Economics for Managers
Question Bank
Course Introduction
Economics for Managers is designed to equip students with a solid understanding of fundamental economic principles and how they apply to managerial decision-making. The course covers both microeconomic and macroeconomic concepts, emphasizing topics such as supply and demand, market structures, pricing strategies, and the impact of government policies on business environments. Through real-world case studies and problem-solving exercises, students learn to analyze market behavior, interpret economic data, and make informed decisions that optimize organizational performance in a competitive global marketplace.
Recommended Textbook
Economics Today 17th Edition by Roger LeRoy Miller
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Page 2
Chapter 1: The Nature of Economics
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Sample Questions
Q1) The hypothesis that people are nearly, but not fully rational, cannot possibly fully examine every available choice, and utilize simple rules of thumb in making decisions is known as the
A) irrationality hypothesis.
B) ceteris paribus hypothesis.
C) individual aggregation hypothesis.
D) bounded rationality hypothesis.
Answer: D
Q2) A scientist who is studying earthquakes includes the impact of wind when performing some tests of damages to structures. This is an example of A) failing to understand how to do scientific methodology. B) irrational behavior in noneconomic situations.
C) accounting for every possible phenomena that may effect the problem under examination.
D) failing to hold all other things constant.
Answer: D
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Chapter 2: Scarcity and the World of Trade-Offs
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Q1) Between points "b" and "c" in the above figure, the opportunity cost of 250 more bushels of corn is
A) 200 yards of cloth.
B) 250 yards of cloth.
C) 600 yards of cloth.
D) 800 yards of cloth.
Answer: A
Q2) Using the above table but now the bakery bakes 30 pizzas and 240 loaves of bread (alternative
A) 2.5 loaves of bread
B) 2 loaves of bread
B), moving from alternative B to alternative D, what is the opportunity cost of one pizza pie?
C) 0.5 loaf of bread
D) 150 loaves of bread
Answer: B
Q3) "Economics deals with human needs." Do you agree or disagree? Why?
Answer: Disagree. The concept of needs is difficult to define objectively for each person, so that economists consider people's unlimited wants instead of their needs.
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Page 4
Chapter 3: Demand and Supply
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Q1) "A shortage is the same thing as scarcity." Do you agree or disagree with this statement? Why? What can cause a shortage to disappear in a market? What can cause scarcity to disappear?
Answer: Disagree with the statement. Scarcity is the situation where the resources available to produce goods and services are insufficient to satisfy all human wants. Scarcity is a condition of the world. A shortage occurs when the price is below the equilibrium price and quantity demanded at that price is greater than quantity supplied. The shortage can disappear by letting price rise to its equilibrium level. Scarcity will never disappear.
Q2) Which of the following statements is correct?
A) A shortage and scarcity are the same thing.
B) A shortage occurs when the quantity demanded is less than the quantity supplied at a price below the market clearing price.
C) A shortage occurs when the quantity demanded is greater than the quantity supplied at a price below the market clearing price.
D) A shortage occurs when the quantity demanded is less than the quantity supplied at a price above the market clearing price.
Answer: C
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Chapter 4: Extensions of Demand and Supply Analysis
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Sample Questions
Q1) If the demand for a product rises and the supply stays the same
A) the market clearing price will fall and the equilibrium quantity will rise.
B) the market clearing price will rise and the equilibrium quantity will fall.
C) both the market clearing price and the equilibrium quantity will fall.
D) both the market clearing price and the equilibrium quantity will rise.
Q2) A newspaper headline asserts: "Rising Demand Pushes Up Housing Prices." This headline
A) incorrectly implies that the demand for housing can change, whereas in fact only the quantity of housing demanded can change.
B) incorrectly implies that the price of housing will rise when demand increases.
C) incorrectly implies that more housing will be demanded at higher prices.
D) correctly implies that an increase in demand will increase the market clearing price.
Q3) When the government sets a price floor which is below the equilibrium price
A) a surplus will develop.
B) a shortage will develop.
C) the equilibrium price will be maintained.
D) a price ceiling will follow.
Q4) What are the terms of exchange and how are these terms related to the price?
