When the prices were ($4, $1), Mary chose the bundle (x, y) = (8,6) . Now at the new
prices, (Px , Py ) , she chooses the bundle (x, y) = (7,9) . For Mary’s behavior to be
consistent with the weak axiom of revealed preference, it must be that
Py = 4Px
4Py < Px
3Py < Px
Px < Py
None of the above.
Mary is very picky and insists that his mom make his breakfast with equal parts of
cereal and apple juice – any other combination and it ends up on the floor. Cereal costs
4 cents per tablespoon and apple juice costs 6 cents per tablespoon. If Mary’s mom
budgets $8 per month for Mary’s breakfast, how much cereal and juice does she buy?
40 tablespoons each of cereal and juice.
80 tablespoons each of cereal and juice.
40 tablespoons of cereal and 75 tablespoons of juice.
100 tablespoons of cereal and 67 tablespoons of juice.
The difference between the utility of expected income and expected utility from income
is
zero because income generates utility
positive because if utility from income is uncertain, it is worth less.
negative because if income is uncertain, it is worth less.
that expected utility from income is calculated by summing the utilities of possible
incomes, weighted by their probability of occurring, and the utility of expected
income is calculated by summing the possible incomes, weighted by their
probability of occurring, and finding the utility of that figure.
that the utility of expected income is calculated by summing the utilities of possible
incomes, weighted by their probability of occurring, and the expected utility of
income is calculated by summing the possible incomes, weighted by their
probability of occurring, and finding the utility of that figure.
A firm has the production function Q = KL , where K is the amount of capital and
L is the amount of labor it uses as inputs. The cost per unit of capital is rental fee r
and the cost per unit of labor is a wage w . The conditional labor demand function
L(Q,w, r) is
Qwr .
the square root of Qr / w .
Qw / r .
the square root of Q / rw .
Q / wr .
Which of the following is true at the output level where P = MC ?
The monopolist is maximizing profit.
The monopolist is not maximizing profit and should increase output.
The monopolist is not maximizing profit and should decrease output.
The monopolist is earning a positive profit.
Your economics professor has decided that your class will not be graded on a curve but
on an absolute scale. Therefore, it is possible for every student in the class to get an
“A”. Your grade will not depend in any way on your classmates’ performance. Based
on this information, you decide that you should study economics three hours each day,
regardless of what your classmates do. In the language of game theory, your decision to
study three hours each day is:
a dominant strategy.
a minimax strategy.
a maximum strategy.
a Prisoner’s dilemma.
If an individual’s labor supply curve is backward bending, then
the income effect associated with a higher wage is greater than the substitution
effect.
the substitution effect associated with a higher wage is greater than the income
effect.
the substitution effect associated with a higher wage encourages more leisure.
(A) and (C).
(B) and (C).
A certain magazine offers its subscribers the opportunity to “Buy Now and Save.” If at
the time their subscription renewal is due they agree to pay for 2 years rather than 1,
the renewal price will be $50 per year rather than the usual $60 per year. At what
interest rate will the consumer, who is certain she will subscribe to the magazine for the
next 2 years, decide to “Buy Now and Save”?
any interest rate under 50 percent
any interest rate over 1.5 percent
any interest rate over 150 percent
any interest rate under 5 percent
She will always take this offer if she is absolutely certain to buy the magazine for
another 2 years.
Suppose there is a water shortage, and the governor proposes that the government
distributed equal quantities of water to each person at no cost to the consumers. If
consumers were forbidden to trade water, would such a distribution be Pareto optimal?
Yes, because each person has the same amount of water as everyone else.
Yes, because everyone would be receive their water for free.
Not necessarily, as people may differ in their marginal rates of substitution between
water and other goods.
It is impossible to determine without knowing the price of water.
None of the above.
If a France firm produces computers in the United States, that production should count
towards:
France GNP.
France GDP.
U.S. GNP.
It will not affect either U.S. GNP or U.S. GDP.
Goods that go into inventory and are not sold during the current period
are excluded from GDP, because we can’t measure the market values of that goods.
are intermediate goods until sold, hence, are excluded from GDP.
are included in GDP as consumption.
are included in GDP as inventory investment.
A government budget surplus will:
shift the demand curve for loanable funds to the right and the equilibrium real
interest rate will rise.
shift the demand curve for loanable funds to the left and the equilibrium real
interest rate will rise.
shift the supply curve for loanable funds to the right and the equilibrium real
interest rate will fall.
shift the supply curve for loanable funds to the left and the equilibrium real interest
rate will fall.
An increase in the demand for loanable funds causes
the demand for securities to shift to the right.
the supply of securities to shift to the left.
the price of securities to rise.
the yield of securities to rise.
Calculate the government purchases multiplier if the marginal propensity to consume
equals 0.8, the tax rate is 0.15, and the marginal propensity to import equals 0.2. Round
the answer to the nearest tenth.
2.5
2.1
1.9
1.4
190 thousand people are employed, 10 thousand people are unemployed, the
working-age population is 250 thousand, and 50 thousand people are out of the labor
force, then the unemployment rate is
10%
11%
8%
5%
The yen will depreciate relative to the dollar if:
income in Japan rises.
Japanese interest rates increase.
speculators think the future value of the yen will be higher relative to future value
of the dollar.
there is a recession in Japan.
The Central Bank of the Republic of China increases interest rates. What effect will the
increase in interest rates have on the value of the New Taiwan dollar relative to the
dollar? Show using a graph of the demand and supply of U.S. dollars for NT dollars.
(5%) Illustrate, using the aggregate demand graph what will happen to net exports and
aggregate demand as a result? (5%) Illustrate using the aggregate supply and demand
model what happens in the long run when the economy experiences the increase in
interest rates. (5%)
What happens to money supply when the Federal Reserve announces that it’s cut the
discount rate by half a percentage point to 5.75%? (5%) Using a graph of the money
market show what this does to interest rates. (5%)
Using a graph of the demand and supply of loanable funds explain the crowding out
effect. (5%)
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