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5 Steps To A 5 AP Microeconomics Macroeconomics 2008-2009 2nd Edition Eric Dodge - Solutions

The elasticity of supply is typically greater when(A) producers have fewer alternative goods to produce.(B) producers have less time to respond to price changes.(C) producers are operating near the limits to their production.(D) producers have less access to raw materials necessary for
Which of the following is a fundamental aspect of the free market system?(A) A high degree of government involvement.(B) Public ownership of resources.(C) Private property.(D) Central planners set wages and prices.(E) Employers consult government agencies for guidance in hiring workers with
Which of the following goods is likely to have the most elastic demand curve?(A) Demand for white Ford minivans.(B) Demand for automobiles.(C) Demand for Ford automobiles.(D) Demand for American-made automobiles.(E) Demand for a Ford minivan.
An effective price ceiling in the market for good X likely results in(A) a persistent surplus of good X.(B) a persistent shortage of good X.(C) an increase in the demand for good Y, a substitute for good X.(D) a decrease in the demand for good Z, a complement with good X.(E) a rightward shift in
Which of the following certainly lowers the equilibrium price of a good exchanged in a competitive market?(A) The demand curve shifts to the right.(B) The supply curve shifts to the left.(C) The demand curve shifts to the left and the supply curve shifts to the right.(D) The demand curve shifts to
A competitive market for coffee, a normal good, is currently in equilibrium. Which of the following would most likely result in an increase in the demand for coffee?(A) Consumer income falls.(B) The price of tea rises.(C) The wage of coffee plantation workers falls.(D) Technology in the harvesting
A rational consumer who is eating Girl Scout cookies stops eating when(A) the total benefit equals the total cost of eating cookies.(B) the marginal benefit equals the marginal cost of the next cookie.(C) the marginal cost of eating cookies is maximized.(D) the marginal benefit of eating cookies is
Which of the following scenarios would increase a nation’s production possibility frontier (PPF)?(A) The nation’s system of higher education slowly declines in quality.(B) The nation invests in research and development of new technology.(C) The nation’s infant mortality rate increases.(D)
The figure above shows the production possibility frontiers (PPFs) for two nations that produce crabs and cakes. If these nations specialize and trade based on the principle of comparative advantage, which of the following trade agreements benefit both nations?(A) Nation A trades three crabs to
Which of the following is likely to have a demand curve that is the least elastic?(A) Demand for the perfectly competitive firm’s output.(B) Demand for the oligopoly firm’s output with a homogenous product.(C) Demand for the oligopoly firm’s output with a differentiated product.(D) Demand for
The law of increasing costs is useful in describing(A) a demand curve.(B) a marginal benefit curve.(C) a linear production possibility frontier.(D) a concave production possibility frontier.(E) a total fixed costs curve.
Land, labor, capital and entrepreneurial talent are often referred to as(A) production possibilities.(B) goods and services.(C) unlimited human wants.(D) opportunity costs.(E) scarce economic resources.
Lower interest rates in the United States cause the value of the dollar and exports to change in which of the following ways?
Which of the following likely results in a permanent increase in a nation’s productive capacity?(A) A decline in the birth rate.(B) Declining adult literacy rates.(C) Widespread relocation of manufacturing firms to low-wage nations.(D) National program of child immunization.(E) A global increase
When a nation is operating at the natural rate of employment,(A) there is no cyclical unemployment.(B) the inflation rate is zero.(C) there is no structural unemployment.(D) the nation is experiencing a recession.(E) the unemployment rate is zero.
A negative, or contractionary, supply shock will(A) shift the Phillips curve to the left.(B) shift the investment demand curve to the right.(C) shift the money demand curve to the right.(D) shift the money supply curve to the left.(E) shift the Phillips curve to the right
The short-run Phillips curve depicts the ____ relationship between ____ and ____.(A) positive, price level, interest rate(B) negative, interest rate, private investment(C) negative, the inflation rate, the unemployment rate(D) positive, price level, real GDP(E) negative, interest rate, money demand
Labor productivity and economic growth increase if(A) a nation subsidizes education for all citizens.(B) a nation imposes tariffs and quotas on imported goods.(C) a nation removes penalties for firms that pollute natural resources.(D) a nation ignores societal barriers like discrimination.(E) a
Which of the following is an example of expansionary monetary policy for the Federal Reserve?(A) Increasing the discount rate.(B) Increasing the reserve ratio.(C) Buying Treasury securities from commercial banks.(D) Lowering income taxes.(E) Removal of import quotas.
