Refer to the figure below. The marginal utility of apples is:
A. constant.
B. first increasing, but decreasing after the fourth apple.
C. decreasing after the first apple.
D. constantly increasing.
Player 1 and Player 2 are playing a game in which Player 1 has the first move at A in
the decision tree shown below. Once Player 1 has chosen either Up or Down, Player 2,
who can see what Player 1 has chosen, must choose Up or Down at B or C. Both
players know the payoffs at the end of each branch.
What is the equilibrium outcome of this game?
A. Player 1 and Player 2 both choose Up.
B. Player 1 and Player 2 both choose Down.
C. Player 1 chooses Up and Player 2 chooses Down.
D. Player 1 chooses Down and Player 2 chooses Up.
To compare the purchasing power of nominal wages in two different years, one must:
A. compare the nominal values.
B. deflate both quantities by a common price index.
C. increase both quantities by the same percentage increase in a price index.
D. adjust both quantities by the real interest rate.
Refer to the figure below. Moving from point B to point A, the opportunity cost of 25
more salads is:
A. 5 pizzas.
B. 10 pizzas.
C. 15 pizzas.
D. 20 pizzas.
As the real wage decreases, the quantity of labor demanded ______ and the quantity of
labor supplied _______.
A. increases; increases
B. increases; decreases
C. decreases; decreases
D. decreases; increases
For policymakers, the problem with a recessionary gap is ________ and the problem
with an expansionary gap is ________.
A. a tendency for inflation to increase; wasted resources
B. wasted resources; a tendency for inflation to increase
C. an increase in cyclical unemployment; an increase in structural unemployment
D. an increase in structural unemployment; an increase in cyclical unemployment
The core rate of inflation excludes food and energy prices because:
A. these prices don”t change very frequently.
B. these prices are most frequently responsible for short-run fluctuations in the inflation
rate.
C. consumers do not directly face these prices.
D. these prices do not matter to policymakers.
Refer to the figure below. If Mallory and Rick are the only two consumers in this
market and the price of soda is $0.75 per can, then what will be the market demand for
soda each week?
A. 70
B. 50
C. 30
D. 20
Mary Jane is willing to babysit for $6 an hour. Her neighbor has asked her to babysit for
$8 an hour. Assuming Mary Jane accepts the offer:
A. her consumer surplus will be $2 per hour.
B. her economic rent will be $2 per hour.
C. her economic profit will be $8 per hour.
D. her accounting profit will be $8 per hour, and her economic profit will be $0 per
hour.
Suppose that the total expenditures for a typical household in 2010equaled $2,500 per
month, while the cost of purchasing exactly the same items in 2015 was $3,000. If 2010
is the base year, the CPI for 2010 equals:
A. 0.83
B. 1.00
C. 1.20
D. 1.25
Suppose you notice that more and more people are driving gas-guzzling cars. Since you
drive an economy car, their increased demand for gas:
A. does not affect you.
B. causes companies to charge a lower price, thus benefiting you.
C. causes the price you pay for gas to increase.
D. does not change the price you pay, but reduces the quantity of gas supplied.
If your income elasticity of demand for hot dogs is negative, then:
A. your demand curve for hot dogs is not downward sloping.
B. hot dogs are an inferior good for you.
C. hot dogs have no close substitutes for you.
D. you must not enjoy eating hot dogs.
Suppose a small island nation imports sugar for its population at the world price of
$1,500 per ton. The domestic market for sugar is shown below.
If the government provides a subsidy of $500 per ton, then relative to before the
subsidy, consumer surplus will ______ by ______ per day.
A. decrease; $500
B. decrease; $1,000
C. increase; $1,000
D. increase; $5,000
Last year Christine worked as a consultant. She hired an administrative assistant for
$15,000 per year and rented office space (utilities included) for $3,000 per month. Her
total revenue for the year was $100,000. If Christine hadn’t worked as a consultant, she
would have worked at a real estate firm earning $40,000 a year.
Christine’s opportunity cost of working as a consultant last year was ______.
A. $15,000
B. $51,000
C. $40,000
D. $36,000
A situation is efficient if it is:
A. possible to find a transaction that will make at least one person better off, even if
others are made worse off.
B. possible to find a transaction that will make everyone better off.
C. possible to find a transaction that will make at least one person better off without
harming others.
D. not possible to find a transaction that will make at least one person better off without
harming others.
Refer to the figure above. In this market, if all buyers’ reservation prices for a cup of
coffee increased by $1.00;
A. the equilibrium price would increase by $1.00.
B. the equilibrium price would increase by less than $1.00.
C. the equilibrium price would increase by more than $1.00.
D. the equilibrium price would not change.
According to the textbook, the evidence indicates that NAFTA has:
A. reduced the wages of skilled workers in the United States.
B. reduced the employment of unskilled workers in the United States significantly.
C. stopped illegal immigration from Mexico.
D. not significantly reduced the employment of unskilled workers in the United States.
Suppose that the salary range for recent college graduates with a bachelor’s degree in
economics is $30,000 to $50,000, with 25 percent of jobs offering $30,000 per year, 50
percent offering $40,000 per year and 25 percent 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.
