Sven likes to water ski, but can only water ski during the one week that he is on
vacation. Therefore, he plans to ski every day, for eight hours a day. The first day, Sven
skied for eight hours and enjoyed every hour. The second day, Sven slept in and then
skied for seven hours, which was fun but not as much fun as the first day. The third day,
Sven skied for six hours, but was starting to get a bit bored by the end. The fourth day,
Sven skied for four hours and then took a nap. On the fifth day of Sven’s vacation, Sven
went blueberry picking all day.
Sven gets ______ utility from his first hour of skiing than from his tenth hour of skiing.
A. less
B. more
C. the same
D. the same amount, but better quality
A nation’s saving equals its ______ income less its spending on _______.
A. real; investment
B. current; current needs
C. nominal; investment
D. nominal; net taxes
Anchored inflationary expectations are people’s expectations of future inflation that:
A. increase if inflation rises temporarily.
B. are based on the unemployment rate.
C. do not change if inflation rises temporarily.
D. are based on the level of potential output.
Holding other factors constant, if the education and skills of the typical worker in an
economy increases, 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
The greater the degree of labor market mobility and competition, the
A. more likely the exploitation view is accurate.
B. lower wages will be.
C. higher the workplace injury rate will be.
D. less likely the exploitation view of work place safety is accurate.
Production data for Joe’s Pizza Parlor are as follows. For simplicity assume that labor is
the only input. Each pizza sells for $5.
How many workers will Joe hire if he must pay each one $35 a day?
A. 1
B. 2
C. 3
D. 4
Explanations for the high saving rate in Japan consistent with the bequest reason for
saving include:
A. long life expectancies and large down payments required for home purchases.
B. lifetime employment.
C. the desire to leave resources to children who provide support and attention to parents
in their old age.
D. low unemployment rates in Japan.
Refer to the figure above. If the good shown on the graphs is a public good,
__________ units are demanded when price is $21 and if the good in the table is a
private good, __________ units are demanded when price is $21.
A. 0; 0
B. 20; 0
C. 20; 20
D. 10; 20
The introduction of new technologies ______ the real interest rate and ______ the
equilibrium quantity of national saving.
A. increases; increases
B. increases; decreases
C. decreases; decreases
D. decreases; increases
Assume an economy produces only hamburgers and hotdogs and the base year is 2005.
Given the data in the table above, what is the value of nominal GDP in 2006?
A. $5,000
B. $7,000
C. $10,500
D. $15,000
Suppose that a firm is located along a river. The firm uses water from the river to cool
its machinery and returns the water to the river several degrees warmer, which has led
to a decline in the fish population downstream of the firm.
The damage to the downstream fish is a(n):
A. relevant cost of production.
B. relevant cost of production only if the firm is charged a fine for the damage done.
C. relevant cost of production only if there are commercial fishing activities
downstream.
D. implicit cost of production which the firm will take into account in determining
profit maximizing output.
Cyclical unemployment is:
A. the additional unemployment not captured in official statistics resulting from
discouraged workers and involuntary part-time workers.
B. the extra unemployment that occurs during periods of recession.
C. short-term unemployment that is associated with the process of matching workers
with jobs.
D. long-term and chronic unemployment that exists even when the economy is
producing at a normal rate.
Gino’s Pizza shop hires cooks in a competitive market. The raw material required to
make each pizza costs $5. Daily output at Gino’s Pizza varies with the number of
workers hired, as shown in the table below:
The marginal product of the 3rd worker is _______.
A. 12
B. 14
C. 16
D. 18
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 marginal cost of looking at the fourth apartments is
A. zero.
B. $15.
C. $45.
D. $60.
You own shares in a start-up internet company. If large swings in the stock market
increase financial investors’ concerns about market risk, then the price of your shares
will _____, holding other factors constant.
A. increase
B. decrease
C. not change
D. either increase or decrease
A change in consumers’ income levels:
A. changes demand.
B. changes supply.
C. changes price.
D. creates cross-price elasticity.
When a bank makes a loan by crediting the borrower’s checking account balance with
an amount equal to the loan:
A. money is created.
B. the bank gains new reserves.
C. the bank immediately loses reserves.
D. the Fed has made an open-market purchase.
The introduction of a new technology that increases the productivity of labor will:
A. increase the supply of labor.
B. decrease the supply of labor.
C. increase the demand for labor.
D. decrease the demand for labor.
In Macroland, currency held by the public is 2,000 econs, bank reserves are 300 econs,
and the desired (and current) reserve/deposit ratio is 15 percent. If commercial banks
borrow 100 econs in reserves from the Central Bank through discount window lending,
then the money supply in Macroland will ______ to ______ econs, assuming that the
public does not wish to change the amount of currency it holds.
