If consumption spending increases by $10 million with no changes in net taxes, then:
A. public saving increases.
B. public saving decreases.
C. private saving increases.
D. private saving decreases.
Your math professor has assigned 20 homework problems that are due next week. After
working for an hour, you notice you have completed 4 problems. After another hour,
you have completed 3 more problems. During the third hour, you finish 2 problems.
What economic principle best explains this?
A. The equilibrium principle: the supply of problems is greater than your demand for
problems.
B. The increasing opportunity cost principle: you completed the easiest problems first.
C. The cost-benefit principle: the benefit of working an additional problem is less than
the cost.
D. The principle of comparative advantage: you are better at English than at math.
Jody has purchased a non-refundable $25 ticket to attend a Miley Cyrus concert on
Friday evening. Subsequently, she is asked to go to dinner and dancing at no expense to
her. If she uses cost-benefit analysis to choose between going to the concert and going
on the date, she should:
A. include only the entertainment value of the concert in the opportunity cost of going
on the date.
B. include the cost of the ticket plus the entertainment value of the concert in the
opportunity cost of going on the date.
C. include only the cost of concert ticket in the opportunity cost of going on the date.
D. include neither the cost of the ticket nor the entertainment value of the concert in the
opportunity cost of going on the date.
Any value of the money supply chosen by the Federal Reserve implies a specific value
for ______.
A. potential output
B. the nominal interest rate
C. government purchases
D. the budget deficit
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.
By taking the first tons from ______, Earth Movers & Shakers is producing consistent
with the _____ Principle.
A. Mother Lode; Low Hanging Fruit
B. Middle Drift; Compromise
C. Middle Drift; Low Hanging Fruit
D. Scraping Bottom; Cost Minimizing
To a prospective employer, Curly’s degree from a highly selective educational
institution will give ________.
A. a credible signal about Curly’s ability to work hard and intelligence.
B. a signal about Curly’s experience performing tasks needed on the job.
C. no signal about Curly’s ability to get the job done.
D. them the idea that anyone can get a college degree if they work hard.
Suppose that a vaccine is developed for a highly contagious strain of flu. The likelihood
that anyone will get this flu decreases as more people receive the vaccine. One of the
demand curves in the diagram reflects private benefits and the other reflects social
benefits.
Refer to the figure above. If the flu vaccine is provided by private markets, deadweight
loss will be _______.
A. zero
B. $375
C. $500
D. $1,125
Suppose a 10% increase in the price of pain relievers leads to a 5% decrease in quantity
demanded of pain relievers. The demand for pain relievers, with respect to price, is:
A. elastic.
B. inelastic.
C. unitary elastic.
D. perfectly inelastic.
Vinnie is looking for an apartment in Dayton, Ohio. In Dayton, 75% of the two
bedroom, one bath apartments are $800 a month and 25% are $600. The marginal cost
of his search increases by $15 per search, i.e., the marginal cost of looking at the first
apartment is $15, the marginal cost of looking at the second apartment is $30, the
marginal cost of looking at the third apartment is $45 and so on.
The expected benefit to Vinnie of searching for an apartment is
A. $400.
B. $200.
C. $100.
D. $50.
If marginal utility is positive as consumption increases,
A. the consumer will not experience diminishing marginal utility.
B. total utility will remain high and constant as consumption increases.
C. total utility will increase as consumption increases.
D. the demand curve will have a positive slope.
When a U.S. oil company purchases oil from Saudi Arabia and the Saudi Arabian firm
uses the proceeds from its sale of oil to the U.S. to buy transportation services from the
U.S., U.S. net exports ______ and the capital inflow to the United States ______.
A. is positive; is negative
B. is negative; is positive
C. is negative; is negative
D. equals zero; equals zero
J.R.’s business requires a steady supply of oil. After interviewing several suppliers, J.R.
decided to buy his oil from Dub, who agreed to sell J.R. all the oil he needs at $50 a
barrel for a period of one year. Suppose that the current oil price is $50 a barrel but that
price tends to fluctuate widely over the course of a year.
J.R. and Dub are considering formalizing this agreement in a contract. Which is true?
A. The contract will limit both parties’ freedom to take advantage of a better deal.
B. Neither J.R. nor Dub will benefit from a written contract because the contract price
is the same as the current market price.
C. J.R. will benefit from having a contract, but Dub will not because it guarantees a low
price.
D. Dub will benefit from having a written contract, but J.R. will not because Dub has
superior information about the future supply of oil.
The free rider problem occurs when
A. buyers pay less than their reservation price.
B. sellers receive more than their reservation.
C. nonpaying buyers cannot be excluded from consuming a good or service.
D. paying buyers are excluded from consuming a good or service.
The tendency for nominal interest rates to be high when inflation is high and low when
inflation is low is known as:
A. the consumer price index.
B. deflating.
C. shoe leather costs.
D. the Fisher effect.
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:
Does the 3rd hour spent cleaning satisfy the cost benefit principle?
