Studying how Pat allocates her time between teaching classes and assisting
undergraduate students is an example of:
A. microeconomics.
B. macroeconomics.
C. individual economics.
D. economic naturalism.
When real output decreases, planned aggregate expenditures decrease because:
A. autonomous expenditures increase.
B. autonomous expenditures decrease.
C. induced expenditures increase.
D. induced expenditures decrease.
The price of a gallon of gasoline at the pump increased by 5 percent at the same time
that the inflation rate was also 5 percent. The nominal price of gasoline _____, and the
real price of gasoline _____.
A. did not change; increased
B. did not change; did not change
C. increased; did not change
D. increased; decreased
A movement along a demand curve from one price-quantity combination to another is
called:
A. a change in quantity demanded.
B. a shift in the demand curve.
C. a change in demand.
D. a change in quantity supplied.
If commercial banks are maintaining a 4 percent reserve/deposit ratio and the Fed raises
the required reserve ratio to 6 percent, then banks will ______ their loans and deposits,
and the money supply will _____.
A. increase; increase
B. increase; decrease
C. decrease; increase
D. decrease; decrease
______ post-World War II ______ have been preceded by increases in inflation.
A. Many; expansions
B. Few; recessions
C. All; expansions
D. Many; recessions
Suppose that this graph describes the current labor market for high school teachers:
If wages are currently W*,
A. there will be a shortage of certified teachers.
B. there will be a surplus of certified teachers.
C. the market is in equilibrium: neither a shortage nor a surplus exists.
D. teachers are underpaid.
Suppose you want to equalize your marginal utility per dollar across all the goods that
you consume. If your marginal utility per dollar is higher for one of those items than for
any others, you should
A. consume less of it to reduce your marginal utility.
B. consume more of it to reduce your marginal utility.
C. consume more of the other goods to equalize your marginal utilities per dollar.
D. consume more of all goods in equal proportions.
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. If Acme
matches the price cut and customers are evenly split between the two firms, what will
Acme’s economic profit be?
A. $75
B. $100
C. $150
D. $200
Goods and services that are used up in the production of other goods and services are
called ______ goods and services.
A. intermediate
B. final
C. value added
D. nominal
Assets of the commercial banking system include:
A. reserves and loans.
B. deposits.
C. reserves and deposits.
D. loans and deposits.
If you were to start your own business, your implicit costs would include:
A. rent that you have paid in advance for use of a building.
B. the opportunity cost of your time.
C. profit over and above normal profit.
D. interest that you pay on your business loans.
Which argument against enacting workplace safety regulations can be justified using
economic tools or observation?
A. Compensating wage differentials give firms an incentive to provide safety features.
B. Historically, employers have provided safe working environments without
regulation.
C. According to the cost-benefit principle, the marginal cost of safety virtually always
exceeds the marginal benefit.
D. Insurance will cover most workplace injuries, so the safety regulations are
unnecessary.
A resource that has common property rights is one that:
A. is subject to common law.
B. benefits everyone equally.
C. has no marginal benefit.
D. is treated as though it has a price of zero.
Pizzas sell for $10 each.
Refer to the figure above. The pizza shop earns a _____ of _____ when it uses 3
workers per day.
A. loss, $550
B. profit, $550
C. loss, $950
D. profit, $950
The population of Alpha totals one million people, 40 percent of whom are employed.
Average output per worker in Alpha is $20,000. Real GDP per person in Alpha totals:
A. $8,000.
B. $12,000.
C. $20,000.
D. $50,000.
You need a TV, DVD player, and CD player. The sale flyer from a store downtown
shows that the TV that you want to buy is on sale for 10% off of the regular price this
week. DVD and CD players are both on sale for 20% off next week. Last week you
drove downtown to save $30 on some concert tickets, a 15% savings. The regular prices
for TVs, DVD players, and CD players are given in the table below.
If nothing else has changed, should you drive downtown next week to buy the DVD
player and the CD player?
A. Yes, because you will save $32.
B. No, because you will save less than $30.
C. Yes, because you will save $64.
D. Yes, because it is always worth it to drive downtown to earn a 20% discount.
If a certain automotive part can be purchased in Mexico for 32 pesos or in the United
States for $5.25, and if the nominal exchange rate is 8 pesos per U.S. dollar, then the
automotive part:
A. is more expensive in Mexico.
B. is more expensive in the United States.
C. is less expensive in the United States.
D. costs the same in Mexico and the United States.
Which of following is NOT true of an equilibrium price?
A. Consumers who are willing to pay the equilibrium price can acquire the good.
B. It measures the value of the last unit sold to consumers.
C. It is always a fair and just price.
D. Firms who are willing to accept the equilibrium price can sell what they produce.
Refer to the figure above. If the demand is ________ with respect to price, a price
increase will ___________ total revenues.
