Which of the following investments is part of a positional arms race?
A. Watching your friend train for a soccer game
B. Renting movies for the weekend
C. Studying hard for your economics exam because your professor grades on a curve
D. Playing golf for fun
In a perfectly competitive market, if supply and demand fully reflect all of the costs and
benefits associated with production and consumption, then total economic surplus is
maximized when:
A. price controls keep prices low enough that most consumers can purchase the item.
B. consumer surplus and producer surplus are equal.
C. consumer surplus is greater than producer surplus.
D. the market is in equilibrium.
Which one of the following policies mitigates the negative effects of moral hazard?
A. Mandatory car insurance for car owners
B. Lowering everyone’s insurance premium
C. Increasing everyone’s insurance premium
D. Insurance policies with large deductibles
Suppose a monopolist offers a $20 mail-in rebate on an item with a list price of $100. In
order for the rebate to be a perfect hurdle, it must be the case that:
A. buyers use the rebate if and only if they have a reservation price between $80 and
$100.
B. all buyers with a reservation price greater than $80 use the rebate.
C. some buyers with a reservation price greater than $80 use the rebate.
D. buyers use the rebate if and only if their cost of filling out the rebate is less than $20.
Refer to the figure below.
If a price ceiling were imposed at $4, total economic surplus would be ______, which is
______ less than when the market is unregulated market.
A. $8; $24
B. $24; $8
C. $24; $16
D. $48; $8
Refer to the figure below. The law of diminishing marginal utility:
A. applies to t-shirts but not sweaters.
B. does not apply to either t-shirts or sweaters.
C. applies to sweaters but not t-shirts.
D. applies to both t-shirts and sweaters.
The decision about the forms in which to hold one’s wealth is called the ______
decision.
A. Taylor
B. portfolio allocation
C. Fisher effect
D. life-cycle
Changes in planned spending that shift the aggregate demand curve are those:
A. caused by changes in output.
B. caused by changes in the inflation rate.
C. caused by changes in output and changes in the real interest rate.
D. not caused by changes in output or changes in the inflation rate.
If an economy produces 3 million oranges that sell for $0.25 each and 100,000 cars that
sell for $25,000 each, then when the market value of total output is calculated:
A. oranges receive a greater weight than cars.
B. oranges receive the same weight as cars.
C. oranges receive a smaller weight than cars.
D. the market value of oranges is excluded.
According to the textbook, as it is currently administered, the workers’ compensation
system in the United States:
A. does not adjust employers’ premiums fully to reflect injury rates.
B. produces the optimal amount of workplace safety.
C. sets premiums that are too low for firms with low injury rates.
D. sets premiums that are too high for firms with high injury rates.
As the price of a good rises:
A. firms earn larger profits.
B. more firms can cover their opportunity costs of producing the good.
C. firms find they can raise price by even more.
D. government regulation becomes more justified.
A fiscal policy action to close a recessionary gap is to:
A. increase taxes.
B. decrease transfer payments.
C. increase government purchases.
D. increase the marginal propensity to consume.
A decrease in the real exchange rate will tend to ______ exports and to ______ imports.
A. increase; decrease
B. increase; increase
C. decrease; decrease
D. decrease; increase
Frank owns an apple farm and plans to spend 4 hours today picking apples. The number
of apples he can pick per hour depends on the total number of hours he spends working
in either the east orchard or the west orchard in the manner shown in the table below.
What is the marginal benefit to Frank of the 2nd hour he spends picking in the east
orchard?
A. 8 apples
B. 24 apples
C. 32 apples
D. 64 apples
Refer to the figure above. Assume the market is originally at point W. Movement to
point Y 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.
As disposable income increases, consumption:
A. increases.
B. decreases.
C. may either increase or decrease depending on the wealth effect.
D. may either increase or decrease depending on the mpc.
If the percentage change in the price of a good is equal to the percentage change in the
quantity demanded of that good, then the demand for that good is:
A. elastic.
B. inelastic.
C. unit elastic.
D. perfectly elastic.
When the Fed sells government securities, the banks’:
A. reserves will increase and lending will expand, causing an increase in the money
supply.
B. reserves will decrease and lending will contract, causing a decrease in the money
supply.
C. reserve requirements will increase and lending will contract, causing a decrease in
the money supply.
D. reserves/deposit ratio will increase and lending will expand, causing an increase in
the money supply.
The greater the degree of labor market mobility, the
A. less likely it is that firms will provide the socially optimal level of workplace safety.
B. lower workers’ wages will be.
C. more likely it is that workers will be injured on the job.
D. more likely it is that firms will provide the socially optimal level of workplace
safety.
Normative economic principles are concerned with how people ______ make decisions
while positive economic principles are concerned with how people ______ make
decisions.
A. do; should
B. should; do
C. in power; in ordinary life
D. in ordinary life; in power
Firms suddenly becoming pessimistic about future business prospects 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
When unemployment insurance benefits exceed the wages a worker could earn when
employed, the worker will have an incentive to:
A. remain unemployed longer than otherwise.
B. have his/her unemployment insurance benefits cancelled.
C. accept the first job offered.
D. decrease his/her reservation price.
Credit card balances are not considered to be money primarily because they:
A. are rarely used to make purchases.
B. are not part of people’s wealth.
C. are an asset used in making transactions.
D. do not represent an obligation to pay someone else.
The No-Cash-on-the-Table Principle states that there are:
A. never unexploited opportunities available to individuals.
B. never unexploited opportunities available to individuals in equilibrium.
C. sometimes unexploited opportunities available to individuals in equilibrium.
D. always unexploited opportunities available to individuals.
Refer to the figure below. The socially optimal quantity in this market could be
achieved by imposing a ______ equal to the vertical distance ______.
A. tax; LN
B. subsidy; LN
C. tax; LM
D. subsidy; LM
A government policy of providing job training for unskilled youths is an example of a
policy to promote economic growth by:
A. increasing human capital.
B. increasing physical capital.
C. improving technology.
D. increasing the availability of natural resources.
According to the textbook, social norms:
A. are usually ignored.
B. are a type of positional externality.
C. can help curtail positional arms races.
D. are never effective at limiting positional arms races.
If firms are providing the optimal level of workplace safety, then:
A. workers will not be injured on the job.
B. the marginal benefit of improved safety will equal zero.
C. the total benefit of workplace safety will equal the total cost of workplace safety.
D. the marginal benefit of improved safety will equal the marginal cost of improved
safety.
The price elasticity of demand is typically expressed as a positive number because:
A. price and quantity move in the same direction.
B. the demand curve has a positive slope.
C. it’s convenient to use absolute values.
D. both the numerator and the denominator are negative, so the formula yields a
positive number.
Which of the following would increase the investment component of U.S. GDP?
A. You purchase a new clothes washing machine produced in the U.S.
B. You purchase a new clothes washing machine produced in France.
C. A laundry in Seattle purchases a new clothes-washing machine produced in the U.S.
D. A laundry in Mexico purchases a new clothes-washing machine produced in the U.S.
The Federal Reserve consists of ______ regional banks, ______ governors on the Board
of Governors, and ______ voting members of the Federal Open Market Committee.
A. 7; 12; 12
B. 12; 7; 12
C. 12; 7; 19
D. 14; 7; 21