EC 202

If a Starbucks tall latte cost $3.20 in the United States and 3 euros in the Euro area, then purchasing-power parity implies the nominal exchange rate is how many euros per dollar? Select one: a. .938 If the exchange rate is less than this, it costs more dollars to buy a tall latte in the U.S. than in the Euro area. b. .938 If the exchange rate is less than this, it costs fewer dollars to buy a tall latte in the U.S. then in the Euro area. c. 1.067 If the exchange rate is less than this, it costs more dollars to buy a tall latte in the U.S. than in the Euro area. d. 1.067 If the exchange rate is less than this, it costs fewer dollars to buy a tall latte in the U.S. than in the Euro area.

a. .938 If the exchange rate is less than this, it costs more dollars to buy a tall latte in the U.S. than in the Euro area.

If P denotes the price of goods and services measured in terms of money, then Select one: a. 1/P represents the value of money measured in terms of goods and services b. P can be interpreted as the inflation rate c. the supply of money influences the value of P, but the demand for money does not d. All of the above are correct

a. 1/P represents the value of money measured in terms of goods and services

Which of the following is an example of an increase in government purchases? Select one: a. The government builds new roads. b. The Federal Reserve purchases government bonds. c. The government decreases personal income taxes. d. The government increases unemployment insurance benefit payments.

a. The government builds new roads.

An increase in government spending initially and primarily shifts Select one: a. aggregate demand to the right. b. aggregate demand to the left. c. aggregate supply to the right. d. neither aggregate demand nor aggregate supply in either direction.

a. aggregate demand to the right.

If the demand for loanable funds shifts to the right, then the equilibrium interest rate Select one: a. and quantity of loanable funds rises b. and quantity of loanable funds falls c. rises and the quantity of loanable funds falls d. falls and the quantity of loanable funds rises

a. and quantity of loanable funds rises

When conducting an open-market purchase, the Fed Select one: a. buys government bonds, and in so doing increases the money supply b. buys government bonds, and in so doing decreases the money supply c. sells government bonds, and in so doing increases the money supply d. sells government bonds, and in so doing decreases the money supply

a. buys government bonds, and in so doing increases the money supply

The interest-rate effect Select one: a. depends on the idea that decreases in interest rates increase the quantity of goods and services demanded. b. depends on the idea that decreases in interest rates decrease the quantity of goods and services demanded. c. is responsible for the downward slope of the money-demand curve. d. is the least important reason, in the case of the United States, for the downward slope of the aggregate- demand curve.

a. depends on the idea that decreases in interest rates increase the quantity of goods and services demanded.

In an open economy, national saving equals Select one: a. domestic investment plus net capital outflow. b. domestic investment minus net capital outflow. c. domestic investment. d. net capital outflow

a. domestic investment plus net capital outflow.

During recessions investment Select one: a. falls by a larger percentage than GDP b. falls by about the same percentage as GDP c. falls by a smaller percentage than GDP d. falls but the percentage change is sometimes much larger and sometimes much smaller

a. falls by a larger percentage than GDP

Which of the following is not a reason the aggregate-demand curve slopes downward? As the price level increases, Select one: a. firms may believe the relative price of their output has risen. b. real wealth declines. c. the interest rate increases. d. the exchange rate increases.

a. firms may believe the relative price of their output has risen.

Other things the same, a country that increases its savings rate will have Select one: a. higher future capital and higher future real GDP per person. b. higher future capital but not higher future real GDP per person. c. higher future real GDP per person but not higher future capital. d. neither higher future capital nor higher future real GDP per person.

a. higher future capital and higher future real GDP per person.

As the reserve ratio decreases, the money multiplier Select one: a. increases b. does not change c. decreases d. could do any of the above

a. increases

In the Production Possibilities model an economy is producing efficiently if the economy at a point Select one: a. on the production possibilities frontier curve. b. outside the production possibilities frontier curve. c. on or inside the production possibilities frontier curve. d. inside the production possibilities frontier curve.

a. on the production possibilities frontier curve.

As the price level rises Select one: a. people will want to hold more money, so the interest rate rises b. people will want to hold more money, so the interest rate falls c. people will want to hold less money, so the interest rate falls d. people will want to hold less money, so the interest rate rises

a. people will want to hold more money, so the interest rate rises

If purchases of French assets by foreigners are less than French purchases of foreign assets, then France has a Select one: a. positive net capital outflow and a trade surplus. b. positive net capital outflow and a trade deficit. c. negative net capital outflow and a trade surplus. d. negative net capital outflow and a trade deficit.

a. positive net capital outflow and a trade surplus.

Inventors often obtain patents on new products and processes, thereby turning new ideas into Select one: a. private goods and increasing the incentive to engage in research. b. private goods but decreasing the incentive to engage in research. c. public goods and increasing the incentive to engage in research. d. public goods but decreasing the incentive to engage in research.

a. private goods and increasing the incentive to engage in research.

Suppose that foreign citizens decide to purchase more U.S. pharmaceuticals and U.S. citizens decide to buy more stock in foreign corporations. Other things the same, these actions Select one: a. raise both U.S. net exports and U.S. net capital outflows. b. raise U.S. net exports and lower U.S. net capital outflows. c. lower both U.S. net exports and U.S. net capital outflows. d. lower U.S. net exports and raise U.S. net capital outflows.

a. raise both U.S. net exports and U.S. net capital outflows.

Mia puts money into a piggy bank so she can spend it later. What function of money does this illustrate? Select one: a. store of value b. medium of exchange c. unit of account d. None of the above is correct

a. store of value

Using the liquidity-preference model, when the Federal Reserve decreases the money supply, Select one: a. the equilibrium interest rate increases. b. the aggregate-demand curve shifts to the right. c. the quantity of goods and services demanded is unchanged for a given price level. d. the short-run aggregate-supply curve shifts to the left.

a. the equilibrium interest rate increases.

