An appreciation in the value of the U.S. dollar would
a. encourage foreigners to make more investments in the United States.
b. encourage U.S. consumers to purchase more foreign-produced goods.
c. increase the number of dollars that could be purchased with the euro.
d. discourage U.S. consumers from traveling abroad.
Patents grant their owners
a. a property right to new products and production processes that they have developed.
b. the exclusive right to use a newly developed process or product forever.
c. the right to use resources owned by their competitors.
d. an exemption from laws that prohibit price discrimination.
Several states require cosmetologists to undertake 1,500 hours or more of training in
order to obtain a license to provide hair styling or braiding services. This is an example
of
a. antitrust legislation.
b. government action that promotes competition.
c. a barrier to entry
d. the legal structure that is required for the operation of price-taker markets.
Which of the following best describes the difference between an objective concept and
a subjective concept?
a. A subjective concept is a fact based on observation that is not subject to personal
opinion, while an objective concept is based on personal preferences and value
judgments.
b. An objective concept is a fact based on observation that is not subject to personal
opinion, while a subjective concept is based on personal preferences and value
judgments.
c. A subjective concept relates to issues in microeconomics, while an objective concept
relates to issues in macroeconomics.
d. An objective concept can only be illustrated in words, while a subjective concept can
usually be illustrated with a graph.
Investors are often willing to pay positive prices for shares of firms that have never
earned a profit because the investors
a. do not know the firms have never earned a profit.
b. expect the firms to have positive net earnings in the future.
c. expect that interest rates will rise in the future.
d. expect that higher rates of inflation will push stock prices higher in the future.
Data from the effects of the substantial tax rate reductions in the 1980s
a. cast serious doubt on the Laffer curve as a guide for tax policy.
b. are consistent with the principles illustrated in the Laffer curve.
c. generally reject the idea that lower tax rates can lead to higher tax revenue.
d. support an “inverted Laffer curve” in which reducing tax rates for those with high
incomes leads to lower tax revenue.
Under the adaptive expectations hypothesis, which of the following is the most likely
long-run effect of a move to a more expansionary monetary policy?
a. higher prices and no change in real output
b. higher prices and expansion in real output
c. no change in prices but an expansion in real output
d. no change in either prices or real output
Which of the following is true?
a. Changes in personal costs and benefits will exert a predictable impact on the choices
of human decision makers.
b. Only direct monetary costs matter in making decisions.
c. If a good is provided free to an individual, its production will not consume valuable
scarce resources.
d. Secondary effects are seldom of importance in economics.
When economic losses are present in a market, firms will tend to
a. exit from the market.
b. raise their prices until the break-even point is reached.
c. lower their prices, regardless of cost, so they can capture more of the market.
d. increase output.
Public choice analysis suggests that bureaucrats and public-sector managers have a
strong incentive to
a. economize on their spending so more funds will be available for other government
programs.
b. ensure that their budget is exactly the size that would be considered economically
efficient.
c. expand their budgets to sizes beyond what would be considered economically
efficient.
d. keep individual legislators fully informed as to every expenditure.
Determine whether each of the following transactions will be counted in the 2005 GDP
of the United States. If the transaction is counted, identify which expenditure
component (personal consumption, gross investment, government consumption and
gross investment, or net exports) will be affected.
a. Norm, a frequent visitor to a local bar, purchases a Budweiser beer. (Budweiser beer
is domestically produced.)
b. The owner of the local bar purchases a new domestically made cooler unit in which
to store his beer.
c. Carla, a U.S. foreign exchange student, works her way through college in Germany
as a waitress in a bar.
d. On her night off, Carla purchases a Budweiser beer for her friend in the German bar.
As government becomes larger and larger as a share of the economy, economic growth
is likely to decline because
a. taxes are reduced to levels that are inconsistent with economic efficiency.
b. governments are involved in many activities for which they are ill-suited.
c. tax-transfer activities are reduced and sometimes virtually eliminated.
d. governments do not spend enough on the provision of key public goods like
education.
Which of the following would cause the money supply in the United States to expand?
a. a decrease in reserve requirements
b. an increase in the discount rate
c. the sale of bonds by a Federal Reserve bank
d. an increase in the world supply of gold
Compared to high-income families, low-income families tend to have
a. more earners per family.
b. fewer persons per family.
c. more full-time workers per family.
d. both b and c.
Which of the following best explains why economists are generally critical of
unregulated monopolists?
a. Monopolists do not try to minimize their costs of production.
b. Monopolists produce where marginal revenue is greater than marginal costs.
c. Monopolists attempt to produce too many products, and as a result, their prices are
high, and consumers waste time trying to choose between too many options.
d. Monopolists restrict output, and as a result, they fail to produce units that are valued
more than the marginal cost of producing them.
Which of the following economies have the highest degree of economic freedom?
a. Hong Kong and Singapore
b. Argentina and Brazil
c. Germany and Italy
d. Russia and Nigeria
Which of the following will most likely increase short-run aggregate supply?
a. unfavorable weather conditions in the nation’s agricultural areas
b. an increase in income tax rates
c. an increase in the expected inflation rate
d. a reduction in resource prices
In the short run, an unanticipated shift to a more expansionary monetary policy is most
likely to result in
a. an increase in short-term interest rates.
b. a reduction in aggregate demand.
c. a reduction in the inflation rate.
d. an increase in employment.
