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Use the figure below to answer the following question(s).
Figure 4-8
Refer to Figure 4-8. The supply curve S1 and the demand curve D indicate initial
conditions in the market for soft coal. A $40-per-ton tax on soft coal is levied, shifting
the supply curve from S1 to S2. Imposing the tax increases the equilibrium price of soft
coal from
a. $20 to $60 per ton.
b. $20 to $50 per ton.
c. $50 to $60 per ton.
d. $50 to $90 per ton.
In the short run, which are most important in determining changes in output?
a. marginal costs and marginal revenue.
b. total costs and total revenue.
c. average costs and total revenue.
d. fixed costs.
Which of the following is most likely to cause the productivity of labor to increase?
a. higher money wages
b. a higher rate of investment in human and nonhuman capital
c. more flexible working hours and improved retirement plans
d. an increase in the proportion of the workforce that belongs to a labor union
Use the figure below to answer the following question(s).
Figure 14-2
If the Fed anticipates that the conditions illustrated by AD1and SRASin Figure 14-2 will
be present in the near future, it should
a. shift to a more restrictive policy.
b. shift to a more expansionary policy.
c. request that Congress raise tax rates.
d. refuse to buy any more U.S. securities.
Which of the following must be true if a price-searcher firm is operating at the
profit-maximizing output rate?
a. The marginal cost of producing the last unit is greater than the marginal revenue
derived from its sale.
b. The marginal cost of producing the last unit is no greater than the marginal revenue
derived from its sale.
c. The total cost of producing all units is no greater than the total revenue derived from
the sale of the units.
d. The total cost of producing all units is less than the total revenue derived from the
sale of the units.
Consider two goods--one that generates external costs and another that generates
external benefits. The actual market outcome would
a. result in output that is lower than the efficient output for both goods.
b. result in output that is higher than the efficient output for both goods.
c. result in output that is lower than the efficient output for the good with an external
benefit and output that is higher than the efficient output for the good with an external
cost.
d. result in output that is higher than the efficient output for the good with an external
benefit and output that is lower than the efficient output for the good with an external
cost.
While waiting in line to buy two tacos at 80 cents each and a medium drink for 90
cents, Kayla notices that the restaurant has a value meal containing three tacos and a
medium drink all for $3. For Kayla, the marginal cost of the third taco would be
a. zero.
b. 50 cents.
c. 80 cents.
d. $1.
Other things being equal, the effect of an increase in the price of milk would be
illustrated by
a. an upward movement along the demand curve for milk.
b. a leftward shift in the demand curve for milk.
c. a downward movement along the demand curve for milk.
d. a rightward shift in the demand curve for milk.
An example of a non-pecuniary job characteristic is
a. over-time pay.
b. salary.
c. an end-of-the-year bonus.
d. a comfortable work environment.
Economists make assumptions in order to
a. mimic the methodologies employed by other scientists.
b. minimize the number of experiments that yield no useful data.
c. minimize the likelihood that some aspect of the problem at hand is being overlooked.
d. focus their thinking on the essence of the problem at hand.
According to the monetarists, which of the following is true?
a. Instability in the money supply is the primary cause of economic instability.
b. A reduction in the money supply will cause consumers to increase spending.
c. A reduction in the money supply will cause a proportional reduction in wages and
prices, leaving output unchanged.
d. A rapid growth rate of the money supply will lead to a rapid growth rate of real GDP.
The difference between positive economic statements and normative economic
statements is that
a. positive statements are based on opinion while normative statements are based on
fact
b. positive statements are true and normative statements are often false
c. positive statements are often false and normative statements are true
d. positive statements are based on fact while normative statements are based on
opinion
e. both b and d.
Forests in the United States have, in recent decades,
a. expanded substantially in the amount of wood grown.
b. been steadily declining in acreage and in wood produced.
c. been cut and cleared at a faster and faster rate.
d. shown no trend in growth or shrinkage.
The money rate of interest that lenders pay for borrowed funds minus the real rate of
interest equals the
a. nominal rate of interest.
b. present value of an asset.
c. inflationary premium.
d. productivity of capital.
Which of the following will limit the money creation process to an amount less than the
potential amount?
a. bank pursuit of profits
b. increase in currency holdings by the public
c. business demand for loans
d. increased use of credit cards
Compared to the 1910-1960 period, during the past 50 years the severity of
macroeconomic fluctuations has
a. increased.
b. decreased.
c. changed little.
d. increased, but the general level of prices has been more stable.
