Figure 3-7     19) Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for blu-ray discs.  Which panel best describes what happens in this market if there is a substantial increase in the price of blu-ray players? A) Panel (a) B) Panel (b) C) Panel (c) D) Panel (d)   20) Refer to Figure 3-7. […]

  Multiple Choice – Section 03: Why Economists Disagree 1.“Ifalleconomistswerelaidendtoend,theywouldnotreachaconclusion.”Whomadethiswhimsicalobservation? a.HarryTruman b.GeorgeBernardShaw c.JohnMaynardKeynes d.RonaldReagan 2.PresidentRonaldReaganoncejokedthataTrivialPursuitgamedesignedforeconomistswould a.havenoquestionsbuthundredsofanswers. b.have100questionsand3,000answers. c.have1,000questionsbutnoanswers. d.neverproduceawinner. 3.Economistssometimesgiveconflictingadvicebecause a.graduatestudentsineconomicsareencouragedtoarguewitheachother. b.economistshavedifferentvaluesandscientificjudgment. c.economistsactingasscientistsdonotliketoagreewitheconomistsactingaspolicyadvisers. d.economicsismoreofabeliefsystemthanascience. 4.Thetwobasicreasonswhyeconomistsoftenappeartogiveconflictingadvicetopolicymakersaredifferencesin a.opinionsandeducation. b.opinionsandvalues. c.scientificjudgmentsandeducation. d.scientificjudgmentsandvalues. 5.Sometimeseconomistsdisagreebecausetheirscientificjudgmentsdiffer.Whichofthefollowinginstancesbestreflectsthissourceofdisagreement? a.Oneeconomistbelieveseveryoneshouldpaythesamepercentageoftheirincomeintaxes;anothereconomistbelievesthatwealthiercitizensshouldpayahigherpercentageoftheirincomeintaxes. b.Oneeconomistbelievesthatmanufacturingfirmsshouldfacegreaterregulationtopreservetheenvironment;anothereconomistbelievesthegovernmentshouldnotinterveneinfreemarkets. c.Oneeconomistbelievesthatequalityshouldbevaluedoverefficiencyinpolicydecisions;anothereconomistbelievesthatefficiencyshouldbevaluedoverequalityinpolicydecisions. d.Oneeconomistbelievesthegovernmentshouldtaxahousehold’sincome?anothereconomistbelievesthegovernmentshouldtaxahousehold’sconsumption. 6.Differencesinscientificjudgementbetweeneconomistsaresimilartoallofthefollowingexcept a.astronomersdebatingwhetherthesunorearthwasatthecenterofthesolarsystem. b.meteorologistsdebatingtheexistenceofglobalwarming. c.twopoliticiansarguingaboutthefairnessofthetaxcode. d.explorersdebatingwhetherornottheearthwasflatbeforethetimeofChristopherColumbus. 7.Sometimeseconomistsdisagreebecausetheirvaluesdiffer.Whichofthefollowinginstancesbestreflectsthissourceofdisagreement? a.OneeconomistbelievestheNorthAmericanFreeTradeAgreement(NAFTA)hasledtoalossofAmericanjobs;anothereconomistdisputesthisclaim. b.Oneeconomistbelievesthatwhenincometaxesarecut,peoplewillincreasetheirspending;anothereconomistbelievesthatwhenincometaxesarecut,peoplewillincreasetheirsaving. c.Oneeconomistadvisesagainstincreasesinsalestaxesbecauseshethinkssuchincreasesareunfairtolow-incomepeople;anothereconomistdisputestheideathatincreasesinsalestaxesareunfairtolow-incomepeople. d.Oneeconomistbelievesthat,priortotheCivilWar,slaverycontributedtoeconomicgrowthintheSouth;anothereconomistbelievesthatslaveryheldbacktheSouth’seconomicgrowth. 8.JoeandFredareeconomists.Joethinksthatthewealthiest10%oftheUSpopulationshouldbetaxedaratehigherthantherestofsocietybecausetheycanbetteraffordit.Fredthinksthateveryoneshouldbetaxedatthesameratebecausethatisthefairestscenarioandthewealthyshouldnotbepenalizedfortheirsuccess.Inthisexample,JoeandFred a.disagreeaboutthevalidityofapositivetheory. b.havedifferentnormativeviewsabouttaxpolicy. c.mustbothbeincorrectbecausetaxpolicyisneverthatsimple. d.Noneoftheaboveiscorrect. 9.Whichofthefollowingisoneofthebasicreasonswhyeconomistsoftenappeartogiveconflictingadvicetopolicymakers? a.similaropinionsaboutthevalidityofeconomictheories b.significantdifferencesineducation c.differencesinpersonalvalues d.arelianceonnormativestatementforresearchtheories 10.YiandAvikarebotheconomists.Yithinksthattaxingconsumption,ratherthanincome,wouldresultinhigherhouseholdsavingbecauseincomethatissavedwouldnotbetaxed.Avikdoesnotthinkthathouseholdsavingwouldrespondmuchtoachangeinthetaxlaws.In thisexample, Yiand Avik a.holddifferentnormativeviewsaboutthetaxsystem. b.disagreeaboutthevalidityofapositivetheory. c.haveafundamentalmisunderstandingofthetaxsystem. d.Morethanoneoftheaboveiscorrect.    