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Page 6
Chapter 5: Public Spending and Public Choice
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Sample Questions
Q1) In its most ideal form, a price system allows
A) firms to act in such a way that they eliminate scarcity.
B) consumers to satisfy all their wants.
C) resources to move from lower-valued uses to higher-valued uses through voluntary exchange.
D) government policy makers to allocate resources to the uses which they consider to be in the best interests of society.
Q2) An example of a market failure is
A) a firm is dumping toxic waste that is making people sick.
B) when not everyone who wants to see a major league football game can.
C) when there is an increase in demand and a shortage develops.
D) unemployment.
Q3) Which of the following statements is NOT true about the price system?
A) The price system allows resources to flow from low-valued uses to high-valued uses.
B) The price system encourages the production of public goods.
C) Individuals have freedom to purchase what they want.
D) The price system allows for economic efficiency.
Q4) Explain why an external cost leads to an over-allocation of resources to the production of a good.
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Chapter 6: Funding the Public Sector
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Sample Questions
Q1) How would the market for coffee be affected if the government charged an excise tax of $1.00 on each unit of coffee sold?
A) There would be a shortage of coffee.
B) The demand for coffee would increase.
C) The demand for coffee would decrease.
D) The supply curve would shift up vertically by $1.00.
Q2) Using the above table, a unit tax of $2 is imposed on the product. How much of the tax is paid by the consumer?
A) $1.
B) $2.
C) $3.
D) unable to determine.
Q3) Assume that Mr. Smith's income increased from $40,000 last year to $45,000 this year and that he paid an additional $2,000 in taxes. This would indicate that his marginal tax rate is
A) 10 percent.
B) 25 percent.
C) 30 percent.
D) 40 percent.
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Page 8
Chapter 7: The Macroeconomy: Unemployment, Inflation, and Deflation
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Sample Questions
Q1) Refer to the above table. You are given information on Jasmin's consumption for 2005 and 2015. Using 2005 as the base year, compute the price index for 2015. The index equals
A) 1.5.
B) 70.588.
C) 141.667.
D) 107.143.
Q2) Describe the major types of unemployment.
Q3) Since 1950, it can be observed that the female participation rate in our labor force has
A) increased.
B) decreased.
C) stayed constant.
D) moved erratically up and down.
Q4) A business fluctuation when the pace of economic activity is slowing down is called A) a reduction.
B) a contraction.
C) a depression.
D) a slowdown.
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Chapter 8: Measuring the Economys Performance
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Q1) Which of the following is included in GDP?
A) A newly laid-off worker receives his $400 unemployment compensation check from the state government.
B) A college senior receives a $1,000 graduation gift from a grandparent.
C) You buy a $12 snow shovel to have on hand for the next snow storm.
D) You purchase $300 worth of clothes from a thrift shop selling second-hand clothing.
Q2) National income is
A) the total of factor payments to owners of resources.
B) the dollar value of all final goods and services produced in a country in a year.
C) the amount of monetary payments households actually receive before paying personal income taxes.
D) the amount of monetary payments households actually receive after paying personal income taxes.
Q3) The two main approaches to measuring GDP are the
A) concept approach and the reality approach.
B) flow approach and the stock approach.
C) government approach and the consumer approach.
D) income approach and the expenditure approach.
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Page 10
Chapter 9: Global Economic Growth and Development
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Sample Questions
Q1) Which of the following factors would economists consider "key" to economic development?
A) expansionary monetary policy
B) establishing a system of property rights
C) policies that promote consumption expenditures by households
D) All of the above are correct
Q2) A higher rate of saving should lead to
A) higher current consumption.
B) less growth.
C) more investment, higher capital growth, and more future consumption.
D) a higher price level and reduced future consumption.
Q3) Free trade is viewed as key to economic development because
A) it encourages a faster spread of technology.
B) it encourages a country's exports only.
C) it brings in expensive new technology.
D) none of the above is correct.
Q4) What is economic growth and why are growth rates so important?
Q5) Would a new growth theorist expect economic growth to be very rapid in one of the Communist nations before the fall of Communism? Why or why not?
Page 11
Q6) Explain the relationship between economic growth and labor productivity.
