CED

In​ 2017, an article in the Wall Street Journal on the latest data on U.S. net exports noted​ that, along with other​ currencies: "The​ [the Chinese] yuan has risen this year against the​ dollar." The article also noted that there had been​ "Stronger [economic] growth in Asia and​ Europe..." ​Source: Josh​ Mitchell, "U.S. Trade Gap Shrinks as Exports​ Rise," Wall Street Journal​, April​ 4, 2017. What does the article mean that the yuan had​ "risen" against the​ dollar? A. It now takes fewer dollars to buy one yuan. B. It now takes more dollars to buy one yuan. Your answer is correct. C. U.S. goods are more expensive relative to Chinese goods. D. U.S. dollars have more value relative to the Chinese yuan. Briefly explain whether the combination of other currencies rising against the dollar and stronger economic growth in Asia and Europe had led to an increase or a decrease in U.S. net exports. A. ​Decrease, because more U.S. exports are produced. B. ​Increase, because U.S. incomes rise. C. ​Decrease, because U.S. exports are more expensive. D. ​Increase, because U.S. exports are cheaper. Your answer is correct. Will the outcome you discussed above result in a movement along the U.S. aggregate demand curve or a shift of the aggregate demand​ curve? Briefly explain. A. Movement along the U.S. aggregate demand​ curve, because this is a change in the price level. B. Shift of the U.S. aggregate demand​ curve, because this is a change in the price level. C. Shift of the U.S. aggregate demand​ curve, because this is not a change in the price level. Your answer is correct. D. Movement along the U.S. aggregate demand​ curve, because this is not a change in the price level.

B D C

McDonald's eliminateseliminates ​$1.00 off coupons. This will cause A. demand for​ McDonald's Big Mac hamburgers to shift to the leftshift to the left. B. demand for​ McDonald's Big Mac hamburgers to shift to the rightshift to the right. C. a movement along the demand curve for​ McDonald's Big Mac hamburgers

C

We often use real GDP per capitaLOADING... as a measure of a​ country's well-being. Review the definition of real GDP per capita before answering the following question. ​Today, the typical American works fewer than 40 hours per week. In​ 1890, the typical American worked 60 hours per week. Would the difference between the real GDP per capita in 1890 and the real GDP per capita today understate or overstate the difference in the​ population's economic​ well-being? A. The increase in real GDP per capita between 1890 and today overstates​ well-being because the value of leisure is not included in GDP. B. The decrease in real GDP per capita between 1890 and today understates​ well-being because the value of leisure is not included in GDP. C. The decrease in real GDP per capita between 1890 and today overstates​ well-being because the value of leisure is not included in GDP. D. The increase in real GDP per capita between 1890 and today understates​ well-being because the value of leisure is not included in GDP.

D

Is Jill Johnson correct when she says the​ following: ​"I am currently producing​ 10,000 pizzas per month at a total cost of ​$50 comma 00050,000. If I produce​ 10,001 pizzas, my total cost will rise to ​$50 comma 05050,050. ​Therefore, my marginal cost of producing pizzas must be​ increasing." A. ​Jill's average total cost of production is​ decreasing, so her marginal cost of producing pizzas must be increasing. B. ​Jill's average total cost of production is​ decreasing, so her marginal cost of producing pizzas must be decreasing. C. Though​ Jill's average total cost of production is​ decreasing, her marginal cost of producing pizzas could be increasing or decreasing. D. ​Jill's average total cost of production is​ increasing, so her marginal cost of producing pizzas must be decreasing. E. ​Jill's average total cost of production is​ increasing, so her marginal cost of producing pizzas must be increasing.

E

At one​ point, Time Warner and the Walt Disney Company discussed merging their news operations. Time Warner owns the Cable News Network​ (CNN), and Disney owns ABC News. After analyzing the​ situation, the companies decided that a combined news operation would have higher average costs than either CNN or ABC News had separately. ​Source: Martin Peers and Joe​ Flint, "AOL Calls Off​ CNN-ABC Deal, Seeing Operating​ Difficulties," Wall Street Journal​, February​ 14, 2003. The​ long-run average cost curve for Time Warner and the Walt Disney Company must have been A. horizontal. B. ​U-shaped. Your answer is correct. C. ​L-shaped. D. downward sloping. Time Warner and Walt Disney did not merge their news companies because doing so would have resulted in diseconomies of scale.

U shaped Diseconomies of scale

In the​ U.S., gross domestic product ​(GDPLOADING...​) and gross national product ​(GNPLOADING...​) are close in value. Under what circumstances would GNP be much larger than​ GDP? a, Few foreign citizens currently work in the U.S. and few foreign firms maintain facilities in the U.S. b, Many U.S. citizens currently work in foreign countries while few foreign citizens currently work in the U.S. c, Few foreign firms maintain facilities in the U.S. while many U.S. firms are currently operating abroad. d, All of the above would push GNP above GDP.

d, All of the above would push GNP above GDP.

For Jill​ Johnson's pizza​ restaurant, explain whether each of the following is a fixed or variable cost. The payment she makes on her fire insurance policy is a ....cost. The payment she makes to buy pizza dough is a ......cost. The wages she pays her workers is a ........ cost. The lease payment she makes to her landlord who owns the building where her store is located is a .... cost. The​ $300-per-month payment she makes to her local newspaper for running her weekly advertisements is a ...... cost

fixed variable variable fixed fixed

A person who is in between jobs but actively engaged in a job search is considered to be ...... Experts in​ hand-drawn animation who remain unemployed due to the film​ industry's switch to​ computer-generated animation are considered to be structurally unemployed. When a company reduces production and employment during economic​ recessions, those employees who lose their jobs are generally considered to be cyclically unemployed.

frictionally unemployed structurally unemployed. cyclically unemployed.

Suppose that Apple and the investors buying the​ firm's bonds both expect a 22 percent inflation rate for the year. ​Further, suppose the nominal interest rate on bonds is 66 percent and the expected real interest rate is 44 percent. Now suppose that a year after the investors purchase the​ bonds, the inflation rate turns out to be 33 ​percent, rather than the 22 percent that had been expected. In this​ situation, investors ...and borrowers .....

lose win

Consider each of the following events and then figure out how each of these events will affect the aggregate demandLOADING... curve. a. An increase in the price level will cause a movement up along the aggregate demand curve. b. An increase in government purchases will cause a rightward shift of the aggregate demand curve. c. An increase in state income taxes will cause a leftward shift of the aggregate demand curve. d. An increase in interest rates will cause a leftward shift of the aggregate demand curve. e. A faster income growth in other countries will cause a rightward shift of the U.S. aggregate demand curve.

movement up along rightward shift of leftward shift of leftward shift of rightward shift of

Suppose the amount the federal government collects in personal income taxes decreasesdecreases​, while the level of GDP remains the same. What will happen to the values of national​ income, personal​ income, and disposable personal​ income? National income will...... Personal income will ...... Disposable personal income will ........

remain the same. remain the same. increase

According to an article in the Wall Street Journal​, KB Home and other builders found demand for new houses increasing in 2017 as a result of an increase in the formation of new households. In the long​ run, formation of new households depends on population growth. ​Source: Laura Kusisto and Sarah​ Chaney, "U.S. Housing Starts Fell in April for Third Time in Four​ Months," Wall Street Journal​, May​ 16, 2017. Are firms like homebuilders that sell products whose demand depends partly on demographic factors likely to be more or less affected by the business cycle than are other firms whose products are less dependent on these factors​ (holding constant other factors that affect the demand for new​ houses)? Briefly explain. A. Less​ affected, because demographic factors are independent of the business cycle. Your answer is correct. B. More​ affected, because demographic factors are stable and rely on the business cycle. C. More​ affected, because it is difficult to measure demographic​ factors, such as age or income level. D. Less​ affected, because the products that homebuilders sell are necessities and therefore not subject to the business cycle.

A

According to an article in the Wall Street Journal​, reporting on​ Coca-Cola's results for the fourth quarter of​ 2016: "Higher pricing ... drove revenue growth of​ 8%." ​Source: Jennifer Maloney and Anne​ Steele, "Coke's Profit Falls as Restructuring​ Continues," Wall Street Journal​, February​ 9, 2017. Based on this​ information, is the demand for the beverages Coke sells price elastic or price​ inelastic? Briefly explain. A. ​Inelastic, because a price increase raises​ Coca-Cola's revenue. Your answer is correct. B. ​Elastic, because a price increase raises the quantity demanded of Coke. C. ​Elastic, because a price increase raises​ Coca-Cola's revenue. D. ​Inelastic, because a price increase raises the quantity demanded of Coke.

A

Comic book fans eagerly compete to buy copies of Amazing Fantasy No.​ 15, which contains the first appearance of the superhero​ Spider-Man. At the same time the publisher printed copies of the comic for the U.S.​ market, with the price printed on the cover in​ cents, it printed copies for the U.K.​ market, with the price printed on the cover in British pence. About 10 times as many U.S. copies of Amazing Fantasy No. 15 have survived as U.K. copies. Yet in auctions that occurred at about the same time in​ 2013, a U.S. copy sold for​ $29,000, while a U.K. copy in the same condition sold for only​ $10,755. ​Source: Auction price date​ from: GPA Analysis for CGC Comics​, www.comics.gpanalysis.com. The market supply curve for Amazing Fantasy No. 15 in the U.S. is to the "right" of the supply curve in the U.K. The market demand curve for Amazing Fantasy No. 15 in the U.S. is to the "right" of the demand curve in the U.K. In both​ countries, the market equilibrium is where A. the demand curve intersects the supply curve. Your answer is correct. B. demand is greater than supply. C. there is a surplus. D. demand is zero.

A

In recent​ years, a number of cities have passed taxes on carbonated sodas to help reduce obesity and to raise tax revenues. An article in the New York Times observes​ that: "With that public​ momentum, a soda tax may be coming to a city near​ you." ​Source: Anahad​ O'Connor and Margot​ Sanger-Katznov, "As Soda Taxes Gain Wider​ Acceptance, Your Bottle May Be​ Next," New York Times​, November​ 26, 2016. If this forecast is​ correct, is the demand for premium bottled water likely to increase or​ decrease? Briefly explain. A. ​Increase, because premium bottled water and carbonated sodas are substitutes. Your answer is correct. B. ​Decrease, because premium bottled water and carbonated sodas are substitutes. C. ​Decrease, because premium bottled water and carbonated sodas are complements. D. ​Increase, because premium bottled water and carbonated sodas are complements.

A

State whether each of the following events will result in a movement along the demand curve for​ McDonald's Big Mac hamburgers or whether it will cause the curve to shift. The price of Burger​ King's Whopper hamburger increases. This will cause A. demand for​ McDonald's Big Mac hamburgers to increase. Your answer is correct. B. demand for​ McDonald's Big Mac hamburgers to decrease. C. a movement along the demand curve for​ McDonald's Big Mac hamburgers.

