Practice Questions for Micro/macro - Final

d. planned investment is $200 billion more than planned saving.

ignoring the government and foreign sectors, there is an unplanned decrease in inventories of $200 billion at the current level of real national income of $12 trillion. From this information, we know that Select one: a. saving equals $200 billion. b. planned investment is $200 billion less than planned saving. c. consumption expenditures equal $12 trillion less saving less $200 billion. d. planned investment is $200 billion more than planned saving.gnoring the government and foreign sectors, there is an unplanned decrease in inventories of $200 billion at the current level of real national income of $12 trillion. From this information, we know that Select one: a. saving equals $200 billion. b. planned investment is $200 billion less than planned saving. c. consumption expenditures equal $12 trillion less saving less $200 billion. d. planned investment is $200 billion more than planned saving.

b. economic profits will be zero.

in the long run in a perfectly competitive industry, Select one: a. some firms will be experiencing economic losses. b. economic profits will be zero. c. only entrepreneurs will earn more than their opportunity costs. d. opportunity costs are negligible.

c. All of these

Which of the following is a stock variable? Select one: a. public debt b. wealth c. All of these d. money supply

C. the total number of employed and unemployed people.

A country's labor force is equal to: A. The population between the ages of 16 and 65. B. The number of employed people. C. the total number of employed and unemployed people. D. the total number of employed people, unemployed people, and discouraged workers.

B. is nominal Gross Domestic Product​ (GDP) divided by the price index.

Constant dollar Gross Domestic Product​ (GDP) A. is equal to real GDP multiplied by the overall price level. B. is nominal Gross Domestic Product​ (GDP) divided by the price index. C. is the same as nominal Gross Domestic Product​ (GDP). D. all of the above.

A. They have the freedom to decide what they wish to purchase

Consumers are sovereign when A. They have the freedom to decide what they wish to purchase B. They can prevent market failure C. A few consumers exercise coercion on sellers and other consumers D. prices are decided by sellers

a. they have qualities that are difficult for consumers to fully assess.

Credence goods are particularly susceptible to the lemons problem because Select one: a. they have qualities that are difficult for consumers to fully assess. b. creative responses among consumers create volatility in market demand. c. creative responses among producers create volatility in market supply. d. they have qualities that are difficult for producers to fully assess.

c. platforms in a transaction-based market.

Credit card companies that operate as intermediary firms between credit card holders and business vendors are best described as Select one: a. platforms in a shared-input market. b. end users in a transaction-based market. c. platforms in a transaction-based market. d. end users in a shared-input market.

c. cannot be converted to spendable dollars either until it matures or is sold to another investor.

A corporate bond is not as liquid as cash because the bond Select one: a. represents an exchange for gold only. b. can be exchanged only for the goods or services produced by the company that issued the bond. c. cannot be converted to spendable dollars either until it matures or is sold to another investor. d. must be exchanged for a stock certificate before it can be converted to spendable funds.

a. summary record of a country's economic transactions with foreign residents and governments over a year.

A country's balance of payments shows a Select one: a. summary record of a country's economic transactions with foreign residents and governments over a year. b. detailed record of the country's imports. c. summary record of international financial assistance received by the country. d. detailed record of the import and export of services for the country.

b. conforming to the letter of the law but undermining its spirit.

A creative response to regulations can be described as Select one: a. totally conforming to the law. b. conforming to the letter of the law but undermining its spirit. c. none of the above. d. completely ignoring the law.

Domestic Product (GDP). d. a lower price level.

A decrease in the supply of money will, according to the quantity theory of money, lead to Select one: a. a lower real Gross Domestic Product (GDP). b. a higher price level. c. a higher nominal Gross Domestic Product (GDP). d. a lower price level.

c. there are very close substitutes for the good.

A firm can be the sole supplier of a good and is still not a monopolist if Select one: a. the good produced is not important to the economy. b. the firm is not large. c. there are very close substitutes for the good. d. the firm is not making excessive profits.

a. there are very close substitutes for the good.

A firm can be the sole supplier of a good and is still not a monopolist if Select one: a. there are very close substitutes for the good. b. the good produced is not important to the economy. c. the firm is not making excessive profits. d. the firm is not large.

d. banks keep only a fraction of their deposits on hand as reserves.

A fractional reserve banking system is a system whereby Select one: a. banks specialize so that one type of bank handles one kind of deposit and another type of bank handles another type of deposit. b. a central bank tells all banks what fraction of the population they can serve. c. banks keep at least 100 percent of their deposits on hand as reserves. d. banks keep only a fraction of their deposits on hand as reserves.

b. cartel.

A group of producers that agree to coordinate their production is called a Select one: a. free market competition. b. cartel. c. monopoly. d. vertical merger.

a. total planned real expenditures exceed real Gross Domestic Product (GDP).

A higher level of real Gross Domestic Product (GDP) will result if Select one: a. total planned real expenditures exceed real Gross Domestic Product (GDP). b. aggregate supply exceeds aggregate demand. c. leakage exceeds injections. d. aggregate demand exceeds aggregate supply.

d. the monopolist's marginal revenue curve lies below its demand curve.

A major difference between a monopolist and a perfectly competitive firm is that Select one: a. the monopolist is certain to earn economic profits. b. the monopolist engages in marginal cost pricing. c. the monopolist charges the highest possible price that he can. d. the monopolist's marginal revenue curve lies below its demand curve.

c. vertical merger.