A. Yes, since he makes $28.
B. Yes, since the additional amount earned is $14.
C. No, since the additional amount earned is $6.
D. Yes, since the additional amount earned is $6.
Suppose that there are three power-generating plants, all of which generate emissions.
The table summarizes the cost of emission reduction for each firm given five different
levels of pollution:
The least costly way of lowering smoke emissions from 12 tons to 9 tons would be for
A. each firm to reduce emissions by 1 ton, emitting 3 tons each.
B. Firm A to emit 1 ton, and the other firms to emit 4 tons each.
C. Firm A to emit 2 tons, Firm B to emit 4 tons and Firm C to emit 3 tons.
D. Firm A to emit 0 tons; Firm B to emit 4.5 tons and Firm C to emit 4.5 tons.
If the frictional rate of unemployment equals 3 percent, the structural rate of
unemployment equals 4 percent, and the cyclical rate of unemployment equals -2
percent, then the natural rate of unemployment equals:
A. 1%.
B. 5%.
C. 6%.
D. 7%.
An increase in interest rates results in a(n) ______ in the required rate of return to hold
stocks and ______ current stock prices.
A. increase; reduces
B. increase; raises
C. decrease; raises
D. decrease; reduces
A person’s reservation price for performing a task equals
A. the equilibrium wage.
B. the total value of all other things the person could be doing during that time.
C. the value of the most attractive alternative activity that the person could be doing
during that time.
D. the price for which the good produced could be sold.
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. Which of the following is evidence that the low-hanging fruit
principle applies to Moe’s study habits?
A. Earning the first 65 points in economics has a lower opportunity cost than earning
the ten points that moves his score from 90 to 100 in economics.
B. Physics is easier to grasp than economics, so it is the “low-hanging fruit” for Moe.
C. Economics is easier to grasp than physics, so it is the “low-hanging fruit” for Moe.
D. The low-hanging fruit principle applies only to production of goods and services, not
to grades.
The optimal amount of information to acquire before making a purchase is
A. zero.
B. as much as technically possible.
C. an amount such that the total cost of acquiring information equals the total benefit.
D. an amount such that the marginal cost of acquiring information equals the marginal
benefit.
A labor union in the labor market is analogous to a(n) __________ in the output market.
A. monopsony
B. oligopoly
C. cartel
D. perfect competitor
According to Okun’s Law, when cyclical unemployment is positive, then the output
gap:
A. is positive.
B. is negative.
C. equals zero.
D. equals the rate of cyclical unemployment.
The marginal cost of collecting information
A. rises as more information is collected.
B. falls as more information is collected.
C. is now zero because of the Internet.
D. is independent of the size of the expenditure.
Refer to the figure above. Assume demand remains unchanged at D1. If supply shifts
from S1 to S2, then the equilibrium price will ________ and the equilibrium quantity
will __________.
A. rise; fall
B. rise; rise
C. fall; fall
D. fall; rise
A boom is:
A. a period in which the economy is growing at a rate significantly below normal.
B. the high point of economic activity prior to a downturn.
C. a particularly severe and protracted recession.
D. a particularly strong and protracted expansion.
Suppose a treacherous stretch of road winds through Deadman’s Canyon for 5 miles. A
highway department study estimates that better lighting would reduce the traffic fatality
rates as follows:
The fifth light is estimated to reduce the fatality rate by ___ at a marginal cost of $__
per life saved.
A. 1; $7m
B. 0.1; $25m
C. 0.1; $7m
D. 0.1; $70m
Assume that all firms in this industry have identical cost functions.
When price is $15 in this industry,
A. the industry is in its long run equilibrium.
B. it is because supply has shifted from Supply B to Supply A because firms that were
not making a profit left the industry.
C. new firms will be expected to enter.
D. all firms are making zero economic profits.
For a given inflation rate, if bright prospects for the future of the economy cause
businesses to increase their spending on new capital, then the ______ shifts _____.
A. aggregate demand curve; right
B. aggregate demand curve; left
C. aggregate supply curve; upward
D. aggregate supply curve; downward
For two goods, coffee and scones, MU(coffee)/P(coffee) = 4 and MU(scones)/P(scones)
= 3. The consumer should
A. purchase less coffee and more scones.
B. purchase more coffee and fewer scones.
C. purchase less coffee and fewer scones.
D. purchase more coffee and more scones.
Suppose that both the equilibrium price and quantity of ketchup fall. The most
consistent explanation for these observations is:
A. a decrease in demand for ketchup with no change in supply.
B. an increase in demand for ketchup with no change in supply.
C. an increase in demand for ketchup and a decrease in the supply of ketchup.
D. an increase in the supply of ketchup with no change in demand.
If consumers completely cease purchasing a product when its price increases by any
amount, demand is classified as:
A. elastic.
B. perfectly inelastic.
C. unitary elastic.
D. perfectly elastic.
Holding other factors constant, if a larger proportion of the population enters the labor
force as a result of a growing social acceptance of women working, 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
Refer to the figure above. Based on the figure, the income expenditure multiplier
equals:
A. 0.5.
B. 2.
C. 5.
D. 200.