Joss is a marketing consultant. Iris and Daphne are potential customers interested in
commissioning Joss to undertake a market survey and compile the findings in a report.
Iris is willing to pay $500 for the service while Daphne is willing to pay $800. Suppose
that the opportunity cost of Joss’s time is $1,200. Assume that Iris and Daphne do not
know each other. If the price is $500 per copy,
A) only Iris will purchase Joss’s services and Joss will undertake the job for her.
B) only Daphne will purchase Joss’s services and Joss will undertake the job for her.
C) both Iris and Daphne will purchase Joss’s services and Joss will undertake the job.
D) both Iris and Daphne will want to purchase Joss’s services but Joss will not be
willing to undertake the job.
Scarcity refers to the situation in which
A) unlimited wants exceed limited resources.
B) unlimited resources exceed limited wants.
C) a country’s population is larger than its resource base.
D) a nation’s poverty level increases faster than its population.
Vipsana’s Gyros House sells gyros. The cost of ingredients (pita, meat, spices, etc.) to
make a gyro is $2.00. Vipsana pays her employees $60 per day. She also incurs a fixed
cost of $120 per day. Calculate Vipsana’s average fixed cost per day when she produces
50 gyros using two workers?
A) $2.00
B) $2.40
C) $4.40
D) $6.80
For each of the following pairs of products state which are complements, which are
substitutes, and which are unrelated.
a. House plants and potato chips
b. Eyeglasses and contact lenses
c. Motorcycles and gasoline
d. Smartphone and smartphone apps
e. Red wine and white wine
Which of the following are not considered part of government purchases?
A) welfare benefits
B) teachers’ salaries paid by a local government
C) a tank purchased by the federal government
D) a bridge purchased by the state government
The situation in which short-term interest rates are pushed to zero, leaving the central
bank unable to lower them further is known as
A) the Taylor rule.
B) a liquidity trap.
C) a zero-sum game.
D) an interest rate panic.
“The price of digital cameras fell because of improvements in production technology.
As a result, the demand for non-digital cameras decreased. This caused the price of
non-digital cameras to fall; as the price of non-digital cameras fell the demand for
non-digital cameras decreased even further.” Evaluate this statement.
A) The statement is false because the demand for non-digital cameras would increase as
the price of digital cameras fell.
B) The statement is false. A decrease in the price of digital cameras would decrease the
demand for non-digital cameras, but a decrease in the price of non-digital cameras
would not cause the demand for non-digital cameras to decrease.
C) The statement is false because it confuses the law of demand with the law of supply.
D) The statement is false because digital camera producers would not reduce their
prices as a result of improvements in technology; doing so would reduce their profits.
The bargaining power of buyers increases if
A) there are many large buyers.
B) the input in question has few substitutes.
C) the input in question is not a critical component of production.
D) there are wide variations in the quality of inputs from supplier to supplier.
One argument advanced in favorof not increasing the income tax on individuals with
high income is that
A) increasing income tax increases wealth which contributes to increases in GDP.
B) increasing the income tax on these individuals will reduce economic efficiency.
C) increasing the income tax affects mostly middle-income and low-income individuals
who are already paying heavy income taxes.
D) not increasing income taxes will discourage corporations from increasing
investment.
The labor force is the sum of
A) employed workers and discouraged workers.
B) employed workers and unemployed workers.
C) employed workers and individuals not looking for work.
D) employed workers and the working age population.
E) unemployed workers and the working age population.