A

An article in the Wall Street Journal about the U.S. economy states that​ "Fed officials have talked down the need for government tax and spending programs aimed at juicing​ short-term economic​ growth, calling instead for policies that would raise the​ economy's long-term potential growth ratelong dash—the fastest pace it could expand without fueling too much​ inflation." ​Source: Harriet​ Torry, "Yellen Says​ Family-Friendly Work Policies Can Boost​ Economy," Wall Street Journal​, May​ 5, 2017. What does​ "government tax and spending​ programs" mean? A. Fiscal policy. Your answer is correct. B. International trade. C. Household expectations. D. Monetary policy. What does​ "juicing short-term economic​ growth" mean? A. Increasing equilibrium real GDP. Your answer is correct. B. Decreasing full employment. C. Increasing production capacity. D. Increasing potential GDP. Use a basic aggregate demand and aggregate supply graph to explain how government tax and spending programs could​ "juice short-term economic​ growth." Assume the economy is initially in​ long-run equilibrium. The aggregate demand curve will shift to the right. The new​ short-run equilibrium will be where A. the new aggregate demand curve intersects the original​ short-run aggregate supply curve. Your answer is correct. B. the new aggregate demand curve intersects the original​ long-run aggregate supply curve. C. the new aggregate demand curve intersects a new​ short-run aggregate supply curve. D. the original​ short-run aggregate supply curve intersects the original​ long-run aggregate supply curve. As a result of the fiscal​ policy, real GDP increases. Use a dynamic aggregate demand and aggregate supply graph to explain the effect of policies that raise the​ economy's long-term potential growth rate without any inflation. The aggregate​ demand, short-run aggregate​ supply, and​ long-run aggregate supply curves will shift to the right. The new​ long-run equilibrium will be where A. the new aggregate demand curve intersects the new​ short-run aggregate supply curve at the original​ long-run aggregate supply curve. B. the original aggregate demand curve intersects the new​ short-run aggregate supply curve at the original​ long-run aggregate supply curve. C. the new aggregate demand curve intersects the new​ short-run aggregate supply curve at a new​ long-run aggregate supply curve. Your answer is correct. D. the new aggregate demand curve intersects the original​ short-run aggregate supply curve at the original​ long-run aggregate supply curve. As a result of the fiscal​ policy, potential GDP increases.

A A aggregate demand - right A Increase Shift to the right C Increases.

The BLS defines a job quit as a​ "voluntary separation initiated by an​ employee." The BLS estimated that there were 3.1 million job quits in March 2017. ​Source: Bureau of Labor​ Statistics, "Job Openings and Labor Turnover Surveylong dash—March ​2017," May​ 9, 2017. Unemployment caused by an increase in job quits would be classified as A. frictional unemployment. Your answer is correct. B. cyclical unemployment. C. seasonal unemployment. D. structural unemployment. An increase in the number of job quits would suggest that it is becoming A. more difficult to find jobs because people are unsatified with their work. B. easier to find jobs because employees who leave voluntarily are confident of finding another one. Your answer is correct. C. more difficult to find jobs because employees who leave voluntarily are less confident of finding another one. D. neither easier nor more difficult to find a job.

A B

Indicate whether you agree or disagree with the following statements. ​"If nominal GDP is less than real​ GDP, then the price level must have fallen during the​ year." A. Disagree. Nominal GDP is less than real GDP if the current price level is less than the base year price level. A fall in the price level during the year is neither necessary nor sufficient to cause nominal GDP to be less than real GDP. Your answer is correct. B. Agree. Real GDP will be less than nominal GDP if the price level falls and is lower than the base​ year's prices. C. Agree. Nominal GDP will be less than real GDP if the price level falls and is higher than the base​ year's prices. D. Disagree. Real GDP will be equal to nominal GDP if the price level increases and is equal to the base​ year's prices. ​"Whenever real GDPLOADING... ​declines, nominal GDPLOADING... must also​ decline." A. Agree. Both real GDP and nominal GDP decline if price falls and output remains constant. B. Disagree. Real GDP falls if output falls. Nominal GDP can increase if output falls and prices rise. Your answer is correct. C. Agree. Both real GDP and nominal GDP decline if output falls and prices remain constant. D. Disagree. Real GDP falls if output falls. Nominal GDP can increase if output falls and prices fall. ​"If a recession is so severe that the price level​ declines, then we know that both real GDP and nominal GDP must​ decline." A. Disagree. Real GDP falls if output falls. Nominal GDP can increase if output falls and prices rise. B. Agree. If prices​ fall, real GDP and nominal GDP will both fall if output increases. C. Disagree. Real GDP falls if output falls. Nominal GDP can increase if output falls and prices fall. D. Agree. If both output and prices are​ falling, then both real GDP and nominal GDP will fall. Your answer is correct. ​"If real GDP stayed the same while nominal GDP declined between 2008 and​ 2009, then the GDP deflator must also have​ declined." A. Disagree. If nominal GDP declined between 2008 and​ 2009, then the GDP deflator could have gone up. B. Disagree. If nominal GDP increased between 2008 and​ 2009, then the GDP deflator must have remained the same. C. Agree. If nominal GDP declined between 2008 and​ 2009, then the GDP deflator must also have declined. Your answer is correct. D. Disagree. If real GDP declined between 2008 and​ 2009, then the GDP deflator must also have declined.

A B D C

Assume the economy is in​ long-run equilibrium. Now assume that there is a large increase in demand for U.S. exports. As a result of increased demand for U.S.​ exports, the A. aggregate demand curve will shift right. Your answer is correct. B. ​long-run aggregate supply curve will shift left. C. ​short-run aggregate supply curve will shift left. D. aggregate demand curve will shift left. The new​ short-run equilibrium will be A. where the new aggregate demand curve intersects the original aggregate demand curve. B. where the new aggregate demand curve intersects the original​ short-run aggregate supply curve. Your answer is correct. C. where the original aggregate demand curve intersects the original​ short-run aggregate supply curve. D. where the new aggregate demand curve intersects the original​ long-run aggregate supply curve. At the new short run​ equilibrium, the unemployment rate will be lower compared to the unemployment rate at the initial​ equilibrium, prior to the increase in exports. Which of the following best explains how the economy will adjust back to​ long-run equilibrium? A. ​Short-run aggregate supply will decrease​ (shift leftward) as firms and workers adjust to the new price level. Your answer is correct. B. Aggregate demand will​ decrease, restoring the original equilibrium price and quantity. C. Aggregate demand will​ increase, restoring the original equilibrium price and quantity. D. ​Short-run aggregate supply will increase​ (shift rightward) as firms and workers adjust to the new price level. At the new​ long-run equilibrium, A. real GDP and price level will be higher and the unemployment rate will be lower compared to the initial​ equilibrium, prior to the increase in exports. B. real​ GDP, the unemployment rate and the price level all will remain the same compared to the initial​ equilibrium, prior to the increase in exports. C. real GDP and the price level will be higher but the unemployment rate will remain the same compared to the initial​ equilibrium, prior to the increase in exports. D. real GDP and the unemployment rate will remain the​ same, but price level will be higher compared to the initial​ equilibrium, prior to the increase in exports

A B be lower A D

A study of consumers in Mexico found that the​ cross-price elasticity of demand between soda and milk was​ 0.11, while the​ cross-price elasticity of demand between the soda and candy was minus−0.32. ​Source: M.A.​ Colchero, et​ al., "Price Elasticity of the Demand for Sugar Sweetened Beverages and Soft Drinks in​ Mexico," Economics and Human Biology​, Vol.​ 19, December​ 2015, pp.​ 129-137. Is soda a substitute or a complement for​ milk? Briefly explain. A. ​Substitute, because the​ cross-price elasticity of demand is positive. Your answer is correct. B. ​Substitute, because the​ cross-price elasticity of demand is less than 1 in absolute value. C. ​Complement, because the​ cross-price elasticity of demand is less than 1 in absolute value. D. ​Complement, because the​ cross-price elasticity of demand is positive. Is soda a substitute or a complement for​ candy? Briefly explain. A. ​Substitute, because the​ cross-price elasticity of demand is less than 1 in absolute value. B. ​Complement, because the​ cross-price elasticity of demand is less than 1 in absolute value. C. ​Complement, because the​ cross-price elasticity of demand is negative. Your answer is correct. D. ​Substitute, because the​ cross-price elasticity of demand is negative.

A C

Suppose a house is built and sold in the year 2008. If the house is resold in the year​ 2019, is the value of the house included in Gross Domestic ProductLOADING... ​(GDP) for​ 2019? A. No. GDP for 2019 includes only production that occurs during 2019. Your answer is correct. B. No. GDP for 2019 includes only the market value of final goods. A house resold in 2019 is an intermediate good. C. Yes. The value of the house is included in Personal Consumption Expenditures for 2019. D. Yes. The value of the house is included in Gross Private Domestic Investment for 2019. Would the services of a real estate agent who helped sell​ (or helped​ buy) the house be included in GDP for​ 2019? A. Yes. Real estate services are considered Gross Private Domestic Investment. B. No. GDP for 2019 includes only the market value of final goods. Real estate services are not final goods. C. Yes. GDP for 2019 includes the market value of final goods and services. This includes real estate services. Your answer is correct. D. No. The value of the house is not included in GDP for 2019.​ Therefore, real estate services are not included either.

A C

An article in the Los Angeles Times about​ driver-less trucks states that​ "Trucking will likely be the first type of driving to be fully automatedlong dash—meaning ​there's no one at the​ wheel." The article adds that there is a financial incentive for automating trucks because​ "Trucking is a​ $700-billion industry, in which a third of costs go to compensating​ drivers." ​Source: Natalie​ Kitroeff, "Robots Could Replace 1.7 Million American Truckers in the Next​ Decade," Los Angeles Times​, September​ 25, 2016. How are​ driver-less trucks likely to affect costs to businesses of transporting​ goods? A. ​Driver-less trucks would decrease transportation costs by requiring less labor. Your answer is correct. B. ​Driver-less trucks would increase transportation costs since worker productivity will fall. C. ​Driver-less trucks would decrease transportation costs since less capital is required. D. ​Driver-less trucks would increase transportation costs by requiring more labor. How are​ driver-less trucks likely to affect the​ short-run aggregate supply curve​ (SRAS)? A. Using​ driver-less trucks would result in a movement down along the SRAS curve as prices fall. B. ​Driver-less trucks would shift the SRAS curve to the left due to an increase in capital. C. ​Driver-less trucks would shift the SRAS curve to the right due to a technological advance. Your answer is correct. D. ​Driver-less trucks would shift the SRAS curve to the right due to an increase in labor. How are​ driver-less trucks likely to affect the​ long-run aggregate supply curve​ (LRAS)? A. ​Driver-less trucks would not affect the LRAS curve because they represent production at capacity. B. Automating trucks would not affect the LRAS curve because it does not represent a change in the business cycle. C. Using​ driver-less trucks would result in a movement down along the LRAS curve as prices fall. D. ​Driver-less trucks would shift the LRAS curve to the right due to a technological advance.

