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5 Steps To A 5 AP Microeconomics And Macroeconomics 1st Edition Eric Dodge - Solutions
17. 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.
16. 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.
15. 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
14. 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
13. 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
12. 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
11. 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.
10. 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
9. 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
8. 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
7. 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
6. 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 fundamen- tal to economic growth. D.
5. An increase in the Consumer Price Index is commonly referred to as A. economic growth. B. inflation. C. unemployment. D. discouraged workers. E. deflation.
4. 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;
3. How would fiscal and monetary policymakers combine spending, tax, and monetary policy to fight a recessionary gap, while avoiding large budget deficits?Spending Policy Tax Policy Monetary Policy A. Higher Lower taxes spending Sell Treasury securities B. Lower Higher taxes spending C. Lower
2. A nation is producing at a point inside of its pro- duction possibility frontier. Which of the follow- ing is a possible explanation for this outcome? A. This nation has experienced a permanent decrease in their production capacity. B. This nation has experienced slower than usual technological
1. Which of the following statements are true of production possibility frontiers and trade between nations? I. Nations specialize and trade based on com- parative advantage in production. II. Free trade allows each nation to consume beyond the production possibility frontier. III. The flow of
3. 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
2. 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.A. In competitive input markets, cach hour of labor costs $6 to employ
1. Bob's Beans is a perfectly competitive soybean producer. The short-run price of soybeans is cur- rently below average total cost, but above Bob's shutdown point. A. Using two correctly labeled graphs, show the soybean market side-by-side with Bob's Beans. Clearly indicate which graph repre-
60. 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.
59. 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
58. 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.
57. 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.
56. 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
55. 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?Demand BA Employment for Economist of Economics Wages
54. 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
53. 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.
52. 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.
51. 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
50. The marginal revenue product of the fourth unit of labor is equal to A. $19 B. $16 C. $8 D. $20 E. $2
49. 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
48. 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
47. 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
46. 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,
45. 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
44. 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.
43. 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
42. 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.
41. 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
40. 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
39. 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.
38. 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
37. 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
36. Dead weight loss is equal to which of the following areas?A. abcd B. cdfg C. 0abQ1 D. Q1Q2gh E. bdgh
35. If this firm were a profit-maximizing monopolist, the price and output would be which of the following?A. 0a and Q1 B. 0c and Q1 C. 0e and Q1 D. 0e and Q2 E. 0f and Q1
34. Which of the following is true of monopoly markets?A. Dead weight loss exists in the short run, but not in the long run.B. A homogenous product allows for long-run entry of competing firms.C. Collusion between close rivals creates pricing above marginal cost.D. Barriers to entry allow for the
33. Declining populations of tuna in the Atlantic Ocean have likely had which of the following impacts on the wages of tuna fishermen, the employment of tuna fishermen, and real estate prices in New England fishing towns?Fisherman Employment Real Estate Wages of Fishermen Prices A. Decrease
32. For the perfectly competitive firm, the profit maximizing decision to shut down is made when the price A. falls below minimum average total cost.B. is greater than minimum average variable cost, but lower than minimum average total cost.C. falls below minimum average variable cost.D. is equal
31. Which of the following might explain how a price decrease might cause a decrease in quantity demanded and an upward sloping demand curve?A. The good is inferior and the income effect is stronger than the substitution effect.B. The good is normal and the income effect is stronger than the
30. Jason cleans swimming pools in a perfectly competitive local market. A profit-maximizer, he can charge $10 per pool to clean 9 pools per day, incurring total variable costs of $80 and total fixed costs of $20. Which of the following is true?A. Jason should shutdown in the short run, with
29. If a market is organized by a cartel, we can expect A. normal profits for all cartel firms.B. an incentive for cartel firms to cheat on the cartel agreement.C. profit maximization by individual firms in the cartel.D. allocative efficiency.E. perfectly competitive prices.
28. If the market price is above the perfectly competitive firm’s average total cost curve, we expect that in the long run, A. the industry contracts as firms exit the market.B. the industry expands as firms exit the market.C. the industry contracts as firms enter the market.D. the industry
27. Which of the following is true in the long run in perfect competition?A. P = MR = MC = ATC B. P = MR = MC> ATC C. P > MR = MC= ATC D. P = MR> MC = ATC E. P > MR = MC> ATC
26. The demand curve for a perfectly competitive firm’s product is A. downward sloping and equal to the market demand curve.B. perfectly elastic.C. perfectly inelastic.D. “kinked” at the going market price.E. the same as the firm’s marginal cost curve.
25. If total product of labor is rising at an increasing rate, A. marginal product of labor is rising.B. marginal product of labor is at its minimum.C. marginal product of labor is at its maximum.D. marginal cost is rising.E. average product of labor is at its minimum.
