Data on output and planned aggregate expenditure in Macroland are given below.
Based on these data, the short-run equilibrium level of output is _____.
A. 2,000
B. 3,200
C. 4,100
D. 5,000
An economy with a trade deficit must also have:
A. a trade deficit.
B. a budget surplus.
C. positive net capital outflows.
D. positive net capital inflows.
Refer to the figure above. The market demand curve indicates that at a price of $0.75,
_______ cans of soda will be demanded.
A. 20
B. 50
C. 70
D. 100
Suppose Jordan and Lee are trying to decide what to do on a Friday. Jordan would
prefer to see a comedy while Lee would prefer to see a documentary. One documentary
and one comedy are showing at the local cinema. The benefit they receive from seeing
the films either together or separately are shown in the payoff matrix. Both Jordan and
Lee know the information contained in the payoff matrix. They purchase their tickets
simultaneously, ignorant of the other’s choice.
Refer to the figure above. Lee has:
A. no dominant strategy.
B. a dominant strategy of seeing a comedy.
C. a dominant strategy of seeing a documentary.
D. two dominant strategies, depending on Jordan’s choice.
Lane and Riley are the only two residents in a neighborhood, and they share the same
driveway. They would like to have the driveway paved. The value of the paved
driveway is $1500 to Lane and $1000 to Riley. Irrespective of who pays for the paving
both people will benefit from it.
Suppose the cost of paving the driveway is $2000, it is _____ for them to share its cost,
because then they will have a total economic _______.
A. inefficient; shortage of $500
B. efficient; surplus of $500
C. efficient; shortage of $500
D. efficient; surplus of $1000
The price of gold is $300 per ounce in New York and 2,550 pesos per ounce in Mexico
City. If the law of one price holds for gold, the nominal exchange rate is ______ pesos
per U.S. dollar.
A. 0.118
B. 1.18
C. 8.5
D. 85.5
Government expenditures include spending by federal, state, and local governments on:
A. consumer durables, nondurables, and services.
B. stocks, bonds, and other financial instruments.
C. capital goods, residential housing, and changes in inventories.
D. final goods and services.
The law of demand indicates that as the cost of an activity
A. falls, less of the activity will occur.
B. rises, more of the activity will occur.
C. rises, the level of the activity may or may not increase depending on the individual.
D. falls, more of the activity will occur.
Refer to the figure above. Relative to point x, at point y:
A. more sandals and more clogs are produced.
B. more sandals and fewer clogs are produced.
C. more clogs and fewer sandals are produced.
D. fewer sandals and fewer clogs are produced.
The PPC shown in this graph is characteristic of production that displays:
A. constant opportunity costs.
B. decreasing opportunity costs as production of a good increases.
C. increasing opportunity costs as production of a good increases.
D. inefficient production because it is downward sloping.
Involuntary part-time workers are:
A. chronically unemployed.
B. considered out of the labor force.
C. short-term unemployed workers.
D. not counted as unemployed.
Refer to the figure above. The total utility of consuming two pizzas in a single week is
A. 45
B. 60
C. 30
D. 15
The following table provides information about production at the XYZ-TV Company.
How many workers will the XYZ-TV Company hire if the going wage for TV
production workers is $28,000?
A. 1
B. 2
C. 3
D. 4
In a model of competitive labor markets in the United States, the supply curve would
shift to the right if
A. the United States relaxed its immigration laws.
B. a cultural or social change occurred such that fewer mothers returned to work after
their children were born.
C. firms replaced human workers with robots.
D. firms opened more plants overseas.
Imagine that you are an entrepreneur, making designer t-shirts in your garage. Your
accountant has estimated that your firm’s total costs can be expressed by the function
TC = 300 + 10 × Q, where Q represents the number of t-shirts you make.
Your fixed costs are _______ and your marginal cost is _____.
A. $300; $10
B. $300/Q; $30
C. $300; $10 times quantity
D. $300/Q; $10
Refer to the figure above. The marginal utility of consuming the 2nd apple is
A. 10
B. 15
C. 20
D. 35
Refer to the figure above. The total economic surplus after the $4 price ceiling is
imposed is ____, so that the surplus lost due to the $4 price ceiling is ________.
