The figure below depicts the demand, marginal revenue and marginal cost curves of a
profit-maximizing monopolist.
Figure 11-15
Refer to Figure 11-15. Which of the following areas represents the deadweight loss due
to monopoly pricing?
a. Triangle bde
b. Triangle bge
c. Rectangle acdb
d. Rectangle cfgd
In economics the term utility refers to
a. the subjective benefit or satisfaction a person expects to receive from a choice or
course of action.
b. the number of possible uses for a resource.
c. the fact that human desire for goods is unlimited while the resources available to
meet those desires is limited.
d. the highest valued alternative that must be sacrificed when a choice is made.
It can be difficult to define and enforce property rights against damaging pollutants
when
a. many polluters are harming one person.
b. many polluters harm the same large group of people with the same pollutant.
c. the harms are difficult to quantify.
d. All of the above are true.
Which of the following would be most indicative of a shift to a more restrictive
monetary policy?
a. Rapid expansion in the monetary base, higher short-term interest rates, and a decline
in the growth rate of the M1 money supply.
b. Rapid expansion in the monetary base, declining short-term interest rates, and an
increase in the growth rate of the M2 money supply.
c. A reduction in the monetary base, higher short-term interest rates, and a decline in the
growth rate of the M2 money supply.
d. A reduction in the monetary base, lower short-term interest rates, and a decline in the
growth rate of the M1 money supply.
Which of the following is an implication of the law of comparative advantage?
a. Countries with small amounts of labor relative to capital should specialize in
producing labor-intensive commodities.
b. Since workers in high-income countries utilize larger amounts of capital than
workers in less developed nations, trade between capital-rich and capital-poor nations
results in the exploitation of labor in the less developed countries.
c. Countries that are high cost producers of agricultural products should trade those
products for goods they can produce only at a low opportunity cost.
d. Countries that are low opportunity cost producers of timber products should trade
those products for goods they can produce only at a high opportunity cost.
Which of the following would cause a firm’s cost curve to shift downward?
a. a decrease in resource prices
b. an increase in taxes
c. an increase in demand for the firm’s product
d. a reduction in output
The official poverty rate of elderly families
a. has been virtually unchanged for the last four decades.
b. increased as the elderly became a larger proportion of the U.S. population during the
1970s.
c. rose prior to the War on Poverty programs of the late 1960s, but it has declined
steadily since.
d. has declined during the last four decades.
According to international trade theory, a country can gain
a. if it protects domestic industries from low-wage foreign producers.
b. only if the trade harms its trading partners.
c. by importing goods when they can be obtained more economically from foreign
producers.
d. if it maximizes the employment in domestic industries that face competition from
foreign producers who have lower costs.
Public choice theory indicates that tariffs, quotas, and other trade restrictions are
primarily the result of the
a. political clout of foreigners.
b. political clout of domestic consumers.
c. political power of the special interest groups.
d. attractiveness of sound economic policies to elected political officials.
Which of the following is true?
a. Competition from abroad fails to provide domestic producers with a strong incentive
to improve the quality of their products and keep their costs low.
b. When economies of scale are important in an industry, international trade benefits
domestic consumers but harms domestic producers.
c. When economies of scale are important in an industry, international trade will be
particularly important for domestic producers operating in small countries.
d. Economies of scale eliminate the potential gains from international trade.
If Melanie’s marginal benefit as a consumer in the jeans market is larger than the price
of a pair of jeans,
a. Melanie will not purchase any more jeans.
b. Melanie can benefit by purchasing more jeans.
c. the opportunity cost of a pair of jeans is lower than the price.
d. Melanie will decrease her total utility by purchasing more jeans.
In 2012, government income transfers redistributed what percentage of national
income?
a. 1.1 percent
b. 7.7 percent
c. 17.4 percent
d. 25.5 percent
Dividing data into quartiles means that you are dividing data into
a. two groups.
b. three groups.
c. four groups.
d. twenty-five groups.
Senator Blacklung represents a state that grows a significant amount of tobacco. Not
only do many of his constituents work for businesses in this industry, but the tobacco
firms also make generous contributions to his reelection campaign. According to public
choice theory, which of the following bills would Senator Blacklung be most likely to
support?
a. a bill proposing an increase in the tax on cigarettes to fund urban renewal programs
across the nation
b. a bill that would provide substantial subsidies for tobacco growers
c. a bill proposing increased funding for a national antismoking awareness campaign
financed by an increase in the tax on cigarettes
d. a bill that would prohibit senators from accepting campaign contributions from firms
who are involved in the production or sale of tobacco products
Assume that Jamal is a single parent who is in poverty. He receives food stamps and
Medicaid. For every $100 that he earns, Jamal loses $35 in food stamps and $20 in
Medicaid benefits. Also, Jamal’s income is taxed at a rate of 10%. Then, Jamal’s total
tax rate is
a. 45 percent
b. 55 percent
c. 65 percent
d. 70 percent
If the price of pizzas has risen from $4 to $5 at the same time that the price of an hour
of aerobics class has risen from $20 to $30, then
a. pizzas have become relatively more expensive.
b. aerobics classes have become relatively more expensive.
c. the relative prices of pizzas and aerobics classes have remained constant.
d. workers’ real income must have decreased.