A merger between firms in which one firm purchases an input from the other is called a Select one: a. conglomerate merger. b. horizontal merger. c. vertical merger. d. None of these.

a. by charging a higher price to consumers whose demand is more inelastic.

A monopolist engages in price discrimination Select one: a. by charging a higher price to consumers whose demand is more inelastic. b. by charging the same price to all consumers. c. by charging a lower price when marginal cost is higher. d. by charging a lower price to consumers whose demand is more inelastic.

d. leads to greater profits

A monopoly will look for opportunities to price discriminate because the practice Select one: a. is desired by customers. b. leads to selling more units. c. allows it to charge higher prices. d. leads to greater profits

a. do not engage in collusive behavior together.

A noncooperative game would refer to a situation in which oligopoly firms Select one: a. do not engage in collusive behavior together. b. are made worse off by their actions. c. are too small to be interdependent. d. behave as a joint monopoly.

c. locating the intersection of the market demand and market supply curves.

A perfectly competitive industry's market price is found by Select one: a. the horizontal summation of all the industry firms' individual supply curves. b. identifying the price at which each firm realizes its largest economic profit. c. locating the intersection of the market demand and market supply curves. d. finding the point on the market demand curve where the largest number of units will be purchased.

d. an expansion.

A period of time in which the overall business activity is rising at a rapid rate is known as Select one: a. hyperinflation. b. a contraction. c. inflation. d. an expansion.

d. the price per unit equals the long-run average cost.

A regulated natural monopolist allowed to earn a "fair" rate of return would produce to the point at which Select one: a. the marginal revenue curve meets the long-run marginal cost curve. b. the price per unit equals its marginal revenue. c. the marginal revenue curve meets the long-run average cost curve. d. the price per unit equals the long-run average cost.

B. An ounce of silver

Absolute purchasing power parity is most apt to exist for which one of the following items? A. A cell phone B. An ounce of silver C. A pound of beef D. A computer E. An automobile

d. 50.

According to the equation of exchange, if real Gross Domestic Product (GDP), in base year dollars, is $25 billion, the money supply is $1 billion, and the price index equals 2, then the income velocity of money is Select one: a. 10. b. 25. c. 5. d. 50.

c. that incur lower opportunity costs.

According to the principle of comparative advantage, a nation should specialize in economic activities Select one: a. for which it has no absolute advantage. b. for which it has an absolute advantage. c. that incur lower opportunity costs. d. that incur higher opportunity costs.

C. 1930s

According to the​ text, during which time period did the United States have the highest unemployment​ rates? A. 2000s B. 1980s C. 1930s D. 1950s

c. a congressionally mandated decrease in tax rates to stimulate the economy.

All of the following are automatic fiscal stabilizers EXCEPT Select one: a. an increase in unemployment expenditures during a recession. b. a decrease in overall tax revenues during a recession. c. a congressionally mandated decrease in tax rates to stimulate the economy. d. a decrease in unemployment compensation payments during an expansion.

b. reducing the federal deficit.

All of the following are cited as factors in explaining U.S. competitiveness EXCEPT Select one: a. economic restructuring. b. reducing the federal deficit. c. large investments in scientific research. d. widespread entrepreneurship.

b. an increase in the overall price level

All of the following would shift the LRAS curve to the right EXCEPT Select one: a. an improvement in technology. b. an increase in the overall price level. c. a net inflow of human capital. d. an increase in the size of the labor force.

D. a firm is dumping toxic waste that is making people sick.

An example of a market failure is A. unemployment. B. when there is an increase in demand and a shortage develops. C. when not everyone who wants to see a major league football game can D. a firm is dumping toxic waste that is making people sick.

D. Depression

An extreme recession is known as a: A. trough B. peak C. contraction D. depression

c. the shape of the demand curve each faces.

An important difference between a perfectly competitive firm and a monopolist is Select one: a. the size of the firms. b. the goals of the owners of the firms. c. the shape of the demand curve each faces. d. a monopolist normally produces a service, while a perfect competitor normally produces a good.

c. a country did not have control of its domestic monetary policy. Correct

An important problem with the gold standard was that Select one: a. it was too complicated and restricted business activity. b. one country could easily manipulate the system to its advantage and the disadvantage of other countries. c. a country did not have control of its domestic monetary policy. d. exchange rates tended to fluctuate a great deal, making it difficult for businesses to make long-run plans.

c. marginal physical product eventually declines as output increases.

As a firm's production increases in the short run, the average total cost curve eventually slopes upward because Select one: a. average fixed cost declines with increases in output. b. average physical product rises with increases in output. c. marginal physical product eventually declines as output increases. d. marginal cost eventually declines as output increases.

d. ¥40,000

Assume that $1 equals 100 yen (¥). A Japanese visitor to the United States wants to pay her $400 hotel bill. How many yen should she exchange in order to have enough dollars to pay the bill? Select one: a. ¥4 b. ¥40 c. ¥4,000 d. ¥40,000

b. economic regulation.

Commonwealth Edison is the only provider of electricity to many households in the Chicago area. Commonwealth Edison is regulated by the government. This type of regulation is known as Select one: a. social regulation. b. economic regulation. c. the Federal Register. d. the market share test.

b. produce less output and charge a higher price.