    61.TransMetro Incorporated has EBIT of $1 million for the current year. On the firm balance sheet, there is $6 million of debt outstanding that carries a coupon rate of 15 percent. Investors seek a return of 20 percent on the firm, and the firm has a corporate tax rate of 40%. What is the present value of the firm’s tax shields? a.$2,000,000 b.$2,200,000 […]

  10.1   Negative Externalities: Pollution   1) Externalities A) can be either benefits or costs. B) always create extra social costs. C) always make society better off. D) cannot be expressed in dollar amounts. E) are always part of private costs or private benefits.   2) A cost that arises from the production or consumption that falls on someone other than the producer or consumer […]

  6.5   Are Markets Fair?   1) The “equality of opportunity” idea of fairness claims A) a society should make the poorest as well off as possible. B) the results and the rules should both be fair. C) it’s not fair if the rules aren’t fair. D) private property can be transferred under government order. E) only a first-come, first-served system of allocating resources is […]

  10.1   Utility and Consumer Decision Making   1) Economists assume that the goal of consumers is to A) do as little work as possible to survive. B) make themselves as well off as possible. C) expend all their income. D) consume as much as possible.     2) Utility is A) easily measured in units called utils. B) subjective and difficult to measure. C) […]

    21) Which of the following is a microeconomic topic? i)Gas prices increase after a hurricane hits the gulf coast. ii)Xavier starts a new business designing web pages. iii)Abby decides to practice an extra hour of soccer instead of studying. A) i, ii and iii B) i only C) ii and iii D) ii only E) i and ii   22) Macroeconomics is the […]

  11) If typical firms in a competitive industry are earning economic profits, the industry A) is in a long-run equilibrium. B) has too many resources allocated to it. C) must be experiencing an increase in monopoly power D) can be expected to experience the entry of new firms. E) is allocatively efficient. 12) Which of the following statements about the price system is most […]

    71) Refer to Figure 17-4. Firms X and Y have an emissions tax of $t imposed on each unit of pollution they produce. If Firm X chooses to abate QX units of pollution, the total cost of its abatement is A) tax amount t multiplied by the maximum possible level of pollution abatement. B) area beneath the marginal cost of pollution abatement curve. […]

    11) Which of the following would increase the size of the government purchases multiplier? A) an increase in the tax rate B) an increase in the quantity of imports purchased by households from an increase in income C) a decrease in the amount of consumption spending by households from an increase in income D) a decrease in the amount saved by households from […]