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Chapter 10: Real GDP and the Price Level in the Long Run
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Q1) All of the following explain the downward slope of the aggregate demand curve EXCEPT
A) changes in the stock of real wealth held by individuals.
B) the effect of changing interest rates on the quantity demanded of interest-rate-sensitive goods.
C) the availability of foreign substitute goods.
D) the presence of unused production capacity and unemployment.
Q2) The level of real GDP identified by the long-run aggregate supply curve is A) the full-employment level of real GDP.
B) the level of GDP at which each business firm is experiencing growth in sales.
C) the level of GDP at which each industry is experiencing growth in sales.
D) the level of GDP at which no one is below the poverty line.
Q3) If a nation's production possibilities curve shifts outward, we should expect its long-run aggregate supply curve to A) have an upward movement along the curve. B) have a downward movement along the curve. C) have a rightward shift.
D) have a leftward shift.
Q4) What is the shape of the long-run aggregate supply curve? Why?
Q5) What causes the aggregate demand curve to shift?
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Chapter 11: Classical and Keynesian Macro Analyses
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Sample Questions
Q1) The Keynesian short-run aggregate supply curve is demonstrated graphically as a A) vertical line.
B) horizontal line.
C) upward sloping curve.
D) downward sloping curve.
Q2) Say's law implies that
A) the willingness to purchase other goods is unrelated to the production of goods and services.
B) producing goods and services generates the means and the willingness to purchase other goods and services.
C) prices and wages are sticky downwards.
D) wages and prices are inflexible.
Q3) The equilibrating force in the credit market in the classical model is
A) the interest rate.
B) the price level.
C) full employment.
D) fiscal policy.
Q4) What is the shape of the modern short-run aggregate supply (SRAS) curve? Why?
Q5) What is Say's Law and what does it mean?
Q6) What effect does a stronger dollar have on aggregate supply? Why?
Page 13
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Chapter
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Q1) In the above figure, the sum of real planned investment spending, government expenditures, and net export spending is equal to
A) $0.5 trillion.
B) $1.0 trillion.
C) $1.5 trillion.
D) $2.0 trillion.
Q2) At the point at which the consumption function intersects the 45 degree reference line
A) planned real consumption equals real disposable income.
B) equilibrium output is supply determined equilibrium output is determined by both.
C) planned real saving equals real disposable income.
D) planned real consumption of real disposable income equals zero.
Q3) Autonomous consumption is the level of consumption that is
A) consistent with the average standard of living.
B) observed at the poverty line.
C) independent of real income.
D) available to someone earning the minimum wage.
Q4) Explain how the aggregate demand curve is related to the C + I + G + X curve.
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14
Chapter 13: Fiscal Policy
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Sample Questions
Q1) The existence of automatic stabilizers will
A) reduce the recognition lag of discretionary fiscal policy.
B) eliminate recessions.
C) reduce the size of recessionary and inflationary gaps.
D) cause the effects of shocks to aggregate demand to have a larger effect on GDP.
Q2) Automatic stabilizers are so-named because
A) they are automatically undertaken by the Federal Reserve Bank to reduce budget deficits.
B) they occur automatically when real GDP changes.
C) the policy suggestions of the Council of Economic Advisors are automatically followed.
D) the policy suggestions of the Office of Management and Budget are automatically followed.
Q3) All of the following are automatic fiscal stabilizers EXCEPT
A) a congressionally mandated decrease in tax rates to stimulate the economy.
B) a decrease in unemployment compensation payments during an expansion.
C) a decrease in overall tax revenues during a recession.
D) an increase in unemployment expenditures during a recession.
Q4) What is supply-side economics?
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Chapter 14: Deficit Spending and the Public Debt
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Q1) Which of the following statements is true about the public debt and future generations?
A) Future generations will always be worse off because they will have to pay off the public debt.
B) Increased consumption today will lead to increases in the capital stock in the future.
C) Future generations may be better off if the rate of return on the borrowed funds is higher than the interest rate paid to foreign residents.
D) The public debt cannot be held by foreign residents therefore we really owe the debt to ourselves.
