Question: Whether marginal revenue is constant or decreasing

> If supply and demand are lines then at equilibrium consumer and producer surplus are both a) equal. b) shown as squares. c) shown as trapezoids. d) shown as triangles.

> Imagine an economist ordering pizza by the slice. When deciding how many slices to order she would pick that number where the enjoyment of the _____ equals the enjoyment she could get from using the money on another good. a) first slice b) last slice c)

> The evidence on most environmental pollutants (lead in the air and water, sulfur in the air, etc.) is that a) they are not nearly as harmful as once thought. b) they are increasing at an alarming rate. c) they have decreased substantially in the last

> The introduction of e-cigarettes provides a substitute for regular cigarettes. The result is likely that the a) elasticity of supply increases. b) elasticity of supply decreases. c) elasticity of demand increases. d) elasticity of demand decreases.

> Using an interest rate of 5%, which figure has the smallest present value? a) $5,000 b) $5,050 to be received two years from now c) $5,075 to be received three years from now d) $5,500 to be received ten years from now

> When a firm chooses to shut down, it is a) making a poor decision because it should always produce where marginal cost equals marginal revenue. b) making a poor decision because it should always produce where average costs exceed average revenue. c) m

> An increase in which of the following determinants of demand will have an ambiguous (uncertain) effect on price? a) Taste b) Price of a complement c) Income d) Price of a substitute

> The approval process for new drugs, if governed by economic thinking, should set stringency standards so that the __________ equals the ___________. a) total cost; total benefit b) average cost; average benefit c) marginal cost; marginal benefit d) c

> The Medicare Trust Fund is necessary because a) current expenses are greater than current revenues. b) current expenses are less than current revenues. c) future expenses will be greater than future revenues. d) future expenses will be less than futu

> Medical care inflation is likely to be easily overstated (if you look simply at the increase in the cost of a hospital stay) because that calculation ignores a) the original costs. b) the new costs. c) quality increases. d) quality decreases.

> If policy makers were to attempt to set a tax equal to the external costs of alcohol, one would have to evaluate a) the cost of production. b) the price paid by consumers. c) the value of innocent lives lost to drunk driving. d) the value of the shor

> The World Trade Organization governs the provisions of a) NAFTA. b) GATT. c) CAFTA. d) SHAFTA.

> Using simple linear production possibilities frontiers in a simple two-good, two-country model, absolute advantage is evident when a) one country can make more of a good than the country other can. b) the slopes of the two production possibilities fron

> What source of rapid (1950–1975) growth is not duplicable? a) Electrification of lighting b) Increases in education c) Increases in productivity

> The job losses during this recession were a) typical of a short recession. b) nonexistent. c) significant and rapid.

> By way of international comparison, recent U.S. deficits have increased the ratio of debt to GDP a) such that the United States has the highest ratio in the industrialized world. b) but every other industrialized nation’s ratio is much worse. c) but t

> When looking at a balanced-budget amendment to the U.S. Constitution, economists a) are universally opposed to it. b) are universally in favor of it. c) are of two minds with opponents concerned about its procyclical nature. d) are of two minds with

> Total federal spending on health care, after adjusting for inflation, has been a) growing. b) relatively constant. c) declining slowly. d) declining rapidly.

> During 1999 through 2006 the Federal Reserve a) was passive and simply let things happen. b) reacted actively to quell potentially inflationary expansions but did nothing to deal with the recession. c) reacted actively to deal with the recession but

> One typical response to a recession using discretionary fiscal policy is to a) raise taxes and cut spending. b) lower taxes and cut spending. c) raise taxes and increase spending. d) lower taxes and increase spending.

> An economist worrying about the economic impact of environmental regulations would model that impact with a a) decrease in aggregate supply. b) increase in aggregate supply. c) decrease in aggregate demand. d) increase in aggregate demand.

> One problem with using real gross domestic product as a measure of social welfare is that a) it fails to count home production. b) it fails to count services, a growing part of the economy. c) it double, triple, and sometimes quadruple counts goods th

> Under perfect competition, the supply curve is a) the marginal cost curve for all price quantity combinations. b) the marginal cost curve, but only that portion that is downward sloping. c) the marginal cost curve, but only that portion that is upward

> The optimization assumption suggests that people make a) irrational decisions. b) unpredictable decisions. c) decisions to make themselves as well off as possible. d) decisions without thinking very hard.