A C D

The marginal product of labor is A. initially increasing and then decreases. Your answer is correct. B. upward sloping. C. a straight line. D. ​L-shaped. The average product of labor is A. a straight line. B. ​L-shaped. C. initially increasing and then decreases. Your answer is correct. D. downward sloping. The marginal product of labor curve A. is always below the average product of labor curve. B. intersects the average product of labor curve when the marginal product of labor is at a maximum. C. is always above the average product of labor curve. D. intersects the average product of labor curve when the average product of labor is at a maximum.

A C D

Suppose James and Frank both retire this year. For income from​ retirement, James will rely on a pension from his company that pays him a fixed​ $2,500 per month for as long as he lives. James​ hasn't saved anything for retirement. Frank has no pension but has saved a considerable​ amount, which he has invested in certificates of deposit​ (CDs) at his bank.​ Currently, Frank's CDs pay him interest of​ $2,300 per month. a. Ten years from​ now, A. Frank will have a higher real income although he has a lower nominal income because his interest income is likely to increase with inflation. Your answer is correct. B. James will have a higher real income because he is subject to a lower CPI than Frank. C. Frank will have a higher real income since he has a lot of money invested in CDs. D. James will have a higher real income since he has a higher nominal income and their incomes are not adjusted for inflation. Real income is defined as the​ following: A. Real Income equals Nominal Income times CPI Subscript current year Baseline times 100Real Income=Nominal Income×CPIcurrent year×100 B. Real Income equals Nominal Income minus Rate of InflationReal Income=Nominal Income−Rate of Inflation C. Real Income equals StartFraction Nominal Income plus CPI Subscript current year Over 100 EndFractionReal Income =Nominal Income+CPIcurrent year100 D. Real Income equals StartFraction Nominal Income Over CPI Subscript current year EndFraction times 100Real Income=Nominal IncomeCPIcurrent year×100 Your answer is correct. b. Now suppose that instead of being a constant​ amount, James's pension increases each year by the same percentage as the CPI. For​ example, if the CPI increases by 5 percent in the first year after James​ retires, then his pension in the second year equals​ $2,500 +​ ($2,500 ×​ 0.05) =​ $2,625. In this​ case, 10 years from​ now, A. James will have a higher real income because he has a higher nominal income and his income is indexed with the CPI. Your answer is correct. B. James will have a higher real income because it is his pension payment. C. Frank will have a higher real income since his interest income is compounded over time. D. Frank will have a higher real income because he has substantial savings.

A D A

According to an article in the Wall Street Journal​, the Reserve Bank of India lowered its key policy interest rate in​ 2015, "citing weakness in parts of the economy as well as favorable inflation​ figures." The article notes that the central bank lists constraints to further interest rate​ cuts, including the​ "risk that inflation could flare​ again." ​Source: Gabriele​ Parussini, "India Cuts Key Interest Rate for Second Time This​ Year," Wall Street Journal​, March​ 4, 2015. Use the dynamic aggregate demand and aggregate supply model to explain where the Reserve Bank of India expected the​ country's economy to be in 2015 without the interest rate cut.​ Assume, for​ simplicity, that real GDP in India in 2014 equaled potential GDP. India expected A. aggregate demand and​ short-run aggregate supply to shift to the right but by less than​ long-run aggregate supply. Your answer is correct. B. aggregate demand to shift to the right but by less than​ short-run aggregate supply and​ long-run aggregate supply. C. aggregate demand and​ short-run aggregate supply to shift to the right by more than​ long-run aggregate supply. D. aggregate​ demand, short-run aggregate​ supply, and​ long-run aggregate supply to shift to the right by the same amounts. ​Next, determine the desired equilibrium the central bank is trying to achieve with the interest rate cut. The central​ bank's desired equilibrium is where the new​ short-run equilibrium is A. on the original​ long-run aggregate supply curve. B. to the right of the new​ long-run aggregate supply curve. C. to the left of the new​ long-run aggregate supply curve. D. on the new​ long-run aggregate supply curve. Your answer is correct. The Reserve Bank of India might be afraid that additional interest rate cuts would cause inflation to increase because it would A. decrease aggregate supply sufficiently to increase the price level. B. increase aggregate demand sufficiently to increase the price level. Your answer is correct. C. increase​ long-run aggregate supply sufficiently to increase the price level. D. increase aggregate supply sufficiently to increase the price level.

A D B

An article in the Economist discussing the​ 2007-2009 recession states that​ "employers found it difficult to reduce the cash value of the wages paid to their staff.​ (Foisting a pay cut on your entire workforce hardly boosts​ morale.)" ​Source:​ "Careful Now," Economist​, April​ 11, 2015. During a​ recession, some firms lay off some of their​ workers, while not cutting the wages of the workers they continue to​ employ, because the workers they continue to employ A. would likely react by becoming less productive if their wages are cut. Your answer is correct. B. negotiated this arrangement. C. have fixed contracts so their wages cannot be cut. D. would likely quit if their wages are cut. Could these firms have reduced their labor costs by the​ same, or possibly​ more, if they laid off fewer workers while cutting​ wages? A. ​Yes, but they chose not to do that because they wanted to reduce their workforce anyway. B. ​No, because labor contracts specify the terms of workforce changes during economic slowdowns. C. ​Yes, but this could cost more in the long run because some workers would have been idle. D. ​No, because workers would become disgruntled with wage cuts and reduce their​ productivity, resulting in higher production costs. Your answer is correct. What does the article mean by firms reducing the​ "cash value" of​ workers' wages? A. It means firms found it difficult to cut real wages by more than prices. B. It means firms found it difficult to cut nominal wages. Your answer is correct. C. It means firms found it difficult to cut nominal wages by more than prices. D. It means firms found it difficult to cut real wages. If firms want to reduce workers wages over​ time, they have to reduce A. the cash or average​ value, of wages. B. the cash or nominal​ value, of wages. Your answer is correct. C. the cash or marginal​ value, of wages. D. the cash or real​ value, of wages.

A D B B

The European Central Bank​ (ECB) issued the following statement after its June 2017 monetary policy meeting on monetary​ policy: Regarding​ non-standard monetary policy​ measures, the Governing Council confirms that the net asset​ purchases, at the current monthly pace of euro€60 ​billion, are intended to run until the end of December​ 2017, or​ beyond, if​ necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. ​Source: European Central​ Bank, "Monetary Policy​ Decisions," Press​ Release, June​ 8, 2017,​ www.ecb.europa.eu/press/pr/date/2017/html/ecb.mp170608.en.html. What is this​ non-standard monetary policy of net asset purchases​ called? A. Quantitative easing. Your answer is correct. B. Open market operations. C. Fiscal policy. D. Discount policy. The Federal Reserve has attempted to use this​ non-standard monetary policy of net asset purchases you identified above. Based on the European Central​ Bank's statement do you expect that the inflation rate is above or below the​ ECB's inflation​ target? Briefly explain. A. ​Above, because the​ ECB's statement indicates that it is using contractionary monetary policy to achieve its policy goals. B. ​Below, because the​ ECB's use of this​ non-standard monetary policy is intended to increase the money supply. Your answer is correct. C. ​Below, because the​ ECB's use of this​ non-standard monetary policy is designed to raise the discount rate. D. ​Above, because the​ ECB's use of this​ non-standard monetary policy is aimed at slowing economic growth.

A has B

According to an article in the New York Times​, in early​ 2015, Walmart received bad customer​ reviews: "They complained of dirty​ bathrooms, empty​ shelves, endless checkout lines and​ impossible-to-find employees." Shortly​ thereafter, Walmart announced that it was changing its employment​ practice, by among other​ things, increasing wages. A year and a half​ later, the article noted​ that: "[Walmart​ store] managers describe a big shift in the kind of workers they can bring in by offering​ $10 an hour with a solid path to​ $15 an​ hour." ​Source: Neil​ Irwin, "How Did Walmart Get Cleaner Stores and Higher​ Sales? It Paid Its People​ More," New York Times​, October​ 15, 2016. ​Wouldn't raising wages from​ $10 per hour to​ $15 per hour reduce​ Walmart's profits? Why would they have adopted such a​ policy? A. ​Yes, paying higher wages is a good way for firms to lower​ profits, so the new wage policy must have been the result of government intervention. B. ​No, the higher wage would not decrease profits if it motivates workers to work harder and be more productive. Your answer is correct. C. ​No, it would not reduce​ profits, since Walmart would be required to monitor its workers more​ closely, resulting in less shirking. D. ​Yes, it would lower​ profits, but by paying employees an efficiency​ wage, Walmart would be able to improve its customer reviews.

B

An article discusses the market for autographs by Mickey​ Mantle, the superstar centerfielder for the New York Yankees during the 1950s and​ 1960s: ​"At card​ shows, golf​ outings, charity​ dinners, Mr. Mantle signed his name over and​ over." One expert on sport autographs is quoted as​ saying: ​"He was a real good signer ... He is not​ rare." Yet the article quotes another expert as​ saying: ​"Mr. Mantle's autograph ranks No. 3 of​ most-popular autographs, behind Babe Ruth and Muhammad​ Ali." A baseball signed by Mantle is likely to sell for the relatively high price of​ $250 to​ $400. By​ contrast, baseballs signed by Whitey​ Ford, a teammate of​ Mantle's on the​ Yankees, typically sell for less than​ $150. ​Source: Beth​ DeCarbo, "Mantle Autographs Not​ Rare, but Collectors​ Don't Care," Wall Street Journal​, August​ 4, 2008. Explain how the price of baseballs signed by Mantle could be higher than the price of baseballs signed by Ford. The supply curve for baseballs signed by Mantle should be an​ upward-sloping line that is to the right of the supply curve for baseballs signed by Ford. In order for the price of baseballs signed by Mantle to be higher than the price of baseballs signed by​ Ford, the demand curve for baseballs signed by Mantle must be a​ downward-sloping line that is A. only slightly to the right of the demand curve for baseballs signed by Ford. B. significantly to the right of the demand curve for baseballs signed by Ford. Your answer is correct. C. to the left of the demand curve for baseballs signed by Ford. D. equivalent to the demand curve for baseballs signed by Ford.

B

An article in the Wall Street Journal notes that although U.S. oil production has increased rapidly in recent​ years, the increase has still amounted to only 5 percent of world production.​ Still, that increase has been​ "enough to help trigger a price​ collapse." ​Source: Georgi Kantchev and Bill​ Spindle, "Shale-Oil Producers Ready to Raise​ Output," Wall Street Journal​, May​ 13, 2015. A small increase in supply can lead to a large decline in equilibrium price when A. demand is perfectly elastic. B. demand is relatively inelastic. Your answer is correct. C. supply is perfectly elastic. D. demand is relatively elastic.

