Richard receives government transfer payments and currently consumes five guns and
six goose livers. Assume the price of guns decreases by 10% and the price of goose
liver increases by 20%. The government raises Richard’s transfer payments so he can
still afford five guns and six goose livers. Does this constitute a true cost-of-living
adjustment?
Yes. The payment just achieves the right level of compensation.
Not enough information.
No. Richard is overcompensated.
No. Richard is undercompensated.
Consider the following two situations.
(i) You purchase a $10 movie ticket in advance over the Internet, but when arriving at
the theater, you realize that you lost the ticket. The only way to see the movie is to
purchase a new ticket.
(ii) On the way to seeing a movie, you drop a $10 bill. You still can afford the movie,
but you have lost the $10.
How should you, rational person, respond to the two situations?
You should still see the movie in both situations
In each situation, you should not see the movie.
In the first situation, you should skip the movie; in the second, you should still see
the movie.
You should respond the same way to each situation, whether it is to see the movie
or not.
A small business owner earns $5,000 in revenue annually. The explicit annual costs
equal $3,000. The owner could work for someone else and earn $2,500 annually. The
owner's business profit is _____and the economic profit is ________.
$2,000, $500
$2,000, −$500
$2,500, −$500
$4,500, −$500
If the utility function (U) between food (F) and clothing (C) can be represented as U =
F × C, the marginal rate of substitution of clothing for food equals
−C/F
−F/C
−C/F
−F/C
The below figure shows the demand and cost curves facing a monopoly. If the firm is a
profit maximizer, its Lerner index will equal
1/3
1
1.5
3
The below figure shows the reaction functions for two pizza shops in a small isolated
down. The Stackelberg leader will produce
25pizzas
50 pizzas
66.7 pizzas
100 pizzas
Which of the following total cost functions suggests the presence of a natural monopoly?
TC = 2Q
TC = 100 + 2Q
TC = 100 + 2Q2
All of the above.
A perfect-price-discriminating monopoly's marginal revenue curve
lies below the demand curve.
is the demand curve.
varies for each consumer.
is the same as the monopolist's marginal revenue curve.
A multimarket price discriminator sells its product in Florida for three times the price it
sets in New York. Assuming the firm faces the same constant marginal cost in each
market and the price elasticity of demand in New York is −2.0, the demand in Florida
has an elasticity of −6.0.
is more price elastic than the demand in New York.
has an elasticity of −1.2.
has an elasticity of −0.67.
The demand for a monopoly's output is P = 100 − Q. The firm's production function is
Q = 2L. Which of the following is the firm’s demand for labor?
w = 200 − 8
w = 200 − 4L
w = l00 − L
w = 2L
Bob invests $50 in an investment that has a 50% chance of being worth $100 and a
50% chance of being worth $0. From this information we can conclude that Bob is
NOT
risk loving
risk neutral
risk averse
rational
In the automobile insurance market, adverse selection occurs when
drivers with greater risks buy a policy with large deductibles.
uninsured drivers drive recklessly.
drivers with greater risks buy a policy with no deductibles.
insured drivers drive recklessly.
The Keynesian activist prescription for a permanent decrease in aggregate demand is a
fixed rule that calls for budget deficits and increasing the growth rate of the quantity
of money.
feedback rule that calls for budget surpluses and decreasing the growth rate of the
quantity of money.
feedback rule that calls for budget deficits and increasing the growth rate of the
quantity of money.
fixed rule that keeps constant taxes, government purchases and the growth rate of
the quantity of money.
Which of the following is a flow variable?
Capital.
The money in your pocket
Wealth.
Gross domestic product.
Which of the following is NOT considered to be in the labor force?
A student who works part-time.
A person who is not working but who has tried to find a job in the past week
A person who is waiting to start a new job in the next 30 days.
A person who is not working and who has not tried to find a job.
Which of the following will decrease the unemployment rate?
Discouraged workers leave the labor force.
More women enter the labor force and seek jobs.
Young people graduate from college and start to look for their first full-time job.
None of the above because they all increase or do not change the unemployment
rate.
Andrew just lost his job as a corkscrew operator since his company has found a
machine to perform his work tasks. Andrew did not have the skills needed to operate
the machine. Andrew has searched for a new job for 6 months and continues to search.
Therefore, Andrew is considered to be
frictionally unemployed.
a discouraged worker.
cyclically unemployed.
structurally unemployed.
The below table shows answers given by people interviewed in a government survey of
households. Which individuals are considered unemployed?
1, 2, and 3
2, 3, and 4
1,3, and 4.
3 and 4.
Full employment occurs when the
structural unemployment rate equals the frictional unemployment rate
unemployment rate equals the natural rate of unemployment.
natural unemployment rate equals the frictional unemployment rate.
cyclical unemployment rate equals the natural rate of unemployment.
Which of the following is (are) TRUE regarding the demand for labor?
I. The quantity of labor demanded depends on the real wage rate.
II. If the money wage rate increases and the price level remains the same, the quantity
of labor demanded decreases.
III. If the money wage rate and the price level increase in the same proportion, the
quantity of labor demanded decreases.
I.
I and II.
II and III.
I, II, and III.
If the Federal Reserve wanted to increase the quantity of money, it would
convince the federal government to run a budget deficit.
sell government securities in the open market.
tell the banks to lower interest rates.
purchase government securities in the open market.
The quantity of money people want to hold increases if
the price level falls.
the interest rate rises.
real GDP increases.
All of the above answers are correct.
Banks hold no excess reserves and the public holds no currency. Suppose that the
required reserve ratio is lowered from 20 percent to 10 percent. The effect of lowering
the required reserve ratio is to
decrease the deposit multiplier from 0.2 to 0.1
increase the deposit multiplier from 5 to 10
increase the deposit multiplier from 6 to 10
decrease the deposit multiplier from 0.16 to 0.1
A decrease in government purchases due to Congressional budget cuts will cause
AD curve shifts right
AD curve shifts left
AS curve shifts right
AS curve shifts left
Suppose the equilibrium real wage is $35 per hour and the current real wage rises to
$40 per hour while the equilibrium real wage remains $35 per hour. Which of the
following will occur?
I. Job search will increase.
II. The unemployment rate will be greater than the natural rate of unemployment.
III. Labor productivity will increase.
I only.
I and II.
I and III.
I, II and III.
Suppose in PC market, there are 10 consumers and 5 producers. Every consumer has
the same individual demand curve: qd =1 − 0.2p , and every producer has the same
supply curve:
qs = 0.4 + 0.4p. Please answer the following questions.
(1) Derive the market demand and supply curve.
(2) In equilibrium, what is the market price and quantity demanded? Calculate the total
consumer surplus.
According to the above data, answer the following questions.
(1) Find the short-run equilibrium output; show it in a Keynesian cross diagram. Does
there exists any recessionary gap or expansionary gap? How much is the gap?
(2) How can the government adjust (i) G and (ii) T (fiscal policy) to eliminate the
output gap? If the government wants to (iii) balance its budget while eliminating the
output gap, how can it do?
(3) If the nation's central bank wants to eliminate the output gap, it can (i) use open
market operation; (ii) adjust desired reserve-deposit ratio, how can it do to eliminate
the output gap.
Suppose the equilibrium real wage is $35 per hour and the current real wage rises to
$40 per hour while the equilibrium real wage remains $35 per hour. Which of the
following will occur?
I. Job search will increase.
II. The unemployment rate will be greater than the natural rate of unemployment.
III. Labor productivity will increase.
I only.
I and II.
I and III.
I, II and III.
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