Q&A Hero

Q: Which of the following features are relevant for determining the extent of a market? A) Its geographical boundaries. B) Technological innovations that would reduce the cost of production. C) The range of products to be included in it. D) both A and B E) both A and C

Q: Why is market definition important for economic decision making? A) A firm is interested in knowing its actual and potential competitors. B) A firm will define its market in order to maximize revenue. C) Government regulators are interested in knowing the effect of mergers and acquisitions on competition and prices in a particular market. D) both A and C E) both A and B

Q: Washington D.C.'s metro train system is being extended further into the neighboring states of Maryland and Virginia, thereby reducing the cost of commuting into the United States' capitol. Other things being held constant, this can be expected to: A) decrease the extent of the market for housing around Washington D.C. B) increase the extent of the market for housing around Washington D.C. C) have no effect on the extent of the market for housing around Washington D.C. as the actual geography remains unchanged. D) have no effect on the extent of the market for housing around Washington D.C. as the range of houses available has not changed. E) have no effect on the extent of the market for housing around Washington D.C. as property taxes have not changed.

Q: Although the U. S. airline industry has only a relatively small number of sellers, the market is nevertheless highly competitive. The reason is that: A) the number of buyers is very large. B) due to fierce competition, no firm has significant control over prices. C) due to fierce competition, no firm has significant control over the quantity supplied. D) most airline routes are served by relatively many sellers.

Q: Which of the following are examples of perfectly competitive markets? A) Wheat B) Textiles C) Gold D) The stock market E) all of the above

Q: Boeing Corporation and Airbus Industries are the only two producers of long-range commercial aircraft. This market is not perfectly competitive because: A) each company has annual sales over $10 billion. B) each company can significantly affect prices. C) Airbus receives subsidies from the European Union. D) Airbus cannot sell aircraft to the United States government. E) all of the above

Q: In a perfectly competitive market: A) there are a few buyers. B) there is a single seller. C) there is a cartel. D) no single buyer or seller can significantly affect the market price.

Q: Use the following two statements to answer this question: I. A market is a collection of buyers and sellers that, through actual or potential interactions, determine the price for a product or set of products. II. An industry is a collection of markets for similar or closely related products. A) Both I and II are true. B) I is true, and II is false. C) I is false, and II is true. D) Both I and II are false.

Q: An investor can acquire shares of stock in Acme Corporation either by purchasing shares on the stock market or by purchasing a bond that is convertible into shares of Acme stock. After careful study, the investor discovers that she can profit by purchasing the bond, converting it to shares of stock, and selling the stock. This practice is called: A) selling short. B) arbitrage. C) profiteering. D) dumping. E) none of the above

Q: Which of the following markets has the most restrictive geographic boundary? A) The market for retail gasoline B) The market for housing C) The market for gold D) The market for beef

Q: Which of the following statements is NOT true? A) If an economic theory is proven to be untrue, then it must be discarded. B) If an economic theory is proven to be untrue, then it may be modified or discarded. C) Economic theories provide the basis for making predictions. D) Economic models are specific representations of economic theories.

Q: Which of the following economic values is NOT an example of a price? A) Wage earned per hour B) Annual interest rate paid for borrowed money C) College tuition per semester D) all are examples of prices

Q: During the presidential campaigns, the candidates from each party typically describe their plans to maintain or change federal taxes on personal and business income. Are these policy statements generally positive or normative? A) Positive B) Normative C) Both positive and normative D) Neither positive or normative

Q: Firms face trade-offs in production, including decisions related to: A) which products to produce. B) how much of a particular product to produce. C) the best way to produce a given amount of output. D) all of the above

Q: The trade-offs facing workers include all of the following EXCEPT: A) decision to work or remain outside the workforce. B) decision to work or seek additional education. C) decision to work for a large corporation or a small firm. D) decision to allocate their time between work and leisure. E) All of the above are trade-offs facing workers.

