Economic Policy Analysis
Exam Materials
Course Introduction
Economic Policy Analysis examines the principles and tools used to evaluate and design public policies affecting economic outcomes. The course focuses on understanding how governments intervene in markets through fiscal, monetary, and regulatory measures, assessing the intended and unintended consequences of these interventions. Students will learn to apply economic theories and empirical methods to analyze policy effectiveness, equity considerations, and efficiency trade-offs. Case studies and real-world examples are used to explore topics such as taxation, welfare programs, labor markets, international trade, and environmental regulation, providing a comprehensive foundation for evaluating policy options in diverse economic contexts.
Recommended Textbook
Economics Private and Public Choice 14th Edition by
David A. Macpherson
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6847 Verified Questions
6847 Flashcards
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Chapter 1: The Economic Approach
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Sample Questions
Q1) Ex-London School of Economics student Mick Jagger sang, "You can't always get what you want, but if you try sometime, you just might find you can get what you need."
Another statement of the basic economic principle expressed in this lyric is that
A) rational decisions are not always possible.
B) you can allocate your resources to what gives you the highest value.
C) you can create the supply to meet your own demand.
D) you can maximize social welfare by making optimal decisions.
Answer: B
Q2) When economists say an individual displays economizing behavior, they simply mean that she is
A) making a lot of money.
B) buying only those products that are cheap and of low quality.
C) learning how to run a business more effectively.
D) seeking the lowest cost method to accomplish her objectives.
Answer: D
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3
Chapter 2: A : Some Tools of the Economist
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Q1) Suppose you can type a paper in two hours or mow the lawn in four hours, while it takes your friend Ann eight hours to type a paper or two hours to mow the lawn. Which of the following is true?
A) You have a comparative advantage in typing.
B) You have a comparative advantage in mowing the lawn.
C) You and Ann could save time if you mowed her lawn while she typed your paper.
D) You and Ann cannot gain from specialization and trade.
Answer: A
Q2) A nation with cheap, efficient communications is likely to be
A) richer, ceteris paribus, because transaction costs will be lower and trade greater. B) richer only if production of goods is cheaper, too, since trade itself cannot create value.
C) poorer since it spends so much on communication instead of true productivity. D) spending too much on communications, which adds nothing to the value of output.
Answer: A
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4
Chapter 2: B : Some Tools of the Economist
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Sample Questions
Q1) In Figure 2-11, which shows the production possibilities curve, A) A is efficient.
B) B is inefficient.
C) C is unattainable.
D) all of the above are true.
Answer: D
Q2) According to the law of comparative advantage,
A) each producer should strive toward self-sufficiency in order to maximize the total production of the economy.
B) each product should be produced by the lowest opportunity cost producer in order to maximize output.
C) one should never compare one's abilities with those of another.
D) each product should be produced by the individual who can produce more of that product than any other individual.
Answer: B
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5
Chapter 3: A : Supply, Demand, and the Market Process
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Sample Questions
Q1) To be economically successful, the entrepreneur must
A) combine resources in a manner that increases their value.
B) produce a good that consumers value less than the resources used to produce it.
C) use only personal financial capital to avoid the interest payments that would have to be paid if the money is borrowed from the bank.
D) transform or rearrange resources to maximize the entrepreneur's cost of production.
Q2) Other things being equal, the effect of a decrease in the price of orange juice would be illustrated by
A) a rightward shift in the demand curve for orange juice.
B) an increase in the quantity demanded for orange juice.
C) a leftward shift in the demand curve for orange juice.
D) a decrease in the quantity demanded orange juice.
Q3) A demand curve for concert tickets would show the
A) number of tickets the box office is willing to sell at various prices.
B) number of people who need tickets.
C) quantity of people who want to buy these concert tickets.
D) number of tickets that will be purchased at various prices.
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Chapter 3: B : Supply, Demand, and the Market Process
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Q1) An agricultural economist reports that corn prices are very high this year and that corn growers are earning substantial profits. He concludes that government action is needed to direct more farmers to grow corn. Is such action necessary? Why or why not?
Q2) Refer to Figure 3-23. It is apparent from the figure that
A) the good is inferior.
B) the demand for the good decreases as income increases.
C) the demand for the good conforms to the law of demand.
D) All of the above are correct.
Q3) A recent editorial in a local newspaper argues, "Consumers need to know more about products than just their price. They need to know how these prices are determined, who owns the businesses, and the wages of the workers." Is the editorial writer correct? Why or why not?
Q4) Refer to Figure 3-22. Which of the four graphs represents the market for cars as a result of the adoption of new technology on assembly lines?
A) A
B) B
C) C
D) D
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Chapter 4: A : Supply and Demand: Applications and Extensions
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Sample Questions
Q1) Other things constant, a decrease in the demand for computers will
A) increase the price of computers.
B) increase the quantity supplied of computers.
C) increase the demand for computer manufacturing workers.
D) decrease the demand for computer manufacturing workers.
Q2) Figure 4-1 illustrates the market for compact discs. If the government imposes a price floor of $25 for compact discs, which of the following will be true?
A) Consumers would wish to purchase 1,000 compact discs.
B) Producers would wish to sell 5,000 compact discs.
C) There would be a surplus of 4,000 compact discs.
D) All of the above are true.
Q3) Refer to Figure 4-12. The exhibit illustrates the impact of granting a subsidy on a particular good. Which of the following is true for this subsidy given the information provided in the exhibit?
A) The subsidy has been statutorily (legally) paid to buyers.
B) The subsidy results in an increase in the selling price of the good.
