Average total cost is defined as
A. Total cost divided by output.
B. Total cost divided by price.
C. Variable cost divided by output.
D. Variable cost divided by price.
The last time gas prices increased drastically, sales of large Sport Utility Vehicles
(SUVs) fell. What economic reason would explain this decrease in sales?
A. SUVs were a fad and were no longer popular.
B. People who liked SUVs had already purchased one.
C. Higher gas prices increased the cost of owning a SUV.
D. The price of SUVs increased because it cost more to build them.
The following data show the relationship between the number of drivers who leave for
work at 8:00 am, their average commute times, and their marginal benefit associated
with the commute times.
Refer to the information given above. Suppose a toll is imposed in the following way:
leaving between 8 a.m. and 9 a.m. costs $5 per driver, after 9 a.m., the toll is zero. The
toll __________ because __________.
A. reduces efficiency; citizens are paying for the highway through taxes and through the
toll
B. improves efficiency; government now has more tax revenue
C. reduces efficiency; drivers don’t change their behavior because $5 is less than the
benefit of driving
D. improves efficiency; the highway is no longer treated as having a price of zero
Suppose a jar of DeLux popcorn that is ultimately sold to a customer at Friendly
Groceries is produced by the following production process:
If the corn was grown and the jar of popcorn produced in the year 2009, but the jar was
sold at Friendly Groceries in the year 2010, what is the contribution of these
transactions to GDP in the year 2010?
A. $0.00
B. $0.50
C. $1.50
D. $4.00
If Dylan saves $50 per week, then Dylan’s ______ will increase by $50 per week.
A. investment
B. consumption
C. taxes
D. wealth
When the interest rate on newly issued bonds increases, the price of existing bonds:
A. increases.
B. decreases.
C. increases only if the coupon rate is below the new rate.
D. may either increase or decrease.
Refer to the figure above. How many Nash equilibria are there?
A. 0
B. 1
C. 2
D. 3
Compared to the taxing of pollution, pollution permits offer the advantage of
A. eliciting the largest reduction in pollution from those firms that can do so most
cheaply.
B. raising revenues for the government.
C. allowing the public to influence the amount of pollution allowed through the
purchasing of permits.
D. ensuring all firms reduce pollution by the same percentage.
Suppose Acme and Mega produce and sell identical product with zero marginal and
average cost. Following is the market demand and marginal revenue curves for the
product.
Refer to the figure above. Suppose Mega and Acme have colluded to work as a pure
monopolist, but Mega cheats on Acme and reduces its price to $1.00 each. How much
profit will Mega earn?
A. $75
B. $100
C. $150
D. $200
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:
A second hour cleaning windows will yield additional earnings of _________.
A. $2
B. $14
C. $8
D. $7
Production data for Joe’s Pizza Parlor are as follows. For simplicity assume that labor is
the only input. Each pizza sells for $5.
How many workers will Joe hire if he must pay each one $45 a day?
A. 1
B. 2
C. 3
D. 4
Refer to the figure above. Point u is an __________ point in relation to the production
possibilities curve.
A. attainable
B. efficient
C. unattainable
D. inefficient
Suppose that a new drug has been approved to treat a life-threatening disease. Demand
for that drug is shown on the graph below. Prior to approval of this drug, the only
treatment for this condition was non-prescription pain relief. Demand for one brand of
non-prescription pain reliever is also shown on the graph below.
Refer to the figure above. The manufacturer of the pain reliever would _______ total
revenue by increasing the price from $15 to $25.
A. increase
B. decrease, but continue to earn some
C. experience no change
D. completely eliminate
In general, individuals and nations should specialize in producing those goods for
which they have a(n):
A. absolute advantage.
B. comparative advantage.
C. absolutely comparative advantage.
D. absolute advantage and a comparative advantage.
In Macroland autonomous consumption equals 100, the marginal propensity to
consume equals 0.75, net taxes are fixed at 40, planned investment is fixed at 50,
government purchases are fixed at 150, and net exports are fixed at 20. Planned
aggregate expenditure equals:
A. 290 + 0.25Y.
B. 320 + 0.25Y.
C. 320 + 0.75Y.
D. 290 + 0.75Y.
Assume that all firms in this industry have identical cost functions.
