If short-run equilibrium output equals 10,000, the income-expenditure multiplier equals
10, the mpc equals 0.9, and potential output (Y*) equals 9,000, then taxes must be
increased by approximately ______ to eliminate any output gap.
A. 90
B. 100
C. 111
D. 1,000
Casey earns $150 a week and consumes only fish and shrimp. The price of fish is $3 a
pound and the price of shrimp is $5 a pound.
If Casey’s income rises to $210 Casey could buy a maximum of _____ pounds of fish or
a maximum of _____ pounds of shrimp.
A. 30, 24
B. 24, 30
C. 70, 42
D. 42, 70
Assume that this graph illustrates a perfectly competitive labor market.
Suppose a minimum wage law required the wage to be at least $20 in this market. If
that happened,
A. there would be an excess supply of worker hours.
B. there would be excess demand for worker hours.
C. demand for worker hours would shift to the right.
D. there would be no change in the hourly wage paid or the number of worker hours
hired.
When calculating the worthiness of a college education, one must use __________
values because the costs and benefits __________.
A. nominal; are estimated
B. discounted; accumulate over time
C. real; cannot keep pace with inflation
D. non-monetary; are largely non-monetary
If the interest rate in the U.S. rises, U.S. financial assets become ______ attractive to
buyers and the ______ U.S. dollars will rise.
A. more; demand for
B. more; supply of
C. less; demand for
D. less; supply of
Refer to the figure above. The __________ at the socially efficient level of output will
be __________ at the profit maximizing level of output.
A. loss; smaller than
B. profit; smaller than
C. loss; larger than
D. profit; larger than
Commercial banks create new money:
A. when they increase their desired reserve/deposit ratio.
B. by issuing checks.
C. through multiple rounds of lending.
D. when they buy government bonds from the Federal Reserve.
The income-expenditure multiplier leads to greater than one-for-one changes in output
when autonomous spending changes because:
A. the direct changes in spending change the income of producers which leads to
additional changes in spending.
B. multiple deposits are generated when new reserves are produced through fractional
reserve banking.
C. autonomous spending supports more output than induced spending.
D. planned changes in inventories signal producers to adjust the level of output.
When Cody went to the physician with a sore elbow, after hearing Cody’s symptoms
and examining the elbow manually, Cody’s physician had two options:
(1) prescribe an anti-inflammatory drug and advise Cody to abstain from vigorous
physical activity for a period; or
(2) advise Cody to undergo a magnetic resonance imaging (MRI) exam, a costly
diagnostic procedure.
Which of the following physicians is more likely to go with option (2)?
A. A physician who is compensated under conventional health insurance.
B. A physician in an HMO plan.
C. A physician who is concerned about the marginal cost of MRI.
D. Any physician will recommend option (2).
A period in which the economy is growing at a rate significantly below normal is called
a(n):
A. expansion.
B. boom.
C. peak.
D. recession.
Periods of unusually low production in an economy result in ______ unemployment.
A. cyclical
B. environmental
C. structural
D. frictional
Economic growth may face environmental limits because:
A. economic growth can take the form of new, different, and “cleaner” goods and
services.
B. economic growth may lead to less, not more, pollution.
C. the market mechanism mobilizes resources to deal with shortages.
D. global environmental problems are not handled by markets or national governments.
Increasing wage inequality results when international trade leads to ______ wages for
workers in exporting industries and ______ wages for workers in importing industries.
A. higher; higher
B. higher; lower
C. lower; no change in
D. lower; higher
The real rate of interest measures the ______ of capital investment.
A. value of the marginal product
B. opportunity cost
C. marginal benefit
D. relative price
The price level is:
A. the rate of inflation.
B. a measure of overall prices at a particular point in time.
C. the percentage change in a price index such as the CPI.
D. the price of a specific good in comparison to the prices of other goods and services.
The direct trade of goods and services for other goods and services is called:
A. financial intermediation.
B. diversification.
C. barter.
D. using a medium of exchange.
Firms will not produce if price is less than _____ costs, and so only the part of the
_____ cost curve above that point is the supply curve.
A. average total; marginal
B. average fixed; marginal
C. average variable; average
D. average variable; marginal
Your economics professor has announced the following grading policy: For each exam,
the highest score in the class will be entered as a 100%; all other scores will be entered
as the percent of that top score. For example, if the highest test score is 50 out of 100, it
will be counted as a perfect paper, and exams with a score of 40 out of 100 will be
entered as an 80%. The final grade for the course will be determined using these
adjusted percentages, with 90% and above an A, 80% and above a B, 70% and above a
C, and below 70%, not passing.