Q2) Some economists believe that deficit spending can impose a burden on future generations. Which of the following does NOT explain the burden?
A) Investment will be crowded out by an increase in current consumption.
B) Deficit spending that is allocated to purchases leads to long-term increases in real GDP.
C) Future generations will have a smaller capital stock that will reduce their wealth.
D) Future generations will have to be taxed at a higher rate.
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Chapter 15: Money, Banking, and Central Banking
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Sample Questions
Q1) All of the following are examples of financial intermediaries EXCEPT
A) credit unions.
B) insurance companies.
C) retirement funds.
D) stock exchanges.
Q2) Beginning in late 2010, the FDIC sought to increase the public's confidence in depository institutions by
A) lowering insurance premiums for bank deposits.
B) eliminating insurance premiums for bank deposits.
C) assessing insurance premiums on banks' total liabilities.
D) changing the scope of insurance to banks' assets.
Q3) The process in which financial institutions accept savings from businesses, households, and governments and lend the funds to other businesses, households, and governments is called A) central banking system.
B) financial intermediation.
C) moral hazard.
D) adverse selection.
Q4) For the United States, what is money based on the transactions approach to measuring money?
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Chapter 16: Domestic and International Dimensions of Monetary Policy
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Q1) In the above figure, assume the economy starts out in equilibrium at point d. If the Fed increases the money supply so that the new aggregate demand curve is AD<sub>3</sub>, then the long-run equilibrium will be at point
A) a.
B) b.
C) c.
D) i.
Q2) In the real world, contractionary monetary policy would be used to
A) combat a recession.
B) reduce the rate of inflation.
C) increase nominal GDP.
D) increase long-run aggregate supply.
Q3) Which Federal Reserve Bank now regularly tracks target levels for the federal funds rate predicted by a basic Taylor-rule equation?
A) Boston
B) Chicago
C) New York
D) St. Louis
Q4) What is meant by the demand for money?
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Chapter 17: Stabilization in an Integrated World Economy
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Q1) Based on the work of economist A.W. Phillips, economists concluded that
A) there is no trade-off between inflation and unemployment.
B) high inflation rates are associated with low unemployment rates.
C) unemployment can be effectively combated by raising wages.
D) higher rates of inflation are associated with higher rates of unemployment.
Q2) What kinds of unemployment are associated with the natural rate of unemployment?
Q3) Suppose that the economy is in long-run equilibrium and the government decided to engage in unexpected contractionary policy by decreasing the money supply. If we assume rational expectations, which of the following statements is correct about the effect of contractionary policy in the long run?
A) The unemployment rate will increase, real GDP will increase and the price level will increase.
B) The unemployment rate will decrease, real GDP will decrease and the price level will decrease.
C) The unemployment rate will remain unchanged, real GDP will remain unchanged and the price level will increase.
D) The unemployment rate will remain unchanged, real GDP will remain unchanged and the price level will decrease.
Q4) Describe and explain the real business cycle theory.
Page 19
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Chapter 18: Policies and Prospects for Global Economic Growth
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Q1) Discuss the rationales for foreign financing of investment in developing actions and explain how developing countries benefit from international capital investment.
Q2) What will happen to the annual rate of growth of per capita real GDP if the annual rate of population growth increases and the annual rate of growth of real GDP goes down?
A) It will increase since an increase in population means an increase in labor that translates into an increase in real GDP.
B) It will increase since the annual rate of growth of real GDP does not influence the growth rate of per capita real GDP.
C) It will decrease since an increase in the growth rate of population and a decrease in the growth rate of real GDP both work to decrease the growth of per capita real GDP. D) The effect will depend upon whether the rate of population growth is greater than or less than the rate of growth of real GDP.
Q3) What is the mission of the World Bank?
Q4) What is the mission of the International Monetary Fund (IMF)?
Q5) What are the sources of private investments in foreign nations?
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Chapter 19: Demand and Supply Elasticity
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Q1) The price elasticity of demand is measured by the A) percentage change in quantity demanded divided by the percentage change in price.
B) percentage change in price divided by the percentage change in quantity demanded.
C) change in quantity demanded divided by the change in price.