C) Sellers will receive a larger proportion of the benefit from this subsidy than buyers.
D) All of the above are true.
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Chapter 4: B : Supply and Demand: Applications and Extensions
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Sample Questions
Q1) With a price ceiling above the equilibrium price,
A) quantity demanded would exceed quantity supplied.
B) quantity supplied would exceed quantity demanded.
C) the market would be in equilibrium.
D) the equilibrium price would be expected to fall over time.
Q2) Suppose there is an increase in the excise tax imposed on cigarettes, a good for which the demand is relatively inelastic. The short-run burden of the tax increase will be borne primarily by
A) consumers, because the increase in market price will be large relative to the increase in the excise tax.
B) firms, because the increase in market price will be large relative to the increase in the excise tax.
C) consumers, because the increase in market price will be small relative to the increase in the excise tax.
D) firms, because the increase in market price will be small relative to the increase in the excise tax.
Q3) Suppose the U.S. Government banned the sale and production of cigarettes. What are likely effects of this action on the market for cigarettes?
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Chapter 5: Difficult Cases for the Market and the Role of Government
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Sample Questions
Q1) When competitive forces in an industry are weak, A) the absence of competition generally leads to overproduction.
B) prices may exceed the amount consumers are willing to pay.
C) the operational efficiency of private firms will be enhanced.
D) higher prices and less than optimal production may result.
Q2) Market failure will most likely arise from poor information when the product is A) a repeat-purchase item.
B) easily evaluated on inspection.
C) often purchased from the same seller.
D) unlikely to be purchased from the same seller in the future.
Q3) A free-rider problem exists when a good that has the following characteristic?
A) Rivalry in consumption.
B) Elastic demand.
C) Inelastic demand.
D) Nonexcludable.
Q4) A good that is both nonexcludable and nonrival-in-consumption is called a
A) common good.
B) external good.
C) public good.
D) private good.
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Chapter 6: The Economics of Collective Decision-Making
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Sample Questions
Q1) At the most basic level, the distinguishing characteristic of government that makes it different from private firms is
A) the difference in incentive structure motivating economic activity.
B) its ability to direct resources in a manner that is more economically efficient.
C) its ability to produce goods and services that people value.
D) its ability to use coercive force against people to modify their behavior or force them to pay for a good or service whether they benefit from it or not.
Q2) In which case is the political process most likely to result in the acceptance of productive programs and rejection of unproductive political activities?
A) when the benefits are highly concentrated and costs widespread among voters
B) when the costs are highly concentrated and the benefits widespread among voters
C) when both the benefits and costs are widespread among voters
D) when the benefits accrue primarily in the future, whereas the costs are more visible during the current period
Q3) Is calling a voter rationally ignorant the same as calling her irrational? Explain.
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Chapter 7: A : Taking the Nations Economic Pulse
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Sample Questions
Q1) If nominal GDP rises from one year to the next, then
A) the economy must be producing a larger output of goods and services.
B) prices at which goods and services are sold must be higher.
C) either output, or the general level of prices, or both must be rising.
D) employment and productivity must be rising.
Q2) You buy 50 shares of stock in a telecommunications company for $20 a share and pay $100 commission. How much will this transaction add to GDP?
A) zero
B) $100
C) $1,000
D) $1,100
Q3) If a country has attracted a relatively large number of foreign workers and a large amount of foreign investment,
A) national income will generally exceed gross national product.
B) gross national product will generally exceed gross domestic product.
C) net domestic product will generally exceed gross domestic product.
D) gross domestic product will generally exceed gross national product.
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Chapter 7: B : Taking the Nations Economic Pulse
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Sample Questions
Q1) Economists generally use GDP to measure a nation's total output because it is A) equal to the sales value of all transactions conducted during a period and thus can be easily calculated.
B) the best available measure of the true costs of producing consumer goods.
C) unaffected by changes in the prices of products over time.
D) a relatively reliable measure of the value of all final product goods and services produced during a specific time period.
Q2) Discuss the problems with GDP as a measure of a country's current production and income.
Q3) Assume that between 2000 and 2010 the money GDP of an economy increased from $3 trillion to $8 trillion and that the appropriate index of prices increased from 100 to 200. Which of the following expresses GDP for 2000 in terms of 2010 prices?
A) $1 trillion
B) $3 trillion
C) $4 trillion
D) $6 trillion
Q4) Explain the two approaches to calculating GDP.
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Chapter 8: Economic Fluctuations, Unemployment, and Inflation
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Sample Questions
Q1) If the nominal interest rate was 12 percent and the inflation rate was 10 percent in 1980, while the nominal interest rate was 7 percent and the inflation rate was 2 percent in 2011, then
A) real rates were higher in 2011.
B) real rates were higher in 1980.
C) credit was more expensive in 1980.
D) credit was cheaper in 2011 because the nominal rate was lower.
Q2) The natural rate of unemployment
A) increases sharply during a recession but declines significantly during a business expansion.
B) is the unemployment rate accompanying the economy's maximum sustainable output.
C) is generally less than the unemployment rate associated with the economy's full-employment rate of output.
D) is present when the economy operates at approximately 94 percent of its potential GDP.
Q3) Discuss the dangers of inflation; that is, why may it hurt an economy?
Q4) Describe two ways that public policy could reduce the natural rate of unemployment.
Page 14
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Chapter 9: A : an Introduction to Basic Macroeconomic Markets
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Sample Questions
Q1) Ceteris paribus, a decrease in the U.S. price level will cause
A) an increase in U.S. exports.
B) an increase in U.S. imports.
C) the aggregate demand curve to shift to the right.
