Which of the following is not correct?
a. The economy contains many labor markets for different types of workers.
b. The impact of the minimum wage depends on the skill and experience of the worker.
c. The minimum wage is binding for workers with high skills and much experience.
d. The minimum wage is not binding when the equilibrium wage is above the minimum
wage.
Normative statements are
a. descriptive.
b. claims about how the world should be.
c. claims about how the world is.
d. made by economists speaking as scientists.
The aggregate supply curve is upward sloping in
a. the short and long run.
b. neither the short nor long run.
c. the long run, but not the short run.
d. the short run, but not the long run.
Table 3-12
Labor Hours Needed to
Make 1 Pound of: Amount
Produced in 40 hours
Refer to Table 3-12. For the rancher, the opportunity cost of 1 pound of meat is
a. 0.4 pound of potatoes.
b. 2.5 pounds of potatoes.
c. 4 pounds of potatoes.
d. 10 pounds of potatoes.
In the fourteenth century it is estimated that deaths resulting from the bubonic plague
reduced the population by about a third. Assuming diminishing returns, the decrease in
population should have
a. increased productivity and real GDP per person.
b. increased productivity but decreased real GDP per person.
c. increased real GDP per person, but decreased productivity.
d. decreased productivity and real GDP per person.
Scenario 13-2. Assume the following information for an imaginary, closed
economy.
GDP = $200,000; consumption = $120,000;
government purchases = $35,000; and taxes = $25,000.
Refer to Scenario 13-2. Suppose, for this economy, the relationship between the real
interest rate, r, and investment, I, is given by the equation I = 69,000 ” 3,000r. (If, for
example, r = 10, this means that the real interest rate is 10 percent.) The equilibrium
real interest rate for this economy is
a. 6 percent.
b. 7 percent.
c. 8 percent.
d. 9 percent.
At a given real exchange rate, which of the following, by itself, would increase the
supply of dollars in the market for foreign-currency exchange?
a. foreign citizens want to buy more U.S. bonds
b. U.S. citizens want to buy more foreign bonds
c. foreign citizens want to buy more U.S. goods
d. U.S. citizens want to buy more foreign goods
The income of a typical worker in a country is most closely linked to which of the
following?
a. population
b. productivity
c. market power
d. government policies
Table 10-4
The country of Caspir produces only cereal and milk. Quantities and prices of these
goods for the last several years are shown below. The base year is 2008.
Prices and Quantities
Refer to Table 10-4. This country’s inflation rate from 2010 to 2011 was
a. 15.4%.
b. 26.1%.
c. 45.5%.
d. 77.8%.
Kristi and Rebecca sell lemonade on the corner. It costs them 7 cents to make each cup.
On a certain day, they sell 40 cups. Their producer surplus for that day amounts to
$19.20. Kristi & Rebecca sold each cup for
a. 31 cents.
b. 38 cents.
c. 45 cents.
d. 55 cents.
Friedman argued that the Fed could use monetary policy to peg
a. nominal exchange rates.
b. the level of real GDP.
c. the rate of unemployment.
d. None of the above is correct.
Figure 5-4
Refer to Figure 5-4. The section of the demand curve from B to C represents the
a. elastic section of the demand curve.
b. inelastic section of the demand curve.
c. unit elastic section of the demand curve.
d. perfectly elastic section of the demand curve.
Figure 8-2
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 8-2. The loss of producer surplus as a result of the tax is
a. $1.
b. $2.
c. $3.
d. $4.
U.S. public policy discourages saving because
a. other things the same, taxes increase the return from savings.
b. means tested programs such as Medicaid provide lower benefits to those who did not
save.
c. none of parents’ bequest to their children is taxed.
d. some forms of capital income are taxed twice.
If the Federal Reserve increases the money supply, then initially people want to
a. sell bonds so the interest rate rises.
b. sell bonds so the interest rate falls.
c. buy bonds so the interest rate rises.
d. buy bonds so the interest rate falls.
A corporation’s earnings are
a. the amount of revenue it receives for the sale of its products minus its costs of
production as measured by its accountants minus the dividends paid out.
b. the amount of revenue it receives for the sale of its products minus its direct and
indirect costs of production as measured by its economists minus the dividends paid
out.
c. the amount of revenue it receives for the sale of its products minus its costs of
production as measured by its accountants.
d. the amount of revenue it receives for the sale of its products minus its direct and
indirect costs of production as measured by its economists.