Compared to an efficient perfectly competitive industry, the monopolist will Select one: a. produce less output at a higher total cost. b. produce less output and charge a higher price. c. produce more output at a higher price and higher profit. d. produce more output at a lower price.

c. less; higher

Compared to perfect competition, a monopoly will produce ________ output, and charge a ________ price. Select one: a. less; lower b. more; higher c. less; higher d. more; lower

c. stock in IBM.

Durable consumer goods include all of the following EXCEPT Select one: a. an automobile. b. a compact disc player. c. stock in IBM. d. a computer.

A. automobiles, furniture, and household appliances

Durable consumer goods include which of the following: A. automobiles, furniture, and household appliances B. items that last less than three years C. gasoline and food D. medical care and education

b. supply of foreign currency and demand for dollars.

Every transaction concerning the exportation of U.S. goods constitutes a Select one: a. supply of foreign currency, with no effect on the market for dollars. b. supply of foreign currency and demand for dollars. c. demand for foreign currency and a supply of dollars. d. demand for dollars, with no effect on markets for foreign currencies.

d. flexible exchange rates.

Exchange rates that are allowed to fluctuate in the open market in response to changes in supply and demand are known as Select one: a. IMF exchange rates. b. fixed exchange rates. c. gold exchange rates. d. flexible exchange rates.

.d. little effect due to time lags and the crowding-out effect.

Fiscal policy during periods of relatively low unemployment and low inflation have Select one: a. significant effect due to the timely intervention of the president and congress. b. significant effect because the changes in fiscal policy gives investors confidence in the economy. c. little effect because the global market makes up fifty percent of aggregate spending. d. little effect due to time lags and the crowding-out effect.

c. various time lags associated with fiscal policy cause the policy changes to take effect too late to solve the problem it was supposed to solve.

Fiscal policy may end up being destabilizing to an economy because Select one: a. the President may have different goals than Congress. b. the economy is almost always at full employment. c. various time lags associated with fiscal policy cause the policy changes to take effect too late to solve the problem it was supposed to solve. d. there is never a long enough time lag.

b. exchange rates are determined by forces of supply and demand.

Flexible exchange rates exist when Select one: a. governments and central banks spend foreign reserves to prop up an exchange rate at a certain level. b. exchange rates are determined by forces of supply and demand. c. speculators bet that a currency will soon be depreciated. d. no one knows what the true value of a currency is.

c. a network effect

For years, your parents claimed they had no desire to join a social web site. Recently, however, they joined one and said they did so because all their relatives have joined the same site with them. Your parents' behavior is an example of Select one: a. the impact of negative market feedback. b. a switching cost. c. a network effect. d. the impact of positive market feedback.

d. It borrows funds by selling Treasury bonds

How does the federal government finance a budget deficit? Select one: a. It redeems its IOUs. b. It purchases U.S. Treasury bonds. c. It cuts spending on entitlement programs. d. It borrows funds by selling Treasury bonds

d. both I and III

In general, who will benefit as the result of a tariff?I. Domestic producersII. Domestic consumersIII. The domestic government Select one: a. I only b. All of the above are correct. c. both II and III d. both I and III e. II only

c. 90.88 in 2008, 100.00 in 2009, and 117.43 in 2010.

If 2009 is the base year, then the consumer price index was a. 83.00 in 2008, 100.00 in 2009, and 132.50 in 2010. b. 89.97 in 2008, 100.00 in 2009, and 117.43 in 2010. c. 90.88 in 2008, 100.00 in 2009, and 117.43 in 2010. d. 169.50 in 2008, 186.50 in 2009, and 219.00 in 2010.

c. Kami has a comparative advantage in producing tablets.

If Kami can produce 40 tablets or 30 radios during a month's time, while Sally can produce 10 tablets or 20 radios, then it is correct to state that Select one: a. Kami has a comparative advantage in producing both tablets and radios. b. Sally has a comparative advantage in producing both tablets and radios. c. Kami has a comparative advantage in producing tablets. d. Sally has an absolute advantage in tablets.

b. sell its home currency.

If a central bank wants to keep the value of its home currency fixed in the foreign exchange market, then an increase in the demand for its home currency will lead the central bank to Select one: a. sell foreign currencies. b. sell its home currency. c. do nothing. d. buy its home currency.

b. liquid.

If an asset can be obtained or disposed of without much risk of losing its nominal value, it is said to be Select one: a. valuable. b. liquid. c. fiduciary. d. wealth

d. an increase in the supply of bonds and a fall in the price of existing bonds.

If the Fed sells bonds through its open market operations, then there is Select one: a. a decrease in interest rates because of the increase in the supply of bonds. b. a decrease in interest rates because of the decrease in the demand for bonds. c. an increase in the demand for bonds and a rise in the price of existing bonds. d. an increase in the supply of bonds and a fall in the price of existing bonds.

c. cause the price level to fall.

If the economy is near full capacity, the effect of a negative aggregate demand shock is to Select one: a. increase the firm's cost of producing at every level of output. b. increase the level of employment. c. cause the price level to fall. d. increase the level of aggregate demand.

a. the multiplier decreases. Correct

If the marginal propensity to consume (MPC) decreases, then Select one: a. the multiplier decreases. b. the marginal propensity to save (MPS) decreases. c. MPC + MPS is less than 1. d. the multiplier increases.

c. long-run aggregate supply is growing at a slower rate than aggregate demand.