B

Sally looks at her college transcript and says to​ you, ​"How is this​ possible? My grade point average​ (GPA) for this​ semester's courses is higher than my GPA for last​ semester's courses, but my cumulative GPA still went down from last semester to this​ semester." Explain to Sally how this is possible. A. Sally took more courses last semester than this semester. B. ​Sally's GPA for this semester is lower than her cumulative GPA. Your answer is correct. C. ​Sally's GPA for last semester was equal to her cumulative GPA. D. This is not​ possible, and​ Sally's cumulative GPA has been calculated incorrectly. E. ​Sally's GPA for this semester is higher than her cumulative GPA.

B

From 1979 to​ 2015, China had a policy that allowed couples to have only one child.​ (Since 2016, couples have been allowed to have two​ children.) The​ one-child policy caused a change in the demographics of China. Between 1980 and​ 2015, the share of the population aged 14 and under decreased from 36 percent to 17 percent.​ And, as parents attempted to ensure that the lone child was a​ son, the number of male children relative to female children increased. ​Sources: World​ Bank, World Development Indicators​, April​ 2016; and​ "China New​ 'Two Child' Policy Increases Births by 7.9​ Percent, Government​ Says," cbsnews.com, January​ 23, 2017. How has the​ one-child policy changed the relative demand for goods and services in​ China? A. The sheer number of consumers in​ China, coupled with that​ country's very rapid​ growth, renders relative demand shifts totally insignificant. B. It has undoubtedly shifted away from goods and services appealing to youthful​ buyers, particularly youthful female buyers. Your answer is correct. C. The Chinese economy is still largely a command​ economy; market​ forces, and hence relative​ demands, are insignificant. D. One would only expect the relative demand for baby related products to be reduced.

B

In early​ 2009, Christina​ Romer, who was then the chair of the Council of Economic​ Advisers, and Jared​ Bernstein, who was then an economic adviser to Vice President Joseph​ Biden, forecast how long they expected it would take for real GDP to return to potential​ GDP, assuming that Congress passed fiscal policy legislation proposed by President​ Obama: It should be understood that all of the estimates presented in this memo are subject to significant margins of error. There is the obvious uncertainty that comes from modeling a hypothetical package rather than the final legislation passed by the Congress.​ But, there is the more fundamental uncertainty that comes with any estimate of the effects of a program. Our estimates of economic relationships . . . are derived from historical experience and so will not apply exactly in any given episode.​ Furthermore, the uncertainty is surely higher than normal now because the current recession is unusual both in its fundamental causes and its severity. ​Source: Christina Romer and Jared​ Bernstein, The Job Impact of the American Recovery and Reinvestment Plan​, January​ 9, 2009. Why would the causes of a recession and its severity affect the accuracy of forecasts of when the economy would return to potential​ GDP? A. Federal policymakers disagree about whether to use monetary or fiscal policy to correct a recession. B. Models used for forecasting are based on historical experience and the relationships in the model can change. Your answer is correct. C. The equations have been statistically estimated using economic data. D. Economists disagree that an automatic mechanism brings the economy back to potential GDP in the long run.

B

List the errors in the graph to the right ​(where AFC is average fixed​ cost, AVC is average variable​ cost, ATC is average total​ cost, and MC is marginal cost​). A. AFC should be​ MC, ATC should be​ AVC, and AVC should be AFC. B. AFC should be​ MC, ATC should be​ AVC, and AVC should be ATC. Your answer is correct. C. AFC should be​ MC, ATC should be​ AFC, and AVC should be ATC. D. AFC should be MC. E. ATC should be AVC and AVC should be ATC.

B

Michael Burda of Humboldt University in Germany and Daniel Hamermesh of the University of Texas examined how workers in the United States who lost their jobs between 2003 and 2006 spent their time. They discovered that during the period when they were​ unemployed, the reduction in the number of hours of paid work was almost completely replaced by an increase in the number of hours spent on household production. ​Source: Michael Burda and Daniel S.​ Hamermesh, "Unemployment and Household​ Production," National Bureau of Economic Research working paper​ 14676, January 2009. Based on these​ findings, what can we predict about total productionlong dash—whether or not that production is included in the calculation of GDPlong dash—in the economy when these workers became​ unemployed? A. When workers lose their​ jobs, total production falls since workers are no longer earning wages. B. If the workers had been paying other people to perform the household activities prior to​ unemployment, then total production will fall. Your answer is correct. C. If the workers had been paying other people to perform the household activities prior to​ unemployment, then total production will rise. D. Since household production is not calculated in​ GDP, there is a decrease in total production that comes due to unemployment.

B

The U.S. economy enters a period of rapid growthrapid growth in incomes. This will cause A. demand for​ McDonald's Big Mac hamburgers to shift to the rightshift to the right if they are inferior goods. B. demand for​ McDonald's Big Mac hamburgers to shift to the leftshift to the left if they are inferior goods. Your answer is correct. C. a movement along the demand curve for​ McDonald's Big Mac hamburgers if they are normal goods.

B

The price elasticity of demand in the United States for crude oil has been estimated to be minus−0.061 in the short run and minus−0.453 in the long run. ​Source: John C. B.​ Cooper, "Price Elasticity of Demand for Crude​ Oil: Estimate for 23​ Countries," OPEC Review​, ​March, 2003, pp.​ 1-8. The demand for crude oil A. is equally price inelastic in both the short and long run as there are not many substitutes for crude oil. B. is more price elastic in the long run than in the short run because in the long run a substitute for crude oil may be found. Your answer is correct. C. is more price inelastic in the long run than in the short run because in the short run a substitute for crude oil may be found. D. is price elastic in both the short and long run as there exists many substitutes for crude oil.

B

The price of fries ..This will A. increase the demand for McDonald's Big Mac hamburgersincrease the demand for McDonald's Big Mac hamburgers. B. decrease the demand for McDonald's Big Mac hamburgersdecrease the demand for McDonald's Big Mac hamburgers. Your answer is correct. C. cause a movement along the demand curve for​ McDonald's Big Mac hamburgers

B

During a discussion with a​ reporter, former Microsoft CEO Steve Ballmer discussed the data compiled on the usafacts.org Web site. Ballmer asked if the reporter knew how many people the government employed and provided the​ answer: "Almost 24 million. Would you have guessed​ that?" ​Source: Andrew Ross​ Sorkin, "Steve Ballmer Serves Up a Fascinating Data​ Trove," New York Times​, April​ 17, 2017. Is​ local, state, and federal government spending on salaries and benefits for these employees considered production as measured by​ GDP? Briefly explain. A. ​No, spending on salaries and benefits is not part of GDP since government workers do not produce a good. B. ​Yes, because the government purchases component of GDP includes spending on salaries and benefits for government employees. Your answer is correct. C. ​No, this spending would not be measured by GDP because government workers are an input to production. D. ​Yes, but this would only be considered production measured by GDP if the workers are federal employees. According to data on the usafacts.org​ site, in 2014 the federal government spent​ $850.5 billion on Social Security payments to retired and disabled people. Is this federal government spending considered production as measured by​ GDP? Briefly explain. A. ​No, because Social Security payments do not result in the production of new goods and services. Your answer is correct. B. ​Yes, Social Security payments are part of GDP because the payments provide a service to retirees. C. ​No, Social Security payments are not part of GDP since the payments are financed with government borrowing. D. ​Yes, because Social Security payments are spent on household​ consumption, which is a component of GDP.

B A

Assume that the economy is in​ long-run equilibrium. ​Now, assume that there is an unexpected increase in the price of oil. As a result of higher oil​ prices, the A. ​long-run aggregate supply curve will shift left. B. ​short-run aggregate supply curve will shift left. Your answer is correct. C. ​short-run aggregate supply curve will shift right. D. aggregate demand curve will shift left. The new​ short-run equilibrium will be A. where the new​ short-run aggregate supply curve intersects the original aggregate demand curve. Your answer is correct. B. where the new​ short-run aggregate supply​ curve, the original aggregate demand​ curve, and a new​ long-run aggregate supply curve intersect. C. where the new​ short-run aggregate supply​ curve, the original aggregate demand​ curve, and original​ long-run aggregate supply curve intersect. D. where the original​ short-run aggregate supply curve intersects the original aggregate demand curve. In the new​ short-run equilibrium, the unemployment rate is higher than the unemployment rate in the initial equilibrium prior to the increase in the price of oil. Which of the following best explains how and why the economy will adjust back to​ long-run equilibrium? A. Aggregate demand will​ decrease, restoring the original equilibrium price and quantity. B. Aggregate demand will​ increase, restoring the original equilibrium price and quantity. C. ​Short-run aggregate supply will increase​ (shift rightward) as the recession makes firms and workers willing to accept lower wages and prices. Your answer is correct. D. ​Short-run aggregate supply will decrease​ (shift leftward) as firms and workers adjust to the​ new, higher price level. After the adjustment of aggregate supply is​ complete, the economy returns to equilibrium at The image is a graph that shows the aggregate demand and aggregate supply model. The horizontal axis is labeled Real GDP, Y. The vertical axis is labeled Price level. There is a downward-sloping straight line labeled AD subscript 1. There is an upward-sloping straight line labeled SRAS subscript 1. SRAS subscript 1 intersects AD subscript 1 at a point labeled A. There is another upward-sloping straight line, labeled SRAS subscript 2. SRAS subscript 2 is parallel to SRAS subscript 1. SRAS subscript 2 lies above and to the left of SRAS subscript 1. There is an arrow from SRAS subscript 1 pointing toward SRAS subscript 2. The arrow shows the shift from SRAS subscript 1 to SRAS subscript 2. SRAS subscript 2 intersects AD subscript 2 at a point labeled B. B lies above and to the left of A. The vertical intercept of B lies above the vertical intercept of A. There is a vertical line labeled LRAS that passes through A and intercepts the horizontal axis. A. a point lower than​ (i.e., south-east​ of) A. B. in between points A and B. C.A Your answer is correct. D. b When the economy returns to​ long-run equilibrium again A. real GDP and the unemployment rate will be the same but the price level will be higher compared to the initial equilibrium value prior to the increase in the price of oil. B. real​ GDP, the unemployment​ rate, and the price level will be the same as the initial equilibrium values prior to the increase in the price of oil. Your answer is correct. C. the unemployment rate will be the​ same, but real GDP will be lower and the price level higher compared to the initial equilibrium value prior to the increase in the price of oil. D. real GDP will be lower and the unemployment rate and the price level will be higher compared to the initial equilibrium value prior to the increase in the price of oil.

B A C C B

An article in the Wall Street Journal noted that many economists believe that GDP data for India are unreliable because​ "most enterprises are tiny and​ unregistered, and most workers are employed off the books. The​ government's infrequent surveys represent only a best guess of the value being added in​ back-alley workshops, outdoor markets and other​ cash-based corners of the​ economy." ​Source: Raymond​ Zhong, "On Close​ Inspection, India's Sharp Growth Picture Gets​ Fuzzy," Wall Street Journal​, May​ 1, 2016. Working​ "off the​ books" refers to A. working in exchange for goods and services. B. earning income that is not reported for tax purposes. Your answer is correct. C. volunteering. D. reporting false income paid to workers. The problems of small firms working off the books and far from major cities would make it difficult for the Indian government to accurately measure GDP because the A. firms do not employ enough people to report accurately to government. B. measures of value added will be distorted. C. measures of GDP will be understated if these practices are common. Your answer is correct. D. measures of GDP will be overstated if these practices are common. If government cannot accurately measure​ GDP, A. they will be unable to make a case for foreign aid. B. there will be little impact if the size of the overall economy is​ large, rather than small. C. businesses will not be able to correctly gauge the​ market, and the government will be unable to design efficient tax policies. Your answer is correct. D. there will be little impact in the short​ run, and even less in the long​ run, so long as the inaccuracies are consistent.

