There are 20 residents in the village of Towneburg. The size of the village’s annual
fireworks display depends upon the number of shells that are fired off. Each resident’s
demand for fireworks is shown below. The total cost of the fireworks display is $1,000
plus $10 per shell.
Collectively, the residents of Towneburg would be willing to pay ______ for the 10th
shell, and the marginal cost of the 10th shell is ______.
A. $30; $100
B. $600; $1100
C. $30; $10
D. $600; $10
Refer to the figure below. As the firm increases the number of employee-hours each day
from 1 to 2, output increases by:
A. 33 units.
B. 66 units.
C. 99 units.
D. 132 units.
Average labor productivity is determined by:
A. consumption, investment, government spending, and net exports.
B. the number employed, unemployed, and the labor force participation rate.
C. the quantity and quality of human capital, physical capital, technology, natural
resources, entrepreneurship, and the legal and political environment.
D. the real interest rate, the nominal interest rate, and the rate of inflation.
A price ceiling that is set above the equilibrium price will result in:
A. a market price that is above the equilibrium price.
B. a loss in total economic surplus.
C. no change in total economic surplus.
D. an increase in consumer surplus.
High Tech, Inc. produces plastic chairs that sell for $10 each. The following table
provides information about how many plastic chairs can be produced per hour.
How many workers will be hired if the hourly wage for workers is $70?
A. 1
B. 2
C. 3
D. 4
The term marginal utility denotes the amount by which ______ changes when
consumption changes by ______ unit(s).
A. total utility; 1
B. demand; 10
C. demand; 1
D. total utility; 10
Crowding out is the tendency for increased government deficits to:
A. reduce investment spending.
B. increase investment spending.
C. reduce consumption spending.
D. increase consumption spending.
Bank C promises to pay a compound annual interest rate of 6 percent, while Bank S
pays a 10 percent simple annual interest rate on deposits. If you deposit $1,000 in each
bank, after 10 years, your deposit in Bank C equals _____, while your deposit in Bank
S equals ______.
A. $1,060; $1,100
B. $1,600; $2,000
C. $1,600; $2,594
D. $1,791; $2,000
The quantity equation is always true because it:
A. is the definition of velocity rewritten.
B. is a law of economics.
C. has been empirically tested.
D. has been historically verified.
Each of the following would increase the supply of U.S. dollars, shifting the supply
curve for dollars to the right, except:
A. an increased preference for foreign-made goods.
B. an increase in U.S. real GDP.
C. an increase in the real interest rate on foreign assets.
D. an appreciation of the U.S. dollar relative to other currencies.
A tax increase that affects both aggregate demand and potential output is predicted to
_____ the long-run equilibrium level of output, while inflation _____.
A. decrease; increases
B. increase; decreases
C. decrease; may increase, decrease, or remain unchanged
D. decrease; decrease
The essential reason some species of whales have nearly been driven to extinction is
that:
A. it is difficult to define and enforce property rights to whales.
B. the demand for whales is extremely high.
C. the price of whales is very low.
D. experienced whalers find it easy to catch whales.
The following table provides data for an economy in a certain year. __
Given the data in the table, compute the value of GDP.
A. 130
B. 140
C. 150
D. 160
The tragedy of the commons refers to the:
A. overuse of resources that have no price.
B. overuse of resources that have no cost.
C. under production of goods that have external benefits.
D. failure of the Coase theorem when negotiation is costly.
The reason that the prisoner’s dilemma presents a dilemma is that:
A. neither player has a comparative advantage, so neither can infer what the other
player will choose.
B. the market cannot be in equilibrium because the players do not have dominant
strategies.
C. each player has an incentive to play his or her dominant strategy, but when both
choose the dominant strategy each player has a lower payoff than if they both had
chosen the dominated strategy.
D. each player has an incentive to play his or her dominated strategy, but when both
choose the dominated strategy each player has a lower payoff than if they both had
chosen the dominant strategy.
In tit-for-tat, if your partner ______ in your first interaction, then you will ______ in
your next interaction.
A. defects; cooperate
B. defects; defect
C. cooperates; defect
D. defects; refuse to play
Lower real income ______ the demand for money and a lower price level ______ the
demand for money.
