Table 14-4 Alistair Luggage
and Baine Baggage are the only firms selling luggage in the upscale town of Montecito.
Each firm must decide on whether to increase its advertising spending to compete for
customers. If one firm increases its advertising budget but the other does not, then the
firm with the higher advertising budget will increase its profit. Table 14-4 shows the
payoff matrix for this advertising game.
If Alistair assumes that Baine would increase its advertising budget, what should it do?
A) Alistair should keep its own budget the same and allow Baine to incur the higher
cost.
B) Alistair should also increase its advertising spending.
C) Alistair should reduce its advertising spending.
D) Being a duopolist, Alistair is not affected by Baine’s choices because it has a secure
50 percent market share.
The equilibrium wage in a local labor market is $6 per hour. If a minimum wage of $8
per hour is imposed, which of the following will occur?
A) There will be an increase in unemployment.
B) There will be an increase in the quantity of labor demanded by firms.
C) There will be a decrease in the quantity of labor supplied by households.
D) All of the above will occur.
Table 2-4
Table 2-4 shows the output per day of two gardeners, George and Jack. They can either
devote their time to mowing lawns or cultivating gardens.
What is Jack’s opportunity cost of cultivating a garden?
A) half a garden cultivated
B) two lawns mowed
C) two-thirds of a garden cultivated.
D) one and a half lawns mowed
Figure 2-4
Figure 2-4 shows various points on three different production possibilities frontiers for
a nation. A movement from X to Y
A) could be due to a change in consumers’ tastes and preferences.
B) could occur because of an influx of immigrant labor.
C) is the result of advancements in food production technology only, with no change in
the technology for plastic production.
D) is the result of advancements in plastic production technology only, with no change
in food production technology.
Which of the following government policies would most likely result in an increase in
economic growth?
A) a decrease in the life of a patent from 20 years to 15 years
B) a decrease in the interest rate at which the government provides student loans
C) a decrease in government spending on grants issued through the National Institutes
of Health
D) decreased copyright protection on music and movies
Table 19-16
Given the information above, what can we say has happened in the economy from 2012
to 2013?
A) The price level has fallen.
B) The price level has risen.
C) The price level has remained constant.
D) Not enough information is available to determine what has happened to prices.
As the value of the Gini coefficient approaches zero
A) income distribution becomes less unequal.
B) income distribution becomes more unequal.
C) the percentage of the population under the poverty line increases.
D) the percentage of the population under the poverty line decreases.
Figure 5-9 Companies producing
toilet paper bleach the paper to make it white. The bleach is discharged into rivers and
lakes and causes substantial environmental damage. Figure 5-9 illustrates the situation
in the toilet paper market.The efficient output is
A) Q1.
B) Q2.
C) Q3.
D) Q4.
Figure 2-2 Figure 2-2 above shows the production
possibilities frontier for Vidalia, a nation that produces two goods, roses and orchids.
What is the opportunity cost of one dozen roses?
A) 0.4 dozen orchids
B) 2.5 dozen orchids
C) 7.25 dozen orchids
D) 16 dozen orchids
Increasing opportunity cost is represented by a ________ production possibilities
frontier.
A) linear
B) bowed in
C) bowed out
D) vertical
When exchange rates are not determined in the market but are instead set by a country’s
central bank, we say that the country’s exchange rate is
A) flexible.
B) fixed.
C) a nominal exchange rate.
D) a real exchange rate.
According to the production possibility model, if more resources are allocated to the
production of physical and human capital, then all of the following are likely to happen
except
A) fewer goods will be produced for consumption today.
B) the production possibilities frontier will be shift outward in the future.
C) future economic growth is enhanced.
D) the country’s total production will fall.
In the United States, each bank panic in the late nineteenth and early twentieth centuries
was accompanied by
A) inflation.
B) deflation.
C) a depression.
D) a recession.
Increasing opportunity cost is represented by a ________ production possibilities
frontier.
A) linear
B) bowed in
C) bowed out
D) vertical