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 the legal and political environment.
D. the real interest rate, the nominal interest rate, and the rate of inflation.
The value of marginal product
A. equals marginal product times net price.
B. equals total product divided by net price.
C. equals marginal product divided by net price.
D. equals average product times the wage rate.
The following graph depicts demand.
Refer to the figure above. At point D, demand is:
A. price inelastic.
B. price elastic.
C. unitary elastic.
D. perfectly price elastic.
The Hatfields and the McCoys both earn $50,000 per year in real terms in the labor
market, and both families are able to earn a 25% real interest rate on their savings. In
the year 2000, both families began to save. The Hatfields saved 8% of their income
each year; the McCoys saved 10%. In 2000, the Hatfields consumed ______ more than
the McCoys; in 2001, the Hatfields consumed ______ than the McCoys.
A. $1,000; $25 more
B. $2,000; $25 more
C. $1,000; $25 less
D. $2,000; $25 less
Earth Movers & Shakers operates 3 iron ore mines. This table shows their daily
production rates and the current number of miners at each mine. All of the miners work
for the same wage and each miner in any given mine produces the same number of tons
as each other miner in that mine.
Refer to the table above. The opportunity cost of moving one miner from Middle Drift
to Mother Lode is:
A. 1 ton.
B. 3 tons.
C. 4 tons.
D. 5 tons.
Government policies that increase the long-term economic growth rate by a small
amount result in ______ in average living standards.
A. large increases
B. small increases
C. small decreases
D. no change
Subsidies are most likely to:
A. reduce consumer surplus.
B. increase total economic surplus.
C. reduce total economic surplus.
D. leave total economic surplus unchanged, but transfer surplus from producers to
consumers.
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.
Refer to the figure above. Both of Moe’s professors require at least a 65 to pass and a 90
to earn an A. After looking at his PPC, Moe realizes that:
A. he can pass both classes.
B. he can pass economics, but only if he fails physics.
C. he can pass physics, but only if he fails economics.
D. he could earn an A in economics and still pass physics.
The scarcity principle tells us that __________, and the cost-benefit principle tells us
__________.
A. choices must be made; how to make the choices
B. choices must be made; that the costs can never outweigh the benefits of the choices
C. rare goods are expensive; that the costs should outweigh the benefits of the choices
D. rare goods are expensive; that the costs can never outweigh the benefits of the
choices
Relative to workers in Western Europe, workers in the U.S.
A. face a lower marginal tax rate and work fewer hours per year.
B. face a higher marginal tax rate and work more hours per year.
C. face a lower marginal tax rate and work more hours per year.
D. face a higher marginal tax rate and work fewer hours per year.
The primary objective of a monopolist is to:
A. charge the highest possible price.
B. maximize total revenues.
C. minimize total costs.
D. maximize profits.
Starting from potential output, if firms become more optimistic about the future and
decide to increase their investment in new capital, then this will shift the ______ curve
to the right and generate ______.
A. aggregate demand; a recessionary output gap
B. aggregate supply; a recessionary output gap
C. aggregate demand; an expansionary output gap
D. aggregate supply; an expansionary output gap
The following graphs depict a perfectly competitive firm and its market.
Assume that all firms in this industry have identical cost functions.
A starting assumption about this industry was that all of the firms had identical cost
functions. This assumption
A. is unrealistic because all firms are unique.
B. is realistic because any cost advantage of one firm will be quickly adopted by the
others.
C. is unrealistic because firms closely guard their production process secrets.
D. is unrealistic because competition forces all firms to seek the most efficient
production processes.
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.
Refer to the information given above. The reason there is _____ waste with an
all-you-can-eat buffet than with a price-per-item cafeteria is that:
A. less; students are able to afford more food at an all-you-can-eat buffet.
B. more; students do not bear the cost of waste with an all-you-can-eat buffet.
C. less; students face greater incentives to choose wisely with an all-you-can-eat buffet.
D. more; students must east faster at an all-you-can-eat buffet.
If the percentage change in price for a good is equal to the percentage change in
quantity demanded of that good, then the demand for that good, with respect to price,
is:
A. elastic.
B. inelastic.
C. unitary elastic.
D. perfectly elastic.
Relative to a single price monopolist, a price discriminating monopolist generates:
A. less total surplus.
B. more total surplus.
C. the same amount of total surplus, but more consumer surplus and less producer
surplus.
D. the same amount of total surplus, but less consumer surplus and more producer
surplus.
As fewer families choose to purchase insurance, the cost of premiums will rise,
ensuring that fewer, and sicker, families buy insurance. This is an example of
A. long-term upward spiral.
B. a commitment problem.
C. a moral hazard.
D. adverse selection.
Refer to the figure above. A perfectly competitive equilibrium would have resulted in a
price of __________ and a quantity of __________.
A. B; A
B. G; H
C. C; K
D. G; A
Real wages increased in industrialized countries in the twentieth century because the
demand for labor:
A. increased more rapidly than the supply of labor increased.
B. increased more slowly than the supply of labor increased.
C. increased, while the supply of labor decreased.
D. decreased, while the supply of labor increased.
If a nation can produce a good more quickly than any other nation, that nation has a(n):
A. comparative advantage.
B. absolute advantage.
C. relative advantage.
D. specialization advantage.
The cost of a higher living standard in the future is giving up:
A. current consumption.
B. current investment.
C. future consumption.
D. future investment.
According to the rational spending rule, for a rational consumer the relationship
between the price of an item and the utility gained by consuming that item is
A. the lower the price, the greater the total utility.
B. the lower the price, the greater the marginal utility.
C. the lower the price, the lower the marginal utility.
D. the higher the price, the lower the marginal utility.
Taylor lives in a residential neighborhood that prides itself on well-groomed lawns.
