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The reason the marginal benefit of information curve is downward sloping is because
A. some information is useless.
B. most information is useless.
C. information is subject to the law of diminishing marginal returns.
D. there is only so much to learn about a product.
Mel is thinking of going on a cruise. Mel values a cruise in nice weather at $2,000 and
values a cruise in bad weather at $50. According to a very reliable source, the
probability of nice weather is 60% and the probability of bad weather is 40%. Trip
insurance is sometimes available. If purchased, it allows travelers to delay the cruise
until the weather is nice.
In the absence of trip insurance, the most Mel will be willing to pay for the cruise is
_______.
A. $1200
B. $1250
C. $1220
D. $1000
Quick Buck and Pushy Sales produce and sell identical products and face zero marginal
and average cost. Below is the market demand and marginal revenue curves for the
product.
Refer to the figure above. Quick Buck and Pushy Sales have agreed to each produce
half the profit-maximizing monopolist quantity, set the monopoly price and split the
profits evenly. Suppose Quick Buck cheats on Pushy Sales and reduces its price to
$1.00 and Pushy Sales matches the price cut. Consumers are evenly split between the
two firms. What will be the economic profit for Quick Buck?
A. $1,000
B. $1,500
C. $2,000
D. $3,000
Refer to the table above. The average cost of 5 units of activity is:
A. $1
B. $2
C. $3
D. $4
Suppose that two types of indistinguishable coffee beans are imported to the U.S.: those
grown in the mountains of South America and those grown in greenhouses in Canada.
Mountain grown coffee produces a better tasting coffee, but buyers cannot distinguish
the beans by sight or smell. Only the importers know the source of the beans. Buyers
value mountain grown beans at $10 a pound and greenhouse grown beans at $3 a
pound. Assume that 70% of imported beans are mountain grown, and 30% are
greenhouse grown.
As time goes on, the buyers' reservation price will __________ and __________
mountain grown beans will be offered for sale.
A. rise; more
B. fall; more
C. rise; fewer
D. fall; fewer
Capital income includes:
A. profits, rent, and interest.
B. wages and salaries.
C. earnings of the self-employed.
D. capital gains from stock sales.
Which of the following is NOT a characteristic of a market in equilibrium?
A. Excess supply is zero.
B. All consumers are able to purchase an amount equal to their quantity demanded.
C. Excess demand is zero.
D. The equilibrium price is stable, i.e., there is no pressure for it to change.
You paid $35 for a ticket (which is non-refundable) to see SPAM, a local rock band, in
concert on Saturday. (Assume that you would not have been willing to pay any more
than $35 for this concert.) Your boss called and she is looking for someone to cover a
shift on Saturday at the same time as the concert. You will have to work 4 hours and she
will pay you time and a half, which is $9/hr.
What is the opportunity cost of going to the concert?
A. $1
B. $9
C. $35
D. $36
Last summer, Casey took fresh vegetables to sell at the Farmer's Market, but this year,
Casey did not plant any vegetables and went to work at the local bank.
Refer to the information above. It was easy for Casey to leave the vegetable growing
business because:
A. the productive resources that Casey used were mobile.
B. vegetable growing is a seasonal occupation.
C. demand for vegetables is price inelastic.
D. inputs to vegetable production are specialized.
A trade surplus occurs when:
A. exports exceed imports.
B. imports exceed exports.
C. tariffs exceed quotas.
D. quotas exceed tariffs.
The CPI in 1974 equaled 0.49. The CPI in 1975 equaled 0.54. The rate of inflation
between 1974 and 1975 was ______ percent.
A. 5.0
B. 5.4
C. 9.3
D. 10.2
A credible threat is an action that is:
A. possible to carry out.
B. legally enforceable.
C. in the threatener's self interest to carry out.
D. not in the threatener's self interest to carry out.
An increase in the value of a currency relative to other currencies is called a(n):
A. evaluation.
B. devaluation.
C. appreciation.
D. overvaluation.
If firms sell less output than expected, planned investment:
A. is greater than actual investment.
B. is less than actual investment.
C. equals actual investment.
D. equals zero.
When auctions, such as those used on eBay, are used to sell a product
A. information about consumers' true reservation prices is minimized.
B. information about consumers' true reservation prices is revealed.
C. consumers have an incentive to bid higher than their true reservation prices.
D. consumers do not have an incentive to bid their true reservation prices.
Inflation is a measure of the ______ of prices; the CPI is a measure of the ______ of
prices.