D) the aggregate demand curve to shift to the left.
Q2) Output in the goods and services market will be sustained into the future
A) if aggregate demand and short-run aggregate supply are in balance.
B) only when the prior choices of decision makers were based on a correct anticipation of prices.
C) only when prices are rising.
D) only when wage rates are declining.
Q3) If the dollar price of the English pound goes from $1.50 to $1.75, the dollar has
A) appreciated, and Americans will find English goods cheaper.
B) appreciated, and Americans will find English goods more expensive.
C) depreciated, and Americans will find English goods cheaper.
D) depreciated, and Americans will find English goods more expensive.
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Page 15
Chapter 9: B : an Introduction to Basic Macroeconomic Markets
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Sample Questions
Q1) What is the difference between short-run equilibrium and long-run equilibrium in the goods and services market?
Q2) As the real interest rate in the domestic loanable funds market increases,
A) the cost of purchasing goods and services during the current period will decrease.
B) the net inflow of capital from abroad will increase.
C) the inflationary premium will rise and the money rate of interest will decline.
D) a trade surplus will occur.
Q3) The exchange rate is
A) the price of one nation's currency in terms of the currency of another nation.
B) the amount households will spend on imports.
C) the amount of foreign capital a nation receives when there is a trade surplus.
D) the amount charged by bankers for loanable funds
Q4) Under what circumstances will inflation help borrowers at the expense of lenders?
Under what circumstances will both parties be unaffected? Which scenario would you expect in the long run?
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16
Chapter 10: Dynamic Change, Economic Fluctuations, and the Ad-As Model
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Sample Questions
Q1) How will an unanticipated decrease in aggregate demand influence equilibrium output in the goods and services market?
A) Output will increase, and the general level of prices will fall.
B) Output will increase, and the general level of prices will rise.
C) Output will decrease, and the general level of prices will rise.
D) Output will decrease, and the general level of prices will fall.
Q2) An unanticipated decline in the real interest rate in the loanable funds market will cause the
A) aggregate demand curve to shift to the right.
B) aggregate demand curve to shift to the left.
C) long-run aggregate supply curve to shift to the left.
D) natural rate of unemployment to fall.
Q3) Which of the following reduced aggregate demand and thereby contributed to the crisis of 2008?
A) a rise in the value of the U.S. dollar
B) falling housing and stock prices
C) an increase in the real rate of interest
D) optimism about future economic conditions
Q4) How does the self-correcting mechanism act to pull the economy out of a recession?
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Chapter 11: Fiscal Policy: the Keynesian View and Historical Perspective
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Sample Questions
Q1) When the spending of consumers, businesses, government, and foreigners (net exports) is less than the current level of output, Keynesian analysis indicates that A) the economy's output will fall short of its potential.
B) prices will rise.
C) equilibrium real GDP will increase.
D) inventories will decline.
Q2) How does Keynesian economic theory recommend that fiscal policy be conducted?
Q3) According to the Keynesian view, if an economy was operating at long-run equilibrium, an increase in government expenditures (holding taxes constant) would A) be inflationary.
B) lead to a recession.
C) lower the real rate of interest.
D) reduce the size of the national debt.
Q4) When Keynesian equilibrium is present,
A) aggregate demand for goods and services will equal the current rate of output.
B) business inventories will be increasing.
C) full employment must be present.
D) the actual rate of unemployment must equal the natural rate of unemployment.
Page 18
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Chapter 12: Fiscal Policy, Incentives, and Secondary Effects
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Sample Questions
Q1) Susan sells life insurance and is considering buying a $50,000 Mercedes for business purposes (thus, the expense reduces her taxable income). If Susan is in the 40 percent marginal tax bracket, how much after-tax income will she have to give up in order to enjoy the Mercedes?
A) $20,000
B) $30,000
C) $25,000
D) $70,000
Q2) When household debt as a share of income is abnormally high,
A) rapid growth of consumption is likely to lead the recovery.
B) the growth prospects of the economy will be excellent because high household debt is the key to a strong economy.
C) the growth of consumption is likely to remain sluggish even as the economy begins to recover.
D) consumers will be in a strong position to deal with irregular expenses.
Q3) What effect will expansionary fiscal policy have on the economy, according to new classical economists?
Q4) What is the "crowding-out" effect? How does the crowding-out effect influence the potency of fiscal policy?
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Chapter 13: A : Money and the Banking System
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Sample Questions
Q1) Which of the following most clearly limits the ability of the commercial banking industry to expand the money supply?
A) the reserve requirements mandated by the Fed B) the number of commercial bank charters issued by the Fed C) the dollar value of the bonds issued by the U.S. Treasury
D) the federal funds interest rate that commercial banks pay (and receive) for short-term loanable funds
Q2) Which of the following lists two things that both decrease the money supply?
A) make open market purchases and raise the reserve requirement ratio
B) make open market purchases and lower the reserve requirement ratio
C) make open market sales and raise the reserve requirement ratio
D) make open market sales and lower the reserve requirement ratio
Q3) A reserve requirement of 20 percent implies a potential money deposit multiplier of A) 1.
B) 5.
C) 20.
D) 80.
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20
Chapter 13: B : Money and the Banking System
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Sample Questions
Q1) Does the Federal Reserve operate like an ordinary commercial bank? What is the Fed's job?
Q2) What are the advantages of a fractional reserve banking system compared to a system that requires 100 percent of deposits to be kept on reserve?
Q3) You deposit a $1,000 scholarship check in the bank. If the required reserve ratio is 10 percent, explain how the banking system will create new money and how much money can potentially be created.
