If the production of a good creates pollution, then the
A) marginal social benefit curve lies above the marginal private benefit curve.
B) marginal social cost curve lies above the marginal private cost curve.
C) marginal social benefit curve lies below the marginal private benefit curve.
D) marginal social cost curve lies below the marginal private cost curve.
E) marginal social benefit curve intersects the marginal private cost curve at the
efficient quantity.
The underground economy is any economic activity that
A) produces intermediate goods or services.
B) is not taxed.
C) is unreported or illegal.
D) has negative social value.
E) is conducted underground.
Chuck and Barry have identical total utility schedules but Chuck has a much higher
income. If each is maximizing his total utility, then
A) they will have equal total utilities.
B) Chuck will have lower total utility than Barry.
C) Chuck will have lower marginal utility than Barry for each normal good consumed.
D) Chuck will have higher marginal utility than Barry for each normal good consumed.
E) they will have equal marginal utilities for each normal good consumed.
If a rise in the price of good B increases the demand for goodA, then
A) A and B are substitutes.
B) A and B are complements.
C) the cross elasticity of demand between A and B is negative.
D) A is a resource used in the production of B.
E) the demand for A is price elastic.
If the price of a natural resource is expected to rise at a rate that exceeds the interest
rate, demand ________ and supply ________.
A) decreases; increases
B) increases; decreases
C) increases; increases
D) decreases; decreases
E) increases; does not change
If the demand for its good or service is elastic, a monopoly’s
A) total revenue is unchanged when the firm lowers its price.
B) total revenue decreases when the firm lowers its price.
C) marginal revenue is positive.
D) marginal revenue is zero.
E) marginal revenue is negative.
Which one of the following will lead to an increase in the slope of the AE function?
A) an increase in the marginal propensity to import
B) an increase in the marginal tax rate
C) a decrease in the marginal propensity to consume
D) a decrease in the marginal propensity to save
E) an increase in the marginal propensity to save
Governments tend to tax items with inelastic demand because
A) governments wish to avoid big rises in after-tax prices.
B) sellers pay most of the tax in these cases.
C) buyers pay most of the tax in these cases.
D) these goods yield the most tax revenues.
E) these goods are luxury goods.
In a country with a working-age population of 30 million, 18 million are employed, 2
million are unemployed, and 2 million of the employed are working part-time, half of
whom wish to work full-time. If 1 million of those unemployed are cyclically
unemployed, what is the natural unemployment rate?
A) 5.6 percent
B) 5 percent
C) 6.7 percent
D) 11.1 percent
E) 1 percent
Refer to Table 15.2.4. The marketers of Budweiser Light beer and Miller Lite beer must
decide whether or not to offer new advertising campaigns promoting their products. The
payoffs in the table are the economic profit made by Bud and Miller. Which one of the
following observations is correct?
A) This game has no dominant strategies.
B) This game has no Nash equilibrium.
C) Miller has a dominant strategy but Bud does not.
D) Bud has a dominant strategy but Miller does not.
E) Bud and Miller each have a dominant strategy.
Suppose the price of potatoes falls and there is a decrease in the purchases of potatoes,
what can we infer?
A) The income effect is negative and exceeds the substitution effect.
B) The income effect is negative and reinforces the substitution effect.
C) The income effect is positive and exceeds the substitution effect.
D) The income effect is positive and reinforces the substitution effect.
E) The income effect is negative and just about offsets the substitution effect.
Refer to Table 28.4.1. The table gives points on the short-run Phillips curve for the
country of Ruritania. If the expected inflation rate is 10 percent, and the inflation rate
unexpectedly falls to 8 percent, what is the unemployment rate?
A) 4 percent
B) 5 percent
C) 6 percent
D) 7 percent
E) 8 percent
If you take an additional class this term, you can graduate earlier. This is an example of
A) opportunity cost.
B) total cost.
C) the pursuit of social interest.
D) marginal benefit.
E) social cost.
In a perfectly competitive market, which of the following increases the price that the
firms charge in the short run?
A) an increase in the number of firms
B) an increase in the price of a good that is a complement of the good produced in this
market
C) an increase in market supply
D) a decrease in the price of a good that is a substitute for the good produced in this
market
E) an increase in market demand
Which of the following statements is TRUE about contestable markets?
A) There are significant barriers to entry.
B) Firms earn large economic profits.
C) Each firm faces a perfectly elastic demand.
D) There are few firms in the industry.
E) The Herfindahl-Hirschman Index is close to zero.
Economic growth is
A) a sustained expansion of the population.
