Investment spending ________ during a recession, and ________ during an expansion.
A) declines; increases
B) increases; declines
C) increases; increases
D) declines; declines
If Molly Bee increases her work hours when her wage increases, then
A) the income effect of the wage increase outweighs the substitution effect.
B) the substitution effect of the wage increase outweighs the income effect.
C) leisure is an inferior good to Molly.
D) Molly is spending beyond her means.
The International Nickel Company of Canada is often cited as an example of monopoly,
but International Nickel eventually lost its monopoly. What event was responsible for
this?
A) New technology allowed other firms to achieve network externalities after World
War II.
B) The Canadian government, which had owned International Nickel, sold the company
after World War II. The government no longer blocked entry into the market for nickel.
C) Competition in the market for nickel increased after nickel fields were developed in
Russia after World War II.
D) Competition in the market for nickel increased after Canada signed the North
American Free Trade Agreement with the United States and Mexico in 1994.
A dominant strategy is
A) an equilibrium where each firm chooses the best strategy, given the strategies of
other firms.
B) a strategy chosen by two firms that decide to charge the same price or otherwise not
to compete.
C) a strategy that is obviously the best for each firm that is a party to a business
decision.
D) a strategy that is the best for a firm no matter what strategies other firms use.
Table 11-2
Table 11-2 summarizes production at the Crunchy Apple Orchard for the month of April
2005. What is the average product of labor when the orchard employs 5 workers?
A) 270 bushels
B) 54 bushels
C) 40 bushels
D) 8 bushels
The short-run Phillips curve will shift if there is
A) an increase in the unemployment rate.
B) an increase in inflation that is unanticipated.
C) a decrease in inflation that is unanticipated.
D) a change in inflation expectations.
When the U.S. government places a tariff on a product, such as the tariff on tires
imported from China, the quantity of the product imported will generally ________ and
the price paid by consumers for the product will generally ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
A financial intermediary’s main function is to match ________ with excess funds to
________ with a shortage of funds.
A) savers; borrower
B) borrower; savers
C) governments; households
D) firms; insurance companies
An outward shift of a nation’s production possibilities frontier represents
A) economic growth.
B) rising prices of the two goods on the production possibilities frontier model.
C) an impossible situation.
D) a situation in which a country produces more of one good and less of another.
Suppose real GDP is $13 trillion, potential real GDP is $13.5 trillion, and Congress and
the president plan to use fiscal policy to restore the economy to potential real GDP.
Assuming a constant price level, Congress and the president would need to increase
government purchases by
A) $500 billion.
B) less than $500 billion.
C) more than $500 billion.
D) None of the above are correct. Congress must act to decrease government purchases
in this case.
Suppose that homemakers are included as employed in the labor force statistics, rather
than being counted as out of the labor force. This would
A) increase the measured unemployment rate.
B) increase the measured labor force participation rate.
C) decrease the number of persons in the labor force.
D) decrease the number of persons in the working-age population.
Which of the following characterizes the Fed’s ability to prevent recessions?
A) The Fed is able to “fine tune” the economy and entirely eliminate recessions.
B) The Fed is incapable of changing aggregate demand through its monetary policy
tools.
C) The Fed is able to keep a recession shorter and milder than it would otherwise be.
D) The Fed is able to eliminate the business cycle and achieve absolute price stability.
A market supply curve reflects the
A) external costs of producing a good or service.
B) external benefits of producing a good or service.
C) social costs of producing a good or service.
D) private costs of producing a good or service.
If the exchange rate changes from $0.08 = 1 mexican peso to $0.09 = 1 mexican peso,
then
A) both the peso and dollar have appreciated.
B) both the peso and dollar have depreciated.
C) the peso has appreciated and the dollar has depreciated.
D) the peso has depreciated and the dollar has appreciated.
Figure 2-9
Figure 2-9 shows the production possibilities frontiers for Pakistan and Indonesia. Each
country produces two goods, cotton and cashews. If the two countries have the same
amount of resources and the same technological knowledge, which country has an
absolute advantage in the production of cotton?
A) Indonesia
B) They have the same advantage.
C) Pakistan
D) cannot be determined
During its run on Broadway, the play The Producers regularly sold out all available
tickets at the St. James Theater. The theater could have raised ticket prices from $75 to
$125 and still sold all available tickets but chose not to do so. The best explanation for
this decision is
A) theater owners are unaware of the elasticity of demand for Broadway shows.
B) theater owners do not want to raise their tickets on weekends, when demand is high,
and then have to lower prices during the week, when demand is lower.
C) firms sometimes give up profits in the short run to keep their customers happy and
increase their profits in the long run.
D) theater owners are not motivated to maximize their profits.
At a price of $50, Ghani sells 20 hand-made leather cell-phone covers, but at a price of
$60, zero units are sold. Based on this information, the demand for his cell-phone
covers is
A) elastic or perfectly inelastic
B) elastic or perfectly elastic.
C) unit-elastic.
D) perfectly inelastic.
Table 2-1
Production choices for Tomaso’s Trattoria
Assume Tomaso’s Trattoria only produces pizzas and calzones. A combination of 36
pizzas and 30 calzones would appear
A) along Tomaso’s production possibilities frontier.
B) inside Tomaso’s production possibilities frontier.
C) outside Tomaso’s production possibilities frontier.
D) at the horizontal intercept of Tomaso’s production possibilities frontier.