9.1   Perfectly Competitive Markets 1) Assume the market for organic produce sold at farmers’ markets is perfectly competitive. All else equal, as more farmers choose to produce and sell organic produce at farmers’ markets, what is likely to happen to the equilibrium price of the produce and profits of the organic farmers in the long run? A) The equilibrium price is likely to increase […]

  61.Ifthegovernmentwantstoreducetheburningoffossilfuels,itshouldimposeataxon a.buyersofgasoline. b.sellersofgasoline. c.eitherbuyersorsellersofgasoline. d.whicheversideofthemarketislesselastic. 62.Thetermtaxincidencerefersto a.whetherbuyersorsellersofagoodarerequiredtosendtaxpaymentstothegovernment. b.whetherthedemandcurveorthesupplycurveshiftswhenthetaxisimposed. c.thedistributionofthetaxburdenbetweenbuyersandsellers. d.widespreadviewthattaxes(anddeath)aretheonlycertaintiesinlife. 63.Whenataxisplacedonthebuyersoflemonade,the a.sellersbeartheentireburdenofthetax. b.buyersbeartheentireburdenofthetax. c.burdenofthetaxwillbealwaysbeequallydividedbetweenthebuyersandthesellers. d.burdenofthetaxwillbesharedbythebuyersandthesellers,butthedivisionoftheburdenisnotalwaysequal. 64.Whichofthefollowingstatementsiscorrectconcerningtheburdenofataximposedontake-outfood? a.Buyersbeartheentireburdenofthetax. b.Sellersbeartheentireburdenofthetax. c.Buyersandsellerssharetheburdenofthetax. d.Wehavetoknowwhetheritisthebuyersorthesellersthatarerequiredtopaythetaxtothegovernmentinordertomakethisdetermination. 65.Thetaxincidence a.isthemannerinwhichtheburdenofataxissharedamongparticipantsinamarket. b.canbeshiftedtothebuyerbyimposingthetaxonthebuyersofaproductinamarket. c.canbeshiftedtothesellerbyimposingthetaxonthesellersofaproductinamarket. d.Alloftheabovearecorrect. 66.Howistheburdenofataxdivided? (i)When the tax is levied on the sellers, the sellers bear a higher proportionofthetaxburden. (ii)Whenthetaxisleviedonthebuyers,thebuyersbearahigherproportionofthetaxburden. (iii)Regardlessofwhetherthetaxisleviedonthebuyersorthesellers,thebuyersandsellersbearanequalproportionofthetaxburden. (iv)Regardlessofwhetherthetaxisleviedonthebuyersorthesellers,thebuyersandsellersbearsomeproportionofthetaxburden.   a.(i)and(ii)only b.(iv)only c.(i),(ii),and(iii)only d.(i),(ii),and(iv)only 67.Whenataxisplacedonthesellersofenergydrinks,the a.sellersbeartheentireburdenofthetax. b.buyersbeartheentireburdenofthetax. c.burdenofthetaxwillbealwaysbeequallydividedbetweenthebuyersandthesellers. d.burdenofthetaxwillbesharedbythebuyersandthesellers,butthedivisionoftheburdenisnotalwaysequal. 68.Ifataxisleviedonthesellersofflour,then a.buyerswillbeartheentireburdenofthetax. b.sellerswillbeartheentireburdenofthetax. c.buyersandsellerswillsharetheburdenofthetax. d.thegovernmentwillbeartheentireburdenofthetax. 69.Supposethegovernmentimposesa20-centtaxonthesellersofartificially-sweetenedbeverages.Thetaxwouldshift a.demand,raisingboththeequilibriumpriceandquantityinthemarketforartificially-sweetenedbeverages. b.demand,loweringtheequilibriumpriceandraisingtheequilibriumquantityinthemarketforartificially-sweetenedbeverages. c.supply,raisingtheequilibriumpriceandloweringtheequilibriumquantityinthemarketforartificially-sweetenedbeverages. d.supply,loweringtheequilibriumpriceandraisingtheequilibriumquantityinthemarketforartificially-sweetenedbeverages. 70.Supposethegovernmentimposesa30-centtaxonthesellersofsoftdrinks.Which […]