Q4) Explain how the Fed would use its four tools to decrease and to increase the money supply.
Q5) Why is there more than one definition of the money supply? What is the difference between them?
Q6) What is the difference between the Treasury and the Federal Reserve? Is there any difference in the effect on the money supply between the sale of bonds by the Treasury and the sale of bonds by the Fed?
Q7) What advantages does a money economy have over a barter economy?
Q8) Briefly explain the three functions of money.
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Chapter 14: Modern Macroeconomics and Monetary Policy
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Sample Questions
Q1) Low rates of inflation are generally associated with A) low rates of government spending.
B) small or nonexistent government budget deficits.
C) low rates of productivity growth.
D) low rates of growth of the quantity of money.
Q2) Which of the following is true?
A) Monetary policy influences long-term real interest rates more than short-term interest rates.
B) Short-term interest rates are primarily determined by real factors and the expected inflation.
C) A shift to a more expansionary monetary policy will tend to raise short-term interest rates.
D) A shift to expansionary monetary policy that increases the fear of future inflation will tend to increase long-term interest rates.
Q3) Why do individuals choose to hold part of their wealth in money rather than in other types of assets? Discuss the benefits and costs of holding money.
Q4) Indicate how changes in monetary policy are transmitted to the goods and services market? Discuss for the case of an expansion in the money supply.
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Page 22
Chapter 15: Stabilization Policy, Output, and Employment
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Q1) The index of leading indicators was developed to provide more reliable information on
A) the expected future direction of the economy.
B) the future profitability of the leading companies in various industries.
C) where the economy has been in the recent past.
D) the extent to which the economy's existing plant and equipment capacity is being used.
Q2) Between 1983 and 2007, the U.S. economy was in recession approximately
A) 6 percent of the time.
B) 20 percent of the time
C) 30 percent of the time
D) This is a trick question; the U.S. economy has not experienced a recession during this period.
Q3) During the last century, the percent of time the U.S. economy has been in recession has
A) risen substantially.
B) stayed about the same.
C) risen slightly.
D) fallen.
Q4) What is the index of leading indicators, and what is it used for?
Page 23
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Chapter 16: Creating an Environment for Growth and Prosperity
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Q1) Some low-income countries generally remain poor because
A) their institutional arrangements and policies often discourage productive activity and reduce the potential gains from specialization and exchange.
B) they are oppressed by developed nations that benefit from the cheap goods available from countries with low wage rates.
C) they are poorly endowed with natural resources, which are essential for long-term growth.
D) when the average income level is low, workers have little incentive to earn higher incomes.
Q2) Stable money and prices are a key source of economic growth because
A) they allow activist policymakers to fine tune the economy.
B) uncertainty and instability in prices will attract investors and business decision makers.
C) price instability increases capital formation.
D) price stability reduces the risks that accompany investment and other long-term commitments.
Q3) How can increased investment help a country achieve increased economic growth? What costs are involved?
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Chapter 17: Institutions, Policies, and Cross-Country
Differences in Income and Growth
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Q1) Which of the following economies was most economically free during 1980-2009?
A) United States
B) Brazil
C) Japan
D) Hong Kong
Q2) According to the Economic Freedom of the World (EFW) rating, which of the following countries has the highest level of economic freedom?
A) Argentina
B) Nigeria
C) United States
D) Nicaragua
Q3) Democracy tends to best promote economic freedom when there is A) checks on the power of both the executive and legislative majorities.
B) constitutional protection of private property rights.
C) political decentralization.
D) all of the above.
Q4) From the viewpoint of economic growth, why is the legal structure of a country crucially important? What are some of the key attributes of a legal system that will encourage economic growth?
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Chapter 18: Gaining From International Trade
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Q1) Trade restrictions that limit the sale of low-price foreign goods in the U.S. market
A) increase the real income of Americans.
B) benefit domestic producers in the protected industries at the expense of consumers and domestic producers in export industries.
C) help channel more of our resources into producing goods for which we are a low-cost producer.
D) reduce unemployment and increase the productivity of American workers.
Q2) Refer to Figure 17-14. If the world price of this good is PW and there are no restrictions on imports, domestic suppliers will produce ____ units, domestic demanders will consume ____ units, and total imports will be ____ units.
A) 30; 100; 70
B) 50; 100; 50
C) 30; 80; 80
D) 100; 70; 30
Q3) "Trade restrictions will stop foreign imports, which will increase American employment and protect American jobs." Most economists realize this argument is wrong. Can you explain why?
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Chapter 19: International Finance and the Foreign Exchange Market
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Q1) Figure 18-3 displays the international currency market for yen in terms of dollars and dollars in terms of yen. The demand curve in graph (A) is comprised of
A) U.S. citizens attempting to purchase Japanese-made goods.
B) Japanese attempting to purchase U.S.-made goods.
C) U.S. businesses attempting to sell to the Japanese.
D) Japanese businesses attempting to sell to the U.S.
E) the U.S. government attempting to unload dollars to the international market.
Q2) Which of the following is most likely to happen as the result of lower real interest rates in the United States?
A) the dollar will depreciate on the foreign exchange market and imports will grow relative to exports.
B) the dollar will appreciate on the foreign exchange market, and exports will grow relative to imports.
C) the dollar will depreciate on the foreign exchange market, and exports will grow relative to imports.
D) the dollar will appreciate on the foreign exchange market, and imports will grow relative to exports.
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Page 27
Chapter 20: Consumer Choice and Elasticity
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Q1) If a 50 percent increase in the price of hula hoops led to a 10 percent reduction in the quantity of hula hoops purchased, the price elasticity of demand is
A) 5 and the demand for hula hoops is elastic.
