Archives: Quiz

The government proposes a tax on imported champagne. Buyers will bear the entire burden of the tax if the A) supply curve for imported champagne is vertical. B) demand curve for imported champagne is vertical. C) demand curve for imported […]

If the dollar appreciates against the Mexican peso, A) Mexican imports to the U.S. become more expensive. B) U.S. exports to Mexico become less expensive. C) U.S. exports to Mexico become more expensive. D) The value of Mexican imports to […]

The Difference between the ________ and the ________ from the sale of a product is called producer surplus. A) lowest price a firm would have been willing to accept; price it actually receives B) highest price a firm would have […]

The 10-year protection period from generic competition for drug manufacturers is a form of A) copyright. B) trademark. C) hallmark. D) patent. Commodity money A) has value independent of its use as money. B) has little to no value independent […]

The total amount of producer surplus in a market is equal to the area below the supply curve. If the number of firms producing mouthwash increases and consumer preference for mouthwash increases, the equilibrium price of mouthwash will definitely increase. […]

Changes in the health of the average person are relatively unimportant as an indicator of changes in the standard of living. International flows of capital increase both efficiency and growth in countries around the world. Answer: TRUE Transfer payments are […]

A decrease in the marginal income tax rate is a fiscal policy which will increase aggregate demand. The Congressional Budget Office estimates that the additional taxes and fees enacted under the ACA will be enough to pay for the plan […]

A monopolistically competitive firm can increase its profits beyond the long-run equilibrium break-even level by deliberately lowering its price to force some of its competitors out of the market. The aggregate demand curve shows the relationship between the price level […]

Managed float exchange systems were abandoned with the implementation of the gold standard. The marginal product of labor curve is the demand curve for labor. Answer: FALSE If Tanisha can audit more tax returns in one hour than Libby, then […]

The producer price index tracks the prices firms receive for goods and services at all stages of production. If you purchase a share of stock from your friend who initially purchased the stock three years ago, your purchase of the […]

“A decrease in the price of digital cameras will decrease the demand for camera film.” This statement is an example of a positive economic statement. Japan has a single-payer health care systemin which the government provides national health insuranceto all […]

If planned aggregate expenditure is less than real GDP, some firms will experience unplanned increases in inventories. Expansionary fiscal policy is used to increase aggregate demand in an attempt to fight rising inflation. Answer: FALSE The values of real GDP […]

Between 1981 and 2011, deaths from cancer have increased in the United States. Selling a product at a price below its cost is known as dumping. Answer: TRUE Market economies tend to grow more quickly than centrally-planned economies. Answer: TRUE […]

The substitution effect explains why there is an inverse relationship between the price of a product and the quantity of the product demanded. For a perfectly competitive firm, at the profit-maximizing output average revenue equals marginal cost. Answer: TRUE Horizontal […]

Producer surplus is the Difference between the highest price someone is willing to pay and the price he actually pays. In the case of an upward-sloping aggregate supply curve, the change in real GDP brought about by a change in […]

When a business is set up as a sole proprietorship, the owner of the business faces limited liability. If inflation is higher than expected, this helps borrowers (by reducing the real interest rate they pay) and hurts lenders (by reducing […]

If Blake can pick more cherries in one hour than Cody, then Blake has a comparative advantage in cherry picking. A decrease in the amount of human capital acquired by workers will lead to decrease in the supply of labor. […]

For a given quantity, the total profit of a perfectly competitive firm is equal to the vertical distance between the firm’s total revenue curve and its total cost curve. A real appreciation of the dollar is caused by either a […]

If a country has a comparative advantage in producing a product, it may not have an absolute advantage in producing that product. The U.S. economy would gain from the elimination of tariffs and quotas even if other countries do not […]

The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in the price of a complementary product. In the short run, if a firm shuts down, its […]

Producer surplus is the Difference between the lowest price a firm is willing to accept for a product and the price it actually receives for the product. A depreciation of a country’s currency always lowers the domestic firm’s profits. Answer: […]

Insurance companies use deductibles and coinsurance to reduce moral hazard. After an increase in demand in a constant-cost industry, firms will find themselves with higher average cost curves. Answer: FALSE The economic model of consumer behavior explains how consumers’ tastes […]

Technological advancements that increase labor’s productivity shift the labor supply curve to the right. Contractionary fiscal policy is used to decrease aggregate demand in an attempt to fight rising inflation. Answer: TRUE When colleges use yield management techniques, they increase […]

Rent-seeking behavior, unlike profit-maximizing behavior in competitive markets, wastes society’s scarce resources. The marginal propensity to consume measures the average amount of wealth that a consumer spends in a given period of time. Answer: FALSE With the Troubled Asset Relief […]

The term “trust” in antitrust refers to a board of trustees that has collusive control over different companies. Economists believe that cost-plus pricing may be the best way for a firm to determine its optimal product price when the firm’s […]

