Refer to the figure above. If the good shown on the graphs is a private good at a price of
$4 market demand is __________ units.
A. 100
B. 90
C. 70
D. 50
A consumer expenditure survey reports the following information on consumer protein
spending:
Using 2005 as the base year, by how much does a “cost of protein” index increase
between 2005 and 2006?
A. 5.2%
B. 8.6%
C. 13.4%
D. 14.3%
The price of the average domestic good or service relative to the price of the average
foreign good or service, when prices are expressed in terms of a common currency is
called the ______ exchange rate.
A. flexible
B. fixed
C. real
D. nominal
Globalization and skill-biased technological change have contributed to:
A. the long-term growth in real wages.
B. the slowdown in productivity since 1973.
C. increasing wage inequality.
D. high rates of employment in Western Europe.
Choosing to study for an exam until the extra benefit (improved score) equals the extra
cost (mental fatigue) is:
A. not rational.
B. an application of the cost-benefit principle.
C. an application of the scarcity principle.
D. the relevant opportunity cost.
If actual output equals potential output, but potential is growing unusually slowly, then
an economy:
A. is in a recession.
B. is in an expansion.
C. has an output gap.
D. has a recessionary gap.
Generally, on a linear two-good production possibilities curve, the opportunity cost of
the good measured on the vertical axis is:
A. one minus the opportunity cost of the good measured on the horizontal axis.
B. the reciprocal of the opportunity cost of the good measured on the horizontal axis.
C. the slope of the production possibilities line.
D. the negative of the opportunity cost of the good measured on the horizontal axis.
Shel and Fran are neighbors. They work at the same firm and hold the same title. Shel
finds that when Fran’s consumption rises, Shel feels worse off. Fran feels the same way
towards Shel’s consumption.
Refer to the information given above. For both Shel and Fran:
A. their own consumption is a positional externality.
B. consumption in general is a positional externality.
C. consumption in general has external benefits.
D. each other’s consumption generates a positional externality.
To close an expansionary gap, the Fed ______ interest rates which ______ planned
aggregate spending and ______ short-run equilibrium output.
A. raises; increases; increases
B. raises; decreases; increases
C. raises; decreases; decreases
D. reduces; increases; decreases
The principal suppliers of U.S. dollars to the foreign exchange market are:
A. foreigners wishing to purchase U.S. goods or assets.
B. the Federal Reserve.
C. U.S. households or firms wishing to purchase U.S. goods or assets.
D. U.S. households or firms wishing to purchase foreign goods or assets.
Refer to the figure above. The profit-maximizing level of output for the monopolist is:
A. H.
B. H – A.
C. A.
D. K.
Suppose Chris’ marginal utility from the first taco Chris eats is 15 and Chris’ marginal
utility from the second taco is 12. One can infer that Chris
A. has total utility of 2 tacos equal to 27.
B. should eat only one taco.
C. has average utility for 2 tacos of 27.
D. should eat 2 tacos.
Implicit costs:
A. are always fixed.
B. measure the forgone opportunities of the owners of the business.
C. always exceed explicit costs.
D. are irrelevant to business decisions.
With ATMs, it is possible to retrieve cash from the bank at any time. One hundred years
ago, one could only get cash from the bank during business hours, say, 9 am to 3 pm.
The difference has arisen because:
A. flexibility was not valued 100 years ago.
B. it was impossible to provide 24-hour service 100 years ago.
C. the cost of providing 24-hour service is much lower today.
D. government forced banks to become more convenient.
In an open economy with flexible exchange rates, monetary policy affects ______
through changes in the real interest rate and affects ______ through changes in the
exchange rate.
A. taxes and saving; net exports
B. net exports; taxes and saving
C. productivity and growth; consumption
D. consumption and investment; net exports
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.
