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A consumer has a reservation price of $90 for a blender. If the local store is offering the
blender for $100 with a $10 rebate and he does not make the purchase, one can surmise
that:
A. his reservation price was too high.
B. his reservation price was too low.
C. the hurdle was too high.
D. the hurdle was too low.
Where Y is GDP, C is consumption, I is investment, G is government spending, T is net
taxes, and there is no international trade, public saving equals:
A. T - G.
B. Y - T - C.
C. Y + T - G.
D. Y - C - T.
Ted and Alice want to make sure that their children will inherit lots of money when they
die, so that their children do not have to struggle the way that they themselves did.
Saving more in response to this is a ______ reason for saving.
A. life-cycle
B. bequest
C. private
D. precautionary
If the natural rate of unemployment is 4 percent, what is the actual rate of
unemployment if output is 2 percent below potential?
A. 3 percent
B. 5 percent
C. 6 percent
D. 8 percent
When the Chinese government buys U.S. government bonds, from the perspective of
the United States, this is a(n):
A. import.
B. export.
C. capital outflow.
D. capital inflow.
Taylor lives in a residential neighborhood that prides itself on well-groomed lawns.
Taylor's neighbors find that the collective marginal benefit of someone else's
well-groomed lawn is $10. Taylor, however, dislikes yard work and receives zero net
benefit from an unkempt lawn and a net benefit of -$1 for a well-groomed lawn; the
cost of maintaining the lawn is a dollar more than the benefit of having a well-groomed
lawn.
Refer to the information given above. If Taylor acts independently, Taylor's lawn will be
__________, and total economic surplus to the rest of the neighborhood will be
__________.
A. well groomed; $10
B. well groomed; $5
C. unkempt; $0
D. unkempt; $5
The unemployment rate equals the number of people:
A. unemployed.
B. unemployed divided by the number employed.
C. unemployed divided by the labor force.
D. unemployed plus discouraged workers divided by the labor force.
Social Security benefits, welfare payments, and farm support payments are examples
of:
A. consumption spending.
B. public interest payments.
C. investment spending.
D. transfer payments.
If one euro nation is experiencing rapid growth and inflation while another is facing
sluggish growth and recession:
A. the European Central Bank ought to employ a tight monetary policy.
B. the European Central Bank ought to employ an easy monetary policy.
C. the two countries will disagree about the monetary policy that ought to be employed
by the European Central Bank.
D. only an appreciation of the euro can help both countries simultaneously.
The major characteristic of an HMO is
A. emphasis on acute medical treatment.
B. medical treatment is provided for a fixed annual payment.
C. freedom to see nonmember physicians.
D. medical treatment is provided on a fee-for-service basis.
Refer to the figure above. What might cause Supply to shift from the Original Supply to
the New Supply?
A. A storm in South America wipes out the entire coffee crop.
B. New technology reduces the amount of coffee beans necessary to make a
good-tasting pot of coffee.
C. A news report that coffee consumption greatly increases productivity.
D. An increase in the price of tea.
The table below shows the payoff matrix in the form of short term profits for two firms,
A and B, for two different strategies, investing in new capital or not investing in new
capital. Payoffs are in millions of dollars.
Refer to the figure above. An industrial spy from firm A comes to firm B and offers to
pay B in exchange for B's certain and enforceable promise to not invest. What is the
most that firm A will be willing to pay B to not invest?
A. $0.
B. $20 million.
C. $35 million.
D. $50 million.
Which of the following factors is not part of one's stock of human capital?
A. I.Q.
B. Years of education.
C. The current level of unemployment.
D. Ability to concentrate.
If the income-expenditure multiplier equals 2.5 and a 1 percentage point increase in the
real interest rate reduces autonomous spending by 200 units, then a 1,000 unit
expansionary gap can be eliminated by ______ the real interest rate by ______
percentage points.
A. increasing; 2.5
B. increasing; 4.0
C. increasing; 2.0
D. decreasing; 2.0
Refer to the figure above. When the firm uses 9 employee-hours, it will produce _____
units of output and experience total cost of _______.
A. 120; $126
B. 80; $64
C. 80; $56
D. 120; $176
Assume an economy produces only hamburgers and hotdogs and the base year is 2005.
Given the data in the table above, what is the value of real GDP in 2006?
A. $5,000
B. $7,000
C. $10,000
D. $10,500
Which of the following events would increase the unemployment rate, if nothing else
changed?