B) 0.2 and the demand for hula hoops is elastic.
C) 5 and the demand for hula hoops is inelastic.
D) 0.2 and the demand for hula hoops is inelastic.
Q2) The market demand for a good is
A) the horizontal sum of all individual demand curves for the good.
B) generally upward sloping, unlike individual demand curves.
C) usually a vertical line at a quantity of one hundred.
D) the average amount purchased by each individual in the market.
Q3) A recent increase in the supply of oranges caused the price to drop from $5 to $3 per bushel, and quantity demanded to rise from 10,000 bushels to 25,000 bushels. This indicates that the price elasticity of demand for oranges in this price range is
A) -0.33.
B) -0.58.
C) -1.
D) -1.71.
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28
Chapter 21: A : Costs and the Supply of Goods
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223 Verified Questions
223 Flashcards
Source URL: https://quizplus.com/quiz/34272
Sample Questions
Q1) For a firm that wants to remain in business, which of the following costs could be avoided if it halted current production?
A) fixed costs
B) variable costs
C) sunk costs
D) implicit costs
Q2) In Figure 8-8, which output minimizes per-unit cost?
A) 4
B) 6
C) 7
D) 8
Q3) Which of the following represents a long-run adjustment?
A) the hiring of four additional cashiers by a supermarket
B) a cutback on purchases of coke and iron ore by a steel manufacturer
C) construction of a new assembly-line plant by a car manufacturer
D) the extra dose of fertilizer used by a farmer on his wheat crop
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29
Chapter 21: B : Costs and the Supply of Goods
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8 Verified Questions
8 Flashcards
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Sample Questions
Q1) The AB Manufacturing Company has hired an economist to evaluate its financial situation. She explains to the board of directors that the company is making zero economic profit. Should the company go out of business?
Q2) Suppose you are planning to open a lemonade stand. List separately all the explicit and implicit costs that might be involved.
Q3) Mr. Jones pays his employees by the hour. He believes they purposely work slowly to maximize their personal satisfaction. What can he do to provide them with a stronger incentive to work efficiently?
Q4) If the ABC Company decides to take over the XYZ Corporation by purchasing all of the stock of XYZ, what does this tell us about the view ABC holds of XYZ?
Q5) The boss observes that her 10 workers produce 1,000 widgets a day. She concludes that she can employ 20 workers and make 2,000 widgets, 30 to make 3,000, or 40 to make 4,000. Explain why this observation is either correct or incorrect.
Q6) James opened a baseball manufacturing operation, and initially the more balls he made, the lower the per-unit cost. Now, as output expands, his per-unit costs are rising. He concludes that diseconomies of scale have set in. Is he correct? Why?
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Chapter 22: A : Price Takers and the Competitive Process
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237 Verified Questions
237 Flashcards
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Sample Questions
Q1) If the market price in a price-taking industry was currently above the average total cost of production for firms in the industry,
A) firms in the industry would earn short-run economic profits that would be offset by long-run economic losses.
B) new firms would enter the industry, which would drive price down to the average total cost of production in the long run.
C) firms in the industry would earn positive economic profits in the long run.
D) most firms in the industry would shut down in the long run.
Q2) Which of the following best explains why a firm in a competitive price-taker market must take the price determined in the market?
A) The short-run average total costs of firms that are price takers will be constant.
B) If a price taker increased its price, consumers would buy from other suppliers.
C) Firms in a price-taker market will have to advertise in order to increase sales.
D) There are no good substitutes for the product supplied by a firm that is a price taker.
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Chapter 22: B : Price Takers and the Competitive Process
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Sample Questions
Q1) When a firm is operating in a price-taker market, marginal revenue is
A) equal to price.
B) always less than price.
C) equal to zero when the market is in long-run equilibrium.
D) equal to the change in output divided by the change in total revenue.
Q2) The competitive market process tends to promote economic prosperity because it
A) keeps the prices of goods higher than their production costs.
B) creates inefficiencies, which causes people to economize.
C) directs self-interested action toward the production of goods that are highly valued relative to their cost.
D) sends signals to the government about which goods to produce.
Q3) Which of the following products would most closely fit the competitive price-taker model?
A) stereo systems-there are many reputable brands.
B) beer-it has many consumers.
C) eggs-there are many producers of this relatively homogeneous product.
D) automobiles-there are substantial economies of scale in production.
Q4) Even if a firm is optimistic about the future, why should it shut down if it cannot cover its variable cost? If it does shut down, are there ramifications not mentioned in the textbook?
Page 32
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Chapter 23: Price-Searcher Markets With Low Entry Barriers
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216 Verified Questions
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Sample Questions
Q1) Which of the following is a major difference between a competitive price searcher and a price taker?
A) Price takers need to compete through advertising because they cannot choose their own price, whereas competitive price searchers compete primarily through their pricing policies.
B) Price takers are exposed to competition because of low barriers to entry, whereas competitive price searchers are somewhat immune from competition due to relatively high barriers to entry.
C) Price takers can never earn economic profits, whereas competitive price searchers can earn economic profits in the short run.
D) Price takers produce identical goods, whereas competitive price searchers produce goods that are differentiated from the goods produced by their competitors.
Q2) Firms that engage in price discrimination
A) will earn less profit than those that do not discriminate.
B) will earn more profit than those that do not discriminate.
C) are biased against certain buyers in the market.
D) will always produce less output than firms that do not discriminate.