If there is persistent inflation a. long-run aggregate supply is growing at a faster rate than aggregate demand. b. long-run aggregate supply is constant. c. long-run aggregate supply is growing at a slower rate than aggregate demand. d. there is an excess of total planned expenditures.

A) personal income.

If you take national income and add transfer payments, then subtract income earned but not received, the result will be A) personal income. B) disposable personal income. C) net national product. D) wages.

b. can protect United States jobs in the protected industry but will also lead to job reductions in other export industries. Correct

Import restrictions Select one: a. cannot protect American jobs in any sector of the economy. b. can protect United States jobs in the protected industry but will also lead to job reductions in other export industries. c. hurt people who work in importing companies, but makes consumers better off. d. can protect United States jobs in the protected industry, which increases economic welfare of the country as a whole.

d. can protect United States jobs in the protected industry but will also lead to job reductions in other export industries.

Import restrictions Select one: a. hurt people who work in importing companies, but makes consumers better off. b. cannot protect American jobs in any sector of the economy. c. can protect United States jobs in the protected industry, which increases economic welfare of the country as a whole. d. can protect United States jobs in the protected industry but will also lead to job reductions in other export industries.

d. United States

Of the following, which country has the highest annual real GDP per capita according to the International Monetary Fund and World Bank? Select one: a. China b. Brazil c. Italy d. United States

c. be able to prevent resale of its product.

In order to price discriminate, a firm must Select one: a. sell to customers with identical price elasticities of demand. b. produce a product that is a close substitute for products of other firms. c. be able to prevent resale of its product. d. have different marginal costs for serving different customers.

b. economies of scale.

In the above figure, the long-run cost curve between points A and B illustrates Select one: a. diminishing marginal product. b. economies of scale. c. diseconomies of scale. d. constant returns to scale.

c. 10,000 units at a price of $10 per unit.

In the above figure, the profit-maximizing output and price for this monopolistically competitive firm are Select one: a. 13,000 units at a price of $7 per unit. b. 10,000 units at a price of $5 per unit. c. 10,000 units at a price of $10 per unit. d. 12,000 units at a price of $8 per unit.

c. This sum must always be zero, because the sum of all surplus and deficit items associated with cross-border transactions must equal zero.

In the balance of payments, if there are no statistical errors or discrepancies, which of the following is TRUE of the sum of the capital account balance, the current account balance, and the official reserve transactions account balance? Select one: a. This sum is positive only if the U.S. government operates with a budget surplus. b. This sum is either positive or negative, depending on whether the sum of all surplus and deficit items associated with cross-border transactions is positive or negative. c. This sum must always be zero, because the sum of all surplus and deficit items associated with cross-border transactions must equal zero. d. This sum is positive only if the U.S. government operates with a budget deficit.

D. sell resources.

In the factor market, households A. buy resources. B. are neither buyers nor sellers of resources. C. are both buyers and sellers of resources. D. sell resources.

a. a reduction in real GDP with falling prices if the economy was below or at full employment.

In the short run, a fiscal policy action that results in a reduction in the size of the budget deficit will cause Select one: a. a reduction in real GDP with falling prices if the economy was below or at full employment. b. an increase in real GDP with stable prices if the economy was below full employment. c. an inflationary gap if the economy was initially operating at full employment. d. an inflationary gap if the economy was initially operating below full employment.

b. monopolistic competition

In which industry structure is advertising and sales promotion likely to be most important? Select one: a. monopoly b. monopolistic competition c. All of the above are equally reliant on effective advertising and promotion. d. perfect competition

B. discouraged workers

Individuals who have stopped looking for a job because they are convinced they will not find a job are considered: A. underemployed B. discouraged workers C. part of the labor force D. structurally employed

c. raise government spending, thereby increasing aggregate demand and pushing up real Gross Domestic Product (GDP) with little or no inflationary consequences.

Keynesian economics predicts that if government policy makers deem current equilibrium real Gross Domestic Product (GDP) to be "too low," then an appropriate policy action would be to Select one: a. do nothing, because the economy is self-adjusting. b. increase taxes, thereby causing aggregate demand to increase and inducing a rise in real Gross Domestic Product (GDP) with little or no inflationary consequences. c. raise government spending, thereby increasing aggregate demand and pushing up real Gross Domestic Product (GDP) with little or no inflationary consequences. d. reduce the money stock, thereby causing aggregate demand to decrease and inducing a rise in fall in the price level that generates an increase in total planned expenditures.

d. moral hazard.

Lenders generally want borrowers to agree to invest prudently, yet once a loan is made borrowers may use the funds in a highly risky fashion. This leads to the problem of Select one: a. critical mass. b. investor selection. c. deposit insurance. d. moral hazard.

c. anticipate the reaction of rival firms.

Managers in oligopoly firms must Select one: a. advertise heavily in order to differentiate their product. b. eliminate any barriers to entry if they hope to make short-run profits. c. anticipate the reaction of rival firms. d. establish many varieties of their products to cover the spectrum of consumer tastes.

A. An unrestrained market economy leads to too few or too many resources going to a specific economic activity.

Market failure occurs when: A. An unrestrained market economy leads to too few or too many resources going to a specific economic activity. B. The stock market experiences a very large loss. C. A good is too expensive for the market to provide. D. one good is superior to another and drives it out of the market.