A. $4; $48.
B. $24; $16
C. $24; $8
D. $32; $8
Imagine a world in which landlords always fix problems quickly, tenants never damage
property and always pay their rent in a timely fashion. In such a world, lease
agreements would ________
A. still exist to solve the commitment problem.
B. be unnecessary.
C. apply only to people with low monthly income.
D. only serve the interests of tenants.
In an economy of 100 people in the labor force, if 10 people are unemployed for 4
weeks during the year, and 30 people are unemployed for 8 weeks during the year, and
the rest are employed continuously throughout the year, then the average duration of
unemployment in this economy is:
A. 5 weeks.
B. 6 weeks.
C. 7 weeks.
D. 8 weeks.
Economics is best defined as the study of:
A. prices and quantities.
B. inflation and interest rates.
C. how people make choices under the conditions of scarcity and the results of those
choices.
D. wages and incomes.
To the patient, the marginal cost of medical care is zero
A. always.
B. under first-dollar insurance coverage.
C. in an HMO.
D. never.
If the government wanted to use the incentive principle to discourage smoking, it could:
A. publicize the health risks associated with second-hand smoke.
B. increase taxes on cigarettes, effectively raising the price.
C. subsidize hospitals treating lung disease.
D. invest more money in health research.
Relative to a person who earns minimum wage, a person who earns $30 per hour has:
A. a lower opportunity cost of working longer hours.
B. a higher opportunity cost of taking a day off.
C. a lower opportunity cost of driving farther to work.
D. the same opportunity cost of spending time on leisure activities.
Early settlers in the town of Dry Gulch drilled wells to pump as much water as they
wanted from the single aquifer beneath the town. (An aquifer is an underground body of
water.) As more people settled in Dry Gulch, the aquifer level fell and new wells had to
be drilled deeper at higher cost.
Refer to the information given above. In Dry Gulch, the supply of water is:
A. perfectly inelastic.
B. perfectly elastic.
C. upward sloping.
D. downward sloping.
If Gerry saves $500 per month, then Gerry’s ______ will increase by _____.
A. wealth; $500 only if he has no debt
B. income; $500 only if he buys additional assets
C. wealth; $500
D. wealth; $500 only if he buys additional assets
Refer to the figure above. Assume that a Coase Theorem solution (private negotiation)
is impractical for solving the externality problem illustrated. The efficient equilibrium
could be achieved by:
A. banning production of the good.
B. compensating those injured by the externality.
C. taxing the good by an amount equal to the external cost.
D. subsidizing the good by an amount equal to the external benefit.
If Jane can produce 3 pairs of shoes hourly, while Bob can produce 2, then one can infer
that the __________ advantage belongs to __________.
A. absolute; Jane
B. comparative; Jane
C. comparative; Bob
D. comparative and absolute; Jane
If a natural monopoly increases the quantity of output it produces:
A. its average costs will decrease.
B. its average costs will increase.
C. it will have to increase the price that it charges.
D. its profits will increase.
Jen is offered a job answering the phone in the State U economics department during
lunchtime, from noon to 1 P.M., Tuesdays and Thursdays. Her reservation wage for this
job is $15/hour.
If the department chair offers Jen $150/week, how much economic surplus will she
enjoy each week as a result of accepting the job?
A. $15
B. $120
C. $135
D. $150
Mexico and the members of OPEC produce crude oil. Realizing that it would be in their
best interests to form an agreement on production goals, a meeting is arranged and an
informal, verbal agreement is reached. If both Mexico and OPEC stick to the
agreement, OPEC will earn profits of $200 million and Mexico will earn profits of $100
million. If both Mexico and OPEC cheat, then OPEC will earn $175 million and
Mexico will earn $80 million. If only OPEC cheats, then OPEC earns $185 million and
Mexico $60 million. If only Mexico cheats, then Mexico earns $110 million and OPEC
$150 million. You may find it helpful to fill in the following payoff matrix in order to
answer the question below.
Refer to the information given above. Mexico has:
A. no dominant strategy.
B. a dominant strategy of not cheating.
C. no dominated strategy.
D. a dominant strategy of cheating.
If the existence of alternative opportunities makes people become less willing to work
in poultry processing plants, then the real wage of unskilled workers in poultry
processing plants is predicted to ______ and the employment of unskilled workers in
poultry processing plants is predicted to ______.
A. increase; increase
B. increase; decrease
C. increase; not change
D. decrease; decrease
Refer to the figure above. What will be the long-run economic profit for this firm?
A. $0
B. $10,000
C. $15,000
D. $20,000