From the perspective of an externality, most communities have zoning laws to:
A. control external benefits.
B. control external costs.
C. encourage positive externalities.
D. raise government revenues.
Sam owns a candy factory and hires workers in a competitive labor market to pack
cases of candy. The company’s weekly output of cases of candy varies with the number
of workers hired, as shown in the table:
If each case sells for $3 more than the cost of the materials used in producing it, then
the most Sam would pay the 5th worker is _______.
A. $330
B. $360
C. $390
D. $120
Real GDP per person in both Alpha and Omega is equal to $2,000. Over the next 100
years, real GDP per person grows at a 1.5 percent annual rate in Alpha and at a 2.5
percent annual rate in Omega. After 100 years, real GDP per person in Alpha is ______
smaller than real GDP per person in Omega.
A. $2,000
B. $5,410
C. $8,864
D. $14,763
The economy of Omega operates according to Okun’s law. In Omega, the actual and the
natural rates of unemployment equal 5 percent, and potential GDP equals $10 trillion.
What is real GDP in Omega?
A. $9.0 trillion
B. $9.5 trillion
C. $10.0 trillion
D. $10.5 trillion
Suppose that the price of doughnuts decreases and that doughnut-holes are a by-product
of producing doughnuts. One would expect:
A. the supply of doughnut holes to decrease.
B. the supply of doughnuts to decrease.
C. the supply of doughnut holes to increase.
D. the supply of doughnuts to increase.
The demand for labor depends on ______ and _______.
A. the supply of labor; the marginal product of labor
B. the supply of labor; the price of output produced
C. the rate of price inflation; the price of the output produced
D. the marginal product of labor; the price of output produced
Refer to the figure above. With no subsidy, what is the consumer surplus?
A. $1,000
B. $7,500
C. $10,100
D. $14,000
Suppose there are ten people playing cards in a room. One of them wants to smoke a
cigar; nine of them dislike the smell of cigar smoke. The smoker values the privilege of
smoking at $5, and each of the other nine occupants of the room would be willing to
pay fifty cents for clean air in the room. The rules governing use of the room state that
smoking is not allowed unless everyone agrees to allow smoking.
Refer to the information given above. Which outcome is consistent with the Coase
Theorem?
A. The cigar smoker will not be able to smoke because there are more non-smokers in
the room.
B. The cigar smoker will pay each other occupant fifty-five cents, and they will agree to
allow smoking.
C. The cigar smoker will smoke because the external cost of smoking does not need to
be taken into consideration.
D. The nine non-smoking occupants will each pay the cigar smoker fifty cents and the
cigar smoker will not smoke.
Refer to the figure above. If the consumer had to pay the marginal cost for each routine
visit, they would choose to go to the doctor _____ times a year.
A. 5
B. 1
C. 2
D. 3
Assume an economy produces only footballs and baseballs and the base year is 2005.
Given the data in the table above, what is the value of nominal GDP in 2006?
A. $10,000
B. $12,000
C. $12,500
D. $16,500
It takes a bus and a driver to produce bus service for the students in a college town.
Therefore, the bus and the driver are the ___________ for bus service.
A. short run output
B. variable cost
C. factors of production
D. only inputs in the long run
The consumer price index for the current year measures the cost of a standard basket in
the ______ year relative to the cost of the same basket in the ______ year.
A. current; base
B. current; current
C. base; index
D. base; current
Refer to the figure above. If the price of the plastic used to make action figures rises,
supply will:
A. shift from Current Supply to Supply B.
B. not change because a change in raw material prices cannot affect market prices.
C. shift from Current Supply to Supply A.
D. remain at Current Supply because Demand for Shrek figures is so strong.
According to Okun’s Law, when cyclical unemployment increases by one percentage
point, the recessionary gap ______ by ______ percentage point(s).
A. increases; one
B. increases; two
C. decreases; one
D. decreases; two
Acme Dynamite has $2000 of variable costs and $500 of fixed costs when its output is
250 units. It sells each unit for $25.
Average variable cost is _____ and average total cost is _______ at this output level.
A. $8; 2
B. $10; 10
C. $10; 2
D. $8; 10
Chris has determined that the probability of earning a 95 on the next economics test is
10%, the probability of earning an 85 is 40%, and the probability of earning a 75 is
50%.
Chris’s expected test score is _______.
A. 85
B. 81
C. 75
D. 78
When the price of insulin was $10, consumers demanded 100 units; when the price was
$15, consumers demanded 100 units; and when the price was $20, consumers
demanded 100 units. Based on this information, insulin must have a(n) _______
demand curve.
