Frictional unemployment may be economically beneficial if:
A. its psychological costs are borne only by the unemployed worker.
B. losses in economic output are small.
C. it leads to a better match between worker and job.
D. the social costs are limited to smaller tax revenues collected.
Refer to the table below. The marginal cost of the 3rd unit of this activity is:
A. $30
B. $25
C. $20
D. $10
Which of the following is an example of an intermediate 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
An economy with an expansionary gap will, in the absence of stabilization policy,
eventually experience a(n) ______ in the inflation rate, leading to a(n) ______ in
output.
A. increase; increase
B. increase; decrease
C. decrease; increase
D. decrease; decrease
In the market for coffee, for many consumers:
A. tea is a substitute.
B. non-dairy creamer is a substitute.
C. cola beverages are complements.
D. coffee mugs are substitutes.
A Luddite is:
A. someone who opposes the introduction of new technologies.
B. a worker whose real wage rises as a result of globalization.
C. a fictional character from American folk history.
D. a consumer who refuses to buy imported goods, even if they are cheaper.
In a certain economy, the components of planned spending are given by:
C = 500 + 0.8(Y – T) – 300r
Ip = 200 – 400r
G = 200
NX = 10
T = 150
Given the information about the economy above, which expression below gives
planned aggregate expenditure (PAE)?
A. [790 – 700r] + 0.8Y
B. [790 ” 700r]
C. [910 ” 700r]
D. [910 ” 700r] + 0.8Y
Suppose that both supply and demand for iPads decrease. One can predict that the:
A. equilibrium price will rise but the equilibrium quantity can increase or decrease.
B. equilibrium price and quantity will decrease.
C. equilibrium price and quantity will rise.
D. equilibrium quantity will fall but the equilibrium price can rise or fall.
Jordan has the following assets and liabilities:
Suppose that Jordan wins $100,000 in the lottery. If he uses that money to pay off his
mortgage, his wealth would ______; if he puts that money in his checking account, his
wealth would ______.
A. increase to $209,000; not change
B. not change; increase to $207,000
C. increase to $209,000; increase to $209,000
D. increase to $207,000; not change
A tax cut that affects both aggregate demand and potential output is predicted to _____
the long-run equilibrium level of output, while inflation _____.
A. increase; increases
B. increase; decreases
C. increase; may increase, decrease, or remain unchanged
D. decrease; decrease
Refer to the figure above. The equilibrium price in this market is:
A. nonexistent.
B. between $40 and $50.
C. less than $40.
D. greater than $50.
In the Nash equilibrium of a prisoner’s dilemma:
A. there is no cash left on the table.
B. there is unrealized opportunity for both to gain.
C. total economic surplus is maximized.
D. both players have equal payoffs.
Alpha has $40,000 of capital per worker, while Beta has $5,000 of capital per worker.
In all other respects, the two countries are the same. According to the principle of
diminishing returns to capital, an additional unit of capital will increase output ______
in Alpha compared to Beta, holding other factors constant.
A. more
B. less
C. not at all
D. by the same amount
Suppose last year Moe faced a 25% marginal tax rate. This year tax rates increased and
now Moe faces a 30% marginal tax rate. Moe may choose to work fewer hours this year
because:
A. working hours tend to increase over a worker’s life in the U.S.
B. the opportunity cost of leisure has increased.
C. the opportunity cost of leisure has fallen.
D. he must work more hours to have the same after-tax income this year.
Holding other factors constant, if computers allow factory workers to manufacture more
products per hour, then the real wages of factory workers will ______ and employment
of factory workers will _____.
A. increase; increase
B. increase; decrease
C. decrease; not change
D. decrease; increase
If two countries are economically identical except that citizens in one country have
more leisure time, then the level of GDP:
A. will be higher in the country with more leisure time.
B. will be higher in the country with less leisure time.
C. will be the same in both countries.
D. will be greater than the level of economic well being in each country.
Two firms, Acme and FirmCo, have access to five production processes, each of which
has a different cost and gives off a different amount of pollution. The daily costs of the
processes and the corresponding number of tons of smoke emitted are shown in the
table below.