  51.Marciahasfoursavingsaccounts.Whichaccounthasthelargestbalance? a.$100deposited1yearagoatan8percentinterestrate b.$100deposited2yearsagoata4percentinterestrate c.$100deposited4yearsagoata2percentinterestrate d.$100deposited8yearsagoata1percentinterestrate 52.Clintputs$200intoanaccountwhentheinterestrateis8percent.Laterhecheckshisbalanceandfindsthathehasabalanceofabout$272.10.HowmanyyearsdidClintwaittocheckhisbalance? a.3years b.3.5years c.4years d.4.5years 53.Lucretiaputs$400intoanaccountwhentheinterestrateis10percent.Latershechecksherbalanceandfindsit’sworthabout$708.62.Howmanyyearsdidshewaittocheckherbalance? a.5years b.6years c.7years d.8years 54.Laurasaysthatthepresentvalueof$700tobereceivedoneyearfromtodayiftheinterestrateis6percentislessthanthepresentvalueof$700tobereceivedtwoyearsfromtodayiftheinterestrateis3percent.Cassiesaysthat$700savedforoneyearat6percentinteresthasasmallerfuturevaluethan$700savedfortwoyearsat3percentinterest. a.BothLauraandCassiearecorrect. b.BothLauraandCassieareincorrect. c.OnlyLauraiscorrect. d.OnlyCassieiscorrect. 55.Bradensaysthat$400savedforoneyearat4percentinteresthasasmallerfuturevaluethan$400savedfortwoyearsat2percentinterest.Leftysaysthatthepresentvalueof$400tobereceivedoneyearfromtodayiftheinterestrateis4percentexceedsthepresentvalueof$400tobereceivedtwoyearsfromtodayiftheinterestrateis2percent. a.BradenandLeftyarebothcorrect. b.BradenandLeftyarebothincorrect. c.OnlyBradeniscorrect. d.OnlyLeftyiscorrect. 56.Jarrodsaysthatthefuturevalueof$250savedforoneyearat6percentinterestislessthanthefuturevalueof$250savedfortwoyearsat3percentinterest.Simonsaysthatthepresentvalueofa$250paymenttobereceivedinoneyearwhentheinterestrateis6percentislessthanthevalueofa$250paymenttobereceivedintwoyearswhentheinterestrateis3percent. a.JarrodandSimonarebothcorrect. b.JarrodandSimonarebothincorrect. c.OnlyJarrodiscorrect. d.OnlySimoniscorrect. 57.Threepeoplegotothebanktocashintheiraccounts.Amyhadhermoneyinanaccountfor25yearsat4percentinterest.Billhadhismoneyinanaccountfor20yearsat5percentinterest.Celiahadhermoneyinanaccountfor5yearsat20percentinterest.Ifeachofthemoriginallydeposited$500intheiraccounts,whichofthemgetsthemostmoneywhentheycashintheiraccounts? a.Amy b.Bill c.Celia d.Theyeachgetthesameamount. 58.Veronicadeposited$1,000intoanaccounttwoyearsago.Thefirstyearsheearned7percentinterest;thesecondyearsheearned5percent.HowmuchmoneydoesVeronicahaveinheraccounttoday? a.$1,133.31 b.$1,120.00 c.$1,123.50 d.Noneoftheabovearecorrecttothenearestcent. 59.Felixdeposited$500intoanaccounttwoyearsago.Thefirstyearheearned3percentinterestandthesecondyearheearned5percentinterest.HowmuchmoneydoesFelixhaveinhisaccountnow? a.$540.75 b.$540.80 c.$540.85 d.Noneoftheabovearecorrecttothenearestcent. 60.Jorgedeposited$1,000intoanaccountthreeyearsago.Thefirsttwoyearsheearned5percentinterest;thethirdyearheearned6percentinterest.HowmuchmoneydoesJorgehaveinhisaccounttoday? a.$1,157.90 b.$1,168.65 c.$1,176.00 d.Noneoftheabovearecorrecttothenearestcent.    

