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A fiscal policy action to close an expansionary gap is to: A. increase taxes. B. increase transfer payments. C. increase government purchases. D. increase the marginal propensity to consume. If the Fed wishes to increase nominal interest rates, it must […]

In general, the optimal amount of medical care to receive is A. as much as one can afford. B. enough to get well. C. that quantity for which the total costs of the care equal the total benefits. D. that […]

Following the 1960 and 1973 period, average real earnings of workers grew more ______ from 1973 to 1996 and then ______ from 1996 to 200 A. slowly; grew more rapidly B. slowly; slowed even more C. slowly; grew at about […]

Suppose a treacherous stretch of road winds through Deadman’s Canyon for 5 miles. A highway department study estimates that better lighting would reduce the traffic fatality rates as follows: Suppose that experts have estimated the statistical value of a life […]

The nominal exchange rate is the: A. market on which currencies of various nations are traded for one another. B. price of the average domestic good or service relative to the price of the average foreign good or service, when […]

If firms sell more output than expected, planned investment: A. is greater than actual investment. B. is less than actual investment. C. equals actual investment. D. equals zero. Assume that Dusty has $30 in income, the price of a loaf […]

Which of the following is NOT an example of an activity with external benefits? A. Eating a sandwich in the dining hall B. Planting flowers in your front yard C. Attending class when you have the flu D. Having your […]

Refer to the table above. The amount of currency held by the public ______, and the amount of reserves held by banks ______. It must be the case that, in 1932, the Federal Reserve ______. A. increased; also increased; increased […]

The Federal Reserve discount rate is the rate of interest charged on loans from ______ to _____. A. the Federal Reserve; commercial banks B. the Federal Reserve; the U.S. Treasury C. commercial banks; the Federal Reserve D. the U.S. Treasury; […]

Average labor productivity is determined by: A. consumption, investment, government spending, and net exports. B. the number employed, unemployed, and the labor force participation rate. C. the quantity and quality of human capital, physical capital, technology, natural resources, entrepreneurship, and […]

As one moves down along a linear demand curve (i.e., from high price, low quantity pairs to low price, high quantity pairs), the demand: A. becomes more price elastic. B. increases. C. decreases. D. becomes less price elastic. A crowded […]

Refer to the figure above. With no subsidy, what is the producer surplus? A. $0 B. $6,000 C. $7,500 D. $17,000 Refer to the figure above. Based on the figure, if autonomous spending increases from 400 to 600, then the […]

In deciding the number of guitars to buy for his shop before the Christmas season, Mark is making a(n) __________________ decision. A. microeconomic B. macroeconomic C. economic surplus D. marginal choice In a market where government has set the maximum […]

Refer to the figure above. The diagram shows Sven’s Production Possibilities for one day. For Sven, the opportunity cost of spending one more hour studying: A. is diminishing with each additional hour. B. is increasing with each additional hour. C. […]

If consumption spending increases by $10 million with no changes in net taxes, then: A. public saving increases. B. public saving decreases. C. private saving increases. D. private saving decreases. Your math professor has assigned 20 homework problems that are […]

Point A on a linear production possibilities curve represents a combination of 12 coffees and 3 cappuccinos, and point B represents 3 coffees and 6 cappuccinos. Suppose coffees are on the vertical axis and cappuccinos are on the horizontal axis. […]

Moe’s parents frequently tell him how it was back in their childhoods. They had a smaller house, fewer toys, only one car and one black-and-white TV, but they were happy. In fact, Moe’s parents claim that they were happier than […]

Sven likes to water ski, but can only water ski during the one week that he is on vacation. Therefore, he plans to ski every day, for eight hours a day. The first day, Sven skied for eight hours and […]

In models of labor supply, the opportunity cost of spending an hour enjoying leisure activities is A. the price paid to engage in those activities. B. the hourly wage that could have been earned during that hour. C. zero. D. […]

The price of a gallon of gasoline was $0.35 in 1972 when the CPI equaled 0.418. The cost of a gallon of gasoline was $2.25 in 2005 when the CPI equaled 1.68. The real cost of a gallon of gasoline […]

Demands for greater government regulations of workplace safety rest on the belief that A. labor market competition is great. B. firms will adopt safety devices on their own. C. left on their own, firms will exploit workers and subject them […]

Refer to the figure above. Suppose the economy is in a short-run equilibrium at output Y3 and inflation rate π2. The economy is currently experiencing ______, and the correct fiscal policy response to this situation, to return the economy to […]

