The highest valued alternative that must be given up in order to choose an option is
called
a. opportunity cost.
b. utility.
c. scarcity.
d. disutility.
For a typical product, a decrease in consumer income will cause the market demand for
the product to
a. decrease, which is a shift to the left of the demand curve.
b. decrease, which is a shift to the right of the demand curve.
c. increase, which is a shift to the left of the demand curve.
d. increase, which is a shift to the right of the demand curve.
An improvement in technology that allows workers to process twice as many insurance
forms in an hour than before will cause
a. more labor to be employed because its marginal revenue product has fallen.
b. an increase in insurance premiums.
c. fewer workers to be employed because their marginal revenue product has decreased.
d. more workers to be employed because their marginal revenue product has increased.
e. fewer workers to be employed because their marginal revenue product has increased.
The natural rate of unemployment
a. increases sharply during a recession but declines significantly during a business
expansion.
b. is the unemployment rate accompanying the economy’s maximum sustainable output.
c. is generally less than the unemployment rate associated with the economy’s
full-employment rate of output.
d. is present when the economy operates at approximately 94 percent of its potential
GDP.
If a market is in long-run equilibrium, which of the following conditions will be present
in a competitive price-taker market but absent from a competitive price-searcher
market?
a. P = ATC
b. MR = MC
c. P = MC
d. MR < P
Refer to Table 12-5. What is the marginal product of the fourth worker?
a. 65
b. 70
c. 75
d. 80
Which of the following lists two things that both increase the money supply?
a. the Fed buys bonds and lowers the discount rate.
b. the Fed buys bonds and raises the discount rate.
c. the Fed sells bonds and lowers the discount rate.
d. the Fed sells bonds and raises the discount rate.
The marginal revenue product of a resource
a. is defined as the marginal product of the resource multiplied by the resource price.
b. simply means that a firm should add to its capital stock as long as competition
requires it.
c. equals the extra output produced by an additional unit of the resource multiplied by
the marginal revenue per unit of that output.
d. equals the average product of the resource multiplied by the cost of hiring an
additional (marginal) unit of the resource.
Which of the following would be most likely to encourage capital formation in a
less-developed country?
a. the expectation of sustained high inflation
b. the expectation that property rights will be highly secure in the years ahead
c. the imposition of high tariffs and other restraints limiting imports
d. higher personal and corporate tax rates
Which combination of signals would be a strong indication that Fed policy is too
expansionary and that a shift to a more restrictive policy is in order?
a. commodity prices are falling and the dollar is appreciating.
b. commodity prices are rising and the dollar is depreciating.
c. commodity prices are rising and the dollar is appreciating.
d. commodity prices are falling and the dollar is depreciating.
The primary cause of inflation is
a. large budget deficits.
b. high taxes.
c. rapid expansion of the money supply.
d. government expenditures that are large relative to the size of the economy.
An analysis of large declines in the stock market since the Great Depression indicates
that
a. the stock market crash in October 1929 was more severe than subsequent crashes.
b. a prolonged recession will always follow a large decline in the stock market.
c. almost all stock market crashes since the Great Depression were followed by short
recessions of 12 to 18 months, and in some cases, no recession at all.
d. the only way to recover from a stock market crash is through government spending,
increased regulation, and tax-increases.
Suppose a student group from your university tours the United Kingdom. As they
purchase English goods, their actions will
a. create a demand for dollars and a supply of English pounds in the foreign exchange
market.
b. create a demand for English pounds and a supply of dollars in the foreign exchange
market.
c. cause the U.S. dollar to appreciate.
d. cause the English pound to depreciate.
Within the framework of the Keynesian model, if spending is abnormally low,
a. the economy will be in equilibrium at full employment, but inflation will be high.
b. equilibrium output will be less than the full-employment rate of output.
c. the equilibrium output rate will exceed the economy’s full-employment capacity.
d. the actual rate of unemployment will be less than the natural rate of unemployment.
During the 1900-1950 period,
a. the growth of real GDP was more stable than has been the case since 1950.
b. unemployment seldom exceeded 4 percent of the labor force.
c. double-digit swings in real GDP during a single year were not uncommon.
d. the money supply was increased at a constant annual rate of between 4 percent and 6
percent throughout the period.
Which of the following would tend to increase the value of a future stream of income?
a. an increase in the rate of inflation
b. an increase in the interest rate
c. a reduction in the interest rate
d. a reduction in the size of the expected future income
If factor prices rise as demand increases and the firms expand output, the long-run
market supply curve will be upward sloping. In terms of economics, this describes
a. an oligopolistic industry.
b. a constant cost industry.
c. an increasing cost industry.
d. a decreasing cost industry.
