Archives: Quiz

Hotelling’s model has been used to describe differentiation in the political “market.” Suppose that 100 voters are evenly distributed between the extreme left and the extreme right on the political spectrum, and that all voters vote, and they always vote […]

The price of a gallon of gasoline was $0.35 in 1972 when the CPI equaled 0.418. The cost of a gallon of gasoline was $2.25 in 2005 when the CPI equaled 1.68. The real cost of a gallon of gasoline […]

Which of the following transactions would be included in the GDP of the United States? A. Coca Cola produces soft drinks in England. B. Honda produces cars in Ohio. C. McDonalds sells hamburgers in Russia. D. Ford Motor Company produces […]

Which one of the following government actions is intended to generate positive externalities? A. Taxing polluting industries B. Speed limits on the highways C. Requiring autos to meet minimum emissions regulations D. Subsidies for planting trees on hillsides For Outback […]

To counteract relative price changes, the government would implement: A. monetary policy. B. fiscal policy. C. polices that affect the supply and demand for a specific good. D. policies that affect the supply and demand for all goods and services. […]

Based on the theory of purchasing power parity, in the long run, currencies of countries with significant inflation will tend to: A. be flexible. B. have nominal exchange rates. C. depreciate. D. appreciate. When real output increases, planned aggregate expenditures […]

Refer to the figure below. The economy pictured in the figure has a(n) ______ gap with a short-run equilibrium indicated by point ___. A. recessionary; A B. recessionary; B C. recessionary; C D. expansionary; A The percentage change in quantity […]

The economy of Omega operates according to Okun’s law. In Omega, the actual and the natural rates of unemployment equal 5 percent, and real GDP equals $10 trillion. What is potential GDP in Omega? A. $9.0 trillion B. $9.5 trillion […]

Morgan lives in San Francisco and likes to dine out. Morgan has noticed that prices at restaurants near popular tourist destinations in the city tend to be higher than at restaurants of the same quality in other neighborhoods. One reason […]

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 per hour. If the department chair offers Jen […]

The figure below shows the demand curve for a product that can be sold only in whole-number amounts. At a price of $15 per unit, what would be the total consumer surplus in this market each day? A. $0 B. […]

The percentage change in quantity supplied that results from a 1 percent change in price is known as the: A. cross-price elasticity of supply. B. slope of the supply curve. C. price elasticity of supply. D. cross-price elasticity of demand. […]

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 […]

The economy is in long-run equilibrium: A. when the AD and AS curves intersect at potential output, Y*. B. when the AD and AS curves intersect, regardless of the level of output. C. when the AD and AS curves become […]

A demand shock is a change in planned spending that is: A. caused by changes in output. B. caused by changes in the inflation rate. C. caused by changes in output and changes in the real interest rate. D. not […]

Sven likes to water ski, but can only water ski during the one week each year when he is on vacation. Therefore, he plans to ski every day, for eight hours a day. The first day, Sven skied for eight […]

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 […]

Cyclical unemployment is equal to zero when: A. there is no recessionary gap. B. there is no expansionary gap. C. actual GDP and potential GDP are equal. D. frictional unemployment equals structural unemployment. Which of the expenditure components of GDP […]

The marginal tax rate is: A. total taxes divided by total before-tax income. B. the average tax rate divided by the total tax rate. C. the amount by which taxes increase when before-tax income rises by one dollar. D. the […]

Joe is the owner of the 7-11 Mini Mart, Sam is the owner of the SuperAmerica Mini Mart, and together they are the only two gas stations in town. Currently, they both charge $3 per gallon, and each earns a […]

Holding other factors constant, technological progress ______ the real wage and ______ employment. A. increases; increases B. increases; decreases C. increases; does not change D. decreases; increases If planned aggregate expenditure (PAE) in an economy equals 1,000 + 0.9Y and […]

Fred runs a fishing lodge, and has a very profitable business during the summer. In the fall, the number of guests at the lodge starts to decline. Fred should keep the lodge open: A. all year because his summer profits […]

Since the year2000, the share of the populationholding or actively looking forjobs have _______ in the United States: A. been record high. B. increased. C. remained approximately constant. D. decreased. The increase in the unemployment rate during a recession is […]

A drawback of using market values to aggregate the quantities of goods and services produced in an economy is that: A. higher-priced items count more. B. GDP increases when not all goods are produced in greater quantities. C. market prices […]

Prior to January 2000, the demand for money increased as people anticipated Y2K problems. If the Fed had taken no action to offset this increase in money demand, then nominal interest rates would have: A. increased. B. decreased. C. remained […]

During Thanksgiving you participated in a pumpkin-pie eating contest. You really enjoyed the first two pies, the third one was okay, but as soon as you ate the fourth one you became ill and lost the contest. You got ______ […]

