If you purchase a share of stock from your friend who initially purchased the stock
three years ago, your purchase of the stock represents a transaction in the secondary
financial market.
An increase in disposable income will shift the aggregate demand curve to the right.
Suppose a monopoly is producing its profit-maximizing output level. Now suppose the
government imposes a lump-sum tax on the monopoly, independent of its output. As a
result, the monopolist will increase the price of its product to cover its higher cost.
If the market for a product is narrowly defined, then there are likely to be many
substitutes for the product and the demand for the product is relatively elastic.
If average total cost is falling, marginal cost must also be falling.
When voluntary exchange takes place, only one party gains from the exchange.
In most circumstances, employees do not pay taxes on the value of health insurance
their employers provide them.
Allocative efficiency is achieved in an industry when firms supply those goods and
services that provide consumers with a marginal benefit equal to the marginal cost of
producing those goods and services.
In a market with positive externalities, the market equilibrium quantity will be less than
the efficient equilibrium quantity.
Any output combination along a production possibility frontier is associated with
overused or unattainable resources.
If you want to know the present value of a future payment received in one year, what
formula can you use?
A) Present value equals future payment times the current market rate of interest.
B) Present value equals future payment divided by one plus the rate of interest.
C) Present value equals one plus the rate of interest in decimals divided by future
payment.
D) Present value equals future payments times one plus the rate of interest.
Figure 3-2
An increase in price of inputs would be represented by a movement from
A) A to B.
B) B to A.
C) S1 to S2.
D) S2 to S1.
In evaluating the degree of economic efficiency in a market, we can state that the size
of the deadweight loss in a market will be smaller
A) the greater the difference between marginal cost and price.
B) the smaller the difference between marginal cost and average total cost.
C) the smaller the difference between marginal cost and price.
D) the greater the difference between marginal cost and average revenue.
Figure 2-13 Figure 2-13
shows the production possibilities frontiers for Tahiti and Bora Bora. Each country
produces two goods, milk and honey.
If the two countries have the same amount of resources and the same technological
knowledge, which country has an absolute advantage in the production of milk?
A) Bora Bora
B) They have the same advantage.
C) Tahiti
D) cannot be determined
Figure 3-5
At a price of $10, the quantity sold
A) is 2 units.
B) is 4 units.
C) is 6 units.
D) is 8 units.
When a perfectly competitive firm finds that its market price is below its minimum
average variable cost, it will sell
A) the output where marginal revenue equals marginal cost.
B) any positive output the entrepreneur decides upon because all of it can be sold.
C) nothing at all; the firm shuts down.
D) the output where average total cost equals price.
Figure 5-7 The marginal benefit
of reducing pollution curve is the same curve as
A) the supply of pollution reduction curve.
B) the demand for pollution reduction curve.
C) the positive externality curve.
D) the external benefit curve.
Table 29-3
Given the following exchange rates in the above table, what are the exchange rates
stated as U.S. dollars per Danish krone and U.S. dollars per EU euro respectively?
A) 0.20 dollars per krone and 1.43 dollars per euro
B) 2.00 dollars per krone and 7.14 dollars per euro
C) 0.02 dollars per krone and 0.70 dollars per euro
D) 0.05 dollars per krone and 1.30 dollars per euro
One reason why the coffeehouse market is competitive is that
A) demand for specialty coffee is very high.
B) it is trendy and therefore is likely to have a customer following.
C) barriers to entry are low.
D) consumption takes place in public.
Table 11-3
The table above refers to the relationship between the quantity of workers employed
and the number of cardboard boxes produced per day by Manny’s House of Boxes. The
capital used to produce the boxes is fixed. The average product of labor will equal 60
boxes when Manny hires
A) the second worker.
B) the third worker.
C) the fourth worker.
D) the fifth worker.
Explain and show graphically how an increase in incomes in the United States will
affect equilibrium in the foreign exchange market?
Explain the endowment effect.
What is the relationship among the AD, SRAS and LRAS curves when the economy is in
macroeconomic equilibrium?
What are the five steps by which economists arrive at a useful economic model?
List the competitive forces in the five competitive forces model.
“When it comes to public goods, individuals do not reveal their true preferences
because it is not in their self-interest to do so.” Evaluate this statement.
When the actual inflation rate turns out to be greater than the expected inflation rate,
who gains – the borrower or the lender – and who loses? Explain why.
Table 20-12
Consider a simple economy that produces only three products: burritos, flashlights, and
golf balls. Use the information in the table to calculate the inflation rate for 2013, as
measured by the consumer price index.