Bob’s Barber Shop cut 3,000 heads of hair in 2009 and 3,100 in 2010. The price of a
haircut was $7 in 2009 and $8 in 2010. If 2009 is the base year, what was Bob’s
contribution to nominal GDP in the year 2010?
A. $21,000
B. $21,700
C. $24,000
D. $24,800
Refer to the figure above. Based on the figure, when PAE = 600 + 0.5Y, short-run
equilibrium output equals:
A. 1,200.
B. 400.
C. 600.
D. 800.
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 $30,000?
A. 0
B. 1
C. 2
D. 3
An investor purchasing an inflation protected bond with a fixed annual real return of
1.75 percent will earn a nominal annual return of ______ percent if the actual inflation
rate turns out to be 3.25 percent.
A. 1.50%
B. 1.86%
C. 5.00%
D. 5.69%
According to the textbook, the reason parents use safety seats for their infant children in
cars but not in airplanes is
A. they are not required to when flying.
B. parents are generally unconcerned with the safety of their children in planes.
C. buying an extra plane ticket is more than the benefit of a small increment in safety.
D. airlines fail to produce safety seats.
From the point of view of a particular country, capital outflows are:
A. purchases of domestic goods or services by foreigners.
B. purchases of domestic assets by foreigners.
C. purchases of foreign goods or services by domestic households or firms.
D. purchases of foreign assets by domestic households or firms.
Suppose that the marginal benefit of having a security camera in the library is given by
MB, at the supermarket is given by MB1 and at the museum is given by MB2. All
values are per week.
Suppose cameras are currently allocated efficiently. Now suppose that a camera at the
museum malfunctioned and it will take two weeks to replace it. Owners of the
supermarket would
A. be willing to rent the museum a camera for less than the value of the camera to the
museum.
B. not be willing to rent the museum a camera for less than the value of the camera to
the museum, but managers at the library would.
C. not be willing to rent the museum a camera for less than the value of the camera to
the museum, and neither would managers at the library.
D. exploit the situation by renting a camera to the museum for more than $U per week.
The market value of final goods and services produced within a country during a period
of time is called:
A. guaranteed direct prices.
B. general domestic productivity.
C. government documented production.
D. gross domestic product.
Citizens of Tinytown are considering building a new city park. If each voter in
Tinytown has a reservation price that is less than the total cost of the park, then
A. by definition, the benefits of the park are less than the costs and thus the park should
not be built.
B. some sort of collective action by voters will be necessary to fund the park.
C. a private firm will have an incentive to build the park.
D. the park will never be built.
Using conspicuous consumption as a signal for ability produces a social inefficiency
because
A. consumption and ability are very poorly correlated.
B. conspicuous consumption is not a useful signal.
C. a positional arms race ensues, with greater and greater amounts being spent on
conspicuous consumption.
D. earnings and ability are very poorly correlated.
What is the opportunity cost of living in a house that you already own?
A. Zero, because you already own it.
B. That mostly depends on current mortgage rates.
C. The rent you could receive if you rented the house out to someone else.
D. The taxes you pay your local government.
Refer to the figure above. In this game, how many dominant strategies does Player B
have?
A. 0
B. 1
C. 2
D. 4
Which of the following transactions would be included in the GDP of the United
States?
A. Coca Cola produces soft drinks in England.
B. Honda produces cars in Ohio.
C. McDonalds sells hamburgers in Russia.
D. Ford Motor Company produces cars in Mexico.
Refer to the figure above. Suppose that the government requires that resources are used
efficiently. Which of the following would the government definitely not allow?
A. Specialization in warhead production.
B. Specialization in medical care production.
C. Production at a point other than C.
D. Production at Point D.
Refer to the figure above. Suppose that this economy is currently producing at point B,
but an aging population is demanding more medical care. Providing 400 additional
units of medical care will cost this economy:
A. 800 warheads.
B. 400 warheads.
C. 200 warheads.
D. 600 warheads.
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. The salaries remain the same. Who will choose to work
where?
