Figure 4-9 Figure 4-9 shows the market for
cigarettes. The government plans to impose a unit tax in this market.
The price buyers pay after the tax is
A) $12.
B) $8.
C) $5.
D) $3.
A curve that shows combinations of consumption bundles that give a consumer the
same utility is called
A) a utility curve.
B) an indifference curve.
C) a preference curve.
D) a demand curve.
The ________ production points on a production possibility curve are the points along
and inside the production possibility frontier.
A) attainable
B) unattainable
C) productively efficient
D) allocatively efficient
Which of the following would cause the money demand curve to shift to the left?
A) an open market purchase of Treasury securities by the Federal Reserve
B) an increase in the interest rate
C) an increase in the price level
D) a decrease in real GDP
Table 4-2
The table above lists the highest prices five consumers are willing to pay for a theater
ticket. If the price of one ticket is $25,
A) everyone will buy a ticket.
B) consumer surplus will be maximized.
C) Anya’s consumer surplus is $1.
D) no one will buy a ticket.
The Herfindahl-Hirschman Index is one factor used to determine whether a merger
between two firms should be allowed. Which of the following statements regarding the
value of the Index for a given industry is true?
A) If a merger would result in an Index value less than 1,000, the merger would not be
challenged.
B) If a merger would result in an Index value of 1,000 or more, the industry would be
considered a monopoly and the merger would be challenged.
C) If a merger resulted in an Index of between 1,000 and 1,800, the industry would be
considered competitive and the merger would not be challenged.
D) If a merger would increase the Index by 100, the industry would be considered a
monopoly and the merger would be challenged.
Which of the following would cause both the equilibrium price and equilibrium
quantity of barley (assume that barley is an inferior good) to increase?
A) an increase in consumer income
B) a drought that sharply reduces barley output
C) a decrease in consumer income
D) unusually good weather that results in a bumper crop of barley
In the desire to have a celebrity’s image protected to prevent it from being used in ways
he would not approve, a celebrity’s estate
A) will probably not be successful, since there are no laws regulating this kind of use in
the United States.
B) will have to be granted a patent declaring the celebrity’s image a new product, and
this will give the estate protection for 7 years.
C) can rely on U.S. laws that protect intellectual property rights to prevent the
unauthorized use of his image.
D) will most likely be more successful in developing countries than in high-income
countries, since property regulations are better enforced in developing countries.
The Soviet Union consistently increased the amount of capital available to its workers,
but found that increases in capital resulted in progressively smaller and smaller
increases in GDP per worker. This phenomenon is referred to as
A) a rising standard of living.
B) diminishing returns to capital.
C) new growth theory.
D) a shift of the per-worker production function.
If the current account is in surplus and the capital account is zero, then
A) the financial account must be in deficit.
B) the balance of trade must be in deficit.
C) the balance of payments must be in deficit.
D) there is a capital inflow.
E) the balance of services must be in deficit.
If the absolute value of the tax multiplier equals 1.6, real GDP is $13 trillion, and
potential real GDP is $13.4 trillion, then taxes would need to be cut by ________ to
restore the economy to potential real GDP.
A) $250 billion
B) $400 billion
C) $640 billion
D) None of the above are correct. Taxes should be increased in this case.
Table 9-6
Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-6 shows the production
and consumption quantities without trade, and the production numbers with trade.
Which country has a comparative advantage in producing clocks?
A) Denmark
B) Belize
C) both countries
D) neither country
At low wages, the labor supply curve for most people slopes upward because
A) the supply of labor is perfectly inelastic at low wages.
B) as wages increase, the opportunity cost of leisure increases.
C) as wages increase, income also increases unless hours worked decrease.
D) the demand for labor is perfectly elastic at low wages.
Figure 12-4
Potential GDP equals $500 billion. The economy is currently producing GDP1 which is
equal to $450 billion. If the MPC is 0.8, then how much must autonomous spending
change for the economy to move to potential GDP?
A) -$40 billion
B) -$10 billion
C) $10 billion
D) $40 billion
The Taylor rule predicted a federal funds rate which was ________ that set when Paul
Volcker was chairman of the Fed, and a rate which was ________ that set when Arthur
Burns chaired the Fed.
A) greater than; equal to
B) greater than; less than
C) less than; equal to
D) less than; greater than
Which of the following is most likely to exert the bargaining power of a buyer?
A) Barnes and Noble purchases books from publishers for sale in its online stores.
B) Wal-Mart, The world’s largest discount store, seeks vendors to supply products made
exclusively for its stores.
C) Ground beef producers seek to purchase cattle from ranchers.
D) Cowgirl Creamery, a small cheese producer, seeks a dairy farm for its organic milk
supplies.
If, in response to an increase in the price of chocolate the quantity of chocolate
demanded decreases, economists would describe this as
A) a decrease in demand.
B) a decrease in quantity demanded.
C) a change in consumer income.
D) a decrease in consumers’ taste for chocolate.
Which of the following is the best example of a voluntary export restraint?
A) a limit imposed by the U.S. government on the number of cell phones that the
United States can import from Korea
B) a subsidy granted by the U.S. government to domestic cell phone manufacturers so
they can compete more effectively with foreign cell phone manufacturers
C) a limit set by the Korean government on the number of cell phones that the United
States can import fro Korea.
D) a $50 per-cell phone-fee imposed on all cell phones vehicles imported into the
United States
Scenario 14-2 Imagine that Kristy deposits $10,000 of currency into her checking
account deposit at Bank A and that the required reserve ratio is 20%.
As a result of Kristy’s deposit, Bank A’s reserves immediately increase by
A) $2,000.
B) $8,000.
C) $10,000.
D) $50,000.
If a nation changes its laws to more actively enforce intellectual property rights, all of
the following will most likely take place except
A) more software companies will choose to export their products to that country.
B) more film makers will choose to do business in that country.
C) the black market for intellectual property will become more prosperous in in that
country.
D) foreign investment in that country will increase.