Figure 4-24
Refer to Figure 4-24. The price that sellers receive after the tax is imposed is
a. P1.
b. P2.
c. P3.
d. impossible to determine from the figure.
If the exchange rate of the English pound goes from $1.50 to $2.00, the pound has
a. appreciated, and the English will find U.S. goods cheaper.
b. appreciated, and the English will find U.S. goods more expensive.
c. depreciated, and the English will find U.S. goods cheaper.
d. depreciated, and the English will find U.S. goods more expensive.
According to the Austrian view of the business cycle, expansionary monetary policy
that pushes the interest rate to an artificially low level will
a. lead to an increase in long-term investments like houses and office buildings without
generating the savings that will be required for their purchase in the future.
b. lead to a reduction in long-term investments like houses and office buildings that will
quickly throw the economy into a recession.
c. lead to an increase in long-term investments like houses and office buildings that will
enhance the long-term growth of the economy.
d. lead to a reduction in investment, but there will be no impact on output, employment
or the general level of prices.
Table 3-1
Refer to Table 3-1. If the table represents the willingness to pay of four buyers and the
price of the product is $18, then their total consumer surplus is
a. $38.
b. $42.
c. $46.
d. $72.
Institutions that encourage productive activities and discourage counterproductive ones,
will tend to promote
a. economic growth.
b. rent-seeking
c. economic fluctuations
d. high rates of unemployment.
As far as contributions to a professional sports team’s bottom line are concerned,
players generally receive
a. about what they are worth.
b. about half of what they are worth.
c. about twice what they are worth.
d. about ten times more than what they are worth.
Which of the following portions of the national debt impose a net interest burden on the
federal government?
a. treasury bonds held by government agencies
b. treasury bonds held by private investors
c. treasury bonds held by the Federal Reserve system
d. treasury bonds held in the Social Security Trust Fund
Which of the following is a function performed by market prices?
a. Market prices communicate information to buyers and sellers.
b. Market prices coordinate the decisions of buyers and sellers.
c. Market prices motivate entrepreneurs to produce those products that are currently
most desired relative to their costs of production.
d. All of the above are functions performed by market prices.
Interest is
a. the price paid for early availability of funds.
b. the risk of extending a loan.
c. an unnecessary premium charged for the use of money.
d. the price one must pay when she does not save.
The graph below depicts the cost structure for a firm in a competitive market.
Figure 9-13
Refer to Figure 9-13. When price rises from P3to P4, the firm finds that
a. fixed costs are lower at a production level of Q4.
b. it can earn a positive profit by increasing production to Q4.
c. profit is still maximized at a production level of Q3.
d. average revenue exceeds marginal revenue at a production level of Q4.
Andre, a wheat farmer, is deciding whether or not to add fertilizer to his crops. If he
adds 1 pound of fertilizer per acre, the value of the resulting crops rises from $80 to
$100 per acre. According to marginal analysis, Andre should add fertilizer if it costs less
than
a. $12.50 per pound.
b. $20 per pound.
c. $80 per pound.
d. $100 per pound.
Which of the following is the best example of a fixed cost for a business?
a. the insurance payment for the protection of a building owned by the firm
b. shipping charges for the delivery of products
c. managerial salaries paid
d. the total of medical insurance premiums on the firm’s employees
Which of the following about minimum wage is true?
a. Most minimum wage workers are employed more than 40 hours per week.
b. Economic analysis indicates an increase in the minimum wage would increase the
training opportunities available to inexperienced workers.
c. Most minimum wage workers are heads of families with incomes below the poverty
level.
d. Most minimum wage workers are employed part-time, and they are often members of
a household with an income well above the poverty level.
The schedule of the amount of a product that consumers would be willing to purchase at
alternative prices during a specific time period is the
a. total utility schedule.
b. marginal utility schedule.
c. supply schedule.
d. demand schedule.
According to the Keynesian view, which of the following would most likely stimulate
real output if an economy were in a recession?
a. a decrease in tax rates
b. an increase in tax rates
c. a reduction in government expenditures
d. a budget surplus
Firms will only adopt more automated methods of production when
a. they reduce the need for workers.
b. they lower production costs.
c. they lengthen the production process.
d. other firms in the industry are doing it.
The deadweight loss (or excess burden) resulting from levying a tax on an economic
activity is the
a. tax revenue raised by the government as the result of the tax.
b. loss of potential gains from trade from activities forgone because of the tax.
c. increase in the price of an activity as the result of the tax levied on it.
d. marginal benefits derived from the expansion in government activities made possible
by the increase in tax revenues.
Which of the following is a correct statement?
a. Fiscal policy is the use of tax and spending policies by Congress and the president.
b. Fiscal policy involves the control of the money supply by the Federal Reserve Bank.
c. Monetary policy involves the control of the money supply by Congress and the
president.
d. Monetary policy is the use of tax and spending policies by the Federal Reserve Bank.