A. prevent the price system from attaining economic efficiency.

Market failures A. prevent the price system from attaining economic efficiency. B. strengthen economic efficiency by forcing unprofitable firms to close. C. weaken the argument for government intervention in the economy. D. result in quantities and prices that are socially desirable.

c. anything people generally accept in exchange for goods and services.

Money is defined as Select one: a. a by product of a barter economy. b. any financial instrument that is backed by gold. c. anything people generally accept in exchange for goods and services. d. a person's net worth.

b. have the least elastic demand for its product.

Other things being equal, a price-discriminating firm will charge more to the customers who Select one: a. are the least rational in making their decisions. b. have the least elastic demand for its product. c. have the highest incomes. d. have the most elastic demand for the product.

- disposable personal income plus personal income taxes

Personal income is equal to - NDP minus national income - disposable personal income plus personal income taxes ​- disposable personal income plus personal and corporate income taxes - national income minus (corporate income taxes and social security)

C) the amount of national income not going to households.

Personal income is national income minus A) depreciation. B) net factor income to the rest of the world. C) the amount of national income not going to households. D) imports.

B. national income minus retained corporate earnings plus government transfer payments and interest on government bonds.

Personal income is: A. national income minus income taxes B. national income minus retained corporate earnings plus government transfer payments and interest on government bonds. C. national income plus government transfer payments. D. equal to the value of all final goods and services produced within a country's borders during one year.

d. an increase in investment spending.

Proponents of the interest-rate-based monetary policy transmission mechanism argue that when the Federal Reserve buys bonds, there will be Select one: a. a decrease in the money supply. b. a decrease in the price of outstanding bonds. c. a decrease in nominal Gross Domestic Product (GDP), but not in real income. d. an increase in investment spending.

b. buys as many goods abroad as at home.

Purchasing power parity exists when domestic currency Select one: a. maintains a fixed exchange rate with a foreign currency. b. buys as many goods abroad as at home. c. buys more goods at home than abroad. d. is not convertible to a foreign currency.

b. receive a price equal to or greater than the minimum of its average variable cost.

Refer to the above figure. In order to stay open in the short run, this firm must Select one: a. earn a positive profit. b. receive a price equal to or greater than the minimum of its average variable cost. c. recover its fixed cost. d. receive a price exactly equal to its average total cost.

b. can protect United States jobs in the protected industry but will also lead to reductions in U.S. output and income.

Restricting imports Select one: a. can protect United States jobs in the protected industry, which increases economic welfare of the country as a whole. b. can protect United States jobs in the protected industry but will also lead to reductions in U.S. output and income. c. can protect United States final goods and services in the protected industry and makes consumers better off. d. can protect United States final goods and services in the protected industry and increase economic welfare of the country as a whole.

c. eventually reduce exports, too.

Restrictions on imports Select one: a. usually have no long-run effects on an economy. b. enhance economic welfare by encouraging more exports. c. eventually reduce exports, too. d. are the quickest way for a country in recession to start on a path of economic recovery.

a. aggregate demand remains unchanged while economic growth increases long-run aggregate supply.

Secular deflation occurs when Select one: a. aggregate demand remains unchanged while economic growth increases long-run aggregate supply. b. there is no economic growth and aggregate demand falls. c. both aggregate demand and aggregate supply are shifting left. d. aggregate demand increases at the same time there is no economic growth.

c. Oligopoly

Strategic behavior and game theory are features of which market structure? Select one: a. Monopoly b. Monopolistic competition c. Oligopoly d. Perfect competition

b. decreases in the additional per-unit revenues earned by the monopolist.

Successive downward movements along the demand curve for the product of a monopolist always generate successive Select one: a. decreases in the additional per-unit costs incurred by the monopolist. b. decreases in the additional per-unit revenues earned by the monopolist. c. increases in the monopolist's average total costs. d. increases in the monopolist's marginal revenue.

b. $2,732.

Suppose 2009 is the base year. From 2009 to 2010, the price index increases from 100 to 102.5. If nominal Gross Domestic Product (GDP) is $2,800 in 2010, then the real Gross Domestic Product (GDP) in 2010 is Select one: a. $2,800. b. $2,732. c. $2,700. d. $2,870.

d. Ethan has a comparative advantage in picking apples.

Suppose Ethan and Ava work in a farm that grows apples and oranges of the same size. In one hour, Ethan can pick 8 pounds of apples or 1 pound of oranges. Ava can pick 6 pounds of apples or 1 pound of oranges. It can be concluded that Select one: a. Ava has a comparative advantage in picking apples. b. Ava has an absolute advantage in picking apples. c. Ethan has an absolute advantage in picking oranges. d. Ethan has a comparative advantage in picking apples.

b. 15 percent of GDP.

Today, in the United States, imports are over Select one: a. 1 percent of GDP. b. 15 percent of GDP. c. 4 percent of GDP. d. 8 percent of GDP.

c. not change output or price.

Suppose a monopolist's costs and revenues are as follows: ATC = $45.00; MC = $35.00; MR = $35.00; P = $45.00. The firm should Select one: a. increase output and decrease price. b. decrease output and increase price. c. not change output or price. d. shut down.

b. not change output or price.

Suppose a monopolist's costs and revenues are as follows: ATC = $45.00; MC = $35.00; MR = $35.00; P = $45.00. The firm should Select one: a. increase output and decrease price. b. not change output or price. c. shut down. d. decrease output and increase price

A) Product markets.

