The unemployment rate for younger workers is usually ________ the unemployment
rate for older workers.
A. lower than
B. approximately equal to
C. higher than
D. more predictable than
A price setter is a firm that:
A. attempts but fails to be perfectly competitive.
B. has the ability to set price at any level it wishes.
C. has some degree of control over its price.
D. faces perfectly inelastic demand.
The dates of the “official” peaks and troughs of business cycles in the United States are
determined by the:
A. Federal Reserve Board.
B. Congressional Budget Office.
C. National Bureau of Economic Research
D. Council of Economic Advisers.
Consider two restaurants located next door to each other: Quick Burger and The
Sunshine Café. If Quick Burger opens a drive-through window, the increased traffic and
noise will bother customers seated outside at The Sunshine Café. The table below
shows the monthly payoffs to Quick Burger and The Sunshine Café when Quick Burger
does and does not operate a drive-through window.
If Quick Burger has the legal right to operate a drive-through window, then the
Sunshine Café would have to pay Quick Burger at least ______ per month to NOT
operate a drive-through window.
A. $9,000
B. $11,000
C. $15,000
D. $24,000
If firms sell less than expected, actual investment increases because _____, which is
counted as investment.
A. the unsold goods are added to inventory
B. the government buys the unsold goods
C. the unsold goods are distributed to poor households
D. households buy the unsold goods are bargain prices
If fewer families choose to purchase medical insurance because of rising health
insurance premiums, then:
A. those who remain insured will tend to spend less on health care.
B. those who remain insured will tend to have higher-than-average rates of illness.
C. the frequency of illness in the general population will fall.
D. those who remain insured will tend to have lower-than-average rates of illness.
Which of the following is NOT a reason why there are gains to specialization?
A. It eliminates many of the costs of switching from one task to another.
B. It further improves skills through experience and practice.
C. It increases the amount productive resources in the economy.
D. It allows individuals to concentrate on the activities in which they have a
comparative advantage.
Suppose that when a perfectly competitive firm produces 500 units of output a day, it
earns an economic loss. If the price of each unit of output is $1.50, then, in the short
run, it’s clear that this firm:
A. should shut down.
B. should not shut down if its total variable cost is less than $750.
C. is not maximizing its profit.
D. should produce more than 500 units a day.
Which of the following is NOT a characteristic of governmental rent controls?
A. Equitable distribution of apartments.
B. Excess demand for apartments.
C. Fewer newly built apartment buildings.
D. Very low vacancy rates.
In order to increase the capital stock, society must divert ______ that could be
otherwise used to increase the currentsupply of _____.
A. money; consumer goods
B. credit; labor
C. money; labor
D. resources; consumer goods
Refer to the figure below. If the price of a t-shirt is $6 and the price of a sweater is $80,
then the rational spending rule is satisfied when the consumer purchases _____ t-shirts
and ______ sweaters.
A. 4; 3
B. 3; 4
C. 4; 4
D. 4; 1
For a given nominal exchange rate and foreign price level, an increase in the domestic
price level ______ the real exchange rate.
A. increases
B. decreases
C. may either increase or decrease
D. offsets any change in
When the economy is in short-run equilibrium, there will be ______ output gap.
A. no
B. only a recessionary
C. either a recessionary or an expansionary
D. only an expansionary
Total revenue minus both explicit and implicit costs defines a firm’s:
A. gross earnings.
B. profit.
C. marginal earnings.
D. net worth.
If a consumer buys two goods, the rational spending rule requires that the:
A. total expenditure on the two goods be equal.
B. ratio of total utility to price be equal for the two goods.
C. ratio of average utility to price be equal for the two goods.
D. ratio of marginal utility to price be equal for the two goods.
International capital flows are:
A. purchases of foreign goods or services.
B. sales of domestic goods or services to foreigners.
C. exports plus imports.
D. purchases or sales of real and financial assets across international borders.
Insurance companies practice statistical discrimination because:
A. young males are willing to pay more for insurance than other groups.
B. the demand for insurance is very inelastic.
C. young males are more likely than other groups to generate insurance claims.
D. insurance markets aren’t perfectly competitive.
A cost-saving innovation in a perfectly competitive industry will lead to:
A. entry by new firms.
B. economic profits for new firms.
C. economic profits for a few firms for a short time.
D. a leftward shift of the industry supply curve.
The value of goods produced, but unsold, in the current period is:
A. excluded from GDP.
B. counted in GDP as inventory investment.
C. counted in GDP as consumption spending.
D. allocated to GDP in future periods when the goods are sold.
If workers received a 5 percent wage increase and the rate of inflation was 3 percent,
then their real wage:
A. increased.
B. decreased.
C. remained constant.
D. equaled the nominal wage.
Suppose the table below describes the relationship between price and quantity
demanded for a monopolist.
