The classical model of the price level is most applicable in a. the United States. b. periods of high inflation. c. periods of low inflation. d. recessions. e. depressions.

The following schedule shows the technology of production at Mahalo Macadamia Nut Farm for 2015: If macadamia nuts sell for $3.50 per pound and workers can be hired in a competitive labor market for $800 per week, how many workers should be hired? What if workers unionized and the weekly wages doubled? (Hint: Create marginal product and marginal revenue product columns for the table.) Explain […]

For each of the following statements, do you agree or disagree? Why? a. Economic theory predicts unequivocally that a payroll tax reduction will increase the supply of labor. b. Corporate income taxes levied on a monopolist are likely to be regressive because the monopoly can pass on its burden to consumers. c. If labor supply is relatively elastic, the burden of a payroll tax falls […]

Consider the table below, which lists James’s marginal utility schedule for steak and hamburger meals: Given a budget of $45, how many steak and hamburger meals will James buy per month to maximize his total utility? What is the total utility realized?

Do you agree or disagree with each of the following statements? Explain your answer. a. Nutritional food is a public good and should be produced by the public sector because private markets will fail to produce it efficiently. b. Imperfect markets are inefficient because as price-makers, firms in these markets can guarantee that price will al-ways be less than marginal cost. c. Financial planning service […]

Consider an industry that exhibits external economies of scale. Now suppose that over the next decade, the demand for that industry’s product increases rapidly. Describe the adjustments likely to follow. Use diagrams in your answer.

For cases A through F in the following table, would you (a) operate or shut down in the short run and (b) expand your plant or exit the industry in the long run?

A paper released by the World Bank in 2014 states that while economic growth is essential for reducing poverty rates, growth by itself is not enough, and efforts to reduce poverty must be complemented with programs that devote more resources to the extreme poor. According to the paper, as extreme poverty declines, growth by itself tends to be less successful at lifting additional people out […]

Which of the following defines the “store of value” function of money? a. A common measurement of the relative value of different goods and services. b. The ability of money to hold value over time. c. That the materials used to manufacture money are of medium grade or quality, so that people will not hoard money for its commodity value. d. That money is widely […]

Can you imagine a situation in which water would be more expensive than diamonds? Suppose the price per gallon of water is 1 cent and the price per carat of a diamond is $10,000. Is the total utility of diamonds 10,000 times as great as the total utility received from water?

The following table contains data compiled by the Organisation for Economic Co-operation and Development (OECD). The data reflects the average annual percentage change in real household income by income group from the mid-1980s to the late-2000s for five OECD countries. For each of the listed countries, average annual real income increased for the overall population, as is shown in the “Total Population” column, but the […]

A change in a third variable not on either axis of a graph is illustrated with a. a horizontal or vertical line. b. a movement along a curve. c. a shift of a curve. d. a point of intersection.

Explain why it is possible that a firm with a production function that exhibits increasing returns to scale can run into diminishing returns at the same time. One of the more recent innovations in computer technology is called “cloud computing.” With cloud computing, information and software are provided to computers on an “as-needed” basis, much like utilities are provided to homes and businesses. At the […]

For each sentence below describing changes in the tangerine market, note whether the statement is true, false, or uncertain, and explain your answer. You will find it helpful to draw a graph for each case. a. If consumer income increases and worker wages fall, quantity will rise and prices will fall. b. If orange prices decrease and taxes on citrus fruits decrease, quantity will fall […]

The five busiest airports in the United States are in Atlanta, Chicago, Los Angeles, Dallas-Ft. Worth, and Denver. At these airports there are more than 450 food outlets, with each airport offering a number of dining options that feature regional cuisines. Passengers will also see many familiar names like McDonald’s, Starbucks, Jamba Juice, Burger King, Subway, and Chili’s. Why might these national chains find it […]

Explain cost-push inflation verbally and graphically, using aggregate demand and aggregate supply analysis. Assess the impact on the price level, real GDP, and employment. Explain demand-pull inflation graphically using aggregate demand and supply analysis. Assess the impact on the price level, real GDP, and employment. Would the Greenhouse Effect Cause Inflation, Unemployment, or Both?

Which of the following reasons helps explain why the aggregate demand curve is downward sloping? a. The real balances effect: Consumers spend more on goods and services when the price level falls because lower prices increase consumer purchasing power. b. The producer-push effect: At less than fullemployment, increases in quantity demanded will raise price, and thus will motivate sellers to produce more. c. The hidden […]

If the monopolist in Exhibit 11 operates at the profit-maximizing output, it will earn total revenue to pay about what portion of its total fixed cost? a. None b. One-half c. Two-thirds d. All total fixed costs

Any point inside the production possibilities curve is a(an) a. efficient point. b. unfeasible point. c. inefficient point. d. maximum output combination.

Suppose that widgets can be produced using two different production techniques, A and B. The following table provides the total input requirements for each of five different total output levels. a. Assuming that the price of labor (PL) is $2 and the price of capital (PK) is $3, calculate the total cost of production for each of the five levels of output using the optimal […]