Workplace safety laws are ___ in developed countries because
A. rare; policy makers believe that they undermine the free market system.
B. rare; corporate lobbyists convince legislators to vote against them.
C. necessary; without them firms that hire workers in competitive labor markets would
have no incentive to provide safe workplaces.
D. common; policy makers believe that labor markets are not perfectly competitive and
so firms may not provide the optimal level of safety.
According to the textbook, the Manning study suggests that a large share of the
inflation in medical expenditures is caused by
A. advances in medical technology.
B. high deductible policies.
C. the annual stipend given to the poor to defray the medical expense.
D. first-dollar medical insurance.
Indexing is the process of:
A. dividing a real quantity by a price index.
B. dividing a nominal quantity by a price index.
C. increasing a nominal quantity by an amount equal to the percentage change in a price
index.
D. increasing a real quantity by an amount equal to the percentage change in a price
index.
Pat just spent a thousand dollars on a painful dental procedure. In this case
A. Pat’s resources yielded negative utility.
B. demand for dental procedures is upward sloping.
C. we can assume that having the dental services performed increased Pat’s utility.
D. utility is irrelevant to this decision to spend money.
If Terry gets maximum utility from owning 10 pairs of shoes, then Terry’s total utility
from owning 7 pairs of shoes is ______ Terry’s total utility from owning 8 pairs.
A. greater than
B. equal to
C. less than
D. less than or equal to
Shocks to aggregate demand ______ require the Fed to choose between inflation and
output stability; shocks to aggregate supply ______ require the Fed to choose between
inflation and output stability.
A. do; do
B. do; do not
C. may or may not; may or may not
D. do not; do
Why does your grocery store sell day-old bakery goods but not day-old canned goods?
A. Canned goods are priced at the market equilibrium.
B. An excess supply of bakery goods will quickly spoil, but excess canned goods will
not.
C. There is excess demand for canned goods.
D. Demand for canned goods is easier to predict.
Dent n’ Scratch Used Cars and Trucks employs 3 salesmen. Data for their sales last
month are shown in this table:
______ should specialize in truck sales, and ______ should specialize in car sales.
A. Joe; Ralph
B. Ralph; Larry
C. Larry; Ralph
D. Larry; Joe
The value of final goods and services equals:
A. total business profits.
B. the sum of the value added by all firms.
C. total business spending.
D. the sum of revenues from all sales.
Adam Smith believed that the individual pursuit of self-interest:
A. was a basic human instinct that must be curbed in order for society to advance.
B. always worked to undermine social benefits.
C. always worked to advance social benefits.
D. sometimes worked to advance social benefits.
Casey earns $150 a week and consumes only fish and shrimp. The price of fish is $3 a
pound and the price of shrimp is $5 a pound.
If Casey’s income falls to $120, the rational spending rule would predict Casey would
buy
A. more fish and less shrimp.
B. more fish and more shrimp.
C. less fish and more shrimp.
D. less fish and less shrimp.
In a certain economy, the components of planned spending are given by:
C = 500 + 0.8(Y – T) – 300r
Ip = 200 – 400r
G = 200
NX = 10
T = 150
Given the information about the economy above, which expression below gives
induced expenditures?
A. [910 – 700r]
B. [790 – 700r]
C. 0.8Y
D. 0.2Y
As a general rule, failure to equalize the marginal benefits and costs of any publicly
approved activity, e.g., crime control, results in
A. an inefficient level of the activity; either too little or too much.
B. too much of the activity.
C. too little of the activity.
D. the wrong activities.
Consider the problem of finding an apartment for rent. If the expected value of going to
see the next apartment is zero, then
A. all persons will consider seeing the next apartment.
B. only risk-averse persons will consider seeing the next apartment.
C. risk-averse people will not consider seeing the next apartment.
D. only risk-neutral persons will not consider seeing the next apartment.
The value of intermediate goods is excluded from the measurement of GDP in order to:
A. adjust for inflation.
B. avoid double counting.
C. index economic activity.
D. measure GDP in constant prices.
Deposit insurance is a system in which the government guarantees that:
A. depositors will not lose any money even if their bank goes bankrupt.
B. people can have deposits at commercial banks.
C. commercial banks will not go bankrupt.
D. commercial banks will not lose any deposits.
This graph illustrates the marginal cost, marginal private benefit, and marginal social
benefit of immunization against a contagious childhood disease.
