Refer to Table 3.5.2. If the price is set at $0.80 per cup, there is ________ leading to a
price ________.
A) a shortage; rise
B) a shortage; fall
C) a surplus; rise
D) a surplus; fall
E) an equilibrium; rise
Refer to Figure 9.1.2. Which budget line has the lowest relative price for compact
discs?
A) DA
B) DB
C) DC
D) The relative price is equal for all three budget lines.
E) Cannot be determined without studying the indifference curves.
Refer to Figure 1A.3.5. In Figure 1A.3.5, the slope across arc CD is
A) 1/2.
B) 1.
C) -1/2.
D) -1.
E) -5/8.
Refer to Figure 26.3.1. Consider statements (1) and (2) and select the correct answer.
(1) The actual unemployment rate exceeds the natural unemployment rate.
(2) Short-run aggregate supply will automatically shift leftward as the economy adjusts
to long-run equilibrium.
A) (1) is true; (2) is false.
B) (2) is true; (1) is false.
C) (1) and (2) are false.
D) (1) and (2) are true.
E) (1) is true; (2) is true if the money wage rate falls.
Which of the following is an economic function of a chartered bank?
A) issuing bank notes
B) pooling risk
C) supervising financial markets
D) conducting monetary policy
E) supervising the payments system
Consider Table 23.2.3. If planned investment decreases by $1.0 trillion at each real
interest rate, what is the new equilibrium real interest rate?
A) 2 percent a year
B) 5 percent a year
C) 2.5 percent a year
D) 3.5 percent a year
E) There is no new equilibrium real interest rate.
Suppose that the interest rate is greater than the equilibrium interest rate. Which of the
following statements is true?
I. There is an excess quantity of money.
II. The quantity of money automatically increases.
III. The interest rate falls.
A) I only
B) II only
C) III only
D) I and III only
E) None of the above statements are true.
Refer to Table 18.2.1. If the firm can sell all the output it wants for the price of $4 a
unit, what is the profit-maximizing number of workers if the wage rate is $12?
A) zero
B) 10
C) 4
D) 8
E) 6
The amount of real money people want to hold will decrease if either ________ or the
interest rate ________.
A) the price level increases; rises
B) the price level decreases; falls
C) real GDP increases; falls
D) real GDP decreases; rises
E) the price of bonds increase; rises
Allocative efficiency refers to a situation where
A) opportunity costs are equal.
B) we cannot produce more of any one good without giving up some other good.
C) goods and services are produced at the lowest possible cost and in the quantities that
provide the greatest possible benefit.
D) opportunity cost is zero.
E) marginal benefit is maximized.
You are given the following information about the economy of Nocoin:
The banks have deposits of $300 billion. Their reserves are $15 billion, two thirds of
which is in deposits with the central bank. Households and firms hold $30 billion in
bank notes. There are no coins!
The banks have no excess reserves.
The Bank of Nocoin, the central bank, increases bank reserves by $0.5 billion.
The quantity of money ________.
The change in the quantity of money is not equal to the change in the monetary base
because ________.
The money multiplier is ________.
A) increases; when bank reserves increase, banks loan out their excess reserves and a
multiplier process ensues; 7.33
B) decreases; money includes currency, but the monetary base does not include
currency; 7.0
C) decreases; an increase in monetary base brings about a decrease in the quantity of
money; 7.33
D) increases; the components of the monetary base are not the components of the
quantity of money; 7.0
E) increases; the monetary base includes bank deposits; 7.0
Canada’s economic growth rate was highest in which of the following decades?
A) the 1930s
B) the 1960s
C) the 1970s
D) the 1980s
E) the 1990s
Which of the following quotes shows cheating on a cartel in the widget industry?
A) “I am producing extra widgets, even though it costs me short-run profit, to stop
Wally’s Widgets from expanding into my market.”
B) “I am producing more widgets than Wally and I agreed to in our talk last week.”
C) “If only Wally and I could agree on a higher price, we could make more profit.”
D) “I have been spending extra on research and development of my new two-way
widget.”
E) None of the above
A firm has excess capacity if
A) it produces above its efficient scale.
B) it produces below its efficient scale.
C) it produces the same level as its efficient scale.
D) it sells some of its factors of production.
E) it improves the quality of its factors of production.
“The rich should face higher income tax rates than the poor.” This is an example of
A) a normative statement.
B) a positive statement.
C) a negative statement.
D) economic reasoning.
E) neither a normative nor a positive statement.
Suppose the government places a tax on business profits so that businesses decrease
production and generate a deadweight loss. Revenues from the tax are used to boost the
incomes of the poor. The decision to levy the tax implies that in this case the
government
A) values people but not businesses.
B) values efficiency more than its view of fairness.
C) profits from collecting taxes.
D) values its view of fairness more than efficiency.
E) is unaware of the deadweight loss it is creating.
If demand increases and supply decreases, then the
A) equilibrium quantity increases but the effect on the equilibrium price is unknown.
B) equilibrium quantity decreases but the effect on the equilibrium price is unknown.
C) equilibrium price falls but the effect on the equilibrium quantity is unknown.
