Which of the following will lead to a decrease in supply of a good?
a. an increase in the price of the good
b. an increase in consumer incomes
c. an increase in the price of an important resource used to produce the good
d. a technological advance that lowers the cost of producing the good
Suppose the Pleasant Corporation cuts the price of its American Girl dolls by 10
percent, and as a result, the quantity of the dolls sold increases by 25 percent. This
indicates that the price elasticity of demand for the dolls over this range is
a. 2.5.
b. 0.4.
c. 0.5.
d. 5.
e. inelastic.
Which of the following is true regarding the growth record of less-developed countries
(LDC’s) during the past quarter of a century?
a. Some are among the fastest growing countries in the world.
b. Some are among the slowest growing countries in the world.
c. The most populous, less-developed countries have experienced declining per capita
income levels.
d. All of the above are true.
The consumer price index (CPI) is designed to measure
a. the impact of price changes on the value of real GDP.
b. the nominal value of consumer spending on food, clothing, and energy.
c. the total spending of households as a percentage of GDP.
d. the impact of price changes on the cost of the typical bundle of goods purchased by
households.
Cyclical unemployment
a. is caused by changes in the business cycle.
b. results from imperfect search activities in matching qualified employees with
employers.
c. results from institutional factors that make it difficult for some workers to find jobs.
d. will probably go up as a result of improvements in online job searching.
The efficiency of market organization is dependent on which of the following?
a. well-regulated supply and demand
b. the availability of low cost resources and high tariffs on foreign imports
c. competitive markets and well-defined and enforced private property rights
d. Government establishment of the invisible hand principle and the inelasticity of
certain goods.
Economic theory indicates that the economy is better off not to produce proved reserves
of a mineral “too quickly.” By this, we mean that we
a. prefer some bad luck in exploration efforts, rather than too much good luck in finding
the resources.
b. do not want the resource to be too abundantly available since this would reduce its
price and GDP.
c. want to use other nations’ resources first, even if doing so is more costly.
d. do not want to use additional resources for exploration if the present discounted value
of the benefits is smaller than the cost.
Which of the following reduced the demand stimulus effects of the Fed’s low interest
rate policy pursued during, and after, the financial crisis of 2008-2009?
a. Declining stock prices during 2010-2012.
b. A reduction in the velocity of money.
c. An increase in earnings derived from money market accounts, saving deposits, and
similar saving instruments.
d. A sharp increase in the rate of inflation during 2009-2012.
Mateo values his camper at $4,000, and Nicole values it at $9,000. If Nicole buys it
from Mateo for $7,000, which of the following is true?
a. Mateo gains $3,000 of value, and Nicole gains $2,000 of value.
b. Mateo gains $7,000 of value, and Nicole loses $7,000 of value.
c. Mateo gains $7,000 of value, and Nicole gains $6,000 of value.
d. Mateo and Nicole both gain $7,000 of value.
When property rights are clearly defined and enforced, private owners will
a. use their property for selfish ends because they have little or no incentive to consider
the desires of others.
b. develop and direct their property toward uses that others value highly because the
market will generally reward them for doing so.
c. have little or no incentive to take care of their property or conserve it for the future.
d. be unable to derive personal gain if they are sensitive to the desires of others when
deciding how to use their property.
Opportunity costs differ among nations primarily because
a. nations employ different currencies.
b. nations have different endowments of land, labor skills, capital, and technology.
c. nations have different political institutions.
d. work-leisure preferences vary considerably from one nation to another.
Which of the following factors are likely to lead to an increase in the female/male
earnings ratio in the future?
a. As the labor force participation of women increases, their years of work experience
will become more similar to men.
b. In recent years, a higher proportion of women have been preparing for careers in the
professions.
c. As the proportion of families headed by a female parent increases, the average hours
worked per week of female employees will decline.
d. Both a and b are correct.
Use the figure below to answer the following question(s).
Figure 6-2
Figure 6-2 illustrates the four possibilities of the structure of production and
consumption for a good or service. In which case is the incentive of producers to be
efficient and the incentive for consumers to economize the weakest?
a. A
b. B
c. C
d. D
Which of the following is true for a firm that is a monopolist?
a. the firm will make an economic profit in the short run.
b. the firm will produce a smaller quantity of output than what would be best from the
viewpoint of ideal economic efficiency.
c. the additional revenue that can be generated from an increase in output will exceed
the firm’s price.
d. the firm can charge whatever it wants for its product since consumers have no
alternatives.
Citizens Bank confronts a reserve requirement of 20 percent and currently holds
millions of dollars in excess reserves. If a depositor withdraws $35,000, the excess
reserves of the bank will
a. decline by $7,000.
b. decline by $35,000.
c. decline by $28,000.
d. increase by $7,000.
Suppose business decision makers become more optimistic about future economic
conditions and desire additional funds to expand their plant capacity. What is the likely
effect on the loanable funds market?
a. The demand for loanable funds will increase, and the interest rate will rise.
b. The demand for loanable funds will decrease, and the interest rate will fall.
c. The supply for loanable funds will increase, and the interest rate will fall.
d. The supply for loanable funds will decrease, and the interest rate will rise.
