Which of the following would increase the investment component of U.S. GDP?
A. You purchase a new clothes washing machine produced in the U.S.
B. You purchase a new clothes washing machine produced in France.
C. A laundry in Seattle purchases a new clothes-washing machine produced in the U.S.
D. A laundry in Mexico purchases a new clothes-washing machine produced in the U.S.
Daily Supply and Demand: Oranges in Hurricane Alley
Refer to the figure above. If the supplier sells the tenth pound of oranges to the most
eager buyers for $8, the seller is _____ better off than before and the buyer is ______
better off than before.
A. $8; $0
B. $6; $2
C. $4; $4
D. $2; $6
Suppose that the price of chicken rises sharply compared to the price of turkey. In
response, consumers buy more turkey and less chicken than they did in the CPI base
year. In this situation the CPI will tend to ______ inflation as a result of ______ bias.
A. overstate; substitution
B. understate; substitution
C. accurately measure; substitution
D. overstate; quality adjustment
Refer to the figure above. In the matrix above:
A. Jess has a dominant strategy, but Cory does not.
B. Cory has a dominant strategy, but Jess does not.
C. both Cory and Jess have the same dominant strategy.
D. neither Cory nor Jess has a dominant strategy.
Suppose that you are an economic researcher, and you have access to detailed
information about all of the firms in a given geographic area. You would conclude that
the pollution reduction policy in that area is efficient if you observe that
A. all firms produce approximately the same amount of pollution.
B. the cleanest firms are also the most profitable.
C. all firms have approximately equal marginal costs of reduction at current emission
levels.
D. all firms currently use the same pollution reduction technology.
The self-correcting tendency of the economy means that rising inflation eventually
eliminates:
A. expansionary gaps.
B. recessionary gaps.
C. exogenous spending.
D. unemployment.
In professional baseball, some players earn over $6 million per year while the average
salary is $1.2 million. The explanation for this rests with
A. a winner-take-all labor market.
B. the best players being nearly six times better than average players.
C. undisciplined owners overspending on players’ salaries.
D. racial discrimination.
In the short run with predetermined prices, when output is less than planned aggregate
expenditure, firms will:
A. reduce production.
B. increase production.
C. increase planned aggregate expenditure.
D. decrease planned aggregate expenditure.
The recession of 2007-2009 happened in part because, after the housing bubble burst in
2006, disruptions in the financial market made it difficult:
A. for government to finance deficit spending.
B. to fight inflation.
C. for businesses and consumers to borrow money.
D. to shift the PAE line downward.
The decision about how much money to hold is an application of the:
A. scarcity principle.
B. principle of comparative advantage.
C. equilibrium principle.
D. cost-benefit principle.
Suppose that the latest Indiana Jones movie played in theaters first, where it was sold
out during its opening week. Several months later it was available on pay-per-view TV.
Two years later it was shown on CBS, a broadcast television network.
When the movie was playing at the theater it was a _______ good, when it was
available on pay-per-view TV it was a _______ good and when it was shown on CBS it
was a _______ good.
A. private; public; public
B. private; collective; public
C. collective; private; commons
D. collective; commons; public
Everyone in the neighborhood has been complaining about the deteriorating condition
of the park, but nobody has cleaned it up. Why not?
A. There is an excess demand for parks in the neighborhood.
B. There is an excess supply of parks in the neighborhood.
C. The reservation price for a clean park exceeds the cost of cleaning it.
D. No single person’s reservation price to clean the park makes it worth cleaning it.
Refer to the figure above. At the profit-maximizing level of output, the monopolist
collects total revenues equal to the area:
A. 0BKA.
B. 0CEA.
C. 0GIH.
D. 0GLA.
Diminishing returns to capital is a consequence of firms’ incentives to use each piece of
capital as productively as possible and illustrates the:
A. principle of comparative advantage.
B. principle of increasing opportunity costs.
C. scarcity principle.
D. cost-benefit principle.
A police department is trying to allocate crime control resources between murder and
burglary. Detectives cost $40,000 each. Suppose that she marginal benefit of one less
murder is $20,000 while the marginal benefit of one less burglary is $1,000. The
number of murders and burglaries that occur at different levels of detective allocation is
shown in the table.