Which of the following is included in M1 and M2? Select one: a. traveler's checks b. savings deposits c. money market mutual funds d. small time deposits

a. traveler's checks

It takes China 10 hours to produce a chair and 30 hours to produce a desk. What is the opportunity cost for china to produce a chair? Select one: a. 3 desks b. 1/3 of a desk c. 10 desks d. 1 desk

b. 1/3 of a desk

Which of the following is an example of U.S. foreign portfolio investment? Select one: a. Disney builds a new amusement park near Barcelona Spain b. A U.S. citizen buys bonds issued by the British government c. A Dutch hotel chain opens a new hotel in the United States d. A citizen of Singapore buys a bond issued by a U.S. corporation

b. A U.S. citizen buys bonds issued by the British government

When Jamie, a U.S. citizen, purchases a wool jacket made in Ireland, the purchase is Select one: a. both a U.S. and Irish import b. A U.S. import and an Irish export c. A U.S. export and an Irish import d. neither an export nor an import

b. A U.S. import and an Irish export

Adam and Doug both build birdhouses. Adam works 30 hours a week and produces 15 bird houses. Doug works 20 hours a week and produces 12 bird houses. Which of the following is correct? Select one: a. Adam's production and productivity are higher than Doug's. b. Adam's production is higher than Doug's, but Doug's productivity is higher than Adam's. c. Doug's production is higher than Adam's, but Adam's productivity is higher than Doug's. d. Doug's production and productivity are higher than Adam's.

b. Adam's production is higher than Doug's, but Doug's productivity is higher than Adam's.

A bank has an 8 percent reserve requirement, $10,000 in deposits, and has loaned out all it can given the reserve requirement. Select one: a. It has $80 in reserves and %9,920 in loans b. It has $800 in reserves and $9,200 in loans c. It has $1,250 in reserves and $8,750 in loans d. None of the above are correct

b. It has $800 in reserves and $9,200 in loans

(IMAGE: CH 8) Suppose the government imposes a tax of P' - P'''. Total surplus after the tax is measured by the area Select one: a. I+Y. b. J+K+L+M. c. I+Y+B. d. I+J+K+L+M+Y.

b. J+K+L+M.

Which of the following would shift the aggregate demand to the right? Select one: a. Congress reduces purchases of new weapons systems b. The Fed buys bonds in the open market c. The price level falls d. Net exports falls

b. The Fed buys bonds in the open market

Other things the same, which of the following would both make foreigners more willing to engage in U.S. portfolio investment? Select one: a. U.S. interest rates rise,, the default risk of U.S. assets rise b. U.S. interest rates rise, the default risk of U.S. assets fall c. U.S. interest rates fall, the default risk of U.S. assets rise d. U.S. interest rates fall, the default risk of U.S. assets fall

b. U.S. interest rates rise, the default risk of U.S. assets fall

The leverage ratio is calculate as Select one: a. assets minus liabilities b. assets divided by bank capital c. the reciprocal of the required reserve ratio d. the required reserve ratio multiplied by bank capital

b. assets divided by bank capital

The confidence you have that a retailer will accept dollars in exchange for goods is based primarily on money Select one: a. being a unit of account b. being a medium of exchange c. serving as a store of value d. having intrinsic value

b. being a medium of exchange

The change in aggregate demand that results from fiscal expansion changing the interest rate is called the Select one: a. multiplier effect. b. crowding-out effect. c. accelerator effect. d. Ricardian equivalence effect.

b. crowding-out effect.

An increase in real interest rates in the United States Select one: a. discourages both U.S. and foreign residents from buying U.S. assets. b. encourages both U.S. and foreign residents to buy U.S. assets. c. encourages U.S. residents to buy U.S. assets, but discourages foreign residents from buying U.S. assets. d. encourages foreign residents to buy U.S. assets, but discourages U.S. residents from buying U.S. assets.

b. encourages both U.S. and foreign residents to buy U.S. assets.

Evidence shows that during a recession the economy experiences Select one: a. falling real GDP, rising employment, and rising income b. falling real GDP, rising unemployment, and falling income c. rising real GDP, increasing employment, and falling income d. rising real GDP, rising unemployment, and falling income

b. falling real GDP, rising unemployment, and falling income

Currently, U.S. currency is Select one: a. fiat money with intrinsic value b. fiat money with no intrinsic value c. commodity money with intrinsic value d. commodity money with no intrinsic value

b. fiat money with no intrinsic value

If aggregate demand shifts right then in the short run Select one: a. firms will increase production. In the long run increased price expectations shift the short-run aggregate supply curve to the right. b. firms will increase production. In the long run increased price expectations shift the short-run aggregate supply curve to the left c. firms will decrease production. In the long run increased price expectations shift the short-run aggregate supply curve to the right. d. firms will decrease production. In the long run increased price expectations shift the short-run aggregate supply curve to the left.

b. firms will increase production. In the long run increased price expectations shift the short-run aggregate supply curve to the left

When the price level rises, the number of dollars needed to buy a representative basket of goods Select one: a. increases, and so the value of money rises b. increases, and so the value of money falls c. decreases, and so the value of money rises d. decreases, and so the value of money falls

b. increases, and so the value of money falls

When public saving falls by $2b and private saving falls by $1b in a closed economy, Select one: a. investment falls by $1b b. investment falls by $3b c. investment increases by $1b d. investment falls by $2b

b. investment falls by $3b

The catch-up effect refers to the idea that Select one: a. saving will always catch-up with investment spending. b. it is easier for a country to grow fast and so catch-up if it starts out relatively poor. c. population eventually catches-up with increased output. d. if investment spending is low, increased saving will help investment to "catch-up."

b. it is easier for a country to grow fast and so catch-up if it starts out relatively poor.

Other things the same, a lower real interest rate decreases the quantity of Select one: a. loanable funds demanded. b. loanable funds supplied. c. domestic investment d. net capital outflow

b. loanable funds supplied.

A decrease in the expected price level shifts Select one: a. only the long-run aggregate supply curve to the right b. only the short-run aggregate supply curve right c. both the short-run and the long-run aggregate supply curve right d. Neither the short-run nor the long-run aggregate supply curve right

b. only the short-run aggregate supply curve right

For an imaginary closed economy, T = $5,000; S = $11,000; C = $48,000; and the government is running a budget surplus of $1,000. Then Select one: a. private saving = $10,000 and GDP = $55,000. b. private saving = $10,000 and GDP = $63,000. c. private saving = $12,000 and GDP = $67,000. d. private saving = $12,000 and GDP = $69,000.

b. private saving = $10,000 and GDP = $63,000.

If the demand for dollars in the market for foreign-currency exchange shifts right, then the exchange rate Select one: a. rises and the quantity of dollars exchanged rises. b. rises and the quantity of dollars exchanged does not change. c. falls and the quantity of dollars exchanged falls. d. falls and the quantity of dollars exchanged does not change.

b. rises and the quantity of dollars exchanged does not change.

