Mike and Tom debone chicken breasts for Ted’s Chicken Co. Mike is new and can only
debone 30 chicken breasts per hour, while Tom’s experience allows him to debone 60
chicken breasts per hour. Both Mike and Tom work 40 hours per week. Their average
hourly productivity as a team is ______ chicken breasts.
A. 30
B. 45
C. 60
D. 90
Graphically, short-run equilibrium occurs at the intersection of the aggregate demand
curve and:
A. the aggregate supply curve and potential output.
B. the planned aggregate expenditure line.
C. the aggregate supply curve.
D. potential output.
A worldwide slowdown in productivity growth occurred:
A. before 1950.
B. in the 1950s and 1960s.
C. in the 1960s and 1970s.
D. in the 1970s and 1980s.
Curly loves pizza, and often has supper at an all-you-can eat pizza buffet. Curly eats
more pizza there than at the Buy-By-the-Slice pizza stand in the student union because
A. Curly is irrational and has no will-power.
B. Curly does not experience diminishing marginal utility for pizza.
C. Curly is setting his Marginal Utility for pizza per dollar equal at each place.
D. Curly is setting his Marginal Utility for pizza equal at each place.
Larry was accepted at three different graduate schools, and must choose one. Elite U
costs $50,000 per year and did not offer Larry any financial aid. Larry values attending
Elite U at $60,000 per year. State College costs $30,000 per year, and offered Larry an
annual $10,000 scholarship. Larry values attending State College at $40,000 per year.
NoName U costs $20,000 per year, and offered Larry a full $20,000 annual scholarship.
Larry values attending NoName at $15,000 per year.
Larry maximizes his surplus by attending:
A. Elite U, because $60,000 is greater than the benefit at the other schools.
B. State College, because the difference between the benefit and cost is greatest there.
C. NoName U, because Larry has a full scholarship there.
D. Elite U, because the opportunity costs of attending Elite U are the lowest.
Buyers and sellers of a particular good comprise the:
A. market for the good.
B. demand for the good.
C. supply for the good.
D. production possibilities curve for the good.
Refer to the figure above. The socially efficient price and output combination is:
A. $5 and 7 units of output.
B. $5 and 3.5 units of output.
C. $19.30 and 7 units of output.
D. $22.50 and 3.5 units of output.
Which of the following statements illustrates the concept of efficiency?
A. The production of the good generates very little pollution.
B. At equilibrium, all mutually beneficial transactions have taken place.
C. The production of the good generates very few by-products.
D. The consumption of the good produces very little waste.
For the two good case, the rational spending rule requires that
A. total expenditures on the two goods be equal.
B. total utility from the two good be equal.
C. average utility from the two goods be equal.
D. the ratio of marginal utility to price be equal for the two goods.
Suppose Jordan and Lee are trying to decide what to do on a Friday. Jordan would
prefer to see a comedy while Lee would prefer to see a documentary. One documentary
and one comedy are showing at the local cinema. The benefit they receive from seeing
the films either together or separately are shown in the payoff matrix. Both Jordan and
Lee know the information contained in the payoff matrix. They purchase their tickets
simultaneously, ignorant of the other’s choice.
Refer to the figure above. Jordan has:
A. no dominant strategy.
B. a dominant strategy of seeing a comedy.
C. a dominant strategy of seeing a documentary.
D. two dominant strategies, depending on Lee’s choice.
Suppose there are three kinds of people living in Midtown: people who do not have a
lot of money, and so cannot afford to conspicuously consume; people who come from
old money, all of whom believe that conspicuous consumption is in exceedingly poor
taste; and the newly rich, all of whom engage in conspicuous consumption.
In Midtown, if you observe someone driving an old Chevy you can assume that he or
she
A. is neither old money nor newly rich.
B. is either not wealthy or comes from an old money family.
C. cannot afford a nicer car.
D. does not care what other people think of them.
Which of the following is an example of the precautionary motive for saving?