If average labor productivity in two countries is the same, average living standards will be lower in the country with: A. the smaller population. B. the larger population. C. the higher share of population employed. D. the lower share of […]

According to the textbook, the evidence indicates that NAFTA has: A. reduced the wages of skilled workers in the United States. B. reduced the employment of unskilled workers in the United States significantly. C. stopped illegal immigration from Mexico. D. […]

The following data show the relationship between the number of drivers who leave for work at 8:00 am, their average commute times, and their marginal benefit associated with the commute times. Refer to the information given above. An argument for […]

Real GDP per person in Richland is $20,000, while real GDP per person in Poorland is $10,000. However, Richland’s real GDP per person is growing at 1 percent per year, and Poorland’s real GDP per person is growing at 2 […]

If the real interest rate is 3% and the inflation rate is 7%, then the nominal interest rate equals: A. 3%. B. 4%. C. 7%. D. 10% This graph shows the cost functions of Moe’s mushroom gathering business, which is […]

If short-run equilibrium output equals 10,000, the income-expenditure multiplier equals 10, the mpc equals 0.9, and potential output (Y*) equals 9,000, then taxes must be increased by approximately ______ to eliminate any output gap. A. 90 B. 100 C. 111 […]

This graph shows the cost functions of Moe’s mushroom gathering business, which is perfectly competitive. Moe’s short run supply curve is A. Curve C to the right of curve A B. Curve B to the right of curve A C. […]

An example of a government policy to increase physical capital formation is: A. the construction of an interstate highway system. B. government support for basic research. C. maintaining a well-functioning legal system. D. the provision of publicly-funded education. You expect […]

Money market mutual funds are ______ the M1 measure of money and ______ the M2 measure of money. A. included in; excluded from B. included in; included in C. excluded from; excluded from D. excluded from; included in The Smart […]

Data on output and planned aggregate expenditure in Macroland are given below. Based on these data, the short-run equilibrium level of output is _____. A. 2,000 B. 3,200 C. 4,100 D. 5,000 An economy with a trade deficit must also […]

Refer to the figure above. The profit-maximizing level of output for the monopolist is ____ and the profit-maximizing price is _______. A. 50; $20 B. 33.33; $13.33 C. 33.33; $26.67 D. 50; $26.67 When actual output equals potential output there […]

When the price of hot dogs is $1.50 each, 500 hot dogs are sold every day. After the price falls to $1.35 each, 510 hot dogs are sold every day. At the original price, what is the price elasticity of […]

As the dollar exchange rate, e, increases, the quantity of dollars supplied in the foreign exchange market ____, and the quantity of dollars demanded in the foreign exchange market ____. A. increases; increases B. increases; decreases C. decreases; increases D. […]

Lunch in Jamie’s dorm is an all-you-can-eat buffet, served from 11 a.m. until 1 p.m. By noon, the buffet is picked over, and by 12:30, there are very few popular items left. The garbage bins, though, are full of food. […]

In a small town of 100 people, there are 10 children under 16, 10 retired people, 60 people with full-time jobs, 3 people with part-time jobs, 3 full-time students over 16, and 4 full-time homemakers. The remaining people did not […]

According to the Congressional Budget Office, over the past twenty years, the natural rate of unemployment in the United States has: A. increased. B. remained constant. C. fallen. D. fallen to zero, and is now becoming negative. An example of […]

When Cody went to the physician with a sore elbow, after hearing Cody’s symptoms and examining the elbow manually, Cody’s physician had two options: (1) prescribe an anti-inflammatory drug and advise Cody to abstain from vigorous physical activity for a […]

Shel and Fran are neighbors. They work at the same firm and hold the same title. Shel finds that when Fran’s consumption rises, Shel feels worse off. Fran feels the same way towards Shel’s consumption. Refer to the information given […]

Generally, ______ motivate firms to enter an industry while ______ motivate firms to exit an industry. A. economic profits; economic losses B. accounting profits; accounting losses C. accounting profits; economic losses D. economic profits; accounting losses In a certain economy, […]

The reason the marginal benefit of information curve is downward sloping is because A. some information is useless. B. most information is useless. C. information is subject to the law of diminishing marginal returns. D. there is only so much […]

Refer to the figure above. If the good shown on the graphs is a private good at a price of $4 market demand is __________ units. A. 100 B. 90 C. 70 D. 50 Answer: A consumer expenditure survey reports […]

