Price discrimination means charging:
A. higher prices to women and minorities.
B. different prices to different consumers because production costs are different.
C. the same price to all consumers even if production costs are different.
D. different prices to different consumers when production costs are the same.
De Beers accounts for approximately 80% of diamond sales worldwide. The source of
their market power is:
A. its exclusive ownership of South African diamond mines.
B. its patent on diamond production.
C. the perfectly inelastic demand for diamonds.
D. Western engagement customs.
Matt is offered a job driving the campus shuttle bus from 4 P.M. to 6 P.M. each
Monday. His reservation wage for this job is $7/hour.
Now suppose the director offers Matt $50/hour, but also announces that the earnings
from the job will be divided equally among Matt and the 99 other students who live in
Matt’s dorm. How much economic surplus will Matt enjoy now for accepting the job?
A. $0.50
B. $1.00
C. -$6.00
D. -$6.50
The tendency for consumers to purchase more of a good or service as its price falls is
called
A. the law of supply.
B. the law of increasing cost.
C. the Low-Hanging Fruit principle.
D. the law of demand.
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.
Suppose that the government accurately knew the three reservation prices and the cost
of the public good. To achieve the ideal tax structure and collect no more in tax revenue
than $900, each voter should be charged __________ percent of their __________.
A. 100; reservation price
B. 70; reservation price
C. 20; income
D. 90; reservation price
Capital goods are
A. long-lived goods used for producing other goods and services.
B. the end products of production.
C. publicly provided.
D. excluded from GDP.
Which of the following characteristics of a central bank is expected to enhance
monetary policy credibility?
A. the central bankers short terms that coincide with the terms of the legislature.
B. daily central bank actions are subject to the review and veto of the executive branch
of the government.
C. the central bank announces a numerical inflation target.
D. the central bank is under the obligation to finance the national deficit.
Suppose a jar of DeLux popcorn that is ultimately sold to a customer at Friendly
Groceries is produced by the following production process:
What is the value added of DeLux Popcorn Co.?
A. $0.50
B. $1.50
C. $2.00
D. $2.50
Medical insurance covering routine medical care became common
A. at the turn of the last century.
B. in the 1920’s.
C. after World War II.
D. during the 1980’s.
Suppose that two types of indistinguishable coffee beans are imported to the U.S.: those
grown in the mountains of South America and those grown in greenhouses in Canada.
Mountain grown coffee produces a better tasting coffee, but buyers cannot distinguish
the beans by sight or smell. Only the importers know the source of the beans. Buyers
value mountain grown beans at $10 a pound and greenhouse grown beans at $3 a
pound. Assume that 70% of imported beans are mountain grown, and 30% are
greenhouse grown.
If a buyer offers $7 per pound, and the importer accepts the offer
A. the beans must be from Canada.
B. the beans must be mountain grown.
C. the beans may or may not be mountain grown.
D. both the buyer and the importer will gain surplus.
Suppose that the short run price elasticity of demand for electricity is 0.03 and the long
run price elasticity of demand is 1.2. One would classify the short run elasticity as being
___________ and the long run elasticity as being ____________.
A. elastic; elastic
B. elastic; inelastic
C. inelastic; unitary elastic
D. inelastic; elastic
The most efficient distribution of pollution abatement among polluters is
A. a geographically equal abatement.
B. a fixed percent reduction for all.
C. for large reductions from the largest polluters.
D. when the marginal cost of abatement is the same across all polluters.
The two parts of planned aggregate expenditure are ______ expenditures and ______
expenditures.
A. real; nominal
B. inflated; deflated
C. autonomous; induced
D. positive; normative
You own a pizza shop called “Pizzas’R’ Us”. Currently you are paying your cooks an
hourly wage of $20. You sell a medium pizza for $10. By hiring more cooks, you can
increase your pizza production as shown in the following table.
If you operate one hour every day, what is the marginal cost of hiring the 4th cook?
A. $10
B. $20
C. $40
D. $60
If the price elasticity of demand for a good is greater than one, then the demand for that
good, with respect to price, is:
A. elastic.
B. inelastic.
C. unitary elastic.
D. perfectly elastic.
Refer to the figure above. This economy might be operating at Point B if:
A. technology has made cattle herding obsolete.
B. the low-hanging fruit principle applies.
C. opportunity costs are too high to finance a movie.
D. resources that are best suited for making movies are being used to herd cattle, while
resources that are best used for herding cattle are being used to make movies.
