Arnold Kim began blogging about Apple products during his fourth year of medical
school. Kim’s Website, MacRumors.com, became so successful that he decided to give
up his medical career and work full time on his Website, despite the nearly $200,000 he
had invested in his education. In making his decision, Kim decided to ignore the money
and time he spent on his education. Economists would say that Kim made a
A) rational decision to ignore these sunk costs.
B) poor decision since he had already invested his time and money on his medical
career.
C) poor decision since doctors are in greater demand than bloggers.
D) hasty decision by not waiting to recoup his financial investment before giving up his
medical career.
The Soviet Union’s economy grew rapidly in terms of GDP per hour worked in the
1950s, but eventually this growth slowed. Why did this occur?
A) Capital per hour worked grew rapidly from 1950 to 1980, but technological change
occurred very slowly.
B) Capital per hour worked grew slowly, but technological change grew very rapidly.
C) Increasing implementation of new technologies eventually suffered diminishing
marginal returns.
D) The centrally planned economy invested too heavily in technological change.
The effect of a recession on a company like Whirlpool Corporation is such that
A) sales decline more sharply for Whirlpool as compared to firms that do not produce
durable goods.
B) profits fall less sharply as compared to firms that do not produce durable goods.
C) the decline in sales is more short-lived as compared to firms that do not produce
durable goods.
D) there is no difference in the impact of the recession on its profits as compared to
firms that do not produce durable goods.
Assuming no change in the nominal exchange rate, how will a decrease in the price
level in the United States relative to France affect the real exchange rate between the
two countries? (Assume the United States is the “domestic” country.)
A) The real exchange rate will rise.
B) The real exchange rate will fall.
C) The real exchange rate will be unaffected.
D) The impact on the real exchange rate cannot be predicted.
If foreign holdings of U.S. dollars increase, holding all else constant,
A) the balance on the U.S. financial account will increase.
B) the balance on the U.S. current account will increase.
C) the balance on the U.S. capital account will increase.
D) the U.S. balance of trade will increase.
To calculate the price elasticity of demand we divide
A) the percentage change in quantity demanded by the percentage change in price.
B) the percentage change in price by the percentage change in quantity demanded.
C) rise by the run.
D) the average price by the average quantity demanded.
Figure 18-1
Suppose that the U.S. government deficit causes interest rates in the United States to
rise relative to those in the European Union. Assuming all else remains constant, how
would this be represented?
A) Supply would decrease, demand would decrease and the economy moves from B to
C to D.
B) Supply would increase, demand would decrease and the economy moves from C to
B to A.
C) Supply would decrease, demand would increase and the economy moves from A to
D to C.
D) Supply would increase, demand would increase and the economy moves from D to
A to B.
Which of the following leads to a decrease real GDP?
A) an increase in government spending
B) an increase in the inflation rate in other countries, relative to the inflation in the
United States
C) an increase in interest rates
D) Households have increasingly optimistic expectations about future income.
Figure 29-2
Consider the market for U.S. Dollars against the British pound shown in the graph
above. From this graph we can conclude that the dollar price of a British pound has
________ to ________ dollars per pound
A) decreased; 0.46
B) increased; 2.17
C) decreased; 2.00
D) increased; 0.50
In which of the following cartels is total cartel profit likely to be the highest?
A) a cartel made up of equal sized firms each producing different quantities of a
differentiated product
B) a cartel made up of firms of various sizes each producing different quantities of a
homogeneous product
C) a cartel made up of firms of various sizes each producing the same quantity of a
differentiated product
D) a cartel made up of identical firms each producing the same quantity of a
homogeneous product
Which of the following financial securities is most liquid?
A) a savings account
B) a share of stock
C) a cashier’s check
D) a $20 bill
Consider the following pieces of information:
a. According to Bonnie Reyes, president and chief operating officer of Better Investing,
a national organization of investment clubs, women have traditionally made up about
60 percent of the membership of investment clubs. By contrast, less than a third of
team-managed mutual funds on Wall Street have even one woman on the management
team.
b. Research conducted by professors E. Brooke Harrington and Max Planck concluded
that mixed investment clubs, on average, outperformed the typical single-sex
investment club.
c. The lack of gender diversity in Wall Street could be influenced by its reputation,
according to professor Harrington, “for being inhospitable to women.”
Source: Michael Hulbert, “Strategies: At some Funds, a Gender Communications
Gap,” The New York Times, October 7, 2007, Sunday Money, page 5. The
information presented is an example of
A) economic discrimination.
B) a negative feedback loop.
C) marginal productivity theory.
D) the absence of comparable worth.
Which is the smallest component of aggregate expenditure?
A) planned investment expenditures
B) consumption expenditures
C) government expenditures
D) net export expenditures
Which of the following policies are designed specifically to directly promote
technological change in an economy?
A) government subsidization of research and development
B) tax incentives to promote investment in 401K plans
C) laws to strengthen property rights
D) a vaccination program to combat infectious diseases
Figure 3-7
Assume that the graphs in this figure represent the demand and supply curves for
women’s clothing. Which panel best describes what happens in this market when the
wages of seamstresses rise?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
The United States usually exports ________ goods than it imports and exports
________ services than it imports.
A) more; more
B) more; fewer
C) fewer; more
D) fewer; fewer
The curve showing the short-run relationship between the unemployment rate and the
inflation rate is called
A) the monetary policy curve.
B) the Phillips curve.
C) the Sargent curve.
D) the unemployment curve.
An increase in the domestic interest rate relative to other interest rates should
A) increase investment spending.
B) decrease consumption spending.
C) increase government spending.
D) increase net exports.
Table 19-17
A very simple economy produces three goods: movies, burgers, and bikes. The
quantities produced and their corresponding prices for 2006 and 2013 are shown in the
table above. What is real GDP in 2013, using 2006 as the base year?
A) $3,320
B) $3,690
C) $6,360
D) $7,035