If the marginal cost of producing each unit of output is $5, then this monopolist
maximizes its profit by charging ______ per unit.
A. $3
B. $5
C. $6
D. $8
Suppose Chris is offered the following gamble: with probability 0.1 he will win $90,
with probability 0.4 he will win $50, and with probability 0.5 he will lose $60. Chris
will:
A. accept this gamble if he is risk-averse, but not if he is risk-neutral.
B. accept this gamble if he is risk neutral, but not if he is risk-averse.
C. accept this gamble if he is either risk neutral or risk-averse.
D. not accept this gamble if he is risk-neutral.
The figure below shows a single consumer’s demand for ice cream at the student union.
An increase in the number of students on this campus would cause:
A. the demand curve shown above to shift to the right.
B. the demand curve shown above to shift to the left.
C. the market demand curve for ice cream from the student union to shift to the right.
D. no change in the market demand curve for ice cream from the student union.
Consider an industry with two firms producing similar products. Each firm’s total cost
(in dollars) is given below.
Acme Manufacturing: TC = 100 + 3Q.
Generic Industries: TC = 500 + 3Q.
Which of the following statements is true?
A. Acme has a lower marginal cost than does Generic.
B. Acme and Generic have the same marginal cost.
C. Marginal cost at each firm depends on the level of output.
D. Acme has greater economies of scale than does Generic.
The marginal cost curve for information is upward sloping because:
A. most information is provided by sources that have a vested interest in offering false
information.
B. consumers tend to start with the least expensive sources of information and then
progress to more expensive sources.
C. there is only so much to learn about a product.
D. most information is misleading.
Which of the following is an example of an investment in human capital?
A. A firm replaces manually controlled production with a computer controlled
procedure.
B. A firm pays for workers to take college classes.
C. A chemical firm supports research to develop new chemicals.
D. A firm purchases new equipment for a manufacturing process.
Suppose that the total production of an economy consists of 10 oranges and 5 candy
bars, each orange sells for $0.20, and each candy bar sells for $1.00. What is the market
value of production in this economy?
A. $1.20
B. $2.00
C. $5.00
D. $7.00
Suppose the market consists of 3 individuals: Citizen A, Citizen B and Citizen C.
If the good shown on the graphs is a public good, and the marginal cost of the 20th unit
is $10, then the optimal quantity of the public good is:
A. zero.
B. 20 units
C. less than 20 units.
D. greater than 20 units.
A measure of the average price of a given class of goods or services relative to the price
of the same goods and services in a base year is called a:
A. real price.
B. real quantity.
C. rate of inflation.
D. price index.
Because the minimum wage is not indexed to inflation, when there is inflation the
nominal minimum wage _____, and the real minimum wage _____.
A. remains constant; decreases
B. remains constant; remains constant
C. decreases; remains constant
D. increases; decreases
An editorial in the paper argues that a person only should be allowed to attend school if
the marginal cost of educating that person is less than the marginal benefit of educating
that person. The writer’s reasoning is an application of:
A. positive economics.
B. negative economics.
C. normative economics.
D. economic naturalism.
As the number or quality of available resources improves, ______ shifts to the _____.
A. aggregate demand; left
B. aggregate demand; right
C. aggregate supply; left
D. aggregate supply; right
Refer to the figure below. Suppose the economy is in a short-run equilibrium at output
Y1 and inflation rate π2. The economy is currently experiencing ______, and the correct
fiscal policy response to this situation, to return the economy to potential GDP, is to
______.
A. a recessionary gap; increase government spending
B. an expansionary gap; decrease government spending
C. a recessionary gap; increase taxes
D. an expansionary gap; decrease taxes
Suppose Campus Books, a profit-maximizing firm, is the only supplier of the textbook
for a given class. The marginal cost of supplying each book is constant and equal to
$10, and Campus Books has no fixed costs. The table below shows the reservation
prices of the eight students enrolled in the class.
If Campus Books is permitted to charge 2 prices, and the bookstore knows customers
with a reservation price above $30 never bother with coupons, whereas those with a
reservation price of $30 or less always use them, then how many in total books will the
bookstore sell?
A. 8
B. 7
C. 6
D. 5