Archives: Quiz

Which of the following would be classified as fiscal policy? A) The federal government passes tax cuts to encourage firms to reduce air pollution. B) The Federal Reserve cuts interest rates to stimulate the economy. C) A state government cuts […]

Currency traders expect the dollar to depreciate. What impact will this have on equilibrium in the foreign exchange market? A) The dollar will appreciate, and the equilibrium quantity of dollars will decrease. B) The dollar will depreciate, and the equilibrium […]

Marla is an architect who is designing a home for Chuck. Chuck is paying Marla $150 per hour to design his new home. When Chuck and Marla get married, Marla continues to work on designing the home, but she no […]

Why does a prisoner’s dilemma lead to a noncooperative equilibrium? A) because each player had agreed before the game started to minimize the harm that he can inflict on the other players B) because each player is uncertain how other […]

Which of the following best describes how banks create money? A) Banks charge higher interest rates on loans than they pay on deposits. B) Banks charge fees for providing financial advice. C) Banks create checking account deposits when making loans […]

Table 1-1 Eva runs a small bakery in the village of Roggerli. She is debating whether she should extend her hours of operation. Eva figures that her sales revenue will depend on the number of hours the bakery is open […]

Article Summary. For only the second time in the previous 10 quarters, China’s GDP grew at a faster rate than from the same period a year earlier. From July through September 2013, China’s GDP increased 7.8 percent, but a decline […]

You borrow $10,000 from a bank for one year at a nominal interest rate of 5%. The CPI over that year rises from 180 to 200. What is the real interest rate you are paying? A) 15% B) 5% C) […]

Figure 11-3 Fancy Footwear manufactures shoes. Figure 11-3 shows Fancy Footwear’s marginal product of labor and average product of labor curves in the short run. For what quantity of labor does production display diminishing returns? A) for more than 1 […]

Figure 3-1 An increase in the price of the product would be represented by a movement from A) A to B. B) B to A. C) D1 to D2. D) D2 to D1. Households ________ final goods and services in […]

Marginal revenue product of labor for a competitive seller is A) the change in total product from hiring one more worker. B) equal to the marginal product of labor multiplied by the output price. C) the output price multiplied by […]

The government proposes a tax on halogen light bulbs. Sellers will bear the entire burden of the tax if the A) supply curve of halogen bulbs is horizontal. B) demand curve for halogen bulbs is vertical. C) demand curve for […]

In order to be binding, a price floor A) must lie above the free market equilibrium price. B) must lie below the free market equilibrium price. C) must coincide with the free market equilibrium price. D) must be high enough […]

Gold is an example of A) commodity money. B) fiat money. C) barter money. D) M1. If a stock’s dividend is expected to grow at a constant rate of eight percent in the future and it has just paid a […]

When an investor buys a corporate bond, A) the investor becomes part owner of the corporation. B) the principal of the bond is a loan to the corporation. C) the interest made on the bond represents the bondholders limited liability […]

Potential GDP in the United States A) does not change over time. B) grows as the economy grows. C) changes over a given business cycle. D) declines over time. Figure 2-4 Figure 2-4 shows various points on three different production […]

If an 8 percent decrease in the price of lobster leads to a 15 percent decrease in the quantity supplied of lobster, then the supply of lobster is A) unit-elastic. B) unitarily elastic. C) elastic. D) perfectly inelastic. Fiscal policy […]

Which of the following is an example of a “how much” decision? A) The Pleasantville movie theatre is open only in the evenings. The theatre’s manager is debating whether to add daily matinee shows. B) The Zhous have demolished their […]

Sparkle, one of many firms in the market for toothpaste, is in long-run equilibrium. Sparkle has a small market share and has been in business for a long time. a. Identify the market structure in which Sparkle operates. Explain your […]

Figure 4-6 Figure 4-6 shows the market for granola. The market is initially in equilibrium at a price of P1 and a quantity of Q1. Now suppose producers decide to cut output to Q2 in order to raise the price […]

Suppose a tax equal to the value of the marginal external cost at the optimal output is imposed on a pollution generating good. All of the following will result from the tax except A) an increase in the equilibrium market […]

Suppose that in 2014, all prices in the economy double and that all wages and salaries also double. In 2014 you A) are worse off than you were in 2013 as you can no longer afford to buy as many […]

Article Summary. In a September 2013 speech to the Independent Bankers Association of Texas, Federal Reserve Bank of Dallas president Richard Fisher stated that the Fed’s credibility was harmed when it announced the previous week that it would continue its […]

If the market price is $40 in a perfectly competitive market, the marginal revenue from selling the fifth unit is A) $8. B) $20. C) $40. D) $200. Figure 30-4 The equilibrium exchange rate is originally at A, $3/pound. Suppose […]

Which of the following will result in an increase in labor productivity? A) a decrease in the number of people attending institutions of higher education B) a decline in the amount of human capital per worker C) an increase in […]