The market for bagels contains two firms: BagelWorld (BW) and Bagels’R’Us (BRU).
The owners of the two firms decide to fix the price of bagels. The table below shows
how each firm’s profit (in dollars) depends on whether they abide by the agreement or
cheat on the agreement.
For Bagel World, ______ is a ______.
A. abiding by the agreement; dominant strategy
B. cheating on the agreement; dominated strategy
C. cheating on the agreement; dominant strategy
D. abiding by the agreement; dominant strategy when Bagels’R’Us also abides
Sven likes to water ski, but can only water ski during the one week each year when 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’s marginal utility from his first hour of skiing
was ______ his marginal utility from his tenth hour of skiing.
A. less than
B. greater than
C. the same as
D. more negative
Regarding the fiscal policy responses to the 2007-2009 recession, the Congressional
Budget Office (CBO) found that:
A. the Bush Administration’s fiscal policy worked, but the Obama Administration’s did
not.
B. the Obama Administration’s fiscal policy worked, but the Bush Administration’s did
not.
C. both the Bush Administration’s fiscal policy and the Obama Administration’s fiscal
policy worked.
D. neither the Bush Administration’s fiscal policy nor the Obama Administration’s fiscal
policy worked.
Easy monetary policy will ______ net exports as a result of a ______ currency.
A. increase; stronger
B. increase; weaker
C. decrease; weaker
D. decrease; stronger
Starting from potential output, if consumer confidence decreases and consumers decide
to spend less, then this will generate a(n) _____ gap and inflation will _____.
A. recessionary; increase
B. recessionary; decrease
C. expansionary; decrease
D. expansionary; increase
In markets with incomplete information, middlemen tend to ______ total economic
surplus by ______.
A. reduce; raising prices
B. reduce; giving misleading information
C. increase; raising prices
D. increase; matching sellers with buyers who have high reservation prices
The increase in wage inequality resulting from globalization can be reversed through:
A. revoking the principle of comparative advantage.
B. increases in worker mobility.
C. decreases in worker mobility.
D. making markets more competitive.
Suppose a jar of orange marmalade that is ultimately sold to a customer at The Corner
Store is produced by the following production process:
If the oranges were grown and the jam produced in the year 2015, but the marmalade
was sold at The Corner Store in the year 2016, what is the contribution of these
transactions to GDP in the year 2015?
A. $1.25
B. $2.00
C. $2.50
D. $2.75
Refer to the figure below. For Jeff, the consumption of movies reflects the law of:
A. demand.
B. diminishing marginal utility.
C. total utility maximization.
D. marginal utility maximization.
A consumer goes to purchase a TV advertised for $300. As he is checking out, the clerk
informs him of a $20 rebate offer for the TV, which he fills out and receives in 3
months. What can one can infer about the consumer’s reservation price?
A. It was at least $300.
B. It was at most $280.
C. It was exactly $300.
D. It was at least $280 but less than $300.
Reduced macroeconomic variability in the U.S. since 1981 has all of the following
benefits except:
A. improving market functioning.
B. making business planning easier.
C. reducing resources devoted to managing inflation risks.
D. allowing the Fed to pursue accommodating policy.
If the percentage change in quantity demanded is zero for any percentage change in the
price of the good, demand is classified as:
A. inelastic.
B. perfectly inelastic.
C. unit elastic.
D. perfectly elastic.
Most political scientists and economists agree that ______ is detrimental to economic
growth.
A. a set of well-defined property rights
B. the free and open exchange of ideas
C. political instability
D. a just-in-time inventory system
If both supply and demand increase simultaneously, the new equilibrium price is
___________ and the new equilibrium quantity is _________________.
A. lower; lower
B. lower; indeterminate
C. indeterminate; higher
D. higher; indeterminate
Which of the following would be expected to increase the demand for U.S. currency?
A. Competition among brokers forces down the commission charge for selling bonds or
stocks.
B. The economy enters a recession.
C. Political instability rises dramatically in developing nations.
D. On-line banking allows customers to transfer funds between checking and stock
mutual funds 24 hours a day.
If a certain automotive part can be purchased in Mexico for 60 pesos or in the United
States for $6.25 and if the nominal exchange rate is 8 pesos per U.S. dollar, then the
automotive part:
A. is less expensive in Mexico.
B. is more expensive in the United States.
C. is less expensive in the United States.
D. costs the same in Mexico and the United States.
The extra cost that results from carrying out one additional unit of an activity is the
_____ of the activity.
A. marginal benefit
B. marginal cost
C. reservation cost
D. opportunity cost