> Using an interest rate of 5 percent, which figure has the largest present value? a) $5,000 b) $5,050 to be received two years from now c) $5,075 to be received three years from now d) $5,500 to be received ten years from now

> Compared to a recreational user of a drug, an addicted user’s elasticity of demand is a) much more elastic. b) much less elastic. c) much less. d) flatter.

> A bursting of a housing bubble could create more problems than the NASDAQ crash in 2000 because the housing bubble involves a) assets, and NASDAQ was about debts. b) risky forms of debt. c) more people. d) fewer people.

> A housing bubble occurs when _________ drive(s) prices more than fundamental factors. a) the price of gasoline b) a home’s expected future price c) interest rate changes d) property tax increases

> The Federal Reserve has indirect control over short-term interest rates, and as a result, their ability to control economic activity is through a) aggregate supply. b) aggregate demand. c) residual demand. d) the exchange rate.

> When one party harms another and the harmed party hires a lawyer who will collect only if the harmed party wins the suit, they have hired a a) personal injury attorney. b) contingency attorney. c) corporate lawyer. d) disbarred attorney.

> The market form for a new drug in an area that had one other drug is a) perfect competition. b) monopolistic competition. c) oligopoly. d) monopoly.

> The DRG system controls Medicare expenses by a) preventing doctors from using particular procedures. b) paying hospitals after they submit bills. c) paying hospitals on the basis of a disease or injury rather than expenses. d) paying the patient who

> Which of the following forms of private insurance is likely to have the lowest premiums and least doctor choice flexibility? a) Medicare b) An HMO c) A PPO d) A fee-for-service plan

> Overfishing certain parts of the ocean and certain species of fish has been a problem for centuries with countries actually going to war over fishing disputes. Ronald Coase would suggest that there would be no the problem if a) someone owned (and could

> When one country objects to the trade restrictions of another, the provisions of trade treaties typically a) allow it to militarily exact retribution against the offending party. B) require that it submit its objections to an adjudication body to dete

> For the ruler of a developing country, the opportunity cost of a choice to invest in universal education a) is the reduction in health care spending. b) does not exist because food is a necessity. c) is much lower than a similar choice for the ruler o

> The reason the European Central Bank (ECB) didn’t engage in the kind of expansionary monetary policy that the Federal Reserve did for the United States was that a) the ECB didn’t view the problem as serious. b) the ECB could not raise the capital. c)

> The oil price increases of 2002-2005 are an example of a a) positive aggregate demand shock. b) negative aggregate demand shock. c) positive aggregate supply shock. d) negative aggregate supply shock.

> Using simple linear production possibilities frontiers in a simple two-good, two-country model, comparative advantage is evident when a) one country can make more of both goods than the other. b) the slopes of the two production possibilities frontiers

> State and local pensions for government employees are usually a) defined benefit plans. b) defined contribution plans. c) entitlements. d) determined year to year.

> The large increase in the Labor Force Participation Rate is ________ source of growth. a) a duplicable b) an unduplicable

> The Obama administration's stimulus package was a) almost entirely made up of tax cuts. b) almost entirely made up of spending on "shovel ready" projects. c) a balance between tax cuts, spending on projects, and shoring up the unemployment and welfare

> The portion of the national debt owed to citizens of other countries a) is economically irrelevant however big it is. b) is economically important, but it has been falling in recent years. c) is economically important and it has been rising in recent

> The largest single item in federal spending is a) international aid. b) welfare. c) interest on the debt. d) Social Security.

> The “creation” of money is a) entirely the purview of Congress. b) entirely the purview of the Federal Reserve. c) formally the purview of the Federal Reserve, constitutionally the purview of Congress, but banks have a practical means of creating mon

> The aggregate demand-aggregate supply model examines the impact of discretionary fiscal policy and nondiscretionary fiscal policy by focusing on movements of a) interest rates. b) aggregate supply. c) aggregate demand. d) regulatory policies.

> The consumer price index (CPI) is a heavily criticized measure of inflation because a) the government does nothing to fix its known deficiencies. b) it consistently understates the increase in the cost of living. c) it consistently overstates the incr

> Economic theory would suggest that the profitability of an industry would be a) directly related to the number of firms competing in the industry. b) inversely related to the number of firms competing in the industry. c) unrelated to the number of fir

> Substitution in the context of the “rational terrorist model” suggests that a clampdown at airports will a) end terrorism. b) cause terrorists to target airports even more as they attempt to show their strength. c) cause terrorists to seek alternative

> Combined the consumer surplus and producer surplus at equilibrium is a) lower than it would be at prices below equilibrium. b) lower than it would be at prices above equilibrium. c) typically negative. d) as big as it can get.

