If the demand for light bulbs increases, producer surplus in the market for light bulbs
a. increases.
b. decreases.
c. remains the same.
d. may increase, decrease, or remain the same.
A nonbinding price floor
(i) causes a surplus.
(ii) causes a shortage.
(iii) is set at a price above the equilibrium price.
(iv) is set at a price below the equilibrium price.
a. (iii) only
b. (iv) only
c. (i) and (iii) only
d. (ii) and (iv) only
In the long run, if there is an increase in the money supply growth rate, which of the
following curves shifts right?
a. the short-run and the long run Phillips curves
b. the short-run but not the long run Phillips curve
c. the long-run but not the short-run Phillips curve
d. neither the short-run nor the long-run Phillips curves
You deposit $3,000 into an N“year certificate of deposit that pays 4.5 percent annual
interest, and at the end of the N years you have $3,738.54. What is the number of years,
N?
a. 4
b. 5
c. 6
d. 7
In the economy of Ukzten in 2010, consumption was $3000, exports were $200, GDP
was $8000, government purchases were $1000, and imports were $600. What was
Ukzten’s investment in 2010?
a. $3200
b. $3600
c. $3800
d. $4400
Producer surplus is
a. represented on a graph by the area below the demand curve and above the supply
curve.
b. the amount a seller is paid minus the cost of production.
c. also referred to as excess supply.
d. All of the above are correct.
Table 11-11. Megan’s salary for three consecutive years, along with other values, are
presented in the table below.
Refer to Table 11-11. Suppose the consumer price index for 2010 is not necessarily
233.2. Then Megan’s 2010 salary represents more purchasing power than her 2008
salary as long as the consumer price index for 2010 is
a. greater than 240.00.
b. less than 240.00.
c. greater than 233.33.
d. less than 233.33.
Comparative advantage is related most closely to which of the following?
a. output per hour
b. opportunity cost
c. efficiency
d. bargaining strength in international trade
The natural rate of unemployment
a. is constant over time.
b. varies over time, but can”t be changed by the government.
c. is the unemployment rate that the economy tends to move to in the long run.
d. depends on the rate at which the Fed increases the money supply.
Suppose U.S.-based Intel Corporation builds and operates a new computer chip factory
in Ghana. Future production from such an investment would
a. increase Ghanaian GDP more than it would increase Ghanaian GNP.
b. increase Ghanaian GNP more than it would increase Ghanaian GDP.
c. not affect Ghanaian GNP, but would increase Ghanaian GDP.
d. have no affect on either Ghanaian GDP or GNP.
Suppose that monetary neutrality holds. Of the following variables, which ones do not
change when the money supply increases?
a. real interest rates
b. inflation
c. the price level
d. real output
e. real wages
f. nominal wages
Identify each of the following topics as being part of microeconomics or
macroeconomics:
a. the impact of a change in consumer income on the purchase of luxury automobiles
b. the effect of a change in the price of Coke on the purchase of Pepsi
c. the impact of a war in the Middle East on the rate of inflation in the United States
d. factors influencing the rate of economic growth
e. factors influencing the demand for tractors
f. the impact of tax policy on national saving
g. the effect of pollution taxes on the U.S. copper industry
h. the degree of competition in the cable television industry
i. the effect of a balanced-budget amendment on economic stability
j. the impact of deregulation on the savings and loan industry
Table 3-8
Assume that Huang and Min can switch between producing parasols and producing
porcelain plates at a constant rate.
Labor Hours Needed
to Make 1 Quantity Produced
in 36 Hours
Refer to Table 3-8. The opportunity cost of 1 plate for Huang is
a. 1/3 parasol.
b. 1/2 parasol.
c. 3 parasols.
d. 4 parasols.
When a binding price floor is imposed on a market to benefit sellers,
a. every seller in the market benefits.
b. all buyers and sellers benefit.
c. every seller who wants to sell the good will be able to do so, but only if he appeals to
the personal biases of the buyers.
d. some sellers will not be able to sell any amount of the good.
