Features of the labor market that are likely to cause structural unemployment include all
of the following EXCEPT:
A. labor unions.
B. minimum wage laws.
C. unemployment compensation.
D. differences in the skills and experience of workers.
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:
Refer to the information above. What is John’s hourly opportunity cost of cleaning
windows?
A. $14
B. $8
C. $7
D. $2
The slope of the production possibilities curve must be:
A. positive.
B. decreasing.
C. increasing.
D. negative.
The market for bagels contains two firms: BagelWorld (BW) and Bagels’R’Us (BRU).
The owners of the two firms decide to fix the price of bagels. The table shows the total
profits the firms will earn if they abide by the price setting agreement or if they cheat on
the agreement.
Refer to the figure above. Suppose the firms agree to the following: if one firm cheats
today, the other firm will cheat tomorrow, but if one firm abides today, the other will
abide tomorrow. The likely effect of this agreement would be:
A. to increase the probability that both firms would cheat.
B. to increase the probability that Bagel World would cheat.
C. to increase the probability that both firms would abide.
D. to increase the probability that Bagels ‘R’ Us would cheat.
The inside lag of macroeconomic policy is the:
A. time between a shift in aggregate demand and a shift in aggregate supply.
B. delay between when a policy change is needed and the policy is implemented.
C. difference between actual inflation and the target rate of inflation.
D. delay between when a policy change is implemented and when most of the effects of
policy have occurred in the economy.
Smith and Jones comprise a two-person economy. Their hourly rates of production are
shown below.
Refer to the table above. Suppose Smith and Jones begin by producing 100 calculators
per hour; as Smith and Jones choose to efficiently produce fewer computers and more
calculators, __________ devotes more time to calculators because his __________.
A. Smith; absolute advantage is larger
B. Jones; absolute advantage is smaller
C. Jones; opportunity costs are lower
D. Smith; opportunity costs are lower
Elaine owns a beautiful diamond ring she purchased for $2,500. When she has it
appraised she learns that it is now worth $3,000. Based on this information:
A. Elaine’s saving this year has increased by $500.
B. Elaine’s saving this year has decreased by $500.
C. Elaine has experienced a $500 capital gain.
D. Elaine’s wealth is unchanged.
When marginal revenues are zero:
A. profits are maximized.
B. total costs are minimized.
C. elasticity of demand is zero.
D. total revenue is maximized.
Price elasticity of demand is _______ the slope of the demand curve.
A. not related to
B. inversely related to
C. positively related to
D. equal to
Refer to the figure above. The equilibrium price and quantity for this market are:
A. $8; 6.
B. $6; 4.
C. $4; 6.
D. $2; 8.
The following table shows the relationship between the speed of a computer’s CPU and
the benefits and costs. Assume that all other features of the computer are the same, i.e.,
CPU speed is the only source of variation.
The total benefit of an 800 Mhz computer is:
A. $400.
B. $800.
C. $1,900.
D. $2,200.
NAFTA helped ______ to exploit a comparative advantage in the production of goods
made by unskilled labor.
A. Canada
B. Cuba
C. Mexico
D. The USA
Your classmates from the University of Chicago are planning to go to Miami for spring
break, and you are undecided about whether you should go with them. The round-trip
airfares are $600, but you have a frequent-flyer coupon worth $500 that you could use
to pay part of the airfare. All other costs for the vacation are exactly $900. The most
you would be willing to pay for the trip is $1400. Your only alternative use for your
frequent-flyer coupon is for your trip to Atlanta two weeks after the break to attend your
sister’s graduation, which your parents are forcing you to attend. The Chicago-Atlanta
round-trip airfares are $450.
If you do not use the frequent-flyer coupon to fly, should you go to Miami?
A. Yes, your benefit is more than your cost.
B. No, your benefit is less than your cost.
C. Yes, your benefit is equal to your cost.
D. No, because there are no benefits in the trip.
When new technologies are applied to the production and distribution of goods and
services:
A. scarcity is eliminated.
B. diminishing returns to capital no longer hold.
C. diminishing returns to capital still hold.
D. average labor productivity decreases.
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.