Which of the following is true of automatic fiscal policy stabilizers?(A) For a given level of government spending, they produce a deficit during a recession and a surplus during an expansion.(B) They serve to prolong recessionary and inflationary periods.(C) The regressive tax system is a
Economic growth is best described as(A) an increase in the production possibility frontier and an increase in the natural rate of unemployment.(B) an increase in the production possibility frontier and a leftward shift in long-run aggregate supply.(C) a decrease in the production possibility
A nation that must consistently borrow to cover annual budget deficits risks(A) a depreciation of the nation’s currency as foreigners increase investment in the nation.(B) a decline in net exports as the nation’s goods become more expensive to foreign consumers.(C) lower interest rates that
Which of the following would likely contribute to faster rates of economic growth?(A) A more restrictive immigration policy.(B) Negative net investment.(C) Higher taxes on households and firms.(D) Higher government funding of research on clean energy supplies.(E) Protective trade policies.
If the Federal Reserve was concerned about the“crowding out” effect, they could engage in(A) expansionary monetary policy by lowering the discount rate.(B) expansionary monetary policy by selling Treasury securities.(C) contractionary monetary policy by raising the discount rate.(D)
Which of the following is a predictable consequence of import quotas?(A) Increased competition and lower consumer prices.(B) Increased government tax revenue from imported goods.(C) Rising net exports and a rightward shift in aggregate supply.(D) An improved allocation of resources away from
The “crowding out” effect refers to which of the following?(A) Lower interest rates that result from borrowing to conduct expansionary monetary policy.(B) Higher interest rates that result from borrowing to conduct contractionary fiscal policy.(C) Higher interest rates that result from
Which of the following best describes a key difference between the short-run and long-run aggregate supply curve?(A) Short-run aggregate supply is upward sloping as nominal wages quickly respond to price level changes.(B) Long-run aggregate supply is upward sloping as nominal wages quickly respond
Suppose a nation is experiencing an annual budget surplus and uses some of this surplus to pay down part of the national debt. One potential side effect of this policy would be(A) increase interest rates and throw the economy into a recession.(B) increase interest rates and depreciate the
If $1000 is deposited into a checking account and excess reserves increase by $700, the reserve ratio must be:(A) 70%(B) 30%(C) 40%(D) 90%(E) 75%
Suppose today’s headline is that private investment has decreased as a result of an action by the Federal Reserve. Which of the following choices is the most likely cause?(A) Selling Treasury securities to commercial banks.(B) Lowering of the discount rate.(C) Decreasing the reserve ratio.(D)
If the reserve ratio is 10 percent and a new customer deposits $500, what is the maximum amount of money created?(A) $500(B) $4500(C) $5000(D) $50(E) $5500
All else equal, when the United States exports more goods and services,(A) the value of the dollar falls as the supply of dollars increases.(B) the value of the dollar rises as demand for dollars increases.(C) the value of the dollar falls as demand for dollars decreases.(D) the value of the dollar
The fractional reserve banking system’s ability to create money is lessened if(A) households that borrow redeposit the entire loan amounts back into the banks.(B) banks hold excess reserves.(C) banks loan all excess reserves to borrowing customers.(D) households increase checking deposits in
Assuming that households save a proportion of disposable income, which of the following relationships between multipliers is correct?(A) Tax multiplier > Spending multiplier >Balanced budget multiplier.(B) Spending multiplier = Tax multiplier >Balanced budget multiplier.(C) Spending multiplier >
Which of the following is a component of the M1 measure of money supply?(A) Savings deposits(B) Gold bullion(C) Cash and coins(D) 30-year Treasury certificates(E) 18-month certificates of deposits
If the economy is experiencing an inflationary gap, which of the following is most likely to worsen the problem?(A) An increase in government spending matched by an equal increase in taxes.(B) An increase in government spending with no change in taxes.(C) A decrease in government spending and a
Expansionary monetary policy is designed to(A) lower the interest rate, increase private investment, increase aggregate demand, and increase domestic output.(B) lower the interest rate, increase private investment, increase aggregate demand, and increase the unemployment rate.(C) increase the
If a nation is operating at full employment, and the central bank engages in contractionary monetary policy, the nation can expect the interest rate, the purchases of new homes, and the unemployment rate to change in which of the following ways?
