You are the Minister of Trade for a small island country with the following annual PPC:
You are negotiating a trade agreement with a neighboring island with the following
annual PPC:
What’s the minimum number of fish you would be willing to accept in exchange for a
coconut?
A. 5
B. 4
C. 3
D. 2
Economic activity moves from a period of expansion to a ______ and then moves into a
period of ______ until it reaches a _____.
A. peak; expansion; trough
B. peak, recession; trough
C. trough; expansion; peak
D. trough; recession; peak
The production possibilities curve shows:
A. the minimum production of one good for every possible production level of the other
good.
B. how increasing the resources used to produce one good increases the production of
the other good.
C. the maximum production of one good for every possible production level of the
other good.
D. how increasing the production of one good allows production of the other good to
also rise.
The portion of planned aggregate expenditure that is independent of output is called
______ expenditure.
A. potential
B. planned
C. actual
D. autonomous
Sellers tend to offer _______ for sale as price increases, and so the supply curve is
______ sloping.
A. goods; not
B. more; downward
C. less; upward
D. more; upward
Refer to the figure above. When this market is in equilibrium:
A. the price is $30, and the quantity that will be sold is 15.
B. the price is $25, and the quantity that will be sold is 20.
C. the price is $25, and the quantity that will be sold is 5.
D. the price is $35, and the quantity that will be sold is 20.
Miniville is an isolated town located on the southern shore of Lake Condescending, a
very large lake. The western edge of Miniville is adjacent to impassable mountains and
there are no towns or businesses for many miles to the east. The 300 residents of
Miniville are evenly distributed along 3 miles of shoreline on the lake, east of the
mountains. Lake Shore Drive, the only street in town, provides access to Miniville’s
homes and businesses. All residents live between the lake and the street; businesses
locate on the other side of the street. Lake Shore Drive is 3 miles long, and the points
labeled A, B, and C are 1, 2, and 3 miles from the western end of Lake Shore Drive,
respectively. All residents of Miniville shop at the store located closest to their homes.
If the first store to open in Miniville is located at A, to maximize the number of
customers it attracts, the next store to open should locate:
A. just west of A.
B. at B.
C. at C.
D. just east of A.
The growth of medical insurance in general and first-dollar coverage specifically has
reduced the marginal cost of treatment to the consumer. Therefore, the current level of
medical treatment in the United States is:
A. equal to the efficient level.
B. less than the efficient level.
C. greater than the efficient level.
D. less than or equal to the efficient level.
All else equal, compared to small-budget items such as paper towels, the price elasticity
of demand for big-ticket items such as refrigerators is ______.
A. higher
B. lower
C. very low
D. equal
Which of the following would be considered a factor of production in the provision of
bus service?
A. The revenue from the sale of bus tickets.
B. The amount it costs to provide bus service between two locations.
C. Bus drivers.
D. The hourly wage paid to bus drivers.
Suppose the figure below shows Luke’s demand curve for check-ups along with the
supply curve for check-ups.
Relative to when Luke has to pay the entire marginal cost of each check-up, the loss of
total economic surplus due to first-dollar medical insurance would be ______ per year.
A. $100
B. $200
C. $300
D. $400
A higher real interest rate ______ investment spending and ______ consumption
spending.
A. increases; increases
B. increases; decreases
C. decreases; decreases
D. decreases; increases
The changing age structure of the US population and more efficient labor markets are
both possible explanations for:
A. the decline in the natural rate of unemployment.
B. the increase in the cyclical rate of unemployment.
C. the 2001 recession.
D. the stagnation of real wages.
Central bank independence refers to situations in which central bankers:
A. conduct open market operations in free markets.
B. operate in countries with independently elected governments.
C. are insulated from short-term political considerations.
D. are appointed without confirmation hearings.
uppose Jordan and Lee are trying to decide what to do on a Friday. Jordan would prefer
to see a comedy while Lee would prefer to see a documentary. One documentary and
one comedy are showing at the local cinema. The payoffs they receive from seeing the
films either together or separately are shown in the payoff matrix below. Both Jordan
and Lee know the information contained in the payoff matrix. They purchase their
tickets simultaneously, ignorant of the other’s choice.
Suppose a timing element is added to the game, and that Jordan buys a ticket first.
Then, after seeing Jordon’s choice, Lee buys a ticket. What will be the equilibrium
outcome?
