Prices are useful in coordinating society’s economic planning because
a. they convey information about which goods are scarce and which are plentiful.
b. economies based on price systems are more flexible than centrally planned
economies.
c. economies based on price systems are more likely than centrally planned economies
to minimize the cost of producing society’s output.
d. All of the above are correct.
A firm’s AC will eventually begin to rise because
a. managers’ salaries rise with output.
b. bottlenecks may be reached for some inputs.
c. MFC begins to rise near capacity.
d. the range of negative returns is reached.
Figure 5-13
In Figure 5-13, the line AB is
a. an indifference curve.
b. a budget line.
c. a marginal utility curve.
d. a demand curve.
A firm that sells at a price below average cost is losing money.
a. True
b. False
A vertical demand curve has an elasticity of demand equal to zero.
a. True
b. False
Suppose Tammy grew up on a farm and is very good at plowing. In addition suppose
she is a popular country singer who earns $4,000 per performance. If her husband Bob
can plow (but not as well as Tammy) but he can’t carry a tune, then it would be most
efficient if
a. Tammy did both the plowing and the singing.
b. Tammy specialized in plowing and Bob in singing.
c. Bob did both the plowing and singing.
d. Tammy specialized in singing and Bob in plowing.
e. They both plowed and sang.
Each point on the demand curve is
a. demand for the product.
b. a quantity demanded at that price.
c. the amount that people want to buy.
d. the amount people want to buy at different income levels.
e. All of the above are correct.
An economic boom in America should increase the
a. demand for U.S. dollars.
b. demand for U.S. goods and services.
c. demand for foreign currencies.
d. supply of foreign currencies.
If a firm goes bankrupt, the bondholders will get paid back before the stockholders get
any money.
a. True
b. False
In relation to prices that would prevail in an uncontrolled market, prices charged by a
black market are usually
a. lower, since it is hard for the sellers to locate buyers.
b. lower, since it is hard for the buyers to locate sellers.
c. higher, since black marketers expect compensation for the risk of being caught.
d. higher, since most people enjoy goods more if they are illegal.
The largest income component in the national income accounts is
a. wages.
b. rents.
c. corporate profits.
d. interest.
If you believe that expectations react quickly, you are likely:
a. a believer in rational expectations
b. a Keynesian
c. a theoretical economist
d. None of these.
Figure 20-2
Which of the following explains the movements in Figure 20-2?
a. an increase in the U.S. price level
b. a decrease in the U.S. price level
c. an appreciation of the U.S. dollar
d. an expansionary monetary policy
Policy makers and citizens who want to expand the size of the government sector would
favor stabilization policies that
a. raise G to eliminate a recessionary gap and lower taxes to eliminate an inflationary
gap.
b. raise G to eliminate a recessionary gap and raise taxes to eliminate an inflationary
gap.
c. reduce taxes to eliminate a recessionary gap and raise G to eliminate an inflationary
gap.
d. reduce taxes to eliminate a recessionary gap and reduce G to eliminate an inflationary
gap.
Which of the following areas employed more workers in 2013?
a. educational and health services
b. business and professional services
c. retail trade
d. manufacturing companies
If total spending is greater than the value of output, firms will
a. cut prices.
b. decrease production levels.
c. tend to raise prices.
d. see inventories rise.
If the FOMC orders the sale of T-bills in the open market, then bank reserves are
a. decreased, but the money supply will remain unchanged.
b. decreased, and a multiple contraction of the money supply will occur.
c. increased, but the money supply will remain unchanged.
d. increased, and a multiple expansion of the money supply will occur.
Compared to the size of GDP in 2014, the net national debt was approximately
a. 10% as large.
b. 33% as large.
c. 60% as large.
d. about twice as large.
Sales taxes, property taxes, and value-added taxes are examples of indirect taxes.
a. True
b. False
The majority of American workers are employed in the service sector of the economy.
a. True
b. False
A firm practices input substitution when it
a. retrains Joe the welder as a painter and Pat the painter as a welder.
b. buys extra machines for its workers to use.
c. allows fixed cost to become variable.
d. replaces unskilled labor with automated machinery.
The cost disease of services explains the problems surrounding the health care crisis.
a. True
b. False
Average physical product measures the increase in total output that results from a
one-unit increase in an input.
a. True
b. False
Innovation is the act of generating an idea for a new product.
a. True
b. False
Figure 7-7
In Figure 7-7 at 100 units, AFC equals
a. 10.
b. 100.
c. 180.
d. 1,000.
Most collective bargaining situations lead to strikes.
a. True
b. False
Equilibrium in the market for funds occurs when the
a. lenders and borrowers are mutually satisfied at some interest rate.
b. marginal revenue product of investment using the funds equals the interest rate.
c. demand curve for funds and the supply curve for funds intersect.
d. All of the above are correct.
The case of production with a single variable input is analogous to
a. changing the use of land, labor, and capital in production by a constant absolute
amount.
b. a controlled laboratory experiment in which the scientist permits one variable to
change at a time.
c. changing the use of land, labor, and capital in production by a constant percentage.
d. specialization in one particular product by a company.
The depreciation of the Japanese yen in 2002 would ease their problems with regard to
recession.
a. True
b. False
Figure 4-21
A surplus will tend to occur at which price in Figure 4-21?
a. P1
b. P2
c. P3
In economic theorizing, common sense will always lead to the correct answer.
a. True
b. False
If the demand for steak shifts to the right, the most likely explanation is that
a. the price of cattle feed has fallen.
b. consumer income has risen.
c. the price of steak has fallen.
d. cattle production has fallen.
The unemployment rate is equal to
a. the number unemployed divided by the labor force.
b. the number unemployed divided by the population.
c. the number unemployed divided by the number employed.
d. the labor force divided by the population.