> If the supply and demand curves cross at a quantity of 100, then the price necessary to get firms to sell more than that will have to be _______ equilibrium. a) above b) at c) below d) within 10 percent either way of

> The underlying reason production possibilities frontiers are likely to be bowed out (rather than linear) is a) choices have consequences. b) there is always opportunity costs. c) some resources and people can be better used producing one good rather tha

> If the supply and demand curves cross at a price of $2, at any price above that there will be a) an equilibrium. b) a surplus. c) a shortage. d) a crisis.

> Medicaid spending per recipient is a) twice that of the average citizen’s use of health care. b) somewhat less than the average citizen’s use of health care. c) somewhat greater than the average citizen’s use of health care. d) half that of the avera

> One of the biggest problems for developing countries is that they are all too often a) ruled by representative democracies. b) populated by people unwilling to work hard. c) lack the financial, physical, and social infrastructure to grow. d) indulge

> The dependency ratio in the United States is a) growing. b) steady. c) falling rapidly. d) falling slowly.

> The Federal Reserve's response to the recession of 2007-2008 was a) clearly effective in shortening the recession. b) quick but not obviously effective in shortening the recession. c) slow and subject to criticism for being rather timid. d) procycli

> Suppose your grandmother told you (today) that she had set aside an amount of money in a savings account baring 3 percent interest that was sufficient to give you a $5,000 graduation present in exactly four years. How much would she have had to set aside

> The concern that gambling affects not only the gambler and casino but others is called a _____ and suggests that there would be too _______ production in an unregulated or untaxed market. a) positive externality; much b) negative externality; much c)

> Economists insist that bankruptcy laws are always harmful to a well-functioning economy. a) True b) False

> The market form for a new drug in an area where there are no competitors is a) perfect competition. b) monopolistic competition. c) oligopoly. d) monopoly.

> Medicaid spending per recipient is a) twice that of the average citizen’s use of health care. b) somewhat less than the average citizen’s use of health care. c) somewhat greater than the average citizen’s use of health care. d) half that of the avera

> If you have a $2000 covered health expense, a deductible of $500, and a 20% co-pay, then you pay _____ and the insurance company pays _____. a) $1500, $500 b) $1000, $1000 c) $800, $1200 d) $700, $800

> When tackling local environmental problems, taxes and regulations can be useful. The reason that global problems (like global warming) are more difficult to control is that a) it is in every country’s aggregate interest to ignore the problem. b) it is

> Decriminalizing a drug is likely to lead to a price decrease if a) the anticipated supply effect is greater than the anticipated demand effect. b) the anticipated demand effect is greater than the anticipated supply effect. c) the anticipated demand e

> Free trade agreements a) are just that, about tariff and quota-free trade. b) have very little to do with the trade of goods and services and more to do with currency exchange. c) are about making trade freer than it was before and rarely about makin

> The reason the Greek’s didn’t use a plan similar to TARP to save their banks was that a) the Greek Central Bank had no funds. b) the interest rates Greece would have had to pay on the loans would have been unaffordable. c) banks weren’t a problem in G

> If one country determines it wants a fixed exchange rate with another a) it can do nothing on its own, it must have the cooperation of the other country. b) it only needs to announce its desired exchange rate, and that will result. c) it must stand re

> The trends in U.S. international trade are such that a) imports are increasing and exports are decreasing. b) imports are decreasing and exports are increasing. c) both imports and exports are decreasing. d) both imports and exports are increasing.

> In the past 40 years work stoppages have a) plummeted. b) remained constant. c) increased slowly. d) increased rapidly.

> The large increase in the Labor Force Participation Rate that occurred between 1950 and 2000 was because a) women’s participation in the labor force doubled. b) men’s participation in the labor force increased. c) the proportion of the population over

> Fundamentally, housing prices are a function of the home’s a) location and amenities. b) amenities only. c) location only. d) interest rates only.

> The $400 billion deficits of 2005 were a) accurately forecast by the Office of Management and Budget in 2000. b) accurately forecast by the Office of Management and Budget in 2002. c) accurately forecast by the Office of Management and Budget in 2003

> Mandatory spending implies spending that is a) required by a previously passed set of laws. b) required by the U.S. Constitution. c) needed more than discretionary spending. d) off-limits for any cuts at any time.

> Federal Reserve independence is a) completely fictitious. b) totally complete. c) subject to Congress’s desire to keep it independent. d) subject to the Supreme Court’s desire to keep it independent.