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Page 33
Chapter 24: A : Price-Searcher Markets With High Entry
Barriers
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229 Verified Questions
229 Flashcards
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Sample Questions
Q1) The demand curve facing a monopolist
A) is perfectly elastic.
B) lies above its marginal revenue curve.
C) lies below its marginal revenue curve.
D) is the same as its marginal revenue curve.
Q2) The demand and cost schedules of a monopolist are presented in Table 11-5. What price should a profit-maximizing monopolist charge?
A) $10
B) $9
C) $8
D) $7
Q3) Which of the following would increase the likelihood that firms in an industry could successfully collude?
A) a large number of firms in the industry
B) unstable demand conditions in the industry
C) high barriers to entry in the industry
D) product characteristics that make it difficult for firms to detect other firms that cheat on the agreement
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Chapter 24: B : Price-Searcher Markets With High Entry
Barriers
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25 Verified Questions
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Sample Questions
Q1) Why does the U.S. government maintain a monopoly in the delivery of first-class mail? Does the Postal Service nevertheless face other forms of competition?
Q2) Which of the following is true for a firm that is a monopolist?
A) the firm will make an economic profit in the short run.
B) the firm will produce a smaller quantity of output than what would be best from the viewpoint of ideal economic efficiency.
C) the additional revenue that can be generated from an increase in output will exceed the firm's price.
D) the firm can charge whatever it wants for its product since consumers have no alternatives.
Q3) Mr. Stewart owns the only hardware store in a small Midwestern town. His nearest competition is more than 50 miles away, yet he does not earn any economic profit. Does someone need to explain the economic concept of monopoly to him?
Q4) Monopoly is a word derived from Greek origins that means, roughly, single seller. Why is the definition of monopoly as single seller inadequate in economic terms?
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35
Chapter 25: The Supply of and Demand for Productive Resources
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200 Verified Questions
200 Flashcards
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Sample Questions
Q1) Physical and human capital investments are
A) different in that the opportunity for economic profit is present for physical capital but not for human capital investments.
B) different in that human capital decisions do not involve future income considerations, while physical capital investments do.
C) similar in that nonmonetary considerations play an equally important role in both.
D) similar in that both involve forgoing current income (and consumption) in an effort to achieve higher future income (and consumption).
Q2) Other things constant, if the demand for a final product is quite elastic, the demand for a resource used to produce the product will tend to be
A) highly inelastic.
B) of unitary elasticity.
C) a curve sloping upward to the right.
D) quite elastic as well.
Q3) Why is it more expensive to acquire a new house in an urban area than in a rural area if the costs of labor and building materials are the same?
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Chapter 26: Earnings, Productivity, and the Job Market
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109 Verified Questions
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Sample Questions
Q1) Which of the following is most likely to reduce the market wage rate in a job category?
A) The job requires substantial out-of-town travel.
B) Employees have considerable flexibility in choosing their work hours.
C) The job is widely viewed as dangerous.
D) The job requires employees to move from city to city quite often.
Q2) What is the most probable reason why garbage collectors have higher wages than bookkeepers?
A) Employment discrimination
B) A high unionization rate for bookkeepers
C) A higher educational requirement for garbage collectors than bookkeepers
D) The nonmonetary attractiveness of garbage collection causes fewer people to want to be garbage collectors.
Q3) Which of the following would cause the demand for mathematicians to increase?
A) a decrease in the productivity of mathematicians.
B) an increase in the wage of mathematicians.
C) an increase in the productivity of mathematicians.
D) an increase in the productivity of physicists.
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Chapter 27: Investment, the Capital Market, and the Wealth of Nations
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129 Verified Questions
129 Flashcards
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Sample Questions
Q1) Most of the income of Americans comes from A) transfer payments.
B) the ownership of bonds and physical assets.
C) the ownership of bonds and corporate stocks.
D) the ownership of human capital.
Q2) If the interest rate was 6 percent, the net present value of $100 to be received two years from now would be
A) $89.00.
B) $94.34.
C) $100.00.
D) $112.00.
Q3) At a discount rate of 10 percent, what is the net present value of an investment expected to yield $1,000 per year (to be received at year end) for the next two years?
A) $1,859.41
B) $1,801.23
C) $1,735.54
D) $1,527.78
Q4) In a barter economy that had no form of currency, how could interest exist?
Page 38
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Chapter 28: Income Inequality and Poverty
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136 Verified Questions
136 Flashcards
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Sample Questions
Q1) The poverty threshold income level is
A) adjusted annually for increases in real per capita income.
B) adjusted annually for changes in prices.
C) invariant to differences in the size and composition of families.
D) the highest income level that would leave one in the bottom quintile of income recipients.
Q2) Measuring poverty using an absolute income scale like the poverty line can be misleading because
A) income measures do not include the value of in-kind transfers.
B) money is valued less highly by the poor than by the rich.
C) the poor are not likely to participate in the labor market.
D) income measures are adjusted for the effects of labor-market discrimination.
Q3) Which of the following statements regarding poverty in the United States is correct?
A) There are as many poor African Americans as there are poor whites.
B) The incidence of poverty is lower among females than among males.
C) The incidence of poverty is higher among African Americans than among whites.
D) Most of the poor people in the United States are elderly (over age 65).
Q4) Some people inherit money and wealth that they did nothing to earn. Why don't we tax inheritance at 100 percent?
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Special Topic 1 : Government Spending and Taxation
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79 Verified Questions
79 Flashcards
Source URL: https://quizplus.com/quiz/34305
Sample Questions
Q1) The overall federal tax structure is
A) regressive because the average tax rate of those with low incomes is higher than the rate imposed on those with higher incomes.