A. Pat puts $400 per month in his 401(k) retirement account.
B. Jordan sets aside $200 per month in case she has to pay for a new roof for her house.
C. Gerry and Terry put $2,000,000 in a trust fund that will go to their children when
they die.
D. Every month, Chris puts $400 into his saving account so that he can buy a new car in
a few years.
Drew is taking an economics class in which two tests and a final will be given. The two
tests are worth 25% each while the final exam counts for 50%. Drew’s final score will
be
A. (.25)(Score on Test 1) + (.25)(Score on Test 2) + (.50)(Score on Final Exam).
B. (Test 1 + Test 2 + Final Exam)/3.
C. (.33)(Test 1) + (.33)(Test 2) + (.33)(Final Exam).
D. (25)(Test 1) + (25)(Test 2) + (50)(Final Exam).
Refer to the table above. The marginal cost of the 3rd unit of this activity is:
A. $30
B. $25
C. $20
D. $10
In general, if the price of a fixed factor of production increases:
A. price rises.
B. marginal costs are unchanged.
C. marginal costs increase.
D. the profit maximizing level of output falls.
Two firms can use five different technologies to produce the same quantity of output:
1,2,3,4 and 5. The first technology is the cheapest, but also the dirtiest. The fifth
technology is the most expensive, but results in the lowest levels of pollution. The
amount of pollution emitted by each firm and the cost of the technologies are shown in
the table.
Suppose the firms are both currently using technology 1, and that the government
adopts rules requiring each firm to reduce pollution by 20%. To comply, the firms will
adopt technology ___ for a total cost of __________.
A. 1; $1250.
B. 2; $1500.
C. 3; $2200.
D. 4; $3600.
A profit-maximizing perfectly competitive firm must decide:
A. only on what price to charge, taking output as fixed.
B. both what price to charge and how much to produce.
C. only on how much to produce, taking price of the good as fixed.
D. only on which industry to join, taking price and output as fixed.
Dent n’ Scratch Used Cars and Trucks employs 3 salesmen. Data for their sales last
month are shown in this table:
Joe’s opportunity cost of selling a car is ______ than Ralph’s, and Joe’s opportunity cost
of selling a car is ______ than Larry’s.
A. less; greater
B. greater; less
C. less; less
D. greater; greater
If government needs to raise revenues to pay for a public good, the ideal tax structure
would be to tax
A. all citizens by the same amount.
B. all citizens in proportion to their willingness to pay for the public good.
C. all citizens by the same proportion of their income.
D. only the citizens that state that they will use the public good.
Central bank independence refers to situations in which central bankers:
A. conduct open market operations in free markets.
B. operate in countries with independently elected governments.
C. are insulated from short-term political considerations.
D. are appointed without confirmation hearings.
A decrease in demand for a firm’s output results in a(n)
A. increase in labor supply.
B. decrease in labor demand.
C. decrease in labor supply.
D. increase in labor demand.
To increase future living standards by pursuing higher current rates of investment
spending, an economy must:
A. allow higher rates of current consumption.
B. reduce current rates of consumption spending.
C. reduce the current capital stock.
D. decrease the amount of future research and development spending.
In a perfectly competitive industry over the long run:
A. economic profits tend to persist.
B. the number of firms in an industry grows.
C. economic losses tend to persist.
D. economic profits and losses are driven towards zero by entry and exit.
The “true” costs of inflation to an economy include all of the following EXCEPT:
A. shoe-leather costs.
B. higher relative prices.
C. noise in the price system.
D. unexpected redistribution of wealth.
Which of the following would be included in the GDP of the United States?
A. Boeing builds a plane in Seattle that is sold to Air Canada.
B. Chrysler produces a car in Germany that is sold in Michigan.
C. Nestle produces a candy bar in Switzerland that is sold in San Francisco.
D. Planet Hollywood serves customers in a restaurant in Hong Kong.
Most people make some decisions based on intuition rather than calculation. This is:
A. irrational, because intuition is often wrong.
B. consistent with the economic model of decision-making, because calculating costs
and benefits leads to decision-making pitfalls.
