There are two employers in Bucolic that hire people who do not have a high school
degree: a grocery store and a hardware store. The grocery store pays $5.00 per hour and
the hardware store pays $6.00 per hour. People who work at either store can work as
many hours as they want at those wages. Assume that it takes two hours to interview for
a job. Lee works at the grocery store, but would like to work at the hardware store. If
Lee interviews at the hardware store, there is a 10% probability of being hired. Assume
that Lee is risk-neutral.
What is Lee’s expected hourly benefit if Lee interviews at the hardware store?
A. $6
B. 60 cents
C. 10 cents
D. $1.00
The long run is defined as
A. one year or more.
B. a period in which all factors of production are variable.
C. the period of time between annual accounting reports.
D. a period in which at least one factor of production is fixed.
Joe is the owner of the 7-11 Mini Mart, Sam is the owner of the SuperAmerica Mini
Mart and together they are the only gas stations in town. At the current price of $3 per
gallon, both receive total revenues of $1,000. Joe is considering cutting his price to
$2.90, which would increase his total revenue to $1,350 if Sam continues to charge $3.
If Sam’s price remains $3 after Joe cuts his price, Sam will collect $500 in revenues. If
Sam cuts his price to $2.90, his total revenues would also rise to $1,350 if Joe continues
to charge $3. Joe will collect $500 in revenues if he keeps his price at $3 while Sam
lowers his to $2.90. Joe and Sam will receive $900 each in total revenue if they both
lower their price to $2.90. You may find it easier to answer the following question if
you fill in the payoff matrix below.
Refer to the information given above. To Sam, cutting his price to $2.90 is a:
A. revenue maximizing strategy.
B. dominant strategy.
C. dominated strategy.
D. profit maximizing strategy.
Which determines whether a company will earn higher revenues when it raises its
price?
A. The cost of the inputs.
B. Government regulation of the industry.
C. Consumer demand.
D. Companies always earn higher revenues when they increase price.
Which of the following is NOT a capital good?
A. Batteries purchased by a car manufacturer to install in new cars
B. Machines purchased by a car manufacturer to measure metal thicknesses
C. A new house purchased by a family
D. A new apartment building purchased by a corporation
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
planned aggregate expenditure (PAE)?
A. [790 – 700r] + 0.8Y
B. [790 – 700r]
C. [910 – 700r]
D. [910 – 700r] + 0.8Y
The practice of spreading one’s wealth over a variety of different financial investments
in order to reduce overall risk is called:
A. allocation.
B. following the risk premium.
C. diversification.
D. risk reservation.
If the income-expenditure multiplier equals 4 and a 1 percentage point increase in the
real interest rate reduces autonomous spending by 100 units, then a 1,000 unit
recessionary gap can be eliminated by ______ the real interest rate by ______
percentage points.
A. increasing; 10.0
B. increasing; 4.0
C. increasing; 2.5
D. decreasing; 2.5
Bank reserves are:
A. currency and customer checking deposits.
B. currency, customer checking and savings deposits.
C. any asset used to purchase goods and services.
D. cash and similar assets held to meet depositor withdrawals or payments.
The most important decision that sellers make is:
A. whether to set profit maximization as a goal.
B. whether to produce another unit.
C. whether to change the price of their product.
D. whether to expand factory facilities.
If a perfectly competitive firm finds that the productivity of its workers has increased,
then
A. labor supply increases.
B. labor demand decreases.
C. the wage rate decreases.
D. labor demand increases.
Suppose the following information describes the economy:
Private saving equals ____; public saving equals ______; national saving equals ____.
A. 800; 200; 600
B. 800; 200; 1,000
C. 1,000; 800; 1,000
D. 1,500; 700; 2,700
In which of the following markets is the presence of asymmetric information most
critical for the buyers?
A. The market for computers
B. The market for used textbooks
C. The market for paint
D. The market for existing houses
Smith and Jones comprise a two-person economy. Their hourly rates of production are
shown below.
Refer to the table above. If Smith and Jones are dividing their time efficiently and
producing more than 10 computers and fewer than 120 calculators per hour, Smith will
__________ and Jones will __________.
A. produce only computers; produce only calculators
B. produce only computers; split his time between computers and calculators
C. split his time between computers and calculators; produce only computers
D. produce only calculators; produce only computers
Which argument in favor of enacting workplace safety regulations can be justified using
economic tools or observation?
