If it costs Danitra $225 to create 4 necklaces and $275 to create 5 necklaces, then $50 is
the marginal cost of producing the 5th necklace.
The basis for trade is comparative advantage, not absolute advantage.
Consider a country that produces only two goods: kayaks and coconuts. Suppose it is
possible for this country to increase its production of kayaks without producing fewer
coconuts. In this case, its current output combination is efficient.
The demand for The Federalist Papers is likely to be more elastic than the demand for
a best-selling mystery novel.
The market demand curve in a perfectly competitive market is downward sloping.
If the demand for a product increases and the supply of the same product increases, the
equilibrium price will increase.
When potential GDP increases, long-run aggregate supply also increases.
A decrease in the level of cyclical unemployment will shift the long-run Phillips curve.
If technological change occurs in the economy,
A) the long-run aggregate supply curve will shift to the right.
B) the long-run aggregate supply curve will shift to the left.
C) we will move up along the long-run aggregate supply curve.
D) we will move down along the long-run aggregate supply curve.
In Porter’s Five Competitive Forces model, “competition from substitute goods or
services” refers to
A) substitute products that come from outside the industry.
B) substitute products that come from domestic competitors in the same industry.
C) substitute products that come from foreign competitors in the same industry.
D) competition from producers of substitutes who outsource their production.
Today, the United States charged an average tariff rate
A) that is more than its average tariff rate in 1930.
B) which is greater than any other high-income country.
C) of less than 2 percent.
D) that exceeds 50 percent.
Figure 1-3
Calculate the area of the trapezoid X.
A) $361
B) $450
C) $1,020
D) $1,140
Two actions by the Fed during Alan Greenspan’s term as chairman have been identified
as possibly contributing to the financial crisis in 2008. Which of the following was one
of those actions?
A) decreasing the money supply to fight the possibility of disinflation
B) the decision during 1998 to help save the hedge fund Long Term Capital
Management
C) working in concert with the European Central Bank to stabilize the dollar / euro
exchange rate
D) financing the war in Afghanistan by printing money and generating rapid inflation
The main result of the monetarist model is that
A) workers and firms have rational expectations.
B) the quantity of money should be increased at a constant rate.
C) productivity shocks explain fluctuations in real GDP.
D) the economy is slow to adjust to sticky wages and prices.
Table 7-6 Production and
Consumption Production
Without Trade With Trade
Estonia and Morocco can produce both swords and belts. Table 7-6 shows the
production and consumption quantities without trade, and the production numbers with
trade. If the actual terms of trade are 1 belt for 1.5 swords and 70 belts are traded, how
many belts will Morocco gain compared to the “without trade” numbers?
A) 10
B) 20
C) 70
D) 80
Assume that both the demand curve and the supply curve for MP3 players shift to the
right but the demand curve shifts more than the supply curve. As a result
A) both the equilibrium price and quantity of MP3 players will increase.
B) the equilibrium price of MP3 players will increase; the equilibrium quantity may
increase or decrease.
C) the equilibrium price of MP3 players may increase or decrease; the equilibrium
quantity will increase.
D) the equilibrium price of MP3 players will decrease; the equilibrium quantity may
increase or decrease.
Suppose two firms in a duopoly implicitly collude and charge a high price. How might
each firm benefit from advertising that it will match the lowest price offered by its
competitor?
A) The offer to match prices is a way of deterring entry by other large firms, thereby
keeping the market share of the existing firms intact.
B) The advertisement ensures that the other firm does not cheat. If a firm cheats on the
agreement and charges the lower price, the rival firm will retaliate by doing the same.
C) The offer to match prices is a way of signaling to antitrust authorities that the firms
are not engaged in illegal collusion.
D) The advertisement is meant to suggest to consumers that the offered price is actually
the lowest price available.
Which of the following is a characteristic of a firm in a perfectly competitive market?
A) The firm cannot make a profit in the short run because it is too small a part of the
total market.
B) The firm can make a profit in the long run but not in the short run.
C) The firm can sell as much as it wants without having to lower its price.
D) The firm must lower its price in order to increase quantity demanded.
A contract under which a buyer agrees to make payments in exchange for the provider
agreeing to pay some or all of the buyer’s medical bills is referred to as
A) a fee-for-service plan.
B) the Affordable Care Act.
C) a deductible.
D) health insurance.
Which of the following is an example of a nonexcludable product?
A) college education
B) a public library
C) public transportation
D) Internet service for your home computer
Explain why the demand curve for loanable funds has a negative slope.
How would a marketing campaign directed at single women improve the chances of
success at a place like a cigar bar?
Japan experienced periods of deflation € a declining price level € during the 1990s.
During a deflationary period, which would be higher: nominal GDP or real GDP? Why?
Assume that the base year of choice is prior to the deflationary period.
List the five main factors of production.
The increase in consumption of a good when its price falls is caused by two effects.
What are these two effects? Explain the difference between these effects.
What do reports that the dollar is “undervalued” mean? How will foreign exchange
markets respond to this information? Support your answer graphically.
Why are music, television, and movie companies concerned about their products being
posted to Internet websites such as YouTube?