Refer to the figure above. After the price ceiling at price G is imposed, producer surplus
_________ and is represented by the area _______.
A. increases; DBC
B. decreases; DGF
C. increases; 0GFQ2
D. decreases; 0DFQ2
Pat has 4 hours to spend either studying for a test or playing a new video game. If Pat
spends all of that time studying, Pat can score a 92 on the test. If Pat plays for 1 hour,
Pat’s test score falls 5 points. For playing a second hour, Pat’s score falls by another 7
points. Playing for a third hour will lower Pat’s score by another 10 points.
Refer to the information above. The intercept on the test score axis of Pat’s PPC is:
A. 100
B. 92
C. 5 hours
D. 4 hours
In recent decades, slower growth in the demand for labor accompanied by an
accelerated growth in the supply of labor in the U.S. explains:
A. slower real wage growth and double-digit rates of unemployment.
B. slower real wage growth and increasing wage inequality.
C. slower real wage growth and an increase in the number of people with jobs.
D. increasing wage inequality and double-digit rates unemployment.
Easy monetary policy will ______ net exports as a result of a ______ currency.
A. increase; stronger
B. increase; weaker
C. decrease; weaker
D. decrease; stronger
Suppose Marion and Gab must both choose between two jobs, a safe job that pays
$250/week and a risky job that pays $300/week. The value of safety to each is
$75/week. Each also values having a higher income than the other at $75/week. Having
the same job (income) as the other means no change in satisfaction. The following
payoff matrix shows the income (satisfaction) each would get based on the other
decision.
Suppose that Gab chooses the safe job, Marion is most likely to choose the ____ and
obtain a total of ____ satisfaction.
A. safe job; $325
B. safe job; $250
C. risky job; $375
D. risky job; $300
Suppose you quit your job to start a business. In the first month, your total revenue was
$6,000. You paid:
$1,000 in monthly rent for office space.
$200 in monthly rent for equipment.
$3,000 to your workers in wages for the month.
$1,000 for the supplies you used that month.
You determine that your profit that month was negative $200. Why?
A. You did the math incorrectly.
B. You accounted for lost salary of $200.
C. You accounted for lost salary of $1,000.
D. Your equipment rent is an implicit cost.
Suppose that the equilibrium price of T-shirts increases and the equilibrium quantity
falls. Which of the following best fits the observed data?
A. An increase in demand with supply constant.
B. A decrease in supply with demand constant.
C. An increase in demand coupled with an increase in supply.
D. A decrease in demand with supply constant.
To compare the change in physical production (GDP) between 2000 and 2006, we
should compare ______ GDP in 2000 with ______ GDP in 2006.
A. real; real
B. real; nominal
C. nominal; nominal
D. current dollar; current dollar
Real GDP per person can increase:
A. only if the share of the population employed increases.
B. only if the share of the population employed decreases.
C. only if average labor productivity increases.
D. if the share of population employed and/or average labor productivity increases.
When the coupon rate on newly-issued bonds decreases from 6% to 5%, the prices of
existing bonds:
A. increase.
B. decrease.
C. remain unchanged.
D. decrease only if the coupon rate is less than 5%.
According to the textbook, the percentage of gross domestic product devoted to
healthcare between the years 1940 and 2000
A. declined from 4% to 2%.
B. increased slightly from 4% to 6%.
C. increased sharply from 4% to 14%.
D. increased exponentially from 4% to 40%.
The towns of Jekyll and Hyde each have a labor force of 2,000 people. In Jekyll, 500
people were unemployed for the entire year, while the rest of the labor force was
employed continuously. In Hyde, every member of the labor force was unemployed for
three months and was employed for nine months. The average duration of
unemployment spells over the year was ______ months in Jekyll and ______ months in
Hyde.
A. 3; 3
B. 3; 9
C. 12; 3
D. 12; 9
This table shows demand for shoes in a 3 consumer market:
What is the market demand for shoes when the price is $50 per pair?
A. 7 Pairs of shoes.
B. 11 Pairs of shoes.
C. 15 Pairs of shoes.
D. It will depend on the supply at $50.
Profits, rents, interest, and royalties are examples of:
A. consumption.
B. labor income.
C. capital income.
D. investment.
The tendency of markets to automatically gravitate toward equilibrium is an application
of which core principle?
A. The Scarcity Principle
B. The Cost-Benefit Principle
C. The Principle of Comparative Advantage
D. The Incentive Principle
This graph shows the cost functions of Moe’s mushroom gathering business, which is
perfectly competitive.
n the graph above, Average Variable Cost is labeled _____, Average Total Cost is
labeled _____, and Marginal Cost is labeled ______.
