Deadweight loss refers to the reduction in economic surplus resulting from a market not
being in competitive equilibrium.
Answer:
A decrease in disposable income will shift the aggregate demand curve to the left.
Answer:
If the multiplier is 10, the marginal propensity to consume must be 0.1.
Answer:
Network externalities refer to the situation where the usefulness of a product increases
with the number of consumers who use it.
Answer:
One reason college students do not study enough to get high grades is that they are
unrealistic about their future behavior.
Answer:
Human capital refers to the accumulated skills and training that workers possess.
Answer:
An increase in the unemployment rate may be represented as a movement from a point
on the production possibilities frontier to a point inside the frontier.
Answer:
Potential GDP is always greater than real GDP in an economy.
Answer:
Collusion would be common in an oligopoly and a monopolistically competitive
industry.
Answer:
If planned aggregate expenditure equals GDP, the economy is in macroeconomic
equilibrium.
Answer:
If Abigail can make more candles in one day than Pierre, then Abigail has an absolute
advantage in making candles.
Answer:
The supply of money is easier to control with commodity money than it is with fiat
money.
Answer:
If real equilibrium GDP is above potential GDP, expansionary fiscal policy should be
pursued.
Answer:
The payment received by suppliers of entrepreneurial skills is called profit.
Answer:
Figure 5-13 Figure 5-13
illustrates the market for gasoline before and after the government imposes a tax to
bring about the efficient level of gasoline production. The amount of the gasoline tax is
________ per gallon.
A) $0.75
B) $1.25
C) $1.75
D) $2.00
Answer:
If the quantity of tacos demanded is represented by the equation QD = 20 – 0.5P then
the corresponding price of tacos is represented by the equation
A) P = 0.5QD + 10.
B) P = 40 – 2QD.
C) P = 10 – 2QD.
D) P = QD + 40.
Answer:
Which of the following is a normative economic statement?
A) Tobacco products should be banned in all public spaces.
B) The increase in tobacco taxes has caused an increase in the price of cigarettes.
C) Better awareness of health risks has decreased tobacco use.
D) A reduction in tobacco subsidies has caused the price of tobacco to increase.
Answer:
Mel’s House of Cars is an automobile dealership that sells both new and used cars. Two
other dealerships located nearer Mel’s pay their salespeople a straight salary – they
receive no commission for each car they sell. Mel has decided to pay all of his
salespeople a commission on all car sales. Which of the following is most likely to
occur as a result of Mel’s decision?
A) Mel will have difficulty finding salespeople. Research by labor economists has
found that most employees prefer the security of a salary to the uncertainty of being
paid based on how much revenue they generate for their employers.
B) Mel will experience a principal-agent problem. Some of his salespeople will tend to
shirk because they will not be paid if they sell no cars, regardless of how hard they
work.
C) Mel will be able to hire some of the most productive salespeople who work for the
other two dealerships.
D) Mel risks violation of federal law that regulates firms’ compensation policies.
Answer:
Refer to the Article Summary. Arguing that a merger would lead to higher prices,
reduced service, and significantly less competition, the Justice Department and
attorneys general from 6 states and the District of Columbia filed a lawsuit in
August to challenge the pending merger of American Airlines and US Airways.
The lawsuit took some by surprise as the Justice Department has in recent years
approved the mergers of Delta with Northwest and United with Continental. The
European Union approved the merger in August, and American and US Airways
had hoped to complete the merger by September. Source: Even Perez, “US
government seeks to block American-US Airways merger,” CNN.com, August 13,
2013.
A merger between two competitors such as American Airlines and US Airways may
ultimately be approved by the Department of Justice and the FTC if the two companies
can substantiate ________ as a result of the merger.
A) increases in revenue for the merged company
B) an increase in the HHI to over 1,800
C) decreases in marginal revenue for the merged company
D) increases in economic efficiency
Answer:
Figure 3-6
The figure above represents the market for canvas tote bags. Compare the conditions in
the market when the price is $50 and when the price is $35. Which of the following
describes how the market differs at these prices?
A) At each price there is a surplus; the surplus is greater at $35 than at $50.
B) The difference between quantity supplied and quantity demanded is greater at $50
than at $35.
C) At each price there is a surplus; firms will lower the equilibrium price in order to
eliminate the surplus.
D) At each price the supply of tote bags exceeds that demand for tote bags.
Answer:
Table 2-8
Table 2-8 shows the number of labor hours required to produce a digital camera and a
pound of wheat in China and South Korea. If the two countries specialize and trade,
who should export digital cameras?
A) There is no basis for trade between the two countries.
B) China
C) South Korea
D) They should both be importing digital cameras.