As a general rule, if pollution costs are external, firms will produce
a. too little of a polluting good.
b. too much of a polluting good.
c. an optimal amount of a polluting good.
d. cannot be determined without additional information.
Which of the following would be the best example of consumer surplus?
a. Shaniqua does not get cell-phone service because she feels that it is worth less than
the $30 a month fee.
b. Nicolas pays $8 for a haircut that is worth $10 to him.
c. Diego buys a house for $104,000, the maximum amount that he would be willing to
pay for it.
d. Isabella purchases a book for $20 and uses a credit card to pay for it.
An increase in the price of metal raises the cost of manufacturing dishwashers. As a
result, the market changes to a new equilibrium because of
a. a surplus of dishwashers.
b. an increase in the demand for dishwashers.
c. a leftward shift in the demand curve for dishwashers.
d. a leftward shift in the supply curve for dishwashers.
In the AD/AS model, the aggregate demand for goods and services is composed of the
purchases made by
a. households and foreigners (net exports).
b. businesses, bondholders, and foreigners (net exports).
c. businesses and governments.
d. consumers, investors, governments, and foreigners (net exports).
Figure 8-1
In Figure 8-1, point E represents:
a. recession and a trough.
b. peak and a trough.
c. recession and a peak.
d. recovery and a peak.
Ex-London School of Economics student Mick Jagger sang, “You can’t always get what
you want, but if you try sometime, you just might find you can get what you need.”
Another statement of the basic economic principle expressed in this lyric is that
a. rational decisions are not always possible.
b. you can allocate your resources to what gives you the highest value.
c. you can create the supply to meet your own demand.
d. you can maximize social welfare by making optimal decisions.
Public choice analysis indicates that it will be politically more attractive to
a. enact restrictive fiscal policy during an economic expansion than to enact
expansionary fiscal policy during a recession.
b. enact expansionary fiscal policy during an economic expansion than to enact
restrictive fiscal policy during a recession.
c. enact expansionary fiscal policy during a recession than to enact restrictive fiscal
policy during an economic expansion.
d. raise taxes than to increase spending.
Over time, GDP may increase as the result of either (i) expansion in the quantities of
goods produced or (ii) higher prices. Which of the following is true?
a. (i) will generally increase living standards, but (ii) will not.
b. (ii) will generally increase living standards, but (i) will not.
c. Both (i) and (ii) will generally increase living standards.
d. Neither (i) nor (ii) will generally increase living standards.
The “incidence of a tax” is the term used to indicate
a. the responsibility for collecting the tax.
b. who actually bears the tax burden.
c. who the tax is initially levied on.
d. the regressive rate structure of the tax.
Which of the following statements about price discrimination is correct?
a. Price discrimination is always more profitable than charging a single price.
b. A price discriminator would want to charge the highest price to those customers with
the most elastic demand for his product.
c. To be successful, a price discriminator must assure that items can be resold between
high- and low-price groups.
d. To maximize profit, a price discriminator distinguishes groups with different
demands and charges higher prices to those with the more inelastic demand.
When competition is present, self-interested business decision makers have a strong
incentive to
a. produce efficiently.
b. ignore the wishes of customers who are also self-interested.
c. adopt technological improvements slowly in order to avoid making wrong decisions
d. maximize price in order to maximize profits.
If the United States imports low-cost goods produced in low-wage countries instead of
producing the goods domestically,
a. the United States will incur a net loss of total jobs.
b. the United States will gain, and domestic resources will be employed more
productively.
c. dollars that leave the United States will not return to buy goods produced by
high-wage American workers.
d. the availability of consumption goods in the United States will be reduced.
Increasing opportunity costs of producing goods imply that the production possibilities
curve will be
a. downward sloping.
b. upward sloping.
c. bowed inward.
d. bowed outward.
The demand for most products is likely to be
a. more elastic in the long run than in the short run.
b. less elastic in the long run than in the short run.
c. equally elastic in the short and long run.
d. equally inelastic in the short and long run.
The marginal revenue product of a resource is equal to the value of marginal product
when the product produced by the resource is sold in
a. a competitive price-taker market.
b. a competitive price-searcher market.
c. an oligopolistic market.
d. a monopolistic industry.
Which of the following is true of technology?
a. Technological improvements are less important today than was true in the past.
b. Lack of access to modern technology is a major barrier restraining the growth of
low-income countries.
c. Often, perverse institutions and policies in low-income countries undermine the
potential gains from adoption of modern technology.
d. Countries with high investment rates will be unable to apply modern technology
effectively.
If the legal and regulatory environment fails to protect property rights and is often used
to favor some at the expense of others, which of the following is most likely to be
encouraged?
a. productive activities
b. a high rate of investment
c. rent-seeking and unproductive activities
d. competitive markets
If pollutants emitted by firms in the steel industry increase, but there is no increase in
the costs borne by these firms, you could conclude that
a. pollution is not a serious problem in this industry.
b. the consumers of steel are unwilling to bear the costs of pollution generated from
steel production.
c. pollution is an externality in this market, since producers and purchasers of steel do
not bear the full costs of the pollution.
d. pollution creates an external benefit rather than an external cost in this case.