Suppose an individual buys a new CD of her favorite musical artist. This purchase has taken place in the _____. A) Product markets. B) Factor markets. C) Labor markets. D) Resource markets.

d. the dollar is stronger this year than it was last year and this will cause the United States' short-run aggregate supply (SRAS) curve to shift to the right.

Suppose that last year $1 U.S. exchanged for 1.2 euros. If this year $1 exchanges for 1.3 euros, then we can conclude that Select one: a. the dollar is weaker this year than it was last year and this will cause the United States' short-run aggregate supply (SRAS) curve to shift to the left. b. the dollar is weaker this year than it was last year and this will cause the United States' short-run aggregate supply (SRAS) to shift to the right. c. the dollar is stronger this year than it was last year and this will cause the United States' short-run aggregate supply (SRAS) curve to shift to the left. d. the dollar is stronger this year than it was last year and this will cause the United States' short-run aggregate supply (SRAS) curve to shift to the right.

b. 17.5 cookies

Suppose that one worker can produce 15 cookies, two workers can produce 35 cookies together, and three workers can produce 60 cookies together. What is the average product of the first two workers? Select one: a. 35 cookies b. 17.5 cookies c. 20 cookies d. 15 cookies

c. 25 cookies

Suppose that one worker can produce 15 cookies, two workers can produce 35 cookies together, and three workers can produce 60 cookies together. What is the marginal product of the 3rd worker? Select one: a. 35 cookies b. 60 cookies c. 25 cookies d. 20 cookies

d. .75.

Suppose that when disposable income increases by $1,000, consumption spending increases by $750. Given this information, we know that the marginal propensity to consume (MPC) is Select one: a. 1/.25 = 4. b. .25. c. $1,000/$750 = 1.33. d. .75.

c. reduce the size of the recessionary gap

Suppose the economy is initially experiencing a short-run recessionary gap. An increase in the size of the budget deficit will Select one: a. lead to a decrease in prices with an increase in real GDP. b. lead to an increase in prices with no increase in real GDP. c. reduce the size of the recessionary gap. d. increase the size of the recessionary gap.

b. a recessionary gap.

Suppose the economy is initially operating at full employment. A reduction in the size of the budget deficit will cause which of the following in the short run? Select one: a. an increase in real GDP and an increase in the price level. b. a recessionary gap. c. an increase the price level and a reduction in real GDP. d. an increase in the price level with no change in real GDP.

b. slopes downward, because AVC is constant, AFC slopes downward, and ATC = AVC + AFC.

The ATC curve for a firm that produces an information product Select one: a. is U-shaped, because AVC is U-shaped, AFC slopes downward, and ATC = AVC + AFC. b. slopes downward, because AVC is constant, AFC slopes downward, and ATC = AVC + AFC. c. slopes downward, because MC slopes downward, AVC is constant, and ATC = AVC +MC. d. slopes upward, because AFC is constant, AVC slopes upward, and ATC = AFC + AVC.

a. insures the deposits held in banks.

The Federal Deposit Insurance Corporation Select one: a. insures the deposits held in banks. b. insures the open market operations of the Fed. c. insures the deposits held by the Fed. d. insures banks against lawsuits by depositors.

a. unfair competitive practices and deceptive acts.

The Federal Trade Commission Act, as amended, prohibits Select one: a. unfair competitive practices and deceptive acts. b. horizontal mergers. c. price discrimination. d. price-fixing agreements.

b. tax rates and tax revenues.

The Laffer curve shows a relationship between Select one: a. interest rates and investment spending. b. tax rates and tax revenues. c. price level and real Gross Domestic Product (GDP). d. inflation rates and unemployment rates.

d. of widespread entrepreneurship.

The United States is considered by the Institute for Management Development to be the most competitive economy because Select one: a. of selected restrictions on imports from Japan and Europe. b. U.S. residents are willing to work harder than anyone else is. c. of a high saving rate. d. of widespread entrepreneurship.

c. bundling.

The act of offering two or more products for sale as a set is called Select one: a. tie-in sales. b. branding. c. bundling. d. versioning.

b. International Monetary Fund.

The agency which functions as a "lender of last resort" for national governments is the Select one: a. World Trade Organization. b. International Monetary Fund. c. International Trade Organization. d. World Trade Fund.

b. crowding-out effect.

The concept that increased government spending will lead to lower investment and consumer spending is referred to as the Select one: a. inflationary effect. b. crowding-out effect. c. aggregate demand effect. d. Keynesian effect.

b. the industry demand curve.

The demand curve a monopolist faces is Select one: a. horizontal. b. the industry demand curve. c. inelastic at all points. d. vertical.

b. reduce quantity supplied and raise price.

The effect of a quota is to Select one: a. increase quantity supplied and lower price. b. reduce quantity supplied and raise price. c. increase demand for the good and increase price. d. increase quantity supplied and increase price.

b. variable inputs.

The focus of firm decisions in the short run is primarily on Select one: a. economies of scale. b. variable inputs. c. plant size. d. capital investment.

d. the number of times per year a dollar is spent on final goods and services.

The income velocity of money is Select one: a. the time it takes for monetary policy to have an effect on world financial markets. b. the time lag from when the Fed decides to increase the money supply until the effect takes place. c. the time it takes to produce money. d. the number of times per year a dollar is spent on final goods and services.

d. causes interest rates to fall, which causes an increase in planned investment, and an increase in aggregate demand.