If the U.S. imposed import quotas on cotton, then which of the following would rise? Select one: a. the U.S. real exchange rate and U.S. net exports b. the U.S. real exchange rate but not U.S. net exports c. U.S. net exports but not the U.S. real exchange rate d. neither the U.S. real exchange rate nor U.S. net exports

b. the U.S. real exchange rate but not U.S. net exports

If a country had a trade deficit of $20 billion and then its exports rose by $7 billion and its imports fell by $10 billion, its net exports would now be Select one: a. $37 billion b. $3 billion c. -$3 billion d. -$37 billion

c. -$3 billion

If the MPC = 0.75, then the government purchases multiplier is about Select one: a. 1.33 b. 7 c. 4 d. 3

c. 4

Which of the following shifts aggregate demand to the right? Select one: a. The price level rises. b. The price level falls. c. The Fed purchases government bonds on the open market. d. None of the above is correct.

c. The Fed purchases government bonds on the open market.

Which of the following would necessarily increase the equilibrium interest rate? Select one: a. If both the demand for and the supply of loanable funds shift right b. if both the demand for and the supply of loanable funds shift left c. The demand for loanable funds shifts right and the supply of loanable funds shifts left d. The demand for loanable funds shifts left and the supply of loanable funds shifts right

c. The demand for loanable funds shifts right and the supply of loanable funds shifts left

In the early 2000's mortgage interest rates were falling and mortgage lending was increasing. Which of the following could have caused this? Select one: a. The demand for loanable funds was shifting outward b. The demand for loanable funds was shifting inward c. The supply of loanable funds was shifting outward d. The supply of loanable funds was shifting inward

c. The supply of loanable funds was shifting outward

(IMAGE: CH 12) The curve becomes flatter as the amount of capital per worker increases because of Select one: a. increasing returns to capital. b. increasing returns to labor. c. diminishing returns to capital. d. diminishing returns to labor

c. diminishing returns to capital.

If nominal GDP rises from one year to the next, then Select one: a. the economy must be producing a larger output of goods and services. b. goods and services must be selling at higher prices. c. either the economy must be producing a larger output of goods and services, or goods and services must be selling at higher prices, or both. d. employment or productivity must be rising.

c. either the economy must be producing a larger output of goods and services, or goods and services must be selling at higher prices, or both.

If a country raises its budget deficit, then net capital outflow Select one: a. rises, so the supply of its currency shifts right in the market for foreign-currency exchange. b. rises, so the demand for its currency shifts right in the market for foreign-currency exchange. c. falls, so the supply of its currency shifts left in the market for foreign-currency exchange. d. falls, so the demand for its currency shifts right in the market for foreign-currency exchange.

c. falls, so the supply of its currency shifts left in the market for foreign-currency exchange.

Money demand refers to Select one: a. the total quantity of financial assets that people want to hold b. how much income people want to earn per year c. how much wealth people want to hold in liquid form d. how much currency the Federal Reserve decides to print

c. how much wealth people want to hold in liquid form

If the economy is initially at long-run equilibrium and aggregate demand declines, then in the long run the price level Select one: a. and output are higher than in the original long-run equilibrium b. and output are lower than in the original long-run equilibrium c. is lower and output is the same as the original long-run equilibrium d. is the same and output is lower than in the original long-run equilibrium

c. is lower and output is the same as the original long-run equilibrium

A central bank's setting (or altering) of the money supply is known as Select one: a. open-market operation b. interest rate policy c. monetary policy d. employment policy

c. monetary policy

The supply of money increases when Select one: a. the price level falls b. the interest rate increases c. the Fed makes open-market purchases d. money demand increases

c. the Fed makes open-market purchases

You are planning a graduation trip to Mexico. Other things the same, if the dollar appreciates relative to the peso, then Select one: a. the dollar buys fewer pesos. Your hotel room in Mexico will require fewer dollars. b. the dollar buys fewer pesos. Your hotel room in Mexico will require more dollars. c. the dollar buys more pesos. Your hotel room in Mexico will require fewer dollars. d. the dollar buys more pesos. Your hotel room in Mexico will require more dollars.

c. the dollar buys more pesos. Your hotel room in Mexico will require fewer dollars.

Which of the following would shift the supply of dollars in the market for foreign-currency exchange of the open- economy macroeconomic model to the left? Select one: a. the exchange rate rises b. the exchange rate falls c. the expected rate of return on U.S. assets rises d. the expected rate of return on U.S. assets falls

c. the expected rate of return on U.S. assets rises

When the government's budget deficit increases Select one: a. the government is borrowing less and public savings falls. b. the government is borrowing less and public savings increases. c. the government is borrowing more and public savings falls. d. the government is borrowing more and public savings increases.

c. the government is borrowing more and public savings falls.

Suppose the market for loanable funds is in equilibrium. What would happen in the market for loanable funds, other things the same, if the Congress and President increased the maximum contribution limits to 401(k) and 403(b) tax- deferred retirement accounts? Select one: a. the interest rate and the quantity of loanable funds would increase b. the interest rate and quantity of loanable funds would decrease c. the interest rate would decrease and the quantity of loanable funds would increase d. the interest rate would increase and the quantity of loanable funds would decrease

c. the interest rate would decrease and the quantity of loanable funds would increase

In an open macroeconomy, if saving is greater than domestic investment, then Select one: a. there is a trade deficit and Y>C+I+G b. there is a trade deficit and Y < C + I + G c. there is a trade surplus and Y > C + I + G. d. there is a trade surplus and Y < C + I + G.

c. there is a trade surplus and Y > C + I + G.

A country has output of $900 billion, consumption of $600 billion, government expenditures of $150 billion and investment of $120 billion. What is its supply of loanable funds? Select one: a. $30 billion b. $90 billion c. $120 billion d. $150 billion

d. $150 billion

Which of the following effects helps to explain the slope of the aggregate demand curve? Select one: a. the exchange rate effect b. the wealth effect c. the interest rate effect d. All of the above

d. All of the above

A double coincidence of wants Select one: a. is required when there is no item in an economy that is widely accepted in exchange for goods and services. b. is required in an economy that relies on barter. c. is a hindrance to the allocation of resources when it is required for trade. d. All of the above are correct.

d. All of the above are correct.

Which of the following would increase productivity? Select one: a. an increase in the physical capital stock per worker b. an increase in human capital per worker c. an increase in natural resources per worker d. All of the above are correct.

d. All of the above are correct.

Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 1,000, consumption equals 7,500, and government purchases equal 2,000. What is national saving? Select one: a. -500 b. 500 c. 2,000 d. None of the above are correct

d. None of the above are correct

In the open-economy macroeconomic model, the supply of loanable funds comes from Select one: a. the sum of domestic investment and net capital outflow. b. net capital outflow alone. c. domestic investment alone d. None of the above is correct

d. None of the above is correct

Which of the following equations represents GDP for a closed economy? Select one: a. Y=C+I+G+T b. S=I-G c. I=Y-C+G d. Y=C+I+G

d. Y=C+I+G

An open economy's GDP is always given by Select one: a. Y=C+I+G b. Y=C+I+G+T c. Y=C+I+G+S d. Y=C+I+G+NX

d. Y=C+I+G+NX

According to liquidity preference theory, if the quantity of money supplied is greater than the quantity demanded, then the interest rate will Select one: a. increase and the quantity of money demanded will decrease. b. increase and the quantity of money demanded will increase. c. decrease and the quantity of money demanded will decrease. d. decrease and the quantity of money demanded will increase.

d. decrease and the quantity of money demanded will increase.

In the open-economy macroeconomic model, if a country's interest rate rises, its net capital outflow Select one: a. rises and the real exchange rate rises. b. falls and the real exchange rate falls. c. rises and the real exchange rate falls. d. falls and the real exchange rate rises.

d. falls and the real exchange rate rises.

Other things the same, an increase in the price level makes the dollars people hold worth Select one: a. more, so they can buy more b. more, so they can buy less c. less, so they can buy more d. less, so they can buy less

d. less, so they can buy less

In a closed economy, what does (T - G) represent? Select one: a. national saving b. investment c. private saving d. public saving

d. public saving

The model of aggregate demand and aggregate supply explains the relationship between Select one: a. the price and quantity of a particular low b. unemployment and output c. wages and employment d. real GDP and the price level

d. real GDP and the price level

People choose to hold a larger quantity of money if Select one: a. the interest rate rises, which causes the opportunity cost of holding money to rise. b. the interest rate falls, which causes the opportunity cost of holding money to rise. c. the interest rate rises, which causes the opportunity cost of holding money to fall. d. the interest rate falls, which causes the opportunity cost of holding money to fall.

d. the interest rate falls, which causes the opportunity cost of holding money to fall.

In a particular production process, if the quantities of all inputs used double, then the quantity of output doubles as well. This means that Select one: a. the production process cannot be enhanced by technological advances. b. no mathematical representation of the relevant production function can be formulated. c. the relevant production function has the limits-to-growth property. d. the relevant production function has the constant-returns-to-scale property.

d. the relevant production function has the constant-returns-to-scale property.

With the value of money on the vertical axis, the money supply curve is Select one: a. upward-sloping b. downward-sloping c. horizontal d. vertical

d. vertical

The only four producers in a market have the following costs: Seller Cost Evan $50 Selena $100 Angie $150 Kris $200 If Evan, Selena, and Angie sell the good, and the resulting producer surplus is $300, then the price must have been Select one: a. $200. b. $300 c. $450 d. $600

a. $200.

Price Quantity Demanded Quantity Supplied $12.00 0 36 $10.00 3 30 $ 8.00 6 24 $ 6.00 9 18 $ 4.00 12 12 $ 2.00 15 6 $ 0.00 18 0 Both the demand curve and the supply curve are straight lines. At equilibrium, producer surplus is Select one: a. $24. b. $32. c. $48. d. $64.

a. $24.

Suppose a tax of $5 per unit is imposed on a good, and the tax causes the equilibrium quantity of the good to decrease from 200 units to 100 units. The tax decreases consumer surplus by $450 and decreases producer surplus by $300. The deadweight loss from the tax is Select one: a. $250 b. $500 c. $750 d. $1,000

a. $250

Maddy purchases 2 pounds of beans and 3 pounds of rice per month when the price of beans is $2 per pound. She purchases 1 pounds of beans and 4 pounds of rice per month when the price of beans is $3 per pound. Maddy's cross-price elasticity of demand for beans and rice is Select one: a. 0.71, and they are substitutes. b. -0.71, and they are complements. c. 1.4, and they are substitutes. d. -1.4, and they are complements.

a. 0.71, and they are substitutes.

Ken and Traci are two woodworkers who both make tables and chairs. In one month, Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs. Given this, we know that the opportunity cost of 1 chair is Select one: a. 1/6 table for Ken and 1/3 table for Traci. b. 1/6 table for Ken and 3 tables for Traci. c. 6 tables for Ken and 1/3 table for Traci. d. 6 tables for Ken and 3 tables for Traci.

a. 1/6 table for Ken and 1/3 table for Traci.

In one day Alpha Cabinet Company made 40 cabinets with 320 hours of labor. What was Alpha Cabinet Company's productivity? Select one: a. 1/8 cabinet per hour b. 8 hours per cabinet c. 40 cabinets d. None of the above is correct.

a. 1/8 cabinet per hour

The price index was 220 in one year and 238.2 in the next year. What was the inflation rate? Select one: a. 8.3 percent b. 108.3 percent c. 4.8 percent d. 38.2 percent

a. 8.3 percent

(IMAGE: CH 7) When the price is P2, consumer surplus is Select one: a. A b. B c. A + B d. A + B + C

a. A

Belarus has a comparative advantage in the production of linen, but Russia has an absolute advantage in the production of linen. If these two countries decide to trade, Select one: a. Belarus should export linen to Russia. b. Russia should export linen to Belarus. c. trading linen would provide no net advantage to either country. d. Without additional information about opportunity costs, this question cannot be answered.

a. Belarus should export linen to Russia.

Suppose Katie, Kendra, and Kristen each purchase a particular type of cell phone at a price of $80. Katie's willingness to pay was $100, Kendra's willingness to pay was $95, and Kristen's willingness to pay was $80. Which of the following statements is correct? Select one: a. For the three individuals together, consumer surplus amounts to $35. b. Having bought the cell phone, Kristen is better off than she would have been had she not bought it. c. Had the price of the cell phone been $95 rather than $80, Katie and Kendra definitely would have been buyers and Kristen definitely would not have been a buyer. d. The fact that all three individuals paid $80 for the same type of cell phone indicates that each one placed the same value on that cell phone.

a. For the three individuals together, consumer surplus amounts to $35.

(IMAGE: CH 9) From the figure it is apparent that Select one: a. Guatemala will export coffee if trade is allowed. b. Guatemala will import coffee if trade is allowed. c. Guatemala has nothing to gain either by importing or exporting coffee. d. the world price will fall if Guatemala begins to allow its citizens to trade with other countries.

a. Guatemala will export coffee if trade is allowed.

Assume, for Mexico, that the domestic price of oranges without international trade is lower than the world price of oranges. This suggests that, in the production of oranges, Select one: a. Mexico has a comparative advantage over other countries and Mexico will export oranges. b. Mexico has a comparative advantage over other countries and Mexico will import oranges. c. other countries have a comparative advantage over Mexico and Mexico will export oranges. d. other countries have a comparative advantage over Mexico and Mexico will import oranges.

a. Mexico has a comparative advantage over other countries and Mexico will export oranges.

