Recessions in the United States typically are:
A. limited to a few industries.
B. limited to specific regions of the country.
C. widely felt outside the United States.
D. confined to the domestic economy.
A group of physicians that provides medical services to members for a fixed annual fee
is termed a:
A. health management organization.
B. fee-for-service plan.
C. partnership.
D. health maintenance organization.
The figure below shows the production possibilities curve for the island of Genovia:
The opportunity cost of producing one ton of agricultural products in Genovia is:
A. 1,000 cars.
B. 1 car.
C. 1/5 of a car.
D. 1/50 of a car.
Double coincidence of wants is avoided if money is used as a:
A. medium of exchange.
B. measure of value.
C. standard of deferred payment.
D. store of value
If the San Diego Opera decreases the price of their opera tickets and their total revenue
falls, then this suggests that, at the original price, the demand for tickets to the San
Diego Opera was:
A. unit elastic.
B. elastic.
C. inelastic.
D. either elastic or inelastic.
Refer to the table below. Pat’s opportunity cost of delivering a pizza is making:
A. 12 pizzas
B. 10 pizzas
C. 3/2 of a pizza
D. 2/3 of a pizza
The money supply in Econland is 1,000, and currency held by the public equals bank
reserves. The desired reserve/deposit ratio is 0.25. Bank reserves equal _____.
A. 200
B. 250
C. 500
D. 800
In an open economy, domestic investment equals:
A. net capital inflows.
B. domestic saving plus net capital outflows.
C. domestic saving.
D. domestic saving plus net capital inflows.
Jen is offered a job answering the phone in the State U economics department during
lunchtime, from noon to 1 p.m., Tuesdays and Thursdays. Her reservation wage for this
job is $15 per hour. Now suppose the department chair announces that the $150 per
week earnings from the job will be divided equally among Jen and 299 other students in
the department. How much economic surplus will Jen enjoy each week if she accepts
the job?
A. $0.50
B. -$14.00
C. -$29.00
D. -$29.50
Refer to the figure below. If the market for doughnuts is perfectly competitive, and the
price of a doughnut is 25 cents, then this firm should:
A. shut down.
B. produce 90 doughnuts.
C. produce 80 doughnuts.
D. produce 50 doughnuts.
In the Keynesian model, consumption depends on:
A. whether the government has a budget surplus or deficit.
B. potential output.
C. the natural rate of unemployment.
D. disposable income.
Ginger and Maryann are lost in the jungle, where the only things to eat are mangoes and
fish. Ginger can gather more mangoes per hour than Maryann and can also catch more
fish per hour than can Maryann. Therefore:
A. There are no gains to specialization and trade for Ginger.
B. There are no gains to specialization and trade for Maryann.
C. Maryann should specialize in the activity for which she has a comparative
advantage.
D. Ginger should specialize in the activity for which she has an absolute advantage.
Dan owns an autographed copy of a Brittany Spears CD that he values at $100. If he
sells the CD at the garage sale he’s planning to hold in a few weeks, it will be sold to a
buyer with a reservation price of $175. If he sells it on eBay, it will be sold to a buyer
with a reservation price of $500. eBay will charge Dan $50 to auction the CD, which
just covers eBay’s opportunity cost of running the auction. Relative to selling the CD at
his garage sale, auctioning the CD on eBay will lead:
A. to no change in total economic surplus.
B. total economic surplus to increase by $500.
C. total economic surplus to increase by $275.
D. total economic surplus to increase by $100.
Refer to the figure below. The law of diminishing marginal utility:
A. applies to Good A but not Good B.
B. does not apply to either Good A or Good B.
C. applies to Good B but not Good A.
D. applies to both Good A and Good B.
The figure below shows the supply and demand curves for oranges in Smallville.
At a price of $4 per pound there will be an excess ______ of ______ pounds of oranges
per day.
A. supply; 20
B. demand; 30
C. supply; 10
D. demand; 20
Suppose Erie Textiles can dispose of its waste “for free” by dumping it into a nearby
river. While the firm benefits from dumping waste into the river, the waste reduces fish
and bird reproduction. This causes damage to local fishermen and bird watchers. At a
cost, Erie Textiles can filter out the toxins, in which case local fishermen and bird
watchers will not suffer any damage. The relevant gains and losses (in thousands of
dollars) for the three parties are listed below.
When Erie Textiles operates with a filter, the total gain (in thousands of dollars) by all
three parties is ______.
A. $985
B. $600
C. $510
D. $475
Suppose Matt and Gabe must both choose between two jobs, a safe job that pays $250
per week and a risky job that pays $300 per week. The value of safety to each is $75 per
week. Having more income than the other is worth $75 per week to each, and having
less income than the other means a $75-per-week reduction in satisfaction. Having the
same income as the other means no change in satisfaction. The payoff matrix below
summarizes this situation.