A. increases; increases
B. increases; decreases
C. increases; does not change
D. decreases; decreases
Suppose that there are two types of houses for sale: those with solid foundations and
those with cracked foundations. In all other respects, the two types of houses are
identical. Houses with solid 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. Sellers
know which type of house they have, but buyers cannot detect whether the foundation
has a crack. Suppose that 80 percent of the houses for sale have a solid foundation and
20 percent of the houses for sale have a cracked foundation. In the long run, we would
expect:
A. 80 percent of the houses for sale to have a solid foundation, 20 percent to have a
cracked foundation, and houses to sell for $196,000.
B. 100 percent of the houses for sale to have a cracked foundation and to sell for
$180,000.
C. 100 percent of the houses for sale to have a solid foundation and to sell for $200,000.
D. 100 percent of the houses for sale to have a cracked foundation and to sell for more
than $180,000.
The following table provides information about production at the XYZ-TV Company.
How many workers will XYZ-TV Company hire if the going wage for TV production
workers is $60,000?
A. 0
B. 4
C. 5
D. More than 5
When the Fed eases U.S. monetary policy, domestic interest rates ______, making U.S.
assets relatively less attractive to foreign investors, and ______ the equilibrium
exchange rate.
A. rise; increasing
B. fall; increasing
C. fall; decreasing
D. rise; decreasing
The United States was unable to maintain its dominance in the production of televisions
because:
A. the highly technical skills necessary to produce televisions are greater in other
countries.
B. the raw materials necessary to build televisions became scarce in the United States.
C. the product designs evolved too rapidly for engineers in the United States to keep up.
D. automated techniques allowed production to be outsourced to countries with
less-skilled workers.
The additional utility gained from consuming an additional unit of a good is called:
A. total utility
B. marginal utility
C. costly utility
D. an util
The investment demand curve indicates that there is a(n):
A. positive relationship between the real interest rates and the level of investment
spending, all other things equal.
B. inverse relationship between the real interest rates and the level of investment
spending, all other things equal.
C. direct relationship between the real interest rates and the level of investment
spending, all other things equal.
D. inverse relationship between the determinants of investment and the level of
investment spending, holding interest rates constant.
In deciding how many guitars to buy for his shop before the Christmas season, Mark is
making a(n) ______ decision.
A. microeconomic
B. macroeconomic
C. normative
D. irrational
Saving by households and businesses is called ______ saving.
A. private
B. public
C. national
D. aggregate
When two people agree to a price in a negotiation, we can assume that:
A. each one will receive equal benefits from the transaction.
B. the seller will receive more benefit from the transaction than the buyer.
C. only one of the parties will benefit, but there is not enough information to determine
which one it will be.
D. both parties will benefit.
If the Luddites had succeeded in ______ the introduction of labor-saving machinery,
economic growth in Great Britain may have been ______.
A. blocking; slower
B. blocking; more rapid
C. promoting; slower
D. promoting; more rapid
Ginger bought a phone that came with a $10 rebate. Ginger should fill out and mail in
the rebate form if:
A. the opportunity cost of the time and trouble of sending in the rebate form is less than
$10.
B. the opportunity cost of the time and trouble of sending in the rebate form is more
than $10.
C. she would have bought the phone without the rebate, and so sending in the rebate
form involves no opportunity cost.
D. Ginger’s surplus from purchasing the phone was less than $10.
The benefits of net capital inflows to a country include all of the following except:
A. a larger pool of total savings.
B. a higher rate of investment in new capital.
C. a potentially higher growth rate.
D. interest and dividend payments owed to foreign investors.
If marginal utility is positive, then as consumption increases:
A. the consumer will not experience diminishing marginal utility.
B. total utility will not change.
C. total utility will increase.
D. the demand curve will have a positive slope.
Patents, which confer market power, are intended to:
A. protect consumers from imitations, or knock-offs.
B. enable patent holders to charge lower prices for new and innovative products.
C. encourage innovation by helping firms recoup the costs of research and
development.
D. maintain the dominance of U.S. firms.
If two products are substitutes, then the:
A. income elasticity of demand for both will be high.
B. price elasticity of demand for both will be positive.
C. cross-price elasticity of demand between them will be negative.
D. cross-price elasticity of demand between them will be positive.
The use of psychological incentives to solve commitment problems would be least
effective in games played:
A. repeatedly between strangers.
B. once between family members.
C. repeatedly between family members.
D. once between strangers.
If the desired reserve/deposit ratio is 0.25 and the banking system receives an additional
$10 million in reserves, bank deposits will increase by:
A. $10 million.
B. $250 million.
C. $40 million.
D. $4 million.
A nation’s saving equals its ______ income less its spending on _______.
A. real; investment
B. current; current needs
C. nominal; investment
D. nominal; net taxes