Explanations for the high saving rate in Japan consistent with the life-cycle reason for saving include: A. long life expectancies and large down payments required for home purchases. B. lifetime employment. C. the desire to leave resources to children who […]

The following table provides information about production at the XYZ-TV Company. How many workers will the XYZ-TV Company hire if the going wage for TV production workers is $60,000? A. 0 B. 4 C. 5 D. More than 5 One […]

Suppose that the salary range for recent college graduates with a bachelor’s degree in economics is $30,000 to $50,000, with 25% of jobs offering $30,000 per year, 50% offering $40,000 per year and 25% offering $50,000 per year and that […]

The United States generally has a comparative advantage in the development of technology because of: A. larger amounts of natural resources. B. a high concentration of the best research universities. C. tax incentives. D. the existence of patent law, which […]

In the long run, increases in output per person arise primarily from: A. increases in female labor force participation. B. increases in male labor force participation. C. an increasing proportion of the population retiring. D. increases in average labor productivity. […]

European firms wishing to purchase American goods and services are ______ the foreign exchange market. A. suppliers of U.S. dollars in B. demanders of Euros in C. supplied dollars by the European Central Bank for use in D. demanders of […]

Refer to the figure above. If this firm were to increase sales from 20 units to 30 units of output, its marginal revenue would be: A. $20. B. $200. C. $0. D. -$20. U.S. firms wishing to purchase European goods […]

The ongoing search by savers for high returns leads the bond and stock markets to direct funds to the uses that appear: A. most likely to be productive. B. least likely to be productive. C. to have the least risk. […]

Credit card balances are not considered to be money primarily because they: A. are rarely used to make purchases. B. are not part of people’s wealth. C. are an asset used in making transactions. D. do not represent an obligation […]

A police department is trying to allocate crime control resources between murder and burglary. Detectives cost $40,000 each. Suppose that she marginal benefit of one less murder is $20,000 while the marginal benefit of one less burglary is $1,000. The […]

The difference between the price of electronic equipment in a retail store and on the Internet reflects in part A. the extent to which middlemen drive the price up for extra profit. B. the lack of competition between brick and […]

From the perspective of an externality, most communities have zoning laws to: A. control external benefits. B. control external costs. C. encourage positive externalities. D. raise government revenues. Sam owns a candy factory and hires workers in a competitive labor […]

Bob’s Barber Shop cut 3,000 heads of hair in 2009 and 3,100 in 2010. The price of a haircut was $7 in 2009 and $8 in 2010. If 2009 is the base year, what was Bob’s contribution to nominal GDP […]

Pizzas sell for $10 each. Refer to the figure above. When the pizza shop employs 2 workers per day, it will experience a marginal cost of ______ per pizza. A. $15 B. $25 C. $6 D. $3 Answer: D. Costs […]

Samantha is lending Jack $1,000 for one year. The CPI is 1.60 at the time the loan is made, and they both expect it to be 1.68 in one year. If Samantha and Jack agree that Samantha should earn a […]

There are two separate labor markets in Toontown, illustrated by the graphs below. Both labor markets currently pay $6.00 per hour, and both require the same skills and qualifications. The Toontown City Council is considering enacting a $7.50 living wage […]

One potential problem with using fiscal policy to close recessionary output gaps is that: A. sustained government deficits can be harmful to long-run economic growth. B. decreased government spending can cause inflationary pressure to build. C. reductions in interest rates […]

Moe divides his time between studying Physics and studying Economics. He has discovered that he can earn grades as shown on this production possibilities curve. Moe needs to earn at least an 80 in both economics and physics to keep […]

Workplace safety laws are ___ in developed countries because A. rare; policy makers believe that they undermine the free market system. B. rare; corporate lobbyists convince legislators to vote against them. C. necessary; without them firms that hire workers in […]

Refer to the figure above. The law of diminishing marginal utility A. applies to Food but not Rooms. B. does not apply to either Food or Rooms. C. applies to Rooms but not Food. D. applies to both Food and […]

The growth of lawsuits seeking compensation from firms when a worker is injured should serve to A. reduce the firm’s incentive to improve safety. B. increase the worker’s incentive to get injured. C. increase the firms’ incentive to improve safety. […]

The long-run average annual growth of real GDP per person is the United States is approximately ______ percent. A. one B. two C. five D. seven Refer to the figure above. If the market is unregulated, the value of producer […]