Q: The trade-offs facing consumers include: A) how to allocate income across goods and serves. B) how to allocate income between consumption and savings. C) both A and B D) none of the above

Q: Please use the following statements to answer this question: I. The process of testing and revising theories is central to the development of economics as a science. II. Theory is imperfect and may not adequately describe economic behavior in some cases. A) I and II are true. B) I is true and II is false. C) I is false and II is true. D) I and II are false.

Q: Which of the following statements is NOT true? A) The trade-offs facing consumers and producers are based on prices. B) All prices are determined by market interactions between buyers and sellers. C) Prices serve an important role in microeconomics. D) Only A and B above false. E) Only B and C above are false.

Q: The key assumption underlying the theory of the firm is that: A) firms are assumed to maximize sales revenue. B) managers are assumed to maximize the number of employees in their department. C) firms are assumed to maximize profits. D) none of the above

Q: ________ questions have to do with explanation and prediction, ________ questions have to do with what ought to be. A) Positive; negative. B) Negative; normative. C) Affirmative; positive. D) Positive; normative. E) Econometric; theoretical.

Q: Use the following two statements to answer this question: I. In order to answer normative questions, it is necessary to make value judgments. II. In order to conduct positive economic analysis, it is always necessary to use empirical evidence in addition to economic theories. A) I and II are incorrect. B) I is correct, II is incorrect. C) I is incorrect, II is correct. D) Both I and II are correct.

Q: Which of the following statements is false? An economic analysis of carbon taxes can: A) calculate the increase in costs faced by coal-using industries. B) predict the effect on unemployment in West Virginia coal mining communities. C) compare the likely reductions in medical expenditures on diseases caused by smog. D) present a trade-off of the costs and benefits of different levels of carbon taxes. E) conclude that such taxes should be imposed to benefit future generations.

Q: Which of the following is a positive statement? A) When the price of a good goes up, consumers buy less of it. B) When the price of a good goes up, firms produce more of it. C) When the Federal government sells bonds, interest rates rise and private business investment is reduced. D) all of the above E) none of the above

Q: Which of the following is a positive statement? A) Intermediate microeconomics should be required of all economics majors in order to build a solid foundation in economic theory. B) The minimum wage should not be increased because this action would increase unemployment. C) Smoking should be restricted on all airline flights. D) All automobile passengers should be required to wear seatbelts in order to protect them against injury. E) none of the above

Q: Which of the following is a normative statement? A) The taxes paid by the poor should be reduced in order to improve the income distribution in the U.S. B) State governments should not subsidize corporations by training welfare recipients. C) Presidential candidates should not be given funds from the federal government to run campaigns. D) The sea otter should not be allowed to spread into Southern California coastal waters, because it will reduce the value of fisheries. E) all of the above

Q: Which of the following is a positive statement? A) The President of the United States ought to be elected by a direct vote of the American people rather than the Electoral College. B) A fundamental assumption of the economic theory of consumer behavior is that consumers always prefer having more of any good to having less of it. C) Because many adults cannot afford to go to college, tax credits for tuition should be introduced. D) all of the above E) none of the above

Q: Use the following two statements to answer this question: I. Economic theories are developed to explain observed phenomena by deducing from a set of basic rules and assumptions. II. Economic theories use value judgments to determine which people ought to pay more taxes. A) Both I and II are true. B) I is true, and II is false. C) I is false, and II is true. D) Both I and II are false.

Q: A valid and useful theory of gold prices: A) helps to predict the movements of gold prices over time. B) may be founded on simplifying assumptions. C) need not exactly predict every change in gold prices. D) all of the above E) none of the above

Q: Economics is about the allocation of scarce resources. Which of the following is NOT an example of economic scarcity? A) If Steve goes to see a movie on Saturday, he will not be able to afford buying ice cream. B) If Jenny studies for her economics quiz this evening, she will not have time to walk her dog. C) If General Motors increases its production of SUVs this year, it will have to spend more on advertising. D) If Barnes and Noble bookstore increases the number of titles it carries, it will have to reallocate shelf space to accommodate the new titles.

