The burden of a tax will fall primarily on buyers when the
a. demand for the product is highly inelastic and the supply is relatively elastic.
b. demand for the product is highly elastic and the supply is relatively inelastic.
c. tax is legally (statutorily) imposed on the seller of the product.
d. tax is legally (statutorily) imposed on the buyer of the product.
Figure 18-3
Figure 18-3 displays the international currency market for yen in terms of dollars and
dollars in terms of yen. The supply curve in graph (A) is comprised of
a. U.S. citizens attempting to purchase Japanese-made goods.
b. Japanese attempting to purchase U.S.-made goods.
c. U.S. businesses attempting to sell to the Japanese.
d. Japanese businesses attempting to sell to the U.S.
e. the U.S. government attempting to unload dollars to the international market.
Middlemen are individuals who
a. add to the buyer’s expense without performing a useful function.
b. add to the seller’s cost without performing a useful function.
c. provide services that reduce the cost of transactions and help achieve additional gains
from trade.
d. act as a middle person between the top management of a business firm and the hourly
employees who actually produce the goods and services.
Economic theory implies that the incentive for a manager of a publicly operated firm
(for example, a state university or the post office) to promote internal efficiency of their
operations would be
a. strong because inefficiency is easily detected and leads to the loss of voter support.
b. strong because public officials are unconcerned about personal gain.
c. weak because government employees are less educated than employees who work in
the private sector.
d. weak because it is difficult for voters to detect inefficiency and for public officials to
gain from actions that would improve the efficiency of government.
Figure 3-20
Refer to Figure 3-20. At the equilibrium price, producer surplus is
a. $480.
b. $640.
c. $1,120.
d. $1,280.
If a nation is going to achieve and sustain a high rate of economic growth, it must
a. prohibit low-wage foreign producers from supplying goods to the domestic market.
b. have an abundant domestic supply of low cost energy resources.
c. have a mechanism capable of attracting savings and channeling them into
wealth-creating projects.
d. impose regulations that will limit the intensity of competition among domestic firms.
Which of the following will most likely increase the natural rate of unemployment?
a. a decrease in the minimum wage
b. an increase in unemployment benefits
c. an increase in the number of people who stop looking for a job
d. an increase in the proportion of prime-age workers as a share of the labor force
Use the figure to answer the following question(s).
Figure 10-4
What is the maximum economic profit this firm depicted in Figure 10-4 will be able to
earn?
a. $200 loss
b. zero profit
c. $250 profit
d. $700 profit
Which of the following would be a protective function of government?
a. legal enforcement of contracts and rules against fraud
b. undertaking income redistribution
c. providing national parks
d. providing a stable monetary system
Which of the following statements about demand is true?
a. The demand curve for a group of consumers in a market is simply the horizontal
summation of each individual’s demand.
b. The single demand curve shows the quantity of a good that people will buy, allowing
all factors (price, income, expected future prices, etc.) to vary.
c. An increase in income will cause a person to move down and to the right along her
demand curve.
d. All of the above are true.
An effective minimum wage
a. imposes a price ceiling on the wages of various categories of low-skill workers.
b. increases the demand for low-skill workers.
c. makes it easier for low skill workers to find jobs.
d. increases the earnings of some low-skill workers while reducing the employment and
training opportunities available to others.
Which of the following would be most likely to improve the standard of living of a
less-developed country?
a. development of strong labor unions.
b. more foreign investment, attracted by the expectation of economic and political
stability.
c. adoption of trade barriers (higher tariffs and quotas).
d. widespread use of price controls to allocate goods and resources.
Under a system of flexible exchange rates, an increase in the supply of foreign
exchange (an increase in the demand for the dollar) will cause the
a. dollar to appreciate.
b. dollar to depreciate.
c. U.S. trade deficit to decrease.
d. U.S. inflation rate to increase.
If the demand for a product increases in an increasing cost industry, as the market
adjusts in the long run,
a. price will rise.
b. the firm’s per-unit costs will increase.
c. the firm’s per-unit costs will fall.
d. the market price will return to its initial position.
When economists talk about a barrier to entry, they are referring to
a. a factor that makes it difficult for potential competitors to enter a market.
b. the opportunity cost of equity capital that is incurred by a firm producing at
minimum total cost.
c. the downward-sloping portion of the long-run average total cost curve.
d. the declining output experienced as additional units of a variable input are used with
a given amount of a fixed input.
A depreciation of the U.S. dollar on the foreign exchange market will
a. make U.S. exports cheaper to foreigners.
b. make imports less expensive for U.S. consumers.
c. make U.S. exports more expensive for foreign consumers.
d. probably cause the United States to run a capital account surplus in the long run.