If current real GDP is $5000, and full employment real GDP is at $4000, which of the following combinations of policies might have brought the economy to this point?(A) A decrease in taxes and a lower discount rate.(B) An increase in government spending and an increase in taxes.(C) A decrease in
U.S. real GDP most likely falls when(A) tariffs and quotas are removed.(B) investment in human capital is high.(C) the money supply is increased.(D) there is a trade surplus in goods and services.(E) the value of the dollar, relative to foreign currencies, is high.
If households are more optimistic about the future, how would the consumption function be affected?(A) The marginal propensity to consume would increase, increasing the slope of the consumption function.(B) The entire consumption function would shift downward.(C) The entire consumption function
Suppose that households increase the demand for U.S. Treasury bonds as financial assets. Which of the following accurately describes changes in the money market, the interest rate, and the value of the dollar in foreign currency markets?
At the peak of a typical business cycle, which of the following is likely the greatest threat to the macroeconomy?(A) Unemployment(B) Bankruptcy(C) Declining labor productivity(D) Falling real household income(E) Inflation
Investment demand most likely increases when(A) real GDP increases.(B) the cost of acquiring and maintaining capital equipment rises.(C) investor optimism improves.(D) the real rate of interest rises.(E) taxes on business investment rise.
Higher levels of consumer wealth and optimism would likely have which of the following changes in the market for loanable funds?
Which of the following represents a combination of contractionary fiscal and expansionary monetary policy?
Households demand more money as an asset when(A) nominal GDP falls.(B) the nominal interest rate falls.(C) bond prices fall.(D) the supply of money falls.(E) nominal GDP increases.
Which of the following tends to increase the spending multiplier?(A) An increase in the marginal propensity to consume.(B) A decreased velocity of money.(C) An increase in the marginal propensity to save.(D) An increase in the real interest rate.(E) An increase in the price level.
When nominal GDP is rising, we would expect money demand to(A) increase as consumers demand more money as a financial asset, increasing the interest rate.(B) increase as consumers demand more money for transactions, increasing the interest rate.(C) decrease as the purchasing power of the dollar is
When both aggregate supply and aggregate demand increase, which of the following can be said for certain?(A) The price level rises, but real GDP falls.(B) Both the price level and real GDP rise.(C) The price level rises, but the change in real GDP is uncertain.(D) The price level falls, but real
Which of the following most likely increases aggregate demand in the United States.?(A) An American entrepreneur founds and locates a software company in London.(B) The U.S. military relocates a military base from San Diego to Seattle.(C) The Chinese government makes it increasingly difficult for
Which of the following is true of the complete circular flow model of an open economy?(A) All goods and services flow through the government in exchange for resource payments.(B) There is no role for the foreign sector.(C) Households supply resources to producers in exchange for goods and
What does the presence of discouraged workers do to the measurement of the unemployment rate?(A) Discouraged workers are counted as “out of the labor force,” thus understating the unemployment rate, making the economy look stronger than it is.(B) Discouraged workers are counted as “out of the
In the long run, aggregate supply is(A) upward sloping at full employment.(B) horizontal below full employment.(C) vertical at full employment.(D) vertical below full employment.(E) vertical above full employment.
The economy is currently operating at full employment. Assuming flexible wages and prices, how would a decline in aggregate demand affect GDP and the price level in the short run, and GDP and the price level in the long run?
A likely cause of falling Treasury bond prices might be(A) expansionary monetary policy.(B) contractionary monetary policy.(C) a depreciating dollar.(D) fiscal policy designed to reduce the budget deficit.(E) a decrease in the money demand.
Which of the following policies best describes supply-side fiscal policy?(A) An increase in the money supply.(B) Increased government spending.(C) Lower taxes on research and development of new technology.(D) Lower taxes on household income.(E) More extensive government social welfare programs.
