Refer to the figure above. What is the price elasticity of supply at point A?
A. 4
B. 2
C. 1
D. 1/2
Fred purchases a bond, newly issued by the Big Time Corporation, for $10,000. The
bond pays $400 to its holder at the end of the first, second, and third years and pays
$10,400 upon its maturity at the end of four years. The principal amount of this bond is
___, the coupon rate is ____, and the term of this bond is _____.
A. $400; 40%; four years
B. $10,000; 4%; four years
C. $10,000; $400; 4%
D. $10,400; 4%; four years
The AD curve ______ because, holding all else constant, an increase in ______ causes
C, IP and NX to fall.
A. slopes downward; real GDP
B. slopes downward; the inflation rate
C. slopes upward; real GDP
D. is horizontal; the inflation rate
John is trying to decide how to divide his time between his job as a stocker in the local
grocery store, which pays $7 per hour for as many hours as he chooses to work, and
cleaning windows for the businesses downtown. He makes $2 for every window he
cleans. John is indifferent between the two tasks, and the number of windows he can
clean depends on how many hours he spends cleaning in a day, as shown in the table
below:
The first hour John spends cleaning windows costs him ________ that he could have
earned in the grocery store.
A. $2
B. $7
C. $14
D. $18
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.
Suppose the police department has $160,000 to spend on detectives. The allocation of
detectives which results in the greatest social benefit is to assign
A. all four detectives to murder prevention.
B. two detectives to murder prevention and two to burglary.
C. three detectives to murder prevention and one to burglary.
D. one detective to murder prevention and three to burglary.
If the nominal interest rate is 10% and the inflation rate is 3%, then the real interest rate
equals:
A. 3%
B. 7%
C. 10%
D. 13%
Refer to the figure above. When the demand is P2 = $15, what is the profit maximizing
output?
A. 30
B. 45
C. 60
D. 80
Ben and Ashley are identical in every way except for one: Ashley has an IQ score 10
points higher than Ben. All else equal, human capital theory would predict Ashley
A. and Ben will earn the same.
B. will earn exactly 10% more than Ben.
C. will earn less than Ben.
D. will earn more than Ben.
A supplier of a factor of production has a reservation price of $100. The purchaser of
the factor of production has a reservation price of $200. If the factor of production is
unique, then:
A. there will be no transaction as the reservation prices are unequal.
B. the transaction will occur and the price will be $150.
C. the transaction will occur and the price will be $200.
D. the transaction will occur and the price will be $100.
For which of the following products is demand likely to be least price elastic?
A. Frozen food
B. Soft drinks
C. Groceries
D. Diet Coke
Jen is offered a job answering the phone in the State U economics department during
lunchtime, from noon to 1 P.M., Tuesdays and Thursdays. Her reservation wage for this
job is $15/hour.
If the department chair offers Jen $150/week, and Jen doesn’t have to share her income
with anyone else. Will Jen accept this job?
A. Not enough information.
B. Yes, accepting the job means a positive surplus for Jen.
C. No, accepting the job means a negative surplus for Jen.
D. Yes, although accepting the job means a negative surplus for Jen, still it’s better than
having no job.
Refer to the figure above. When the price is equal to 8, the price elasticity of demand
for the demand curve D1 is ______ and D2 is _____.
A. 4; 1
B. 1; 4
C. 4; 4
D. 2; 4
Based on the information in the table, how many people are out of the labor force?
A. 144,000
B. 200,000
C. 280,000
D. 576,000
A period in which the economy is growing at a rate significantly above normal is called
a(n):
A. depression.
B. expansion.
C. peak.
D. recession.
The principle of diminishing returns to capital states that if the amount of labor and
other inputs employed is held constant, then the greater the amount of capital in use the:
A. less is produced.
B. less production is wasted.
C. the more an additional unit of capital adds to production.
D. the less an additional unit of capital adds to production.
Refer to the figure above. Moving from demand curve D1 to demand curve D2
illustrates a(n):
A. increase in quantity demanded.
B. increase in demand.
C. decrease in demand.
D. decrease in quantity demanded.
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.
What is Jamie’s optimal combination of muffins and doughnuts?