D) change in price divided by the change in quantity demanded.
Q2) A perfectly inelastic demand curve is
A) a horizontal straight line.
B) a vertical straight line.
C) a downward sloping straight line that intersects the horizontal axis at the origin.
D) an upward sloping straight line that crosses the vertical axis.
Q3) A measure of the responsiveness of demand to changes in income, all other things being constant, is
A) income elasticity of demand.
B) price income elasticity of demand.
C) price elasticity of demand.
D) cross price elasticity of demand.
Q4) Which has a more elastic demand: hamburger or beef?
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Chapter 20: Consumer Choice
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Q1) If two units of a good provide 7 utils and the marginal utility of the third unit of the good is 2 utils, what is the total utility from consuming three units of the good?
A) 3 utils
B) 7 utils
C) 9 utils
D) 10 utils
Q2) Assuming that the marginal utility of the first four pieces of candy was 30, 28, 24, and 18 respectively, how much total utility was derived from eating the first three pieces of candy?
A) 58
B) 82
C) 54
D) 100
Q3) Other things being equal, when the money price of a good increases, its relative price
A) stays the same.
B) increases.
C) decreases.
D) falls to zero.
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Page 22
Chapter 21: Rents, Profits, and the Financial Environment of Business
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Q1) "Economic profits are less than or at most equal to accounting profits." Do you agree or disagree? Explain.
Q2) Normal rate of return is
A) accounting profit.
B) an explicit cost.
C) economic profit.
D) the amount that must be paid to obtain investment in a business.
Q3) Present value is
A) unrelated to the rate of interest.
B) lower the longer the time horizon.
C) not expressed in today's dollars.
D) opposite the time value of money.
Q4) Interest rates perform the function of
A) signaling information about the inflation rate.
B) allocating funds, but only in the consumer sector.
C) allocating funds, which determines the allocation of physical capital.
D) rewarding those who save but has no direct allocative role.
Q5) If the random walk theory is correct, then is there any way to "beat the market"?
Q6) What is a normal rate of return?
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Chapter 22: The Firm: Cost and Output Determination
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Q1) What is minimum efficient scale? Why is it important?
Q2) If a farmer seeks to buy one-hundred more acres for her kiwi fruit farm, she is making a
A) long-run decision.
B) short-run decision.
C) immediate-run decision.
D) variable-input decision.
Q3) Using the above table, the AFC, the AVC, and the ATC when output is 1 unit are
A) $10, $10, and $20, respectively.
B) $5, $10, and $15, respectively.
C) $0, $10, and $10, respectively.
D) $5, $10, and $5, respectively.
Q4) When marginal product is rising,
A) total product is falling.
B) marginal cost is falling.
C) marginal cost is rising.
D) average fixed cost is rising.
Q5) "A firm cannot experience both economies of scale and diminishing marginal product." Do you agree or disagree? Why?
Page 24
Q6) What factors generate economies of scale?
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Chapter 23: Perfect Competition
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Q1) In a perfectly competitive market structure both buyers and sellers have equal access to information. This implies
A) the products sold will be alike.
B) firms will move labor and capital in pursuit of profit-making opportunities to whatever business venture gives them the highest return on their investment.
C) no one buyer or seller has any influence on price.
D) consumers are able to find out about lower prices charged by other firms.
Q2) Which of the following statements is not true for a perfectly competitive firm?
A) A firm's demand curve is horizontal.
B) The firm can influence its demand curve by advertising its product.
C) The firm's demand curve is perfectly elastic.
D) The market demand and supply curves determine the market price.
Q3) The short-run supply curve of a perfect competitor is
A) its average variable cost curve.
B) its marginal revenue curve.
C) its entire marginal cost curve.
D) its marginal cost curve equal to or above the minimum point on its average variable cost curve.
Q4) How do we determine whether a firm has maximized profits?
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Chapter 24: Monopoly
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Q1) The demand curve faced by the monopolist
A) has a constant price elasticity.
B) is the industry demand curve.
C) is identical to the firm's MR curve.
D) is identical to the firm's TR curve.
Q2) Economies of scale can
A) result in an increasing cost industry.