B) progressive because the average tax rate of those with high incomes is greater than the rate imposed on those with lower incomes.
C) flat because the average tax rate is approximately constant across all income brackets.
D) progressive for income levels up to approximately $100,000 but regressive for income levels above this figure.
Q2) When the tax structure of a nation is progressive, as real incomes increase, the tax revenues of the government will A) decline.
B) increase by the same proportion as the increase in real income.
C) increase by a larger proportion than the increase in real income.
D) remain unchanged unless legislative action is undertaken.
Q3) How has the structure of the personal income tax changed and the share of taxes paid by various income groups changed in recent decades?
Q4) Discuss how size of government can negatively affect economic growth.
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Page 40
Special Topic 2 : The Economics of Social Security
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54 Verified Questions
54 Flashcards
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Sample Questions
Q1) The Social Security system is currently generating tax revenues that exceed the benefits paid to recipients. This surplus is
A) being invested in foreign bonds, which will provide Americans with a source of income when the baby boom generation retires.
B) separated from other government revenue so politicians will not spend the money during the current period.
C) being channeled into earmarked private savings accounts.
D) invested in government bonds, the redemption of which will require an increase in taxes (or additional Treasury borrowing).
Q2) In 2010, the number of workers per Social Security beneficiary was approximately ____; by the year 2030, this figure is expected to ____.
A) 5; increase to approximately 8
B) 2.9; fall to approximately 2.1
C) 2.2; increase to approximately 3.2
D) 8; fall to approximately 5
Q3) Jane states that "Social Security is an unfair program. It discriminates against married women in the workforce and middle-income recipients." Evaluate this view.
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Special
3
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Sample Questions
Q1) If Apple Computer Corporation constitutes a sizeable share of your current stock holdings, the purchase of which of the following stocks would provide you with the greatest reduction in risk?
A) Hewlett-Packard
B) IBM
C) Dell Computer Corporation
D) Wal-Mart
Q2) Since 1802, the average annual compound return for stock holdings, adjusted for inflation, has been approximately
A) 2 percent.
B) 7 percent.
C) 15 percent.
D) 30 percent.
Q3) Many personal finance magazines such as Money and Smart Money routinely give advice as to which stocks to buy. Should you take their advice?
Q4) Does it ever make sense to purchase a stock that has never paid a dividend? Explain.
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Special Topic 4 : Great Debates in Economics: Keynes
Versus Hayek
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Sample Questions
Q1) The General Theory of John Maynard Keynes exerted a major impact on macroeconomics during the 20 century primarily because
A) it provided the only logically consistent view of what caused the Great Depression.
B) it provided a reasonable explanation of what went wrong during the Great Depression and what could be done to prevent it from happening again.
C) it explained how gross domestic product could be measured and why this was important.
D) it derived the conditions necessary for maximum efficiency of resource use and explained how these conditions could be achieved through central planning.
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43
Special Topic 5 : The Crisis of 2008: Causes and Lessons for the Future
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Sample Questions
Q1) The increase of sub-prime (including Alt-A) loans as a share of the total from 2001-2005 was an important contributing factor to the economic crisis of 2008 because A) these loans initially reduced the demand for housing.
B) these loans initially reduced housing prices.
C) the default and foreclosure rates on these loans are several times higher than conventional loans to prime borrowers.
D) the default and foreclosure rates on these loans are considerably lower than conventional loans to prime borrowers.
Q2) Beginning in 2002, Federal Reserve policy
A) switched its focus from price stability to stimulating real GDP and reducing unemployment.
B) kept interest rates artificially high, driving housing prices upward.
C) kept interest rates artificially low, driving housing prices downward.
D) switched its focus from stimulating real GDP and reducing unemployment to price stability.
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44
Special Topic 6 : Lessons from the Great Depression
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Sample Questions
Q1) Fiscal policy analysis indicates that large tax increases during a severe recession will result in
A) an increase in the incentive to earn and the maintenance of a balanced federal budget.
B) higher tax revenues and an expansion in government spending.
C) smaller budget deficits, which will speed an economic recovery.
D) a reduction in aggregate demand and a worsening of the recession.
Q2) Which of the following conditions during 2008-2009 most closely paralleled the economic conditions of the Great Depression?
A) record-high unemployment rates for a period of many years
B) a sharp and prolonged contraction in the money supply
C) significant increases in taxes and trade restrictions in order to counter budget deficits
D) frequent policy changes that generated an unstable and unpredictable economic climate
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Special Topic 7 : Lessons from Japan and Canada
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Sample Questions
Q1) As the U.S. recovers from the 2008-2009 recession, asset prices are not likely to rebound quickly
A) even though asset prices did rebound quickly in Japan during the 1990s.
B) because it will take time to correct the mal-investment in the housing market.
C) because there are not enough loanable funds in the banking system due to restrictive monetary policy.
D) because the supply of housing will be unable to keep up with demand, as was the case in Japan during the 1990s.
Q2) The major difference between Japan's response to the recession of the 1990s and the U.S.'s response to the recession of 2008-2009 was
A) the failure of Japan to adopt fiscal stimulus packages.
B) Japan's more expansionary monetary policy.
C) the balanced-budget policy followed by the United States.
D) the more expansionary monetary policy followed by the United States.
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Special Topic 8 : The Federal Budget and the National Debt
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Sample Questions
Q1) Given the underlying demographic changes in our society, we can expect
A) budget surpluses to outnumber budget deficits in the years ahead.
B) the number of budget surpluses to be approximately equal to the number of budget deficits in the years ahead.
C) budget deficits to outnumber budget surpluses in the years ahead.