Refer to the information given above. This grading scheme:
A. uses an absolute standard.
B. uses a relative standard.
C. is too confusing to adequately motivate students.
D. is designed to discourage competitive over-studying.
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
Compared to a monopolist charging a single price to everyone, perfect price
discrimination makes:
A. the monopolist better off and some consumers worse off.
B. society worse off.
C. the monopolist worse off and consumers better off.
D. the monopolist and all consumers better off.
A dominant strategy occurs when:
A. one player has a strategy that yields the highest payoff regardless of the other
player’s choice.
B. both players have a strategy that yields the highest payoff independent of the other’s
choice.
C. both players make the same choice.
D. the payoff is the maximum possible combination of payoffs in the game.
______ is an increase in the price level, while ______ is an increase in the price of one
good in comparison to other goods and services.
A. Inflation; hyperinflation
B. A relative price increase; inflation
C. Hyperinflation; inflation
D. Inflation; a relative price increase
European households wishing to purchase shares of stock in an American company are
______ the foreign exchange market.
A. suppliers of U.S. dollars in
B. demanders of Euros in
C. supplied dollars by the European Central Bank for use in
D. demanders of U.S. dollars in
Refer to the figure above. It is __________ for this farmer to grow 1,000 bushels of
wheat and no corn relative to growing 500 bushels of corn and no wheat.
A. not efficient
B. more efficient
C. less efficient
D. equally as efficient
The establishment of well-defined property rights increases:
A. average labor productivity.
B. the amount of pollution.
C. the unemployment rate.
D. the labor force participation rate.
According to the textbook, social norms can be viewed as:
A. a way to establish property rights.
B. a tool of the government.
C. an informal solution to a positional arms race.
D. a useful way to organize marketing campaigns.
Suppose that the salary range for recent college graduates with a bachelor’s degree in
economics is $30,000 to $50,000, with 25% of jobs offering $30,000 per year, 50%
offering $40,000 per year and 25% offering $50,000 per year and that in all other
respects, the jobs are equally satisfying. Assume that in this market, a job offer remains
open for only a short time so that continuing to search requires an applicant to reject
any current job offer.
If this scenario describes job searches in general, the segment of the population that is
most risk-averse will tend to earn
A. average salaries.
B. below-average salaries.
C. above-average salaries.
D. stable salaries.
Skill-biased technological has different effects on the marginal products of ______
workers and ______ workers.
A. male; female
B. union; nonunion
C. government; private-sector
D. highly trained; low-skilled
Privately-owned firms that accept deposits from individuals and businesses and use
those deposits to make loans are called:
A. mortgage banks.
B. brokerage firms.
C. commercial banks.
D. investment banks.
The Boy Scouts have so far sold 100 tickets for their upcoming raffle, but they sell a
constant additional 12 tickets every day. After three more days of selling tickets, the
stock of tickets sold will be ____, and the flow of tickets sold will be ____.
A. 136; 12
B. 36; 12
C. 100; 36
D. 136; 36
Consider an industry with two firms producing similar products.
Mega Corp’s total costs are TC = $5,000 + 100 × Quantity.
Big Inc’s total costs are TC = $4,000 + 200 × Quantity.
Refer to the information given above. ______ has higher fixed costs and ______ has
greater variable costs.
A. Big Inc; Mega Corp
B. Mega Corp; Big Inc
C. Big Inc; Big Inc
D. Mega Corp; Mega Corp
The market value of a particular bond at any given point in time is called the bond’s:
A. coupon rate.
B. principal.
C. term.
D. price.
Refer to the figure above. Assume that column A and column B are the initial demand
and supply curves. At a price of $50, the market would experience:
A. an equilibrium.
B. excess demand of 5 units.
C. excess supply of 70 units.
D. excess supply of 5 units.
An existing comparative advantage can be further magnified by specialization because:
A. it eliminates the need to switch from one task to another.
B. repetition results in boredom.
C. a variety of tasks will rise.
D. small tasks will be merged into larger tasks.