Some economists believe that when aggregate demand declines, prices are inflexible or “sticky”in the downward direction. This implies that the aggregate supply curve is(A) upward sloping at full employment.(B) horizontal below full employment.(C) vertical at full employment.(D) vertical below
Which of the following scenarios best describes the concepts of scarcity and opportunity cost?(A) As a birthday present, your cousin sends you a $20 bill.(B) Your state government, in order to increase support for higher education, must increase the sales tax to keep the budget balanced.(C) Your
Suppose that the unemployment rate falls from 6 percent to 5 percent and the inflation rate falls from 3 percent to 2 percent. Which of the following best explains these trends?(A) An increase in aggregate demand.(B) A decrease in both aggregate demand and aggregate supply.(C) An increase in both
Which of the following lessens the impact of expansionary fiscal policy?(A) An increase in the marginal propensity to consume.(B) Lower interest rates that cause a decrease in net exports.(C) Higher interest rates that cause an increase in net exports.(D) Higher interest rates that decrease private
Which of the following best measures changes in the price level of national product?(A) The consumer price index.(B) The real interest rate.(C) The unemployment rate.(D) The producer price index.(E) The GDP deflator.
If your nominal income rises 4 percent and your real income falls 1 percent, by how much did the price level change?(A) 5 percent decrease(B) 1⁄4 percent increase(C) 3 percent increase(D) 3 percent decrease(E) 5 percent increase
Which of the following statements are true?I. The velocity of money is equal to real GDP divided by the money supply.II. Dollars earned today have more purchasing power than dollars earned a year from today.III. The supply of loanable funds consists of investors.(A) I only(B) II only(C) III only(D)
Which of the following are harmed by unexpectedly high rates of inflation?I. Borrowers repaying a long-term loan at a fixed interest rate.II. Savers who have put their money in longterm assets that pay a fixed interest rate.III. Workers who have negotiated cost-of-living raises into their
The government has just lowered personal income taxes. Which of the following best describes the effects that this policy has on the economy?(A) Higher disposable income, higher consumption, higher real GDP, lower unemployment.(B) Higher disposable income, lower consumption, higher real GDP, lower
Which of the following is characteristic of a centrally planned economic system?(A) Resources are allocated based on relative prices.(B) The circular flow of goods and services minimizes the role of the federal government.(C) Private ownership of resources is fundamental to economic growth.(D)
An increase in the Consumer Price Index is commonly referred to as(A) economic growth.(B) inflation.(C) unemployment.(D) discouraged workers.(E) deflation.
Corn is exchanged in a competitive market. Which of the following definitely increases the equilibrium price of corn?(A) Both supply and demand shift rightward.(B) Both supply and demand shift leftward.(C) Supply shifts to the right; demand shifts to the left.(D) Supply shifts to the left; demand
How would fiscal and monetary policymakers combine spending, tax, and monetary policy to fight a recessionary gap, while avoiding large budget deficits?
A nation is producing at a point inside of its production possibility frontier. Which of the following is a possible explanation for this outcome?(A) This nation has experienced a permanent decrease in its production capacity.(B) This nation has experienced slower than usual technological
Which of the following statements are true of production possibility frontiers and trade between nations?I. Nations specialize and trade based on comparative advantage in production.II. Free trade allows each nation to consume beyond the production possibility frontier.III. The flow of goods and
The production of pork on large corporate hog farms generates pollution that seeps into the ground and can pollute the local well-water supply.(A) From society’s perspective, use marginal analysis to explain how the competitive market creates a misallocation of resources in the market for
Molly’s lemonade stand employs only labor and lemons to produce lemonade. The table below shows how total production changes at different combinations of labor and lemons. Lemonade sells in a competitive market at $1 per cup.
Bob’s Beans is a perfectly competitive soybean producer. The short-run price of soybeans is currently below average total cost, but above Bob’s shut-down point.(A) Using two correctly labeled graphs, show the soybean market side-by-side with Bob’s Beans. Clearly indicate which graph
If the market for this good was in equilibrium at Q2, but the socially optimal output was Q1, the government could best remedy this —— of resources by legislating a ——on ——of the good.(A) underallocation, per unit tax, consumers(B) overallocation, per unit subsidy, consumers(C)
Which of the following is the best example of the free-rider effect?(A) You and a friend take a road trip to Florida in your friend’s car. You pay for the gas.(B) In exchange for tutoring your friend in economics, she helps you with your geometry assignment.(C) You have ordered a big college
The sales tax that you pay at the grocery store is commonly labeled a(A) progressive tax.(B) regressive tax.(C) proportional tax.(D) excise tax.(E) tax bracket.
A perfectly competitive employer hires labor up to the point where(A) wage = marginal factor cost.(B) wage = marginal product of labor.(C) wage = marginal revenue.(D) wage = marginal revenue product of labor.(E) wage = price of the good produced by the labor.