Refer to the information given above. If you make 100 t-shirts, your average total cost
is _______.
A. $3
B. $10
C. $3.10
D. $13
Refer to the figure above. When the market price of a doughnut is 10 cents, this firm
will
A. shut down
B. produce 50 doughnuts
C. remain in operation only in the short run and shut down in the long run
D. earn negative profits (losses)
It is impossible for total utility to be _________ when marginal utility is ___________
A. increasing; increasing.
B. decreasing; positive.
C. positive; negative.
D. increasing; decreasing.
Three different voters demand curves for a public park are shown on the graphs below.
For a 4-acre public park the market reservation price is
A. $6.
B. $8.
C. $14.
D. $20.
At each value of the domestic interest rate, decreases in the riskiness of domestic assets
______ capital inflows, ______ capital outflows, and ______ net capital inflows.
A. increase; increase; increase
B. increase; increase; decrease
C. increase; decrease; increase
D. decrease; decrease; decrease
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.
If Leo values income and not the source of the income, then if he can only earn $400 he
will choose to
A. work.
B. not work and refuse the benefits.
C. not work and accept the benefits.
D. work part time.
Two firms can use five different technologies to produce the same quantity of output:
1,2,3,4 and 5. The first technology is the cheapest, but also the dirtiest. The fifth
technology is the most expensive, but results in the lowest levels of pollution. The
amount of pollution emitted by each firm and the cost of the technologies are shown in
the table.
Suppose that the government imposes a tax of $150 per ton of pollution. As a result,
pollution emissions are __________ tons for a total cost of ____.
A. 6; $4200
B. 8; $3600
C. 10; $3600
D. 14; $1700
If you use $1,000 to purchase silver bullion, which you plan to keep in a safe, you are
using money as:
A. bank reserves.
B. a medium of exchange.
C. a unit of account.
D. a store of value.
When Joe’s Gas raises its prices for regular unleaded, total revenue from both regular
unleaded falls to zero. It must be the case that:
A. the demand for Joe’s regular unleaded gasoline is perfectly elastic.
B. the demand for regular unleaded must be inelastic.
C. there are NOT many good substitutes for regular unleaded gasoline.
D. consumers are switching to premium grades of gasoline.
Bob’s Barber Shop cut 3,000 heads of hair in 2009 and 3,100 in 2010. The price of a
haircut was $7 in 2009 and $8 in 2010. If 2009 is the base year, what was Bob’s
contribution to real GDP in 2009?
A. $21,000
B. $21,700
C. $24,000
D. $24,800
Carson and Fran are both thrill seekers. Carson has health insurance and Fran does not.
One can predict that
A. Fran will engage in fewer dangerous activities.
B. Carson will engage in fewer dangerous activities.
C. Carson and Fran will have the same frequency of participation in dangerous
activities.
D. Carson’s health insurance has no bearing on Carson’s behavior.
The following data give the dates of successive turning points in U.S. economic activity
and the corresponding levels of real GDP at the time.
Which of the following periods was an expansion?
A. July 1953 through May 1954
B. May 1954 through April 1957
C. July 1953 through April 1957
D. May 1954 through April 1958
If government spending increases by $1 million while net taxes are unchanged, then:
A. public saving increases.
B. public saving decreases.
C. public saving does not change.
D. private saving increases.
The wage paid to workers measured in terms of real purchasing power is called the:
A. nominal wage.
B. cost of living.
C. minimum wage.
D. real wage.
In general, the presence of insurance against the negative outcome of an event (e.g., fire
insurance) tends to
A. lessen the likelihood of the event.
B. have no effect on the likelihood of the event.
C. increase the incentive to prevent the event.
D. decrease the incentive to prevent the event.
The following table provides data for an economy in a certain year.
Given the data in the table, compute the investment component of GDP.
A. 30
B. 40
C. 60
D. 70
A downward sloping demand function:
A. is characteristic of both a perfectly competitive firm and a monopolistic firm.
B. necessarily implies that the firm’s marginal revenue will be less than price.
C. is true only of firms in a perfectly competitive industry.
D. indicates the presence of economies of scale.