The actual rate of unemployment will be greater than the natural rate of unemployment
when
a. the actual output is less than the economy's potential output.
b. the actual output is greater than the economy's potential output.
c. the actual output is equal to the economy's potential output.
d. the inflation rate has been relatively constant for several years.
The National Industrial Recovery Act essentially legalized
a. labor unions.
b. business cartels.
c. minimum wage laws.
d. import tariffs.
If a $2 tax per bottle of wine is imposed on wine producers, which of the following will
occur?
a. The price of wine will increase, fewer bottles will be purchased, and there will be a
deadweight loss from this tax.
b. The price of wine will increase, more bottles will be purchased, and consumers will
gain as the result of this tax.
c. The price of wine will decrease, more bottles will be purchased, and there will be a
deadweight loss from this tax.
d. The price of wine and quantity sold will be unchanged.
If the interest rate was 5 percent and an investment project was expected to yield net
revenue of $3,000 per year (to be received at year end) for each of the next three years,
profit-maximizing decision makers would undertake the investment only as long as it
cost less than
a. $7,461.
b. $8,170.
c. $8,652.
d. $9,000.
If the interest rate is 6 percent, the net present value of $100 to be received two years
from now is
a. $79.72.
b. $86.
c. $89.
d. $100.
The maintenance of a framework of security and order through the establishment and
enforcement of rules under which people can interact peacefully with one another and
be secure in their person and property is known as the
a. productive function of government.
b. protective function of government.
c. transfer function of government.
d. illegitimate function of government.
In competitive price-searcher markets, short-run economic profits will lead to
a. long-run economic profits.
b. the exit of firms from the market and the eventual restoration of zero long-run
economic profits.
c. the entry of additional firms into the market and the eventual restoration of zero
long-run economic profits.
d. the entry of additional firms into the market, which increases the demand for the
product of each firm in the market.
Which group is most likely to argue that an increase in government spending will be
more effective than a reduction in taxes as a tool to promote recovery?
a. monetarists
b. Keynesian economists
c. supply-side economists
d. new classical economists
e. All of the above; there is a consensus on this issue.
If the monetary authorities follow policies that keep the annual rate of inflation steady
and low (for example, 2 percent), which of the following is most likely to occur?
a. a high rate of unemployment because people will anticipate a higher rate of inflation
b. considerable fluctuations in real GDP because the monetary authorities are not
constantly adjusting monetary policy in light of current business conditions
c. higher real interest rates because decision makers will fail to anticipate the 2 percent
rate of inflation
d. an unemployment rate that is at or near the natural rate of unemployment because the
actual rate of inflation will not be much different than what people expect
Figure 14-6
In the situation shown in Figure 14-6, how could the Fed return the economy to
potential output?
a. decrease government spending
b. increase taxes
c. decrease taxes
d. shift to a more restrictive monetary policy
e. shift to a more expansionary monetary policy
Which of the following statements is correct?
a. Interest would not exist in a nonmonetary economy.
b. The present value of a future dollar payment is inversely related to both the interest
rate and to how far in the future the payment will be received.
c. A "positive rate of time preference" means that an individual would rather save than
consume.
d. During an extended inflationary period, the money (or nominal) interest rate will
usually be lower than the real rate of interest.
For a privately owned business in a competitive market setting,
a. reducing resource use while producing the same output adds to profit and typically
reduces waste products and thus cuts pollution as well.
b. when property rights are well-defined and strictly enforced, the firm will be able to
pollute air and water without having to bear the cost of the damages imposed on others.
c. wasteful use of resources results in more pollution but greater profit.
d. reducing pollution almost never pays.
Proved reserves are likely to underestimate the total quantity of the resource in the
ground because
a. of flaws in information flows between countries.
b. government agencies have an incentive to keep reserves secret.
c. of future improvements in technology and higher future prices.
d. scientists have not been able to use the latest techniques to estimate reserves in less
developed countries.
The velocity of money is
a. money supply divided by prices.
b. spending divided by output.
c. required monetary reserves divided by income.
d. GDP divided by the money supply.
If mutual interdependence among firms is present, each profit-maximizing firm in the
market
a. produces a product that must be identical to the products of its rivals.
b. must consider the reactions of its rivals when it determines its price policy.
c. faces a perfectly elastic demand curve for its product.
d. faces a perfectly inelastic demand curve for its product.
The Social Security retirement program is financed by a 10.6 percent payroll tax that
applies to earnings up to an income cutoff that is adjusted upward annually by the
growth rate of nominal wages. As of 2013, the income cutoff was
a. $15,000.
b. $32,700.
c. $113,700.
d. $250,000.