Logrolling refers to attempts by individuals to use government action to make themselves better off at the expense of others. The total amount of producer surplus in a market is equal to the area above the market supply curve and […]

Ceteris paribus, a decrease in the government’s budget deficit will increase domestic investment and net foreign investment. As the number of firms in a market decreases, the supply curve will shift to the left and the equilibrium price will rise. […]

In explaining consumer behavior economists explain how consumer tastes and preferences are formed. The Federal Reserve’s performance in the mid-to-late 1980s, 1990s, and early 2000s has received high marks from economists, even without inflation targeting. Answer: TRUE Even if expectations […]

According to Porter’s Five Competitive Forces Model, similar products produced by different firms within the industry affects a firm’s ability to raise prices far more than substitutable products produced outside the industry. Increasing a fixed exchange rate is called a […]

A monopolistically competitive firm should lower its price if its marginal revenue exceeds its marginal cost. A rising price level decreases consumption by decreasing the real value of household wealth. Answer: TRUE The question of whether economic growth is desirable […]

The excess burden of a tax is also a deadweight loss. In the United States, corporate profits are taxed at the corporate level and then are taxed again as personal income in the form of dividend payments. Answer: TRUE A […]

The public choice model asserts that the self-interest of policymakers is likely to cause them to take actions that are inconsistent with the preferences of voters, even where those preferences are clear. Your checking account balance is included in your […]

One reason why firms would choose a salary system rather than a commission compensation system is that their employees might become less concerned about the quality of their work. If the price of peaches, a substitute for plums, decreases, the […]

Suppose the extra cost for a plumber to keep her shop open for one extra hour is $145. Then, the plumber should not stay open for the extra hour if she can only generate additional revenue of $145 for that […]

In the 1960s, many economists and policymakers believed the trade-off between inflation and unemployment was permanent. If banks receive a greater amount of reserves and do not hold all of these reserves as excess reserves, the money supply expands. Answer: […]

If it costs Sinclair $300 to produce 3 suede jackets and $420 to produce 4 suede jackets, then the difference of $120 is the marginal cost of producing the 4th suede jacket. The multiplier effect following an increase in expenditure […]

An increase in liabilities will reduce a firm’s net worth. Suppose a monopoly is producing its profit-maximizing output level. Now suppose the government imposes a lump-sum tax on the monopoly, independent of its output. As a result the monopolist will […]

If a country is producing efficiently and is on the production possibilities frontier, the country can produce more of one good without producing less of the other good. A monopolistically competitive firm can increase its profits beyond the long-run equilibrium […]

An increase in population shifts the production possibility frontier inwards over time. Ceteris paribus, an increase in the government budget deficit increases interest rates in the United States and causes a real appreciation of the dollar. Answer: FALSE If the […]

Most food products have low income and price elasticities of demand. Monopolistically competitive firms achieve allocative efficiency but not productive efficiency. Answer: FALSE In face of a negative supply shock, the Fed may avoid a rise in unemployment only if […]

In the circular flow model, households supply resources such as labor services in the product market. Some researchers have been unable to find evidence of increasing returns to human capital. Answer: TRUE If net exports are positive for China, it […]

On a diagram of a production possibility frontier, economic growth is represented by the slope of the production possibility frontier. The slope of an isocost line determines the marginal rate of substitution. Answer: FALSE An increase in income results in […]

In recent decades the United States has incurred overall balance of payments deficits. Corporate managers and shareholders always have the same goals. Answer: FALSE The amount of national income in an economy equals the money supply in an economy. Answer: […]

In the United States, partnership profits are taxed at the business level and then are taxed again as personal income in the form of dividend payments. A tax is efficient if it imposes a small excess burden relative to the […]

Economists have not found a way to predict when recessions will begin and end. An increase in net foreign investment is possible through a decrease in national saving or a decrease in domestic investment. Answer: FALSE When a firm experiences […]

The General Agreement on Tariffs and Trade (GATT) was formed to replace the World Trade Organization (WTO) because the WTO was empowered only to reduce barriers to trade in goods. The GATT is an agreement to reduce barriers to trade […]

Those who favor changes in the market for health care that would make it more like the markets for other goods and services are generally in favor of universal health care coverage. A normal good is a good for which […]

Assume that the personal computer industry is perfectly competitive. The fact that the price of personal computers over the last decade has fallen despite increases in demand signifies that the industry is a decreasing-cost industry. Stagflation occurs when aggregate supply […]

The FOMC no longer sets targets for M1 and M2 to meet its goals of price stability and high employment. If a country produces only two goods, then it is not possible to have an absolute advantage in the production […]

If income is unequally distributed in an economy, increases in GDP may not raise well-being in an economy. A perfectly competitive firm’s marginal revenue curve is downward sloping. Answer: FALSE If you purchase a share of stock from your friend […]