The dynamic process of competition
a. provides profit-seeking sellers with little incentive to heed consumer preferences.
b. was shown by Adam Smith to be a major source of economic inefficiency.
c. provides consumers with alternative suppliers and thus a mechanism with which they
can discipline sellers.
d. will permit business decision makers to earn long-run economic profit unless they are
regulated by government officials.
Firms that engage in price discrimination
a. will earn less profit than those that do not discriminate.
b. will earn more profit than those that do not discriminate.
c. are biased against certain buyers in the market.
d. will always produce less output than firms that do not discriminate.
The interval between the recognition of a need for a policy change and when the policy
change is instituted is called the:
a. recognition lag.
b. impact lag.
c. policy lag.
d. administrative lag.
In 2008, nominal GDP was equal to $14,265 billion while the M1 money supply was
$1,423 billion. What was the velocity of the M1 money stock?
a. 1.0
b. 10.0
c. 1.8
d. 0.1
Suppose that sharply lower coffee prices lead to a decrease in the demand for tea. Tea
price decreases, and the tea producers experience short-run economic losses. If the tea
industry is a price-taker market, after sufficient time is allowed for the market to adjust
fully to the decrease in the demand for tea, one would expect the tea industry’s output to
a. increase and economic losses to persist.
b. decline and economic losses to persist.
c. decline and economic losses to disappear.
d. increase and economic losses to disappear
The implicit rate of return that must be paid to induce investors to continue to supply
the funds necessary to maintain a firm’s capital assets is called
a. the investors’ rate of return.
b. the opportunity cost of labor.
c. the opportunity cost of capital.
d. equity capital.
When the Fed unexpectedly increases the money supply, it will cause an increase in
aggregate demand because
a. real interest rates will fall, stimulating business investment and consumer purchases.
b. the dollar will appreciate on the foreign exchange market, leading to a decrease in net
exports.
c. lower interest rates will tend to decrease asset prices (for example, stock prices),
which decreases wealth and, thereby, decreases current consumption.
d. the general level of prices will fall, which will increase the disposable income of
households.
Under what conditions can a monopolist have potentially lower costs and possibly
charge a lower price than would exist if the market were competitive?
a. when the monopolist operates on the inelastic portion of the demand curve
b. when the monopolist is a profit maximizer rather than a revenue maximizer
c. when substantial diseconomies of scale are present
d. when substantial economies of scale are present
What is the primary source of higher real wages?
a. labor unions
b. the threat of a strike by a union
c. increases in productivity
d. increases in the supply of money
The real GDP data could be properly thought of as
a. an index of our economic well-being.
b. a measure of the total wealth of a nation.
c. an index of total output or productive activity.
d. an index that measures the size of government.
The political incentive structure tends to
a. encourage a balanced budget regardless of economic conditions.
b. discourage budget deficits during recessions.
c. encourage budget surpluses during both recessions and expansions.
d. encourage budget deficits during both recessions and expansions.
Darryl can build picnic tables twice as fast as Trevon. Darryl can assemble swing sets
three times as fast as Trevon. The law of comparative advantage suggests that
a. Darryl can gain only at Trevon’s expense.
b. Trevon can gain only at Darryl’s expense.
c. both can gain if Darryl specializes in assembling swing sets and Trevon in building
picnic tables.
d. both can gain if Darryl specializes in building picnic tables and Trevon in assembling
swing sets.
Which of the following factors weakens the case for private-sector provision of goods
and services relative to public-sector provision?
a. externalities
b. the rational-ignorance effect
c. the shortsightedness effect
d. well-informed consumers
Government decisions tend to be biased toward actions that have
a. current costs and future benefits that are both easily observable.
b. future costs that are difficult to identify and current benefits that are easily
observable.
c. future costs and future benefits that are both difficult to identify.
d. current costs that are easily observable and future benefits that are difficult to
identify.
Entrepreneurial judgment
a. is necessary to make business decisions when no fixed decision rule can be used.
b. is fully incorporated into modern economic models of business behavior.
c. requires decision makers to follow carefully defined rules regarding uncertainty,
discovery, and business judgment.
d. requires government advice and regulation.
Two products that serve similar purposes for a consumer would be referred to as
a. substitutes.
b. complements.
c. inferior goods.
d. unrelated goods.
If we want to produce more capital goods during the present time period, we must
a. increase current consumption.
b. lower future consumption.
c. reduce current consumption.
d. reduce our savings rate.
If in market equilibrium the true marginal cost of producing a good exceeds the
marginal cost incurred by the firm,
a. not enough of the product is being produced.
b. the price charged for the good is too high.
c. the good produces a positive externality.
d. the good produces a negative externality.
e. the government should produce the good.