Recently, Lisa’s wealth increased by $500. If her wealth were to increase by another
$500 in the near future, then her utility would increase, but not by as much as it
increased with the recent increase to her wealth. Based on this information, Lisa’s utility
function
a. and marginal utility function are both upward sloping.
b. and marginal utility function are both downward sloping.
c. is upward sloping and her marginal utility function is downward sloping.
d. is downward sloping and her marginal utility function is upward sloping.
For which of the following problems can well-designed public policy enhance
economic efficiency?
a. both externalities and market power
b. externalities, but not market power
c. market power, but not externalities
d. neither externalities nor market power
Table 3-12
Labor Hours Needed to
Make 1 Pound of: Amount
Produced in 40 hours
Refer to Table 3-12. For the farmer, 12.8 pounds of
a. meat is the opportunity cost of 10.6 pounds of potatoes.
b. meat is the opportunity cost of 16.0 pounds of potatoes.
c. potatoes is the opportunity cost of 6.8 pounds of meat.
d. potatoes is the opportunity cost of 8.0 pounds of meat.
Iggie took a university teaching job as an assistant professor in 1974 at a salary of
$10,000. By 2003, she had been promoted to full professor, with a salary of $50,000. If
the price index was 50 in 1974 and 180 in 2003, then what is Iggie’s 1974 salary in
2003 dollars?
a. $2,777.78
b. $18,000
c. $26,000
d. $36,000
Recent forest fires in the western states are expected to cause the price of lumber to rise
in the next six months. As a result, we can expect the supply of lumber to
a. fall in six months but not now.
b. increase in six months when the price goes up.
c. fall now.
d. increase now to meet as much demand as possible.
When a country that exported a particular good abandons a free-trade policy and adopts
a no-trade policy,
a. producer surplus increases and total surplus increases in the market for that good.
b. producer surplus increases and total surplus decreases in the market for that good.
c. producer surplus decreases and total surplus increases in the market for that good.
d. producer surplus decreases and total surplus decreases in the market for that good.
The quantity sold in a market will decrease if the government
a. decreases a binding price floor in that market.
b. increases a binding price ceiling in that market.
c. increases a tax on the good sold in that market.
d. All of the above are correct.
Table 15-4
Refer to Table 15-4. What is the U-5 measure of labor underutilization?
a. 7.5 percent
b. 7.9 percent
c. 8.1 percent
d. 26 percent
Table 3-5
Assume that England and Spain can switch between producing cheese and producing
bread at a constant rate.
Labor Hours Needed
to Make 1 Unit of Number of Units
Produced in 40 Hours
Refer to Table 3-5. England has a comparative advantage in the production of
a. cheese and Spain has a comparative advantage in the production of bread.
b. bread and Spain has a comparative advantage in the production of cheese.
c. both goods and Spain has a comparative advantage in the production of neither good.
d. neither good and Spain has a comparative advantage in the production of both goods.
Under rent control, bribery is a mechanism to
a. bring the total price of an apartment (including the bribe) closer to the equilibrium
price.
b. allocate housing to the poorest individuals in the market.
c. force the total price of an apartment (including the bribe) to be less than the market
price.
d. allocate housing to the most deserving tenants.
Which of the following items plays a role in determining productivity?
a. physical capital
b. natural resources
c. technological knowledge
d. All of the above are correct.
The price elasticity of demand changes as we move along a
a. horizontal demand curve.
b. vertical demand curve.
c. linear, downward-sloping demand curve.
d. All of the above are correct.
When the government runs a budget deficit,
a. interest rates are lower than they would be if the budget were balanced.
b. national saving is higher than it would be if the budget were balanced.
c. investment is lower than it would be if the budget were balanced.
d. All of the above are correct.
During a bank run, depositors decide to hold more currency relative to deposits and
banks decide to hold more excess reserves relative to deposits.
a. Both the decision to hold relatively more currency and the decision to hold relatively
more excess reserves would make the money supply increase.
b. Both the decision to hold relatively more currency and the decision to hold relatively
more excess reserves would make the money supply decrease.
c. The decision to hold relatively more currency would make the money supply
increase. The decision to hold relatively more excess reserves would make the money
supply decrease.
d. The decision to hold relatively more currency would make the money supply
increase. The decision to hold relatively more excess reserves would make the money
supply decrease.
When the demand for a good increases and the supply of the good remains unchanged,
consumer surplus
a. decreases.
b. is unchanged.
c. increases.
d. may increase, decrease, or remain unchanged.
The supply curve for portable charcoal grills shifts
a. only when production technology changes.
b. when a determinant of the supply of portable charcoal grills other than the price of
portable charcoal grills changes.
c. whenany determinant of the supply of portable charcoal grills changes.
d. only when the number of sellers of portable charcoal grills changes.
In the long run, a higher saving rate
a. cannot increase the capital stock.
b. means that people must consume less in the future.
c. increases the level of productivity.
d. None of the above is correct.
Figure 7-8
Refer to Figure 7-8. Which area represents the increase in producer surplus when the
price rises from P1 to P2?
a. BCG
b. ACH
c. ABGD
d. AHGB
Suppose OPEC succeeds in raising world oil prices by 300 percent. This price increase
causes inventors to look at alternative sources of fuel for internal-combustion engines.