B C C

Recall that​ "securitization" is the process of turning a​ loan, such as a​ mortgage, into a bond that can be bought and sold in secondary markets. An article in the Economist ​notes: That securitization caused more subprime mortgages to be written is not in doubt. By offering access to a much deeper pool of​ capital, securitization helped to bring down the cost of mortgages and made​ home-ownership more affordable for borrowers with poor credit histories. ​Source: "Ruptured​ Credit," Economist​, May​ 15, 2008. What is a​ "subprime mortgage," and would a subprime borrower be likely to pay a higher or a lower interest rate than a borrower with a better credit​ history? A. Loans granted to borrowers with the best credit​ histories; a lower interest rate. B. Loans granted to borrowers with flawed credit​ histories; a higher interest rate. Your answer is correct. C. Loans granted to borrowers with the best credit​ histories; a higher interest rate. D. Loans granted to borrowers with flawed credit​ histories; a lower interest rate. Why would securitization give mortgage borrowers access to a deeper pool of​ capital? A. Securitization allowed banks to borrow funds from the​ Fed, deepening the pool of capital available. B. Since banks could make more risky​ loans, there were more borrowers wishing to obtain funds. C. Securitization allowed banks to borrow funds from the​ Treasury, deepening the pool of capital available. D. Since banks could resell mortgages to​ investors, they had access to more funds than just their own deposits.

B D

In early​ 2017, according to the Wall Street Journal President Donald Trump​ said: "the U.S. dollar​ 'is getting too​ strong' and he would prefer the Federal Reserve keep interest rates​ low." The article also quoted the president as​ saying: "It's​ very, very hard to compete when you have a strong​ dollar..." ​Source: Gerard​ Baker, Carol E.​ Lee, and Michael C.​ Bender, "Trump Says Dollar​ 'Getting Too​ Strong,' Won't Label China a Currency​ Manipulator," Wall Street Journal​, April​ 12, 2017. What did President Trump mean by a​ "strong dollar"? A. A​ "strong dollar" means that other currencies can be traded for more dollars. B. A​ "strong dollar" is when it takes more units of a foreign currency to buy a dollar. Your answer is correct. C. This would mean that the value of a dollar in terms of foreign currencies is stable. D. This occurs when U.S. prices in dollars are higher than prices in foreign currencies. Is there an economic connection between the​ president's desire for a weaker dollar and his desire that the Federal Reserve keep interest rates​ low? Briefly explain. A. ​Yes, when the Federal Reserve keeps interest rates​ low, it makes the dollar weaker because firms are less likely to invest in new factories and equipment. B. ​Yes, when the Federal Reserve keeps interest rates​ low, it makes the dollar weaker because foreigners demand more dollars. C. ​No, because the Fed does not have the ability to affect interest rates in a way that would impact the foreign exchange value of the dollar. D. ​Yes, when the Federal Reserve keeps interest rates​ low, it makes the dollar weaker because investing in the United States is less attractive. Your answer is correct. Why would a strong dollar make it hard for U.S. firms to​ compete? A. A strong dollar causes the U.S. trade deficit with other countries to become larger. B. A strong dollar raises the cost of U.S. goods to buyers in foreign countries. Your answer is correct. C. A strong dollar increases the quality of foreign goods relative to U.S. goods. D. When the dollar is​ strong, the cost of production in the United States rises.

B D B

Corruption has been a significant problem in Iraq. Opening and running a business in Iraq usually requires paying multiple bribes to government officials. We can think of there being a demand and supply for​ bribes, with the curves having the usual​ shapes: The demand for bribes will be downward sloping because the smaller the​ bribe, the more business owners will be willing to pay it. The supply of bribes will be upward sloping because the larger the​ bribe, the more government officials will be willing to run the risk of breaking the law by accepting the bribe. Suppose that the Iraqi government introduces a new policy to reduce corruption that raises the cost to officials of accepting bribeslong dash—perhaps by increasing the jail term for accepting a bribe. As a​ result, the supply curve for bribes will shift to the left. If we measure the burden on the economy from corruption by the total value of the bribes​ paid, what must be true of the demand for bribes if the government policy is to be​ effective? ​Source: Frank​ Gunter, "Corruption in​ Iraq: Poor​ Data, Questionable​ Policies," Working​ Paper, March 2009. Suppose a figure illustrating the market for bribes has the following​ attributes: Upper S 1S1 is the initial supply curve for bribes and Upper D 1D1 is the demand curve for bribes. The corresponding equilibrium price for bribes is initially Upper P 1P1 and the equilibrium quantity is Upper Q 1Q1. ​Then, the supply curve for bribes shifts to the left to Upper S 2S2 as the cost to officials of accepting bribes​ increases, as described. The new equilibrium price is Upper P 2P2 and the new equilibrium quantity is Upper Q 2Q2. Determine the area representing the burden of corruption before the government policy is enacted.​ Then, determine the area representing the burden of corruption after the government policy is enacted. The economic burden of corruption before the government policy is enacted is equal to A. the area of a rectangle with a height of Upper P 2P2 and a base of Upper Q 2Q2. B. the area of a rectangle with a height of Upper P 1P1 and a base of Upper Q 1Q1. Your answer is correct. C. the area of a rectangle with a height of Upper P 1P1 and a base of Upper Q 2Q2. D. the area of a rectangle with a height of Upper P 2P2 and a base of Upper Q 1Q1. The economic burden of corruption after the government policy is enacted is equal to A. the area of a rectangle with a height of Upper P 1P1 and a base of Upper Q 2Q2. B. the area of a rectangle with a height of Upper P 2P2 and a base of Upper Q 1Q1. C. the area of a rectangle with a height of Upper P 1P1 and a base of Upper Q 1Q1. D. the area of a rectangle with a height of Upper P 2P2 and a base of Upper Q 2Q2. Your answer is correct. The government policy to reduce corruption will be A. effective because the equilibrium quantity of corruption will decrease. B. ineffective because the equilibrium price of corruption will increase. C. ineffective if the percentage change in the quantity of corruption demanded is large relative to the percentage change in the price of corruption. D. effectiveeffective if the demand for corruption is elasticelastic. Your answer is correct. E. effectiveeffective if the demand for corruption is inelasticinelastic.

B D D

In his​ autobiography, T. Boone​ Pickens, a​ geologist, entrepreneur, and oil company​ executive, wrote: ​It's unusual to find a large corporation​ that's efficient ... When you get an inside​ look, it's easy to see how inefficient big business really is. Most corporate bureaucracies have more people than they have work. ​Source: T. Boone​ Pickens, The Luckiest Man in the World​, ​Washington, DC: Beard​ Books, 2000, p. 275. Pickens was describing A. diminishing​ returns, because he is referring to the decrease in marginal output when another worker is added. B. diminishing​ returns, because he is referring to the inefficieny of a large scale business operation. C. diseconomies of​ scale, because he is referring to the inefficieny of a large scale business operation. Your answer is correct. D. diseconomies of​ scale, because he is referring to the decrease in marginal output when another worker is added.

C

Older oil wells that produce fewer than 10 barrels of oil a day are called​ "stripper" wells. Suppose that you and a partner own a stripper well that can produce eight barrels of oil per day and you estimate that the marginal cost of producing another barrel of oil is​ $80. In making your​ calculation, you take into account the cost of​ labor, materials and other inputs that increase when you produce more oil. Your partner looks over your calculation of marginal cost and​ says: "You forgot about that bank loan we received two years ago. If we take into account the amount we pay on that​ loan, its adds​ $10 per barrel to our marginal cost of​ production." Which of the following statements is most​ true? A. The bank loan should not be included in marginal cost because a loan has to be paid back. B. The bank loan should be included in marginal cost because the interest to service the loan is an ongoing cost. C. The bank loan should not be included in marginal cost because it cannot be avoided by not producing another barrel. Your answer is correct. D. The bank loan should be included in marginal cost because this cost can be avoided by not producing another barrel.

C

The following appears in a Federal Reserve​ publication: ​"In practice, monetary policymakers do not have​ up-to-the-minute, reliable information about the state of the economy and prices. Information is limited because of lags in the publication of data. ​ Also, policymakers have​ less-than-perfect understanding of the way the economy​ works, including the knowledge of when and to what extent policy actions will affect aggregate demand. The operation of the economy changes over​ time, and with it the response of the economy to policy measures. These limitations add to uncertainties in the policy process and make determining the appropriate setting of monetary policy...more​ difficult." ​Source: Board of Governors of the Federal Reserve​ System, The Federal Reserve​ System: Purposes and Functions​, ​Washington, DC, 1994. If the Fed itself admits that there are many obstacles in the way of effective monetary​ policy, why does it still engage in active monetary policy rather than use a monetary growth​ rule, as suggested by Milton Friedman and his​ followers? Policymakers at the Fed believe that A. although it is not​ perfect, active monetary policy is still a destabilizing force in the economy. B. although it is not​ perfect, passive monetary policy is still a stabilizing force in the economy. C. although it is not​ perfect, active monetary policy is still a stabilizing force in the economy. Your answer is correct. D. the current practice of monetary policy is perfect.

C

The unemployment rate declined from 4.5 percent in March 2017 to 4.4 percent in April. The labor force participation rate also declined from March to​ April, from 63.0 percent to 62.9 percent. Holding constant the number of people employed in April​ 2017, if the labor force participation rate had increased instead of​ decreased, the unemployment rate for April 2017 would be A. less than 4.4 percent because the value in the numerator of the formula for the unemployment rate would increase more than the value in the denominator. B. less than 4.4 percent because the value in the numerator of the formula for the unemployment rate would increase less than the value in the denominator. C. greater than 4.4 percent because adding the same number to both the numerator and the denominator of a fraction that is less than one increases the value of the fraction. Your answer is correct. D. greater than 4.4 percent because the value in the numerator of the formula for the unemployment rate would increase less than the value in the denominator.

C

Which of the following statements is correct if real GDP in the United States declined by more during the 2007minus−2009 recession than did real GDP in​ Canada, China, and other trading partners of the United​ States? A. U.S. exports fell more than the​ imports, leading to an increase in net exports. B. U.S. exports fell more than the​ imports, leading to a fall in net exports. C. Imports to the United States fell more than the U.S.​ exports, leading to an increase in net exports. Your answer is correct. D. Imports to the United States fell more than the U.S.​ exports, leading to a decrease in net exports.

