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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 price below the equilibrium price,
one might expect:
A. quantity demanded to equal quantity supplied.
B. excess supply.
C. a black market to develop as individuals try to take advantage of unexploited
opportunities.
D. quantity supplied to surpass quantity demanded.
For all firms, the additional revenue collected from the sale of one additional unit of
output is:
A. price.
B. average revenue.
C. marginal profit.
D. marginal revenue.
Refer to the figure above. If this economy were currently operating at Point D, in order
to make more movies:
A. the first cattle herders to switch to movie making would be the cattle herders with
the greatest comparative advantage in cattle herding.
B. the first cattle herders to switch to movie making would be the cattle herders with the
highest opportunity cost of cattle herding.
C. no cattle herders would have to switch because the economy is already efficient.
D. no cattle herders would have to switch because they are specialized in cattle herding,
not movie making.
Typically unemployment ______ during a recession and ______ during an expansion.
A. rises; rises even more
B. rises; falls
C. rises; does not change
D. falls; rises
A village has five residents, each of whom has accumulated savings of $50. Each
villager can use the money to buy a government bond that pays 10% interest per year or
to buy a year-old goat, send it onto the commons to graze, and sell it after one year. The
price of the goat that the villager will get at the end of the year depends on the amount
of weight it gains while grazing on the commons, which in turn depends on the number
of goats sent onto the commons, as shown in table below.
Refer to the information given above. Suppose a village elder decides the total number
of goats and bonds with the goal of maximizing total village income. The elder will buy
_____ government bond(s) and send ____ goat(s) onto the commons.
A. 0; 5
B. 1; 4
C. 2; 3
D. 3; 2
An extremely high rate of inflation is called _____.
A. super inflation
B. deflation
C. disinflation
D. hyperinflation
If a labor market does not meet the conditions of a perfectly competitive market
A. wages will be higher than in a competitive labor market.
B. the invisible hand will force the labor market to behave as if it were perfectly
competitive.
C. workers will unionize to force competition.
D. wages may be either higher or lower than they would be in a competitive market.
The real wage is the wage:
A. measured in current dollars.
B. required to maintain a minimum standard of living.
C. employers are required to pay workers.
D. measured in terms of purchasing power.
If consumers respond to a 10% price reduction by buying twice as much of a particular
good, we would conclude that:
A. there was excess demand at the original price.
B. there was excess supply at the original price.
C. the absolute value of price elasticity at the original price was greater than one.
D. the absolute value of price elasticity at the original price was less than one.
Where Y is GDP, C is consumption, I is investment, G is government spending, and
there is no international trade, national saving equals:
A. C + I + G.
B. Y - C - G.
C. Y + C + G.
D. Y - C - I.
Who from among the following is counted as employed?
A. Ray wants to work forty hours per week, but can only find work for twenty hours per
week.
B. Anna Marie spends all of her time taking care of her children at home.
C. Frank would like to work, but has not looked for work because he believes no jobs
are available.
D. Martin has been offered several jobs in the past four weeks, but has chosen not to
accept any of the offers.
The two main responsibilities of the Federal Reserve System are to ______ and to
______.
A. apprehend counterfeiters; regulate the stock market
B. enable banks to make affordable mortgages; control the exchange rate of the U.S.
dollar
C. insure bank deposits; print currency
D. conduct monetary policy; oversee financial markets
Someone who is committed to maintaining low inflation even at the short-run cost of
reduced output and employment is called a(n):
A. anchored central banker.
B. reactionary central banker.
C. inflation dove.
D. inflation hawk.
Mike and Tom debone chicken breasts for Ted's Chicken Co. Mike is new and can only
debone 60 chicken breasts per hour, while Tom's experience allows him to debone 120
chicken breasts per hour. Both Mike and Tom work 40 hours per week. Their average
hourly productivity as a team is ______ chicken breasts.
A. 60
B. 75
C. 90
D. 100
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.
Suppose that the technology used to manufacture laptops has improved. The likely
result would be:
A. an increase in supply of laptops.
B. an increase in quantity supplied of laptops.
C. a decrease in supply of laptops.
D. a decrease in quantity supplied of laptops.
For which of the following products is income elasticity likely to be greatest?
A. Salt
B. Groceries
C. Airplane travel
D. Blue jeans
In Okunland, a country that operates according to Okun's law, real GDP equals $7,520
billion, potential GDP equals $8,000 billion, and the actual unemployment rate is 8
percent. What is the natural rate of unemployment in Okunland?
A. 2 percent
B. 5 percent
C. 6 percent
D. 11 percent
If the demand for computers shifts to the right as consumers' incomes rise, computers
are
A. inferior goods.
B. complement goods.
C. normal goods.
D. substitute goods.
The table below shows the payoffs to the running of negative and positive political ads
by two candidates. The payoffs are the percentage increase or decrease in the number of
voters willing to vote for the candidate as a result of the campaign styles.
Refer to the figure above. Given the payoff matrix, running a negative campaign is
__________ for __________.
A. a dominated strategy; the Democratic candidate
B. a dominated strategy; the Republican candidate
C. a dominant strategy; the Democratic candidate
D. neither a dominant nor dominated strategy; the Republican candidate
Chris was the business manager for a real estate firm earning an annual salary of
$40,000. Then Chris decided to become a consultant. Chris hired an administrative
assistant at $15,000 per year and rents office space (utilities included) for $3,000 per
month. Chris earned $100,000 in total revenue the first year as a consultant.
Chris's explicit annual cost is _____ and Chris's implicit cost is ______.
A. $15,000; $43,000
B. $18,000; $40,000
C. $36,000; $140,000
D. $51,000; $40,000
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.
Inflation reduces economic efficiency because it does each of the following EXCEPT:
A. Distort incentives through interaction with the tax laws.
B. Obscure information transmitted by prices.
C. Induce people to minimize cash holdings.
D. Change relative prices.
Contrary to the behavior that would be required to eliminate output gaps, many firms in
the economy:
A. intentionally set prices below equilibrium prices in order to create shortages.
B. adjust their prices only periodically.
C. have fully-flexible prices that change constantly.
D. only change the amount of output they produce in the long run, not in the short run.
If the quantity supplied of money exceeds the quantity demanded of money, people will
______ bonds which will cause bond prices to ______ and the nominal interest rate to
______ until the quantity demanded and quantity supplied of money are equal.
A. buy; rise; fall
B. sell; fall; fall
C. sell; rise; fall
D. buy; fall; rise
Refer to the figure above. If all consumers had first-dollar medical insurance for the
medical treatment, they would choose to stay ____ day(s) in the hospital.
A. 4
B. 1
C. 2
D. 3
One thousand adults live in Milltown. All of them leave work at 4:30 p.m. every day
and arrive home at exactly 5:00. They all go to bed at 9 p.m. Three fundraisers, Alpha,
Beta, and Charlie, have targeted Milltown's population. Because the charities raising the
funds are identical, the first to call a willing donor will get the donation.
Refer to the information given above. Calls made by fundraisers at each firm will tend
to:
A. be evenly distributed throughout the evening.
B. cluster near 5:00 p.m.
C. cluster near 6:00 p.m.
D. cluster near 7:00 p.m.
Refer to the figure above. When this market is in equilibrium, producer surplus is
approximately
A. $350
B. $120
C. $150
D. $180
In a competitive labor market, if a firm pays a worker less than that worker's VMP, then
in the long run
A. the firm will earn positive economic profits.
B. competing firms will be able to hire the worker away, driving wages up to VMP.
C. the worker will have no incentive to work hard.
D. the supply of workers will fall.
