Which of the following is one reason why the income of small family farms has
decreased over time?
A) Technology has increase farm productivity and market supply.
B) The demand for farm products is price elastic.
C) The demand for farm products is income inelastic.
D) The U.S. population has increased greatly since 1950.
If you liquidate $3,000 of your mutual fund and transfer the funds to your checking
account, then initially, M1 will ________ and M2 will ________.
A) not change; decrease
B) increase; decrease
C) increase; not change
D) not change; not change
Table 2-15
Table 2-15 shows the output per day of two gardeners, George and Jack. They can
either devote their time to mowing lawns or cultivating gardens. What is Jack’s
opportunity cost of cultivating a garden?
A) half a garden cultivated
B) two lawns mowed
C) two-thirds of a garden cultivated.
D) one and a half lawns mowed
When the price of a good falls, consumers buy a larger quantity because of the
________ effect and the ________ effect.
A) substitution; income
B) normal; inferior
C) substitute; complement;
D) supply; demand
Which of the following products comes closest to having a perfectly inelastic demand?
A) gasoline
B) cholesterol medication in general
C) iPhones
D) bus rides
Using the money demand and money supply model, an increase in money demand
would cause the equilibrium interest rate to
A) decrease.
B) increase.
C) not change.
D) increase, then decrease.
A personal exemption refers to
A) the tax rate that applies to a particular tax bracket.
B) the tax bracket that represents basic living expenses.
C) an amount representing basic living expenses that can be subtracted from income.
D) a dispensation that allows certain qualifying individuals not to pay federal taxes.
Which of the following explains why fluctuations in real GDP have become less
volatile in the United States since 1950?
A) Services have become a smaller fraction of GDP since the 1950s.
B) Unemployment insurance and other government transfer programs are more
prevalent since the 1950s.
C) The government has become more reluctant to intervene when real GDP declines
and unemployment rises since the 1950s.
D) both B and C
In perfect competition
A) the market demand curve and the individual’s demand are identical.
B) the market demand curve is perfectly inelastic while demand for an individual
seller’s product is perfectly elastic.
C) the market demand curve is perfectly elastic while demand for an individual seller’s
product is perfectly inelastic.
D) the market demand curve is downward sloping while demand for an individual
seller’s product is perfectly elastic.
Which of the following is true for a firm with a downward-sloping demand curve for its
product?
A) Price, average revenue, and marginal revenue are all equal.
B) Price, average revenue, and marginal revenue are all different.
C) Price equals average revenue but is greater than marginal revenue.
D) Price equals average revenue but is less than marginal revenue.
Figure 4-1
Figure 4-1 shows Arnold’s demand curve for burritos.
If the market price is $1.50, what is Arnold’s consumer surplus?
A) $1.50
B) $2.25
C) $3.00
D) $4.75
One implication of compensating differentials is that laws passed to protect the health
and safety of workers may not make workers better off than they were prior to the
passages of the laws. Why is this so?
A) Workers may suffer from cognitive dissonance, which means that the perception
workers have that their jobs are hazardous is not true.
B) If the laws make the work environment safer, there is no reason to pay workers a
compensating differential for the risk associated with their jobs.
C) The principal-agent problem that exists in the workplace may cause workers to shirk
more after the work environment becomes safer.
D) In non-competitive markets, workers are unlikely to receive a compensating
differential to compensate for jobs with extra risk. As a result, after the laws are passed
their wages will not change.
The Arrow impossibility theorem explains
A) why there is no system of voting that will consistently represent the underlying
preferences of voters.
B) why government regulation of private markets will always result in a reduction in
economic efficiency in these markets.
C) why voters are always rationally ignorant.
D) why it is not possible to provide the economically efficient amount of any public
good.
Which of the following explains why many European countries have unemployment
rates that are higher than in the United States?
A) Technological change occurs at a faster rate in Europe, so structural unemployment
is higher in Europe.
B) European countries offer higher unemployment benefits than the United States.
C) Firms in European countries offer employees higher wages and higher benefits than
do firms in the United States.
D) The minimum wage in Europe is lower than it is in the United States.