Which of the following statements is correct? Select one: a. The CPI can be used to compare dollar figures from different points in time. b. The percentage change in the CPI is a measure of the inflation rate, but the percentage change in the GDP deflator is not a measure of the inflation rate. c. Compared to the consumer price index (CPI), the GDP deflator is the more common gauge of inflation. d. The GDP deflator better reflects the goods and services bought by consumers than does the CPI.

a. The CPI can be used to compare dollar figures from different points in time.

Suppose sellers of liquor are required to send $5.00 to the government for every bottle of liquor they sell. Further, suppose this tax causes the price paid by buyers of liquor to rise by $3.00 per bottle. Which of the following statements is correct? Select one: a. This tax causes the supply curve for liquor to shift upward by $5.00 at each quantity of liquor. b. The effective price received by sellers is $5.00 per bottle less than it was before the tax. c. Forty percent of the burden of the tax falls on buyers. d. All of the above are correct.

a. This tax causes the supply curve for liquor to shift upward by $5.00 at each quantity of liquor.

(IMAGE: CH 8) Which of the following statements is correct? Select one: a. Total surplus before the tax is imposed is $500. b. After the tax is imposed, consumer surplus is 45 percent of its pre-tax value. c. After the tax is imposed, producer surplus is 45 percent of its pre-tax value. d. All of the above are correct.

a. Total surplus before the tax is imposed is $500.

Which of the following observations would be consistent with the imposition of a binding price ceiling on a market? After the price ceiling becomes effective, Select one: a. a smaller quantity of the good is bought and sold. b. a smaller quantity of the good is demanded. c. a larger quantity of the good is supplied. d. the price rises above the previous equilibrium.

a. a smaller quantity of the good is bought and sold.

Which of the following is not included in GDP? Select one: a. carrots grown in your garden and eaten by your family b. carrots purchased at a farmer's market and eaten by your family c. carrots purchased at a grocery store and eaten by your family d. None of the above are included in GDP.

a. carrots grown in your garden and eaten by your family

Oil is used to produce gasoline. If the price of oil increases, consumer surplus in the gasoline market Select one: a. decreases. b. is unchanged. c. increases. d. may increase, decrease, or remain unchanged.

a. decreases.

Deadweight loss measures the loss Select one: a. in a market to buyers and sellers that is not offset by an increase in government revenue. b. in revenue to the government when buyers choose to buy less of the product because of the tax. c. of equality in a market due to government intervention. d. of total revenue to business firms due to the price wedge caused by the tax.

a. in a market to buyers and sellers that is not offset by an increase in government revenue.

Gross domestic product measures Select one: a. income and expenditures. b. income but not expenditures. c. expenditures but not income. d. neither income nor expenditures.

a. income and expenditures.

A tax levied on the sellers of blueberries Select one: a. increases sellers' costs, reduces profits, and shifts the supply curve up. b. increases sellers' costs, reduces profits, and shifts the supply curve down. c. decreases sellers' costs, increases profits, and shifts the supply curve up. d. decreases sellers' costs, increases profits, and shifts the supply curve down.

a. increases sellers' costs, reduces profits, and shifts the supply curve up.

The tax incidence Select one: a. is the manner in which the burden of a tax is shared among participants in a market. b. can be shifted to the buyer by imposing the tax on the buyers of a product in a market. c. can be shifted to the seller by imposing the tax on the sellers of a product in a market. d. All of the above are correct.

a. is the manner in which the burden of a tax is shared among participants in a market.

Willingness to pay Select one: a. measures the value that a buyer places on a good. b. is the amount a seller actually receives for a good minus the minimum amount the seller is willing to accept. c. is the maximum amount a buyer is willing to pay minus the minimum amount a seller is willing to accept. d. is the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.

a. measures the value that a buyer places on a good.

The law of supply states that, other things equal, an increase in Select one: a. price causes quantity supplied to increase. b. price causes quantity supplied to decrease. c. quantity supplied causes price to increase. d. quantity supplied causes price to decrease.

a. price causes quantity supplied to increase.

The one variable that stands out as the most significant explanation of large variations in living standards around the world is Select one: a. productivity. b. population. c. preferences. d. prices.

a. productivity.

Hosne has a comparative advantage in the production of Select one: a. purses and Merve has a comparative advantage in the production of wallets. b. wallets and Merve has a comparative advantage in the production of purses. c. both goods and Merve has a comparative advantage in the production of neither good. d. neither good and Merve has a comparative advantage in the production of both goods.

a. purses and Merve has a comparative advantage in the production of wallets.

The price elasticity of demand measures how much Select one: a. quantity demanded responds to a change in price. b. quantity demanded responds to a change in income. c. price responds to a change in demand. d. demand responds to a change in supply.

a. quantity demanded responds to a change in price.

If the cross-price elasticity of two goods is positive, then the two goods are Select one: a. substitutes. b. complements. c. normal goods. d. inferior goods.

a. substitutes.

Consumer surplus is Select one: a. the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. b. the amount a buyer is willing to pay for a good minus the cost of producing the good. c. the amount by which the quantity supplied of a good exceeds the quantity demanded of the good. d. a buyer's willingness to pay for a good plus the price of the good.

a. the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.

A rational decisionmaker takes an action if and only if Select one: a. the marginal benefit of the action exceeds the marginal cost of the action. b. the marginal cost of the action exceeds the marginal benefit of the action. c. the marginal cost of the action is zero. d. the opportunity cost of the action is zero.

a. the marginal benefit of the action exceeds the marginal cost of the action.

(IMAGE: CH 6) How is the burden of the tax shared between buyers and sellers? Buyers bear Select one: a. three-fourths of the burden, and sellers bear one-fourth of the burden. b. two-thirds of the burden, and sellers bear one-third of the burden. c. one-half of the burden, and sellers bear one-half of the burden. d. one-fourth of the burden, and sellers bear three-fourths of the burden.

a. three-fourths of the burden, and sellers bear one-fourth of the burden.