> Nondiscretionary fiscal policy has its impact by a) magnifying the economic ups and downs already occurring. b) purposefully adjusting interest rates. c) Congress focusing its constant attention on the economy. d) dampening the economic ups and downs

> Congress and the president have control of the tax system and government spending. As a result, their policies will directly impact a) aggregate supply. b) aggregate demand. c) residual demand. d) the demand for loanable dollars.

> In early 2005, inflation increased unexpectedly due to an increase oil prices. This helped a) borrowers. b) lenders. c) people on fixed incomes. d) workers.

> Whether a firm stays in business or shuts down depends heavily on the concept of a) economic profit. b) actual profit. c) market share. d) concentration ratios.

> The average total cost curve will be cut by the marginal cost curve from below as long as a) fixed costs are rising. b) average costs are decreasing. c) marginal costs eventually increase. d) marginal costs continually decrease.

> When the National Hockey League had its 2004–2005 work stoppage, it was a) a player strike over salaries that were too low. b) a player strike over a limited ability to move to another team. c) an owner lockout over reducing salaries. d) an owner loc

> The fact that the demand for eggs is inelastic should not surprise you because a) they are a very cheap food. b) the demand for nearly all food products are inelastic. c) the supply of eggs is inelastic. d) they are so expensive.

> The underlying reason that there are unattainable points on a production possibilities frontier diagram is that there a) is government. b) are always choices that have to be made? c) is a scarcity of resources within a fixed level of technology. d) is u

> Suppose a firm has $1,000,000 in fixed costs and variable costs equal to $100; for every unit they produce, a) their marginal costs are decreasing. b) their fixed costs are decreasing. c) their average costs are decreasing. d) the marginal costs are

> A monopolistic competitor’s brand identity is protected by a a) trademark. b) patent. c) copyright. d) bond.

> An example of an externality that we see every day is a) people paying high prices for gasoline. b) people enjoying their ability to drive to work. c) oil companies making record profits. d) the emissions from a car’s tailpipe.

> Which concept from Chapter 1 can be used to explain how it is possible for it to be in the individual interest of each nation to engage in protectionist policies but for everyone to be worse off if they all engage in protectionist policies? a) The falla

> In order to sustain economic growth in a developed economy, it is important for a) taxes to continuously decrease. b) government spending to continuously increase. c) worker productivity to increase. d) worker productivity to decrease.

> The dollar to yuan exchange rate will equal a) the yuan to dollar exchange rate. b) the reciprocal of the yuan to dollar exchange rate. c) the yuan to euro exchange rate. d) the square of the yuan to dollar exchange rate.

> Theoretically speaking, all trade is based on a) comparative advantage. b) absolute advantage. c) numerical advantage. d) political advantage.

> Using a higher rate of discount a) makes no difference when calculating the present value of future liabilities. b) raises the present value of future liabilities. c) lowers the present value of future liabilities.

> Gasoline prices in early 2007 were above $2.25. They were a) the highest nominal prices and highest inflation-adjusted prices in American history. b) the highest nominal prices but were not the highest inflation-adjusted prices in American history. c)

> Gasoline prices _______ in late 2007 through mid-2008. a) spiked b) increased relatively slowly c) remained constant d) plunged

> The most precise tool of monetary policy is a) the adjustment of the federal funds target. b) the adjustment of the discount rate. c) the adjustment of the reserve requirement. d) the use of open-market operations.

> When evaluating whether or not to make an investment one should focus on the _____ because doing so takes into account anticipated inflation. a) nominal interest rate b) real interest rate c) exchange rate d) junk bond rate

> Inflation is measured using _________ in a price index. a) the absolute increase b) a multiyear weighted average increase c) the percentage year-to-year increase d) logarithm-adjusted absolute increase

> If a crime prevention mechanism works initially, but increasing it further has no additional impact that is an example of a) diminishing returns. b) downward sloping demand. c) the division of labor. d) economic loss.

> Orphan drug laws were created because the motivation to invent drugs for these diseases was a) much greater than normal because prices could be high. b) much less than normal because prices would be too low. c) much less than normal because firms anti

> When a program like Medicaid is introduced, the market demand curve for health care will a) increase and flatten. b) increase and become more steep. c) decrease and flatten. d) decrease and become more steep.

> The government, in the form of Medicare, Medicaid and the Children’s Health Insurance Program pay for ____ of health care costs. a) less than 10 percent b) slightly less than half c) about 75 percent d) all