The textbook states that empirical studies have found that the demand for public goods
like public parks, environmental protection and public safety
A. is quite price inelastic.
B. has a small, positive income elasticity.
C. is price elastic.
D. has an income elasticity in excess of 1.
Whether or not a good can be classified as a complement depends on whether;
A. you personally tend to consume the goods together.
B. no substitutes exist.
C. an increase in demand for one good follows a decrease in the price of the other.
D. an increase in demand for one good follows an increase in the price of the other.
Refer to the figure above. When P = 4, the price elasticity of demand for the demand
curve D1 is ______ and D2 is _____.
A. 3; 3
B. 2/3; 1/3
C. 1/3; 3
D. 1/3; 2/3
Refer to the figure above. When the demand is P2 = $15, this producer will earn a
_____ of _______.
A. Loss, $60
B. Profit, $180
C. Loss, $300
D. Loss, $900
The larger the mpc, the ______ the income-expenditure multiplier and the ______ the
effect of a change in autonomous spending on short-run equilibrium output.
A. larger; larger
B. larger; smaller
C. smaller; smaller
D. smaller; larger
Refer to the figure above. An accountant would put the total cost of producing 15 units
of output at ______, and an economist would put the total cost of producing 15 units of
output at _______.
A. $69; $6
B. $63; $69
C. $86; $69
D. $63; $6
As the price of cookies increases, firms that produce cookies will:
A. increase the supply of cookies.
B. increase the quantity supplied of cookies.
C. decrease the supply of cookies.
D. decrease the quantity supplied of cookies.
If the United States has a $300 billion trade deficit, then there must be:
A. net capital inflows of $300 billion.
B. net capital inflows of -$300 billion.
C. no capital inflows or capital outflows.
D. net capital outflows of $300 billion.
Accounting profits minus implicit costs equals:
A. total revenues.
B. economic profits.
C. explicit costs.
D. fixed and variable costs.
A great deal of medical expenditure inflation, from 4% in 1940 to 14% today, has to do
with
A. the emergence of health insurance.
B. high demand for cosmetic surgery.
C. government not controlling the price of routine medical services.
D. increase in spending on medical research.
The number of US households with access to the Internet and those with broadband
connections is growing rapidly. As an economic naturalist, one could predict that when
a major purchase is being considered, families will:
A. always buy online.
B. never buy online.
C. collect more information before making the purchase because the cost of finding and
acquiring it is lower.
D. collect more information before making the purchase because the benefit of
information is now larger.
If the desired reserve/deposit ratio equals 0.10, then every dollar of currency in bank
vaults supports ______ of the money supply, while every dollar of currency held by the
public contributes ______ to the money supply.
A. $1; $10
B. $0.10; $1
C. $1; $0.10
D. $10; $1
A payoff matrix is used to show:
A. the payoff to being a monopolist relative to a competitive firm.
B. the demand curve faced by two competing firms.
C. each player’s payoffs in each possible combination of strategies.
D. the sequence of strategies played in a game over time.
Technological change that affects the marginal products of high-skilled and low-skilled
workers differently is called ______ technological change.
A. capital-labor
B. skill-biased
C. marginal-productivity
D. high-low
Refer to the table above. The marginal benefit (extra donations) of the 2nd employee is:
A. $42,426.
B. $21,213.
C. $12,426.
D. $11,337.
A measure defined at a point in time is called a(n) ______ variable.
A. stock
B. nominal
C. aggregate
D. flow
On a given linear demand curve, demand is ______ at high prices than at low prices.
A. more price elastic.
B. more price inelastic.
C. more negative.
D. more volatile.
For a given domestic and foreign price level, an increase in the nominal exchange rate
______ the real exchange rate.
A. increases
B. decreases
C. may either increase or decrease
D. offsets any change in
Refer to the figure above. The current level of GDP in this economy is ______; the
potential level of GDP is ______.