If the Luddites had succeeded in ______ the introduction of labor-saving machinery, economic growth in Great Britain may have been ______. A. blocking; slower B. blocking; more rapid C. promoting; slower D. promoting; more rapid Pepsi One is a close […]

Policymakers’ use of stabilization policy to eliminate output gaps is more appropriate when an economy self corrects very ______ and when the output gap is very ____. A. rapidly; large B. rapidly; small C. slowly; small D. slowly; large A […]

Mike and Tom debone chicken breasts for Ted’s Chicken Co. Mike is new and can only debone 30 chicken breasts per hour, while Tom’s experience allows him to debone 60 chicken breasts per hour. Both Mike and Tom work 40 […]

When a government increases the cost of international trade, it is: A. helping domestic consumers. B. hurting all domestic producers. C. reducing the total amount of output available to domestic consumers. D. keeping all domestic prices artificially low. Firms that […]

Two types of existing houses are for sale: ones with a cracked foundation and ones without. In all other respects, they are identical. Houses without cracked foundations are worth $200,000 while those with cracked foundations are worth $200,000 minus the […]

There are two employers in Bucolic that hire people who do not have a high school degree: a grocery store and a hardware store. The grocery store pays $5.00 per hour and the hardware store pays $6.00 per hour. People […]

For a given inflation rate, if concerns about future weakness in the economy cause businesses to reduce their spending on new capital, then the ______ shifts _____. A. aggregate demand curve; right B. aggregate demand curve; left C. aggregate supply […]

From the individual’s standpoint, participating in a positional arms race is a _________. From society’s point of view, it is __________. A. dominant strategy; efficient B. tit-for-tat strategy; efficient C. dominant strategy; inefficient D. tit-for-tat strategy; inefficient Assume that all […]

Average total cost is defined as A. Total cost divided by output. B. Total cost divided by price. C. Variable cost divided by output. D. Variable cost divided by price. The last time gas prices increased drastically, sales of large […]

A patch of edible mushrooms growing wild in a national forest is a ____ good. A. public B. private C. pure public D. commons Refer to the figure above. According to this data, marginal utility for apple consumption is A. […]

During the 1960s and 1970s, the U.S. trade balance was close to zero, but during the 1980s, the trade deficit ballooned to unprecedented levels due to: A. an inability of U.S. companies to compete in the international market. B. a […]

Suppose the economy is currently operating at potential output; an expansionary gap may be caused by each of the following EXCEPT: A. a positive demand shock. B. a positive inflation shock. C. an increase in government spending. D. an increase […]

In an economy where planned aggregate spending is given by PAE = 5,500 + 0.6Y – 20,000r, the interest rate is currently 5 percent (0.05). If potential output equals 11,750, the central bank must ______ the interest rate to close […]

According to the quantity equation, if velocity and output are constant, then an increase in the money supply leads to ______ in inflation. A. a less than proportional increase B. a less than proportional decreases C. the same percentage increase […]

Smith and Jones comprise a two-person economy. Their hourly rates of production are shown below. Refer to the table above. If Smith and Jones are dividing their time efficiently and producing fewer than 10 computers and more than 120 calculators […]

Studying how Pat allocates her time between teaching classes and assisting undergraduate students is an example of: A. microeconomics. B. macroeconomics. C. individual economics. D. economic naturalism. When real output decreases, planned aggregate expenditures decrease because: A. autonomous expenditures increase. […]

Price discrimination means charging: A. higher prices to women and minorities. B. different prices to different consumers because production costs are different. C. the same price to all consumers even if production costs are different. D. different prices to different […]

In an open economy, the domestic real interest rate is determined by: A. domestic saving, domestic investment, and net capital inflows. B. domestic investment. C. domestic saving and domestic investment. D. domestic saving and net capital inflows. If short-run equilibrium […]

Which of the following statements is true for both General Motors and a locally owned restaurant? A. Both are perfect competitors. B. Both confront perfectly elastic demand for their products. C. Neither firm is able to influence the price of […]

If a firm spends $400 to produce 20 units of output and spends $880 to produce 40 units, then between 20 and 40 units of output, the marginal cost of production is: A. $20. B. $24. C. $22. D. $480. […]

Psychological factors that may influence the saving rate are ______ and _______. A. the real interest rate; the demonstration effect B. self-control problems; the demonstration effect C. capital gains; the real interest rate D. the desire to leave a bequest; […]