The long-run equilibrium price in this industry is
A. $15.
B. $10.
C. $5.
D. $5 for some firms and $10 for others.
Heterogeneity and the dynamic nature of labor markets are the principal causes of
______ unemployment.
A. cyclical
B. chronic
C. structural
D. frictional
Last year Pat was a soybean farmer and Chris was a corn farmer. This year, high
demand for ethanol, an automobile fuel made from corn, causes the price of corn to
increase.
Refer to the information above. Relative to last year, the price of soybeans is likely to
be ______, and the price of corn is likely to be ______.
A. higher; higher
B. higher; lower
C. lower, higher
D. the same; higher
In many towns in the United States, a single firm provides electricity. Those firms are:
A. monopolists.
B. oligopolists.
C. monopolistic competitors.
D. the government.
Refer to the table above. Corey’s opportunity cost of the delivery of an extra pizza is the
production of ______ pizza(s).
A. 6
B. 12
C. 2
D. 1/2
An economic argument in favor of providing medical care through HMOs is that they
A. increase provision of care to the sickest patients.
B. reduce incentives for providing unnecessary or excessive care.
C. reduce the cost of seeing a specialist.
D. reduce the probability of a malpractice claim.
Suppose that there are three power-generating plants, all of which generate emissions.
The table summarizes the cost of emission reduction for each firm given five different
levels of pollution:
In general, all three firms face _____ costs of abatement, suggesting that the principle
of _____ applies to pollution abatement.
A. increasing marginal; low-hanging-fruit
B. excessive; cost-benefit
C. high; adverse selection
D. decreasing average; economies of scale
Demographers predict that the average age of the population of the U.S. will increase.
One result will be an increase in the demand for nurses. Assume that the graph below
describes the current nursing labor market in a mid-sized city, and that the market is a
competitive one.
Suppose that several years ago the supply of nurses in this city was as shown as Supply
A. Suppose further that the nursing market had been in equilibrium at that time and that
wages did not change when supply changed to Supply, current. (Assume that demand
has remained stable at Demand, current.) The result is that nurses earn _____ and
A. $40; more than 100 nurses work per hour.
B. $40; there is a nursing shortage.
C. $50; there are many nurses willing to work for $40 who are unable to find a job.
D. $50; other labor markets adjust to restore equilibrium in all markets.
Refer to the figure above. For Jeff, consumption of movies satisfies
A. the law of demand
B. the law of diminishing marginal utility
C. the law of utility maximization
D. the law of utility minimization
At the time it collapsed in 1991, the Soviet Union possessed all of the factors that
promote increases in economic growth EXCEPT:
A. a highly educated worker force.
B. a large stock of capital.
C. abundant natural resources.
D. a political and legal environment that promoted economic productivity.
Who from among the following would be classified as out of the labor force?
A. A person with a part-time job who wants and is looking for a full-time job.
B. None of these people would be classified as out of the labor force.
C. A person who is willing to work and has looked for a job in the last week.
D. A person who is willing to work but has not looked for a job in two months.
The real rate of return on holding cash ______ inflation is correctly anticipated.
A. is higher when
B. is lower when
C. does not depend on whether
D. equals the nominal interest rate when
The ______ is the rate of increase of all prices except ______.
A. real rate of inflation; energy and food
B. core rate of inflation; energy and food
C. nominal rate of inflation; labor
D. core rate of inflation; interest rates
Holding all else constant, an increase in the preferences of Americans for Mexican
goods will ______ the supply of dollars in the foreign exchange market and ______ the
equilibrium Mexican peso/U.S. dollar exchange rate.
A. increase; increase
B. increase; decrease
C. decrease; decrease
D. decrease; increase
Refer to the figure above. Based on the diagram, if potential output equals 8,000 and
the real interest rate is 6%, then there is ______ gap and the Fed must ______ the real
interest rate so that output will equal potential output.
A. a recessionary; raise
B. a recessionary; reduce
C. no output; not change
D. an expansionary; raise
Skill-biased technological change increases wage inequality by altering the ______
high-skilled workers relative to low-skilled workers.
A. reservation price of
B. mobility of
C. supply of
D. demand for