A. Analyzing safety in terms of monetary costs and benefits is inappropriate.
B. Concerns about relative income encourage some workers to accept risk in exchange
for higher wages, and that strategy can lead to an inefficient outcome.
C. Economic regulations in competitive markets generally increase total economic
surplus.
D. Firms that exploit workers typically earn excessive profits for the owners, while the
workers bear the risk of injury.
Which of the following would be most vulnerable to the tragedy of the commons?
A. Restrooms in a restaurant
B. Timber on public lands
C. Cattle on a ranch
D. Apples in Phoebe’s apple farm
If your linear, two-good production possibilities graph has a slope steeper than -1:
A. you would have to give up more than one unit of the good measured on the
horizontal axis to gain an additional unit of the good measured on the vertical axis.
B. you would have to give up less than one unit of the good measured on the horizontal
axis to gain an additional unit of the good measured on the vertical axis.
C. by specializing in the good measured on the horizontal axis you would be able to
make more total units than you would if you specialized in the good measured on the
vertical axis.
D. you have a comparative advantage in the good measured on the vertical axis.
Based on the following information, what is the amount of public saving?
A. +3,700
B. +2,500
C. +200
D. -300
Which of the following is not an example of the hurdle method of price discrimination?
A. A rebate offer
B. Eliminating all sales specials and reducing all prices by 10%
C. After-Christmas sales
D. Weekly grocery store coupon fliers
The cumulative difference between the price producers actually receive and the price
for which they are willing to produce is:
A. producer surplus.
B. lost surplus.
C. total economics surplus.
D. consumer surplus.
Refer to the table above. The President of What’s AMatterU decides to hire fundraisers
as long as the average benefit exceeds the average cost, resulting in __________
employees being hired and a net benefit (total donations minus total labor costs) of
__________.
A. 5; $17,080
B. 5; $67,080
C. 4; $60,000
D. 4; $22,000
Refer to the figure above. At the price of $1.25,
A. market demand is 40 cans of soda.
B. market demand is 30 cans of soda.
C. market demand is 10 cans of soda.
D. Mallory and Rick exit the market.
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:
His benefit from the first hour cleaning windows is
A. $14.
B. $18.
C. $7.
D. $2.
Refer to the figure above. If S2 is the short-run industry supply curve for a maple syrup
producer, what is the profit (loss) for this firm?
A. $10,000
B. $15,000
C. $20,000
D. $30,000
Refer to the figure above. What is the maximum price that the buyer of the first unit is
willing to pay?
A. 40
B. 35
C. 25
D. 15
If a firm collects $80 in revenues when it sells 4 units, $100 in revenues when it sells 5
units, and $120 when it sells 6 units, one can infer the firm is more likely to be:
A. a perfect competitor.
B. a monopolistic competitor.
C. an oligopolist.
D. a monopolist.
If banks’ desired reserve ratio increases from 0.10 to 0.15, the public still desires to hold
the same amount of currency, and the Fed takes no actions, the money supply will:
A. increase.
B. decrease.
C. not change.
D. either increase or decrease.
Pollution permit policies achieve an _____ outcome because
A. inefficient; wealthier firms can dominate the market.
B. efficient; the supply of permits is elastic.
C. inefficient; the supply of permits is set by the government, and so is inelastic.
D. efficient; firms have an incentive to minimize costs.
If domestic saving is greater than domestic investment, then a country will have a
______ and positive net capital ______.
A. trade deficit; outflows
B. trade deficit; inflows
C. trade surplus; inflows
D. trade surplus; outflows
The expected benefit of investment equals:
A. private saving.
B. the value of the marginal product of capital.
C. the real interest rate.
D. the price of the capital good.
Quick Buck and Pushy Sales produce and sell identical products and face zero marginal
and average cost. Below is the market demand and marginal revenue curves for the
product.
Refer to the figure above. The profit-maximizing quantity for a monopolist with this
demand curve is _____ units, which the monopolist would sell for ______.
A. 3,000; $1.00
B. 1,000; $1.50
C. 2,000; $1.50
D. 1,000; $2.50