A. increase; 3,133
B. increase; 4,100
C. increase; 4,667
D. increase; 2,667
A decrease in the real exchange rate will tend to ______ exports and to ______ imports.
A. increase; decrease
B. increase; increase
C. decrease; decrease
D. decrease; increase
You are trying to decide how to spend your last lunch dollar. You should use that dollar
to buy more of
A. the item that costs the least.
B. the item that you have already consumed the most of.
C. the item that will give you the greatest marginal utility per dollar spent.
D. the item from which you have gained the greatest total utility already.
A ____ describes all of the possible moves in a game in sequence and the payoffs to
each possible combination of moves.
A. decision tree
B. payoff matrix
C. game graph
D. multi-period game
At his current consumption level Cameron get 3 times more marginal utility from an
additional game of pinball than from an additional game of ping pong. If the price of a
ping pong game is $0.50, than he is maximizing utility if the price of a pinball game is
A. $1.00
B. $1.50
C. $2.00
D. $3.00
If income elasticity for a particular good has a negative sign:
A. the good is a normal good.
B. as income increases, consumers will tend to purchase more of the good.
C. as income increases, consumers will tend to purchase less of the good.
D. the good is a luxury good.
Josh wants to go to the football game this weekend, but he has a paper due on Monday.
It will take him the whole weekend to write the paper. Josh decided to stay home and
work on the paper. According to the scarcity principle, the reason Josh didn’t go to the
game is that:
A. Josh prefers schoolwork to football games.
B. writing the paper is easier than going to the game.
C. Josh doesn’t have enough time for writing the paper and going to the game.
D. it’s too expensive to go to the game.
If potential output equals $8 billion and actual output equals $9 billion, then this
economy has a(n):
A. budget deficit.
B. trade deficit.
C. expansionary gap.
D. recessionary gap.
Fran runs a doughnut shop in a tiny 3-person town. Fran’s rational consumers have the
following demand schedules:
From the data you can assume that Betty
A. thinks that doughnuts are an inferior good.
B. would get more marginal utility from her first doughnut than anything else that she
buys for 50 cents.
C. would get less marginal utility from her first doughnut than anything else that she
buys for 50 cents.
D. is not a rational consumer.
The principle economic cost of growth is:
A. higher interest rates.
B. consumption sacrificed for capital formation.
C. higher inflation rates.
D. investment in stocks and bonds.
In the above decision tree, Tracy picks first, and Amy picks second. Tracy knows Amy’s
payoffs to each choice, and Amy knows Tracy’s payoffs.
Refer to the figure above. If before Tracy chose, Amy could make a credible
commitment to choose either the top or bottom branch when her turn came, Tracy
would get a payoff of _______ and Amy would get a payoff of ______.
A. 25; 225
B. 300; 200
C. 75; 150
D. 125; 125
One assumption of the perfectly competitive model is that of free entry. This
assumption most directly leads to the implication that:
A. firms will spend significant amounts of money on advertising.
B. positive economic profits will only be possible for in the short run.
C. firms will compete on the basis of better service and amenities rather than price.
D. a single firm will emerge as the industry leader.
The marginal cost of an activity is the:
A. change in the cost of the activity that results from an extra unit of the activity.
B. same as the total cost of the activity.
C. ratio of total cost to the level of the activity.
D. change in the level of the activity divided by the change in the cost of the activity.
Refer to the figure above. Based on the diagram, if potential output equals 5,000 and
the real interest rate is 5%, then there is ______ gap and the Fed must ______ the real
interest rate so that output will equal potential output.
A. a recessionary; raise
B. a recessionary; reduce
C. no output; not change
D. an expansionary; raise
A long-term mismatch between the skills of some workers and the jobs available is a
principal cause of ______ unemployment.
A. cyclical
B. structural
C. global
D. frictional