Starting from potential output, if firms become less optimistic and decide to decrease
their investment in new capital, then this will shift the ______ curve to the left and
generate ______.
A. aggregate demand; a recessionary output gap
B. aggregate supply; a recessionary output gap
C. aggregate demand; an expansionary output gap
D. aggregate supply; an expansionary output gap
Suppose the table below describes the demand for a good produced by monopolist.
The total revenue from selling 6 units is ______, and the marginal revenue of selling the
6th unit is ______.
A. $5; 5
B. $30; 0
C. $24; $5
D. $30; $1
Refer to the figure above. Suppose supply increases substantially. Then:
A. demand will also increase.
B. the quantity demanded will increase.
C. the quantity demanded will decrease.
D. price will also increase substantially.
In which of the following markets do firms sell the same standardized product?
A. Four-door cars
B. 2% milk
C. Desktop computers
D. Sandwiches
The time between when income taxes are cut and when consumption spending
increases is an example of:
A. the outside lag of macroeconomic policy.
B. the inside lag of macroeconomic policy.
C. the outside lag of monetary policy.
D. the inside lag of fiscal policy.
If the money supply equals 1,000, velocity equals 5, and real GDP equals 2,500, then
the price level equals:
A. 2.
B. 2.5.
C. 5.
D. 5,000.
According to John Rawls, if people had to choose an income distribution without any
knowledge of their own talents and abilities, they would likely prefer an income
distribution that:
A. rewards hard work.
B. rewards innate intelligence
C. rewards creativity.
D. gives everyone with an equal share.
Shifts in ______ can return the economy to long-run equilibrium.
A. the AD curve only
B. the AS curve only
C. either the AD curve or the AS curve
D. the PAE line only
Mike and Tom debone chicken breasts for Ted’s Chicken Co. Mike is new and can only
debone 30 chicken breasts per hour by hand, while Tom’s experience allows him to
debone 60 chicken breasts per hour by hand. Ted buys one new machine that can
debone 100 chicken breasts per hour. Both Mike and Tom work the same 40 hours per
week, but one of them is assigned to operate the machine instead of deboning the
chicken breasts by hand. To obtain maximum average hourly productivity, ______ is
assigned to use the machine and their combined average hourly productivity as a team
is ______ chicken breasts
A. Mike; 65
B. Mike; 80
C. Tom; 65
D. Tom; 80
Which of the following factors is not part of an individual’s stock of human capital?
A. Intelligence
B. Years of education
C. Employment status
D. Initiative
When an individual deposits currency into a checking account:
A. bank reserves increase, which allows banks to lend more and increases the money
supply.
B. bank reserves decrease, which reduces the amount banks can lend and reduces the
growth of the money supply.
C. bank reserves are unchanged.
D. bank liabilities increase, which reduces the amount banks can lend and reduces the
growth of the money supply.
As consumers’ incomes increase, the demand for ground beef decreases. Ground beef is
called a(n):
A. normal good.
B. complement good.
C. substitute good.
D. inferior good.
Suppose the figure below shows the demand curve, marginal revenue curve and
marginal cost curve for a monopolist.
At the monopolist’s profit-maximizing level of output, deadweight loss equals the area:
A. C0N
B. ALN
C. JLN
D. JKN
Assume both the demand and the supply of beef decrease. Which of the following
outcomes is certain to occur?
A. The equilibrium price of beef will rise.
B. The equilibrium quantity of beef will rise.
C. The equilibrium price of beef will fall.
D. The equilibrium quantity of beef will fall.
A firm earns a normal profit when its:
A. accounting profit is positive.
B. economic profit is positive.
C. economic profit is zero.
D. accounting profit is zero.
Technological change that affects the marginal products of high-skilled and low-skilled
workers differently is called ______ technological change.
A. capital-labor
B. skill-biased
C. marginal-productivity
D. high-low
The figure below shows the supply and demand curves for oranges in Smallville.
The marginal buyer values the tenth pound of oranges at ______.
A. $0
B. $4
C. $8
D. $12
Which of the following would be most vulnerable to the tragedy of the commons?
A. Restrooms in a restaurant
B. Timber on public land
C. Cattle on a ranch
D. Apples in Phoebe’s apple orchard
Refer to the figure above. In the original market equilibrium:
A. 50 cups of coffee are sold for $1.00 each.
B. 50 cups of coffee are sold for $2.50 each.
C. 40 cups of coffee are sold for $2.00 each.
D. 60 cups of coffee are sold for $1.50 each.
Refer to the figure below.