A decrease in the marginal product of labor would be represented by
a. increase in labor demand.
b. decrease in labor demand.
c. increase in the quantity demanded of labor.
d. decrease in the quantity demanded of labor.
e. an increase in wages.
Since the mid-1980s, the primary indicator of monetary policy has been
a. movement of short-term interest rates.
b. the growth rate of real government expenditures.
c. the growth of the M1 money supply.
d. changes in the nominal (dollar) size of budget deficits or surpluses.
Starting from an initial long-run equilibrium, an unanticipated shift to a more
expansionary monetary policy would tend to increase
a. prices and unemployment in the long run.
b. real output in the short run but not in the long run.
c. real output in the long run but not in the short run.
d. real output in both the long run and the short run.
If a firm is using a resource hired in a perfectly competitive market, and if the marginal
resource cost is less than its marginal revenue product,
a. more of the resource should be used.
b. less of the resource should be used.
c. the firm should pay a lower price for the resource.
d. the firm should pay a higher price for the resource.
e. the firm is using the optimal amount of the resource.
When the rate of cyclical unemployment is zero, the
a. natural rate of unemployment must also be zero.
b. rate of frictional unemployment must be negative.
c. economy must have entered a recessionary stage.
d. economy is considered to be at full employment.
Growth in the share of health-care expenditures covered by third parties (for example,
insurance or government programs) will
a. place downward pressure on the prices of health-care services.
b. reduce the incentive of suppliers to provide consumers with health-care services at a
low cost.
c. make consumers more sensitive to the price of health-care services.
d. make it easier to control the growth of health-care expenditures.
Use the figure below to answer the following question(s).
Figure 3-3
In Figure 3-3, if the initial demand for margarine were D1, the impact of an increase in
the price of margarine from $0.35 to $0.40 per pound on consumer purchases would be
illustrated as
a. a shift in the demand curve to D2.
b. a shift in the demand curve to D3.
c. a movement upward to the left along the original demand curve D1.
d. none of the above.
Which of the following is true of government debt?
a. The interest payments on federal bonds held by Americans will be paid to investors in
other countries.
b. The share of the federal debt held by foreigners has declined from 35 percent of GDP
in 1990 to less than 10 percent of GDP in 2012.
c. Between 2000 and 2012, federal debt owed to foreigners has risen from
approximately 10 percent to 35 percent of GDP.
d. Less than 5 percent of the federal debt is owed to foreigners.
Which of the following resulted from Fed policy that first kept short-term interest rates
extremely low during 2002-2004, and then pushed them up substantially during
2005-2006?
a. a reduction in housing prices because variable rate mortgages were unattractive
throughout this period
b. upward pressure on housing prices when the interest rates were low, but downward
pressure on the price of housing as the interest rates rose
c. lower default rates on adjustable rate mortgages as the interest rates peaked during
2006
d. downward pressure on housing prices when the interest rates were low, but upward
pressure on the price of housing as the interest rates rose
The opportunity cost of an activity
a. depends on the individual’s subjective values and opinions
b. is the same for everyone
c. must be calculated and known before undertaking that activity
d. is irrelevant to decision making
e. is not influenced by time costs
An increase in the discount rate impacts the money supply because it
a. makes it more attractive for commercial banks to borrow from the Federal Reserve.
b. decreases the interest yield on new issues of U.S. securities.
c. reduces the incentive of commercial banks to borrow from the Federal Reserve.
d. increases the Federal Reserve’s earnings and, thereby, expands the money supply.
“If Tom had twice as much money, he could consume twice as much. If everyone had
twice as much money, they could consume twice as much.” This quote illustrates
a. the difference between positive and normative economics.
b. the fallacy of composition.
c. that association is not causation.
d. the law of unintended consequences.
If a sizeable amount of U.S. currency is held outside of the United States,
a. the accuracy of the M2 money supply figures will be improved, but there will be no
impact on M1.
b. the accuracy of the M1 money supply figures will be improved, but there will be no
impact on M2.
c. the money supply figures, particularly those for M1, will be less reliable.
d. the money supply figures of the U.S. will not be affected because the funds are held
outside the U.S.
Which of the following is the most likely effect of lower apple juice prices on the price
and quantity purchased of orange juice, a substitute product?
a. The price of orange juice will increase, and the quantity purchased will fall.
b. The price of orange juice will fall, and the quantity purchased will increase.
c. The price of orange juice will increase, and the quantity purchased will increase.
d. The price of orange juice will fall, and the quantity purchased will fall.