Assume for the United States that the opportunity cost of each airplane is 50 cars. Which of these pairs of points could be on the United States' production possibilities frontier? Select one: a. (200 airplanes, 5,000 cars) and (150 airplanes, 4,000 cars) b. (200 airplanes, 12,500 cars) and (150 airplanes, 15,000 cars) c. (300 airplanes, 15,000 cars) and (200 airplanes, 25,000 cars) d. (300 airplanes, 25,000 cars) and (200 airplanes, 40,000 cars)

b. (200 airplanes, 12,500 cars) and (150 airplanes, 15,000 cars)

If the consumer price index was 96 in 2012, 100 in 2013, and 102 in 2014, then the base year must be Select one: a. 2012. b. 2013. c. 2014. d. The base year cannot be determined from the given information.

b. 2013.

Suppose a tax of $3 is imposed on each new garden hose that is sold, resulting in a deadweight loss of $22,500. The supply curve is a typical upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. Before the tax was imposed, the equilibrium quantity of garden hoses was 100,000. We can conclude that the equilibrium quantity of garden hoses after the tax is imposed is Select one: a. 75,000 b. 85,000 c. 90,000 d. 95,000

b. 85,000

Germany has 10,000 labor hours available per month. It takes German laborers 50 hours to produce a TV and 100 hours to produce a computer. Which of the following combinations of TVs and computers would be possible and efficient? Select one: a. 100 computers and 200 TVs b. 90 computers and 20 TVs c. 80 computers 30 TVs d. 50 computers and 110 TVs

b. 90 computers and 20 TVs

Tom Brady should pay someone else to mow his lawn instead of mowing it himself, unless Select one: a. Brady has an absolute advantage over everyone else in mowing his lawn. b. Brady has a comparative advantage over everyone else in mowing his lawn. c. Brady's opportunity cost of mowing his lawn is higher than it is for everyone else. d. All of the above are correct.

b. Brady has a comparative advantage over everyone else in mowing his lawn.

Which of the following statements is correct? Select one: a. Buyers determine supply, and sellers determine demand. b. Buyers determine demand, and sellers determine supply. c. Buyers determine both demand and supply. d. Sellers determine both demand and supply.

b. Buyers determine demand, and sellers determine supply.

John likes to eat cheetos and drink PBR most evenings when he gets home from work. One day he goes to Kroger and sees that the price of cheetos has gone up, what happens to John's demand for PBR. Select one: a. His demand for PBR increases. b. His demand for PBR decreases. c. His demand for PBR will be unaffected. d. His demand could go up or down, it is uncertain.

b. His demand for PBR decreases.

US and French Production Opportunities US: 16 (wine) and 32 (cheese) France: 8(wine) and 4(cheese) The opportunity costs for the US and France are as follows: Select one: a. In the US 1 million gallons of wine costs 1/2 million pounds of cheese and in France 1 million gallons of wine costs 2 million pounds of cheese. b. In the US 1 million gallons of wine costs 2 million pounds of cheese and in France 1 million gallons of wine costs 1/2 million pounds of cheese. c. In the US 1 million pounds of cheese costs 1/2 million gallons of wine and in France 1 million pounds of cheese costs 2 million gallons of wine. d. In the US 1 million pounds of cheese costs 16 million gallons of wine and in France 1 million pounds of cheese costs 8 million gallons of wine.

b. In the US 1 million gallons of wine costs 2 million pounds of cheese and in France 1 million gallons of wine costs 1/2 million pounds of cheese.

When the consumer price index falls, the typical family Select one: a. has to spend more dollars to maintain the same standard of living. b. can spend fewer dollars to maintain the same standard of living. c. finds that its standard of living is not affected. d. can save less because they do not need to offset the effects of rising prices.

b. can spend fewer dollars to maintain the same standard of living.

When the price of an eBook is $15.00, the quantity demanded is 400 eBooks per day. When the price falls to $10.00, the quantity demanded increases to 700. Given this information and using the midpoint method, we know that the demand for eBooks is Select one: a. inelastic. b. elastic. c. unit elastic. d. perfectly inelastic.

b. elastic.

Economics is the study of Select one: a. production methods. b. how society manages its scarce resources. c. how households decide who performs which tasks. d. the interaction of business and government.

b. how society manages its scarce resources.

For any country, if the world price of copper is lower than the domestic price of copper without trade, that country should Select one: a. export copper b. import copper c. neither export nor import since that country cannot gain from trade d. neither export nor import copper, since that country already produces copper at a low cost compared to other countries

b. import copper

An increase in price causes an increase in total revenue when demand is Select one: a. elastic. b. inelastic. c. unit elastic. d. All of the above are possible.

b. inelastic.

Economists make assumptions to Select one: a. provide issues for political discussion. b. make a complex world easier to understand. c. make it easier to teach economic concepts and analysis. d. create policy alternatives that are incomplete or subject to criticism.

b. make a complex world easier to understand.

The consumer price index is used to Select one: a. monitor changes in the level of wholesale prices in the economy. b. monitor changes in the cost of living over time. c. monitor changes in the level of real GDP over time. d. monitor changes in the stock market.

b. monitor changes in the cost of living over time.

Suppose the BLS basket consists of two goods, Redbull and Dorito's. The price of Redbull rises from $3 to $3.75 and the price of a pack of Dorito's rises from $1.25 to $1.75. Furthermore, suppose Dorito's and Redbull are neither complimentary nor substitutable goods. If the CPI rises from 140 to 182, then people likely will buy Select one: a. more Redbull and more Dorito's b. more Redbull and fewer Dorito's c. less Redbull and more Dorito's d. less Redbull and fewer Dorito's.

b. more Redbull and fewer Dorito's

When new goods are introduced, consumers have more variety from which to choose. As a result, each dollar is worth Select one: a. more, and the cost of living increases. b. more, and the cost of living decreases. c. less, and the cost of living increases. d. less, and the cost of living decreases.

b. more, and the cost of living decreases.

Billie Jean has $120 to spend and wants to buy either a new amplifier for her guitar or a new mp3 player to listen to music while working out. Both the amplifier and the mp3 player cost $120, so she can only buy one. This illustrates the basic concept that Select one: a. trade can make everyone better off. b. people face trade-offs. c. rational people think at the margin. d. decisions made at the margin are not particularly important.

b. people face trade-offs.

Suppose Iceland goes from being an isolated country to being an exporter of coats. As a result, Select one: a. consumer surplus increases for consumers of coats in Iceland. b. producer surplus increases for producers of coats in Iceland. c. total surplus remains unchanged in the coat market in Iceland. d. it is reasonable to infer that other countries have a comparative advantage over Iceland in coat production.

b. producer surplus increases for producers of coats in Iceland.

A nation's standard of living is best measured by its Select one: a. real GDP. b. real GDP per person. c. nominal GDP. d. nominal GDP per person.

b. real GDP per person.