    41) The study of how people make decisions in situations in which attaining their goals depends on their interactions with others is called A) game theory. B) oligopoly. C) competitive analysis. D) strategic analysis.   42) In economics, the study of the decisions of firms in industries where the profits of each firm depend on its interactions with other firms is called A) […]

  111.If a market basket of goods cost $100 in the base year and $143 in a later year, then average prices have increased by:    A. 243 percent. B. 143 percent. C. 70 percent. D. 43 percent. 112.If a market basket of goods cost $100 in the base year and $108 in a later year, then average prices have increased by:    A. 8 percent. B. 92.5 percent. C. 108 percent. D. 208 percent. […]

  19.6   The Foreign Exchange Market and Exchange Rates 1) How does an increase in a country’s exchange rate affect its balance of trade? A) An increase in the exchange rate raises imports, reduces exports, and reduces the balance of trade. B) An increase in the exchange rate reduces imports, raises exports, and reduces the balance of trade. C) An increase in the exchange rate […]

  Multiple Choice – Section 01: How Monetary Policy Influences Aggregate Demand 1.Theinterest-rateeffect a.dependsontheideathatincreasesininterestratesincreasethequantityofmoneydemanded. b.dependsontheideathatincreasesininterestratesincreasethequantityofmoneysupplied. c.isthemostimportantreason,inthecaseoftheUnitedStates,forthedownwardslopeoftheaggregate-demandcurve. d.istheleastimportantreason,inthecaseoftheUnitedStates,forthedownwardslopeoftheaggregate-demandcurve. 2.Theinterest-rateeffect a.dependsontheideathatdecreasesininterestratesincreasethequantityofgoodsandservicesdemanded. b.dependsontheideathatdecreasesininterestratesdecreasethequantityofgoodsandservicesdemanded. c.isresponsibleforthedownwardslopeofthemoney-demandcurve. d.istheleastimportantreason,inthecaseoftheUnitedStates,forthedownwardslopeoftheaggregate-demandcurve. 3.Thewealtheffectstemsfromtheideathatahigherpricelevel a.increasestherealvalueofhouseholds’moneyholdings. b.decreasestherealvalueofhouseholds’moneyholdings. c.increasestherealvalueofthedomesticcurrencyinforeign-exchangemarkets. d.decreasestherealvalueofthedomesticcurrencyinforeign-exchangemarkets. 4.Theideathatadecreaseinthepricelevelraisestherealvalueofhouseholds’moneyholdings,whichincreasesconsumerspendingandthequantityofgoodsandservicesdemandedisknownas a.theinterest-rateeffect. b.theexchange-rateeffect. c.thetheoryofliquiditypreference. d.thewealtheffect. 5.WithrespecttotheirimpactonaggregatedemandfortheU.S.economy,whichofthefollowingrepresentsthecorrectorderingofthewealtheffect,interest-rateeffect,andexchange-rateeffectfrommostimportanttoleastimportant? a.wealtheffect,exchange-rateeffect,interest-rateeffect b.exchange-rateeffect,interest-rateeffect,wealtheffect c.interest-rateeffect,wealtheffect,exchange-rateeffect d.interest-rateeffect,exchange-rateeffect,wealtheffect 6.FortheU.S.economy,whichofthefollowingisthemostimportantreasonforthedownwardslopeoftheaggregate-demandcurve? a.thewealtheffect b.theinterest-rateeffect c.theexchange-rateeffect d.thereal-wageeffect 7.Whichofthefollowingislikelymoreimportantforexplainingtheslopeoftheaggregate-demandcurveofasmalleconomythanitisfortheUnitedStates? a.thewealtheffect b.theinterest-rateeffect c.theexchange-rateeffect d.thereal-wageeffect 8.FortheU.S.economy,whichofthefollowinghelpsexplaintheslopeoftheaggregate-demandcurve? a.Anincreaseinthepriceleveldecreasestheinterestrate. b.Anincreaseinthepricelevelincreasestheinterestrate. c.Anincreaseinthemoneysupplydecreasestheinterestrate. d.Anincreaseinthemoneysupplyincreasestheinterestrate. 9.Thewealtheffecthelpsexplaintheslopeoftheaggregate-demandcurve.Thiseffectis a.relativelyimportantintheUnitedStatesbecauseexpendituresonconsumerdurablesisveryresponsivetochangesinwealth. b.relativelyimportantintheUnitedStatesbecauseconsumptionspendingisalargepartofGDP. c.relativelyunimportantintheUnitedStatesbecausemoneyholdingsareasmallpartofconsumerwealth. d.relativelyunimportantbecauseittakesalargechangeinwealthtocauseasignificantchangeininterestrates. 10.WhichofthefollowingclaimsconcerningtheimportanceofeffectsthatexplaintheslopeoftheU.S.aggregate-demandcurveiscorrect? a.Theexchange-rateeffectisrelativelysmallbecauseexportsandimportsareasmallpartofrealGDP. b.Theinterest-rateeffectisrelativelysmallbecauseinvestmentspendingisnotveryresponsivetointerestratechanges. c.Thewealtheffectisrelativelylargebecausemoneyholdingsareasignificantportionofmosthouseholds’wealth. d.Noneoftheaboveiscorrect.    

