand curve.
b. There must be at least two distinguishable groups of consumers.
c. The producer must be a pure monopolist.
d. The seller must be able to prohibit buyers from easily reselling the product to other
potential buyers.
When employment discrimination results from the personal prejudices of employers,
economic theory suggests that
a. it is costless for employers to discriminate against groups they do not like.
b. the wages of employees who are discriminated against will rise.
c. an employer who discriminates will experience higher costs.
d. discrimination by an employer will reduce production costs since the employer can
pay lower wages.
If the value of a nation’s merchandise exports exceeds merchandise imports, the nation
is running a
a. capital account deficit.
b. capital account surplus.
c. balance of trade surplus.
d. balance of trade deficit.
Which of the following would be most likely to reduce the rate of unemployment?
a. a business recession
b. an Internet job listing system that makes it easier to get information about job
openings and available employees
c. an increase in unemployment compensation benefits
d. a rise in the minimum wage
Use the figure below to answer the following question(s).
Figure 3-9
In Figure 3-9, if D and S represent the demand and supply for gasoline, what is the
equilibrium price and quantity?
a. price, $1; quantity, 20
b. price, $2; quantity, 30
c. price, $3; quantity, 40
d. price, $4; quantity, 50
Other things constant, if there is an increase in the demand for goods now compared to
goods in the future, we would expect that the
a. real interest rate would decline.
b. capital investment rate would decline.
c. current rate of saving would increase.
d. real interest rate would rise.
Nicole has just finished high school and started looking for her first job, but has not yet
found one. As a result, the unemployment rate
a. increases, and the labor-force participation rate is unaffected.
b. increases, and the labor-force participation rate increases.
c. is unaffected, and the labor-force participation rate increases.
d. increases, and the labor-force participation rate decreases.
The successful introduction and adoption of a new product or process is known as
a. invention.
b. innovation.
c. origination.
d. adaptation.
Which of the following is true?
a. in recent decades, the rich countries of the world have consistently grown more
rapidly than poor countries.
b. no LDC was able to achieve a more rapid growth rate than the United States during
the 1980 through 2005 period.
c. during recent decades, most LDCs have stagnated economically.
d. during 1980 through 2005, the fastest growing countries in the world were mostly
LDCs.
An increase in the demand for a product will cause the
a. demand for and prices of the resources used to produce the product to increase.
b. demand for and prices of the resources used to produce the product to decrease.
c. demand for and prices of the resources used to produce the product to remain
unchanged.
d. price of the product to decrease.
If the interest rate were 5 percent, how much would people be willing to pay for a stock
that was certain to yield a $10 per share stream of net earnings continuously in the
future?
a. $10
b. $20
c. $200
d. $400
e. $2,000
Reserves that banks are required by law to keep on hand to back up their deposits are
called
a. required reserves.
b. borrowed reserves.
c. actual reserves.
d. excess reserves.
When a firm is a price searcher, its marginal revenue is
a. equal to price because the firm’s demand curve is perfectly elastic.
b. equal to price if, and only if, the firm is maximizing profits.
c. less than price when the firm is maximizing profits.
d. equal to average total cost at the long-run equilibrium output rate.
If a nation is going to benefit fully from technological advances and entrepreneurial
ideas, it must
a. be relatively easy for persons from diverse backgrounds to try out their ideas at a
relatively low cost.
b. have a mechanism that will bring unsound projects to a halt.
c. have a central investment authority that will review projects and decide which should
be undertaken.
d. be both a and b.
In a world of perfect knowledge and communication, competitive markets, and no
uncertainty,
a. there would be neither economic profits nor economic losses.
b. economic profits would exist, but losses would be eliminated.
c. economic profits and losses would exist to a greater degree than presently is the case.
d. there would be economic profits; there is not enough information to comment on
economic losses.
If the interest rate were 12.5 percent, how much would people be willing to pay for a
stock that was certain to yield a $20 per share stream of net earnings continuously in the
future?
a. $20
b. $25
c. $160
d. $250