Lunch in Jamie’s dorm is an all-you-can-eat buffet, served from 11 a.m. until 1 p.m. By
noon, the buffet is picked over, and by 12:30, there are very few popular items left. The
garbage bins, though, are full of food.
Refer to the information given above. Over time, you would expect that students would:
A. stop eating so much at lunch because they would notice that it generates waste.
B. start distributing themselves more evenly over the lunch hours to avoid long lines.
C. come earlier and earlier for lunch in order to have a better selection from which to
choose.
D. be pickier in their selections from the buffet.
Amy is thinking about going to the movies tonight. A ticket costs $7 and she will have
to cancel her dog-sitting job that pays $30. The cost of seeing the movie is:
A. $7.
B. $30.
C. $37.
D. $37 minus the benefit of seeing the movie.
Suppose Acme and Mega produce and sell identical product with zero marginal and
average cost. Following is the market demand and marginal revenue curves for the
product.
Refer to the figure above. If Acme and Mega decide to collude and work as a pure
monopolist such that each firm will produce half the quantity demanded by the market,
what will be the economic profit for Mega?
A. $0
B. $50
C. $100
D. $150
A sudden increase in household wealth is an example of a ______ demand shock, which
would shift the AD curve to the ______.
A. negative; left
B. positive; left
C. negative; right
D. positive; right
A report indicated that the average real wage in manufacturing declined by 2% between
1990 and 2000. If the CPI equaled 1.30 in 1990, 1.69 in 2000, and the average nominal
wage in manufacturing was $35 in 2000, what was the average nominal wage in
manufacturing in 1990?
A. $21.13
B. $26.40
C. $26.92
D. $27.47
Suppose that the marginal benefit of having a security camera in the library is given by
MB, at the supermarket is given by MB1 and at the museum is given by MB2. All
values are per week.
The marginal cost of providing security cameras would shift from MC to MC1 if
A. a natural disaster increased the value of security cameras in a neighboring town.
B. technological advances made it easier to monitor multiple cameras from a single
location.
C. more firms began substituting cameras for live security guards.
D. a crime wave increased the demand for security.
If the total expenditures of a typical family equaled $35,000 per year in 2000 and the
exact same basket of goods and services cost $40,000 in the year 2005, the family’s cost
of living:
A. increased by 14 percent.
B. decreased by 12.5 percent.
C. decreased by 14 percent.
D. increased by 12.5 percent.
Suppose that a vaccine is developed for a highly contagious strain of flu. The likelihood
that anyone will get this flu decreases as more people receive the vaccine. One of the
demand curves in the diagram reflects private benefits and the other reflects social
benefits.
Refer to the figure above. The socially optimal number of vaccines is _______.
A. 50
B. 75
C. 125
D. 150
Refer to the figure above. If Column Cruises offers reduced rates in the summer, and
Row Resorts keeps its rates high in the summer:
A. both Row Resorts and Column Cruises will earn 300 in profits.
B. both Row Resorts and Column Cruises will earn 50 in profits.
C. Row Resorts will earn profits of 500 and Column Cruises will earn profits of 10.
D. Row Resorts will earn profits of 10 and Column Cruises will earn profits of 500.
Airlines that charge higher prices for customers who purchase their tickets at the last
minute are:
A. not price discriminating because the product is not the same.
B. price discriminating by identifying passengers with higher reservation prices.
C. perfect price discriminators.
D. using the hurdle method of price discrimination.
Consumer surplus measures
A. marginal utility.
B. total utility.
C. the cumulative difference between real and nominal prices.
D. the cumulative difference between price and maximum willingness to pay.
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
Small budget items such as soap have ______ price elasticity of demand compared to
big-ticket items such as flat-screen TVs.
A. higher
B. lower
C. very high
D. the same
The main disadvantage of using money as a store of value is that:
A. other assets provide greater anonymity than cash.
B. barter is a more efficient way to conduct transactions than using money.
C. unlike other assets, money serves as a medium of exchange.
D. other assets pay relatively higher rates of interest than money.
What might cause a supply function to shift to the left today?
A. An increase in the product’s own price.
B. An expectation that the product’s price will fall in the future.
C. An expectation that the product’s price will rise in the future.
D. A decrease in the price of one of the inputs to making the product.
Refer to the figure above. Of the labeled points, ______________ are attainable.
