Which of the following goods would have the most inelastic demand?
A) ski vacations
B) bread
C) luxury cars
D) big screen TVs
Suppose a chain of convenience stores reorganized its system of supplying its stores
with food. This led to a sharp reduction in the number of trucks that the company had to
use and increased the amount of fresh food on store shelves. Which of the following
statements best describes the chain stores’ actions?
A) The change implemented is not an example of technological change because it did
not require the use of new machinery of equipment.
B) Technological change refers only to the introduction of new products or
improvements to existing product. As such, the scenario described in the question is not
technological change.
C) The firm is able to produce more output (increase its sales) using fewer inputs (less
trucks). Therefore, the chain of convenience stores has implemented a positive
technological change.
D) The scenario described is an example of management efficiency and not
technological change. Essentially, the chain changes its way of operating its business.
Which of the following would decrease the unemployment rate?
A) an increase in the minimum wage
B) an increase in the efficiency wage
C) an increase in labor union membership
D) government aid to retrain unemployed workers
Figure 2-14
Figure 2-14 shows the production possibilities frontiers for Costa Rica and Guatemala.
Each country produces two goods, pineapples and coconuts.What is the opportunity
cost of producing 1 ton of coconuts in Costa Rica?
A) 3/8 of a ton of pineapples
B) 2/3 of a ton of pineapples
C) 1 1/2 tons of pineapples
D) 100 tons of pineapples
Table 6-1
Suppose you own a bookstore. You believe that you can sell 40 copies per day of the
latest John Grisham novel when the price is $35. You consider lowering the price to $25
and believe this will increase the quantity sold to 50 books per day. Compute the price
elasticity of demand using the mid-point formula and these data. Select the correct
implication from your work.
A) The demand for the John Grisham book is inelastic. Revenue will fall if the price is
lowered.
B) The demand for the John Grisham book is elastic. Revenue will rise if the price is
lowered.
C) The demand for the John Grisham book is inelastic. Revenue will rise if the price is
lowered.
D) The demand for the John Grisham book is elastic. Revenue will fall if the price is
lowered.
________ is equal to consumption spending plus planned investment spending plus
government purchases plus net exports.
A) Full employment GDP
B) Short-run aggregate supply
C) Planned inventory investment
D) Planned aggregate expenditure
The endowment effect suggests that that people
A) have a strong attachment to their entitlement, regardless of whether they paid to
acquire them.
B) have a strong sense of fairness.
C) are concerned about the welfare of others.
D) act in ways to distort market prices.
Hurricane Katrina destroyed oil and natural gas refining capacity in the Gulf of Mexico.
This subsequently drove up natural gas, gasoline, and heating oil prices. As a result, this
should
A) shift the short-run aggregate supply curve to the left.
B) shift the short-run aggregate supply curve to the right.
C) move the economy up along a stationary short-run aggregate supply curve.
D) move the economy down along a stationary short-run aggregate supply curve.
How might a U.S. federal budget surplus affect the balance of trade? (Assume exchange
rates are stated in terms of foreign currency per U.S. dollar.)
A) A federal budget surplus raises interest rates, which raises exchange rates, and
increases the balance of trade.
B) A federal budget surplus raises interest rates, which raises exchange rates, and
reduces the balance of trade.
C) A federal budget surplus reduces interest rates, which raises exchange rates, and
reduces the balance of trade.
D) A federal budget surplus reduces interest rates, which reduces exchange rates and
increases the balance of trade.
Increases in real GDP would understate the well-being of a country over time if, over
that time period, the
A) crime rate increased.
B) percentage of people addicted to illegal drugs increased.
C) amount of pollution decreased.
D) average hours worked per week decreased.
The phrase “demand has increased” means that
A) a demand curve has shifted to the left.
B) there has been an upward movement along a demand curve.
C) there has been a downward movement along a demand curve.
D) a demand curve has shifted to the right.
Suppose the value of the price elasticity of supply is 4. What does this mean?
A) A 4 percent increase in the price of the good causes quantity supplied to increase by
1 percent.
B) A 1 percent increase in the price of the good causes the supply curve to shift upward
by 4 percent.
C) A 1 percent increase in the price of the good causes quantity supplied to increase by
4 percent.
D) For every $1 increase in price, quantity supplied increases by 4 units.
An isocost line shows
A) combinations of two inputs that result in the same total cost for a firm.
B) combinations of two inputs that result in the same total output for a firm.
C) combinations of the two inputs that result in the same profit for a firm.
D) the different levels of total cost that result from various combinations of two inputs.
Figure 15-11
In 2011, Verizon was granted
permission to enter the market for cable TV in Upstate New York, ending the virtual
monopoly that Time Warner Cable had in most local communities in the region. Figure
15-11 shows the cable television market in Upstate New York. Suppose the local
government imposes a $2.50 per month tax on cable companies. What happens to the
price charged by the cable company following the imposition of this tax?
A) The price rises from PMto (PM+ $2.50).
B) The price rises from PM but it increases by an amount less than $2.50.
C) The price rises from PM but it increases by an amount greater than $2.50 to reflect
the monopoly’s markup.
D) The price remains at PM.
Being the first to sell a particular good can give a firm advantages over other firms that
sell similar products. What is the name given to these advantages?
A) first-mover
B) first come, first served
C) follow the leader
D) first to market
A falling price level is called ________ and a fall in the rate of inflation is called
________.
A) disinflation; a contraction
B) a contraction; disinflation
C) disinflation; deflation
D) deflation; disinflation
Which of the following are implicit costs for a typical firm?
A) the cost of labor
B) the opportunity cost of capital owned and used by the firm
C) the cost of energy used in production
D) a business licensing fee
Figure 12-1
If the firm is charging a price of $12 per unit
A) it breaks even.
B) it is making a profit.
C) it is selling 700 units.
D) it is not selling any output.
If the demand for the yen increases relative to the dollar, which of the following would
occur?
A) The dollar will appreciate.
B) The yen will depreciate.
C) The dollar will depreciate.
D) The demand for the dollar will increase.
The economy suffered a mild recession in 2001. Despite the recession, home sales and
durable goods sales remained high. Which of the following is a plausible explanation?
A) The Fed’s pursuit of contractionary policy stimulated these markets.
B) The Fed caused a reduction in the federal funds rate to its lowest level in 40 years.
C) Rising inflation encouraged many to invest in the real estate market.
D) Home building and consumer durable purchases are always high during a recession.