Table 2-9
Table 2-9 shows the number of labor hours required to produce a wristwatch and a
pound of rice in Japan and Thailand. What is Japan’s opportunity cost of producing one
pound of rice?
A) 0.04 units of a wristwatch
B) 4 wristwatches
C) 25 wristwatches
D) 40 wristwatches
If the probability of losing your job remains ________, a recession would be a good
time to purchase a home because the Fed usually ________ interest rates during this
time.
A) low; lowers
B) low; raises
C) high; lowers
D) high; raises
E) low; does not change
The demand curve for a monopoly firm
A) is perfectly inelastic.
B) lies below its marginal revenue curve.
C) is the same as the market demand curve.
D) is horizontal.
In 2008, the Treasury and Federal Reserve took action to save large financial firms such
as Bear Stearns and AIG from failing. Which of the following is one reason why these
measures were taken?
A) The Emergency Economic Stabilization Act required the Fed and the Treasury to
provide financial assistance to firms that participated in regular open market actions
with the Fed.
B) The bankruptcy of a large financial firm would force the firm to sell its holdings of
securities, which could cause other firms that hold these securities to also fail.
C) The Fed and the Treasury wanted to allow Freddie Mac and Fannie Mae more time
to buy the firms before they went bankrupt.
D) The failure of these firms would have forced the Fed to increase interest rates, which
could have led to a severe recession.
The key to understanding the short-run trade-off behind the Phillips curve is that an
increase in inflation will decrease unemployment if the inflation is ________ by both
workers and firms.
A) unexpected
B) expected
C) perfectly predicted
D) ignored
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 should
he do?
A) He should sell the machine now to make the most profit.
B) It does not matter what he does; he is going to take a loss on his project.
C) He should rewire the machine, complete the task and then sell the machine.
D) He should have never purchased the machine because he has already spent too much
time on it and has not been paid for that time.
Figure 13-11
What is the monopolistic competitor’s profit-maximizing price?
A) P1
B) P2
C) P3
D) P4
Table 9-11 Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-11 shows the production
and consumption quantities without trade, and the production numbers with trade.
If the actual terms of trade are 1 hat for 1.8 clocks and 150 hats are traded, how many
hats will Denmark gain compared to the “without trade” numbers?
A) -150
B) 0
C) 150
D) 1,050
The government of Silverado raises revenue through a general income tax paid by all its
residents to operate the city’s marina. The marina is used by private boat owners. This
method of raising revenue to operate the marina is
A) consistent with the benefits-received principle.
B) consistent with the ability-to-pay principle.
C) inconsistent with the benefits-received principle.
D) inconsistent with the ability-to-pay principle.
Suppose real GDP is $14 trillion and potential real GDP is $14.4 trillion. An increase in
government purchases of $400 billion would cause real GDP to ________ potential real
GDP (assuming a constant price level).
A) equal
B) be less than
C) be more than
D) There is insufficient information given here to draw a conclusion.
An article in the Wall Street Journal noted the following: Instead of relying on a
full-coach, round-trip unrestricted fare of about $2,000 between Cleveland and Los
Angeles …Continental [Airlines] since June has offered a $716 unrestricted fare in that
market …. Through October, the test resulted in about the same revenue that Continental
thinks it would have collected with its higher fare.
Source: Scott McCartney, “Airlines Try Cutting Business Fares, Find They Don’t Lose
Revenue,” Wall Street Journal, November 22, 2002. What is the absolute value of the
price elasticity of demand on this airline route?
A) 0
B) less than 1
C) greater than 1
D) approximately 1