C

​EOG, a​ Texas-based producer of oil and​ gas, is called the​ "Apple of​ oil" because of the​ company's history of developing innovative methods to extract energy from shale rock. Using one of​ EOG's innovations, called​ iSteer, the company can navigate through thousands of feet of rock with a drill bit that allows for greater recovery of oil and gas than methods the company previously used. ​Source: Erin​ Ailworth, "Fracking​ 2.0: Shale Drillers Pioneer New Ways to Profit in Era of Cheap​ Oil," Wall Street Journal​, March​ 30, 2017. Briefly explain why economists would consider​ EOG's use of iSteer an example of technological change. A. The​ company's use of iSteer enables it to recover oil and gas using different combinations of inputs. B. The​ company's use of iSteer allows it to recover both oil and gas. C. ​EOG's use of iSteer enables it to recover more oil and gas with a certain quantity of inputs. Your answer is correct. D. EOG is able to recover oil and gas with less labor by using more capital.

C

Peter​ Reinhardt, CEO of​ Segment.com, made the following comment on his blog when discussing how the​ firm's noisy open office was lowering the productivity of its​ engineers: "We​ can't immediately ditch our open floor plan​ (although we're looking at various options for our next​ office.)" ​Source: Peter​ Reinhardt, "Improving Our Focus by Measuring Sound​ Levels," segment.com​, October​ 19, 2016. Why​ can't the firm immediately ditch its open floor​ plan? A. Changing a floor plan requires the appropriate technology. B. Changing its floor plan would require more money. C. Segment considers its current open floor plan to be a fixed cost. Your answer is correct. D. Segment considers its current open floor plan to be an implicit cost. Is​ Reinhardt's remark about​ Segment.com's economic short run or its economic long​ run? Briefly explain. A. Long​ run, because changing the floor plan is expensive. B. Short​ run, because the floor plan is fixed. Your answer is correct. C. Long​ run, because other inputs can be changed. D. Short​ run, because the floor plan impacts production now.

C B

An article in the Wall Street Journal in 2015 reported that the interest rate on​ five-year German government bonds had become​ negative: "The negative yield means investors are effectively paying the German state for holding its​ debt." The article quoted an investment analyst as​ saying: "The negative yield is not scaring investors​ away." ​Source: Emese Bartha and Ben​ Edwards, "Germany Sells​ Five-Year Debt at Negative Yield for First Time on​ Record," Wall Street Journal​, February​ 25, 2015. The interest rate on German government bonds became negative when A. the economy slowed and unemployment exceeded the natural rate. B. the government engaged in a policy of quantitative easing to keep interest rates high. C. the inflation rate exceeded the nominal interest rate. Your answer is correct. D. the government sold securities other than the​ short-term government securities that are usually involved in open market operations. Investors were willing to buy bonds with a negative interest rate because A. the real interest rate was​ positive, it was the nominal rate that was negative. B. banks tied the interest rates they charged on loans to the interest rates on government bonds. C. interest rates on all bonds and on bank deposits were more negative. D. they believed there was no chance that the government would default.

C D

In response to problems in financial markets and a slowing​ economy, the Federal Open Market Committee​ (FOMC) began lowering its target for the federal funds rate from 5.25 percent in September 2007. Over the next​ year, the FOMC cut its federal funds rate target in a series of steps. Writing in the New York Times​, economist Steven Levitt​ observed, ​"The Fed has been pouring more money into the banking system by cutting the target federal funds rate to 0 to 0.25 percent in December​ 2008." ​Source: Steven D.​ Levitt, "The Financial Meltdown Now and​ Then," New York Times​, May​ 12, 2009. What is the relationship between the federal funds rate falling and the money supply​ increasing? A. Cutting the federal funds rate increases bank​ reserves, which increases the money supply. B. Cutting the federal funds rate increases the money supply. C. To decrease the federal funds​ rate, the Fed must increase the money supply. Your answer is correct. D. Cutting the federal funds rate increases​ saving, which increases the money supply. How does lowering the target for the federal funds rate​ "pour money" into the banking​ system? A. To increase the money​ supply, the Fed sells bonds on the open​ market, which increases bank reserves. B. To increase the money​ supply, the Fed decreases​ taxes, which increases consumer spending. C. To increase the money​ supply, the Fed increases government​ spending, which increases aggregate demand. D. To increase the money​ supply, the Fed buys bonds on the open​ market, which increases bank reserves.

C D

In​ 2015, Richard​ Fuld, the last CEO of Lehman​ Brothers, gave a talk in which according to an article in the Wall Street​ Journal,​ "He outlined what he called the​ 'perfect storm' of events that led to the financial​ crisis, saying​ 'it all started with the​ government' and policies that subsidized cheap loans for people to buy homes in order to help them chase the American​ dream." ​Source: Maureen​ Farrell, "Lehman's Fuld Says It​ Wasn't His​ Fault," Wall Street Journal​, May​ 28, 2015. The events that led to the financial crisis include A. investment bank fraud resulting from the creation of complex packagings of mortgages. B. an increase in interest rates which led to mortgage​ defaults, and a disruption of the financial system. C. a burst in a housing bubble in 2006 which led to mortgage​ defaults, and a disruption of the financial system resulting from the creation of complex packagings of mortgages. Your answer is correct. D. a rise in gasoline prices that reduced income and caused many people to default on their home​ mortgages, and banks to go bankrupt. Government policies that could have been said to have been subsidizing cheap loans included A. expansionary fiscal policy and the low interest rates following the 2001 recession. B. expansionary fiscal policy following the 2001 recession and government encouragement of subprime loans. C. government encouragement of​ low-risk loans and the creation of a secondary mortgage market through Fannie Mae and Freddie Mac. D. the creation of a secondary mortgage market through Fannie Mae and Freddie​ Mac, and the low interest rates following the 2001 recession.

C D

In late​ 2012, the U.S. Treasury sold the last of the stock it purchased in the insurance company AIG. The Treasury earned a profit on the​ $22.7 billion it had invested in AIG in 2008. An article in Wall Street Journal noted​ that: ​"This step in​ AIG's turnaround, which essentially closes the book on one of the most controversial bailouts of the financial​ crisis, seemed nearly unattainable in​ 2008, when the​ insurer's imminent collapse sent shockwaves through the global​ economy." . ​Source: Jeffrey Sparshott and Erik​ Holm, "End of a​ Bailout: U.S. Sells Last AIG​ Shares," New York Times​, December​ 11, 2012. The federal government bailed out AIG because A. the Federal Reserve insisted that this was the best course of action. B. it was a​ government-subsidized insurance company so they were obligated to bail the company out. C. it was the largest insurance company in the nation and the government feared the repercussions of a failure of AIG. Your answer is correct. D. AIG promised to help bail out other companies if they needed it. The government bailout was controversial because A. the Federal Reserve excerised powers that it rarely uses. B. AIG got off the hook with no consequences. C. the bailout caused income tax rates to rise. D. it was​ expensive, and other companies suffered through bankruptcy and failure. Your answer is correct. Even though the federal government earned a profit on its investment in​ AIG, economists and policymakers who opposed the bailout were A. wrong because it is the proper role of government to bailout businesses about to go bankrupt. B. not necessarily wrong because taxes rose as a result. C. not necessarily​ wrong, because it was an expensive and risky solution. Your answer is correct. D. wrong because it turned out to be a good investment.

C D C

Indicate which component of GDP will be affected by each of the following transactions involving the Ford Motor Company. a. You purchase a new Ford Escape Hybrid from a Ford dealer. .... b. You purchase a 2013​ (preowned) Ford Escape Hybrid from a friend. ..... c. Ford purchases door handles for the Escape from an auto parts manufacturer in Indiana. ..... d. Ford produces​ 1,000 Escapes in a factory in Missouri and ships them to a car dealer in​ Shanghai, China. .... e. Ford purchases new machine tools to use in its Missouri Escape factory. ..... f. The state of Missouri builds a new highway to help improve access to the Ford Escape plant....

Consumption Expenditure Not included in GDP calculation Not included in GDP calculation Net Export Expenditure Investment Expenditure Government Expenditure

A writer for the Wall Street Journal discussing the relatively poor performance of​ HSBC, a global bank with headquarters in the United​ Kingdom, noted​ that: "[The poor​ performance] is further reason to ask whether the structure of such a​ large, global bank is working against it... There remains a legitimate question whether the group is too big to​ manage." Reading this​ article, a student​ remarks: "It seems that firm is suffering from diminishing​ returns." ​Source: Paul J.​ Davies, "HSBC Shows the Diminished Value of Global​ Banks," Wall Street Journal​, February​ 23, 2015. Briefly explain whether you agree with this remark. A. ​Agree, because the article is describing the long run. B. ​Disagree, because the size of the bank is fixed in the long run. C. ​Agree, because the minimum efficient scale for banks is smaller. D. ​Disagree, because the article is describing diseconomies of scale.

D

An article in the Wall Street Journal discussed the views of Canadian Minister of Finance Joe Oliver on the effect of falling oil prices on the Canadian economy. According to the​ article, Oliver argued that​ "lower oil prices would have a broadly neutral impact on real ... gross domestic​ product, but have a negative effect on nominal​ GDP." ​Source:​ Reuters, "Canada Pushes Back Budget to April Due to Market​ Instability," New York Times​, January​ 15, 2015. Oliver must be expecting the effect of lower oil prices to A. raise the inflation​ rate, which would raise real GDP. B. raise the inflation​ rate, which would offset the reduction nominal GDP. C. not affect the inflation​ rate, which would keep real GDP the same. D. lower the inflation​ rate, which would offset the reduction in nominal GDP.

D

An article on fortune.com estimated that the cost of materials in​ Apple's iPhone 7 with 32 gigabytes of memory was​ $225. Apple was selling the iPhone 7 for​ $649. ​Source: Don​ Reisinger, "Here's How Much the iPhone 7 Cost to​ Manufacture," fortune.com, September​ 20, 2016. Can we conclude from this information that Apple is making a profit of about​ $424 per​ iPhone? Briefly explain. ​Apple's profit is A. likely equal to​ $424 per iPhone because Apple only has fixed costs of production. B. likely equal to​ $424 per iPhone because​ Apple's other costs are implicitimplicit costs. C. likely greater than​ $424 per iPhone because Apple also has nonmonetary opportunitynonmonetary opportunity costs. D. likely less than​ $424 per iPhone because Apple also has fixed costs of production. Your answer is correct. E. likely less than​ $424 per iPhone because Apple also has variable costs of production.

D

Is Jill Johnson correct when she says the​ following: ​"I am currently producing​ 20,000 pizzas per month at a total cost of ​$50 comma 00050,000. If I produce​ 20,001 pizzas, my total cost will rise to ​$50 comma 00250,002. ​Therefore, my marginal cost of producing pizzas must be​ increasing." A. ​Jill's average total cost of production is​ decreasing, so her marginal cost of producing pizzas must be decreasing. B. ​Jill's average total cost of production is​ decreasing, so her marginal cost of producing pizzas must be increasing. C. ​Jill's average total cost of production is​ increasing, so her marginal cost of producing pizzas must be increasing. D. Though​ Jill's average total cost of production is​ decreasing, her marginal cost of producing pizzas could be increasing or decreasing. Your answer is correct. E. ​Jill's average total cost of production is​ increasing, so her marginal cost of producing pizzas must be decreasing.