B) cause input prices to drop.
C) prevent the entry of new firms into a market.
D) reduce the rate of return which the firm may earn.
Q3) Unlike a perfectly competitive firm, a monopolist faces a demand curve that is A) upward sloping.
B) horizontal.
C) vertical.
D) downward sloping.
Q4) Economies of scale may be a barrier to entry in a situation in which
A) only small-scale production can lower the per-unit cost of production.
B) only small-scale production can meet the constantly changing market demand.
C) only large-scale production can lower the per-unit cost of production.
D) large-scale production is inefficient.
Page 26
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Chapter 25: Monopolistic Competition
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Q1) In the above figure for a monopolistically competitive firm, the total economic profit at the profit-maximizing point is
A) $0
B) $240
C) $360
D) $300
Q2) The distinguishing of products by brand name, color, and other attributes
A) is known as interdependence.
B) is known as product differentiation.
C) leads to many firms in the market.
D) leads to collusion.
Q3) At its profit-maximizing output, the firm in the above figure incurs a total cost of production of
A) $7,000.
B) $9,000.
C) $6,300.
D) $3,900.
Q4) Why do firms in a monopolistically competitive industry advertise?
Q5) Explain how information products are "special."
Q6) How does an information product differ from a product such as a desk?
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Chapter 26: Oligopoly and Strategic Behavior
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Q1) A game in which the players neither negotiate nor coordinate in any way is a A) cooperative game.
B) noncooperative game.
C) zero-sum game.
D) negative-sum game.
Q2) When a consumer's willingness to buy a good or service is influenced by the number of people who have purchased that good or service, this is called A) a switching cost.
B) an opportunity cost.
C) a network effect.
D) an advertising gimmick.
Q3) Within a game theory model, if a change in decision-making raises corporation A's profits by $50 and lowers corporation B's profits by $60, the game is a A) negative-sum game.
B) zero-sum game.
C) positive-sum game.
D) cooperative game.
Q4) Distinguish between a horizontal merger and a vertical merger.
Q5) Why would a member of a cartel cheat?
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Chapter 27: Regulation and Antitrust Policy in a Globalized Economy
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Sample Questions
Q1) Clarke's gas station in Podunk only sells gasoline if customers also purchase oil.
A) This is called a tie-in sale and is in violation of antitrust laws.
B) This is not in violation of antitrust laws, as cars need both oil and gas.
C) This is not in violation of antitrust laws, as consumers get the oil below market prices.
D) This is in violation of the Robinson-Patman Act.
Q2) The problem of excess pollution mainly occurs because of A) asymmetric information.
B) a positive externality.
C) a negative externality.
D) a monopoly.
Q3) One of the elements of monopolization is
A) having a monopoly.
B) wanting to be a monopoly and wanting to earn monopoly profits.
C) monopoly pricing.
D) the willful acquisition of monopoly power.
Q4) "As compared to the benefits of economic and social regulation, the costs are minimal." Do you agree or disagree? Why?
Q5) Discuss the important provisions of the Sherman Antitrust Act of 1890.
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Chapter 28: The Labor Market: Demand, Supply and Outsourcing
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Sample Questions
Q1) A fall in the price of the final product produced by a firm will cause
A) a decline in the price of an input used to produce the good.
B) a movement down the demand curve for an input used to produce the final product.
C) a reduction in demand for an input used to produce the final product.
D) a reduction in the supply of an input used to produce the final product.
Q2) Refer to the above table. Suppose the price of the good sold is $4 and the marginal factor cost of labor is $600, how many units of labor will the firm hire?
A) 4.
B) 5.
C) 6.
D) 3.
Q3) The cost of hiring one more worker, ceteris paribus, is known as
A) marginal revenue product.
B) marginal physical product.
C) marginal factor cost.
D) marginal wage.
Q4) What can cause the demand curve for labor to shift? Explain.
Q5) What is marginal factor cost? How is it related to the supply curve of an input?
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Chapter 29: Unions and Labor Market Monopoly Power
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Q1) The National Labor Relations Act (Wagner Act)
A) prohibited the creation of company unions.
B) guaranteed workers the right to organize.
