The demand and total cost schedules of a monopolist are presented in Table 11-2. What
price should a profit-maximizing monopolist charge?
a. $10
b. $9
c. $8
d. $7
Figure 9-1
Figure 9-1 shows the marginal and average total cost curves for a firm producing
product A. What would be the minimum price this firm could charge and still continue
to supply A to the market in the long run?
a. $4
b. $5
c. $6
d. $8
Which of the following lists two things that both decrease the money supply?
a. raise the discount rate and make open market purchases
b. raise the discount rate and make open market sales
c. lower the discount rate and make open market purchases
d. lower the discount rate and make open market sales
Figure 10-3
Starting from long-run equilibrium at point A in Figure 10-3, at which of the following
points would short-run equilibrium occur immediately following an unanticipated
increase in stock prices?
a. A
b. B
c. C
d. D
Since 2002, the Fed has shifted to expansionary monetary policy, then to restrictive
policy, and then back to expansionary monetary policy. Policy shifts of this type are
most likely to
a. promote economic stability and stimulate employment.
b. keep the general level of prices relatively stable because the periods of restrictive
policy will just offset the periods of expansion.
c. help promote economic stability because changes in monetary policy can be counted
on to exert a predictable impact on the economy quickly.
d. promote instability because the time lags of monetary policy are long and variable.
Collusion
a. is exactly the same thing as competition.
b. involves cooperative actions by sellers at the expense of buyers.
c. requires competitive actions by sellers to win customers from rival firms.
d. can only be achieved in price-taker markets.
The national debt is
a. the difference between a nation’s exports and imports of goods and services.
b. the sum of the personal debt of all citizens in the United States.
c. the cumulative effect of all past budget deficits and surpluses of the federal
government.
d. equal to the current size of the budget deficit.
Which of the following compose the M2 money supply?
a. currency only
b. currency, demand deposits, other checkable deposits, and traveler’s checks
c. M1 plus large denomination time deposits and Eurodollar deposits
d. M1 plus savings deposits, small-denomination time deposits, and money market
mutual funds (retail)
Union membership as a share of the work force is ____ in states with right-to-work
laws. (Fill in the blank.)
a. above the national average.
b. below the national average.
c. greater than 50 percent.
d. close to 100 percent.
Profit-maximizing firms enter a competitive market when, for existing firms in that
market,
a. total revenue exceeds fixed costs.
b. total revenue exceeds total variable costs.
c. average total cost exceeds average revenue.
d. price exceeds average total cost.
A monopolist will earn economic profits as long as his price exceeds
a. marginal revenue.
b. average fixed cost.
c. average variable cost.
d. average total cost.
Which of the following is the clearest evidence of employment discrimination against
minority employees?
a. The average wages of minority workers are lower than the average wages of whites.
b. The average wages of minority employees are lower than the average wages of
whites with similar productivity characteristics.
c. The mean number of years of schooling of minority workers is lower than that of
whites.
d. The average hours worked by minority employees exceeds the hours worked by
whites.
Use the production possibilities data below to answer the following question(s).
Table 2-3
Refer to Table 2-3. The opportunity cost of 1 pound of meat for the farmer is
a. 1/4 hour of labor.
b. 4 hours of labor.
c. 4 pounds of potatoes.
d. 1/4 pound of potatoes.
When equilibrium is present in the foreign exchange market, which of the following
will tend to be in balance?
a. the value of goods exported and the value of goods imported
b. real and nominal interest rates
c. imports plus capital outflow and exports plus capital inflow
d. tax revenues and government expenditures
A major difference between a tariff and a quota is that a tariff
a. will reduce imports, but a quota generally will not.
b. can easily be rescinded, but a quota cannot.
c. will reduce the ability of foreigners to obtain the purchasing power to buy a nation’s
export goods, but a quota will not affect the foreign demand for the nation’s exports.
d. typically generates tax revenue, while a quota does not.
A major advantage of built-in or automatic stabilizers is that they
a. guarantee the federal budget will be balanced over the course of the business cycle.
b. require no Congressional action to be effective.
c. automatically produce surpluses during recessions and deficits during inflation.
d. require discretionary actions on the part of Congress before they exert an impact on
output and employment.
Which of the following is necessarily true when an economy is in long-run equilibrium?
a. Prices will be constant (that is, inflation will be zero).
b. The actual output will be less than the full-employment (or potential) output.
c. The actual rate of unemployment equals the natural rate of unemployment.
d. The output of the economy will be greater than the full-employment output.
Predictions of severe shortages due to impending natural resource depletion
a. are widely accepted by resource economists even though such predictions are a
relatively new occurrence.
b. have been wrong in the past, but most resource economists believe that the threat of
resource depletion is now far more severe than ever before.
c. are typically made without adequate recognition and consideration of resource price
elasticities.
d. typically assume that price elasticities are greater than they really are.
A downward-sloping portion of a long-run average total cost curve is the result of
a. economies of scale.
b. diseconomies of scale.
c. diminishing returns.
d. the existence of fixed resources.