A. unitary elastic
B. perfectly elastic
C. perfectly inelastic
D. elastic
A fiscal policy action to close a recessionary gap is to:
A. increase taxes.
B. increase transfer payments.
C. decrease government purchases.
D. decrease the marginal propensity to consume.
In order to sell another unit, an imperfectly competitive firm must:
A. increase its advertising.
B. increase the value of its product.
C. lower its price.
D. lower its quality.
The phenomenon known as ______ occurs when inflation causes people to pay an
increasing percentage of their income in taxes even when their real incomes have not
changed.
A. hyperinflation
B. bracket creep
C. the Fisher effect
D. substitution bias
The three firms shown below can choose among three workplace safety alternatives:
continue with the status quo, provide safety training or purchase new safety equipment.
The injury rates for the firms under the three alternatives as well as the costs of the
alternatives are shown in the table. The cost of treating an injury is $200.
Using the criteria of cost benefit analysis, safety training is
A. not justified.
B. justified only at firms A and B.
C. justified at all firms.
D. efficient only at firm B.
The average annual growth rates of labor productivity from 1960 to 1973 were ______
the average rates over the period from 1973 to 1995.
A. more rapid than
B. slower than
C. about the same as
D. more rapid in the U.S., but slower in other industrialized countries
Economic rent is:
A. the amount you pay for an apartment in a free market.
B. the payment made to suppliers of an input.
C. the difference between the payment made to the supplier of an input and the
supplier’s reservation price.
D. the same as the input supplier’s reservation price.
Two types of existing houses are for sale: ones with a cracked foundation and ones
without. In all other respects, they are identical. Houses without cracked foundations
are worth $200,000 while those with cracked foundations are worth $200,000 minus the
$20,000 to fix the crack or $180,000. The frequency of solid foundations is 80%.
Sellers know which type of house they have but buyers cannot detect a crack. No seller
“must” sell his house in order to move and thus no one accepts anything less than its
value.
Usually, the seller of a home is legally required to disclose any and all defects in the
home that they know to exist. This requirement helps
A. all buyers and sellers of homes with solid foundations.
B. only buyers regardless of the state of the foundation.
C. all buyers and all sellers.
D. only sellers regardless of the state of the foundation.
Refer to the figure above. On the basis of the above graphs, it appears that __________
has the strongest demand for soda.
A. Rick
B. Mallory
C. Mallory and Rick both
D. neither Mallory nor Rick
Sven likes to water ski, but can only water ski during the one week that he is on
vacation. Therefore, he plans to ski every day, for eight hours a day. The first day, Sven
skied for eight hours and enjoyed every hour. The second day, Sven slept in and then
skied for seven hours, which was fun but not as much fun as the first day. The third day,
Sven skied for six hours, but was starting to get a bit bored by the end. The fourth day,
Sven skied for four hours and then took a nap. On the fifth day of Sven’s vacation, Sven
went blueberry picking all day.
On the fifth day of Sven’s vacation, he had decided that another hour of skiing would
yield
A. more utility than the day before
B. the same level of utility as the day before
C. less utility than blueberry picking
D. no utility at all
The discovery and utilization of vast, previously unknown oil and mineral deposits in a
country will increase:
A. average labor productivity.
B. the share of the population employed.
C. the unemployment rate.
D. the quantity of human capital.
Consumer surplus is the value of:
A. consumer spending on frivolous goods.
B. the cumulative difference between what consumers are willing to pay and the price
they actually pay.
C. the difference between the suggested retail price and the everyday low price.
D. the difference between the list price and the price the consumer can negotiate.
If real GDP per person in a country equals $20,000 and 40 percent of the population is
employed, then average labor productivity equals:
A. $8,000.
B. $20,000.
C. $40,000.
D. $50,000.
Suppose a jar of orange marmalade that is ultimately sold to a customer at The Corner
Store is produced by the following production process:
What is the value added of Citrus Growers Inc.?
A. $0.00
B. $0.50
C. $0.75
D. $1.75
A monopolistically competitive firm is one:
A. that behaves like a monopolist.
B. of many firms that produce slightly different but very similar goods.
C. of many firms that produce goods with no close substitutes.
D. that is competitive but wants to be a monopolist.
Refer to the figure above. For Chris, the opportunity to removing one bag of trash is:
A. not planting 25 bulbs.
B. not planting 5 bulbs.
C. not planting 3 bulbs.
D. not planting one-third of a bulb.
An economy produces 1,000,000 computers valued at $2,000 each. Households
purchase 200,000 computers, of which 100,000 are imported. Businesses purchase
300,000 domestically produced computers, the government purchases 300,000
domestically produced computers, and 100,000 domestically produced computers are
sold abroad. The unsold computers at the end of the year are held in inventory by the
computer manufacturers. What is the value of the investment component of GDP?
A. $0.6 billion
B. $0.8 billion
C. $0.9 billion
D. $1.0 billion
The central bank of the United States is:
A. Bank of America.
B. Bank of the United States.
C. the U.S. Treasury.
D. the Federal Reserve System.