Suppose a monopolist and a competitive price-taker firm have the same cost curves.
The monopoly firm would
a. charge a lower price than the competitive price-taker firm.
b. charge a higher price than the competitive price-taker firm.
c. charge the same price as the competitive price-taker firm.
d. refuse to operate in the short run unless an economic profit could be made.
e. refuse to operate in the short run if an economic loss was present.
Over the past two decades, the earnings gap between college graduates and those with
only a high school education has
a. decreased substantially.
b. increased substantially.
c. remained the same.
d. fluctuated in a random pattern.
The U.S. dollar will appreciate if
a. the U.S. demand for foreign exchange decreases.
b. the U.S. demand for foreign exchange increases.
c. the U.S. supply of foreign exchange decreases.
d. Americans want to buy more foreign goods.
e. foreigners want fewer American goods.
Gross domestic product
a. is the sum of all exchanges of goods and services during a period.
b. includes financial transactions such as the purchase of stocks or bonds traded during
a period.
c. is the sum of expenditures for both intermediate and final user goods.
d. is the sum of the total spending on all final-user goods and services produced
domestically during a period.
During 2001-2004, the Fed injected additional reserves into the banking system, which
reduced the federal funds rate and other short-term interest rates. Other things constant,
what is the most likely short-run impact of this policy?
a. an increase in the rate of unemployment
b. a reduction in the growth of employment
c. an increase in aggregate demand and real GDP
d. a reduction in the long-run rate of inflation
If the federal government runs a budget deficit, but the budget deficit as a percent of
GDP is less than the growth rate of real output, the
a. national debt will decrease as a share of GDP.
b. national debt will remain a constant share of GDP.
c. national debt will increase as a share of GDP.
d. size of the national debt (in dollar value) will decline.
Which of the following best explains the political attractiveness of debt financing
relative to taxation?
a. Debt financing pushes the visible cost of government into the future.
b. Debt financing exposes the current costs of government programs; taxes do not.
c. Debt financing reduces the attractiveness of special-interest spending.
d. Taxes allow politicians to supply voters with immediate benefits without having to
impose a visible cost.
Answer the following questions:
a. What is the equation of exchange? Explain each component.
b. What assumptions are placed on the equation of exchange to generate the quantity
theory of money?
c. Explain the quantity theory of money and what it implies about the impact of changes
in the money supply on real output and prices.
Which scenario will most likely happen as employers and employees increase their
usage of the Internet in the job search process?
a. Job-related information will become more costly and cyclical unemployment will go
up.
b. Job-related information will become less costly and frictional unemployment will go
up.
c. Job-related information will become more costly and structural unemployment will
go down.
d. Job-related information will become less costly and frictional unemployment will go
down.
Suppose the equilibrium price of a physical examination (“physical”) by a doctor is
$200, and the government imposes a price ceiling of $150 per physical. As a result of
the price ceiling,
a. the demand curve for physicals shifts to the right.
b. the supply curve for physicals shifts to the left.
c. the quantity demanded of physicals increases and the quantity supplied of physicals
decreases.
d. the number of physicals performed will increase.
Which of the following restricts the volume of international trade?
a. stable prices
b. tariffs
c. the law of comparative advantage
d. stable international monetary system
Figure 10-8
Figure 10-8 presents the demand, marginal revenue, and cost curves for a typical firm in
a market. This figure illustrates
a. short-run equilibrium in a competitive price-taker market.
b. long-run equilibrium in a competitive price-taker market.
c. short-run equilibrium in a competitive price-searcher market.
d. long-run equilibrium in a competitive price-searcher market.
Which of the following makes it more difficult for monetary policy makers to time
policy changes correctly?
a. Monetary policy makers cannot act without congressional approval.
b. The primary effects of the policy change will not be felt for 6 to 15 months into the
future.
c. The Board of Governors of the Federal Reserve System does not meet very often.
d. Monetary policy affects only the general level of prices; it exerts no impact on real
variables such as output and employment.
Long-run equilibrium in the goods and services market requires that decision makers
who agreed to long-term contracts must have
a. incorrectly anticipated the level of prices when they made the agreements.
b. correctly anticipated the level of prices when they made the agreements.
c. correctly anticipated the natural rate of unemployment when they made the
agreements.
d. correctly anticipated actual GDP when they made the agreements.
Use the figure to answer the following question(s).
Figure 11-2
What is the maximum profit per month that the monopolist will be able to earn in
Figure 11-2?
a. zero
b. approximately $10,000
c. approximately $20,000
d. approximately $40,000