As more children are immunized, the marginal cost increases because ____ and the
marginal benefit decreases because ___.
A. of the low-hanging-fruit principle; it is a prisoner’s dilemma.
B. of the low-hanging-fruit principle; the probability of spreading the disease declines.
C. the probability of spreading the disease declines; of the low-hanging-fruit principle.
D. of diminishing marginal utility; the probability of spreading the disease declines.
Taking a limousine to a five star restaurant in New York is a
A. necessity to Donald Trump but a luxury to Joe Average.
B. necessity to both Joe Average and Donald Trump.
C. want to both Joe Average and Donald Trump.
D. want to Donald Trump and a luxury to Joe Average.
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 percent annual rate in Alpha and at a 2 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. $9,080
D. $11,080
In order to effectively price discriminate, a seller must be able to:
A. resell the product.
B. identify customers with different reservation prices.
C. avoid detection because discrimination is illegal.
D. reduce costs when producing the discounted item.
An inflation _____ may be more likely to stabilize output as well as inflation because
they have established credibility and _____.
A. dove; lowered the core rate of inflation.
B. hawk; reduced inside lags.
C. dove: anchored inflationary expectations.
D. hawk; anchored inflationary expectations.
According to the textbook, the homes of the wealthy in Seattle average in excess of
10,000 square feet while the homes of the wealthy in New York City average less than
5,000 square feet. The difference is primarily due to
A. greater “tastes” for space in Seattle.
B. a ban on construction of new homes in excess of 5,000 square feet in NYC.
C. a significantly higher price for land and construction in NYC.
D. greater “tastes” for crowding in NYC.
Alex, who is risk-neutral, is looking for an apartment. The distribution of apartments of
equal quality is as follows: 70% rent for $700 per month, 20% rent for $600 per month,
and 10% rent for $500 per month. Alex’s costs of searching rise by $10 with each
search.
The expected value of rent in this apartment market is
A. $700.
B. $660.
C. $600.
D. $500.
The growth of real GDP per person in the United States between 1960 and 2008 was the
result of:
A. growth in average labor productivity only.
B. growth in the share of population employed only.
C. growth in both average labor productivity and the share of population employed.
D. neither the growth in average labor productivity nor the share of population
employed.
Suppose the price of gold is $300 per ounce in the United States and 2,400 pesos per
ounce in Mexico. If purchasing power parity holds then, if the price of oil is $25 per
barrel in the United States, the price of oil is ______ pesos per barrel in Mexico.
A. 3.125
B. 96
C. 200
D. 250
This graph illustrates the marginal cost, marginal private benefit, and marginal social
benefit of immunization against a contagious childhood disease.
Private market incentives would result in ___ children being immunized. The socially
optimal number of children immunized is ____.
A. 100; 150
B. 150; 100
C. 100; 300
D. 300; 500
The figure above shows a seller’s opportunity costs. What is the seller’s reservation
price when producing 250 units?
A. $2
B. $4
C. $8
D. $14
According to Okun’s Law, when cyclical unemployment is negative, then the output
gap:
A. is positive.
B. is negative.
C. equals zero.
D. equals the rate of cyclical unemployment.
A person 16 years or older who does not work, but is actively looking for work, is
officially classified as:
A. employed.
B. unemployed.
C. chronically unemployed.
D. out of the labor force.
To say that a particular good is nonrivalmeans that
A. it has no substitutes.
B. consumers can enjoy it without paying for it.
C. consumption of the good by one person does not diminish the availability of the
good to others.
D. consumption of the good by one person reduces the availability of the good to
others.
A sudden change in the normal behavior of inflation, unrelated to the nation’s output
gap is called:
A. short-run equilibrium.
B. long-run equilibrium.
C. an inflation shock.
D. inflation inertia.
One reason that commitment problems arise is that:
A. people do not always correctly identify their own dominant strategy.
B. players cannot trust that other players will avoid playing their dominated strategy.
C. following through on a threat or promise often violates the cost-benefit principle.
D. commitments cannot be purchased.
Refer to the figure above. An increase in supply is represented by shifting from:
A. curve A to curve B.
B. curve B to curve A.
C. curve C to curve D.
D. curve C to curve B.