A decrease in quantity demanded Select one: a. results in a movement downward and to the right along a demand curve. b. results in a movement upward and to the left along a demand curve. c. shifts the demand curve to the left. d. shifts the demand curve to the right.

b. results in a movement upward and to the left along a demand curve.

The inflation rate you are most likely to hear on the nightly news is calculated from Select one: a. the GDP deflator. b. the CPI. c. the Dow Jones Industrial Average. d. the unemployment rate.

b. the CPI.

A key determinant of the price elasticity of supply is Select one: a. the ability of sellers to change the price of the good they produce. b. the ability of sellers to change the amount of the good they produce. c. how responsive buyers are to changes in sellers' prices. d. the slope of the demand curve.

b. the ability of sellers to change the amount of the good they produce.

In the circular-flow diagram, Select one: a. firms own the factors of production. b. the factors of production are labor, land, and capital. c. the factors of production are also called "output." d. All of the above are correct.

b. the factors of production are labor, land, and capital.

"Other things equal, when the price of a good rises, the quantity demanded of the good falls, and when the price falls, the quantity demanded rises." This relationship between price and quantity demanded is referred to as Select one: a. equilibrium. b. the law of demand. c. the relationship between supply and demand. d. the definition of an inferior good.

b. the law of demand.

Total surplus is Select one: a. the total cost to sellers of providing the good minus the total value of the good to buyers. b. the total value of the good to buyers minus the cost to sellers of providing the good. c. the difference between consumer surplus and sellers' cost. d. always smaller than producer surplus.

b. the total value of the good to buyers minus the cost to sellers of providing the good.

Spain allows trade with the rest of the world. We know that Spain has a comparative advantage in producing olive oil if we know that Select one: a. Spain imports olive oil. b. the world price of olive oil is higher than the price of olive oil that would prevail in Spain if trade with other countries were not allowed. c. consumer surplus in Spain would exceed producer surplus in Spain if trade with other countries were not allowed. d. All of the above are correct.

b. the world price of olive oil is higher than the price of olive oil that would prevail in Spain if trade with other countries were not allowed.

Merve should specialize in the production of Select one: a. purses. b. wallets. c. both goods. d. neither good.

b. wallets.

Charles purchases 20 basketball tickets per year when his annual income is $50,000 and 25 basketball tickets when his annual income is $60,000. Charles's income elasticity of demand for basketball ticket is Select one: a. 0.82, and basketball tickets are a normal good. b. 0.82, and basketball tickets are an inferior good. c. 1.22, and basketball tickets are a normal good. d. 1.22, and basketball tickets are an inferior good.

c. 1.22, and basketball tickets are a normal good.

(IMAGE: CH 7) Which area represents the increase in producer surplus when the price rises from P1 to P2 due to new producers entering the market? Select one: a. BCG b. ACH c. DGH d. AHGB

c. DGH

Kelly and David are both capable of repairing cars and cooking meals. Which of the following scenarios is not possible? Select one: a. Kelly has a comparative advantage in repairing cars and David has a comparative advantage in cooking meals. b. Kelly has an absolute advantage in repairing cars and David has an absolute advantage in cooking meals. c. Kelly has a comparative advantage in repairing cars and in cooking meals. d. David has an absolute advantage in repairing cars and in cooking meals.

c. Kelly has a comparative advantage in repairing cars and in cooking meals.

Suppose a tax is imposed on bananas. In which of the following cases will the tax cause the equilibrium quantity of bananas to shrink by the largest amount? Select one: a. The response of buyers to a change in the price of bananas is strong, and the response of sellers to a change in the price of bananas is weak. b. The response of sellers to a change in the price of bananas is strong, and the response of buyers to a change in the price of bananas is weak. c. The response of buyers and sellers to a change in the price of bananas is strong. d. The response of buyers and sellers to a change in the price of bananas is weak.

c. The response of buyers and sellers to a change in the price of bananas is strong.

What happens to the total surplus in a market when the government imposes a tax? Select one: a. Total surplus increases by the amount of the tax. b. Total surplus increases but by less than the amount of the tax. c. Total surplus decreases. d. Total surplus is unaffected by the tax.

c. Total surplus decreases.

If T represents the size of the tax on a good and Q represents the quantity of the good that is sold, total tax revenue received by government can be expressed as Select one: a. T/Q. b. T+Q. c. TxQ. d. (TxQ)/Q.

c. TxQ.

Which of the following transactions adds to U.S. GDP for 2015? Select one: a. In 2015, Ann sells a car that she bought in 2011 to Bill for $7,000. b. An American management consultant works in Canada during the summer of 2015 and earns the equivalent of $40,000 during that time. c. When Ken and Kim were both single, they lived in separate apartments and each paid $800 in rent. Ken and Kim got married in 2015 and they bought a previously unoccupied house that, according to reliable estimates, could be rented for $1,700 per month. d. None of the above transactions adds to U.S. GDP for 2015.

c. When Ken and Kim were both single, they lived in separate apartments and each paid $800 in rent. Ken and Kim got married in 2015 and they bought a previously unoccupied house that, according to reliable estimates, could be rented for $1,700 per month.

If macaroni and cheese is an inferior good, then an increase in Select one: a. the price will cause the demand curve for macaroni and cheese to shift to the left. b. the price will cause the demand curve for macaroni and cheese to shift to the right. c. a consumer's income will cause the demand curve for macaroni and cheese to shift to the left. d. a consumer's income will cause the demand curve for macaroni and cheese to shift to the right.

c. a consumer's income will cause the demand curve for macaroni and cheese to shift to the left.

Which of the following would cause price to decrease? Select one: a. a decrease in supply b. an increase in demand c. a surplus of the good d. a shortage of the good

c. a surplus of the good

(IMAGE: CH 6) A government-imposed price of $24 in this market is an example of a Select one: a. binding price ceiling that creates a shortage. b. non-binding price ceiling that creates a shortage. c. binding price floor that creates a surplus. d. non-binding price floor that creates a surplus.

c. binding price floor that creates a surplus.

When a country allows trade and becomes an importer of a good, Select one: a. both domestic producers and domestic consumers become better off. b. domestic producers become better off, and domestic consumers become worse off. c. domestic producers become worse off, and domestic consumers become better off. d. both domestic producers and domestic consumers become worse off.

c. domestic producers become worse off, and domestic consumers become better off.

Absolute advantage is found by comparing different producers' Select one: a. opportunity costs. b. payments to land, labor, and capital. c. input requirements per unit of output. d. locational and logistical circumstances.

c. input requirements per unit of output.