Miniville is an isolated town located on the southern shore of Lake Condescending, a
very large lake. The western edge of Miniville is adjacent to impassable mountains and
there are no towns or businesses for many miles to the east. The 300 residents of
Miniville are evenly distributed along 3 miles of shoreline on the lake, east of the
mountains. Lake Shore Drive, the only street in town, provides access to Miniville’s
homes and businesses. All residents live between the lake and the street; businesses
locate on the other side of the street. Lake Shore Drive is 3 miles long, and the points
labeled A, B, and C are 1, 2, and 3 miles from the western end of Lake Shore Drive,
respectively. All residents of Miniville shop at the store located closest to their homes.
Refer to the information given above. If one store is located at A and the
other store is located at B:
A. all of the people living between A and the mountains will shop at the store at A.
B. some, but not all, of the people living east of B will shop at the store at B.
C. exactly half of the people living west of B will shop at the store at B.
D. exactly half of the people living east of B will shop at the store at B.
If buyers and sellers are free to pursue their own selfish interests, according to the
invisible hand theory, the result would be:
A. anarchy.
B. exploitation of workers and natural resources.
C. an equitable allocation of resources.
D. an efficient allocation of resources.
Capital gains are ______, and capital losses are ______.
A. increases in the flow of investment; decreases in the flow of investment
B. increases in the flow of saving; decreases in the flow of saving
C. additions to plant and equipment; the destruction of plant and equipment
D. increases in the value of existing assets; decreases in the value of existing assets
The speed at which an economy returns to potential following an adverse inflation
shock depends on:
A. the Federal Reserve’s target inflation rate.
B. the Federal Reserve’s target real interest rate.
C. the level of potential output.
D. the public’s expectations of how the Federal Reserve will act.
Fred and Wilma just had a baby girl and want to make sure they save enough in the
future to send her to college. They begin to save in response to this ______ reason for
saving.
A. life-cycle
B. bequest
C. private
D. precautionary
Refer to the figure above. The firm illustrated in the graph is a(n):
A. centralized planner.
B. black market supplier.
C. perfect competitor.
D. natural monopolist.
Suppose you bought three tickets to a concert in advance at the University ticket
window. At the last minute one friend cancelled, so you could use only two of those
tickets. You scalped, or sold, the third ticket just outside the entrance to the concert for
slightly more than the price you had originally paid. Which transaction occurred in a
market?
A. Only the advance purchase and sale at the University window was a market
transaction.
B. Only the transaction that occurred the evening of the concert was a market
transaction.
C. Both transactions, the one at the University ticket window as well as the sale at the
concert entrance, occurred in markets.
D. Neither the advance sale at the University ticket window nor the sale the night of the
concert occurred in markets.
The logical implication of the scarcity principle is that:
A. one will never be satisfied with what one has.
B. as wealth increases, making choices becomes less necessary.
C. as wealth decreases, making choices becomes less necessary.
D. choices must be made.
Refer to the figure above. This firm can earn a positive profit at ______ units of output.
A. greater than 3.5
B. greater than 7
C. no possible
D. all possible
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. Suppose Lee and Cody enter into a binding non-aggression
agreement. As part of that agreement they negotiate a fine that Cody would have to pay
to Lee if Cody responded to Lee’s cooperative choice with aggression. For that fine to
be effective, it must be
A. less than 15.
B. greater than 15.
C. equal to 40.
D. equal to 25.
The purchasing power parity theory is a reasonably good explanation for nominal
exchange rate determination:
A. in the short run.
B. in the long run.
C. when there are significant volumes of non-traded goods and services.
D. when there are fixed exchange rates.
Mike knows how to make hamburgers (like many other people) and got a minimum
wage job at Burger King. With respect to price elasticity of supply, the supply curve for
hamburgers is __________ because the inputs to production are __________.
A. inelastic; mobile
B. inelastic; immobile
C. inelastic; flexible
D. elastic; flexible
The growth rate of average annual earnings in the United States from 1973 to 1996 was:
A. higher than it was from 1960 to 1973.
B. lower than it was from 1960 to 1973.
C. the same as it was from 1960 to 1973.
D. roughly equal to zero.
Efficiency is an important goal in economics because it:
A. assures a fair outcome.
B. assures a normative outcome.
C. assures a higher level of output.
D. takes into consideration the distribution of income.