Which of the following is the best example of a negative externality and the appropriate plan for eliminating it?(A) Air pollution from a factory blows downwind and harms children in a small community. Tax the citizens of the community.(B) Your neighbor plants a fragrant blooming cherry tree in her
More college students are graduating with BA degrees in economics. Given this trend, we would expect the wage of BA economists, the employment of BA economists, and the demand for economics textbooks to change in which of the following ways?
In order to hire the least-cost combination of labor and capital, the firm must do which of the following?(A) Find the combination of labor and capital where the marginal product of labor is equal to the marginal product of capital.(B) Find the combination of labor and capital where the ratio of
A minimum wage in the market for fast food workers is likely to produce(A) an increase in the demand for fast food workers.(B) a decrease in the supply of fast food workers.(C) a shortage of fast food workers.(D) a lower price of fast food products.(E) a surplus of fast food workers.
An industry described as an oligopoly would most likely have(A) normal profits in the long run.(B) no opportunities for collusive behavior.(C) significant barriers to entry.(D) price-taking behavior.(E) one firm with no close rivals.
If the wage paid to all units of labor is $20, how many units of labor are employed?(A) 1(B) 2(C) 3(D) 4(E) 5
The marginal revenue product of the fourth unit of labor is equal to(A) $19(B) $16(C) $8(D) $20(E) $2
Which of the following is most likely to be true in the long run for a monopoly firm?(A) P = MR = MC = ATC(B) P = MR = MC > ATC(C) P > MR = MC = ATC(D) P = MR > MC = ATC(E) P > ATC > MR = MC
If a monopsony labor market suddenly were transformed into a perfectly competitive labor market, how would the wage and employment change?(A) Both would increase.(B) Both would decrease.(C) The wage would remain constant, but employment would increase.(D) The wage would fall, but employment would
In a competitive labor market for housepainters, which of the following would increase the demand for housepainters?(A) An effective minimum wage imposed on this labor market.(B) An increase in the price of gallons of paint.(C) An increase in the construction of new houses.(D) An increase in the
What is one reason why the government discourages collusion between large firms in the same industry?(A) Collusive output levels tend to increase, driving the price above competitive levels.(B) Consumer surplus falls as the price is driven downward.(C) Collusive output levels tend to decrease,
One of the reasons that the government discourages and regulates monopolies is that(A) producer surplus is lost and consumer surplus is gained.(B) monopoly prices insure productive efficiency, but cost society allocative efficiency.(C) monopoly firms do not engage in significant research and
Monopolistic competition is said to be productively inefficient because(A) the long-run price is above minimum average total cost.(B) long-run profits are positive.(C) firms engage in collusive behavior.(D) there exist no barriers to entry.(E) there exist diseconomies of scale.
If firms are entering an industry that is monopolistically competitive, we would expect(A) the demand for existing firms to shift rightward.(B) the market price of the product to increase.(C) the demand for existing firms to become more inelastic.(D) economic profits to rise for all firms.(E) the
Which is true of monopolistic competition?(A) Firms earn long-run economic profits.(B) P = MR = MC = ATC.(C) Firms spend money to differentiate and advertise their products.(D) In the long run the market is allocatively efficient.(E) Excess capacity is eliminated in the long run.
If this firm was operating in a perfectly competitive market, and the price was equal to 0g, economic profit would be equal to which of the following areas?(A) abcd(B) cdgh(C) cdef(D) efgh(E) abgh
The curve labeled 1 represents which of the following?(A) Marginal cost(B) Marginal product of labor(C) Average total cost(D) Average variable cost(E) Average fixed cost
The area 0abQ is equal to(A) total cost.(B) total variable cost.(C) total fixed cost.(D) marginal cost.(E) average product of labor.
When the marginal product of labor is equal to the average product of labor,(A) marginal product of labor is at its maximum.(B) marginal cost of production is at its minimum.(C) marginal cost is equal to minimum average variable cost.(D) average total cost is at its minimum.(E) total product of
If these firms do not collude, the outcome will be(A) Both firms maintain the status quo.(B) Both firms enter the market.(C) Firm X enters the market and Firm Y maintains the status quo.(D) Firm Y enters the market and Firm X maintains the status quo.(E) Both firms alternate between entering the
Dead weight loss is equal to which of the following areas?(A) abcd(B) cdfg(C) 0abQ1(D)Q1Q2gh(E) bdgh

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