Taylor’s neighbors find that the collective marginal benefit of someone else’s
well-groomed lawn is $10. Taylor, however, dislikes yard work and receives zero net
benefit from an unkempt lawn and a net benefit of -$1 for a well-groomed lawn; the
cost of maintaining the lawn is a dollar more than the benefit of having a well-groomed
lawn.
Refer to the information given above. The Coase Theorem suggests that:
A. the rest of the neighborhood will have to tolerate Taylor’s lawn.
B. Taylor could pay the neighbors to stop complaining about the lawn, making
everyone in the neighborhood better off.
C. Taylor’s neighbors could pay Taylor to have a well-groomed lawn, making Taylor
and the neighbors better off.
D. Taylor’s neighbors could pay Taylor to have a well-groomed lawn, making Taylor
better off and the neighbors worse off.
Taylor lives in a residential neighborhood that prides itself on well-groomed lawns.
Taylor’s neighbors find that the collective marginal benefit of someone else’s
well-groomed lawn is $10. Taylor, however, dislikes yard work and receives zero net
benefit from an unkempt lawn and a net benefit of -$1 for a well-groomed lawn; the
cost of maintaining the lawn is a dollar more than the benefit of having a well-groomed
lawn.
Refer to the information given above. If Taylor’s neighbors pay Taylor $5 to maintain
his lawn, Taylor will have a net benefit of ___ and the neighbors will have a net benefit
of _____.
A. +$5; -$5
B. +$4; +$5
C. +$9; 0
D. +$5; $4
The typical family on the Planet Econ consumes 10 pizzas, 7 pairs of jeans, and 20
gallons of milk. In 2004, pizzas cost $10 each, jeans cost $40 per pair, and milk cost $3
per gallon. In 2005, the price of pizzas increased to $14 each, while the price of jeans
and milk remained the same. Between 2004 and 2005, a typical family’s cost of living:
A. increased by 9 percent.
B. decreased by 9 percent.
C. remained the same.
D. increased by 40 percent.
Between the U.S. and Nepal, Nepal invests less in new factories and equipment. This
will likely cause:
A. Nepal’s production possibilities curve to shift outward faster than the U.S.’s.
B. The U.S.’s production possibilities curve to shift inward faster than Nepal’s.
C. The U.S.’s production possibilities curve to shift outward faster than Nepal’s.
D. Nepal’s production possibilities curve to shift inward faster than the U.S’s.
Whether studying the size of the U.S. economy or the number of children a couple will
choose to have, the unifying concept is that wants are:
A. limited, resources are limited, and thus choices must be made.
B. unlimited, resources are limited, and thus choices must be made.
C. unlimited, resources are limited to some but not to others, and thus some people
must make choices.
D. unlimited, resources are limited, and thus government needs to do more.
The level of income the federal government uses to define being poor is called the
A. relative measure of poverty.
B. absolute measure of poverty.
C. poverty threshold.
D. median income threshold.
The most commonly used measure of an economy’s output is:
A. the rate of employment.
B. the rate of inflation.
C. gross domestic product.
D. the Dow Jones stock market index.
Assume that this graph illustrates a perfectly competitive labor market.
In this market, at a wage of $40,
A. the market would be in equilibrium.
B. there would be more people wanting to work than there would be job openings at
firms.
C. firms would not be able to find enough workers to satisfy the firms’ demand for
workers.
D. approximately 175 worker hours would be hired.
During Thanksgiving you participated in a pumpkin-pie eating contest since you love
pumpkin pie. You really enjoyed the first two pies, the third one was OK, but as soon as
you ate the 4th one you became ill and lost the contest.
You got ______ utility from eating the 1st pie than eating the 3rd pie.
A. less
B. more
C. the same amount of
D. marginal
The range of topics or issues that fit within the definition of economics is:
A. limited to market activities, e.g., buying soap.
B. limited to individuals and firms.
C. extremely wide, requiring only the ideas of choice and scarcity.
D. very limited.
Leo is a welfare recipient who qualifies for two means-tested cash benefits. If he does
not earn any income, he receives $225 from each benefit. For each dollar he earns
(which his employer is required to report to the welfare agency), each benefit is reduced
by 75 cents until the benefit equals zero.
If Leo only values income and not how the income was acquired, then he must earn
__________ to be as well off as when he earns __________ and receives benefits.
A. $300; nothing
B. $150; $50
C. $450; nothing
D. $350; nothing
In the short-run Keynesian model where the marginal propensity to consume is 0.5, to
offset a recessionary gap resulting from a $1 billion decrease in autonomous
consumption, government purchases must be:
A. increased by $1 billion.
B. decreased by $1 billion.
C. increased by $0.5 billion.
D. increased by $2 billion.
The monopolist will maximize profits if it produces where:
A. price equals marginal costs.
B. price equals the minimum average total cost.
C. marginal revenue equals average total cost.
D. marginal revenue equals marginal cost.