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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.
For simplicity, assume that labor is the only input. How many workers will be hired if
the hourly wage for workers is $30?
A. 1
B. 2
C. 3
D. 4
Almost every holiday season at least one gift idea achieves fad status. When that
happens, prices tend to increase dramatically. Why?
A. Sellers want to take advantage of people who received a year-end bonus.
B. Quantity demanded exceeds quantity supplied.
C. Too much government regulation in the market.
D. The demand curve for fad items is upward-sloping.
Suppose there are ten people playing cards in a room. One of them wants to smoke a
cigar; nine of them dislike the smell of cigar smoke. The smoker values the privilege of
smoking at $5, and each of the other nine occupants of the room would be willing to
pay fifty cents for clean air in the room. The rules governing use of the room state that
smoking is not allowed unless everyone agrees to allow smoking.
Refer to the information given above. If the rules governing the room instead stated that
smoking is allowed unless everyone in the room agrees to prohibit it:
A. the non-smoking occupants will pay the cigar smoker to not smoke.
B. the cigar smoker will smoke and not have to pay the other occupants for the external
cost.
C. the cigar smoker will smoke, and will pay each other occupant 50 cents.
D. the parties may or may not be able to reach a negotiated agreement depending on the
bargaining strength of each.
When statisticians fail to take into account improvements in the quality of goods and
services, the CPI will tend to ______ the rate of inflation.
A. understate
B. precisely measure
C. be unrelated to
D. overstate
Holding other factors constant, if growing concerns about job security raise
precautionary saving, then the real interest rate will ______ and the equilibrium
quantity of national saving and investment will ____.
A. increase; increase
B. increase; decrease
C. decrease; decrease
D. decrease; increase
Factors increasing the labor supply and thereby contributing to the slowdown in
real-wage growth that began in the 1970s include ______ and _____.
A. skill-biased technological change; globalization
B. increased labor force participation by women; the coming-of-age of the baby-boom
generation
C. technological progress; diminishing returns to labor
D. increasing wage inequality; globalization
Jenny sells lemonade by the street during the summer time. Several other kids also sell
lemonade in Jenny's neighborhood.
Refer to the information above. The lemonade stands are perfectly competitive because:
A. the kids get their ingredients from home and don't have to pay for them.
B. it is easy to open a stand and easy to close it down.
C. the table, cups and lemonade pitchers used in the stands are productive resources that
are only useful for lemonade stands.
D. the kids do not have regular jobs, so their opportunity costs are zero.
Changes in the growth rate of potential output and deviations of actual output from
potential output are two logical explanations for:
A. the decline in the natural rate of unemployment.
B. short-term economic fluctuations.
C. increasing wage inequality.
D. skill-biased technological change.
Well-defined property rights:
A. are clearly written in English.
B. restrict the use of land and natural resources to productive uses.
C. allow the government to confiscate property.
D. clearly state who owns resources and how the resources can be used.
A free rider is someone who
A. obtains a good for a price less than the market equilibrium price.
B. does not pay for the good but still enjoys the benefits of consumption.
C. does not pay for the good and does not enjoy the benefits of consumption.
D. pays for the good and does not get the benefits of consumption.
Refer to the figure above. If the Federal Reserve wants to set the nominal interest rate at
9%, it must conduct open market ______ to set the money supply at _____.
A. purchases; 100
B. sales; 100
C. purchases; 900
D. sales; 900
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 real GDP
equals:
A. $98 trillion.
B. $99 trillion.
C. $101 trillion.
D. $102 trillion.
Refer to the figure above. If the price of Food is $5 and the price of Rooms is $80, then
the rational spending rule predicts _____ units of Food and ______ Rooms will be
purchased.
A. 4; 3
B. 3; 4
C. 4; 4
D. 4; 1
Innovations in the United States, such as credit cards, debit cards, and ATMs have:
A. increased the demand for money.
B. decreased the demand for money.
C. had no impact on the supply or demand for money.
D. increased the supply of money.
As fewer families choose to purchase medical insurance,
A. the frequency of illness in the general population rises.
B. the remaining insured families tend to have higher than average rates of illness.
C. the frequency of illness in the general population falls.
D. the remaining insured families tend to have lower than average rates of illness.
Assume both the demand and the supply of beef decrease. Which of the following
outcomes is certain to occur?