A currency depreciation is a(n): A. increase in the value of a currency relative to other currencies. B. decrease in the value of a currency relative to other currencies. C. reduction in the official value of a currency in a […]

Suppose the figure below illustrates the demand curve facing a monopolist. Suppose this firm maximizes its profits by charging a price of $8 per unit. This implies that the firm’s: A. marginal cost is $8. B. marginal cost is $0. […]

Refer to the figure below. The total utility of consuming two dinners out per week is: A. less than 100. B. 75. C. 175. D. 160. An example of a government policy to increase physical capital formation is: A. the […]

______ is an increase in the price level, while ______ is an increase in the price of one good in comparison to other goods and services. A. Inflation; hyperinflation B. A relative price increase; inflation C. Hyperinflation; inflation D. Inflation; […]

A labor contract provides for a first-year wage of $10 per hour, and specifies that the real wage will rise by 3 percent in the second year of the contract and by another 3 percent in the third year. The […]

The extra costs incurred to avoid holding cash when there is inflation are called the: A. average costs of inflation. B. consumer price index costs. C. external costs. D. shoe leather costs. Suppose farmers in a given market can either […]

As a result of a war in the country of Omega, refugees flee to the country of Alpha to seek employment. Holding other factors constant, the influx of refugees will ______ the real wage in Alpha and ______ employment in […]

All else equal, compared to the case of a closed economy, monetary policy is ______ effective in an open economy with a ______ exchange rate. A. more; fixed B. more; flexible C. less; real D. less; nominal The tendency of […]

Suppose the price of gasoline increases and that sport utility vehicles get poor gas mileage compared to other available cars. One would expect: A. the demand for gasoline to decrease. B. the demand for sport utility vehicles to decrease. C. […]

The deadweight loss from taxing a good will be smaller for goods: A. whose supply and demand curves are more inelastic. B. whose supply and demand curves are more elastic. C. that are relatively expensive. D. that are consumed by […]

Refer to the figure below. For Chris, the opportunity cost of removing one bag of trash is planting: A. 25 bulbs. B. 1/25 of a bulb. C. 3 bulbs. D. 1/3 of a bulb. The demand curve for a public […]

Which of the following investments is part of a positional arms race? A. Watching your friend train for a soccer game B. Renting movies for the weekend C. Studying hard for your economics exam because your professor grades on a […]

Smith and Jones comprise a two-person economy. Their hourly rates of production are shown below. Suppose Smith and Jones begin by producing 100 calculators per hour; as Smith and Jones choose to efficiently produce fewer computers and more calculators, ______ […]

As Lynn eats more pizza, we would typically expect her marginal utility from eating pizza to: A. increase. B. decrease. C. stay the same. D. equal the price of pizza. Skill-biased technological has different effects on the marginal products of […]

Subsidies are most likely to: A. reduce consumer surplus. B. increase total economic surplus. C. reduce total economic surplus. D. leave total economic surplus unchanged, but transfer surplus from producers to consumers. Suppose the figure below shows Annie’s demand curve […]

The table below gives the quantities and prices for 2000 and 2010 for an economy that produces just two goods: sailboats and coconuts. For this economy that produces just sailboats and coconuts, and with 2000 is the base year, real […]

In the United States from 1960 to 2010, the largest positive contribution to national saving was from: A. the public sector. B. the government budget deficit. C. business saving. D. household saving. Refer to the figure below. This economy would […]

A risk-averse individual will: A. never accept any gamble. B. accept a fair gamble. C. only choose certain events. D. accept only better-than-fair gambles. The AD curve ______ because, holding all else constant, an increase in ______ causes C, IP […]

A game involving two players with two possible strategies is a prisoner’s dilemma if each player has a dominant strategy and: A. neither player plays their dominant strategy. B. each player’s payoff is higher when both play their dominated strategy […]

If the consumer’s income and all prices simultaneously triple, then his optimum will not change. A negligence standard, with the allowance of contributory negligence, always leads to a socially optimal outcome. Answer: F A free-rider problem occurs when people can […]

A firm has passed the point of diminishing marginal returns if and only if additional labor lowers its output. Positive externalities created by human capital provide one explanation of why firms do not move more capital to low-wage areas. Answer: […]

A boss can type 200 words per minute and sell 2000 units of the company’s product in one day. His assistant can type 150 words per minute and sell 1000 units of the company’s product in one day. Discuss who […]

A farmer has a comparative advantage at growing wheat if his cost of growing wheat is smaller than his cost of growing any other crop. Economic models of markets generally treat prices as exogenous variables. Answer: F For a given […]

The higher the interest rate, the higher the price of a bond. If the total benefits received from drug enforcement exceed its total costs, then the government should expand its drug enforcement activity. Answer: F If a model is based […]