Process
(smoke/day) A
(10 tons/day) B
(8 tons/day) C
(6 tons/day) D
(4 tons/day) E
(2 tons/day)
Cost to Acme ($/day) $750 $800 $1,000 $1,400 $2,000
Cost to FirmCo ($/day) $500 $750 $1,200 $2,200 $4,000
Suppose the firms are both currently using process A. If the government imposes a tax of
$110 per ton of smoke emitted, a total of ______ tons of smoke will be emitted each day,
and the total cost to society of this policy will be ______ per day.
A. 14; $500
B. 16; $250
C. 18; $50
D. 20; $0
If the natural rate of unemployment equals 6 percent and the actual rate of
unemployment equals 5 percent, then cyclical unemployment equals:
A. -1 percent.
B. 1 percent.
C. -1.2 percent.
D. 11 percent.
Workplace safety laws are ______ in developed countries because _____.
A. rare; policy makers believe that they undermine the free market system
B. rare; corporate lobbyists convince legislators to vote against them
C. necessary; without them firms that hire workers in competitive labor markets would
have no incentive to provide safe workplaces
D. common; many policy makers believe that labor markets are not perfectly
competitive and so firms will not provide the optimal level of safety
If you knew that two countries had the same level of real GDP per person, what
additional piece of information would help you determine in which country people had
a better standard of living?
A. The total physical volume of output for each country
B. The population of each country
C. The average number of hours worked per week in each country
D. The average level of prices in each country
Suppose the elasticity of labor demand is less than 1 in absolute value. Imposing a
minimum wage above the equilibrium wage will:
A. increase the earnings of every worker.
B. result in full employment.
C. increase the earnings of workers as a group.
D. make few workers better off.
According to Okun’s law, when the output gap is positive, cyclical unemployment:
A. equals structural unemployment.
B. equals frictional unemployment.
C. equals zero.
D. is negative.
By changing incentives, reductions in marginal tax rates can increase potential output in
each of the following ways except by encouraging households to:
A. enjoy more hours of leisure.
B. work more hours.
C. take more entrepreneurial risk.
D. invest in more human capital.
Gino’s Pizza shop hires workers in a competitive market to make pizza. The ingredients
required to make each pizza cost $5. Daily output at Gino’s Pizza varies with the
number of workers hired, as shown in the table below:
If pizzas sell for $8 each, what is the value marginal product for the 4th worker?
A. $96 per day
B. $112 per day
C. $48 per day
D. $128 per day
When a Peruvian buys a U.S. government bond, from the perspective of Peru, this is
a(n):
A. import.
B. export.
C. capital outflow.
D. capital inflow.
Smith and Jones comprise a two-person economy. Their hourly rates of production are
shown below.
Suppose Smith and Jones begin by producing 16 computers and 0 calculators per hour.
If they wish to produce 14 computers and 40 calculators per hour efficiently, then Smith
should spend ______, and Jones should spend ______.
A. 1 hour on computers; 40 minutes on computers and 20 minutes on calculators
B. 1 hour on computers; 20 minutes on computers and 40 minutes on calculators
C. 30 minutes on each; 30 minutes on each
D. 45 minutes on computers and 15 on calculators; 1 hour on calculators
The figure below shows a single consumer’s demand for ice cream at the student union.\
If there are 1,000 students on campus during a regular semester, and each student’s
weekly demand for ice cream is shown above, then when the student union charges
$3.00 per scoop, those 1,000 students purchase a total of ______ scoops per week.
A. 400
B. 1,000
C. 2,000
D. 4,000
Refer to the figure above. If demand were to shift from D1 to D2 at the same time
supply were to shift from S1 to S2:
A. the equilibrium quantity would increase and the equilibrium price would remain the
same.
B. the equilibrium quantity would increase and the equilibrium price would increase.
C. the equilibrium quantity would remain the same and the equilibrium price would
increase.
D. the equilibrium quantity would decrease and the equilibrium price would remain the
same.
When inflation turns out to be different from what was expected, purchasingpower is
______.
A. destroyed
B. redistributed
C. increased
D. decreased
Any value of the money supply chosen by the Federal Reserve implies a specific value
for ______.
A. potential output
B. the nominal interest rate
C. government purchases
D. the budget deficit