The theory of comparative advantage suggests that nations should produce a good if
they
a. have the lowest opportunity cost.
b. have the lowest wages.
c. have the most resources.
d. can produce more of the good than any other nation.
Which of the following is most important if a country is going to achieve and sustain
rapid economic growth?
a. large government expenditures as a share of GDP
b. institutions and policies that are supportive of competition (open markets) and
freedom of exchange.
c. free elections and political democracy
d. monetary policy makers who are willing to expand the supply of money rapidly
Which one of the following would count as investment in the national income
accounts?
a. buying a U.S. government bond
b. buying 100 shares of Wal-Mart stock
c. buying an existing house
d. a freight-hauling firm buying a new domestically produced truck
If the government ran a major budget deficit, and there was no noticeable effect on the
level of GDP, this could be taken as evidence of
a. Laffer curve effect.
b. structural deficit.
c. crowding-out.
d. monetary policy ineffectiveness.
Use the figure to answer the following question(s).
Figure 10-9
What price should a competitive price-searcher firm charge with the cost and demand
conditions depicted in Figure 10-9 if it wants to maximize its profit?
a. $12
b. $16
c. $20
d. $24
Given the underlying demographic changes in our society, we can expect
a. budget surpluses to outnumber budget deficits in the years ahead.
b. the number of budget surpluses to be approximately equal to the number of budget
deficits in the years ahead.
c. budget deficits to outnumber budget surpluses in the years ahead.
d. budget deficits one year to be followed by a budget surplus the next so that the
budget balances every two years.
Which of the following is a consensus view among economists with regard to fiscal
policy?
a. Changes in fiscal policy exert a strong influence on real output, just as the basic
Keynesian model suggests.
b. Expansionary fiscal policy will not help promote recovery from a recession.
c. Restrictive fiscal policy is a potent anti-inflationary weapon.
d. Since changes in discretionary policy are difficult to time correctly, fiscal policy
should not be altered in response to each minor disturbance.
What will the federal government have to do in order to redeem the bonds in the Social
Security Trust Fund?
a. raise taxes
b. cut expenditures on other government programs
c. borrow additional funds
d. Some combination of a, b, and c.
Automated production methods are only attractive when they
a. reduce labor productivity.
b. replace workers.
c. decrease per-unit costs of production.
d. lower wages.
Which of the following is a true statement regarding why the government produces
public goods?
a. Public goods are valued highly by some but not by the majority.
b. Because of the electoral system, the public sector tends towards producing those
goods that help politicians get elected.
c. Some goods should be produced whether they are economically efficient or not.
d. Because it is difficult to exclude those who do not pay for public goods.
In the short run, the supply of a resource will generally be
a. less elastic than in the long run.
b. more elastic than in the long run.
c. equally elastic as the supply of the resource in the long run.
d. inversely related to the elasticity of demand for the product that the resource helps
produce.
Which of the following most accurately states the economic significance of exchange?
a. Physical goods have value because they exist; exchange can neither increase nor
decrease their value.
b. Exchange creates value by permitting trading partners to expand total output as the
result of specialization in areas where they have a comparative advantage.
c. Exchange creates value by moving goods from people who value the goods less to
people who value the goods more.
d. Both b and c are true.
The natural rate of unemployment
a. is due to cyclical business conditions.
b. results from normal dynamic changes given the institutional arrangements of the
economy.
c. results from both frictional and cyclical economic conditions.
d. is present when the economy is at the peak of an economic boom.
Figure 12-3
Refer to Figure 12-3. This figure depicts labor demand and supply in a nonunionized
labor market. The original equilibrium is at point A. If a labor union subsequently
establishes a union shop and negotiates an hourly wage of $20, then there will be an
excess
a. supply of 3,000 workers.
b. demand of 7,000 workers.
c. supply of 4,000 workers.
d. supply of 7,000 workers.
The idea that a large public debt is “mortgaging the future of our children and
grandchildren” is misleading because
a. it is the Federal Reserve that will be responsible for making interest payments on the
debt.
b. future generations will have to bear the opportunity costs of the resources that are
used today.
c. future generations will not be liable for the interest obligations of the national debt.
d. future generations will inherit the interest income as well as the interest obligations.
An unanticipated increase in the level of prices in the goods and services market, which
results in a temporary reduction in real wage rates, will
a. decrease the natural rate of unemployment.
b. increase the natural rate of unemployment.
c. result in an actual rate of unemployment that is less than the natural rate of
unemployment.
d. result in an actual rate of unemployment that is greater than the natural rate of
unemployment.
Which of the following grew rapidly during the years following the passage of the
Medicare and Medicaid programs?
a. the share of healthcare expenditures financed by third parties
b. the prices of healthcare relative to the prices of other goods and services
c. expenditures on healthcare as a share of the economy
d. all of the above