If Gabe and Matt choose their jobs at the same time, then you can predict that in the
equilibrium of this game:
A. both Gabe and Matt will choose the safe job.
B. both Gabe and Matt will choose the risky job.
C. Gabe will choose the safe job and Matt will choose the risky job.
D. Matt will choose the safe job and Gabe will choose the risky job.
Outsourcing is a term increasingly used to refer to the act of:
A. hiring illegal immigrants.
B. importing raw materials into the United States from other countries.
C. exporting final goods to other countries.
D. replacing relatively expensive American workers with low-wage workers overseas.
The sum of the value added by all firms equals total:
A. profits.
B. spending on capital goods.
C. investment spending.
D. value of final goods and services.
Suppose a jar of orange marmalade that is ultimately sold to a customer at The Corner
Store is produced by the following production process:
What is the value added of Citrus Growers Inc.?
A. $0.00
B. $0.50
C. $0.75
D. $1.75
Real GDP measures the ______ of production.
A. change in the volume
B. physical volume
C. current dollar value
D. current market value
An increase in marginal tax rates:
A. increases a worker’s hourly after-tax wage.
B. increases the opportunity cost of leisure.
C. reduces the opportunity cost of leisure.
D. increases incentives to work more.
If the official CPI inflation rate is 4%, the “true” rate of inflation may be closer to
______ according to the findings of the Boskin Commission.
A. -4%
B. 0%
C. 2%
D. 6%
In the short run, ______ determines output, and in the long run ______ determines
output.
A. potential output; prices
B. potential output; total spending
C. total spending; potential output
D. total spending; prices
In the Keynesian cross diagram, the vertical intercept of the expenditure line equals
______ and the slope of the expenditure line equals _____.
A. induced expenditures; autonomous expenditures
B. autonomous expenditures; induced expenditures
C. planned spending; unplanned spending
D. autonomous expenditures; the mpc
The market value of final goods and services produced within a country during a period
of time is called:
A. guaranteed direct prices.
B. general domestic productivity.
C. government documented production.
D. gross domestic product.
Refer to the table below. Pat’s opportunity cost of making a pizza is delivering:
A. 3 pizzas
B. 2 pizzas
C. 3/2 of a pizza
D. 2/3 of a pizza
Assume that all firms in this industry have identical cost curves, and that the market is
perfectly competitive.
The long-run equilibrium price in this industry is:
A. $15.
B. $10.
C. $5.
D. $0.
Suppose one could either rent a car or take a train to travel to Chicago from
Washington, D.C. If the price of train tickets increases:
A. the demand for train tickets will increase.
B. the demand for rental cars will increase.
C. the demand for train tickets will decrease.
D. the demand for rental cars will decrease.
The following table provides data for an economy in a certain year._
Given the data in the table, how much did households spend on nondurables and
services?
A. 300
B. 700
C. 1,000
D. 1,300
There are ten states in the democratic nation of Fatlandia, and each state has ten
thousand residents. Although incomes vary, each Fatlandian pays a tax equal to the total
cost of all government projects divided by the number of residents in the country.
Currently, two states each have one army base. An army base adds $2 million to a
state’s local economy each year. In addition, in terms of increased security, the annual
marginal benefit to Fatlandia of having an additional army base is shown below. The
total cost of an army base is $8 million per year.
Suppose the department of defense proposes to build a third base in the state of New
Porkswick. The state representative from New Porkswick will _____ this proposal
because ______.
A. not support; it is not socially optimal for Fatlandia to have a third army base.
B. support; it is socially optimal for Fatlandia to have a third army base.
C. not support; the benefits to his or her constituents would be smaller than the resulting
increase in taxes.
D. support; the benefits to his or her constituents would outweigh the resulting increase
in taxes.
Which of the following policies would be expected to increase private saving?
A. Increasing the income tax.
B. Reducing the tax rate on capital gains and dividends.
C. Providing more generous Social Security retirement benefits.
D. Increasing job security.
The table below shows how the payoffs to two political candidates depend on whether
the candidates run a positive or negative campaign. The payoffs are given in terms of
the percentage change in the number of votes received.
Suppose that the Republican candidate tells the Democratic candidate that he intends to
run a positive campaign. The likely result is that:
A. both candidates will run a positive campaign.
B. the Republican candidate will run a positive campaign, and the Democratic
candidate will run a negative campaign.
C. both candidates will run a negative campaign.
D. the Republican candidate will run a negative campaign, and the Democratic
candidate will run a positive campaign.
Your financial investments consist of U.S. government bonds maturing in twenty years
and shares in a start-up internet company. If interest rates on newly-issued government
bonds increase, then the price of your bonds will ______ and the price of the shares you
own will ____.
A. increase; increase
B. decrease; decrease
C. increase; not change
D. decrease; not change