    31) If there is inflation and we compare the changes in a nominal variable over time versus its real counterpart, such as the nominal wage rate versus the real wage rate, we find that the A) two increase at about the same rate because of inflation. B) real wage rate increases faster because of inflation. C) nominal wage rate increases faster because of […]

    41.If you are an investor that owns shares in a firm that you believe is about to issue additional equity, then you would expect the price of your shares to a.increase. b.be unaffected. c.decrease. d.all three of the above could happen with equal probability.       42.If a firm is going to issue additional equity by offering existing shareholders the right, or […]

  41.Ifapersonisriskaverse,thenshehas a.diminishingmarginalutilityofwealth,implyingthatherutilityfunctiongetsflatteraswealthincreases. b.diminishingmarginalutilityofwealth,implyingthatherutilityfunctiongetssteeperaswealthincreases. c.increasingmarginalutilityofwealth,implyingthatherutilityfunctiongetsflatteraswealthincreases. d.increasingmarginalutilityofwealth,implyingthatherutilityfunctiongetssteeperaswealthincreases. 42.IfAlanisrisk-averse,thenhewillalways a.choosenottoplayagamewherehehasa50percentchanceofwinning$5anda50percentchanceoflosing$5. b.choosenottoplayagamewherehehasa75percentchanceofwinning$5anda25percentchanceoflosing$5. c.choosetoplayagamewherehehasa55percentchanceofwinning$5anda45percentchanceoflosing d.Alloftheabovearecorrect. 43.Whichofthefollowinggamesmightarisk-aversepersonplay? a.agamewhereshehasa50percentchanceofwinning$1anda50percentchanceoflosing$1 b.agamewhereshehasa50percentchanceofwinning$100anda50percentchanceoflosing$100 c.agamewhereshehasa60percentchanceofwinning$1anda40percentchanceoflosing$1 d.agamewhereshehasa40percentchanceofwinning$1anda60percentchanceoflosing$1 44.Whichofthefollowinggamesmightarisk-aversepersonplay? a.agamewhereshehasa70percentchanceofwinning$1anda30percentchanceoflosing$1 b.agamewhereshehasa60percentchanceofwinning$100anda40percentchanceoflosing$100 c.agamewhereshehasa60percentchanceofwinning$2anda40percentchanceoflosing$1 d.Alloftheabovearecorrect. 45.Whichofthefollowingiscorrectconcerningarisk-averseperson? a.Shewouldnotplaygameswheretheprobabilityofwinningandlosingadollararethesame. b.Shemightnotbuyhealthinsuranceifshethinksherrisksarelow. c.Hermarginalutilityofwealthdecreasesasherincomeincreases. d.Alloftheabovearecorrect. 46.Svetlanaisriskaverse.WhichofthefollowingiscorrectaboutSvetlana? a.Hermarginalutilityofwealthincreasesasherincomeincreases. b.Shewillalwaysacceptabetiftheprobabilityofwinningadollaristhesameastheprobabilityoflosingadollar. c.Herutilityfunctionisastraightline. d.Noneoftheabovearecorrect. 47.Theutilityfunctionofarisk-aversepersonhasa a.positiveslopeandgetssteeperaswealthincreases. b.positiveslopebutgetsflatteraswealthincreases. c.negativeslopebutgetssteeperaswealthincreases. d.negativeslopeandgetsflatteraswealthincreases. 48.Arisk-aversepersonhas a.utilityandmarginalutilitycurvesthatslopeupward. b.utilityandmarginalutilitycurvesthatslopedownward. c.autilitycurvethatslopesdownandamarginalutilitycurvethatslopesupward. d.autilitycurvethatslopesupwardandamarginalutilitycurvethatslopesdownward. 49.Diminishingmarginalutilityofwealthimpliesthattheutilityfunctionis a.upward-slopingandhasdecreasingslope. b.upward-slopingandhasincreasingslope. c.downward-slopingandhasdecreasingslope. d.downward-slopingandhasincreasingslope. 50.Ifapersonisriskaverse,thenaswealthincreases,totalutilityofwealth a.increasesatanincreasingrate. b.increasesatadecreasingrate. c.decreasesatanincreasingrate. d.decreasesatadecreasingrate.