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5 Steps To A 5 AP Microeconomics And Macroeconomics 1st Edition Eric Dodge - Solutions

56. Suppose the state requires hairdressers and manicurists to pass a series of exams to be certified cosmetologists. How does this policy change the supply of cosmetologists, the equilibrium wage, and the price of a manicure?Supply of Price of Cosmetologists Wage Manicures A. Decrease Increase
55. A cartel is often the result of A. perfectly competitive firms that agree to produce a homogenous product.B. oligopoly competitors that agree to restrict output to maximize joint profits.C. a monopoly that has been regulated by the government.D. a natural monopoly that has evolved into a
54. The price of labor is $5 and the price of capital is $10 per unit. Using the table below, what is the least cost combination of labor and capital that should be hired to produce 18 units of output?Marginal Marginal Units of Product of Units of Product of Labor Labor Capital Capital 1 6 1 8 2 4
53. A monopsony employer hires labor up to the point where A. Wage = Marginal Factor Cost.B. Marginal Factor Cost = Marginal Product of Labor.C. Marginal Factor Cost = Marginal Revenue Product of Labor.D. Wage = Marginal Revenue Product of Labor.E. Wage = Price of the good produced by the labor.
52. Which of the following increases the demand for interstate truck drivers?A. An increase in the wage of truck drivers.B. An increase in the supply of truck drivers.C. An increase in the price of diesel fuel, which is used to power semitrucks.D. A decrease in the demand for interstate shipping.E.
51. Which of the following would improve the efficiency of a monopoly market?A. The government regulates the monopolist to produce the output where marginal revenue equals marginal cost.B. The government provides additional legal barriers to entry.C. The government subsidizes the monopolist so that
50. If the government wishes to regulate a natural monopoly so that it earns a normal profit, it sets A. Price = Marginal Cost.B. Marginal Revenue = Marginal Cost.C. Price = Average Total Cost.D. Price = Marginal Revenue.E. Marginal Revenue = Average Total Cost.
49. Dead weight loss in industries with market power is a result of A. profit-maximizing output occurs where price equals marginal revenue.B. profit-maximizing output occurs where price exceeds marginal cost.C. profit-maximizing output occurs where price equals marginal cost.D. profit-maximizing
48. The monopolistically competitive price is above marginal revenue because A. firms have differentiated products.B. firms are price takers.C. firms produce a homogenous product.D. the market is allocatively efficient.E. profits are normal in the long run.
47. Which of the following are shared by perfectly competitive firms and monopolistically competitive firms?I. Barriers to entry II. Normal profits in the long run III. Excess capacity IV. A homogenous product A. I only B. II only C. III only D. II and IV only E. I, II, and III only
46. The production of chicken often results in offending odors that are picked up by the wind and blown over rural communities. This is an example of a _____ externality, the result of which are spillover ____ and an _______ of resources to chicken production.A. negative, costs, underallocation.B.
45. Oligopoly has at times been the subject of government antitrust regulation. Which of the following is a reason for this government regulation?A. Price is approximately equal to marginal cost.B. Price is approximately equal to average total cost.C. Dead weight loss lessens over time.D. Consumer
44. Which of the following statements are true of consumer utility-maximizing behavior?I. Utility from consumption of good X is maximized when the marginal utility is equal to zero.II. Total utility from consumption of good X rises at a decreasing rate.III. The consumer spends limited income until
43. The top six firms in an oligopolistic industry have market shares of 25%, 25%, 15%, 10%, 6%, and 3%. Many smaller firms split the rest of the market. What is the value of the four-firm concentration ratio?A. 65%B. 84%C. 75%D. 34%E. 50%
42. Consumer surplus in the monopolist market is equal to the area:A. abce.B. abcf.C. P5cd.D. 0Q1aP1.E. P1P5ca.
41. If this firm were a profit-maximizing monopolist, the price, output and profit would be Price Output Profit A. P5 Q1 Q1 (c-b)B. P5 Q1 Q1 P1 C. P4 Q2 Q2 (P4-P1)D. P1 Q1 Q1 (P5-P1)E. P3 Q3 Q3 P3
40. A monopolist may be able to maintain long-run positive profit due to A. dead weight loss.B. economies of scale in production.C. a price that is set equal to average total cost.D. perfectly elastic demand for the product.E. entry of new firms that keep the price high.