The marginal product of the 14th worker is 8 and the firm sells its output for $4 per unit. If labor is the only variable cost, the value of the 14th worker’s marginal product is A. $2. B. $4. C. […]

Matt has decided to purchase his textbooks for the semester. His options are to purchase the books via the Internet with next day delivery to his home at a cost of $175, or to drive to campus tomorrow to buy […]

Graphically, long-run equilibrium occurs at the intersection of the aggregate demand curve and: A. the aggregate supply curve and potential output. B. the planned aggregate expenditure line. C. the aggregate supply curve. D. potential output. If an automobile manufacturer pays […]

According to the textbook, limits on private property rights, e.g., zoning laws, are: A. market interventions that reduce the size of the economic pie. B. generally unnecessary, as people have an inherent incentive to use private property wisely. C. an […]

Which of the following would increase the investment component of U.S. GDP? A. You purchase a new clothes washing machine produced in the U.S. B. You purchase a new clothes washing machine produced in France. C. A laundry in Seattle […]

Refer to the figure above. After the price ceiling at price G is imposed, producer surplus _________ and is represented by the area _______. A. increases; DBC B. decreases; DGF C. increases; 0GFQ2 D. decreases; 0DFQ2 Pat has 4 hours […]

Two firms can choose from five different technologies to reduce their pollution: A, B, C, D and E. The amount of pollution emitted by each technology and the cost of the technologies are shown in the table. Both firms have […]

A consumer has a reservation price of $90 for a blender. If the local store is offering the blender for $100 with a $10 rebate and he does not make the purchase, one can surmise that: A. his reservation price […]

Suppose that the marginal benefit of having a security camera in the library is given by MB, at the supermarket is given by MB1 and at the museum is given by MB2. All values are per week. Marginal Cost is […]

Suppose you have $200 with which you can buy shares of stock from two companies: ABC Hot Chocolate Company and XYZ Lemonade. Each company’s stock currently sells for $100 per share. If the temperature next year is lower than average, […]

Expansionary policies are government stabilization policy actions intended to increase: A. population. B. unemployment. C. average labor productivity. D. planned spending. In a certain economy, the components of planned spending are given by: C = 500 + 0.8(Y – T) […]

The textbook states that empirical studies have found that the demand for public goods like public parks, environmental protection and public safety A. is quite price inelastic. B. has a small, positive income elasticity. C. is price elastic. D. has […]

The reason buffalo were driven to extinction while at the same time cattle were thriving is that: A. cattle were owned by ranchers whereas buffalo were wild. B. demand for buffalo meat was low, discouraging production. C. Western expansion required […]

Refer to the figure above. What is the price elasticity of supply at point A? A. 4 B. 2 C. 1 D. 1/2 Fred purchases a bond, newly issued by the Big Time Corporation, for $10,000. The bond pays $400 […]

Features of the labor market that are likely to cause structural unemployment include all of the following EXCEPT: A. labor unions. B. minimum wage laws. C. unemployment compensation. D. differences in the skills and experience of workers. John is trying […]

An in-kind transfer payment to the poor is A. made out of kindness. B. a cash payment. C. a benefit in the form of a good or service. D. less costly to provide compared to a cash payment. If the […]

In the case of either a positive or negative externality, it will always be true that, relative to the social optimum: A. the market price will be too low. B. the market price will be too high. C. the market […]

Points that lie below the production possibilities curve are inefficient because: A. more of one or both goods could be produced using currently available resources without giving up production of another good. B. producers are not specializing. C. producers face […]

The excess of government spending over tax collections is: A. national income. B. national saving. C. national wealth. D. the government budget deficit. The opportunity cost of an activity is the value of: A. an alternative forgone. B. the next-best […]

The following graphs depict a perfectly competitive firm and its market. Assume that all firms in this industry have identical cost functions. The long run equilibrium quantity in this industry is A. 300. B. 500. C. 700. D. more than […]

Okun’s law expresses the relationship between: A. unemployment and inflation. B. frictional unemployment and structural unemployment. C. money and velocity. D. cyclical unemployment and the output gap. Suppose males place less importance on the social approval of their job and […]

Refer to the figure above. If Pat and Chris were to specialize in the task for which each has a comparative advantage: A. Chris would plant bulbs and Pat would remove trash. B. Chris would remove trash and Pat would […]

High Tech, Inc. produces plastic chairs that sell for $10 each. The following table provides information about how many plastic chairs can be produced per hour. For simplicity, assume that labor is the only input. How many workers will be […]