The growth of lawsuits seeking compensation from firms when a worker is injured
should serve to
A. reduce the firm’s incentive to improve safety.
B. increase the worker’s incentive to get injured.
C. increase the firms’ incentive to improve safety.
D. reduce moral hazard.
Refer to the figure above. The loss of surplus resulting from monopoly is _______.
A. $111.19
B. $277.86
C. $222.21
D. $360
According to the textbook, as currently administered, the workers’ compensation system
A. sets the premium too low for firms with high injury rates.
B. produces the optimal amount of workplace safety.
C. sets the premium too low for firms with low injury rates.
D. sets the premium too high for firms with high injury rates.
Purchasing goods such that the ratio of marginal utility to price is equal across all goods
results in the
A. greatest total utility.
B. lowest expenditure on goods.
C. greatest marginal utility for the lower.
D. expenditures for all goods being the same.
Pat can either drive to work, which takes half an hour and uses $1.50 worth of gas, or
take the bus, which takes an hour and costs $1.00. How should Pat get to work?
A. Pat should always take the bus because it costs $0.50 less.
B. Pat should always drive because it saves half an hour.
C. Pat should drive if saving a half hour is worth $0.50 or more.
D. Pat should take the bus if a half hour of time is worth $0.50 or more.
The CPI equals 1.00 in year one and 1.15 in year two. If the nominal wage is $15 in
year one and a contract calls for the wage to be indexed to the CPI, what will be the
nominal wage in year two?
A. $15.00
B. $16.15
C. $17.25
D. $22.50
Wages and salaries are examples of:
A. consumption.
B. labor income.
C. capital income.
D. profits.
Large economies, like the United States should ______ employ a flexible exchange
rate, because giving up the power to stabilize the domestic economy via monetary
policy _____.
A. almost never; makes little sense
B. almost never; is of little consequence
C. nearly always; makes little sense
D. nearly always; is of little consequence
Free entry of firms is a characteristic of:
A. all industries in the U. S. economy.
B. perfectly competitive industries.
C. centralized economies.
D. industries in which firms are earning positive economic profit.
In the United States from 1960 to 2009, the largest positive contribution to national
saving was from:
A. the public sector.
B. the government budget deficit.
C. business saving.
D. household saving.
John is trying to decide how to divide his time between his job as a stocker in the local
grocery store, which pays $7 per hour for as many hours as he chooses to work, and
cleaning windows for the businesses downtown. He makes $2 for every window he
cleans. John is indifferent between the two tasks, and the number of windows he can
clean depends on how many hours he spends cleaning in a day, as shown in the table
below:
Refer to the information above. If we plot John’s opportunity cost per window on the
vertical axis and the number of windows cleaned each day on the horizontal axis, we
will have John’s _______ curve for window-cleaning services.
A. production possibilities
B. supply
C. benefit
D. demand
In the short-run Keynesian model where the marginal propensity to consume is 0.75, to
offset a recessionary gap resulting from a $1 billion decrease in autonomous
consumption, taxes must be:
A. increased by $1 billion.
B. decreased by $1 billion.
C. increased by $1.33 billion.
D. decreased by $1.33 billion.
The longest expansion of the United States economy since 1925 began in _____.
A. 1991
B. 1945
C. 1961
D. 1982
In exchange for a share in the revenues earned on campus, State U has granted
CheapFizz the exclusive right to sell soft drinks in the student union and in vending
machines on campus. Prior to the deal, three soft drink companies sold beverages on
campus; now no other soft drink company is allowed to sell its products on campus or
at university events.
Refer to the information above. CheapFizz now has market power due to:
A. the economies of scale gained by having more sales on campus.
B. the grant of a patent.
C. the grant of an exclusive license to sell.
D. network economies caused by all students consuming their product.
Which of the following is NOT a condition for maximizing total economic surplus in a
particular market?
A. All private costs of production must be included.
B. All social costs of production must be included.
C. All private benefits of consumption must be included.
D. Government regulation of the market is needed.
Refer to the figure above. The surplus loss due to the price ceiling imposed at price G is
represented by the area:
A. FEC.
B. DAC.
C. GJEF.
D. JAE + DGF.
Because of diminishing returns to capital, there is a limit to the increases in average
labor productivity that can be gained from additional or improved ______.