D

When the DuPont chemical company first attempted to enter the paint​ business, it was not successful. According to a company​ report, in one year it ​"lost nearly​ $500,000 in actual cash in addition to an expected return on investment of nearly​ $500,000, which made a total loss of income to the company of nearly a​ million." Why did this report include as part of the​ company's loss the amount it had expected to earn​ -- but​ didn't -- on its investment in manufacturing​ paint? ​Source: Alfred D.​ Chandler, Jr., Thomas K.​ McCraw, and Richard​ Tedlow, Management Past and​ Present,​ Cincinnati: South-Western,​ 2000, pp.​ 3-92. A. The report sought to include variable costs because DuPont could have invested its money elsewhere and earned​ $500,000. B. The report sought to include explicit costs because this is standard accounting practice. C. The report sought to include explicit costs because DuPont could have invested its money elsewhere and earned​ $500,000. D. The report sought to include implicit costs because DuPont could have invested its money elsewhere and earned​ $500,000. Your answer is correct. E. The report sought to include implicit costs because this is standard accounting practice.

D

​Currently, the Bureau of Labor Statistics does not include homemakers in its employment and labor force totals. What would happen to the unemployment rate and the labor force participation rateLOADING... if homemakers were included in these​ numbers? A. Both the unemployment rate and the labor force participation rate would increase. B. Both the unemployment rate and the labor force participation rate would decrease. C. The unemployment rate would increase and the labor force participation rate would decrease. D. The unemployment rate would decrease and the labor force participation rate would increase.

D

August 2017 was the​ sixty-fourth consecutive month that the rate of inflation as measured by the core personal consumption expenditures​ (PCE) price index was below the Federal​ Reserve's target of 2 percent. The consumer price index​ (CPI) might yield a rate of inflation different from that found using the core PCE price index because A. the CPI is updated more frequently than the core PCE price index. B. the CPI includes the prices of more goods and services than the core PCE price index. C. the core PCE price index is updated more frequently than the CPI. D. the core PCE does not measure food and energy​ prices, which are measured by the CPI. Your answer is correct. The choice of the price index the Federal Reserve uses to measure inflation can affect monetary policy because A. one goal of monetary policy is price stability​ and, if the price index used to measure inflation is consistently​ wrong, monetary policies based on that information will be wrong. Your answer is correct. B. the various price indexes the Federal Reserve can use to measure inflation are reported with differing​ frequencies, which can influence the process of determining the best monetary policy. C. the various price indexes the Federal Reserve can use to measure inflation are related to different sectors of the​ economy, and the Fed wants to use the one that best represents the sector they are most concerned with. D. one goal of monetary policy is the stability of financial markets and​ institutions, and if the price index used to measure inflation is​ inaccurate, monetary policies based on that information will disrupt financial markets.

D A

Segment.com reorganized its office as part of its​ "anti-distraction campaign." According to an article in the Wall Street​ Journal, the company cut back on its internal text messaging service and moved​ "some of its communication back to email to reduce the number of notifications employees were​ receiving." ​Source: Rachel​ Feintzeig, "How One Firm Lowered Its​ Open-Office Noise," Wall Street Journal​, November​ 15, 2016. Does this movement from a new technologylong dash—text messaginglong dash—to an older technologylong dash—emaillong dash—represent positive or negative technological change at​ Segment? Briefly explain. A. Negative technological​ change, because output from a given quantity of inputs may decline. B. Positive technological​ change, because output can be produced at a lower cost. C. Negative technological​ change, because the old technology had already been available. D. Positive technological​ change, because more output can be produced using the same inputs. Your answer is correct. Suppose that competition for software engineers results in Segment.com having to pay them higher salaries. Would the fact that the firm will now face an increased cost of providing its services be an example of negative technological​ change? Briefly explain. A. ​No, this would not represent technological change because the same output can be produced using the same inputs. Your answer is correct. B. ​No, this would not represent technological change because the​ output's price will rise with​ workers' wages. C. ​Yes, this is an example of negative technological change because fewer workers will be​ hired, reducing output. D. ​Yes, this represents negative technological change because the cost of producing the same output has increased.

D A

Small business owner Jay Goltz described several decisions he made to reduce the fixed costs of his​ businesses, including replacing halogen lamps with LED lamps. Goltz​ noted, "...I'm guessing that many business owners could save a lot more than pennies on their fixed​ costs, and those savings...fall right to the bottom​ line." ​Source: Jay​ Goltz, "Not All Fixed Costs Are Truly​ Fixed," New York Times​, May​ 25, 2011. a. The cost of electricity used to power the lights used in Mr.​ Goltz' businesses are fixed costs because these costs A. cannot be negotiated. B. are unpredictable. C. are paid to one provider. D. must be paid regardless of the volume of output. Your answer is correct. b. Goltz wrote that reducing fixed costs results in savings that​ "fall right to the bottom​ line" because A. ​profit, the bottom​ line, is revenue minus fixed costs minus variable​ costs, so a reduction in fixed costs increases profit. Your answer is correct. B. the bottom line equals fixed costs plus variable​ costs, so a reduction in fixed costs reduces the bottom line. C. ​profit, the bottom​ line, is revenue minus variable​ costs, and since variable costs include fixed​ costs, a reduction in fixed costs increases profit. D. ​revenue, the bottom​ line, is made up of fixed and variable​ costs, so a reduction in fixed costs increases revenue.

D A

The Toyota Prius is a​ gasoline-electric hybrid car that gets 54 miles to the gallon. An article in the Wall Street Journal notes that sales of the Prius have been hurt by low gasoline prices and​ that: "Americans are now more likely to trade in a hybrid or an electric vehicle for an​ SUV...." Does the article indicate that​ gasoline-powered cars and gasoline are substitutes or​ complements? Briefly explain. A. ​Substitutes, because the more consumers buy of one​ good, the less they will buy of the other good. B. ​Substitutes, because the more consumers buy of one​ good, the more they will buy of the other good. C. ​Complements, because they are used for the same purpose. D. ​Complements, because they are used together. Your answer is correct. Does it indicate that​ gasoline-powered cars and hybrids are substitutes or​ complements? A. ​Substitutes, because the more consumers buy of one​ good, the less they will buy of the other good. Your answer is correct. B. ​Complements, because they are used for the same purpose. C. ​Complements, because they are used together. D. ​Substitutes, because the more consumers buy of one​ good, the more they will buy of the other good.

D A

The entrance fee into Yellowstone National Park in northwestern Wyoming is​ "$30 for a​ private, noncommercial​ vehicle; $25 for a motorcycle or a​ snowmobile; or​ $15 for each visitor 16 and older entering by​ foot, bike,​ ski, etc." The fee provides the visitor with a​ seven-day entrance permit into Yellowstone and nearby Grand Teton National Park. ​Source: National Park​ Service, "Yellowstone National​ Park: Basic​ Information," www.nps.gov/yell/planyourvisit/basicinfo.htm. The demand for entry into Yellowstone National Park for visitors in​ private, noncommercial vehicles is A. unit elastic as the prospective park visitors will want to go to the park regardless of the entrance fee. B. perfectly inelastic because the prospective park visitors will enter the park no matter what the cost of the entry fee. C. perfectly elastic because the prospective park visitors will refuse to enter the park if the entry fee is raised even by one cent. D. elastic because when the price is high and the quantity demanded is​ low, demand is elastic. Your answer is correct. Of the three ways to enter the parklong dash—in a​ private, noncommercial​ vehicle; on a​ motorcycle; and by​ foot, bike, or skilong dash—which way would you expect to have the largest price elasticity of​ demand, and which would you expect to have the smallest price elasticity of​ demand? A. The​ private, noncommercial vehicle has the largest price elasticity of demand and visitors 16 and older entering by​ foot, bike,​ ski, etc. have the smallest price elasticity of demand. Your answer is correct. B. The​ private, noncommercial vehicle has the smallest price elasticity of demand and visitors 16 and older entering by​ foot, bike,​ ski, etc. have the largest price elasticity of demand. C. The​ private, noncommercial vehicle has the largest price elasticity of demand and snowmobile or motorcycle has the smallest price elasticity of demand. D. The snowmobile or motorcycle has the largest price elasticity of demand and visitors 16 and older entering by​ foot, bike,​ ski, etc. have the smallest price elasticity of demand.

D A

​Source: T. C.​ Skeat,"The Length of the Standard Papyrus Roll and the​ Cost-Advantage of the ​Codex,"Zeitschrift fur Papyrologie and Epigraphik​, ​1982, p​ 175; and David​ Trobisch, The First Edition of the New Testament​, New​ York: Oxford University​ Press, 2000, p 73. a. Suppose that the fixed cost of preparing a codex was 58 drachmas and that there was no similar fixed cost for a scroll. Would an ancient book publisher who intended to sell 5 copies of a book be likely to publish it as a scroll or as a​ codex? What if he intended to sell 10​ copies? Briefly explain. A. If a publisher intended to sell 5 or 10​ copies, he would publish the book as a codex because the average cost would be lower than as a scroll. B. If a publisher intended to sell 5​ copies, he would publish the book as a scroll because the marginal cost would be lower than as a codex. If he intended to sell 10​ copies, he would publish the book as a codex because the marginal cost would be lower than as a scroll. C. If a publisher intended to sell 5 or 10​ copies, he would publish the book as a codex because the marginal cost would be lower than as a scroll. D. If a publisher intended to sell 5​ copies, he would publish the book as a scroll because the average cost would be lower than as a codex. If he intended to sell 10​ copies, he would publish the book as a codex because the average cost would be lower than as a scroll. Your answer is correct. E. If a publisher intended to sell 5​ copies, he would publish the book as a codex because the average cost would be lower than as a scroll. If he intended to sell 10​ copies, he would publish the book as a scroll because the average cost would be lower than as a codex. b. Although most books were published as scrolls in the first century​ A.D., by the third​ century, most were published as codices. Considering only the factors mentioned in this​ problem, explain why this change may have taken place. A. By the third​ century, enough books were being published such that the total cost of producing a book as a scroll was lower than the total cost of producing a book as a codex. B. By the third​ century, enough books were being published such that the average cost of producing a book as a codex was lower than the average cost of producing a book as a scroll. Your answer is correct. C. By the third​ century, enough books were being published such that the marginal cost of producing a book as a codex was lower than the marginal cost of producing a book as a scroll. D. By the third​ century, so few books were being published that the average cost of producing a book as a codex was lower than the average cost of producing a book as a scroll. E. By the third​ century, enough books were being published such that the average cost of producing a book as a scroll was lower than the average cost of producing a book as a codex.

