If a firm spends $400 to produce 20 units of output and spends $880 to produce 40
units, then between 20 and 40 units of output, the marginal cost of production is:
A. $20.
B. $24.
C. $22.
D. $480.
A freeway without any tolls between 12am and 5am is an example of a ______ good.
A. collective
B. public
C. private
D. commons
An inflation dove is someone who
A. easily anchors inflation expectations.
B. is not strongly committed to maintaining low inflation.
C. is committed to maintaining low inflation even at the cost of reduced output and
employment.
D. believes monetary policy is more powerful than fiscal policy.
Mexico and the members of OPEC produce crude oil. Realizing that it would be in their
best interests to form an agreement on production goals, a meeting is arranged and an
informal, verbal agreement is reached. If both Mexico and OPEC stick to the
agreement, OPEC will earn profits of $200 million and Mexico will earn profits of $100
million. If both Mexico and OPEC cheat, then OPEC will earn $175 million and
Mexico will earn $80 million. If only OPEC cheats, then OPEC earns $185 million and
Mexico $60 million. If only Mexico cheats, then Mexico earns $110 million and OPEC
$150 million. You may find it helpful to fill in the following payoff matrix in order to
answer the question below.
Refer to the information given above. The outcome of this game is:
A. a Nash equilibrium with both Mexico and OPEC not cheating.
B. a Nash equilibrium with both Mexico and OPEC cheating.
C. a Nash equilibrium with Mexico cheating and OPEC not cheating.
D. a Nash equilibrium with Mexico not cheating and OPEC cheating.
Two firms can use five different technologies to produce the same quantity of output:
1,2,3,4 and 5. The first technology is the cheapest, but also the dirtiest. The fifth
technology is the most expensive, but results in the lowest levels of pollution. The
amount of pollution emitted by each firm and the cost of the technologies are shown in
the table.
Suppose that the government imposes a tax of $150 per ton of pollution. As a result,
Acme adopts technology __________, and FirmCo adopts technology _______.
A. 2; 1
B. 3;2
C. 3; 3
D. 4; 3
Earth Movers & Shakers operates 3 iron ore mines. This table shows their daily
production rates and the current number of miners at each mine. All of the miners work
for the same wage and each miner in any given mine produces the same number of tons
as each other miner in that mine.
Refer to the table above. The daily opportunity cost of moving one miner from Scraping
Bottom to Middle Drift is:
A. less than 0.
B. 3 tons.
C. 4 tons.
D. 5 tons.
If all taxpayers pay the same amount of tax, the tax is termed a(n)
A. proportional tax.
B. progressive tax.
C. head tax.
D. per unit tax.
Managers contribute to increased average labor productivity in each of the following
ways EXCEPT by:
A. developing new products.
B. obtaining financing.
C. assigning workers to jobs.
D. dealing with suppliers.
In order for a firm to choose to produce a positive amount of output, it must be the case
that
A. total revenues are greater than total costs.
B. total revenues are greater than fixed costs.
C. total revenues equal total costs.
D. total revenues are greater than or equal to variable costs.
The exchange rate that equates the quantities of the currency supplied and demanded in
the foreign exchange market is called the ______ exchange rate.
A. real
B. market equilibrium value of the
C. target
D. fixed
The relationship between labor usage and output at the local coffee shop is summarized
in the table below. The price of a cup of espresso is $1.25 and no other inputs are
required.
The marginal product of the fourth worker is _______.
A. 70
B. 60
C. 17.5
D. 10
Acme Dynamite has $2000 of variable costs and $500 of fixed costs when its output is
250 units. It sells each unit for $25.
Profit at this output level is
A. $6,250
B. $5,750
C. $4,250
D. $3,750
People are willing to pay more for collectible figurines if they expect the value of those
figurines to increase. The value of collectibles increases more if the figurine is
relatively rare. Manufacturers increase the credibility of their claim that the collectible
will increase in value when they
A. advertise in the Sunday newspaper insert.
B. publicly break the molds used for the figurines after producing a limited number.
C. include the words “limited edition” in the title of the figurine.
D. make figurines that are applicable only to specific holidays or seasons.
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.
The shift in supply from Supply A to the current Supply means that if demand increases
as predicted (to Demand, predicted)
A. wages will have to rise to $60 to avoid a nursing shortage.
B. wages will have to rise to $50 to avoid a nursing shortage.
C. a wage of $40 will be sufficient to achieve equilibrium.
D. a wage of $50 will yield an excess supply of nurses.
Conspicuous consumption is an effective signal of high ability if
A. observers of the conspicuous consumption do not know what the person does for a
living.
B. the conspicuous consumer is famous.
C. the conspicuous consumer has a job that pays a commission or bonus.
D. the conspicuous consumer has a job that pays a flat salary.
Mexico and the members of OPEC produce crude oil. Realizing that it would be in their
best interests to form an agreement on production goals, a meeting is arranged and an
informal, verbal agreement is reached. If both Mexico and OPEC stick to the
agreement, OPEC will earn profits of $200 million and Mexico will earn profits of $100
million. If both Mexico and OPEC cheat, then OPEC will earn $175 million and
Mexico will earn $80 million. If only OPEC cheats, then OPEC earns $185 million and
Mexico $60 million. If only Mexico cheats, then Mexico earns $110 million and OPEC
$150 million. You may find it helpful to fill in the following payoff matrix in order to
answer the question below.