Based on the figure, when PAE = 400 + 0.5Y, short-run equilibrium output equals:
A. 1,200.
B. 400.
C. 600.
D. 800.
When actual output equals potential output and the inflation rate is equal to the
expected rate of inflation, the economy is said to be in ______ equilibrium.
A. long-run
B. recessionary
C. expansionary
D. short-run
Refer to the figure below. Total utility increases with each additional pizza up to the
______ and then declines, but marginal utility ______ with each additional pizza
consumed.
A. 7th pizza; increases
B. 6th pizza; increases
C. 5th pizza; stays the same
D. 6th pizza; decreases
Which of the following is an example of the bequest 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. Chris keeps $15,000 in a money market account to pay expenses in case he loses his
job.
The figure below shows a single consumer’s demand for ice cream at the student union.
During the summer, there are 300 students on campus. Each student’s weekly demand
for ice cream is shown above. When the price of ice cream is $2.00 per scoop, those
300 students purchase a total of ______ scoops per week from the student union.
A. 1,200
B. 1,500
C. 1,800
D. 3,000
Assume that each day ten thousand children watch Sesame Street on public television
and that watching Sesame Street generates a benefit of $100 per child per year. Once a
year, public televisions hold a pledge drive asking viewers to make voluntary
contributions in order to keep the programming available to everyone.
Suppose each parent has just one child who watches Sesame Street. Each parent has a
private incentive to contribute ______ during the pledge drive.
A. $0
B. $100
C. $10,000
D. $1,000,000
If potential output equals $8 billion and actual output equals $9 billion, then this
economy has a(n):
A. budget deficit.
B. trade deficit.
C. expansionary gap.
D. recessionary gap.
In the basic Keynesian model, a decrease in transfer payments:
A. reduces short-run equilibrium output.
B. increases short-run equilibrium output.
C. reduces potential output.
D. increases potential output.
If the demand for salad dressing increases when the price of lettuce decreases, the
cross-price elasticity of demand between salad dressing and lettuce will be ______
because these two goods are ______.
A. equal to 1; inelastic
B. zero; inferior
C. negative; substitutes
D. negative; complements
Suppose there are three power-generating plants, each of which has access to 5 different
production processes. The table below summarizes the cost of each production process
and the corresponding number of tons of smoke emitted each.
process
It would cost Firm X ______ to reduce emissions by one ton if it currently emits 3 tons,
and ______ to reduce emissions by one ton if it currently emits 2 tons.
A. $14; $25
B. $14; $16
C. $16; $25
D. $30; $55
One thousand adults live in Milltown. Every day, they all leave work at 4:30 p.m.,
arrive home at exactly 5:00 p.m., and go to bed at 9:00 p.m. Three fundraisers, Alpha,
Beta, and Charlie, have targeted Milltown’s population. To get a donation, they must
call Milltown’s residents after they get home from work but before they go to bed.
Because the charities raising the funds are identical, the first to call a willing donor will
get the donation. Calls made by the fundraisers will tend to be:
A. evenly distributed throughout the evening.
B. clustered near 5:00 p.m.
C. clustered near 6:00 p.m.
D. clustered near 7:00 p.m.
Suppose that all workers value a safe job $2,000 per year more than a risky job. The
cost to firms of providing a safe job is $700 per year for each worker. Firms currently
pay workers $35,000 per year, without any effort to improve safety. If new firms began
to offer workers $34,000 per year and safe jobs, then the total cost of hiring a worker
would be ______ at the new firms and ______ at the existing firms.
A. $33,700; $35,700
B. $34,700; $35,000
C. $35,000; $34,700
D. $35,700; $33,700
In contrast to first-dollar insurance coverage, one concern about HMOs is that:
A. the price of medical care will be too low.
B. acute treatment will be overemphasized.
C. patients will receive more medical care than they need.
D. patients will not receive adequate medical care.
If a tax imposed in a market generates deadweight in that market, then the tax:
A. will necessarily lower economic surplus.
B. could still increase economic surplus, depending on how the tax revenue is spent.
C. will never be approved by voters.
D. will generate very little tax revenue.