A. elastic; increase
B. inelastic; increase
C. unitary elastic; decrease
D. inelastic; decrease
Cal has two choices. The first offers a 50% chance of winning $20 and a 50% chance of
losing $20. The second option offers a 20% chance of winning $100 and an 80% chance
of losing $20. Which choice has the larger expected value?
A. Both choices have the same expected value, so Cal would be indifferent between the
two options.
B. The 50%-50% chance.
C. Both choices have the same expected value but the 50%-50% is better because the
chance of payoff is greater.
D. The 20%-80% choice.
A public good that would benefit Karen, Tammy, and Max has a one time installation
cost of $900. These three voters must approve any tax plan by simple majority and all
three will cast a vote.
Since the government does not know and cannot discover the voters’ true reservation
prices, it proposes a head tax of $300 per voter. The result of the referendum is
A. the tax passes and the public good is provided.
B. Max votes for the tax but Kris and Taylor vote against it and it fails.
C. Max votes for the tax, Kris votes against it but Taylor’s vote is uncertain.
D. all three voters vote against the tax.
The natural rate of unemployment is the unemployment rate when there is only:
A. structural unemployment.
B. frictional unemployment.
C. cyclical unemployment.
D. structural and frictional unemployment.
When one’s performance is judged relative to others’ performance and not by an
absolute standard:
A. players will over invest in performance enhancements.
B. players will under invest in performance enhancements.
C. the incentive to sabotage the other players is lessened.
D. a positional externality is not possible.
Suppose that in most car collisions between cars of unequal size, the smaller car
sustains the most damage and its occupants suffer the most injury. In answering the
following question, assume that, on average, smaller cars generate less air pollution and
that every person in the economy drives at least one car.
Refer to the information above. As the average size of cars increases, the incentive to
buy a smaller car:
A. also increases due to cost savings at the fuel pump.
B. also increases to offset the external cost of air pollution.
C. decreases because of the increased risk of injury in a collision.
D. remains the same because car purchases depend on individual preferences.
The following data give the dates of successive turning points in U.S. economic activity
and the corresponding levels of real GDP at the time.
Which of the turning points are peaks?
A. (A), (B), and (C)
B. (C), (D), and (E)
C. (A), (C), and (E)
D. (B) and (D)
The biggest problem thwarting economic growth in the poorest countries, compared to
the richest countries, is:
A. insufficient human capital.
B. outdated physical capital.
C. no access to technology.
D. a legal and/or political environment unfavorable to economic growth.
Economic profits are:
A. the same as accounting profits.
B. equal to total revenue minus the sum of explicit fixed and variable costs.
C. equal to total revenue minus both explicit and implicit costs.
D. greater than accounting profits.
Long-run increases in living standards, as measured by real GDP per person, are
primarily the result of increases in:
A. population.
B. the money supply.
C. government budget surpluses.
D. average labor productivity.
In an open economy, a decrease in the government’s budget deficit will ______ the
domestic real interest rate and ______ the level of capital investment in the country,
holding other factors constant.
A. increase; increase
B. increase; decrease
C. decrease; decrease
D. decrease; increase
Pat used to work as an aerobics instructor at the local gym earning $35,000 a year. Pat
quit that job and started working as a personal trainer. Pat makes $50,000 in total annual
revenue. Pat’s only out-of-pocket costs are $12,000 per year for rent and utilities,
$1,000 per year for advertising and $3,000 per year for equipment.
Refer to the information given above. Pat’s accounting profit is _______, and Pat’s
economic profit is _______.
A. $50,000; $15,000
B. $34,000; -$1,000
C. $34,000; $15,000
D. -$1,000; -$1,000
Refer to the figure above. Based on the figure, when PAE = 200 + 0.5Y, short-run
equilibrium output equals:
A. 1,200.
B. 400.
C. 600.
D. 800.
Regarding the fiscal policy responses to the 2007-2009 recession, the Congressional
Budget Office (CBO) found that:
A. the Bush Administration’s fiscal policy worked, but the Obama Administration’s did
not.
B. the Obama Administration’s fiscal policy worked, but the Bush Administration’s did
not.
C. both the Bush Administration’s fiscal policy and the Obama Administration’s fiscal
policy worked.
D. neither the Bush Administration’s fiscal policy nor the Obama Administration’s fiscal
policy worked.
Suppose the most you would be willing to pay for a plane ticket home is $250, but you
buy one online for $175. The economic surplus of buying the online ticket is:
A. $175.
B. $250.
C. $75.
D. $0.
The effect of a one-unit increase in autonomous expenditure on short-run equilibrium
output is called:
A. the marginal propensity to consume.
B. average labor productivity.
C. Okun’s law.
D. the income-expenditure multiplier.