The interest-rate-based monetary policy transmission mechanism argues that an increase in the money supply Select one: a. has no effect on aggregate demand but reduces long-run aggregate supply. b. has no effect on aggregate demand but increases short-run aggregate supply. c. causes the inflation rate to decline, which causes an increase in household consumption spending and an increase in aggregate demand. d. causes interest rates to fall, which causes an increase in planned investment, and an increase in aggregate demand.

d. indirect effect of a change in the money supply that operates via a change in total planned expenditures generated by a change in the interest rate.

The interest-rate-based monetary policy transmission mechanism emphasizes the Select one: a. direct effect of a change in the money supply that operates via a change in total planned expenditures generated by a change in the interest rate. b. direct effect of a change in the money supply that operates via a change in total planned production generated by a change in the price level. c. indirect effect of a change in the money supply that operates via a change in total planned production generated by a change in the price level. d. indirect effect of a change in the money supply that operates via a change in total planned expenditures generated by a change in the interest rate.

b. earn economic profits.

The main objective of the members of a cartel is to Select one: a. obtain a patent. b. earn economic profits. c. produce efficiently. d. make the industry more competitive.

d. earn economic profits.

The main objective of the members of a cartel is to Select one: a. produce efficiently. b. make the industry more competitive. c. obtain a patent. d. earn economic profits.

b. is at its minimum.

The marginal cost curve always intersects the average total cost curve at the point at which the average total cost curve Select one: a. has a vertical slope. b. is at its minimum. c. is zero. d. is at its maximum.

national income accounting

The measurement system used by the U.S. government to estimate national income

National Bureau of Economic Research (NBER)

The official dating of recessions in the United States is the responsibility of the:

B) 2001.

The official dating of the most recent recession places its timing as A) 2000. B) 2001. C) 2002. D) 2001-2003

a. the interest yield that could have been earned by holding some other asset.

The opportunity cost of holding money is measured by Select one: a. the interest yield that could have been earned by holding some other asset. b. the price of government bonds. c. a dollar. d. the liquidity of interest-bearing assets.

d. the lemons problem.

The problem of asymmetric information that brings about a general decline in product quality in an industry is Select one: a. a market failure. b. the result of government regulation. c. creative response. d. the lemons problem.

d. the price level increases, the value of money balances held by individuals, firms, government, and foreigners decreases and spending decreases.

The real-balance effect implies that when Select one: a. the price level decreases, the value of money balances held by individuals, firms, government, and foreigners increases and spending decreases. b. the price level increases, the value of money balances held by individuals, firms, government, and foreigners increases and spending increases. c. the price level decreases, the value of money balances held by individuals, firms, government, and foreigners decreases and spending decreases. d. the price level increases, the value of money balances held by individuals, firms, government, and foreigners decreases and spending decreases.

A) gross domestic product.

The total market value of all final goods and services produced within a given period by factors of production located within a country is A) gross domestic product. B) gross national product. C) net national product. D) net national income.

a. consumers spend more when their incomes are higher.

The traditional Keynesian approach to fiscal policy assumes that Select one: a. consumers spend more when their incomes are higher. b. an equal income distribution ensures a stable economy. c. the effect of unemployment compensation is to destabilize the economy. d. cutting taxes is a more effective way to stimulate the economy than is increasing government spending.

d. certificates of deposit.

The transactions approach to measuring money (M1) includes all of the following EXCEPT Select one: a. traveler's checks. b. currency. c. checking accounts. d. certificates of deposit.

d. traveler's checks.

The transactions approach to measuring money includes Select one: a. government bonds. b. all of these. c. the value of shares of stock in commercial banks. d. traveler's checks.

c. buy U.S. dollars in the foreign exchange market.

To prevent the dollar from depreciating, the U.S. central bank can try to fix the currency value of the dollar when they Select one: a. sell U.S. dollars in the foreign exchange market. b. abandon the U.S. dollar and use another country's currency as its legal currency. c. buy U.S. dollars in the foreign exchange market. d. buy foreign currencies in the foreign exchange market.

d. 12 percent of GDP.

Today, in the United States, exports are about Select one: a. 90 percent of GDP. b. 4 percent of GDP. c. 28 percent of GDP. d. 12 percent of GDP.

d. The higher value of the dollar will decrease exports and increase imports.

What effect does a contractionary monetary policy in the U.S. have on the foreign trade sector? Select one: a. The higher value of the dollar will decrease imports and increase exports. b. The lower value of the dollar will decrease exports and increase imports. c. The lower value of the dollar will decrease imports and increase exports. d. The higher value of the dollar will decrease exports and increase imports.

b. firms can enter and leave the industry without serious impediments.

When considering perfect competition the absence of entry barriers implies that Select one: a. firms can enter but cannot get out of the industry easily. b. firms can enter and leave the industry without serious impediments. c. no firm can enter the industry. d. all firms will earn economic profit.

c. a budget surplus.

