The following table provides information about production at the XYZ-TV Company.
How many workers will the XYZ-TV Company hire if the going wage for TV
production workers is $60,000?
A. 0
B. 4
C. 5
D. More than 5
One thousand adults live in Milltown. All of them leave work at 4:30 p.m. every day
and arrive home at exactly 5:00. They all go to bed at 9 p.m. Three fundraisers, Alpha,
Beta, and Charlie, have targeted Milltown’s population. Because the charities raising the
funds are identical, the first to call a willing donor will get the donation.
Refer to the information given above. Beta’s manager has decided that the best time to
call is 7:00 because it is exactly halfway between 5:00 p.m. and bedtime. Which of the
following is true?
A. Beta is certain to generate the most donations because all potential donors are 2
hours or less away from a phone call.
B. Alpha and Charlie will have an incentive to also make calls at 7:00, causing
clustering at the halfway point in the evening.
C. Alpha and Charlie will divide up the rest of the market, with one choosing to call at
6:00 and the other at 8:00.
D. Beta’s manager did not choose wisely.
Josie has an undergraduate degree in economics and has been working as a utility rate
analyst at the local electricity utility. If she continues on her present career path, the
present value of her lifetime earnings is $250,000. If she takes two years off and gets an
MS degree in economics, the present value of her lifetime earnings is $275,000. The
annual cost of an MS degree in economics is $15,000 and the interest rate is 8%.
Josie should
A. get the MS degree because her lifetime earnings will increase $25,000.
B. get the MS degree because more education is always better than less education.
C. not get the MS degree because $30,000 is greater than $25,000.
D. not get the MS degree if the present value of cost exceeds the present value of
benefit.
Earth Movers & Shakers operates 3 iron ore mines. This table shows their daily
production rates and the current number of miners at each mine. All of the miners work
for the same wage and each miner in any given mine produces the same number of tons
as each other miner in that mine.
Refer to the table above. Earth Movers & Shakers needs to fill an order for 100 tons of
ore in a single day, and has no other orders to fill that day. It should:
A. take it all from Mother Lode.
B. take 75 tons from Middle Drift and 25 tons from Mother Lode.
C. take 75 tons from Middle Drift and 25 tons from Scraping Bottom.
D. take 30 tons from Scraping Bottom and 70 tons from Mother Lode.
Public schools require proof that a child has been immunized against several diseases
before enrolling. Why?
A. It serves as an entry barrier and so screens out children who are harder to educate.
B. It is a costly to fake signal that a child is healthy.
C. Since most children attend school, it is an efficient way to publicize the need for
immunizations.
D. Failure to be immunized imposes external costs on other children and teachers.
Jeans in general have fewer close substitutes than any specific brand of jeans.
Therefore, the demand for jeans in general would be _______ than the demand for a
specific brand of jeans.
A. more elastic
B. more inelastic
C. more unitary elastic
D. less inelastic
The chart below describes the short run productivity of workers at Paper Pushers Inc.,
an office support firm that has no variable costs other than labor.
If the workers are producing a product that sells for $2.00 per page this firm will
A. hire all seven workers if wages are $20.
B. hire all seven workers if wages are $10.
C. hire all seven workers only if wages are $5 or less.
D. always hire the seventh worker.
Assume that the share of population employed in all countries is 50 percent. Based on
the information in the table, which country has the smallest real GDP per capita?
A. Country A
B. Country B
C. Country D
D. Country E
Pat’s total utility after eating 100 Reese’s Peanut Butter Cups was less than his total
utility after eating his ninety-ninth. Therefore, Pat’s marginal utility for the 100th peanut
butter cup was
A. positive, but less than one.
B. positive, but less than Pat’s marginal utility for the 99th peanut butter cup.
C. zero.
D. negative.
The participation rate is the number of people:
A. employed divided by the labor force.
B. employed divided by the population aged 16 years and older.
C. employed and unemployed divided by the labor force.
D. employed and unemployed divided by the population aged 16 years and older.
Dent n’ Scratch Used Cars and Trucks employs 3 salesmen. Data for their sales last
month are shown in this table:
________ has an absolute advantage in selling cars and __________ has an absolute
advantage in selling trucks.
A. Joe; Joe
B. Larry; Ralph
C. Ralph; Larry
D. Larry; Joe
In the United States saving is allocated to its most productive use by:
A. theFederal Reserve.
B. the Federal, state, and local governments.
C. regulations and laws designed to improve productivity.
D. a decentralized, market-oriented financial system.
Refer to the figure above. As the firm increases employee-hours from 1 to 2, output
increases by:
A. 33 units.
B. 66 units.
C. 99 units.
D. 132 units.
Betty and Wilma are the only two cashiers employed at a retail store. Each of them
works the same 40 hours per week and each can check out 20 customers per hour by
manually entering the price of each product purchased into the cash register. The store
owner replaces the old cash registers with new ones that automatically scan product
prices into the register. With the new cash register, Betty and Wilma can each check out
60 customers per hour. Their average labor productivity as a team before the new cash
registers were introduced was ______ customers per hour and ______ customers per
hour after the new machines were installed.