Q: A Rolling Stones song goes: "You can't always get what you want." This echoes an important theme from microeconomics. Which of the following statements is the best example of this theme? A) Consumers must make the best purchasing decisions they can, given their limited incomes. B) Workers do not have as much leisure as they would like, given their wages and working conditions. C) Workers in planned economies, such as North Korea, do not have much choice over jobs. D) Firms in market economies have limited financial resources.

Q: Microeconomics is the branch of economics that deals with which of the following topics? A) The behavior of individual consumers B) Unemployment and interest rates C) The behavior of individual firms and investors D) B and C E) A and C

Q: 1) In the situation involving a bilateral monopoly, aA) single firm acts as both the monopsonist and the monopoly.B) single seller sells to a single buyer.C) monopsonist sells to a monopsonist.D) monopolist sells to a monopolist.

Q: When part of a bank loan does not return to the banking system but rather remains outside the banking system as currency, then the money multiplier ________ in size and the amount of money created by an open market operation ________. A) increases; decreases B) does not change; increases C) decreases; decreases D) increases; increases E) decreases; does not change

Q: When we keep part of our wealth in a bank checking account, we are using money as a A) store of value. B) medium of exchange. C) barter token. D) unit of account. E) unit of currency.

Q: The ________ the desired reserve ratio, the ________ the ________ in the quantity of money created from an initial increase of $100,000 in the monetary base. A) larger; larger; decrease B) larger; larger; increase C) larger; smaller; decrease D) smaller; larger; decrease E) smaller; larger; increase

Q: The store of value function is defined as the A) pricing of goods and services in one measure. B) exchange of goods and services directly for other goods and services. C) holding of money from one transaction to be used later in another transaction. D) double coincidence of wants that is used in the debate over barter versus money. E) use of money as a medium of exchange.

Q: If the monetary base does not change and the desired reserve ratio increases, the money multiplier ________ and the quantity of money ________. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases E) decreases; does not change

Q: When money is used to compare the relative price of a burrito and a taco, money is being used as a A) medium of exchange. B) store of value. C) measurement of inflation. D) unit of account. E) token of bartering.

Q: ________ increases the size of the money multiplier. A) An increase in the currency drain ratio B) An open market purchase of government securities by the Fed C) A reduction in the desired reserve ratio D) An open market sale of government securities by the Fed E) An increase in the size of open market operations

Q: Money is used as a ________ when you visit the local farmers' market and compare prices across different vendors. A) means of payment B) unit of account C) store of value D) medium of exchange E) measure of barter

Q: An increase in the currency drain ratio A) decreases the quantity of money. B) decreases the monetary base. C) increases banks' reserves. D) increases banks' deposits. E) has no effect on the amount of the monetary base or the quantity of money.

Q: When you see a mansion and think to yourself that it must be worth a million dollars, you are using money to perform which function? A) medium of exchange B) unit of account C) store of value D) means of payment E) method of avoiding barter

Q: An increase in the currency drain ratio A) decreases the monetary base. B) increases the quantity of money. C) increases bank reserves. D) does not change the amount of the monetary base. E) does not change the quantity of money.

Q: When we put a price tag on goods and services, we are using money as a A) store of value. B) medium of exchange. C) barter token. D) unit of account. E) means of payment.

Q: If there is an increase in the amount of currency held outside banks, then the A) monetary base will decrease. B) quantity of money will increase. C) quantity of money and the monetary base will decrease. D) quantity of money will decrease. E) quantity of money will not change.

Q: The function of money that helps assess the opportunity cost of an activity is money's use as a A) medium of exchange. B) store of value. C) unit of account. D) store of debt. E) barter tool.

Q: An increase in the currency drain ratio A) decreases the size of the money multiplier. B) increases the size of the money multiplier. C) increases the money supply. D) decreases the required reserve ratio. E) increases the desired reserve ratio.