Figure 2-9 Carlos Vanya grows tomatoes and strawberries on his land. His land is equally suited for growing either fruit. Which of the graphs in Figure 2-3 represents his production possibilities frontier? A) Graph A B) Graph B C) Graph […]

With an optimal two-part tariff, A) consumer surplus equals producer surplus. B) all consumer surplus is transformed into profit. C) consumers maximize consumer surplus. D) the firm earns zero profit. Economists played a key role in the development of merger […]

Inflation targeting refers to conducting ________ policy so as to commit the central bank to achieving a ________. A) fiscal; publicly announced level of inflation B) fiscal; zero inflation rate C) monetary; publicly announced level of inflation D) monetary; zero […]

One goal a firm tries to achieve when it advertises a product is to A) make the demand curve for the product more elastic. B) shift the demand curve for the product to the left. C) make the demand curve […]

Which of the following is a normative economic statement? A) The price of gasoline is too high. B) The current high price of gasoline is the result of strong worldwide demand. C) When the price of gasoline rises, the quantity […]

When a firm faces a downward-sloping demand curve, marginal revenue A) must exceed price because the price effect outweighs the output effect. B) is less than price because a firm must lower its price to sell more. C) equals price […]

In the United States in 2012, the percentage of people without any form of health insurance was about A) 16%. B) 29%. C) 64%. D) 83%. ________ occurs when actions taken by one party to a transaction are Different from […]

A decrease in the demand for soft drinks due to changes in consumer tastes, accompanied by an increase in the supply of soft drinks as a result of reductions in input prices, will result in A) a decrease in the […]

If you exhibit the endowment effect as a decision maker, then you are A) deciding on the basis of sunk costs. B) buying something you can’t really afford because you expect to save in the future. C) ignoring non-monetary opportunity […]

The labor supply for an industry would decrease if A) the wage rate falls. B) the percentage of the population from age 16 to 65 decreases. C) the government welcomes foreign workers into the country. D) a greater percentage of […]

A sharp increase in the divorce rate increases the number of lawyers hired to determine divorce settlements. This will A) increase GDP and increase well-being in the economy. B) increase GDP and decrease well-being in the economy. C) decrease GDP […]

For each of the following pairs of products state which are complements, which are substitutes, and which are unrelated. a. Blu-ray discs and video-on-demand b. Fiat 500 and Mini Cooper S c. Toothpaste and toothbrush d. Popcorn and snowboards e. […]

Cassie’s Quilts alters, reconstructs and restores heirloom quilts. Cassie has just spent $800 purchasing, cleaning and reconstructing an antique quilt which she expects to sell for $1,500 once she is finished. After having spent $800, Cassie discovers that she would […]

Under autarky, domestic producer surplus is represented by the area A) above the supply curve and below the equilibrium price. B) above the supply curve and below the demand curve. C) below the demand curve and above the equilibrium price. […]

Table 7-1 Rob Crusoe and Bill Friday spent their week-long vacation on a desert island where they had to find and make their own food. Rob and Bill spent one day each fishing and picking berries. The table lists the […]

Figure 13-11 The firm represented in the diagram A) makes zero economic profit. B) makes zero accounting profit. C) should exit the industry. D) should expand its output to take advantage of economies of scale. The decision to make the […]

An increase in government spending may expedite recovery from a recession in the short run, but in the long run this policy may A) reduce investment in new capital. B) make domestic businesses less competitive in international markets as the […]

The long-run aggregate supply curve is ________, while the long-run Phillips curve is ________. A) positively sloped; negatively sloped B) vertical; negatively sloped C) vertical; also vertical D) positively sloped; positively sloped Figure 12-9 Figure 12-9 shows cost and demand […]

Figure 13-2 The marginal revenue from selling the additional unit Qinstead of Qa equals A) the area (G + H). B) the area (H – E). C) the area (E + F) – (G + H). D) the area G. […]

Assume that production from an electric utility caused acid rain. If the government imposed a tax on the utility equal to the cost of the acid rain, the government’s action would A) externalize the externality. B) result in a marginal […]

Which of the following is not an advantage to an insurance company of insuring a large group of people for health insurance? A) The characteristics of a large group are likely to reflect those of the entire population. B) It […]

Table 9-12 Production and Consumption Production Without Trade With Trade Estonia and Morocco can produce both swords and belts. Table 9-12 shows the production and consumption quantities without trade, and the production numbers with trade. If the actual terms of […]

Figure 5-13 Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production. The market equilibrium quantity of gasoline is ________ million gallons per month. A) 20 […]

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly. Which of the following statements comparing the conditions in the industry under both market structures is true? A) A monopoly will produce more and […]

For years economists believed that market structure explained the ability of some firms to earn economic profits. For example, firms in industries with little competition and high barriers to entry would earn higher profits than firms in competitive industries with […]