A. the availability of land and natural resources
B. physical capital
C. technology
D. entrepreneurship
Changes in planned spending not caused by changes in output or the inflation rate will
shift the:
A. aggregate supply curve.
B. Keynesian cross.
C. potential output line.
D. aggregate demand curve.
The largest component of planned aggregate expenditure is:
A. consumption.
B. investment.
C. government purchases.
D. exports.
If M stands for the money stock, P for the price level, and Y for real GDP, then velocity,
V, equals:
A. (P × Y) ÷ M.
B. (P × M) ÷ Y.
C. (M × Y) ÷ P.
D. (M × P) ÷ Y.
Refer to the figure above. If consumers had to pay the marginal cost for the medical
treatment, they would choose to stay _____ day(s) in the hospital.
A. 0
B. 1
C. 2
D. 3
The optimal number of workers for a perfectly competitive firm to hire occurs when
A. total labor costs equal total revenues.
B. diminishing marginal productivity is first experienced.
C. the wage rate equals the marginal product of the last worker.
D. the wage rate equals the value of marginal product of the last worker.
Fred and Barney fill egg cartons with eggs. Fred just started the job and can fill only 25
cartons an hour. Barney has significant on-the-job experience that allows him to fill 50
cartons an hour. Both Fred and Barney work 50 hours a week. Fred’s average weekly
productivity is ______ cartons; Barney’s average weekly productivity is ______
cartons; and as a team their average weekly productivity is ______ cartons.
A. 25; 50; 75
B. 25; 50; 37.5
C. 1,000; 2,000; 1,500
D. 1,250; 2,500; 1,875
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 The Corner Store?
A. $0.50
B. $1.75
C. $2.00
D. $2.50
Refer to the figure above. At the point of profit maximization, the monopolist:
A. earns a profit of $38.50.
B. incurs a loss of $11.00.
C. earns a profit of $11.20.
D. incurs a loss of $38.50.
Holding constant risk and the real returns available abroad, higher domestic real interest
rates ______ capital inflows, ______ capital outflows, and ______ net capital inflows.
A. increase; increase; increase
B. increase; increase; decrease
C. increase; decrease; increase
D. decrease; decrease; decrease
The outside lag of macroeconomic policy is the:
A. time between a shift in aggregate demand and a shift in aggregate supply.
B. delay between when a policy change is needed and the policy is implemented.
C. difference between actual inflation and the target rate of inflation.
D. delay between when a policy change is implemented and when most of the effects of
policy have occurred in the economy.
Mexico and the members of OPEC produce crude oil. Realizing that it would be in their
best interests to form an agreement on production goals, a meeting is arranged and an
informal, verbal agreement is reached. If both Mexico and OPEC stick to the
agreement, OPEC will earn profits of $200 million and Mexico will earn profits of $100
million. If both Mexico and OPEC cheat, then OPEC will earn $175 million and
Mexico will earn $80 million. If only OPEC cheats, then OPEC earns $185 million and
Mexico $60 million. If only Mexico cheats, then Mexico earns $110 million and OPEC
$150 million. You may find it helpful to fill in the following payoff matrix in order to
answer the question below.
Refer to the information given above. This game would __________ because
__________.
A. be a prisoner’s dilemma; not cheating is better for both
B. not be a prisoner’s dilemma; cheating is better for both
C. be a prisoner’s dilemma; cheating is better for both
D. not be a prisoner’s dilemma; OPEC does not have a dominant strategy
The income-expenditure multiplier arises because one person’s additional spending
becomes another person’s additional income that will generate additional:
A. spending.
B. autonomous expenditure.
C. menu costs.
D. cyclical unemployment.
Marge is lending Martin $1,000 for one year. The CPI is 1.60 at the time the loan is
made. They expect it to be 1.76 in one year. If Marge and Martin agree that Marge
should earn a 3% real return for the year, the nominal interest rate on this loan should
be ______ percent.
A. 3
B. 7
C. 13
D. 16
Varying the quantity of output produced and sold at preset prices is called:
A. meeting demand.
B. self-correcting economics.
C. Okun’s law.
D. spurring inflation.
The value added by any firm equals the firm’s ______ from selling the product minus
_______.
A. revenue; expenses
B. revenue; the cost of inputs purchased from other firms
C. profits; expenses
D. profits; the cost of inputs purchased from other firms
The presence of an external benefit that is not corrected results in:
A. additional total economic surplus.
B. deadweight loss.
C. a larger economic pie to be distributed among everyone.
D. taxation.