39. Which of the following is a characteristic of a monopoly market?A. Firms produce a homogeneous product.B. Barriers to entry exist.C. Firms are price-taking profit maximizers.D. Dead weight loss is eliminated through entry of competing firms in the long run.E. In the long run the firm earns
38. If a market for a good is producing a negative externality, A. at the market output the marginal costs to society exceed the private marginal costs of production.B. at the market output the marginal benefits to society exceed the private marginal costs of production.C. at the market output the
37. Where is the shutdown point for this perfectly competitive firm?A. Any price below curve 4.B. Any price below 0c.C. Any price below curve 3.D. Any price below curve 2.E. Any quantity less than Q.
36. The curve labeled 4 represents which of the following?A. Marginal cost B. Marginal product of labor C. Average total cost D. Average fixed cost E. Average variable cost
35. The demand for labor falls if A. labor productivity falls.B. price of the good produced by labor rises.C. the price of a complementary input falls.D. demand for the good produced by labor rises.E. a minimum wage is removed from the labor market.
34. At a quantity of 10, what is the value of $(Y − X)?A. $100 B. $25 C. $10 D. $35 E. $350
33. If average variable cost at a quantity of 10 is$25, what is the value of $Y in the figure above?A. $250 B. $25 C. $35 D. $1000 E. $350
31. The figure above shows the long-run average cost curve of a competitive firm. Which of the following choices best describes Region B in the diagram?A. Economies of scale B. Diseconomies of scale C. Constant returns to scale D. Diminishing returns to scale E. Increasing returns to scale 32.
30. The table above shows how hiring increasing amounts of labor to a fixed amount of capital affects the hourly output of Molly’s lemonade stand. Based on this table of production data, which of the following can be said?A. Diminishing returns begins with the first worker hired.B. Marginal cost
29. Which of the following is a characteristic of perfect competition?A. Firms produce a homogeneous product.B. Barriers to entry exist.C. Firms are price-setting profit maximizers.D. The government regulates the price so that dead weight loss is eliminated.E. Long-run positive profits are
28. Diminishing returns to short-run production begin when A. the average product of labor begins to fall.B. the total product of labor begins to fall.C. marginal product of labor becomes negative.D. average variable cost begins to rise.E. marginal product of labor begins to fall.
27. A firm employs variable amounts of labor to a fixed amount of capital to produce output. If the daily wage paid to labor increases, how does this affect the firm’s costs? Total Variable Cost Total Fixed Cost (A) Decrease No change Total Cost Decrease (B) Decrease Decrease (C) Increase (D)
26. If it is true that bacon and eggs are complementary goods, then A. the income elasticity of bacon is positive and the income elasticity for eggs is negative.B. the price elasticity for eggs is greater than the price elasticity for bacon.C. the cross-price elasticity between bacon and eggs is
25. The figure above best represents which of the following functions?A. Total product of labor B. Total revenue C. Total cost D. Total utility E. Total short-run economic profits
24. You are told that the Gini coefficient of income inequality has risen from .35 to .85. Which of the following is a likely cause of this change?A. Market power in the factor and output markets has increased.B. Labor market discrimination has been eliminated.C. The distribution of wealth and
23. Dorothy has daily income of $20, each cup of coffee costs Pc = $1 and each scone costs Ps = $4.The table below provides us with Dorothy’s marginal utility (MU) received in the consumption of each good. As a utility-maximizing consumer, which combination of coffee and scones should Dorothy
22. The downward sloping demand curve is partially explained by which of the following?A. Substitution effects and income effects.B. The Law of Increasing Marginal Costs.C. The principle of comparative advantage.D. The Law of Diminishing Returns to production.E. The least-cost principle.
21. If the market is in equilibrium, which of the following areas corresponds to producer surplus?A. BGD B. 0AHJ C. 0DGK D. 0BG E. 0BGK
20. If the price were to fall from 0C to 0A, which of the following would be true?A. Dollars spent on this good would increase if demand for the good were price inelastic.B. Dollars spent on this good would decrease if demand for the good were price elastic.C. Dollars spent on this good would
19. If the current price is 0B, we would expect A. a surplus in the market to be eliminated by rising prices.B. a shortage in the market to be eliminated by falling prices.C. a surplus in the market to be eliminated by falling prices.D. quantity demanded to be equal to quantity supplied as the
18. Which of the following is true of the perfectly competitive firm in the short run?A. The firm earns a normal profit.B. The firm shuts down if the price falls below average total cost.C. The firm earns positive economic profit.D. The firm maximizes profit by producing where the price equals
17. If the wage paid to all units of labor is $4.50, how many units of labor are hired?A. 1 B. 2 C. 3 D. 4 E. 5
16. Which unit of labor has marginal revenue product equal to $1.50?A. 1st B. 2nd C. 3rd D. 4th E. 5th
15. Suppose a price floor is installed in the market for coffee. One result of this policy would be A. a decrease in the demand for coffee-brewing machines. B. a persistent shortage of coffee in the market. C. an increase in consumer surplus due to lower coffee prices. D. an increase in the demand
14. Which of the following is an implicit cost for the owner of a small store in your hometown? A. The wage that is paid to the assistant manager. B. The cost of purchasing canned goods from wholesale food distributor. C. The value placed on the owner's skills in an alternative career. D. The cost
13. Good X is exchanged in a competitive market. Which of the following is true if an excise tax is now imposed on the production of good X? A. If the demand curve is perfectly elastic, the price rises by the amount of the tax. B. The consumer's burden of the tax rises, as the demand curve is more
12. 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
11. 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
10. 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.