A. only t and u
B. only x, y, and z
C. only w, x, y, z, and v
D. only w, x, y, z, v, and t
Two explanations for increasing wage inequality are ______ and ________.
A. technological progress; a modernized capital stock
B. increased labor supply; a slowdown in productivity growth
C. increased worker mobility; transition aid
D. globalization; skill-biased technological change
Higher nominal interest rates ______ the amount of money demanded and higher real
income ______ the amount of money demanded.
A. increase; increases
B. increase; decreases
C. decrease; increases
D. decrease; decreases
Firms that face menu costs react to a sustained increase in demand by:
A. increasing output and then raising the price at which they are willing to sell their
output.
B. charging higher prices, without necessarily increasing the amount of output they are
willing to sell.
C. charging lower prices, while simultaneously increasing the amount of output they are
willing to sell.
D. increasing output and then reducing the price at which they are willing to sell their
output.
Smith and Jones comprise a two-person economy. Their hourly rates of production are
shown below.
Refer to the table above. By coordinating their production decisions, the maximum
number of computers Smith and Jones can produce in an hour is:
A. 120.
B. 6.
C. 16.
D. 10.
In symbolic terms where Y equals real GDP, POP equals total population, and N equals
the number of employed workers, Y/POP must equal:
A. Y/N × N/POP.
B. N/Y × POP/N.
C. Y/POP × N/POP.
D. N/Y × N/POP.
Lakeville is a small community that completely surrounds a scenic lake up north.
Lakeville’s zoning regulations require that residential lots have at least one hundred feet
of frontage, or shoreline, on the lake. The total shoreline of the lake is 5,000 feet.
Assuming that the zoning regulations in Lakeville remain enforced, elasticity of supply
of lakefront property is,
A. infinite at a quantity of 50.
B. greater than zero at quantities less than 50 and zero at quantity of 50.
C. less than zero at quantities through 100.
D. positive for all quantities.
If total government tax collections equal $200 billion, transfer payments equal $75
billion, and government interest payments equal $10 billion, then net taxes equal:
A. $115 billion.
B. $125 billion.
C. $190 billion.
D. $275 billion.
A firm employs Pam to assemble personal computers. Pam can assemble 1 computer if
she works 1 hour, 4 computers in 2 hours, 8 computers in 3 hours, 10 computers in 4
hours, and 11 computers in 5 hours. Each computer consists of a motherboard that costs
$200, a hard drive that costs $100, a case that costs $20, a monitor that costs $200, a
keyboard that costs $60 and a mouse that costs $20. The cost of employing Pam is $40
per hour.
The firm sells each computer for $620. How many hours should the firm employ Pam
to maximize its benefit from her employment?
A. 0 hour
B. 1 hour
C. 3 hours
D. 4 hours
Holding other factors constant, if new environmental regulations increase firms’ cost of
operating capital, then the real interest rate will ______ and the equilibrium quantity of
national saving and investment will ____.
A. increase; increase
B. increase; decrease
C. decrease; decrease
D. decrease; increase
The large increase in household wealth in the United States in the 1990s was the result
of:
A. a high saving rate.
B. a low saving rate.
C. large capital gains.
D. high rates of inflation.
Refer to the figure above. The market demand curve indicates that 27 lbs of hamburger
will be demanded at a price of
A. $1.00
B. $1.50
C. $2.00
D. $2.50
One family earned an income of $28,000 in 1990. Over the next five years, their
income increased by 15%, while the CPI increased by 15%. After five years, this
family’s nominal income ______, and their real income ______.
A. decreased; also decreased
B. decreased; increased
C. increased; did not change
D. increased; also increased
The statement, “price directs resources across different sectors of the economy” refers
to the ______ function of price.
A. allocative
B. store of value
C. rationing
D. transitivity
In Macroland autonomous consumption equals 100, the marginal propensity to
consume equals 0.75, net taxes are fixed at 40, planned investment is fixed at 50,
government purchases are fixed at 150, and net exports are fixed at 20. Autonomous
expenditure equals:
A. 320.
B. 320 + 0.25Y.
C. 290.
D. 290 + 0.75Y.
What might cause a demand function to shift to the right?
A. An increase in the price of a substitute.
B. An increase in the product’s own price.
C. An increase in the price of a complement.
D. A decrease in the price of a substitute.