Figure 8-20. The figure represents the relationship between the size of a tax and the tax
revenue raised by that tax.
Refer to Figure 8-20. For an economy that is currently at point D on the curve, a
decrease in the tax rate would
a. decrease consumer surplus.
b. decrease producer surplus.
c. increase tax revenue.
d. increase the deadweight loss of the tax.
Table 15-3
2010 Labor Data for Adults (age 16 and older) in Meditor
Refer to Table 15-3. What is the adult female unemployment rate in Meditor?
a. 4.8 percent
b. 5 percent
c. 7.1 percent
d. 7.7 percent
Purchasing-power parity describes the forces that determine
a. prices in the short run.
b. prices in the long run.
c. exchange rates in the short run.
d. exchange rates in the long run.
Years ago, thousands of country music fans risked their lives by rushing to buy tickets
for a Willie Nelson concert at Carnegie Hall. This behavior indicates
a. the ticket price was above the equilibrium price.
b. the ticket price was below the equilibrium price.
c. the ticket price was at the equilibrium price.
d. nothing about the equilibrium price.
Suppose the economy is in long-run equilibrium. In a short span of time, there is a large
influx of skilled immigrants, a major new discovery of oil, and a major new
technological advance in electricity production. In the short run, we would expect
a. the price level to rise and real GDP to fall.
b. the price level to fall and real GDP to rise.
c. the price level and real GDP both to stay the same.
d. All of the above are possible.
Gabrielle, an Italian citizen, uses some previously obtained dollars to purchase a bond
issued by a U.S. company. This transaction
a. decreases U.S. net capital outflow.
b. does not change U.S. net capital outflow.
c. increases U.S. net capital outflow by more than the value of the bond.
d. increases U.S. net capital outflow by the value of the bond.
Scenario 11-3
Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh
Holloway, is an accountant today and he earned $210,000 in 2008. The price index was
17.6 in 1944 and 184 in 2008.
Refer to Scenario 11-3. In real terms, Josh Holloway’s income amounts to about what
percentage of Sue Holloway’s income?
a. 67 percent
b. 167 percent
c. 1045 percent
d. 1750 percent
Lucky Hardware Store considered building a store in a new location. The owners and
their accountants decided that this was not the profitable thing to do. However, soon
after they made this decision, both the interest rate and the cost of building the store
changed. In which case do these changes both make it more likely that they will now
build the store?
a. Interest rates rise and the cost of building the store rises.
b. Interest rates rise and the cost of building the store falls.
c. Interest rates fall and the cost of building the store rises.
d. Interest rates fall and the cost of building the store falls.
Figure 3-4
Perry’s Production Possibilities Frontier Jordan’s Production Possibilities Frontier
Refer to Figure 3-4. If Jordan must work 3 months to write each novel, then her
production possibilities frontier is based on how many months of work?
a. 1 month
b. 3 months
c. 4 months
d. 12 months
You have been promised a payment of $250,000 in the future. In which case is the
present value of this payment highest?
a. You receive the payment 3 years from now and the interest rate is 8 percent.
b. You receive the payment 3 years from now and the interest rate is 6 percent.
c. You receive the payment 2 years from now and the interest rate is 8 percent.
d. You receive the payment 2 years from now and the interest rate is 6 percent.
The increase in living standards of American workers over the past century is primarily
due to
a. the success of labor unions.
b. minimum-wage laws.
c. improvements in productivity.
d. None of the above are correct.
Other things the same, if the money supply rises by 2% and people were expecting it to
rise by 5%, then some firms have
a. higher than desired prices which increases their sales.
b. higher than desired prices which depresses their sales.
c. lower than desired prices which increases their sales.
d. lower than desired prices which depresses their sales.