In a competitive market free of government regulation, Select one: a. price adjusts until quantity demanded is greater than quantity supplied. b. price adjusts until quantity demanded is less than quantity supplied. c. price adjusts until quantity demanded equals quantity supplied. d. supply adjusts to meet demand at every price.

c. price adjusts until quantity demanded equals quantity supplied.

Which of the following is always measured in prices from a base-year? Select one: a. both nominal and real GDP. b. nominal but not real GDP. c. real but not nominal GDP. d. neither nominal nor real GDP.

c. real but not nominal GDP.

The benefit that government receives from a tax is measured by Select one: a. the change in the equilibrium quantity of the good. b. the change in the equilibrium price of the good. c. tax revenue. d. total surplus.

c. tax revenue.

Which of the following agencies calculates the CPI? Select one: a. the National Price Board b. the Department Of Weight and Measurements c. the Bureau of Labor Statistics d. the Congressional Budget Office

c. the Bureau of Labor Statistics

The production possibilities frontier illustrates Select one: a. the combinations of output that an economy should produce. b. the combinations of output that an economy should consume. c. the combinations of output that an economy can produce. d. All of the above are correct.

c. the combinations of output that an economy can produce.

After a country goes from disallowing trade in coffee with other countries to allowing trade in coffee with other countries, Select one: a. the domestic price of coffee will be greater than the world price of coffee. b. the domestic price of coffee will be lower than the world price of coffee. c. the domestic price of coffee will equal the world price of coffee. d. The world price of coffee does not matter; the domestic price of coffee prevails.

c. the domestic price of coffee will equal the world price of coffee.

Melody decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is Select one: a. the $60 she earns working. b. the $60 minus the enjoyment she would have received from going to the park. c. the enjoyment she would have received had she gone to the park. d. nothing, since she would have received less than $60 worth of enjoyment from going to the park.

c. the enjoyment she would have received had she gone to the park.

We can say that the allocation of resources is efficient if Select one: a. producer surplus is maximized. b. consumer surplus is maximized. c. total surplus is maximized. d. sellers' costs are minimized.

c. total surplus is maximized.

GDP is defined as the Select one: a. value of all goods and services produced within a country in a given period of time. b. value of all goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time. c. value of all final goods and services produced by the citizens of a country in a given period of time. d. value of all final goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time.

c. value of all final goods and services produced by the citizens of a country in a given period of time.

(IMAGE: CH 6) The price that buyers pay after the tax is imposed is Select one: a. $8.00. b. $9.00. c. $10.50 d. $12.00

d. $12.00

Heath's income elasticity of demand for concerts is 2. All else equal, this means that if his income increases by 10 percent, he will purchase tickets for Select one: a. 2 percent more concerts. b. 5 percent more concerts. c. 10 percent more concerts. d. 20 percent more concerts.

d. 20 percent more concerts.

In response to a shortage caused by the imposition of a binding price ceiling on a market, Select one: a. price will no longer be the mechanism that rations scarce resources. b. long lines of buyers may develop. c. sellers could ration the good or service according to their own personal biases. d. All of the above are correct.

d. All of the above are correct.

If the demand for a product decreases, then we would expect equilibrium price Select one: a. to increase and equilibrium quantity to decrease. b. to decrease and equilibrium quantity to increase. c. and equilibrium quantity to both increase. d. and equilibrium quantity to both decrease.

d. and equilibrium quantity to both decrease.

Most goods and services produced at home Select one: a. and most goods and services produced illegally are included in GDP. b. are included in GDP while most goods and services produced illegally are excluded from GDP. c. are excluded from GDP while most goods and services produced illegally are included in GDP d. and most goods and services produced illegally are excluded from GDP.

d. and most goods and services produced illegally are excluded from GDP.

Demand is said to be price elastic if Select one: a. the price of the good responds substantially to changes in demand. b. demand shifts substantially when income or the expected future price of the good changes. c. buyers do not respond much to changes in the price of the good. d. buyers respond substantially to changes in the price of the good.

d. buyers respond substantially to changes in the price of the good.

A legal maximum on the price at which a good can be sold is called a price Select one: a. floor. b. subsidy. c. support. d. ceiling.

d. ceiling.

What is the fundamental basis for trade among nations? Select one: a. shortages or surpluses in nations that do not trade b. misguided economic policies c. absolute advantage d. comparative advantage

d. comparative advantage

Demand is elastic if the price elasticity of demand is Select one: a. less than 1. b. equal to 1. c. equal to 0. d. greater than 1.

d. greater than 1.

The CPI differs from the GDP deflator in that Select one: a. the CPI is an inflation index, while the GDP deflator is a price index. b. substitution bias is not a problem with the CPI, but it is a problem with the GDP deflator. c. increases in the prices of foreign produced goods that are sold to U.S. consumers show up in the GDP deflator but not in the CPI. d. increases in the prices of domestically produced goods that are sold to the U.S. government show up in the GDP deflator but not in the CPI.

d. increases in the prices of domestically produced goods that are sold to the U.S. government show up in the GDP deflator but not in the CPI.

A competitive market is a market in which Select one: a. an auctioneer helps set prices and arrange sales. b. there are only a few sellers. c. the forces of supply and demand do not apply. d. no individual buyer or seller has any significant impact on the market price.

d. no individual buyer or seller has any significant impact on the market price.

When a tax is levied on a good, the buyers and sellers of the good share the burden, Select one: a. provided the tax is levied on the sellers. b. provided the tax is levied on the buyers. c. provided a portion of the tax is levied on the buyers, with the remaining portion levied on the sellers. d. regardless of how the tax is levied.

d. regardless of how the tax is levied.

Efficiency means that Select one: a. society is conserving resources in order to save them for the future. b. society's goods and services are distributed equally among society's members. c. society's goods and services are distributed fairly, though not necessarily equally, among society's members. d. society is getting the maximum benefits from its scarce resources.

d. society is getting the maximum benefits from its scarce resources.

A tariff is a Select one: a. limit on how much of a good can be exported b. limit on how much of a good can be imported c. tax on an exported good d. tax on an imported good

d. tax on an imported good

Buyers are able to buy all they want to buy and sellers are able to sell all they want to sell at Select one: a. prices at and above the equilibrium price. b. prices at and below the equilibrium price. c. prices above and below the equilibrium price, but not at the equilibrium price. d. the equilibrium price but not above or below the equilibrium price.

d. the equilibrium price but not above or below the equilibrium price.

The price of sugar that prevails in international markets is called the Select one: a. export price of sugar b. domestic price of sugar c. comparative advantage price of sugar d. world price of sugar

d. world price of sugar