A. Y1;Y1
B. Y2;Y2
C. Y1;Y2
D. Y2;Y1
If the price elasticity of demand for cell phone service is 3, if the price increases by 1%,
quantity demanded decreases by:
A. 0.33%.
B. 0.67%.
C. 1.33%.
D. 3%.
For a game involving two players with two possible strategies, which of the following
is a requirement for a prisoner’s dilemma?
A. Neither player has a dominant strategy.
B. The payoff for each player if both play the dominated strategies must be more than
the payoff for each player if both play dominant strategies.
C. The payoff if both play the dominant strategies must be more than the payoff if both
play their dominated strategies.
D. There is no Nash equilibrium.
P-TV and QRS-TV are planning their fall line-up. Suppose that sit-coms are more
popular than reality shows, and so generate more advertising revenue than do reality
shows, but they are more expensive to produce since real actors must be hired. In the
following decision tree, QRS-TV announces its decision first and P-TV observes that
choice before it decides whether to air a sit-com in the same time slot or a reality show.
Both stations know all of the information shown in this diagram when they make their
decisions.
Refer to the information above. Given the information in this decision tree, if QRS-TV
announces that it will air a reality show, it can expect to:
A. lose $5 million.
B. earn $5 million.
C. earn $10 million.
D. earn $20 million.
The practice of increasing a nominal quantity each period by an amount equal to the
percentage increase in a specified price index is called:
A. a substitution bias.
B. the Fisher effect.
C. deflating.
D. indexing.
Refer to the figure above. This imperfectly competitive firm’s demand function gives
information that is used to determine:
A. the change in costs when output changes.
B. total revenue at different price and quantity combinations.
C. fixed costs in the short run.
D. advertising necessary to gain market share.
In a free market, if the price of a good is above the equilibrium price, then;
A. suppliers, dissatisfied with growing inventories, will raise the price.
B. demanders, wanting to ensure they acquire the good, will bid the price lower.
C. government needs to set a lower price.
D. suppliers, dissatisfied with growing inventories, will lower the price.
Jamie’s marginal utility for consuming muffins and doughnuts in utils are as follows.
Jamie spends $4 for breakfast every morning, the price per muffin is $1.00 and the price
per doughnut is $0.50.
If Jamie consumes 3 muffins, what is Jamie’s marginal utility per dollar from muffins?
A. 6.25
B. 7.5
C. 25
D. 15
Tight monetary policy raises the real interest rate, which ______ the demand for
dollars, ______ the supply of dollars, and ______ the equilibrium value of the dollar.
A. increases; increases; increases
B. decreases; decreases; decreases
C. increases; decreases; increases
D. decreases; increases; increases
If the Consumer Price Index increased from 1.52 to 1.65, then it must be the case that
______ relative to prices in the base year.
A. all prices rose
B. the weighted average level of prices rose
C. all prices fell
D. some prices rose and some prices fell
Holding all else constant, an increase in preferences by Mexicans for U.S. goods will
______ the demand for dollars in the foreign exchange market and ______ the
equilibrium Mexican peso/U.S. dollar exchange rate.
A. increase; increase
B. increase; decrease
C. decrease; decrease
D. decrease; increase
Two types of existing houses are for sale: ones with a cracked foundation and ones
without. In all other respects, they are identical. Houses without cracked foundations
are worth $200,000 while those with cracked foundations are worth $200,000 minus the
$20,000 to fix the crack or $180,000. The frequency of solid foundations is 80%.
Sellers know which type of house they have but buyers cannot detect a crack. No seller
“must” sell his house in order to move and thus no one accepts anything less than its
value.
Suppose that consumers are unsophisticated and assume that houses with cracked and
solid foundations are offered for sale in their true proportion. The consumer’s
reservation price is thus
A. $200,000.
B. $196,000.
C. $180,000.
D. $160,000.
The system of government insurance that pays benefits to workers injured on the job is
referred to as
A. social security.
B. welfare.
C. OSHA.
D. workers’ compensation.