24. Which of the following is an example of a longrun adjustment for the owners of a small café?A. The owners switch from whole wheat to sourdough bread.B. The owners hire several part-time workers to cover the dinner shifts.C. The owners work overtime on a busy weekend.D. The owners install more
23. You are told that the cross-price elasticity between goods X and Y is +2.0. This means that A. goods X and Y are normal goods.B. goods X and Y are inferior goods.C. goods X and Y are complementary goods.D. goods X and Y are substitute goods.E. good X is twice as elastic as good Y.
22. When a firm is earning a normal profit from the production of a good, it is true that A. total revenues from production are equal to explicit costs.B. explicit costs are equal to implicit costs.C. total revenues from production are equal to implicit costs.D. total revenues from production are
21. If Matt’s total utility from consuming bratwurst increased at a constant rate, no matter how many bratwurst Matt consumed, what would Matt’s demand curve for bratwurst look like?A. Vertical B. Horizontal C. Downward sloping D. Upward sloping E. First upward, but eventually downward sloping
20. The market for Cincinnati Reds baseball tickets is currently in equilibrium. Which of the following events would most likely increase the consumer surplus received by Reds fans?A. The Reds offer discounted parking for all home games.B. The Reds increase hot dog prices to reflect a higher cost
19. Monopoly dead weight loss is the result of A. setting the price above marginal cost.B. setting the price above average total cost.C. monopoly output being greater than the competitive output.D. long-run normal profits.E. marginal revenue equaling marginal cost.
18. Suppose the county government sends each parent a coupon that can be used to subsidize the cost of sending each child to daycare. What would you expect to occur in the market for daycare services?A. The demand for daycare falls, lowering the price.B. The demand for daycare rises, increasing the
17. Using the diagram above, which of the following might have caused the outward movement of the production possibility frontier?A. A decrease in the availability of fertile farmland.B. A plague of destructive grasshoppers.C. An increase in the productivity of the labor force.D. A severe and
16. Which of the following causes the supply curve of paper to shift to the left?A. Paper producers expect lower paper prices in the months ahead.B. The price of pencils, a complement to paper, increases.C. Improvements in the technology used to produce paper.D. Household income falls.E.
15. You are told that the income elasticity for CDs is + 1.5. This means that A. a 10 percent increase in income produces a 15 percent increase in consumption of CDs.CDs are a normal luxury good.B. a 10 percent increase in income produces a 15 percent increase in consumption of CDs.CDs are an
14. Which of the following is true of a price floor?A. The price floor shifts the demand curve to the left.B. An effective floor creates a shortage of the good.C. The price floor shifts the supply curve of the good to the right.D. To be an effective floor, it must be set above the equilibrium
13. Suppose the price elasticity of demand for cigarettes is less than one. When an excise tax is imposed on cigarette production, it changes the price, quantity, and consumer spending in which of the following ways? Price Quantity Spending A. Decrease Increase Increase B. Decrease Decrease
12. Which of the following would best complete a short definition of economics? “Economics is the study of . . .”A. how unlimited resources are allocated between scarce wants.B. how money is circulated through the economy.C. how corporations maximize the share price of their stock.D. how
11. When the production or consumption of a good creates a positive externality, it is deemed a market failure because at the market quantity A. the marginal social benefit exceeds the marginal social cost.B. the marginal social cost exceeds the marginal social benefit.C. society produces too much
10. Every day Molly spends her lunch money consuming apples, at $1 each, and oranges, at $2 each. At her current level of consumption, Molly’s marginal utility of apples is 12 and her marginal utility of oranges is 18. If she has already spent all of her lunch money, how should Molly change her
9. If the price were to rise from 0B to 0C, A. dollars spent on this good would increase if demand for the good were price elastic.B. dollars spent on this good would decrease if demand for the good were price inelastic.C. dollars spent on this good would increase if demand for the good were price
8. If the market is initially in equilibrium, which of the following would create a new equilibrium at point H?A. A decrease in consumer income if this good is normal.B. An increase in the price of a substitute for this good.C. A decrease in the cost of a production input for this good.D. An
7. Assuming no government involvement in this market, if the current price were at the level of 0A, 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
6. Which of the following statements are true of a capitalist market economy? I. Economic resources are publicly owned. II. Freedom of enterprise is critical. III. The price system allocates resources in the most efficient way. A. I only B. II only C. III only D. I and II only E. II and III only D
5. Which of the following is the best example of a public good? A. Private violin lessons B. The volunteer fire department in your community C. A ticket for admission to a museum. D. A bag of potato chips E. A history textbook
4. The U.S. is trading salmon to Peru in exchange for anchovies. If these nations are trading based upon relative opportunity costs, what must be the casc? A. The U.S. has comparative advantage in anchovy production and Peru has compara- tive advantage in salmon production. B. The U.S. has
3. Suppose the market for roses is currently in cquilibrium. If the supply of roses falls, while at the same time the demand for roses rises, what can you say about the price and quantity of roses in the market? A. Price and quantity both rise. B. Price riscs, but the change in quantity is
2. Nancy has the choice to spend one hour studying for an exam, mowing the lawn for one hour at a wage of $6, or babysitting her niece for one hour at a wage of $8. If we know that Nancy has chosen to study for the exam, which of the following is true? A. The benefit received from studying is
1. At the birthday party of your best friend, you see a guest help himself to a second piece of cake. For this individual, it must be the case that A. the marginal benefit of the second piece of cake is less than the marginal cost. B. the total benefit received from eating cake is falling. C. the
6. When the U.S. places an import quota on imported sugar, we expect which of the following effects? A. Consumers scck substitutes for sugar and products that use sugar.B. Consumers consume more sugar and products that use sugar. C. The supply of sugar increases. D. Net exports in the U.S. fall. E.