B) a sustained expansion of consumption expenditure over a given period.
C) always accompanied by a rising price level.
D) equal to real GDP per capita multiplied by 70.
E) the expansion of production possibilities.
________ fits the facts of today’s world more closely than other theories.
A) Neoclassical growth theory
B) New growth theory
C) Classical growth theory
D) Malthusian growth theory
E) Doomsday growth theory
If there is a decrease in autonomous expenditure, the new AE curve is
A) flatter than the original AE curve.
B) steeper than the original AE curve.
C) parallel and above the original AE curve.
D) parallel and below the original AE curve.
E) downward sloping.
Which one of the following is not a feature common to all games?
A) rules
B) collusion
C) strategies
D) payoffs
E) an outcome
The Canadian exchange rate appreciates if
A) prices increase in the United States and other countries but remain constant in
Canada.
B) the Canadian interest rate falls.
C) the U.S. interest rate rises.
D) all of the above
E) none of the above
The three types of unemployment are
A) frictional, structural, and involuntary.
B) voluntary, involuntary, and natural.
C) voluntary, involuntary, and cyclical.
D) frictional, structural, and cyclical.
E) cyclical, maternity leave, and paternity leave.
The short run is a time frame in which
A) the firm is not able to hire more workers.
B) the amount of output produced is fixed.
C) there is a shortage of most factors of production.
D) at least one factor of production is fixed.
E) there is not enough time to make all of the decisions necessary to maximize profit.
Short-run macroeconomic equilibrium always occurs when the
A) economy is at full employment.
B) economy is below full employment.
C) economy is above full employment.
D) quantity of real GDP demanded equals the quantity of real GDP supplied.
E) AD curve intersects the LAS curve.
Refer to Figure 29.3.1, which shows the outlays and revenues for the government of
Pianoland. A discretionary fiscal restraint policy would be shown as
A) a movement from left to right along the revenues curve.
B) a movement from left to right along the outlays curve.
C) an upward shift of the revenues curve.
D) an upward shift of the outlays curve.
E) both A and C
An economy is in long-run equilibrium when aggregate supply unexpectedly decreases.
Then real GDP (ceteris paribus) will be
A) above potential GDP.
B) below potential GDP.
C) equal to potential GDP.
D) either above, below, or equal to potential GDP depending on the position of the
aggregate demand curve.
E) either above or equal to potential GDP depending on the position of the aggregate
demand curve.
Consider Figure 13.3.2. Consider a single-price monopoly. If the light grey area shows
the consumer surplus, and the dark grey area shows the producer surplus, which graph
correctly represents this firm?
A) (a)
B) (b)
C) (c)
D) (d)
E) (b) and (c)
Suppose the equilibrium wage is $10 an hour. A minimum wage is a price ________
that will change the quantity of employment if it is set at ________ an hour.
A) floor; $12
B) ceiling; $12
C) floor; $8
D) ceiling; $8
E) floor; $10
If the interest rate is below the equilibrium, how is equilibrium achieved in the money
market?
A) People buy goods to get rid of their excess money, lowering the price of goods and
raising the interest rate.
B) People sell goods to get rid of their excess money, lowering the price of goods and
raising the interest rate.
C) People sell bonds to get rid of their excess money, lowering the price of bonds and
raising the interest rate.
D) People sell bonds to try and raise more money, lowering the price of bonds and
raising the interest rate.
E) People buy bonds to get rid of their excess money, raising the price of bonds and
raising the interest rate.
Luxury goods tend to have income elasticities of demand that are
A) greater than 1.
B) greater than zero but less than 1.
C) less than the income elasticities of demand for necessary goods.
D) negative.
E) first positive and then negative as income increases.
Suppose in a country there are only two persons. Person A is willing to pay $50 to have
one unit of a public good produced; person B is willing to pay $60 to have one unit of a
public good produced and $50 to have two units produced. A point on the country’s
marginal social benefit curve for this public good is a price of ________ and quantity
demanded of ________.
A) $50; 1 unit
B) $60; 1 unit
C) $110; 2 units
D) $110; 1 unit
E) $55; 1 unit
Suppose Honda can triple its production of Civics by tripling its production facility for
those cars. This indicates the presence of
A) constant returns to scale.
B) economies of scale.
C) diseconomies of scale.
D) the law of diminishing returns.
E) minimum efficient scale.
Which of the following pairs of market types are both characterized by having a large
number of firms?
A) oligopoly and monopolistic competition
B) monopoly and oligopoly
C) perfect competition and monopolistic competition
D) monopoly and monopolistic competition
E) perfect competition and oligopoly