C) set the minimum wage at $5.15 an hour.
D) set the length of the workweek at 40 hours.
Q2) A right-to-work state is one in which
A) unions are illegal.
B) there is guaranteed employment for all citizens.
C) the union shop is prohibited.
D) the closed shop is permitted.
Q3) Which of the following is FALSE regarding a monopsonist?
A) The monopsonist is the only buyer in a market.
B) The monopsonist faces an upward sloping labor supply curve.
C) The monopsonist faces an upward sloping labor demand curve.
D) The monopsonist faces the entire market labor supply curve.
Q4) Which is NOT one of the potential benefits of labor unions?
A) Unionism raises social efficiency.
B) Unions appear to reduce wage inequality.
C) Unions may reduce a company's profits.
D) Unions may have contributed to safer working conditions.
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Chapter 30: Income, Poverty, and Health Care
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Q1) The earnings of most people
A) increase steadily until retirement.
B) increase with age until around age 50 due to increased experience, training, and hours worked.
C) increase with age until around age 40 due to increased experience and hours worked.
D) increase with age until around age 60 due to increased experience, training, and hours worked, then level off as hours worked levels off.
Q2) Which of the following statements about the Supplemental Security Income (SSI) program is FALSE?
A) It is designed to establish nationwide minimum incomes for the aged, the blind, and the disabled
B) Benefits are based on need.
C) Recipients who receive benefit payments under Social Security are also eligible for SSI.
D) It covers children and individuals with mental disabilities, including drug addicts and alcoholics.
Q3) Why doesn't the age-earning cycle continuously increase until retirement age?
Q4) Draw and explain a Lorenz curve.
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Chapter 31: Environmental Economics
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Q1) The marginal benefit of the pollution abatement curve
A) has a zero slope.
B) has a positive slope.
C) slopes upward.
D) slopes downward.
Q2) Which of the following statements is true about the optimal quantity of pollution?
A) It equals zero.
B) Pollution abatement should continue up to the point where marginal cost equals the average total cost.
C) Trade-offs exist between producing a cleaner environment and producing other goods and services.
D) Firms should be allowed to determine the profit-maximizing amount of pollution abatement.
Q3) There is an externality present only when
A) private costs diverge from social costs.
B) private benefits diverge from social benefits.
C) private costs or benefits diverge from social costs or benefits.
D) private costs equal social costs.
Q4) Explain how the optimal quantity of air pollution is determined.
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Chapter 32: Comparative Advantage and the Open Economy
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Q1) Since 1950, the volume of world trade and the volume of world real GDP
A) have both increased at roughly the same rate.
B) have both decreased at roughly the same rate.
C) have both increased, but the volume of world trade has increased more slowly than the volume of world real GDP.
D) have both increased, but the volume of world trade has increased faster than the volume of world real GDP.
Q2) Which of the following is NOT a benefit of international trade?
A) It increases overall output.
B) It results in a transmission of ideas.
C) It promotes self-sufficiency.
D) It results in the transmission of new processes.
Q3) Use the above table. Assuming constant opportunity costs, a comparative advantage in producing wine is possessed by
A) neither Argentina or France.
B) both Argentina and France.
C) Argentina.
D) France.
Q4) How can comparative advantage yield gains from trade?
Page 34
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Chapter 33: Exchange Rates and the Balance of Payments
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Q1) Jane has just sent a gift that was made in the U.S. to her relatives in Italy. As far as the balance of payments is concerned this gift will
A) have no influence on the balance of payments since it was made in the U.S.
B) be part of the capital account since the gift is a physical item.
C) be considered an export since it has left the U.S.
D) be part of the current account as a unilateral transfer.
Q2) In the above table, the merchandise trade balance for Country X is ________ billion dollars.
A) +100
B) -150
C) +150
D) -10
Q3) Unilateral transfers are
A) transactions that take place across national boundaries but in which both transactions are citizens of the same country.
B) government transactions that use gold and other official reserves.
C) gifts from a resident of one country to a resident in a foreign country.
D) the payments of interest to residents of another country.
Q4) Why does the supply curve of Japanese yen slope up?
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