Answer:
Article Summary. Brandeis University economist Benjamin Shiller has written a
paper which explains how Netflix could combine demographic data with
customers’ Web browsing habits to more accurately predict how much a customer
would be willing to pay for a Netflix subscription, and how using this method of
first-degree price discrimination would generate higher profits. Shiller explains
that the more information a company has about its customers, the better it is at
being able to set prices to increase profits. As he stated in his paper, “Using all
variables to tailor prices, one can yield variable profits 1.39 percent higher than
variable profits obtained using non-tailored 2nd degree price-discrimination.
Using demographics alone to tailor prices raises profits by much less, yielding
variable profits only 0.14% higher than variable profits attainable under 2nd
degree [price discrimination].” Source: Brian Fung, “How Netflix could use Big
Data to make twice as much money off you,” Washington Post, September 4, 2013.
The pricing method described in the article is referred to as first-degree price
discrimination. First-degree price discrimination is also known as
A) arbitrage.
B) perfect price discrimination.
C) odd pricing.
D) two-part tariff pricing.
Answer:
Table 12-1
Table 12-1 shows the short-run cost data of a perfectly competitive firm that produces
plastic camera cases. Assume that output can only be increased in batches of 100 units.
If the market price of each camera case is $8, what is the firm’s total revenue?
A) $2,400
B) $3,200
C) $4000
D) $4,800
Answer:
A guild is
A) a group of independent producers competing with each other.
B) an organization of producers that limits the amount of a good produced.
C) a group of nations who agree not to compete with each other.
D) a nation that is a free market benchmark.
Answer:
Which of the following could cause nominal GDP to decrease, but real GDP to
increase?
A) The price level rises and the quantity of final goods and services produced rises.
B) The price level falls and the quantity of final goods and services produced rises.
C) The price level rises and the quantity of final goods and services produced falls.
D) The price level falls and the quantity of final goods and services produced falls.
Answer:
Which of the following statements is not true?
A) Consumer surplus measures the difference between the highest price a consumer is
willing to pay for a product and the price she actually pays.
B) Marginal benefit is the additional benefit to a consumer from consuming one more
unit of a product.
C) Consumer surplus measures the net benefit from participating in a market.
D) Producer surplus measures the total benefit received by producers from participating
in a market.
Answer:
Table 16-1
Table 16-1 shows the price for the hardcover version of the novel Inferno by Dan
Brown at four online bookstores. Which of the following can one conclude from the
data above?
A) The data provides clear evidence of price discrimination in online bookstore market.
B) Amazon.com and Walmart.com are able to charge a lower price for the item because
they are more cost efficient than the other two companies.
C) The item offered for sale is similar but not identical; the quality of service and
delivery time might vary from store to store, which justifies the price differences.
D) Walmart.com and Amazon.com have deliberately under-priced their product to force
the other two companies out of business.
Answer:
The larger the number of firms in an industry,
A) the easier it is to implicitly collude to fix prices.
B) the more intense the rivalry among firms.
C) the greater the need for a price enforcement mechanism.
D) the larger the potential number of market segments.
Answer:
Which of the following statements is true?
A) Exports benefit trading countries because exports create jobs. Imports do not benefit
trading countries because they result in a loss of jobs.
B) Each year China exports about 50 percent of its wheat crop and 40 percent of its rice
crop.
C) Most of the leading exporting countries are large, high-income countries.
D) All sectors of the U.S. economy are affected equally by international trade.
Answer:
The labor force equals the number of people
A) employed.
B) unemployed.
C) employed plus unemployed.
D) in the working-age population.
Answer:
Explain what potential conflict exists between shareholders in a corporation and the
corporation’s managers.
Answer:
Suppose that the current equilibrium GDP is $14.5 trillion and that potential GDP is
$14.3 trillion. Will decreasing government purchases by $200 billion, or raising taxes
by $200 billion, restore the economy to potential GDP? Explain.
Answer:
Why is the real-world deposit multiplier smaller than 1/RR, where RR is the required
reserve ratio?
Answer:
The Wilfer Resort Hotel has a spectacular view of a pine forest along a river bank.
Suppose a commercial logger has purchased the pine forest and is planning to clear-cut
the forest in a way that has a negative impact on the resort. Can the two parties arrive at
a Coasian solution and if so what is it?
Answer:
Define productive efficiency. Does productive efficiency imply allocative efficiency?
Explain.
Answer:
Table 9-23
The table above lists the actual minimum wage and CPI in 1974 and in 2012. Using the
above table, calculate the real minimum wage for 1974 and 2012. Calculate the rate of
growth of the real minimum wage from 1974 to 2012. Are workers better off in terms of
the purchasing power of a dollar in 1974 or 2012? Explain why.
Answer:
Use the following supply schedule for cherries to draw a graph of the supply curve. Be
sure to label the supply curve and each axis, and show each point on the supply curve.
Answer:
