Economics 101- Final Exam
Farmer Brown grows strawberries. The average total cost, average cost, and marginal cost of growing for an individual farmer are illustrated in the graph to the right. Farmer Brown will incur losses if the market price falls below $_ per crate. Furthermore, farmer Brown should shut down in the short run if the market price falls below $_ per crate.
$22 $18
Indicate whether each of the following transactions represents the purchase of a final good. 1. The purchase of steel from a steel mill by an automobile manufacturer. (1)____________ 2. The purchase of a new fire truck by the local government. (2)__________ 3. The purchase of domestic wine by a French consumer. (3)____________ 4. The purchase of a new plane by American Airlines. (4)__________
1. Is not the purchase of a final good 2. Is the purchase of a final good 3. Is the purchase of a final good 4. Is the purchase of a final good
Joe has $8.00 to spend on Twinkies and Ho-Hos. Twinkies have a price of $0.50 per pack and Ho-Hos have a price of $1.00 per pack. Use the information in the graphs to determine the number of Twinkies packs and the number of Ho-Hos packs Joe should buy to maximize his utility. Joe should buy _ Twinkies packs and _ Ho-Hos packs.
4 & 6
Why would a firm produce in the short run while experiencing losses? A. A firm would not shut down if by producing it would lose an amount less than its total fixed costs. B. A firm would not shut down if by producing its total revenue would be greater than its total fixed costs. C. A firm would not shut down if by producing a firm would not incur sunk costs. D. A firm would not shut down if by producing a firm's marginal cost would equal its marginal revenue.
A. A firm would not shut down if by producing it would lose an amount less than its total fixed costs.
Which of the following industries uses sophisticated methods to calculate the price of each unit sold each day? A. Airlines B. College Education C. Wheat producers D. All of the above
A. Airlines
Based on the table and graph, which of the following statements regarding total production and total income is true? A. Each measure of production and income gives a different value (even if only slightly) for total production and income. B. Disposable personal income and personal income are equal in 2018. C. Disposable personal income and national income are equal in 2018. D. GDP and GNP are equal in 2018.
A. Each measure of production and income gives a different value (even if only slightly) for total production and income.
In the circular flow of expenditure and income, why must the total value of production in an economy equal the total value of income? A. Every penny spent on a good or service must end up as someone's income. B. Domestic expenditures on imports generally equal foreign expenditures on U.S. exports. C. People tend to spend all of their income on goods and services. D. Taxes on the production of goods and services are determined according to individual income.
A. Every penny spent on a good or service must end up as someone's income.
In addition to the Federal Reserve Bank, what other economic actors influence the money supply? A. Households, firms, and banks. B. The U.S. Mint and the U.S. Treasury. C. The U.S. President and Vice President. D. The U.S. Senate and the U.S. House of Representatives.
A. Households, firms, and banks.
If Irving Fisher was correct in his prediction about the value of velocity, then the quantity equation can be written to solve for the inflation rate as follows: A. Inflation rate = Growth rate of the money supply - Growth rate of real output. B. Inflation rate = Growth rate of the money supply - Growth rate of velocity. C. Inflation rate = Growth rate of the money supply + Growth rate of velocity. D. Inflation rate = Growth rate of the money supply + Growth rate of real output.
A. Inflation rate = Growth rate of the money supply - Growth rate of real output.
During the recession of 2007-2009, people in the millennial age groups of 20 to 24 and 25 to 34 suffered (1) declines in employment than did the labor force as a whole. A. Larger B. Smaller
A. Larger
Beginning in 2008, the Federal Reserve and the U.S. Treasury Department responded to the financial crisis by intervening in financial markets in unprecedented ways. Which of the following is one of the unprecedented actions of the Fed? A. Making loans to primary dealers and holders of mortgage-backed securities. B. Making loans to banks through the discount window. C. Buying Treasury bills and bonds on the open market. D. All of the above. E. A and B only.
A. Making loans to primary dealers and holders of mortgage-backed securities.
Which of the following, if true, would be the strongest evidence in support of the restrictive trade policies? A. Many Argentine firms are efficiently operating in markets that were flooded with imported goods before the trade restrictions were imposed. B. The evidence on how efficiently firms can operate under trade restrictions is mixed. C. Argentina was one of the leading exporters of agriculture products prior to the trade restrictions. D. Even during the period when India imposed high trade barriers, the Indian GDP grew at an average rate of 4%. E. There is free movement of manpower and capital across the Mercosur member nations.
A. Many Argentine firms are efficiently operating in markets that were flooded with imported goods before the trade restrictions were imposed.
GM car sales dropped from 4 million per year in the mid-2000s, when the economy was in an expansion, to only 2.1 million per year at the end of the recession in 2009. The economy experienced a decade-long expansion beginning in 2009, and sales of GM cars and trucks climbed back to 3 million by 2015 and remained at about that level through 2018. Based on these changes in sales in response to changes in the country's level of economic activity, are cars and trucks normal goods or inferior goods? Briefly explain. (Assume that higher U.S. GDP results in higher incomes for most Americans.) A. Normal goods, because holding other factors constant, sales of cars and trucks increased as incomes increased. B. Inferior goods, because cars and trucks can be used for the same purpose. C. Normal goods, because holding other factors constant, sales of cars and trucks decreased as incomes increased. D. Inferior goods, because holdi
A. Normal goods, because holding other factors constant, sales of cars and trucks increased as incomes increased.
Which Congressional Act was passed in 1936 to outlaw price discrimination that reduces competition? A. the Robinson-Patman Act B. the Celler-Kefauver Act C. the Sherman Act D. the Clayton Act
A. The Robinson-Patman Act
Use the graph to help determine which one of the following statements regarding unemployment and business cycles is true. A. The unemployment rate usually continues to rise even after the recession has ended. B. The unemployment rate fell right the beginning of the recession in November 2001. C. The unemployment rate was not affected by the recession in November 2001. D. The unemployment rate fell right after the end of the recession in November 2001.
A. The unemployment rate usually continues to rise even after the recession has ended.
The producer price index (PPI) tracks the prices firms receive for goods and services at all stages of production. A. True B. False
A. True
When is it considered "good policy" for the government to run a budget deficit? A. When borrowing is used for long-lived capital goods. B. When borrowing is used to pay for social insurance programs. C. When borrowing is used for current expenses. D. All of the above.
A. When borrowing is used for long-lived capital goods.
Recessions cause the inflation rate to _________, and the unemployment rate to _________. A. decrease; increase B. increase; decrease C. increase; increase D. decrease; decrease
A. decrease; increase
Budget deficits _. A. occur when government spending exceeds tax revenue, and increase during recessions and wars. B. occur when tax revenue exceeds government spending, and decrease during recessions and wars. C. occur when tax revenue exceeds government spending, and increase during recessions and wars. D. occur when government spending exceeds tax revenue, and decrease during recessions and wars.
A. occur when government spending exceeds tax revenue, and increase during recessions and wars.
Stockholders' equity is _. A. the difference between the value of a corporation's assets and the value of its liabilities; also known as net worth. B. the difference between the value of a corporation's profits and the value of its liabilities; also known as net worth. C. the difference between the value of a corporation's assets and the value of its liabilities; also known as net present value. D. the difference between the value of a corporation's assets and the value of its liabilities; also known as net liabilities.
A. the difference between the value of a corporation's assets and the value of its liabilities; also known as net worth.
From a trough to a peak, the economy goes through _. A. the expansionary phase of the business cycle. B. rising real GDP, but falling real GDP per capita. C. the recessionary phase of the business cycle. D. falling real GDP.
A. the expansionary phase of the business cycle.
In economics, the best definition of technology is _. A. the process a firm uses to turn inputs into outputs. B. the process a firm uses to price output. C. the development of new products. D. the sophistication of the equipment enjoyed by consumers. E. the speed of communication.
A. the process a firm uses to turn inputs into outputs.
What is technology? Technology is _. A. the processes a firm uses to turn inputs into outputs of goods and services. B. the rate of economic depreciation. C. the highest-valued alternative that must be given up to engage in an activity. D. a change in the ability of the firm to produce a given level of output with a given quantity of inputs. E. the additional output a firm produces as a result of hiring one more input.
A. the processes a firm uses to turn inputs into outputs of goods and services.
From the list below, select the variable that will cause the demand curve to shift: A. The cost of raw materials. B. Consumer income C. The number of firms in the market. D. Technology and productivity.
B. Consumer income
Which of the following is not a Federal Reserve district? A. Richmond B. Denver C. Philadelphia D. Dallas
B. Denver
"In years when people buy few shares of stock, investment will be low and, therefore, so will gross domestic product (GDP)." A. Disagree: While GDP will be low in this case, it is the result of a decrease in consumer expenditure on stocks, not investment spending. B. Disagree: Investment as a component of GDP refers to the purchase of physical and human capital and inventory, not stock purchases. C. Agree: GDP = C + I + G + NX. Therefore, as "I" (Investment) decreases, GDP decreases. D. Agree: When investment is low, people must have less money to spend. Therefore, GDP decreases.
B. Disagree: Investment as a component of GDP refers to the purchase of physical and human capital and inventory, not stock purchases.
When a significant fraction of domestic production takes place in foreign-owned facilities, a country's difference between GDP and GNP is as follows: A. GNP will be much larger than GDP. B. GDP will be much larger than GNP. C. GNP will be almost identical to GDP. D. GNP will be a more accurate measure of the level of production within the country's borders.
B. GDP will be much larger than GNP.
________ is caused by central banks increasing the money supply at a rate far in excess of the growth rate of real GDP. A. Securitization B. Hyperinflation C. Deflation D. Disinflation
B. Hyperinflation
Money that you receive at some future date is worth (1)__________ than the money that you receive today. If the interest rate rises, the present value of payments that you will receive in the future will (2)__________. A. More B. Less C. Rise D. Fall E. Remain unchanged
B. Less & D. Fall
In a column of forbes.com, Patrick Rishe, an economist at Washington University, notes that in recent years the National Football League has significantly expanded the number of games it broadcasts. As a result, he argues: "The NFL has oversaturated the market with its product.... TV ratings, consequently, have fallen. At least in part, diminishing marginal utility is a likely explanation as to why." Briefly explain his reasoning. A. Football fans receive little enjoyment or satisfaction from watching NFL games on TV. B. NFL fans experience less additional satisfaction as they watch more NFL games. C. NFL fans enjoy watching NFL games less when the number of other fans increases. D. Fans of the National Football League have a limited amount of income available to spend on NFL games.
B. NFL fans experience less additional satisfaction as they watch more NFL games.
In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act (ACA). Which of the following is true of the legislation? The ACA _. A. requires every resident of the United States to have health insurance or pay a fine of 10% of income. B. Provides tax credits to low-income individuals and small businesses with 25 or fewer employees C. Increased Medicare payments for prescription drugs and the use of diagnostic equipment and other technology. D. Does not raise taxes. C. Requires films with more than 50 employees to offer health insurance to its employees and to automatically enroll them in the plan.
B. Provides tax credits to low-income individuals and small businesses with 25 or fewer employees.
During a period of deflation, which of the following statements is true? A. Real earnings will not fall as much as nominal earnings, and will rise if the decline in prices is less than the decline in nominal earnings. B. Real average hourly earnings are likely to increase faster than nominal average hourly earnings during a period of deflation. C. As prices of goods and services decrease during a period of deflation, nominal earnings are likely to rise quickly. D. All of the above.
B. Real average hourly earnings are likely to increase faster than nominal average hourly earnings during a period of deflation.
What is the difference between technology and technological change? A. Technology is the process of using inputs to make output, while technological change is when a firm is able to produce more output using more inputs. B. Technology is the process of using inputs to make output, while technological change is when a firm is able to produce more output using the same inputs. C. Technology is when a firm is able to produce more output using the same inputs, while technological change is the process of using inputs to make output. D. Technology is the development of new products, while technological change is when a firm is able to produce the same output with fewer inputs. E. Technology is the development of new products, while technological change is when a firm is able to produce more output with the same inputs.
B. Technology is the process of using inputs to make output, while technological change is when a firm is able to produce more output using the same inputs.
Which of the following statements is true about the Fed's monetary policy targets? A. The Fed could simultaneously choose the interest rate and the money supply as its monetary policy targets. B. The Fed is forced to choose between the interest rate and the money supply as its monetary policy target. C. The only monetary policy target the Fed can choose is the interest rate. D. The only monetary policy target the Fed can choose is the money supply.
B. The Fed is forced to choose between the interest rate and the money supply as its monetary policy target.
What is the difference between the consumer price index and the producer price index? A. The producer price index is an average of the prices of... B. The consumer price index is an average of the prices of the goods and services purchased by the typical urban family of four, whereas the producer price index is an average of the prices received by producers of goods and services at all stages of the production process. C. The consumer price index is an average price level equal to nominal GDP divided by real GDP, whereas the producer price index is an average of the prices received by the wholesale producers. D. The consumer price index is an average of the prices of the goods and services purchased by any urban family, whereas the producer price index is an average of the prices received by the retail sector.
B. The consumer price index is an average of the prices of the goods and services purchased by the typical urban family of four, whereas the producer price index is an average of the prices received by producers of goods and services at all stages of the production process.
From the list below, select the variable that will cause the supply curve to shift: A. Population and demographics B. The cost of raw materials C. Prices of related goods D. Consumer Income
B. The cost of raw materials
In spite of the recession, Simon feels that the firm can actually invest in expanding its facilities as it has sufficient cash flows to continue its operation during the crisis period. The firm's marketing head, Sandra Jones, counters this by saying that the firm is already losing sales due to the recession and they should not increase costs further by making large-scale investments in the present climate. Which of the following questions is most relevant to answer in order to determine the accuracy of the CEO's claim? A. Does the current recession affect every firm in country A equally? B. What are consumer expectations of future growth? C. What is the tire industry's contribution to the country's GDP? D. How quickly did the economy recover the last time there was a recession? E. What proportion of total employment does the tire industry account for?
B. What are consumer expectations of future growth?
As a percentage of GDP, the largest deficits of the twentieth century came during _. A. the recession of 2007-2009. B. World Wars I and II. C. the recession of 2001. D. the recession of 1981-1982.
B. World Wars I and II.
Which of the following is an example of positive technological change? Positive technological change occurs when -. A. a firm is able to hire cheaper labor. B. a firm's workers go through a training program. C. a firm becomes more profitable by increasing revenue. D. a firm's managers rearrange the layout of a retail store to decrease sales. E. a firm uses inputs to produce output.
B. a firm's workers go through a training program.
Typically, when will the National Bureau of Economic Research (NBER) announce that the economy is in a recession? A. about six months before the recession begins. B. a year or more after the recession has begun. C. on the date that the recession begins. D. typically, more than 10 years after the recession begins.
B. a year or more after the recession has begun
An underground economy involves all of the following except _. A. avoiding tax payment on the earned income. B. buying and selling of goods and services by obtaining a permit from the government. C. trying to avoid government regulations. D. dealing in illegal goods and services, such as drugs or prostitution.
B. buying and selling of goods and services by obtaining a permit from the government.
When the price of a product changes, _. A. it only causes a substitution effect by changing the relative price of the product. B. it changes the relative price of the product causing a substitution effect and at the same time it changes the purchasing power of the buyer causing an income effect as well. C. it only causes an income effect by changing the purchasing power of the consumer. D. it changes the relative price of the product causing a network effect and at the same time it changes the purchasing power of the buyer causing an income effect as well.
B. it changes the relative price of the product causing a substitution effect and at the same time it changes the purchasing power of the buyer causing an income effect as well.
The difference between a nominal variable and a real variable is that _. A. nominal variables are economic variables that are adjusted for inflation, whereas real variables are valued in today's dollars. B. nominal variables are calculated in current-year prices and the real variables are measured in dollars of the base year for the price index to correct the effects of inflation. C. real variables are calculated in current-year prices and the nominal variables are measured in dollars of the base year to adjust for the effects of inflation. D. real variables are divided by the price index and multiplied by 100 to obtain nominal variables.
B. nominal variables are calculated in current-year prices and the real variables are measured in dollars of the base year for the price index to correct the effects of inflation.
Some countries have larger underground economies than do other countries, because _. A. of low tax rates and lax regulations that prevail in these nations. B. of government policies that are retarding economic growth. C. of government policies that are accelerating economic growth. D. the informal sector can produce much more than the formal sector.
B. of government policies that are retarding economic growth.
The Federal Reserve is divided into two bodies: A. the FDIC and 12 regional districts. B. the Board of Governors and 12 regional districts. C. the Board of Governors and the FDIC. D. the FDIC and the Treasury.
B. the Board of Governors and 12 regional districts.
If inflation is expected to increase, _. A. the nominal interest rate will remain the same. B. the nominal interest rate will increase. C. the real interest rate will increase. D. the nominal interest rate will decrease.
B. the nominal interest rate will increase.
What is technology? Technology is _. A. a change in the ability of the firm to produce a given level of output with a given quantity of inputs. B. the processes a firm uses to turn inputs into outputs of goods and services. C. the additional output a firm produces as a result of hiring one more input. D. the rate of economic depreciation. E. the highest-valued alternative that must be given up to engage in an activity.
B. the processes a firm uses to turn inputs into outputs of goods and services.
Suppose that velocity is 3 and the money supply is $600 million. According to the quantity theory of money, nominal output equals _. A. $180 million. B. $200 million. C. $1.8 billion. D. $2 billion.
C. $1.8 million.
Which of the following is one of the major reasons for rapid increases in health care spending in the United States? A. High rates of labor productivity growth in health care. B. An increase in the number of malpractice lawsuits filed against doctors. C. Advances in medical technology and new prescription drugs that have higher costs. D. Reductions in Medicare, Medicaid, and other government programs that help defray health care costs
C. Advances in medical technology and new prescription drugs that have higher costs.
When a positive technological change occurs, _. A. more output can be produced from the same inputs. B. the same output can be produced with fewer inputs. C. Either (a) or (b). D. None of the above.
C. Either (a) or (b).
An individual producer or a consumer "internalizes as externality" when_. A. They keep knowledge of the externalities private to them. B. They lobby against any government action related to the externalities caused by their actions. C. In their own decisions they take into account the external effects of their actions. D. They ignore the externalities by their actions.
C. In their own decisions they take into account the external effects of their actions.
Which of the following terms best describes the result of the forces of competition driving the market price to the minimum average cost of the typical firm? A. Competitive markdown B. Allocative efficiency C. Productive efficiency D. Decreasing-cost industry
C. Productive efficiency
"There is nothing morally unattractive about saying: We need to analyze which way of spending money on health care will produce more benefit and which less, and using our money as efficiently as we can... It would be more moral to reduce pollution, A. Taking the cost into account because the total cost of reducing pollution is likely enormous. B. Not taking the cost into account because pollution reduction is typically associated with large benefits. C. Taking the cost into account because money spent on pollution reduction is not available for other worthy activities. D. Taking the cost into account because reducing pollution often reduces economic growth. E. Not taking the cost into account because pollution is potentially harmful to our health.
C. Taking the cost into account because money spent on pollution reduction is not available for other other worthy activities.
Why might an oil company like ExxonMobil support a carbon tax rather than other means of dealing with climate change, such as those proposed by the Green New Deal? A. Public opinion favors a carbon tax over all other options that might be used to deal with climate change. B. There are no alternatives, including those proposed by the Green New Deal, that can deal with climate change. C. The alternatives proposed by the Green New Deal would severely curtail the use of nonrenewable resources like oil. D. This statement is false. ExxonMobil would not support a carbon tax because the alternatives would less costly and more effective.
C. The alternatives proposed by the Green New Deal would severely curtail the use of nonrenewable resources like oil.
With real GDP expected to grow at 2 percent this year, the finance minister suggested that the central bank should ensure that money supply growth in the current year is not more than 6 percent. However, inflation at the end of this year turned out to be higher than 4 percent, even though real GDP grew at 2 percent and money supply growth was restricted to 6 percent. Which of the following can most reasonably be inferred from the above information? A. Even though the inflation target was not met, the overall price level did decline this year as compared to last year. B. The central bank of Arkensland must have sold bonds this year in order to reduce the money supply. C. The velocity of money increased this year. D. There is a risk of hyperinflation in Arkensland. E. The growth of GDP in Arkensland has stagnated.
C. The velocity of money increased this year.
A producer or a consumer will internalize an externality because _. A. They are compelled by law. B. They face government regulation. C. They have an incentive to consider the external effects of their actions due to that are imposed or subsidies that they receive. D. They are driven by their individual more codes.
C. They have an incentive to consider the external effects of their actions due to that are imposed or subsidies that they receive.
Economists assume that people are rational in the sense that_. A. They do not respond to economic incentives. B. They make decisions based on total, rather than marginal, variables. C. They use all available information as they take actions intended to receive their goals. D. They generally make correct choices.
C. They use all available information as they take actions intended to achieve their goals.
LaToya is buying corn chips and soda. She has 4 bags of corn chips and 5 bottles of soda in her shopping cart. The marginal utility of the fourth bag of corn chips is 10, and the marginal utility of the fifth bottle of soda is also 10. Is LaToya maximizing utility? A. No. She is not maximizing marginal utility. B. Yes. She is maximizing utility. C. This cannot be determined because we do not know the price of corn chips and soda and whether or not she fully spent her budget allocated to corn chips and soda. D. No. She is maximizing marginal utility but not total utility.
C. This cannot be determined because we do not know the price of corn chips and soda and whether or not she fully spent her budget allocated to corn chips and soda.
Because the word discrimination has unfavorable connotations, many firms call their pricing strategies _. A. Price minimization B. Static pricing C. Yield management D. All of the above
C. Yield Management
What is positive technological change? Positive technological change is when _. A. a firm must use more inputs to produce the same output. B. the price of capital decreases. C. a firm is able to produce more output with the same inputs. D. a firm turns inputs into outputs of goods and services. E. the price of labor increases.
C. a firm is able to produce more output with the same inputs.
To calculate personal income from national income, which of the following must the BEA do? A. add corporate retained earnings B. add profits C. add government transfer payments D. All of the above.
C. add government transfer payments
Research conducted by Edward Prescott of Arizona State University, and Edward Glaeser of Harvard University along with Bruce Sacerdote of Dartmouth College indicate that the effects of supply-side policies _. A. are clearly defined and substantial. B. are clearly defined and small. C. are, as of now, unclear and require more careful study. D. have little or no effect at all.
C. are, as of now, unclear and require more careful study.
Which of the following do we subtract from GDP to obtain national income? A. the production of fixed capital B. consumption C. depreciation D. investment
C. depreciation
There is a strong link between changes in the money supply and inflation _. A. in the short run. B. in neither the short run nor the long run. C. in the long run. D. in both the short run and the long run.
C. in the long run.
An article in the Wall Street Journal notes that the BLS has changed the methods it uses to calculate the CPI with the result that the measured inflation rate is lower than it would have been if the BLS had still used the old methods. The article notes, "But this is not a massive conspiracy to hide runaway inflation." The BLS's motivation in changing its methods of calculating the CPI was to _. A. move one step closer towards eliminating this measure. B. comply with requests from Congress. C. reduce biases thereby allowing for a more accurate measure of the true inflation rate. D. be consistent with methodologies used in other countries.
C. reduce biases thereby allowing for a more accurate measure of the true inflation rate.
Economically rational means that consumers and firms _. A. obtain full information prior to taking actions to reach goals. B. are realistic about the present but not necessarily the future. C. take actions that are appropriate to reach goals given available information. D. take into account monetary costs but ignore nonmonetary opportunity costs. E. take into account monetary costs and sunk costs.
C. take actions that are appropriate to reach goals given available information.
During recessions, the inflation rate _. A. usually increases. B. usually increases near the end of the recession. C. usually decreases. D. is usually higher than during economic expansions.
C. usually decreases.
The carpet industry in a developing country, A, was going through difficult times. While this industry was once a major foreign exchange earner, there was a steady fall in production levels for the past three to four years. Workers, who had the requisite abilities to weave carpets, were finding it difficult to sustain themselves in this industry and began looking for opportunities elsewhere.... Which of the following, if true, could explain this outcome? A. The demand for carpets in the market is quite high. B. The country has been successful in restricting the inflation level within a tolerable band. C. most manufacturing industries in country A have reported increasing production levels recently. D. A new minimum wage law came into effect this year, increasing wage rates substantially. E. The government also invested substantially in the auto industry this year.
D. A new minimum wage law came into effect this year, increasing wage rates substantially.
Which of the following causes changes in the CPI to overstate the true inflation rate? A. Increase in quality bias B. New product bias C. Substitution bias D. All of the above
D. All of the above
Which of the following would cause a shift in the demand curve from point A to point B? A. An increase in income (normal good). B. An increase in the price of a substitute good. C. A decrease in income (inferior good). D. All of the above
D. All of the above
As the economy nears the end of an expansion, which of the following typically occurs? A. Interest rates are usually rising. B. The profits of firms will be falling. C. Wages are usually rising faster than prices. D. All of the above occur.
D. All of the above occur.
Increased government debt can lead to higher interest rates and, as a result, crowding out of private investment spending. In terms of borrowing (debt-spending), what will offset the effect of crowding out in the long run so that government debt poses less of a problem to the economy? A. Debt-spending on education. B. Debt-spending on research and development. C. Debt-spending on highways and ports. D. All of the above.
D. All of the above.
In the book publishing industry, how are firms able to price discriminate across time? A. The existence of large economies of scale in book publishing. B. There are substantial differences in the cost of hardcover versus paperback copies. C. Inflation results in increases in prices over time. D. An author's most devoted book fans want to buy the author's books as soon as they are published.
D. An author's most devoted book fans want to buy the author's books as soon as they are published.
What are the sources of externalities and market failure? A. Incomplete property rights B. The difficulty of enforcing property rights in certain countries. C. A lack of understanding of the market system. D. Both (a) and (b).
D. Both (a) and (b).
A game where pursuing dominant strategies results in noncooperation that leaves everyone worse off is called a _. A. Cooperative equilibrium B. Dominant Strategy C. Noncooperative Equilibrium D. Prisoner's Dilemma
D. Prisoner's Dilemma
Velocity is defined as _. A. V = M × P × Y B. V = M/(P × Y) C. V = M + P + Y D. V = (P × Y)/M
D. V = (P × Y)/M
In the securitization process, _. A. security investors make loans to banks, who in turn make loans to households. B. government bonds are used as a source of funds to make loans to households. C. banks make loans to households, and then collect payments from the government to cover these loans. D. banks grant loans to households and bundle the loans into securities that are then sold to investors.
D. banks grant loans to households and bundle the loans into securities that are then sold to investors.
Further, positive technological change is defined as _. A. being able to produce more output using the same inputs. B. being able to produce the same output using fewer inputs. C. being able to sell more output at higher prices. D. both a and b. E. all of the above.
D. both a and b.
Purchases of which types of goods are business cycles most likely to affect? A. services B. goods the government purchases C. nondurable goods D. durable goods
D. durable goods
It would seem that both households and businesses would benefit if the federal income tax were simpler and tax forms were easier to fill out. However, tax laws have become increasingly complicated because _. A. simpler tax forms would make it easier for businesses and households to cheat on their taxes. B. households would benefit more from simpler taxes than businesses would. C. the more complicated the tax laws the more fair they are. D. the tax laws are used to encourage certain activities and discourage others.
D. the tax laws are used to encourage certain activities and discourage others.
The GDP of the country Sumeria has grown at an average rate of 6 percent over the last two years, while the rate of inflation has remained more or less stable. Macroeconomists in the country are arguing that this increase in GDP is a clear indication of an overall improvement in the well-being of its people. Which of the following, if true about the last two years in Sumeria, would strengthen this argument? A. A population explosion in Sumeria has lowered per capita GDP. B. Higher interest rates in other countries are inducing Sumerians to invest abroad. C. Most of Sumeria's industries have not followed environment-friendly processes. D. The working conditions in many of Sumeria's manufacturing industries have failed to meet generally-accepted standards. E. An increasing percentage of the population is choosing leisure time over time spent in the work force.
E. An increasing percentage of the population is choosing leisure time over time spent in the work force.
If the firm produces 4 units of output, is it achieving allocative efficiency? When producing 4 units of output, the firm _. A. Does not achieve allocative efficiency because MC is not minimized. B. Does not achieve allocative efficiency because MC is increasing. C. Achieves allocative efficiency because demand is constant. D. Achieves allocative efficiency because MC < D. E. Does not achieve allocative efficiency because MC < D
E. Does not achieve allocative efficiency because MC < D.
ABC Corp., a producer of XYZ, has stores both in the bustling commercial city of Nashton, as well as the nearby small town of Oakville. In an attempt to exploit the differences in the income levels between the two cities, ABC Corp decides to charge customers in Nashton a much higher price than those in Oakville. The company expects to earn more profits as a result of this price discrimination. However, sales reports revealed that their profits post discrimination have not increased as expected. Suppose that ABC's profits actually fell following the price discrimination. Which of the following, if true, would explain this result? A. A major substitute good for XYZ stopped competing in the market. B. Customers in Nashton were more likely than customers in Oakville to view XYZ as a luxury good. C. The advertisements for XYZ in Oakville focused on health benefits, where the advertisements for XYZ in Nashton focused on
E. News reports of the price of discrimination resulted in negative publicity for ABC Corp.
Does the market system result in productive efficiency? In the long run, perfect competition _. A. Does not result in productive efficiency because barriers to entry result in firms making a profit. B. Results in productive efficiency because every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it. C. Does not result in productive efficiency because price-taking firms produce where price equals marginal cost. D. Results in productive efficiency because production represents consumer preferences. E. Results in productive efficiency because firms enter and exit until they break even where price equals minimum average cost.
E. Results in productive efficiency because firms enter and exit until break even where price equals minimum average cost.
The former country recorded a much higher GDP growth rate during these years and its domestic currency also had more valuethan the currency of Nebuloz. On the basis of all this information, Ethan tried to convince his friend that Glenshire would be a much better country to live in than Nebuloz. Each of the following, if true, would strengthen Ethan's argument, except one. Identify the exception. A. The crime rate in Nebuloz is higher than that in Glenshire. B. The levels of consumption and government expenditure in Glenshire are higher, while Nebuloz usually records a higher level of imports from foreign countries. C. The level of investment in education in Glenshire is higher than in Nebuloz. D. The people of Glenshire have much more leisure time than people in Nebuloz. D. The people of Glenshire have much more leisure time than people in Nebuloz.
E. The government of Nebuloz uses disposable personal income as a measure of national welfare, while the Glenshire government uses GDP.
Looking at the CPI, John concludes that a factory worker's purchasing power is lower now compared to ten years ago. Larry, however, does not agree that purchasing power has fallen. According to him, this conclusion cannot be drawn from such limited data. Which of the following, if true, would weaken John's claim that the average factory worker's purchasing power has fallen? A. The bargaining power of labor unions has increased over the years. B. The statutory minimum wage was increased twice in the past ten years. C. Although wages are higher in factories in Detrigan compared to other cities, the marginal productivity of a worker is also high. D. The average wage of a factory worker rose faster than the average wages of other categories of workers in the last ten years. E. With the removal of import barriers last year, cheaper and better-quality goods are now available in the country.
E. With the removal of import barriers last year, cheaper and better-quality goods are now available in the country.
An example of technological change is _. A. a firm rearranging the layout of a retail store to increase sales. B. a firm installing faster or more reliable machinery or equipment. C. a firm hiring less − skilled workers. D. both a and b E. all of the above.
E. all of the above.
An example of technological change is _. A. being able to produce the same output using fewer inputs. B. being able to produce more output using the same inputs. C. a decline in the quantity of output that can be produced from a given quantity of inputs. D. both a and b. E. all of the above.
E. all of the above.
An example of technological change is _. A. being able to produce more output using the same inputs. B. being able to produce the same output using fewer inputs. C. a decline in the quantity of output that can be produced from a given quantity of inputs. D. both a and b. E. all of the above.
E. all of the above.
Each year that the federal government runs a deficit, the federal debt (1) . Each year that the federal government runs a surplus, the federal debt (2) .
Grows & Shrinks
What is the supply curve for a perfectly competitive firm in the short run? The supply curve for a firm in a perfectly competitive market in the short run is _. A. That firm's marginal cost curve for prices at or above average variable cost. B. That firm's marginal revenue curve. C. That firm's marginal cost curve for prices at or above average fixed cost. D. A horizontal line equal to the market price. E. That firm's marginal revenue curve for prices at or above average variable cost.
a. That firm's marginal cost curve for prices at or above average variable cost.