The marginal benefits of 1, 2, 3, and 4 detectives being assigned to murder prevention
are
A. 4, 3, 2, and 1.
B. $4,000, $3,000, $2,000, and $1,000.
C. $16,000, $13,000, $11,000, and $10,000.
D. $80,000, $60,000, $40,000, and $20,000.
Refer to the figure above. When the market is unregulated, producer surplus equals:
A. (DB) × (BC).
B. ½ × (DG) × (GF).
C. ½ × (DB) × (BC).
D. ½ × (FH) × (HC).
Refer to the figure above. When the firm uses 9 employee-hours, it will collect total
revenues of:
A. $240.
B. $160.
C. $120.
D. $18.
Technological advances shift the demand for labor
A. to the left.
B. to the right.
C. to the left if technology is a complement of labor, but to the right if it is a substitute.
D. to the right if technology is a complement of labor, but to the left if it is a substitute.
If the nominal interest rate is above the equilibrium value, then the quantity demanded
of money is ______ than the quantity supplied of money, bond prices will ____, and the
nominal interest rate will ____.
A. greater; fall; increase
B. less; rise; decrease
C. greater; rise; increase
D. less; fall; increase
If average labor productivity increases, real GDP per person:
A. increases.
B. decreases.
C. remains constant.
D. may increase or decrease depending on the change in the share of population
employed.
If a bank’s desired reserve/deposit ratio is 0.33 and it has deposit liabilities of $100
million and reserves of $50 million, it:
A. has too few reserves and will reduce its lending.
B. has too many reserves and will increase its lending.
C. has the correct amount of reserves and outstanding loans.
D. should increase the amount of its reserves.
A government policy of providing job training for unskilled youths is an example of a
policy to promote economic growth by:
A. increasing human capital.
B. increasing physical capital.
C. improving technology.
D. increasing the availability of natural resources.
This graph shows one consumer’s demand for ice cream at the student union:
During a regular semester, there are 500 students. Each student’s demand for ice cream
is as depicted above. When the price of one scoop of ice cream is $2.00, those 500
students purchase a total of
A. 2,000 scoops of ice cream
B. 2,500 scoops of ice cream
C. 3,000 scoops of ice cream
D. 5,000 scoops of ice cream
Suppose a firm collects $90 in revenues when it sells 4 units, $100 in revenues when it
sells 5 units, and $105 when it sells 6 units. You could infer the firm is likely to be:
A. a perfect competitor.
B. a cost minimizer.
C. a perfect competitor or a monopolist.
D. a monopolist.
According to the text, the only sensible criterion for allocating scarce health care
resources is
A. determined by length of time on a waiting list.
B. based on the willingness to pay of the recipient of the care.
C. based on the degree of suffering of the recipient of the care.
D. a cost-benefit test.
Suppose that the marginal benefit of having a security camera in the library is given by
MB, at the supermarket is given by MB1 and at the museum is given by MB2. All
values are per week.
If the weekly marginal cost of security cameras is given by MC, the optimal number of
security cameras that should be mounted in the library is ____, the optimal number of
security cameras that should be mounted in the supermarket is ____, and the optimal
number of security cameras that should be mounted in the museum is ____
A. 30; 40; 50.
B. 50; 50; 50.
C. 50; 40; 30.
D. 40; 50; 60.
The following graph depicts demand.
Refer to the figure above. The slope of the demand curve (if you ignore the negative
sign) is:
A. 2.
B. 1.5.
C. 1.
D. 0.5.
The slowdown in the growth of real wages in the United States since 1973 is consistent
with a concurrent:
A. slowdown in productivity gains.
B. slowdown in the growth of the working age population.
C. slowdown in immigration into the country.
D. speedup in the rate of inflation.
This graph describes the production possibilities on the island of Genovia:
The opportunity cost of producing one ton of agricultural products in Genovia is:
A. 1,000 cars.
B. 1 car.
C. 1/5 of a car.
D. 1/50 of a car.
The theory of the disappearing political discourse is an application of
A. the lemons model.
B. adverse selection.
C. risk averse voters.
D. statistical discrimination.
During the Christmas shopping season, the demand for money increases significantly.
To offset the increase in money demand, the Fed must ______ the money supply, which
will put ______ pressure on nominal interest rates.
A. increase; downward
B. increase; upward
C. decrease; downward
D. decrease; upward