D B

In discussing the Taylor​ rule, John Taylor​ wrote: ​"I realize that there are differences of opinion about what is the best rule to guide policy and that some at the Fed​ (including Janet​ Yellen) now prefer a rule with a higher coefficient​ [on the output​ gap]." ​Source: John​ Taylor, "Cross Checking​ 'Checking in on the Taylor​ Rule'," www.economicsone.com, July​ 16, 2013. If the Taylor rule was changed to have a higher coefficient on the output​ gap, then during a recession the federal funds rate would be A. ​lower, because more weight would be given to the inflation gap. B. ​higher, because more weight would be given to the output gap. C. ​higher, because more weight would be given to the inflation gap. D. ​lower, because more weight would be given to the output gap. Your answer is correct. Economists and policymakers might disagree over the best rule to guide monetary policy because A. economists usually have one view and policymakers take the opposite view. B. they usually disagree about most aspects of the economy. C. of differing views about the significance of inflation and unemployment. Your answer is correct. D. most policymakers are not subject to elections while most economists are.

D C

Jared​ Bernstein, an economist at the Center on Budget and Policy​ Priorities, has​ stated: ​"I want to see receipt of unemployment insurance...go up in​ recessions." If government unemployment insurance payments​ didn't go​ up, he​ explains, it​ "would be a sign that​ something's very​ wrong." ​Source: Jared​ Bernstein, "Lessons of the Great​ Recession: How the Safety Net​ Performed," New York Times​, June​ 24, 2013. If government unemployment insurance payments did not rise during a​ recession, A. the government would instead provide subsidized health care for the unemployed. B. the government would instead provide food stamps for the unemployed. C. the economy would improve faster as the government used the money saved to pay down the national debt. D. the economy would suffer as purchasing power of consumers would suffer. Your answer is correct. Government unemployment payments can increase the unemployment rate by A. lowering consumer spending resulting in a wave of new​ lay-offs. B. stigmatizing the unemployed making it harder for them to find new jobs. C. allowing the unemployed to be more picky about taking a new job. Your answer is correct. D. encouraging workers to quit their jobs to get free money.

D C

Suppose Jill Johnson operates her pizza restaurant in a building she owns in the center of the city. Similar buildings in the neighborhood rent for​ $4,000 per month. Jill is considering selling her building and renting space in the suburbs for​ $3,000 per month. Jill decides not to make the move. She​ reasons, "I would like to have a restaurant in the​ suburbs, but I pay no rent for my restaurant​ now, and I​ don't want to see my costs rise by​ $3,000 per​ month." What do you think of​ Jill's reasoning? A. Jill is correctly attempting to limit her explicit costs of production. B. Jill is incorrectly failing to consider her fixed costs of production. C. Jill is incorrectly failing to account for the cost of renting in the suburbs. D. Jill is incorrectly overestimating her variable costs of production. E. Jill is incorrectly ignoring the opportunity cost of using the building she owns.

E

According to one observer of the lobster​ market: ​"After Labor​ Day, when the vacationers have gone​ home, the lobstermen usually have a month or more of improved fishing​ conditions, except for the occasional​ hurricane." Use demand and supply analysis to explain whether lobster prices are likely to be higher or lower during the fall than during the summer. ​Source: Jay​ Harlow, "Lobster: An Affordable​ Luxury," Sallybernstein.com. The supply curve for lobster in the fall is likely to be to the .... of the supply curve for lobster in the summer. The demand curve for lobster in the fall is likely to be to the..... of the demand curve for lobster in the summer. The result of this is that the equilibrium price of lobster in the fall is..... than the equilibrium price of lobster in the summer.

Right Left Lower

In describing the optimal size of an investment​ fund, a writer for the Wall Street Journal​ observed: ...at​ first, bigger is better for both investors and managers.... Managing money is expensive. Small funds have many fixed costs... If a fund is​ small, it​ can't generate enough fees to cover costs... The result is that in terms of​ performance, funds should want to get big to cover costs and maximize​ returns, but not so big that diseconomies of scale erode returns. ​Source: Wesley​ Gray, "Why Your Fund Manager May Not Have the Same Goal as​ You," Wall Street Journal​, May​ 16, 2016. A typical​ long-run average cost curve will be ...... . A quantity for an investment fund that has not reached minimum efficient scale occurs where the average cost curve is .......​; a quantity for an investment fund that has reached minimum efficient scale occurs where the average cost curve is .......​; a quantity for an investment fund that experiences diseconomies of scale occurs where the average cost curve is ........​; and a quantity for an investment fund that experiences constant returns to scale occurs where the average cost curve is .........

U shaped decreasing horizontal increasing horizontal

A Wall Street Journal article described how​ Gemfields, a mining company in​ Mozambique, increased its production of rubies in response to a growing demand for these gems. Mozambique has only recently become a major supplier of rubies. For​ centuries, the ruby​ trade...[was] centered in Southeast​ Asia, with stones plucked from the earth...by​ small, artisanal miners... Because rubies have in the past been so​ rare, Thai cutters and polishers rarely focused on volumes or economies of scale. Gemfields looks to operate on a larger basis. ​Source: Alexandra​ Wexler, "Sitting on a Trove of​ Rubies, Gemfields Looks to Create Fresh​ Demand," Wall Street Journal​, April​ 17, 2017. The​ long-run average cost curve should be ........ The​ short-run average cost curves should be A. L​ shaped, with average costs for Gemfields that are higher than for the typical Asian ruby producer. B. U​ shaped, with a minimum point for Gemfields that is at a lower quantity than for the typical Asian ruby producer. C. ​horizontal, with average costs for Gemfields that are higher than for the typical Asian ruby producer. D. U​ shaped, with a minimum point for Gemfields that is at a higher quantity than for the typical Asian ruby producer. Your answer is correct. The​ short-run average cost curve for Gemfields will ..... be lower​ (for a given level of​ output) than the​ short-run average cost curve for a typical Asian producer.

U shaped D Not always

According to a study by the U.S. Centers for Disease Control and​ Prevention, the price elasticity of demandLOADING... for cigarettes is negative 0.25 .−0.25. Americans purchase about 480 billion cigarettes each year. ​Source: "Response to Increases in Cigarette Prices by​ Race/Ethnicity, Income, and Age Groupslong dash—United ​States, 1976—​1993," Morbidity and Mortality Weekly Report​, July​ 31, 1998. a. If the federal tax on cigarettes were increased enough to raise the price of cigarettes by 4040 ​percent, the quantity of cigarettes demanded would decrease by 4848 billion per year ​(enter your numeric response rounded to the nearest integer​). b. If the demand for cigarettes is elastic​, then the price increase resulting from a tax increase will cause a larger decline in quantity demanded in percentage terms.

a, Decrease - 48 b, elastic

Explain how each of the following events would affect the short-run aggregate supply curve a. An increase in the price level will not change the SRAS curve because this is a change in the price level. b. An increase in what the price level is expected to be in the future will decrease (shift leftward) the SRAS curve because this is a change in expectations about future prices. c. The price level that is currently higher than expected will decrease (shift leftward) the SRAS curve because this is a change in an adjustment to past errors in expectations about future prices. d. An unexpected increase in the price of an important raw material will decrease (shift leftward) the SRAS curve because this is a change in the price of an important natural resource. e. An increase in the labor force will increase (shift rightward) the SRAS curve because this is a change in the productive capacity of the economy.

a, not change - the price level. b, decrease (shift leftward) - expectations about future prices. c, decrease (shift leftward) - an adjustment to past errors in expectations about future prices d, decrease (shift leftward) - the price of an important natural resource. e, increase (shift rightward) - the productive capacity of the economy.

If the Fed wants to keep real GDP at its potential level in​ 2019, it should use an expansionary policy. Explain the effects of this monetary policy action consistent with the data for the year 2019 in the table above. The​ long-run aggregate supply curve will shift to the right. The aggregate demand curve without the policy will A. not shift. B. shift to the right by the same amount as the​ long-run aggregate supply curve. C. shift to the right but by more than the​ long-run aggregate supply curve. D. shift to the right but by less than the​ long-run aggregate supply curve. Your answer is correct. The aggregate demand curve with the policy will A. shift to the right but by more than the​ long-run aggregate supply curve. B. shift to the right but by less than the​ long-run aggregate supply curve. C. shift to the right by the same amount as the​ long-run aggregate supply curve. Your answer is correct. D. not shift.

an expansionary policy right D C

Which of the following are likely to increase the measured level of GDP. and which are likely to reduce​ it? a. When the number of people working outside the home decreases​, the measured level of GDP ..... b. When there is a sharp decrease in the crime​ rate, the measured level of GDP...... c. If higher tax rates cause more people to hide the income they​ earn, the measured GDP.....

decreases may increase or decrease Decrease

On most​ days, the price of a rose is​ $1, and​ 8,000 roses are purchased. On​ Valentine's Day, the price of a rose jumps to​ $2, and​ 30,000 roses are purchased. The effect of​ Valentine's Day is to change the market .....for roses. In​ particular, the demand curve shifts to the ...... Based on this​ information, we do not know much about the price elasticity of demand for roses because the demand curve was not constant.​ However, we do have constant supply. The price elasticity of supply is..... ​(Enter your response rounded to two decimal​ places.)

demand right 1.74

The following problem is somewhat advanced. Using​ symbols, we can write that the marginal product of labor is equal to Upper Delta Upper Q divided by Upper Delta Upper LΔQ/ΔL. Marginal cost is equal to Upper Delta TC divided by Upper Delta Upper QΔTC/ΔQ. Because fixed costs by definition​ don't change, marginal cost is also equal to Upper Delta VC divided by Upper Delta Upper QΔVC/ΔQ. If Jill​ Johnson's only variable cost is labor​ cost, then her variable cost is just the wage times the quantity of workers​ hired, or wtimes×L. If the wage Jill pays is​ constant, then what is Upper Delta VCΔVC in terms of w and​ L? w times Upper Delta Upper Lw×ΔL Use your answer above and the expressions given for the marginal product of labor and the marginal cost of output to find an expression for marginal​ cost, Upper Delta TC divided by Upper Delta Upper QΔTC/ΔQ​, in terms of the​ wage, w, and the marginal product of​ labor, Upper Delta Upper Q divided by Upper Delta Upper LΔQ/ΔL. Marginal cost equals w divided by left parenthesis Upper Delta Upper Q divided by Upper Delta Upper L right parenthesisw/(ΔQ/ΔL). Use your answer above to determine​ Jill's marginal cost of producing pizzas if the wage is ​$750750 per week and the marginal product of labor is 150150. The marginal cost of production is ​$55. ​(Enter your response rounded to two decimal​ places.) If the wage falls to ​$650650 per week and the marginal product of labor is​ unchanged, then​ Jill's marginal cost decreases. If instead the wage is unchanged at ​$750750 per week and the marginal product rises to 200200​, then​ Jill's marginal cost decreases

w x ΔL w/(ΔQ/ΔL) 5 decrease decrease