D) budget deficits one year to be followed by a budget surplus the next so that the budget balances every two years.
Q2) Refer to Table ST8-1. Which of the following is correct regarding this government?
A) In the third year, it had a $50 national debt and ran a $30 deficit.
B) In the third year, it ran a $50 deficit and its national debt after the third year was $60.
C) In the third year, it ran a $50 surplus and its national debt after the third year was $30.
D) In the third year, it ran a $50 deficit and its national debt after the third year was $30.
Q3) What is the difference between the federal budget deficit and the national debt?
Q4) According to the traditional (crowding-out) view, what impact do budget deficits have on the economy?
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Special Topic 9 : The Economics of Healthcare
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Sample Questions
Q1) Does it make any difference whether health-care expenditures are paid for by the consumer or by a third party (the government or an insurance company, for example)?
A) No; the quantity of health-care service demanded is not influenced by either the price of health care or who is paying for it.
B) Yes; consumers of health care will have a stronger incentive to economize when they are buying the service with their own money.
C) Yes; consumers of health-care services will have a stronger incentive to economize when the services are paid for by a third party.
D) No; health care is an essential service, and therefore, the incentive to economize on it is unaffected by who is paying for the service.
Q2) A 2.9 percent payroll tax (1.45 percent levied on both the employee and the employer) imposed on current workers is used to finance the
A) Medicaid program that provides healthcare for the poor.
B) hospitalization costs of Medicare beneficiaries.
C) cost of physician services supplied to the elderly.
D) healthcare costs of both the elderly and the poor.
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Special Topic 10 : Education: Problems and Performance
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Sample Questions
Q1) In 2005, average spending per pupil in public elementary and secondary schools in the United States was approximately
A) $4,585.
B) $6,585.
C) $8,585.
D) $10,585.
Q2) "Increasing competition between schools will tend to lower both the cost and quality of education." Is this statement true or false?
A)True
B)False
Q3) What are some of the criticisms of voucher programs? How would a voucher program be modified to address these concerns?
Q4) Competition between public and private schools is ____ at the college level than at the elementary and secondary level.
A) weaker
B) of similar intensity
C) stronger
D) less important
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Special Topic 11 : Earnings Differences Between Men and Women
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Sample Questions
Q1) Which of the following would constitute the strongest evidence of employment discrimination against female employees?
A) The average wage of female workers is lower than the average wage of males.
B) The average wage of female employees is lower than the average wage of males with similar productive characteristics.
C) The mean number of years of schooling of female workers is lower than that of males.
D) The average hours worked by female employees is less than the average hours worked by males.
Q2) During the decade following the passage of the 1962 equal pay legislation and the 1964 civil rights legislation,
A) the male/female wage differential became much smaller.
B) the male/female wage differential became much larger.
C) there was little change in the earnings of women relative to men.
D) the educational choices of women and men became less similar.
Q3) "If it were not for employment discrimination against women, the average earnings of men and women would be equal." Is this statement true or false?
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Page 50
Special Topic 12 : Do Labor Unions Increase the Wages of Workers?
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Sample Questions
Q1) Laws that prohibit collective bargaining agreements requiring a worker to join a union as a condition of employment are called
A) collective bargaining agreements.
B) minimum wage laws.
C) union shop laws.
D) right-to-work laws.
Q2) Which of the following will tend to lower the ability of a union to increase the wages of its members?
A) strong competition from nonunion labor
B) threat of a strike
C) increased demand for union labor
D) all of the above
Q3) Most studies indicate that during the last two decades, the wages of union members have been approximately
A) 5 percent higher than the wages of similar nonunion workers.
B) 14 to 19 percent higher than the wages of similar nonunion workers.
C) 34 to 39 percent higher than the wages of similar nonunion workers.
D) 64 to 69 percent higher than the wages of similar nonunion workers.
Q4) List some factors that might make the threat of a strike more effective.
Page 51
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Special Topic 13 : The Question of Resource Exhaustion
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Sample Questions
Q1) While the price of a resource may increase sharply during some periods, the structure of ____ accompanying the price increase makes depletion highly unlikely and provides the seeds for future reversal.
A) government programs
B) foreign competition
C) incentives
D) taxation
Q2) What happens to a resource as it becomes scarcer?
A) The price rises and this increases the future supply relative to demand.
B) The price rises and this increases the future demand relative to supply.
C) The price falls and this increases the future supply relative to demand.
D) The price falls and this increases the future demand relative to supply.
Q3) Researcher Indur Goklany has estimated that if traditional technologies, like those used in 1961, were still in use, other things equal, wildlife habitat
A) would be more abundant and far healthier today.
B) would have increased, benefiting wildlife substantially.
C) would have declined substantially, as the need for farmland would not have declined as it did.
D) would have been unaffected.
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Page 52
Special Topic 14 : Difficult Environmental Cases and the
Role of Government
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Sample Questions
Q1) When the federal government owns land resources, such as parks, that are funded by tax dollars,
A) park mangers receive full information about visitor desires simply by asking visitors.
B) public park managers have the same incentives as private park managers, where visitors pay at least the actual costs of use.
C) park managers devote much time and effort to satisfying congressional desires instead of visitor desires.
D) park managers will be well-informed of visitor demands regardless of the funding mechanism.
Q2) Which of the following is, so far, the most utilized method to reduce emissions of industrial pollution to politically chosen levels, while encouraging efficient choices by polluters?
A) government pollution charges or taxes
B) non-tradable emission standards that cap allowable pollution for each emitter
C) cap and trade emission permits
D) regulations that would effectively prohibit all emissions
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53