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.
Comparisons of economic activity over time should be made using:
A. nominal GDP adjusted for unemployment.
B. nominal GDP per capita.
C. current-dollar GDP.
D. real GDP.
A firm that doubles its use of inputs to produce ______ output has increasing returns to
scale.
A. twice as much
B. three times as much
C. 50% more
D. half the original
In the above decision tree, Tracy picks first, and Amy picks second. Tracy knows Amy’s
payoffs to each choice, and Amy knows Tracy’s payoffs.
Refer to the figure above. If the payoffs at the end of each branch are as shown, the
outcome of this game will be:
A. Tracy and Amy both get 125.
B. Tracy gets 75 and Amy gets 150.
C. Tracy gets 300 and Amy gets 200.
D. Tracy gets 25 and Amy gets 225.
Which of the expenditure components of GDP can be negative?
A. consumption spending on durables.
B. government purchases of goods and services.
C. consumption spending on services.
D. net exports.
In the basic Keynesian model all of the following are true EXCEPT:
A. planned consumption always equals actual consumption.
B. planned investment always equals actual investment.
C. planned government spending always equals actual government spending.
D. planned net exports always equal actual net exports.
The supply and demand for saving are brought into equilibrium by adjustments of the
______ rate.
A. discount
B. nominal interest
C. real interest
D. dividend
This graph shows the cost functions of Moe’s mushroom gathering business, which is
perfectly competitive.
The curve labeled A is upward sloping because
A. there are high fixed costs.
B. the first bushels of mushrooms are the easiest to find, but Moe has to really hunt to
find additional mushrooms.
C. increased demand for mushrooms has increased quantity supplied.
D. supply has shifted to the left.
Data for an economy shows that the unemployment rate is 10%, the participation rate
80 percent, and 200 million people 16 years or older are not in the labor force. How
many people are in the working-age population in this economy?
A. 250 million
B. 800 million
C. 1.0 billion
D. 1.6 billion
A credible promise is an action that is:
A. in the promiser’s self interest to keep.
B. legally enforceable.
C. made by an honest person.
D. possible to keep.
Some social scientists have justified safety regulation as necessary to prevent worker
exploitation. The textbook offers an alternative explanation for the existence of
workplace safety regulation. The explanation sees safety regulations as
A. the result of well intentioned buy misguided activists.
B. a solution to the prisoner’s dilemma that confronts workers when choosing between
high wage, risky jobs and low wage, safe jobs.
C. a response to greater value given to life today.
D. an attempt by large companies to drive smaller companies out of business.
When two people agree to a price in a negotiation, we can assume that:
A. each one will receive equal benefits from the transaction.
B. the seller will receive more benefit from the transaction than the buyer.
C. only one of the parties will benefit, but there is not enough information to determine
which one it will be.
D. both parties will benefit.
It is spring, and several graduates of State U are seeking employment. State U graduates
have evenly distributed GPAs, from 2.0 to 4.0, with an average GPA of 3.0. The largest
employer in town, Acme Dynamite, is interviewing candidates, hoping to hire a few
hard workers. While Acme does not require students to submit a transcript with their
applications, the hiring officer believes that high GPAs signal a willingness to work
hard.
Suppose Acme’s Human Resources Department knows that all State U students with
GPAs of 3.0 or better include transcripts with their applications. Therefore, the expected
GPA of students who do not include transcripts with their application is at most
_______.
A. 3.0
B. 2.9
C. 2.75
D. 2.5
Compared to the level of real GDP per person in 1870, by 2008, real GDP in the U.S
was ______ times larger, while real GDP per person in Japan was _______.
A. 13; smaller
B. 13; 13 times larger
C. 13; 31 times larger
D. 31; 13 times larger
Game theory is not useful in understanding perfect competition because:
A. by assumption, the firms are so small as to be unable to influence price and thus are
not interdependent.
B. perfectly competitive firms are honest.
C. the players can’t be identified.
D. the payoffs to their choices are unknown.