Refer to the information given above. To Mexico, the payoff to cheating is either:
A. $60 million or $100 million.
B. $150 million or $200 million.
C. $80 million or $110 million.
D. $100 million or $110 million.
The introduction of word processing software that increases the demand for workers
with computer skills relative to those without such skills is an example of:
A. increasing reservation prices.
B. skill-biased technological change.
C. the diminishing marginal product of labor.
D. globalization.
Martha did not like her job as a receptionist, so she quit the job and is looking for one
that better suits her artistic talents. Ting Pei would like to work, but employers are not
willing to hire him because he does not speak English. Martha is ______ unemployed
and Ting Pei is ______ unemployed.
A. frictionally; structurally
B. structurally; frictionally
C. cyclically; structurally
D. structurally; cyclically
A decrease in the price of pizza will cause a(n):
A. increase in demand.
B. increase in quantity demanded.
C. decrease in quantity demanded.
D. decrease in the number of consumers.
Given the following data for the economy, compute the value of GDP.
A. 56
B. 83
C. 90
D. 141
Net exports equal:
A. the value added of exports.
B. exports plus imports.
C. exports minus imports.
D. exports minus depreciation.
Which of the following is an example of a capital good?
A. A new car sold to a family
B. A metal-stamping machine used to produce cars sold to an automaker
C. A new CD player sold to an automaker for installation in a car
D. A new CD player sold to a teenager
Suppose that the marginal benefit of having a security guard at the airport is MB1, at the
bank is MB2, and at the mall is MB3. The marginal cost of assigning security guard is
the same for all three places, and it is represented by MC2.
The marginal cost curves are upward-sloping because the first guards assigned are the
guards with the lowest opportunity costs for performing this task. This is referred to as
the
A. law of demand.
B. law of supply.
C. law of diminishing marginal utility.
D. low-hanging-fruit principle.
Suppose a jar of orange marmalade that is ultimately sold to a customer at The Corner
Store is produced by the following production process:
What is the sum of the value added of all the firms?
A. $2.50
B. $2.75
C. $4.50
D. $5.25
Suppose there are three kinds of people living in Midtown: people who do not have a
lot of money, and so cannot afford to conspicuously consume; people who come from
old money, all of whom believe that conspicuous consumption is in exceedingly poor
taste; and the newly rich, all of whom engage in conspicuous consumption.
One reason that members of families that have been wealthy for many generations do
not engage in conspicuous consumption in Midtown is that
A. they want to be mistaken for people who are not wealthy.
B. it is too costly a signal to fake.
C. they do not care what other people think of them.
D. they do not want others to think they are newly rich.
An increase in the interest rate directly affects ______, but also has an indirect effect on
______ because of its effect on exchange rates.
A. planned consumption and investment; government spending
B. planned consumption and investment; net exports
C. net exports; planned consumption and investment
D. net exports; government spending
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 Joe, leaving his price at $3 is a:
A. revenue maximizing strategy.
B. dominant strategy.
C. dominated strategy.
D. profit maximization strategy.
When unemployment insurance benefits exceed the wages a worker could earn when
employed, the worker will have an incentive to:
A. remain unemployed longer than otherwise.
B. have his/her unemployment insurance benefits cancelled.
C. accept the first job offered.
D. decrease his/her reservation price.
The economic theory of business behavior assumes that the goal of a firm is to:
A. earn an accounting profit.
B. earn an economic profit.
C. earn maximum revenue.
D. maximize its profit.
Investment spending includes spending on:
A. durables, nondurables, and services.
B. stocks, bonds, and other financial instruments.
C. capital goods, residential housing, and changes in inventories.
D. goods and services by federal, state, and local governments.
Information about the quality of a product is
A. intangible, and therefore not subject to economic principles.
B. impossible to objectively assess, and therefore not subject to economic principles.
C. both beneficial to have and costly to obtain, and therefore subject to economic
principles.
D. subject to economic principles only when it is paid for, for example by subscribing
to Consumer Reports or by hiring a financial advisor.
Suppose the price P on a given demand curve results in a price elasticity of demand
equal to 1. This price is on the ______ portion of the demand curve.
A. elastic
B. unitary elastic
C. inelastic
D. steepest
Refer to the figure above. The growth of access to the Internet would cause
A. the marginal benefit curve to shift from MB2 to MB1.
B. the marginal benefit curve to shift from MB1 to MB2.
C. the marginal cost curve to shift from MC2 to MC1.
D. the marginal cost curve to shift from MC1 to MC2.
Refer to the figure above. If Row Resorts decides to lower its rates for the summer,
Column Cruises would make the most profit if it:
A. kept its rates high for the summer.
B. also lowered its rates for the summer.
C. entered into a cartel with Row Resorts and agreed to jointly reduce rates.
D. It doesn’t matter which strategy is chosen because Column Cruises will have the
same payoff in either case.