A. current level; change in the level
B. change in the level; current level
C. index; base year's level
D. base year's level; index
If firms sell less than expected, actual investment increases because _____, which is
counted as investment.
A. the unsold goods are added to inventory
B. the government buys the unsold goods
C. the unsold goods are distributed to poor households
D. households buy the unsold goods are bargain prices
Lee and Cody are competitors. Each is considering whether to take aggressive action
against the other or to cooperate. Cody can observe Lee's decision. Their decision tree
can be diagrammed as follows:
Refer to the figure above. The equilibrium for this game is for Lee to choose _______
and for Cody to be _______ in response.
A. aggression; cooperative
B. aggression; aggressive
C. cooperation; cooperative
D. cooperation; aggressive
Someone who is not strongly committed to achieving and maintaining low inflation is
called a(n):
A. anchored central banker.
B. inflation dove.
C. inflationary central banker.
D. inflation hawk.
In the United Sates, the average annual rate of growth of real wages was fastest in the
period:
A. 1960-1973.
B. 1960-1996.
C. 1960-2001.
D. 1973-1996.
An agreement among firms to restrict production with the goal of earning economic
profits is a:
A. pure monopoly.
B. oligopoly.
C. cartel.
D. duopoly.
The value of marginal product curve is downward sloping because
A. firms must lower price to sell more.
B. at lower wages, only less qualified workers are available.
C. of the law of diminishing marginal product.
D. profits decline as more workers are hired.
Refer to the figure above. Assume the market is originally at point W. Movement to
point X is a combination of:
A. an increase in quantity supplied and an increase in demand.
B. an increase in supply and an increase in demand.
C. an increase in supply and an increase in quantity demanded.
D. a decrease in supply and an increase in quantity demanded.
This phone center uses only equipment and workers to provide service.
For this firm, Marginal Cost
A. equals Average Variable Cost at Average Variable Cost's minimum point.
B. equals Average Total Cost at Average Total Cost's maximum point.
C. is always greater than Average Variable Cost.
D. is always less than Average Variable Cost.
Suppose that the marginal benefit of having a security guard at the airport is MB1, at the
bank is MB2, and at the mall is MB3. The marginal cost of assigning security guard is
the same for all three places, and it is represented by MC2.
The optimal number of security guards at the airport is ____, the optimal number of
security guards at the bank is _______, and the optimal number of security guards at the
mall is ______.
A. 3; 3; 6
B. 6; 4; 3
C. 5; 4; 2
D. 6; 5; 4
If the quantity demanded of a good is Q when the price for the good is P, the price
elasticity of demand for that good at that point is:
A. (P/Q)*(1/slope)
B. (Q/P)*(1/slope)
C. (P/Q)*(slope)
D. Q*P*(1/slope)
A year's tuition at a state university cost $250 in 1972 when the CPI equaled 0.418. The
cost of a year's tuition at the same state university cost $3,000 in 2005 when the CPI
equaled 1.68. The real cost of tuition between 1972 and 2005:
A. increased.
B. decreased.
C. remained constant.
D. may have either increased or decreased.
Refer to the figure above. The total utility of consuming two dinners out in a week is
A. less than 100.
B. 75.
C. 175.
D. 160.
In Econland autonomous consumption equals 700, the marginal propensity to consume
equals 0.80, net taxes are fixed at 50, planned investment is fixed at 100, government
purchases are fixed at 100, and net exports are fixed at 40. The vertical intercept of the
Expenditure Line is:
A. 890.
B. 900.
C. 940.
D. 990.
In general, when the demand curve shifts to the right and supply remains constant then:
A. quantity demanded will rise.
B. the equilibrium price will fall.
C. the equilibrium quantity will rise.
D. the market cannot reestablish an equilibrium.
You expect a share of EconNews.Com to sell for $65 a year from now. If you are
willing to pay $65.74 for one share of the stock today, and you require a return of 8%,
what dividend payment must you expect to receive from the stock?
A. $4.46
B. $5.20
C. $6.00
D. $9.25