A hydrogen-powered engine is developed which is cheaper to operate than gasoline
engines. Which problems in the construction of the CPI does this situation represent?
a. substitution bias and introduction of new goods
b. introduction of new goods and unmeasured quality change
c. substitution bias and unmeasured quality change
d. income bias and substitution bias
If a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 20
percent, this action by itself initially makes the money supply
a. and wealth increase by $100.
b. and wealth decrease by $100.
c. increase by $100 while wealth does not change.
d. decrease by $100 while wealth decreases by $100.
Other things the same, a higher interest rate induces people to
a. save more, so the supply of loanable funds slopes upward.
b. save less, so the supply of loanable funds slopes downward.
c. invest more, so the supply of loanable funds slopes upward.
d. invest less, so the supply of loanable funds slopes downward.
Table 15-3
2010 Labor Data for Adults (age 16 and older) in Meditor
Refer to Table 15-3. What is the adult labor force in Meditor?
a. 90 million
b. 150 million
c. 160 million
d. 230 million
In the economy of Ukzten in 2010, consumption was $800, GDP was $2000,
government purchases were $400, and investment was $600. What were Ukzten’s net
exports in 2010?
a. -$200
b. $200
c. $1800
d. Net exports cannot be calculated from the information given.
Figure 3-11
The graph below represents the various combinations of ham and cheese (in pounds)
that the nation of Bonovia could produce in a given month.
Refer to Figure 3-11. The nation of Cropitia has a comparative advantage over
Bonovia in producing ham if
a. Cropitia can produce more than 400 pounds of ham per month.
b. Cropitia can produce more than 320 pounds of cheese per month.
c. Cropitia’s opportunity cost of producing a pound of ham is less than 0.8 pounds of
cheese.
d. Cropitia’s opportunity cost of producing a pound of ham is greater than 0.8 pounds of
cheese.
Which of the following is a store of value?
a. cash and stocks
b. cash but not stocks
c. stocks but not cash
d. neither cash nor stocks
According to the efficient market hypothesis, which of the following statements is not
correct?
a. Stock market prices tend to rise today if they rose yesterday.
b. As judged by the typical person in the market, all stocks are fairly valued all the time.
c. At the market price, the number of shares being offered for sale matches the number
of shares people want to buy.
d. All of the above statements are incorrect.
Consider the exhibit below for the following questions.
Figure 20-1
Refer to Figure 20-1. If the economy starts at A and moves to D in the short run, the
economy
a. moves to A in the long run.
b. moves to B in the long run.
c. moves to C in the long run.
d. stays at D in the long run.
Which of the following would both raise the U.S. exchange rate?
a. capital flight from other countries to the U.S. occurs and the U.S. moves from budget
surplus to budget deficit
b. capital flight from other countries to the U.S. occurs and the U.S. moves from budget
deficit to budget surplus
c. capital flight from the U.S. to other countries occurs, the U.S. moves from budget
surplus to budget deficit
d. capital flight from U.S. to other countries occurs, the U.S. moves from budget deficit
to budget surplus
Upland has a population of 15,000, of whom 9,000 work 8 hours a day to produce real
output of $342,000. Lowland has a population of 8,000, of whom 7,000 work 7 hours a
day to produce real output of $171,500.
a. Upland has higher productivity and higher real GDP per person than Lowland.
b. Upland has higher productivity but lower real GDP per person than Lowland.
c. Upland has lower productivity but higher real GDP per person than Lowland.
d. Upland has lower productivity and lower real GDP per person than Lowland.
During the 2008-2009 recession real GDP fell by about
a. 2%
b. 4%
c. 6%
d. 8%
The market supply curve
a. is found by vertically adding the individual supply curves.
b. slopes downward.
c. represents the sum of the prices that all the sellers are willing to accept for a given
quantity of the good.
d. represents the sum of the quantities supplied by all the sellers at each price of the
good.
Which of the following statements is correct?
a. In 1870, real income per person was higher in the United Kingdom than in any other
country at that time.
b. Between 1870 and 2008, India experienced significantly higher growth of real
income per person than did the United States.
c. Between 1870 and 2008, the United States experienced significantly higher growth of
real income per person than did Canada.
d. All of the above are correct.
Table 3-1
Assume that Andia and Zardia can switch between producing wheat and producing beef
at a constant rate.
Minutes Needed to Make 1
Refer to Table 3-1. Which of the following combinations of wheat and beef could
Andia produce in one 8-hour day?
a. 6 bushels of wheat and 35 pounds of beef
b. 9 bushels of wheat and 25 pounds of beef
c. 15 bushels of wheat and 20 pounds of beef
d. 24 bushels of wheat and 40 pounds of beef
The country of Robinya has a tax system identical to that of the United States. Suppose
someone in Robinya bought a parcel of land for 10,000 deera (the local currency) in
1970 when the price index equaled 100. In 2010, the person sold the land for 100,000
deera, and the price index equaled 500. The tax rate on nominal capital gains was 20
percent. Compute the taxes the person paid on the nominal gain and the change in the
real value of the land in terms of 2010 prices to find the after-tax real rate of capital
gain.
a. -20 percent
b. 20 percent
c. 42 percent
d. 64 percent