A. The equilibrium price of beef will rise.
B. The equilibrium quantity of beef will rise.
C. The equilibrium price of beef will fall.
D. The equilibrium quantity of beef will fall.
Which of the following statements expresses the justification for making efficiency the
first goal of economic interaction?
A. Efficiency gives the poor an incentive to improve their economic status.
B. Since the consensus on what is a fair distribution of goods is impossible, efficiency
is the next best goal.
C. People are not really concerned about the problems of the poor.
D. Efficiency maximizes total economic surplus and thereby allows other goals to be
more fully achieved.
Refer to the figure above. In the matrix above, Cory's best response to a decision by
Jess to play Strategy A is:
A. non-existent.
B. to also choose Strategy A.
C. to choose Strategy B.
D. to choose the cell in which Cory's payoff is +10.
In the United States, private property rights are:
A. absolute.
B. rare.
C. subject to limitations.
D. a recent development.
Which of the following questions would not be answered in macroeconomics?
A. What caused the great depression?
B. At what rate does the US economy typically grow?
C. Did the sharp increase in gasoline prices alter SUV sales?
D. How does government spending affect the economy?
Josie has an undergraduate degree in economics and has been working as a utility rate
analyst at the local electricity utility. If she continues on her present career path, the
present value of her lifetime earnings is $250,000. If she takes two years off and gets an
MS degree in economics, the present value of her lifetime earnings is $275,000. The
annual cost of an MS degree in economics is $15,000 and the interest rate is 8%.
The discounted (present value) cost of Josie's graduate degree in economics is _______.
A. $30,000
B. more than $30,000
C. more than $15,000 but less than $30,000
D. $15,000
Which of the following industries does not fit the natural monopoly model?
A. Electricity
B. Cable TV
C. Fast food restaurants
D. Natural gas
Balanced, across the board income growth characterizes the period of the
A. 1980's.
B. entire 20th century.
C. 1960's to 1990's.
D. mid 1940's to the early 1970's.
The general rule governing the hiring of workers is to
A. minimize average labor costs.
B. equate marginal labor costs to marginal labor benefits.
C. equate total labor costs to total labor benefits.
D. maximize marginal product.
Refer to the figure above. The marginal utility of the sixth pizza is
A. 95
B. 100
C. 5
D. 15
Normative economics is concerned with how people _____ make decisions while
positive economics is concerned with how people _____ make decisions.
A. in the real world; in models
B. should; do
C. in power; in ordinary life
D. in ordinary life; in power
To achieve the socially optimal workplace injury rate,
A. strict government regulation is necessary.
B. workers must be educated about potential safety risks at work.
C. workers' compensation premiums must accurately reflect the firm's injury rate.
D. certain high risk jobs must be eliminated.
Curly and Moe are considering living alone or being roommates and splitting the rent
for the next twelve months. If they live alone, they each rent a one bedroom, one bath
apartment for $500 per month, while if they are roommates, they can split a two
bedroom, one bath apartment for $800 per month. The one difficulty they have is that
Moe snores very loudly. Curly estimates the cost of poor sleep due to Moe's snoring at
$150 per month. Moe could obtain a snore-eliminating device for $50 per month.
Refer to the information given above. Curly and Moe have both taken an economics
course and so are willing to apply the Coase Theorem and negotiate. Who will
compensate the other?
A. Neither Moe nor Curly has the initial property right, and so neither will compensate
the other.
B. Moe must compensate Curly because Moe is the one who is snoring.
C. Curly must compensate Moe because Curly is the one who is bothered by the
snoring.
D. Either Moe will compensate Curly or Curly will compensate Moe because the
alternative, renting separate apartments, leaves each worse off.
When the supply of a good decreases, consumers will eventually:
A. decrease their demand.
B. increase their preferences for the good.
C. decrease their quantity demanded.
Suppose that the marginal benefit of having a security camera in the library is given by
MB, at the supermarket is given by MB1 and at the museum is given by MB2. All
values are per week.
An increase in crime would ______ expenditures on security cameras and _____ the
number of cameras.
A. increase; increase
B. increase; decrease
C. decrease; increase
D. decrease; decrease
Liabilities are:
A. current income minus spending on current needs.
B. the debts one owes.
C. saving minus investment.
D. anything of value one owns.