A. A; B; C
B. C; B; A
C. B; C; A
D. C; A; B
Duke is a particularly highly skilled negotiator. The law firm that hires Duke is able to
collect twice as much revenue per hour of Duke’s time than it can for any other
negotiator in town. The increased revenue will:
A. be evenly split between Duke and the law firm to maximize surplus.
B. all go to the law firm because the firm bears the risk of running the business.
C. all go to Duke because, if it didn’t, another firm could hire Duke away.
D. be split, with 75% going to Duke and 25% going to the law firm.
Leo is a welfare recipient who qualifies for two means-tested cash benefits. If he does
not earn any income, he receives $225 from each benefit. For each dollar he earns
(which his employer is required to report to the welfare agency), each benefit is reduced
by 75 cents until the benefit equals zero.
In the absence of earnings, Leo will receive __________ in from each, for a total of
____ in benefits.
A. $225; $225
B. $225; $450
C. $225; $400
D. $200; $400
Refer to the figure above. If the Federal Reserve wants to lower the interest rate to 3%,
it must ______ the money supply to _____.
A. increase; 300
B. decrease; 300
C. increase; 900
D. increase; 700
This graph shows the marginal costs and marginal benefits associated with roadside
litter clean up. Assume that the marginal cost and marginal benefit curves slope in the
usual directions.
Refer to the information given above. A state initiative requiring towns to spend at least
$20 per day on litter removal would be __________ because __________.
A. efficient; any and all reductions in litter are justified
B. inefficient; the marginal costs exceed the marginal benefits
C. inefficient; $20 is insufficient to remove all of the litter
D. efficient; it solves the inefficiency in the market created by the negative externality
In the short-run Keynesian model, if the mpc equals 0.8, then to increase planned
aggregate spending by $20 billion at any output level, government spending must be
increased by ______ or net taxes must be decreased by _____.
A. $20 billion; $20 billion
B. more than $20 billion; more than $20 billion
C. less than $20 billion; less than $20 billion
D. $20 billion; more than $20 billion
Which of the following firms is most likely to be a monopolist?
A. The clothing retailer with the best location in a mall
B. The grocery store in a large city
C. The most popular hot dog vendor on a city street corner
D. The one grocery store in a small town
If the marginal costs of pollution abatement are different across firms, then regulations
that require fixed percentage reductions in pollution will be
A. efficient.
B. inefficient.
C. ineffective.
D. fair to all polluters.
Assume the union contract wage exceeds the market-clearing wage. If there is an
increase in the labor supply, then the number of unemployed workers will ______ and
the number of employed workers will _______.
A. increase; increase
B. increase; decrease
C. increase; not change
D. decrease; increase
Using the economist’s definition, to say that the amount of crime control is efficient
means that
A. the crime rate is approximately zero.
B. few false arrests occur.
C. the marginal benefit of the last dollar spent on crime control equals the marginal
cost.
D. the conviction rate is nearly 100%.
Refer to the figure above. Becky’s maximum production of sandals per hour is
represented by point:
A. u.
B. t.
C. v.
D. z.
The major implication of the _______ is that individuals can solve many externalities if
they can buy and sell the right to generate the externality.
A. Sherman Act
B. Coase Theorem
C. tragedy of the commons
D. prisoner’s dilemma
In Macroland autonomous consumption equals 100, the marginal propensity to
consume equals 0.75, net taxes are fixed at 40, planned investment is fixed at 50,
government purchases are fixed at 150, and net exports are fixed at 20. Induced
expenditure equals:
A. 0.25Y.
B. 320 + 0.25Y.
C. 0.75Y.
D. 290 + 0.75Y.
The major difficulty with using a tax on pollution instead of a fixed percentage
reduction regulation is
A. nonpayment of the tax.
B. it would cause prices to rise.
C. that it only works in theory.
D. establishing the optimal size of the tax.
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.
Suppose that a firm is located along a river. The firm uses water from the river to cool
its machinery and returns the water to the river several degrees warmer, which has led
to a decline in the fish population downstream of the firm.
If the firm does not have to pay for the damage to the downstream fish, the market
equilibrium price will be ________ and the market equilibrium quantity will be _____.
A. inefficiently high; inefficiently low
B. inefficiently high; efficient
C. inefficiently low; inefficiently high
D. efficient; inefficiently low
A few years ago Stan and his kids were the only people who fished in Stan’s personal
pond. Then Stan started to sell tickets to the public. Stan left the pond and the land it
was on to the state in his will, stipulating that the land be used as a public fishing area.
When Stan and his kids were the only people fishing in the pond it was a _______
good.
A. private
B. public
C. collective
D. commons
Usually an abundance of natural resources ______ average labor productivity.
A. doubles
B. increases
C. decreases
D. has no effect on
Marginal cost is calculated as:
A. total revenue minus total costs.
B. the change in output divided by the change in total costs.
C. the percentage change in total costs divided by the percentage change in output.
D. the change in total costs divided by the change in output.
National defense services provided by the military are:
A. included in GDP at market prices.
B. included in GDP at cost.
C. excluded from GDP because they are not sold in markets.
D. excluded from GDP because they are intermediate goods.