A. Both Jordan and Lee will buy a ticket to the comedy.
B. Both Jordan and Lee will buy a ticket to the documentary.
C. Jordan will buy a ticket to the comedy and Lee will buy a ticket to the documentary.
D. Jordan will buy a ticket to the documentary and Lee will buy a ticket to the comedy.
If a good can be consumed by one person without reducing its availability to others,
then it is a ______ good.
A. nonexcludable
B. pure public
C. common
D. nonrival
The major economic cost of growth is:
A. higher interest rates.
B. consumption sacrificed for capital formation.
C. higher inflation rates.
D. investment in stocks and bonds.
Refer to the figure below. Relative to point B, at point C this restaurant is:
A. making more pizzas and more salads.
B. making more pizzas and fewer salads.
C. making fewer pizzas and more salads.
D. operating more efficiently.
C +Ip+G +NX equals:
A. planned aggregate expenditure.
B. potential GDP.
C. the output gap.
D. the income-expenditure multiplier.
The supply and demand for saving are brought into equilibrium by adjustments of the
______ rate.
A. discount
B. nominal interest
C. real interest
D. dividend
Shelter for homeless people is an example of
A. a want.
B. a need.
C. something they can live without.
D. something hard to find.
Suppose a monopolist faces the demand curve shown below.
If the monopolist’s marginal cost is constant and equal to $30, its profit-maximizing
level of output is:
A. 50 units.
B. 40 units.
C. 20 units.
D. 30 units.
The quantity of Revlon nail polish demanded by Jen decreased after the price of Revlon
nail polish increased. Jen decides to find a cheaper brand of nail polish. This is called
a(n):
A. substitution effect of a price change.
B. income effect of a price change.
C. decrease in buyer’s reservation price.
D. increase in buyer’s reservation price.
The figure below shows Becky’s daily production possibilities curve for dresses and
skirts.
The maximum number of skirts that Becky can make in a day is represented by point:
A. U
B. T
C. V
D. Z
Taylor’s marginal utility from watching movies and from eating out (in utils) is shown
below. Taylor spends exactly $100 every month on these two forms of entertainment,
and the price of each movie is $10 and the price of each dinner is $20.
If Taylor eats out 3 times a month, Taylor will watch ______ movies, and have marginal
utility per dollar of ______ from eating out and a marginal utility per dollar of ______
from going to the movies.
A. 4; 6; 2
B. 3; 2; 6
C. 4; 6; 1/2
D. 3; 4; 4
Bob’s Barber Shop cut 3,000 heads of hair in 2014 and 3,100 in 2015. The price of a
hair cut was $7 in 2014 and $8 in 2015. If 2014 is the base year, what was Bob’s
contribution to real GDP in 2015?
A. $21,000
B. $21,700
C. $24,000
D. $24,800
Saving is a(n) ______ and wealth is a(n) ______.
A. stock; flow
B. flow; stock
C. asset; liability
D. liability; asset
Refer to the table below. The average cost of 4 units of this activity is:
A. $20
B. $25
C. $30
D. $40
In determining the beginning of recessions, the NBER Business Cycle Dating
Committee looks for evidence of decline in:
A. specific sectors of the economy.
B. the rate of inflation.
C. the entire economy.
D. the stock market.
The speed at which an economy returns to potential following an adverse inflation
shock depends on:
A. the Federal Reserve’s target inflation rate.
B. the Federal Reserve’s target real interest rate.
C. the level of potential output.
D. the public’s expectations of how the Federal Reserve will act.
Holding other factors constant, if the education and skills of the typical worker in an
economy increases, then the real wages of workers will ______ and employment of
workers will _____.
A. increase; increase
B. increase; decrease
C. decrease; not change
D. decrease; increase
If the absolute value of the price elasticity of demand for cell phone service is 3, then if
the price of cell phone service increases by 1%, quantity demanded would:
A. increase by 0.33%.
B. decrease by 0.33%.
C. increase by 3%.
D. decrease by 3%.
John is trying to decide how to divide his time between his job as a stocker in the local
grocery store, which pays $7 per hour for as many hours as he chooses to work, and
cleaning windows for the businesses downtown. He makes $2 for every window he
cleans. John is indifferent between the two tasks, and the number of windows he can
clean depends on how many hours he spends cleaning in a day, as shown in the table
below:
What is the lowest price per window that would induce John to spend at least one hour
per day cleaning windows?
A. $7
B. $1
C. $3
D. $2