C. consistent with the economic model because people intuitively compare the relative
costs and benefits of the choices they face.
D. inconsistent with the economic model, but rational because intuition takes into
account non-financial considerations.
One factor that contributed to the growth in the share of population employed in the
United States between 1960 and 2008 was increased:
A. labor union participation.
B. female labor force participation.
C. male labor force participation.
D. minimum wages.
Vinnie is looking for an apartment in Dayton, Ohio. In Dayton, 75% of the two
bedroom, one bath apartments are $800 a month and 25% are $600. The marginal cost
of his search increases by $15 per search, i.e., the marginal cost of looking at the first
apartment is $15, the marginal cost of looking at the second apartment is $30, the
marginal cost of looking at the third apartment is $45 and so on.
Suppose that Vinnie discovers that the distribution of high price – low price apartments
is not 75% and 25% but 60% and 40%. He will now be willing to look at a maximum of
__________ apartments.
A. 6
B. 5
C. 4
D. 3
Peg’s Manicure Manor did 4,000 sets of nails in 2010 and 4,500 sets of nails in 2011.
The price of a set of nails was $20 in 2010 and $22 in 2011. If 2010 is the base year,
Peg’s contribution to nominal GDP in 2010 was ______ and in 2011 was _______.
A. $80,000; $88,000
B. $80,000; $90,000
C. $80,000; $99,000
D. $88,000; $90,000
Suppose you have $200 with which you can buy shares of stock from two companies:
ABC Hot Chocolate Company and XYZ Lemonade. Each company’s stock currently
sells for $100 per share. If the temperature next year is lower than average, the stock
price for ABC will increase by $20, and the stock price for XYZ will not change. If the
temperature next year is higher than average, the stock price for XYZ will increase by
$20, and the stock price for ABC will not change. There is a 50% chance that it will be
colder than average next year, and a 25% chance that it will be warmer than average. If
you purchase two shares of XYZ stock and no shares of ABC stock, there is a ______
chance that your gain will be $40. Otherwise, your gain will be ______.
A. 50%; $30
B. 25%; $0
C. 75%; $20
D. 50%; $20
In the short-run Keynesian model where the marginal propensity to consume is 0.75, to
offset an expansionary gap resulting from a $1 billion increase 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.
Leo is a welfare recipient who qualifies for two means-tested cash benefits. If he does
not earn any income, he receives $225 from each benefit. For each dollar he earns
(which his employer is required to report to the welfare agency), each benefit is reduced
by 75 cents until the benefit equals zero.
Suppose Leo earns $10. He will lose _____ from each benefit, for a total loss of ____.
A. $.75; $1.00
B. $7.50; $7.50
C. $7.50; $15.00
D. $.75; $1.50
Refer to the figure above. An increase in demand 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 D to curve C.
Megafirm is the only provider of products in the Seven Corners region, a sparsely
populated area out west. It currently has a small distribution center and two retail
outlets. Gigafirm has threatened to open a competing business in the Seven Corners
region. Megafirm has publicly stated that, if Gigafirm comes in, Megafirm will flood
the market with goods, driving down prices and forcing Gigafirm out. Suppose that
expansion would cost the firm $100,000 and that Megafirm’s profits are $1,000,000 per
year when it is the only firm in the region regardless of whether it expands or not. Both
firms would earn $350,000 if Gigafirm entered and Megafirm remained a small
operation, and both would earn -$100,000 if Gigafirm entered and Megafirm expanded.
Megafirm should
A. stop making empty threats because it undermines its credibility.
B. expand immediately because it is a costly to fake signal that it will carry out its
threat.
C. accept Gigafirm’s entry and a profit of $350,000, saving expansion costs.
D. take out television ads announcing its expansion, whether or not it intends to follow
through on those plans.