5. If the Japanese economy suffers a deep, prolonged recession, in what ways would U.S. net exports and the values of the dollar and yen change?U.S. Net Value of Value of Exports dollar yen A. Decrease Increase Increase B. Decrease Decrease Decrease C. Decrease Decrease Increase D. Increase
4. Which of the following is a consequence of a protective tariff on imported steel?A. Net exports fall.B. Income is transferred from steel consumers to steel producers.C. Allocative efficiency is improved.D. Income is transferred from domestic steel to foreign steel producers.E. Aggregate supply
3. You hear that the U.S. has a negative balance in the current account. With this information we conclude that A. there is a trade deficit.B. there is a capital account deficit.C. there is a capital account surplus.D. more U.S. dollars are being sent abroad than foreign currencies are being sent
2. If the U.S. dollar and Chinese yuan are traded in flexible currency markets, which of the following causes an appreciation of the dollar relative to the Chinese yuan?A. Lower interest rates in the U.S. relative to China.B. Lower price levels in China relative to the U.S.C. Growing American
1. The U.S. produces rice in a competitive market.With free trade, the world price is lower than the domestic price. What must be true?A. The U.S. begins to import rice to make up for a domestic shortage.B. The U.S. begins to export rice to make up for a domestic shortage.C. The U.S. begins to
6. The effect of the spending multiplier is lessened if A. the price level is constant with an increase in aggregate demand. B. the price level falls with an increase in aggre- gate supply. C. the price level is constant with an increase in long-run aggregate supply. D. the price level falls with
5. What is the main contrast between the short-run and long-run Phillips Curve?A. In the short run there is a positive relationship between inflation and unemployment, and in the long run the relationship is negative.B. In the short run there is a positive relationship between inflation and
4. Equilibrium real GDP is far below full employment and the government lowers household taxes.Which is the likely result?A. Unemployment falls with little inflation.B. Unemployment rises with little inflation.C. Unemployment falls with rampant inflation.D. Unemployment rises with rampant
3. Stagflation most likely results from A. increasing AD with constant AS.B. decreasing AS with constant AD.C. decreasing AD with constant AS.D. a decrease in both AD and AS.E. an increase in both AD and AS.
2. Which is the best way to describe the AS curve in the long run?A. Always vertical in the long run.B. Always upward sloping because it follows the Law of Supply.C. Always horizontal.D. Always downward sloping.E. Without more information we cannot predict how it looks in the long run.
1. Using the model of AD and AS, what happens to real GDP, the price level, and unemployment with more consumption spending (C)? Real Price GDP Level Unemployment A. Increases Decreases Decreases B. Decreases Increases Increases C. Increases Increases Decreases D. Decreases Decreases Decreases E.
5. The tax multiplier increases in magnitude when A. the MPS increases.B. the spending multiplier falls.C. the MPC increases.D. government spending increases.E. taxes increase.6. Which of the following is the source of the supply of loanable funds?A. The stock market.B. Investors C. Net exports.D.
4. Which of the following choices is most likely to create the greatest decrease in real GDP?A. The government decreases spending, matched with a decrease in taxes.B. The government increases spending with no increase in taxes.C. The government decreases spending with no change in taxes.D. The
3. Which of the following events most likely increases real GDP?A. An increase in the real rate of interest.B. An increase in taxes.C. A decrease in net exports.D. An increase in government spending.E. A lower value of consumer wealth.
2. Which of the following is true about the consumption function?A. The slope is equal to the MPC.B. The slope is equal to the MPS.C. The slope is equal to MPC + MPS.D. It shifts upward when consumers are more pessimistic about the future.E. It shifts downward when consumer wealth increases in
1. When disposable income increases by $X, A. consumption increases by more than $X.B. saving increases by less than $X.C. saving increases by exactly $X.D. saving remains constant.E. saving decreases by more than $X.
6. You are working at a supermarket bagging groceries but you are unhappy about your wage so you quit and begin looking for a new job at a competing grocery store. What type of unemployment is this?A. Cyclical B. Structural C. Seasonal D. Frictional E. Discouraged
5. What is the unemployment rate?A. 5 percent B. 2.5 percent C. 5.5 percent D. 7 percent E. Unknown, as we do not know the number of discouraged workers.
4. What is the size of the labor force?A. 2000 B. 950 C. 900 D. 1000 E. 1950
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