When government revenues exceed government outlays in a particular year, this is called Select one: a. a budget deficit. b. the national debt. c. a budget surplus. d. fiscal policy

D. the government can step in to correct the market failure

When market failure occurs A. the invisible had will correct for market failures B. the price system will correct the market failures C. people will reduce their consumption D. the government can step in to correct the market failure

d. an increase in taxes

Which of the following fiscal policy actions would be appropriate if the economy is experiencing an inflationary gap? Select one: a. a decrease in interest rates b. an increase in the money supply c. an increase in government spending d. an increase in taxes

d. Perfectly elastic demand curves

Which of the following is NOT a characteristic of oligopoly firms? Select one: a. Strategic dependence b. Non-price competition, such as advertising and promotions c. Product differentiation d. Perfectly elastic demand curves

c. none of the above

Which of the following is NOT a deficit item on a country's balance of payments? Select one: a. a personal gift to a foreign individual b. imports c. none of the above d. gold sales to foreigners

b. subsidizing imported goods Correct

Which of the following is NOT a restriction the government imposes to keep potential entrants out of a market? Select one: a. certificate of convenience b. subsidizing imported goods c. compliance with government safety regulations d. licensing of exclusive ownership of such a vital resources

b. The freedom of consumers to decide what they want to purchase.

Which of the following is a benefit of the price system? Select one: a. Consumers have what they want since politicians and business managers decide what is to be produced. b. The freedom of consumers to decide what they want to purchase. c. The production of public goods. d. The existence of positive externalities.

a. All of these

Which of the following represents a function of money? Select one: a. All of these b. standard of deferred payment c. medium of exchange d. unit of accounting

b. Consumption expenditures

Which of the following spending components makes up the largest percentage of Gross Domestic Product (GDP)? Select one: a. Gross private domestic investment expenditures b. Consumption expenditures c. Expenditures on net exports of goods and services d. Government expenditures

b. A hedge against inflation

Which of the following statements does NOT describe a function of money? Select one: a. A store of value b. A hedge against inflation c. A standard of deferred payment d. A unit of accounting

a. If the permanent rate of output increases to Q2 in panel (a), it will be more profitable to have a plant size corresponding to SAC3.

Which of the following statements with respect to the figure below is INCORRECT? Select one: a. If the permanent rate of output increases to Q2 in panel (a), it will be more profitable to have a plant size corresponding to SAC3. b. If the anticipated permanent rate of output per unit time period is Q1 in panel (a), the optimal plant would correspond to SAC1. c. All the possible short-run average cost curves that correspond to the different plant sizes are shown as SAC1 - SAC8. d. The long-run average cost curve LAC in panel (b) is sometimes called the planning curve representing the locus (path) of points.

b. a market failure

Which of the following terms describes the situation in which too few or too many resources go to a specific economic activity because of external benefits or costs? Select one: a. an external market b. a market failure c. an technologically inefficient market d. a laissez-faire market

c. Foreign goods would become more expensive to U.S. residents.

Which of the following would NOT be a result of a contractionary monetary policy? Select one: a. Imports would rise. b. Interest rates would rise. c. Foreign goods would become more expensive to U.S. residents. d. Net exports would decline.

b. all of the above

Which of the following would increase aggregate supply? Select one: a. increased training and education b. all of the above c. a discovery of new raw materials d. a reduction in input prices

c. trade deflection

Which of the following would increase the total amount of trade in the world? Select one: a. trade diversion b. trade retention c. trade deflection d. rules of origin

d. banks retain only a portion of their deposits in their vaults or at Federal Reserve banks.

With fractional reserve banking, Select one: a. banks can not generate profits. b. monetary policy will be ineffective. c. banks can act as securities brokers. d. banks retain only a portion of their deposits in their vaults or at Federal Reserve banks.

c. by charging a higher price to consumers whose demand is more inelastic. Correct

a monopolist engages in price discrimination Select one: a. by charging a lower price to consumers whose demand is more inelastic. b. by charging the same price to all consumers. c. by charging a higher price to consumers whose demand is more inelastic. d. by charging a lower price when marginal cost is higher.

a. the industry demand curve.

a monopolist's demand curve is Select one: a. the industry demand curve. b. perfectly elastic. c. perfectly inelastic. d. of unit elasticity throughout.

d. firms enter the industry, the market supply curve shifts rightward, and the market price falls.

in the long run when a perfectly competitive firm experiences positive economic profits, Select one: a. firms exit the industry, the market supply curve shifts leftward, and the market price rises. b. firms exit the industry, the market supply curve shifts rightward, and the market price falls. c. firms enter the industry, the market supply curve shifts rightward, and the market price rises. d. firms enter the industry, the market supply curve shifts rightward, and the market price falls.

A. externalities exist

market failure occur when A. externalities exist B. there is a change in quantity demanded C. there is an increase in demand D. wages increase

c. planned investment spending to decrease.

n increase in the interest rate will cause Select one: a. the investment function to shift in. b. the investment function to shift out. c. planned investment spending to decrease. d. planned investment spending to increase

c. $120

ssume it takes 10 units of labor to produce 4 units of output. When the price of labor is $6 per unit and fixed costs equal $60, what is the total cost of those 4 units of output? Select one: a. $70 b. $84 c. $120

c. a fall in bond prices.

the Fed purchases U.S. government securities in the open market, all of the following would occur EXCEPT Select one: a. an increase in investment. b. an expansion of the money supply. c. a fall in bond prices. d. an increase in real Gross Domestic Product (GDP)

d. crowding-out effect

the concept that increased government spending will lead to lower investment and consumer spending is referred to as the Select one: a. aggregate demand effect. b. Keynesian effect. c. inflationary effect. d. crowding-out effect