D) equilibrium price rises but the effect on the equilibrium quantity is unknown.
E) effect on both equilibrium price and quantity is unknown.
Use the table below to answer the following question.
Table 20.4.3
Refer to Table 20.4.3. An economy produces only cell phones, pens, and pizza.
The table gives the quantities produced and prices in 2012 and 2013.
The base year is 2012.
The chained-dollar real GDP in 2013 is
A) $13.
B) $21.
C) $125.
D) $88.
E) $19.
In a perfectly competitive market, a firm maximizes its profit by producing the quantity
of output at which
A) market price equals average fixed cost.
B) market price equals marginal cost.
C) average variable cost equals average fixed cost.
D) market price equals minimum average variable cost.
E) market price equals marginal revenue.
The marginal propensity to import is calculated as
A) imports divided by the change in real GDP.
B) the change in imports divided by real GDP.
C) imports divided by real GDP.
D) the change in imports divided by the change in real GDP.
E) 1-MPC.
If the owner of an apartment building rents only to married couples over the age of 30,
the method of resource allocation is
A) majority rule.
B) contest.
C) personal characteristics.
D) market price.
E) force.
Billy likes chocolate bars and popcorn. Chocolate bars sell for $1.50 each and popcorn
sells for $3 a bag. Currently he is in consumer equilibrium with marginal utility per
dollar on popcorn equal to 100. What is the marginal utility per dollar on chocolate
bars?
A) 50
B) 100
C) 200
D) 25
E) 0.5
Two reasons that explain why international trade in 2014 remained restricted is that
restricted international trade
A) benefits domestic producers of import-competing goods and services and generates
tariff revenue in developing countries.
B) prevents developed countries from exploiting third world countries and saves jobs in
those countries.
C) brings diversity and stability to the whole economy and saves jobs in developing
countries.
D) saves jobs and penalizes developing countries that have lax environmental
standards.
E) brings diversity to the whole economy and penalizes countries that have lax
environmental standards.
A contestable market exists whenever
A) two or more firms are competing.
B) the Herfindahl-Hirschman Index exceeds 1,800.
C) the four-firm concentration ratio exceeds 50 percent.
D) a monopoly contests entry into its markets.
E) potential entry holds down prices.
Suppose there is an increase in the quantity of capital. As a result, the SAS
A) and the LAS curves both shift leftward.
B) and the LAS curves both shift rightward.
C) curve does not shift but the LAS curve shifts rightward.
D) curve does not shift but the LAS curve shifts leftward.
E) curve shifts rightward, but the LAS curve does not shift.
The production possibilities frontier is
A) upward sloping and illustrates a tradeoff in production of the good measured on the
x-axis and the good measured on the y-axis.
B) downward sloping and illustrates a tradeoff in production of the good measured on
the x-axis and the good measured on the y-axis.
C) upward sloping and a movement along the PPF illustrates a free lunch.
D) downward sloping and a movement along the PPF illustrates a free lunch.
E) downward sloping and illustrates the marginal benefit from increasing production of
the good measured on the x-axis.
Use the information below to answer the following questions.
Fact 14.2.1 Groceries for the Gourmet Palate
No food, it seems, is safe from being repackaged to look like an upscale product.
Samuel Adams’ $120 Utopias, in a ridiculous copper-covered 24-oz. bottle meant to
resemble an old-fashioned brew kettle, is barely beer. It’s not carbonated like a Bud, but
aged in oak barrels like scotch. It has a vintage year, like a Bordeaux, is light, complex,
and free of any alcohol sting, despite having six times as much alcohol content as a
regular can of brew.
Refer to Fact 14.2.1. The Utopia’s price of $120 is ________ marginal cost in the short
run and ________ marginal cost in the long run.
A) greater than; greater than
B) greater than; less than
C) less than; greater than
D) less than; less than
E) equal to; equal to
Refer to Table 2.4.1. Each country will gain from trade if
A) Romulus specializes in both goods.
B) Vulcan specializes in both goods.
C) they both continue to produce both goods.
D) Vulcan specializes in good X and Romulus specializes in good Y.
E) Romulus specializes in good X and Vulcan specializes in good Y.
The banks on Sunny Island have deposits of $4 million, reserves of $600,000, and loans
of $2.4 million. The desired reserve ratio is 10 percent. The banks have ________ of
desired reserves and ________ of excess reserves.
A) $400,000; $600,000
B) $200,000; $400,000
C) $400,000; $200,000
D) $600,000; $200,000
E) $200,000; $600,000
Expenditure on alternative energy and the nation’s infrastructure ________ short-run
aggregate supply and ________ potential GDP.
A) increases; does not change
B) increases; increases
C) increases; decreases
D) does not change; increases
E) does not change; does not change
An externality is a cost or benefit arising from an economic activity that falls on
A) consumers but not producers.
B) producers but not consumers.
C) consumers or producers.
D) someone other than consumers or producers.
E) foreigners.
When the nominal interest rate rises, the opportunity cost of holding money
A) rises, and people hold more money.
B) falls, and people hold more money.
C) falls, and people hold less money.
D) rises, and people hold less money.
E) does not change.