9. 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 sub- stitute for good X. D. a decrease in the demand for good Z, a com- plement with good X. E. a rightward
8. 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
7. A competitive market for coffee, a normal good, is currently in equilibrium. Which of the follow- ing would most likely result in an increase in the demand for coffcc? A. Consumer income falls. B. The price of tea rises.C. The wage of coffee plantation workers falls. D. Technology in the
6. A rational consumer who is eating Girl Scout cookics stops cating 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
5. 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 develop- ment of new technology. C. The nation's infant mortality rate increases. D.
4. The figure above shows the production possibil- ity 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 agree- ments benefit both nations? A. Nation A trades three crabs
3. 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
2. 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.
1. 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.
3. The nations of Tundria and Equatoria have an equal amount of resources and have production possibilities given in the table below.A. Assuming constant opportunity costs, draw a single correctly labeled graph to illustrate the production possibility frontiers for cach nation. B. Which nation has
2. Suppose that political upheaval in Argentina has sparked rampant inflation. A. Explain how this unexpected inflation would impact the following groups: i. Retirees living on fixed monthly pensions. ii. Banks with many outstanding loans that are being repaid at fixed interest rates.B. Assume that
1. The U.S. economy is experiencing a lingering recession with an unemployment rate that will not be falling without government intervention. A. Using a correctly labeled aggregate demand and aggregate supply graph, identify each of the following: i. The level of GDP at full employment. ii. The
60. Lower interest rates in the U.S. cause the value of the dollar and exports to change in which of the following ways?Value of the dollar U.S. exports A. Increasing Increasing B. Increasing Decreasing C. Decreasing Increasing D. Decreasing Unchanged E. Increasing Increasing
59. 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
58. 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.
56. 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
55. 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
54. 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.
53. 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
52. 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
51. 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
50. 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.
49. 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.
48. 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 demand.D. An improved allocation of resources away from
47. 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
46. 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
45. 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
44. 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%
43. 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.
42. 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
41. All else equal, when the U.S. 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 rises
40. 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
39. 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 >
38. Which of the following is a component of the M1 measure of money supply?A. Savings deposits B. Gold bouillon C. Cash and coins D. 30 year Treasury certificates E. 18 month certificates of deposits
37. 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
36. 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
35. If a nation is operating at full employment, and the central bank engages in contractionary monetary policy, the nation can expect the real interest rate, the purchases of new homes, and the unemployment rate to change in which of the following ways?Interest New Unemployment Rates Homes Rate A.
34. 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
33. 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.
32. 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
31. 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?Money Market Interest rate Dollar A. Increased supply
30. 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
29. 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.
28. Higher levels of consumer wealth and optimism would likely have which of the following changes in the market for loanable funds? Market for Loanable Funds Interest rate A. Increase in supply Rising B. Increase in demand Rising C. Decrease in demand Falling D. Decrease in supply Falling E.
27. Which of the following represents a combination of contractionary fiscal and expansionary monetary policy? Fiscal Policy A. Higher taxes Monetary Policy Selling Treasury securities B. Lower taxes C. Lower government spending D. Lower government spending E. Higher taxes Buying Treasury
26. Households demand more money as an asset when A. nominal GDP falls.B. the real interest rate falls.C. bond prices fall.D. the supply of money falls.E. nominal GDP increases.
25. 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.
24. 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
23. 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
22. Which of the following most likely increases aggregate demand in the U.S.?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 American
21. 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
20. 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
19. 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.
18. 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? Short- run Short-run Price Long-run Long-run GDP Level GDP Price Level

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