A. Unemployed workers leave the labor force.
B. Employed workers leave the labor force.
C. Workers from outside the labor force become employed.
During Thanksgiving you participated in a pumpkin-pie eating contest since you love
pumpkin pie. You really enjoyed the first two pies, the third one was OK, but as soon as
you ate the 4th one you became ill and lost the contest.
Beyond the 3rd pie your total utility
A. increases, but by less than for the first three pies
B. decreases
C. stays the same
D. is zero
If it is impossible or highly costly to prevent consumers from consuming a good when
they have not paid for it, the good is a(n) __________ good.
A. nonexcludable
B. pure public
C. private
D. nonrival
In the basic Keynesian model, a tax increase:
A. reduces short-run equilibrium output.
B. increases short-run equilibrium output.
C. reduces potential output.
D. increases potential output.
In Macroland, potential output equals $100 trillion and the natural rate of
unemployment is 4 percent. If the actual unemployment rate is 3 percent, then the
output gap equals:
A. -1 percent.
B. -2 percent.
C. 1 percent.
D. 2 percent.
Recessions begin at ______ and end at _____.
A. the highest unemployment rate; the lowest unemployment rate
B. the lowest unemployment rate; the highest unemployment rate
C. a peak; a trough
D. the highest inflation rate; the lowest inflation rate
Suppose that the CPI does indeed overstate the rate of inflation. When the CPI increases
by 5% and household incomes increase by 5%, we should conclude that the real
incomes of households has:
A. increased.
B. stayed constant.
C. decreased.
D. increased more slowly than has inflation.
Refer to the figure above. Based on the figure, the income-expenditure multiplier in the
economy illustrated equals:
A. 0.75
B. 4
C. 4,000
D. 1,000
A rapidly growing supply of money will lead to:
A. rising real GDP.
B. rising velocity.
C. unemployment.
D. inflation.
The tendency of changes in asset prices to affect spending on consumption goods is
called the ______ effect.
A. income
B. substitution
C. wealth
D. multiplier
The demand for a good is unitary elastic with respect to price if the price elasticity of
demand is:
A. equal to one.
B. greater than one.
C. less than one.
D. greater than negative one.
Refer to the figure above. This firm would maximize its profits by selling:
A. 10 units and charging $70, the highest price on its demand function.
B. 40 units, the point at which total revenue is greatest.
C. the number of units at which marginal revenue minus marginal cost is greatest.
D. the number of units at which marginal revenue equals marginal cost.
Your economics professor has announced the following grading policy: For each exam,
the highest score in the class will be entered as a 100%; all other scores will be entered
as the percent of that top score. For example, if the highest test score is 50 out of 100, it
will be counted as a perfect paper, and exams with a score of 40 out of 100 will be
entered as an 80%. The final grade for the course will be determined using these
adjusted percentages, with 90% and above an A, 80% and above a B, 70% and above a
C, and below 70%, not passing.
Refer to the information given above. You would expect that, as the semester
progressed, students in this class who cared primarily about good grades would:
A. study less and less to maintain low standards and still earn high grades.
B. forget about the grading scheme, and learn to study for the sake of learning.
C. engage in a positional arms race, studying more and more.
D. maintain a stable agreement to not study for exams.
Refer to the table above. The monopoly structure in this market causes __________
units produced and a price that is __________ when compared with the socially
efficient outcome.
A. 2 fewer; $1 higher
B. 2 fewer; $2 higher
C. 3 fewer; $2 higher
D. 3 fewer; $1 higher
Refer to the table above. Based on their comparative advantages, Pat should specialize
in _______ while Corey should specialize in _______.
A. pizza delivery; pizza production
B. pizza production; pizza delivery
C. neither pizza production nor pizza delivery; both pizza production and pizza delivery
D. both pizza production and pizza delivery; neither pizza production nor pizza delivery
Imagine that you are an entrepreneur, making designer t-shirts in your garage. Your
accountant has estimated that your firm's total costs can be expressed by the function
TC = 300 + 10 × Q, where Q represents the number of t-shirts you make.
Given the total cost function TC = 2,000 + 2 × Q, when output is 1,000 units average
total costs are __________ and total fixed costs is __________.
A. $2; $2
B. $4; $2
C. $4; $2,000
D. $4,000; $2,000
Refer to the table above. The socially efficient price and quantity combination is
_______.
A. 3 units and $8
B. 5 units and $6
C. 7 units and $4
D. 4 units and $7