Interest foregone on financial capital invested in a firm represents an economic cost
a. only if the firm borrows to finance capital investments.
b. only when the funds are used to buy machinery.
c. because funds invested in the firm could be earning interest elsewhere.
d. because accountants have traditionally input an interest cost for this item.
Use the figure to answer the following question(s).
Figure 8-2
According to Figure 8-2, at what output would a properly constructed marginal cost
curve cross the ATC curve?
a. 15
b. 20
c. 25
d. 30
The strategy underlying price discrimination is
a. to charge higher prices to customers who have good substitutes available to them and
lower prices to customers without many substitutes available to them..
b. to charge everyone the same price but limit the quantity they are allowed to buy.
c. to increase total revenue by charging higher prices to those with the most inelastic
demand for the product and lower prices to those with the most elastic demand.
d. to reduce per-unit cost by charging higher prices to those with the most inelastic
demand and lower prices to those with the most elastic demand.
When a government subsidy is granted to the sellers of a product, buyers can end up
capturing some of the benefit because
a. the market price of the product will fall in response to the subsidy.
b. the market price of the product will rise in response to the subsidy.
c. the market price of the product will not change in response to the subsidy.
d. producers will reduce the supply of the product.
If an increase in the government-imposed minimum wage pushes the price (wage) of
unskilled labor above market equilibrium, which of the following will most likely occur
in the unskilled labor market?
a. an increase in quantity of unskilled labor demanded
b. a decrease in the quantity of unskilled labor supplied
c. a shortage of unskilled labor
d. a surplus of unskilled labor (unemployment)
When a commercial bank borrows from a Federal Reserve bank,
a. the commercial bank’s reserves are reduced.
b. the commercial bank’s lending ability is increased.
c. the money supply automatically declines.
d. the net worth of the bank will decline, indicating that the bank is having financial
difficulties.
Marquis decides to bank with First National Bank (FNB). He opens a checking account
by depositing $1,000. According to the FNB balance sheet, after this initial $1,000
checkable deposit, there are $1,000 in
a. reserves and $1,000 in checkable deposits.
b. liabilities and $2,000 in checkable deposits.
c. checkable deposits and $0 in assets.
d. assets and $0 in liabilities.
e. reserves and $0 in liabilities.
Takeover bids (and the potential for such bids)
a. increase the incentive of corporate managers to perform efficiently.
b. increase the likelihood that managers will be able to gain at the expense of
stockholders.
c. are more likely to occur when a company is producing efficiently and operating
profitably.
d. serve no useful economic purpose.
When economists say a good is scarce, they mean
a. there are only a limited number of consumers who would be interested in purchasing
the good.
b. the human desire for the good exceeds the amount freely available from nature.
c. most people in poorer countries do not have enough of the good.
d. the production of the good has no opportunity cost for society.
Many investment banks quickly collapsed when the housing market collapsed because
a. the Federal Reserve was unwilling to provide them with short-term loans.
b. they ignored the risk assigned by the rating agencies, resulting in leverage ratios that
were too low.
c. new regulations required investment banks to maintain more capital against their
residential housing loans than was true for commercial business loans.
d. they were highly leveraged and had little reserves on hand to meet the short-term
debt obligations of the mortgage-backed securities.
Figure 3-1
Which of the following is true regarding the market for steak shown in Figure 3-1?
a. If the price of steak were $2 per pound, producers would want to supply less steak
than consumers would want to buy.
b. If the price of steak were $4 per pound, producers would want to supply more steak
than consumers would want to buy.
c. If the price of steak were $3 per pound, producers would want to supply the same
amount of steak that consumers would want to buy.
d. All of the above are true regarding the market for steak shown in the figure.
Which of the following, other things the same, would make the price level decrease and
real GDP increase?
a. long-run aggregate supply shifts right
b. long-run aggregate supply shifts left
c. aggregate demand shifts right
d. aggregate demand shifts left
If inventory investment during a year was minus $6 billion, producers must have
a. produced only $6 billion of new capital assets during the year.
b. sold $6 billion more goods and services during the year than they produced.
c. added goods valued at $6 billion to their stock of unsold goods and raw materials.
d. produced new capital assets that exceeded the depreciation allowance by $6 billion.
If the federal government is running a budget surplus,
a. its expenditures must be greater than its revenues.
b. the supply of money will decline.
c. it will be able to reduce its outstanding debt.
d. the U.S. Treasury will have to borrow additional funds in order to cover the surplus.
With time, which one of the following strategies will most likely result in an outward
shift in an economy’s production possibilities curve?
a. passage of legislation reducing the workweek to 30 hours
b. institution of a tax policy encouraging research that advances technology
c. institution of a tax policy encouraging consumption at the expense of investment
d. passage of a law requiring the minimum wage to increase every year