A. 20; 60
B. 40; 120
C. 40; 60
D. 800; 2,400
Assume that this graph illustrates a perfectly competitive labor market.
Equilibrium in this labor market is at a wage of _______ and employment of
approximately __________ worker hours.
A. $30; 100
B. $30; 150
C. $20; 175
D. $20; 100
Refer to the figure above. If this firm were to sell 20 units of output, its total revenue
would be:
A. $50.
B. $100.
C. $140.
D. $1,000.
Last year Pat was a soybean farmer and Chris was a corn farmer. This year, high
demand for ethanol, an automobile fuel made from corn, causes the price of corn to
increase.
Refer to the information above. You would predict that this year Pat may:
A. grow more soybeans.
B. switch to growing corn.
C. continue to grow the same amount of soybeans.
D. go out of business.
Two types of bias that tend to cause the CPI to overstate the “true” rate of inflation are
the ______ bias and the ______ bias.
A. substitution; quality adjustment
B. price; quantity
C. aggregation; price
D. quality adjustment; price adjustment
Point A on a linear production possibilities curve represents a combination of 12 coffees
and 3 cappuccinos, and point B represents 3 coffees and 6 cappuccinos. Suppose
coffees are on the vertical axis and cappuccinos are on the horizontal axis.
The absolute value of the slope of the production possibilities curve between points A
and B equals:
A. 6
B. 4
C. 3
D. 1/3
There is $5,000,000 of currency in Econland, all held by banks as reserves. The public
does not hold any currency. If the banks’ desired reserve/deposit ratio is 0.25, then the
money supply equals:
A. $5,000,000
B. $6,250,000
C. $10,000,000
D. $20,000,000
Bank C promises to pay a compound annual interest rate of 6 percent, while Bank S
pays a 10 percent simple annual interest rate on deposits. If you deposit $1,000 in each
bank, after 10 years, your deposit in Bank C equals _____, while your deposit in Bank
S equals ______.
A. $1,060; $1,100
B. $1,600; $2,000
C. $1,600; $2,594
D. $1,791; $2,000
Pat has just graduated from college and has two job offers. One pays $45,000 and
requires that Pat supervise employees doing construction work on a busy highway. The
other is an office job that pays $40,000. Chris has received the same offers from the
same firms. Pat values the added safety of the office job at $6,000 per year and Chris
values the added safety of the office job at $3,000 per year.
Suppose that the agency that regulates highway safety requires that the freeway
construction firm provide additional safety precautions. After the changes, Chris places
no additional value on working at the office, and Pat values the added safety of the
office job by $2,000 per year. If the safety precautions cost the firm $3,000 per year and
the freeway construction firm reduces salaries by $3,000 to $42,000
A. Pat will certainly take the office job and Chris will be indifferent.
B. both will certainly take the freeway job.
C. both will certainly take the office job.
D. Chris will certainly take the freeway job and Pat will be indifferent.
Which firm is most likely to meet the condition for perfect competition that resources
are mobile?
A. A farm
B. A sidewalk pretzel vendor
C. A department store
D. A movie theater
If the slope of the demand curve is equal to infinity, the price elasticity of demand will
be:
A. zero.
B. infinite.
C. one.
D. equal to the price of the good.
A risk-neutral individual will
A. accept only better than fair gambles.
B. see risk as neither good or bad.
C. accept any gamble with an expected value of zero or greater.
D. accept only gambles with an expected value of one or greater.
If the market equilibrium quantity is less than the socially optimal quantity, one can
infer that:
A. the private supply curve for the activity is below the socially optimal supply curve.
B. the private demand curve for the activity is above the socially optimal demand.
C. there is a positive externality associated with this good.
D. there is a negative externality associated with this good.
The stock of wealth increases more rapidly the faster the flow of ______.
A. income
B. saving
C. money
D. assets
A relative price is:
A. the rate of inflation.
B. a measure of overall prices at a particular point in time.
C. the percentage change in a price index such as the CPI.
D. the price of a specific good in comparison to the prices of other goods and services.
Pat goes to the local stereo store to learn about high-end equipment. The salesperson
spends an hour talking with Pat and demonstrating equipment. Pat then leaves and
orders a system from an Internet store and saves $250. Pat’s behavior is
A. illegal.
B. statistical discrimination.
C. free riding.
D. adverse selection.
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. The profit-maximizing quantity and price for a monopolist
with this demand curve are _____.
A. 50 units and $2
B. 100 units and $2
C. 50 units and $3
D. 100 units and $1