Q: If you shop for a car online and compare car prices across dealerships, money is functioning as a A) medium of exchange. B) unit of account. C) means of payment. D) store of value. E) barter mechanism.

Q: An increase in the currency drain ratio ________. A) increases the size of the money multiplier B) decreases the size of the money multiplier C) increases the deposits in all banks D) decreases the size of the monetary base E) increases the size of the monetary base

Q: The unit of account is defined as A) the exchange of goods and services directly for other goods and services. B) barter. C) an object that is accepted in return for goods and services. D) an agreed upon measure for stating prices of goods and services. E) the medium of exchange.

Q: ________ in the currency drain ratio and ________ in the desired reserve ratio ________ the money multiplier. A) An increase; an increase; increase B) An increase; a decrease; decrease C) A decrease; an increase; decrease D) A decrease; a decrease; increase E) An increase; a decrease; increase

Q: Which of the following best describes a double coincidence of wants? A) Two buyers want the same good. B) Neither buyer wants a good. C) You have what another wants and you want what they have. D) A buyer and a seller rather than two buyers or two sellers must meet. E) None of the above answers is correct.

Q: The quantity of money decreases if A) the currency drain ratio increases. B) the desired reserve ratio decreases. C) banks loan all excess reserves. D) the Treasury Department issues fewer government securities. E) the Fed buys U.S. government securities.

Q: What is a problem with barter that makes it so difficult to use? A) Individuals have to produce something to trade with. B) Barter requires a double coincidence of wants. C) Barter is very efficient but illegal because it avoids taxation. D) Barter requires use of only fiat money. E) Barter omits the store of value role for money.

Q: Which of the following reduces the money multiplier? A) Banks loan all their excess reserves. B) Bank customers hold some of the loan proceeds as currency outside the banking system. C) The Fed reduces the required reserve ratio. D) Banks impose a currency drain on bank customers. E) The Fed sells U.S. government securities.

Q: When you use currency to buy lunch, money is performing which function? A) medium of exchange B) unit of purchase C) store of value D) barter token E) unit of currency

Q: If the Fed buys $10 million of government securities when the desired reserve ratio is 20 percent and the currency drain ratio is 5 percent, the quantity of money A) increases by $42 million. B) increases by $50 million. C) decreases by $42 million. D) decreases by $50 million. E) increases by $7.5 million.

Q: When we use money to purchase goods and services, we are using money as a A) unit of account. B) reserve of wealth. C) medium of exchange. D) store of value. E) bartering tool.

Q: The Fed buys $20,000 of government securities. The desired reserve ratio is 5 percent and the currency drain ratio is zero. What will be the change in the quantity of money? A) $20,000 B) $400,000 C) $399,980 D) $19,000 E) $5,000

Q: The "double coincidence of wants" is A) what is needed to use money. B) eliminated with the use of money. C) eliminated when we barter instead of using money. D) how value is stored when we transact with money. E) money's role as a unit of account.

Q: Suppose the Fed sells $100 of government securities. If the desired reserve ratio is 20 percent and there is no currency drain, then the quantity of money A) decreases by $100. B) decreases by $500. C) decreases by $400. D) increases by $100. E) decreases by $80.

Q: In performing which of its primary functions does money solve the problem of the double coincidence of wants? A) medium of exchange B) unit of account C) store of value D) barter system E) money supply

Q: The Fed conducts an open market purchase of securities of $5,000. If the currency drain ratio is 0 percent and the desired reserve ratio is 10 percent, then the total increase in the quantity of money is A) $5,000. B) $20,000. C) $50,000. D) $10,000. E) $4,000.

Q: A barter system of payment is A) similar to a money system of payment because both require a double coincidence of wants. B) similar to a money system of payment because both use one asset as a unit of account. C) different from a money system of payment because the barter system is a better unit of account. D) different from a money system of payment because money does not require a double coincidence of wants. E) similar to a money system of payment because both are used as stores of value and units of account.