A. 1 muffin, 6 doughnuts
B. 2 muffins, 4 doughnuts
C. 3 muffins, 2 doughnuts
D. 4 muffins, zero doughnuts
Mike and Tom debone chicken breasts for Ted’s Chicken Co. Mike is new and can only
debone 30 chicken breasts per hour by hand, while Tom’s experience allows him to
debone 60 chicken breasts per hour by hand. Ted buys one new machine that can
debone 100 chicken breasts per hour. Both Mike and Tom work the same 40 hours per
week, but one of them is assigned to operate the machine instead of deboning the
chicken breasts by hand. To obtain maximum average hourly productivity, ______ is
assigned to use the machine and their combined average hourly productivity as a team
is ______ chicken breasts
A. Mike; 65
B. Mike; 80
C. Tom; 65
D. Tom; 80
If prices in the current year are higher on average than in the base year, real GDP in the
current year ______ nominal GDP in the current year.
A. is greater than
B. is less than
C. is equal to
D. could be greater than or less than
Among the most important indicators used by the NBER Business Cycle Dating
Committee to determine the beginning of the 2007-2009 recession were each of the
following indicators EXCEPT:
A. industrial production.
B. total sales in manufacturing, wholesale trade, and retail trade.
C. the consumer price index.
D. nonfarm employment.
One trend in labor markets is:
A. a decrease in average real wages in the United States and other industrial countries.
B. decreasing wage inequality in the United States.
C. weak rates of job creation in the United States since 1980.
D. a slowdown in the rate of real wage growth since the early 1970s.
If all taxpayers pay the same percentage of their income in taxes, the tax is termed a(n)
_______
A. proportional tax.
B. progressive tax.
C. head tax.
D. excise tax.
When the government runs a budget surplus, it uses the funds to:
A. issue bonds.
B. pay down outstanding debt.
C. decrease transfer payments.
D. decrease public saving.
If workers received a 5 percent wage increase and the rate of inflation was 3 percent,
then their real wage:
A. increased.
B. decreased.
C. remained constant.
D. equaled the nominal wage.
Fred and Barney fill egg cartons with eggs. Fred just started the job and can fill only 20
cartons an hour. Barney has significant on-the-job experience that allows him to fill 40
cartons an hour. Both Fred and Barney work 40 hours a week. Fred’s average weekly
productivity is ______ cartons; Barney’s average weekly productivity is ______
cartons; and as a team their average weekly productivity is ______ cartons.
A. 20; 40; 60
B. 20; 40; 30
C. 800; 2,000; 1,600
D. 800; 1,600; 1,200
Refer to the figure above. What is the marginal cost of the 9th employee hour?
A. $126
B. $14
C. $50
D. $48
An individual’s supply curve shows his or her:
A. willingness to pay at each quantity.
B. opportunity cost of producing at each quantity.
C. hourly wage for producing at each quantity.
D. profit from producing at each quantity.
When the Fed tightens U.S. monetary policy, domestic interest rates ______, making
U.S. assets relatively more attractive to foreign investors, and ______ the equilibrium
exchange rate.
A. rise; increasing
B. fall; increasing
C. fall; decreasing
D. rise; decreasing
When actual output is greater than potential output there is a(n):
A. budget deficit.
B. budget surplus.
C. expansionary gap.
D. recessionary gap.
The three firms shown below can choose among three workplace safety alternatives:
continue with the status quo, provide safety training or purchase new safety equipment.
The injury rates for the firms under the three alternatives as well as the costs of the
alternatives are shown in the table. The cost of treating an injury is $200.
Suppose the government requires all three firms to install the new safety equipment.
Relative to the status quo, the marginal cost would be _______ and the marginal benefit
would be ______.
A. $2150; $1200
B. $1450; $600
C. $1800; $1200
D. $1800; $1800
Lee and Cody are competitors. Each is considering whether to take aggressive action
against the other or to cooperate. Cody can observe Lee’s decision. Their decision tree
can be diagrammed as follows:
Refer to the figure above. If Lee is aggressive, Cody will respond with ______ and if
Lee cooperates, Cody will respond with ____.
A. aggression; cooperation
B. aggression; aggression
C. cooperation; aggression
D. cooperation; cooperation
When inflation turns out to be different from what was expected, purchasing power is
______.
A. destroyed
B. redistributed
C. increased
D. decreased
The following table provides data for an economy in a certain year.
Given the data in the table, how much did households spend on nondurables and
services?
A. 20
B. 30
C. 50
D. 70
Suppose that all workers value a 1% reduction in the workplace injury rate at $1,000.
The cost of reducing the injury rate by 1% is $200 per worker. Firms currently pay
$20,000 per year to workers, without any effort to improve safety.
Suppose new firms began to offer workers $19,500 and a 1% reduction in the injury
rate. The new firms would find that
A. no workers are applying for their jobs.
B. their costs of wages and injury reduction exceed the costs of the existing firms.
C. workers would be willing to accept their offer.
D. only injury prone workers would apply.