Trade can make everybody better off because it
a. increases cooperation among nations.
b. allows people to specialize according to comparative advantage.
c. requires some workers in an economy to be retrained.
d. reduces competition among domestic companies.
Table 7-9
The numbers reveal the opportunity costs of providing 10 piano lessons of equal
quality.
Refer to Table 7-9. The equilibrium market price for 10 piano lessons is $300. What is
the total producer surplus in the market?
a. $50
b. $150
c. $1,050
d. $1,500
Fundamental analysis shows that stock in Lodgefire Restaurants has a present value
below its price.
a. This stock is overvalued; you should consider adding it to your portfolio.
b. This stock is overvalued; you shouldn’t consider adding it to your portfolio.
c. This stock is undervalued; you should consider adding it to your portfolio.
d. This stock is undervalued; you shouldn’t consider adding it to your portfolio.
Figure 21-4. On the figure, MS represents money supply and MD represents money
demand.
Refer to Figure 21-4. Suppose the current equilibrium interest rate is r3. Let Y3
represent the corresponding quantity of goods and services demanded, and let P3
represent the corresponding price level. Starting from this situation, if the Federal
Reserve decreases the money supply and if the price level remains at P3, then
a. there will be an increase in the equilibrium quantity of goods and services demanded.
b. there will be a decrease in the equilibrium interest rate.
c. the aggregate-demand curve will shift to the right.
d. fewer firms will choose to borrow to build new factories and buy new equipment.
The supply of a good or service is determined by
a. those who buy the good or service.
b. the government.
c. those who sell the good or service.
d. both those who buy and those who sell the good or service.
Suppose expected inflation and actual inflation are both low, and unemployment is at its
natural rate. If the Fed then pursues an expansionary monetary policy, which of the
following results would be expected in the short run?
a. The short-run Phillips curve would shift to the left.
b. The short-run Phillips curve would shift to the right.
c. The economy would move up and to the left along a given short-run Phillips curve.
d. The economy would move down and to the right along a given short-run Phillips
curve.
Figure 3-9
Uzbekistan’s Production Possibilities Frontier Azerbaijan’s Production
Possibilities Frontier
Refer to Figure 3-9. If Uzbekistan and Azerbaijan each divides its time equally
between making bolts and making nails, then total production is
a. 15 bolts and 40 nails.
b. 25 bolts and 70 nails.
c. 30 bolts and 80 nails.
d. 50 bolts and 140 nails.
In recent years, which countries have taken a unilateral approach to the removal of
trade restrictions?
a. China and North Korea
b. Chile and South Korea
c. Russia and Japan
d. the United States and Mexico
Which of the following is not a determinant of the long-run level of real GDP?
a. the price level
b. the supply of labor
c. available natural resources
d. available technology
If a tax is levied on the sellers of a product, then the demand curve will
a. shift down.
b. shift up.
c. become flatter.
d. not shift.
Figure 8-6
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 8-6. The tax results in a deadweight loss that amounts to
a. $600.
b. $900.
c. $1,500.
d. $1,800.
Figure 9-11
Refer to Figure 9-11. Producer surplus plus consumer surplus in this market before
trade is
a. A + B.
b. A + B + C.
c. A + B + C + D.
d. B + C + D.
U.S. Financial Crisis
Suppose that foreigners had reduced confidence in U.S. financial institutions and
believed that privately issued U.S. bonds were more likely to be defaulted on.
Refer to U.S. Financial Crisis. U.S. net exports would
a. rise which by itself would increase aggregate demand.
b. rise which by itself would decrease aggregate demand.
c. fall which by itself would increase aggregate demand.
d. fall which by itself would decrease aggregate demand.
Which of the following would be the least likely result of a binding price ceiling
imposed on the market for rental cars?
a. an accumulation of dirt in the interior of rental cars
b. poor engine maintenance in rental cars
c. free gasoline given to people as an incentive to a rent a car
d. slow replacement of old rental cars with newer ones
Figure 19-5
Refer to Figure 19-5. In the market for foreign-currency exchange, the effects of an
increase in the budget surplus is illustrated as a move from g to
a. e.
b. f.
c. h.
d. i.