Figure 6-19
Refer to Figure 6-19. Which of the following is correct?
a. One-fourth of the burden of the tax falls on buyers, and three-fourths of the burden of
the tax falls on sellers.
b. One-third of the burden of the tax falls on buyers, and two-thirds of the burden of the
tax falls on sellers.
c. One-half of the burden of the tax falls on buyers, and one-half of the burden of the
tax falls on sellers.
d. Two-thirds of the burden of the tax falls on buyers, and one-third of the burden of the
tax falls on sellers.
A problem that the Fed faces when it attempts to control the money supply is that
a. the 100-percent-reserve banking system in the U.S. makes it difficult for the Fed to
carry out its monetary policy.
b. the Fed has to get the approval of the U.S. Treasury Department whenever it uses any
of its monetary policy tools.
c. the Fed does not have a tool that it can use to change the money supply by either a
small amount or a large amount.
d. the Fed does not control the amount of money that households choose to hold as
deposits in banks.
Which of the following actions might we logically expect to result from rising stock
prices?
a. Jim increases his consumption spending.
b. Firms sell fewer shares of new stock.
c. Firms spend less on investment.
d. None of the above is correct.
When the price of a bracelet was $25 each, the jewelry shop sold 20 per month. When it
raised the price to $35 each, it sold 14 per month. Using the midpoint method, the price
elasticity of demand for bracelets is about
a. 1.66.
b. 1.06.
c. 0.94.
d. 0.60.
If net exports are negative, then
a. net capital outflow is positive, so foreign assets bought by Americans are greater than
American assets bought by foreigners.
b. net capital outflow is positive, so American assets bought by foreigners are greater
than foreign assets bought by Americans.
c. net capital outflow is negative, so foreign assets bought by Americans are greater
than American assets bought by foreigners.
d. net capital outflow is negative, so American assets bought by foreigners are greater
than foreign assets bought by Americans.
To promote good economic outcomes, policymakers should strive to enact policies that
a. enhance productivity.
b. enhance individuals’ market power.
c. result in a rapidly-growing quantity of money.
d. All of the above are correct.
If Erin’s income decreases and, as a result, she chooses to buy fewer milkshakes per
month at each price, then her demand curve will
a. shift to the right.
b. shift to the left.
c. not shift; instead, Erin will move along her demand curve downward and to the right.
d. not shift; instead, Erin will move along her demand curve upward and to the left.
You know that a candy bar costs sixty cents today. You also know the CPI for 1962 and
the CPI for today. Which of the following would you use to compute the price of the
candy bar in 1962 prices?
a. sixty cents (today’s CPI – 1962 CPI)
b. sixty cents (1962 CPI – today’s CPI)
c. sixty cents (today’s CPI / 1962 CPI)
d. sixty cents (1962 CPI / today’s CPI)
Critics of government-run employment agencies and public training programs argue
that the private market is better at matching workers and jobs than the government is.
Inflation can be measured using either the GDP deflator or the consumer price index.
If a country made it easier for people to establish and prove the ownership of their
property, real GDP per person would likely rise.
If a savings account pays 5 percent annual interest, then the rule of 70 tells us that the
account value will double in approximately 14 years.
Consumer surplus is the amount a buyer actually has to pay for a good minus the
amount the buyer is willing to pay for it.
More than three-fourths of the unemployed are recent entrants into the labor force.
If the purchasing power of the dollar is always the same at home and abroad, then the
nominal exchange rate defined as units of foreign currency per dollar decreases if the
U.S. price level rises more than the price level in foreign countries.
Ticket scalping can increase total surplus in the market for tickets to sporting events.
Credit cards are a medium of exchange.
When unions raise wages in one part of the economy, the supply of labor increases in
other parts of the economy, which reduces wages in industries that are not unionized.
What is the difference between money and wealth?
Most entrepreneurs finance their purchases of real capital using their past saving.
The real interest rate is the interest rate corrected for inflation.
Efficiency is related to the size of the economic pie, whereas equality is related to how
the pie gets sliced and distributed.
Economics is the study of how society allocates its unlimited resources.