Q: If the required reserve ratio is 15 percent, there is no currency drain, and banks loan all of their excess reserves, an increase in the monetary base of $20,000 leads to a total increase in the quantity of money of A) $3,000. B) $20,000. C) $133,333. D) $200,000. E) $300,000.

Q: The medium of exchange is defined as A) barter. B) the exchange of goods and services directly for goods and services. C) an object that is accepted in return for goods and services. D) credit cards. E) an item that can be stored and hold its value over time.

Q: Suppose the desired reserve ratio is 10 percent and there is no currency drain. Then a $200 increase in the monetary base results in the banking system increasing the quantity of money by A) $200. B) $2,000. C) $20. D) $10. E) $2,190.

Q: Barter requires the A) use of commodity money as a medium of payment. B) use of fiat money as a medium of exchange. C) the triple non-coincidence of wants. D) exchange of goods and services directly for other goods and services. E) use of money as a unit of account.

Q: Suppose the desired reserve ratio is 20 percent and there is no currency drain. Then a $1 increase in the monetary base leads to the banking system to increase the quantity of money by A) $0.02. B) $4. C) $5. D) $20. E) $2.

Q: When you join the local organic food market and then buy produce each month, money is used as A) only a store of value. B) only a unit of account. C) a medium of exchange and a store of value. D) a medium of exchange and a unit of account. E) a store of value and a unit of account.

Q: If the desired reserve ratio is 10 percent and there is no currency drain, then a $100 increase in the monetary base leads the banking system to increase the quantity of money by A) $1,000. B) $400. C) $900. D) $110. E) $1,100.

Q: Money performs all of the following functions EXCEPT serving as a i. medium of exchange. ii. unit of account. iii. barter mechanism. A) i only B) ii only C) iii only D) i and ii E) ii and iii

Q: The Fed buys $25,000 of government securities. The desired reserve ratio is 20 percent and the currency drain ratio is zero. What will be the change in the quantity of money? A) $5,000 B) $20,000 C) $25,000 D) $125,000 E) $50,000

Q: Which of the following is NOT among the primary functions of money? A) unit of account B) store of value C) indicator of supply D) medium of exchange E) an object that is generally accepted in return for goods and services

Q: The Fed buys $50,000 of government securities. The desired reserve ratio is 10 percent and the currency drain ratio is zero. What will be the change in the quantity of money? A) $5,000 B) $50,000 C) $500,000 D) $5,000,000 E) $0

Q: Money serves as a A) means of payment, legal obligation, and public tax. B) medium of exchange, unit of account, and store of value. C) means of settling debts, transaction lubricant, and private commodity. D) means of worker exploitation and capitalist enrichment. E) means to conduct barter transactions.

Q: If the currency drain ratio is zero, which of the following situations leads to the greatest total increase in the quantity of money? A) an increase in the monetary base of $100,000 when the desired reserve ratio is 5 percent B) an increase in the monetary base of $120,000 when the desired reserve ratio is 10 percent C) an increase in the monetary base of $200,000 when the desired reserve ratio is 20 percent D) an increase in the monetary base of $250,000 when the desired reserve ratio is 15 percent E) an increase in the monetary base of $100,000 when the desired reserve ratio is 50 percent

Q: The functions of money are A) medium of exchange, unit of account, and store of value. B) medium of exchange, the ability to buy goods and services, and the ability to pay off debts. C) medium of exchange, the ability to buy goods and services, and checking accounts. D) credit cards, checking accounts, currency, and coins. E) store of value, use as a barter mechanism, and unit of account.

Q: The monetary multiplier is 3 and the change in the monetary base is $100,000. How much will the quantity of money increase? A) $300,000 B) $200,000 C) $100,000 D) $70,000 E) $33,333

Q: For an asset to be a "means of payment," the asset A) is valuable and backed by gold. B) is valuable and backed by the government. C) can be used to settle a debt. D) requires a double coincidence of wants. E) must be used when bartering.