In Econland autonomous consumption equals 700, the marginal propensity to consume
equals 0.80, net taxes are fixed at 50, planned investment is fixed at 100, government
purchases are fixed at 100, and net exports are fixed at 40. Planned aggregate
expenditure equals:
A. 990 + 0.20Y.
B. 900 + 0.80Y.
C. 940 + 0.80Y.
D. 990 + 0.80Y.
Curly and Moe are considering living alone or being roommates and splitting the rent
for the next twelve months. If they live alone, they each rent a one bedroom, one bath
apartment for $500 per month, while if they are roommates, they can split a two
bedroom, one bath apartment for $800 per month. The one difficulty they have is that
Moe snores very loudly. Curly estimates the cost of poor sleep due to Moe’s snoring at
$150 per month. Moe could obtain a snore-eliminating device for $50 per month.
Refer to the information given above. Curly would be willing to pay _____ per month
to eliminate Moe’s snoring.
A. exactly $50
B. no more than $100
C. up to $150
D. nothing
Refer to the figure above. Compare the degree of efficiency at each point. Which is
true?
A. Point A is less efficient than Point B.
B. Points A, B, and C are more efficient than Point D.
C. Points B and C are more efficient than either Point A or Point D.
D. Points A, B, C and D are equally efficient.
When actual output is less than potential output, there is ____ output gap and the rate of
inflation will tend to ____.
A. an expansionary; increase
B. an expansionary; decrease
C. a recessionary; decrease
D. a recessionary; increase
Which of the following is consistent with a political and legal framework that
discourages economic growth?
A. The allocation of bank credit by the government rather than by markets
B. A speedy approval process for new businesses
C. Agricultural prices that are allowed to vary according to market conditions
D. Taxation and regulation that are not very burdensome
One family earned an income of $28,000 in 1990. Over the next five years, their
income increased by 15%, while the CPI increased by 12%. After five years, this
family’s nominal income ______, and their real income ______.
A. decreased; also decreased
B. decreased; increased
C. increased; did not change
D. increased; also increased
In the market for labor, the demand function describes
A. the number of workers who are willing to work at each wage.
B. the output of workers who are paid a given wage.
C. the number of workers a firm is willing to hire at each wage.
D. the demand for the firm’s output.
Last year interest rates fell. The field of economics that would be most concerned with
this is:
A. microeconomics.
B. macroeconomics.
C. economic naturalism.
D. marginal economics.
Who of the following would be considered a discouraged worker?
A. Ray wants to work forty hours per week, but can only find work for twenty hours per
week.
B. Anna Marie has been looking for a job every day for the last month, but has not been
hired.
C. Frank would like to work, but has not looked for work because he believes no jobs
are available.
D. Melissa has a Ph.D. in physics, but is currently employed full time driving a taxi.
Firms will hire additional workers as long as the wage:
A. is less than the marginal product of labor.
B. equals the marginal product of labor.
C. is greater than the marginal product of labor.
D. is less than the value of the marginal product of labor.
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. This game:
A. is a prisoner’s dilemma.
B. is not a prisoner’s dilemma.
C. is an ultimatum bargaining game.
D. has no Nash equilibrium.
The link between the money supply and prices is strongest in:
A. the long run.
B. the short run.
C. a recession.
D. a boom.
Over the period from 1870 to 2008, the growth of real GDP per capita tended to be
more rapid between _____, particularly for _____.
A. 1870-1950; Japan
B. 1870-1950; the United States
C. 1870-1950; Canada
D. 1950-2008; Japan
Suppose that a vaccine is developed for a highly contagious strain of flu. The likelihood
that anyone will get this flu decreases as more people receive the vaccine. One of the
demand curves in the diagram reflects private benefits and the other reflects social
benefits.
Refer to the figure above. This externality could most effectively be corrected by:
A. taxing vaccines.
B. encouraging people to negotiate private payments to those who receive the vaccine.
C. subsidizing vaccines.
D. free provision of 275 vaccines.
If real GDP per person in a country equals $40,000 and 60 percent of the population is
employed, then average labor productivity equals:
A. $24,000.
B. $40,000.
C. $60,000.
D. $66,667.
Refer to the figure above. If the price of Good A is $5 and the price of Good B is $4,
then the rational spending rule predicts _____ units of Good A and ______ units of
Good B will be purchased.
A. 3; 3
B. 1; 3
C. 4; 2
D. 3; 2
Refer to the table above. According to the cost-benefit principle, the level of activity
that provides the largest net benefit is:
A. 1
B. 4
C. 5
D. 7
If the Federal Reserve wants to decrease the money supply, it should:
A. decrease reserve requirements.
B. decrease the discount rate.
C. decrease the interest that it pays on reserves.
D. conduct open-market sales.