The supply curve for a perfectly competitive industry is obtained by
a. making an empirical study of historical data.
b. vertically summing the supply curves of firms in the industry.
c. horizontally summing the average cost curves of firms in the industry.
d. horizontally summing the supply curves of firms in the industry.
Illegal gambling on the NCAA Final Four would be included in GDP.
a. True
b. False
Figure 5-13
In Figure 5-13, the consumer is better off
a. at A than at E.
b. at B than at D.
c. at any point on U2 than at any point on U1.
d. All of the above are correct.
When pollution problems arise from a sudden crisis, pollution taxes are a useful form of
control.
a. True
b. False
The deficit can be defined in simple terms as
a. Tax receipts − government expenditures + transfers.
b. Tax receipts + government expenditures + transfers.
c. Government expenditures + transfers − tax receipts.
d. Government expenditures − transfers − tax receipts.
A total product curve shows the
a. aggregate output of many firms in an industry.
b. amount of product consumers will take off the market.
c. maximum amount of product that it is technically possible to produce.
d. relationship between units of inputs and total output.
The Federal Reserve helped J.P. Morgan purchased Bear Stearns by agreeing to
purchase some unwanted Bear Stearns assets.
a. True
b. False
The U.S. government banned cigarette advertising on radio and television after January,
1971. You would expect to find that after the ban took effect the price of magazine ads
for
a. all goods fell.
b. only cigarettes fell.
c. all goods rose.
d. only cigarettes rose.
A demand curve to remain unit elastic along its entire length should
a. cross the X axis.
b. touch the X axis but not the Y axis.
c. never touch either the X or the Y axis.
d. touch the Y axis but not the X axis.
The fact that resources tend to be specialized is one reason the production possibilities
frontier is drawn
a. bowed outward.
b. bowed inward.
c. as a straight line (but not horizontal).
d. as a horizontal straight line.
As the level of real interest rates rise, the amount of new investment will rise also.
a. True
b. False
Inflation is a very minor problem for lenders because it is relatively easy to estimate
future rates of inflation.
a. True
b. False
The more money firms spend on R&D the faster the economy is expected to grow.
a. True
b. False
The fact that severe fluctuations in inflation and unemployment are socially undesirable
helps make the case for
a. a “hands off” policy by the government.
b. fixed prices and wages.
c. active government stabilization policy.
d. restrictions on imports from low wage countries.
Economists define efficiency as
a. output maximization.
b. the absence of waste.
c. input maximization.
d. the presence of surplus.
Economists generally assume that ____ economic growth is better for society.
a. slower
b. faster
c. stable
d. declining
Technological advances shift the supply curve rightward.
a. True
b. False
Global warming of the past century, and especially in the past decade, is at least partly a
consequence of human activities that have increased ____ in the atmosphere.
a. smog
b. PCBs
c. ozone
d. “greenhouse gases”
A sum of money received at a future date
a. is worth less than the same sum of money received today.
b. is worth more than the same sum of money received today.
c. has the same value as the same sum of money received today.
d. is worth less than the same sum of money received yesterday.
Water quality in the United States has ____ in the past 25 years.
a. improved
b. worsened
c. remained unchanged
d. improved slightly before a recent deterioration
Banks in the United States may create new money equal to their amount of required
reserves.
a. True
b. False
If U.S. interest rates rise while foreign interest rates remain unchanged,
a. GDP will not change since the shift in aggregate supply cancels the positive effects
on aggregate demand.
b. the dollar will depreciate and thus reduce prices and output.
c. foreign capital will be attracted to the United States and the dollar will appreciate.
d. net exports will increase and the economy will expand.
Figure 21-1
In Figure 21-1, a reform in the distribution system that achieves the same distribution
with less damage to work incentives is represented by a move from which points?
a. A to B
b. C to G
c. C to F
d. B to C
Innovation is the act of putting an invention to practical use.
a. True
b. False
In making policies about the nation’s money supply, the Federal Reserve Board
a. operates as an independent entity.
b. must consult each member bank.
c. must consult with Congress.
d. must coordinate all activity with the White House.
Transfer payments exactly replace the income lost because of taxes.
a. True
b. False
Marginal profit equals the difference between marginal revenue and average cost.
a. True
b. False
The following price-quantity coordinates for gold used by U.S. dentists were observed:
P = $875/ounce, Q = 342,000; P = $200/ounce, Q = 706,000. These points most likely
lie along the
a. supply curve for gold for dental use.
b. demand curve for dental use.
c. equilibrium curve for dental use.
d. production possibilities curve for dental use.
Figure 10-6
In Figure 10-6, which graph best illustrates an autonomous increase in consumption
spending?
a. (1)
b. (2)
c. (3)
d. (4)
In 2008, interest rates on Treasury securities fell even though most other interest rates
were rising.
a. True
b. False
Figure 8-1
Given the scatter diagram in Figure 8-1, how much will consumption decrease if the
price level rises by 5 percent?
a. $50 billion
b. $100 billion
c. $200 billion
d. cannot be determined
The definition of human capital refers to
a. worker education and workers’ equipment.
b. worker education and workers’ physical capital.
c. workers’ equipment and workers’ physical capital.
d. worker education and worker training.
An oligopoly will always use game theory to maximize sales rather than profits.
a. True
b. False
High unemployment is socially wasteful. Why?
Discuss some of the arguments that help explain why wages and prices rarely fall in a
modern economy.
What are the strengths and weaknesses of the negative income tax (NIT) as an
alternative to traditional welfare programs?
What is the difference between the deficit and the debt?
If stocks are more risky than bonds, why would a rational investor ever buy stocks?
Why do booms and recessions tend to be transmitted across national borders?
Draw a graph illustrating the relationship between the demand curve of the perfectly
competitive firm and the perfectly competitive industry. Label all curves and axes
correctly.
What reasons would economists give for an increase in the natural rate of
unemployment that could have occurred from 2007 to 2011? What argument would
suggest that the natural rate of unemployment may not have risen?
What is a repeated game? Hoe does this helps the players in a game?
What are the advantages of a tax system for pollution control?
If a firm’s fixed cost (overhead) increases, what happens to its profit-maximizing price
and output?
Use consumer indifference curves and budget lines to show the optimal consumption
curves for a normal good and for an inferior good. (Use two graphs.) Be sure your
graphs are completely and correctly labeled.
In perfect competition, one result of the model was that there were no economic profits
in the long run. In a monopoly, the firm typically earns a positive economic profit. Why
is there this difference?
Some of the promising approaches to reducing the natural rate of unemployment have
to do with education, training, and job placement. What implementation problems do
you anticipate?
On balance, does market power promote or retard technological innovation?
Why is regulation necessary to achieve “universal service”?
The total expenditure schedule in Macroland begins with these initial levels (in billions
of dollars): Income = 1,000; Consumption = 900; Investment = 200; Government =
300; Net Exports = −100. If the MPC = 0.75 and income increases in increments of
200, find the equilibrium level of income. If full employment requires an income level
of 2,000, what (if anything) should the government do? Indicate both the direction of
the spending change and the size of the spending change.
Graphically show a firm earning a profit; shade the appropriate profit rectangle. Explain
how the profit formula represented by the rectangle is analogous to TR – TC.
Show graphically the effect of technological advance on the price of music downloads.
In a separate graph show what happens to the price of CDs as a secondary effect of the
new download technology.
Discuss national defense, infant industry, and strategic trade as arguments for
protection.