In voluntary exchange, if the seller of a product gains,
a. the buyer will generally lose an amount greater than the gain to the seller.
b. the buyer must lose an amount equal to what the seller gains.
c. someone else must lose an equal amount.
d. the buyer must also gain; mutual gain provides the foundation for exchange.
Figure 2-10
Refer to Figure 2-10. A movement from point C to point D could be caused by
a. unemployment.
b. a decrease in society’s preference for bananas.
c. fewer resources available for production of bananas.
d. All of the above are correct.
According to Angus Madison, a leading authority in the area, world per capita GDP
a. increased by about 50 percent during the 800 years following year 1000, but it
increased by nearly tenfold during the past 200 years.
b. increased by nearly tenfold during the 800 years between 1000 and 1813, but it
increased by only 50 percent during the past 200 years.
c. has grown steadily during the past 1000 years.
d. Grew at an annual rate of more than 2 percent during 1000-1813, but the annual
growth rate has declined as the population increased during the past 200 years.
As people have more time to adjust to a price change,
a. demand becomes more elastic, and supply becomes less elastic.
b. demand becomes less elastic, and supply becomes more elastic.
c. both supply and demand become less elastic.
d. both supply and demand become more elastic.
e. elasticity of both demand and supply tends toward unity.
For a major country with extensive capital flows, what is the effect of a decrease in
interest rates?
a. There will be an inflow of capital, a currency depreciation, and increased net exports.
b. There will be an inflow of capital, a currency depreciation, and reduced net exports.
c. There will be an outflow of capital, a currency depreciation, and increased net
exports.
d. There will be an inflow of capital, a currency appreciation, and reduced net exports.
According to the new classical view, if people appropriately realize that an increase in
government debt implies higher future taxes, they will
a. save less since the substitution of debt for taxes makes them wealthier.
b. increase their consumption since the substitution of debt for taxes makes them
wealthier.
c. save more now to meet the future tax liability implied by the increase in debt.
d. alter neither their saving nor their consumption rate.
The fact that wage differentials continue to exist across different groups of workers
leads economists to believe that
a. discrimination by customers is the most common type of economic discrimination.
b. differences in human capital and job characteristics must be important in explaining
the differences in wages.
c. firms apparently are not profit maximizers.
d. the market has failed to properly allocate wages to different workers.
Fracking, a technique for breaking up (or fracturing) rock deep under the earth to
release natural gas, has
a. increased the price of natural gas.
b. decreased the supply of natural gas.
c. contaminated natural gas so it is no longer a “clean” fuel.
d. decreased the price of natural gas.
Which of the following is most likely to lead to an increase in the rental price of
apartments near your campus?
a. lower property taxes on apartment buildings
b. an unexpected increase in enrollment at your college
c. lower prices for the bricks used in the construction of apartments
d. the building of a new large dormitory on the college campus
During the three years following the financial crisis of 2008,
a. the monetary base more than doubled and the M1 money supply increased even more
rapidly.
b. the monetary base more than doubled, but the M1 money supply increased much less
rapidly.
c. the monetary base fell by almost 50 percent, but the M1 money supply continued to
grow at a steady rate.
d. the monetary base fell by almost 50 percent, causing a sharp reduction in the M1
money supply.
Figure 15-3
As shown in Figure 15-3, if people behave according to rational expectations theory, an
increase in the aggregate demand curve from AD1 to AD2 will cause the price level to
move
a. directly from 100 to 105 and then remain at 105.
b. directly from 100 to 110 and then remain at 110.
c. from 100 to 105 initially and then eventually move back to 100.
d. from 100 to 105 initially and then eventually move to 110.
Government programs that take money from high-income people and give it to
low-income people typically
a. improve economic efficiency because they reducing poverty.
b. reduce economic efficiency because they distort incentives.
c. have no effect on economic efficiency because they both reduce poverty and distort
incentives.
d. sometimes improve, sometimes reduce, and sometimes have no effect on economic
efficiency.
If fixed cost at quantity (Q) = 100 is $130, then
a. fixed cost at Q = 0 is $0.
b. fixed cost at Q = 0 is less than $130.
c. fixed cost at Q = 200 is $260.
d. fixed cost at Q = 200 is $130.
e. it is impossible to calculate fixed costs at any other quantity.
How will increased usage of the Internet by employers and employees influence the job
search process?
a. It will make job-related information more costly and, therefore, tend to increase the
rate of unemployment.
b. It will make job-related information less costly and, therefore, tend to increase the
rate of unemployment.
c. It will make job-related information more costly and, therefore, tend to reduce the
rate of unemployment.
d. It will make job-related information less costly and, therefore, tend to reduce the rate
of unemployment.
Which of the following is an important ingredient of efficient economic organization?
a. high marginal tax rates
b. competitive markets
c. rapid increases in the money supply
d. imposition of high tariffs that will protect domestic producers from the ravages of
foreign competition
Use the figure to answer the following question(s).
Figure 8-9
In Figure 8-9, which output would minimize the firm’s average total cost of production?
a. 30
b. 40
c. 50
d. 60