Consider the market for hot dogs. As long as the marginal benefit of consuming hot
dogs is greater than the price of hot dogs,
we will receive consumer surplus from eating hot dogs.
the price of hot dogs will rise.
the value of hot dogs will rise.
there is no decreasing marginal benefit of eating hot dogs.
Consider the market for hot dogs. If the government imposes a tax on hot dogs,
there will be a loss of consumer surplus.
there will be a gain of consumer surplus.
deadweight loss will be minimized.
the marginal cost and marginal benefit of hot dogs will decrease.
Assume that your state government has placed a price ceiling of $.20 per kilowatt hour
on electricity. The equilibrium price per kilowatt hour for electricity is $.25. This
action will result in
surplus of electricity in the electricity market.
an increase in the price of electricity to $.25 per kilowatt hour.
an increase in producer surplus.
a deadweight loss occurring.
Suppose the government wants to discourage the use of cigarettes. If it imposes a tax on
cigarettes, the equilibrium quantity falls the most when the elasticity of demand equals
2.00.
1.00.
0.50.
0.
Lily is a college student who likes to buy only two goods: Cheetos and Pepsi. To
determine how Lily can maximize her utility from consuming Cheetos and Pepsi, you
need to know
I. Lily’s preferences for Cheetos and Pepsi.
II. The price of Cheetos and Pepsi.
III. Lily’s income.
I only.
I and II.
I and III.
I, II and III.
Suppose Hank spends his entire budget buying 2 bagels and 3 cups of coffee each day.
Also, suppose the marginal utility of the second bagel is 100 and the marginal utility of
the third cup of coffee is 200. Which of the following statements is true?
Hank is not maximizing his utility.
Hank will be maximizing his utility as long as the price of cup of coffee is twice the
price if a bagel.
Hank might be maximizing utility only if the price of a cup of coffee is less than the
price of a bagel.
Hank is not maximizing utility because he is not buying equal amounts of each
good.
Which of the following statements is true?
The marginal and average product curves intersect at the maximum level of output.
At every output level the marginal product curve lies above the average product curve.
The marginal product and average product curves intersect when average product is
at its maximum.
The marginal product curve always has a positive slope.
Which of the following is FALSE?
Long-run average variable costs equal long-run average total costs.
fixed costs increase in the long run.
as a firm produce more output, eventually it experiences diseconomies of scale.
In the long run, both the amount of capital and labor used by the firm can be changed.
A single-price monopoly
charges all consumers the lowest price that they want to pay for each unit purchased.
produces less output than it would if it could discriminate.
eliminates all the consumer surplus.
creates a smaller deadweight loss then it would if it could discriminate.
Firms in monopolistic competition have rivals that
match their price increases.
match their price decreases.
agree on a common price.
set their prices according to the demand curves they face.
In a regulated natural monopoly, a marginal cost pricing rule maximizes
total costs.
producer surplus.
economic profit.
total surplus.
If the marginal social benefit of a good equals the marginal private benefit of the good,
then the marginal external benefit of the good
is zero.
equals the marginal social benefit.
equals the marginal social cost.
equals the marginal privates cost.
An perfectly competitive firm facing a competitive labor market will hire more labor
whenever
its average revenue product of labor exceeds the wage rate.
the wage rate exceeds its average revenue product of labor.
its marginal revenue product of labor exceeds the wage rate.
the wage rate exceeds its marginal revenue product of labor.
In recent years, information technology such as computers and scanners have been a
_____ for low-skilled labor and have led to _____ wage rates for low-skilled workers.
substitute; higher
substitute; lower
complement; higher
complement; lower
An increase in Meta’s wealth from $3,000 to $6,000 raises her utility from 80 units to
100. If she is risk averse, with a wealth of $9,000 her utility might be
99 units.
114 units.
120 units.
126 units.
If the prices of a firm’s output falls by 5 percent and the money wages it pays remain
constant, the firm’s
quantity of labor demanded will decrease.
quantity of labor demanded will increase.
quantity of labor demanded will not change.
supply of jobs will increase.
An efficiency wage results in increased unemployment because it
increase the quantity of labor supplied and decreases the quantity of labor demanded.
increase the quantity of labor demanded and decreases the quantity of labor supplied.
increase both the quantity of labor supplied and the quantity of labor demanded.
decreases both the quantity of labor supplied and the quantity of labor demanded.
The productivity curve shows that an increase in technological progress results in
an increase in the revel of real GDP per hour of labor at any level of capital per hour
of labor.
no change in the revel of real GDP per hour of labor at any level of capital per hour
of labor.
a decrease in the revel of real GDP per hour of labor at any level of capital per hour
of labor.
an increase in the quantity of labor.
You deposit $400 in currency in your checking account. The bank holds 20 percent of
all deposits as reserves. As a direct result of your deposit, your bank will create
$200 of new money.
$800 of new money.
$1600 of new money.
$3,200 of new money.
Suppose that the money multiplier is 3. If the Fed sells $2 million in securities, the
quantity of money will
increase by $6 million.
increase by $666,667.
decrease by $6 million.
decrease by $666,667.
Suppose that the interest rate is greater than the equilibrium interest rate. Which of the
following occurs?
I. There is an excess quantity of money.
II. The quantity of money automatically increases.
III. People start buying bonds.
I.
I and II.
I and III.
I, II and III.
According to the quantity theory of money, in the long run
an increase in the quantity of money creates an increase in prices but no additional
increase in real GDP.
the quantity of money in a society will always be just the right amount.
an increase in the quantity of money creates an increase in real GDP.
None of the above answers are correct.
If inflation turns out to be lower than expected,
both borrowers and lenders will wish that the volume of loans had been higher.
borrowers will wish that they had borrowed more and lenders will wish that they
had lent less.
borrowers will wish that they had borrowed less and lenders will wish that they had
lent more.
both borrowers and lenders will wish that the volume of loans had been lower.
In monetarist business cycle theory, increase in money growth temporarily _____ real
GDP because interest rates _____.
increase; rice
increase; fall
decrease; rise
decrease; fall
With a steep short-run aggregate supply curve,
an increase in government spending will not have an impact on the price level.
fiscal policy will be an effective tool to reduce unemployment without raising
prices too much.
an increase in taxes that does not change potential GDP will not decrease real GDP
by much.
there is large change in real GDP whenever the price level rises.
Suppose a tax cut affects both aggregate demand and aggregate supply. The larger is
the supply-side effect of the tax cut, the _____ is the increase in real GDP and the
_____ is the increase in the price level.
larger; larger
larger; smaller
smaller; larger
smaller; smaller
The economy is at full employment when aggregate demand temporarily decreases. A
feedback-rule response to this decrease in aggregate demand would be to
wait until the money wage rate increased.
wait until the money wage rate decreased.
perform expansionary policy.
perform contractionary policy.
If the Fed unexpectedly increases the growth rate of the quantity of money, the
short-run Phillips curve
shifts leftward.
shifts rightward.
does not shift.
becomes vertical.
Sugar producers’ argument that protecting sugar is vital to national security is best
described as an example of
an externality.
rent seeking.
a security subsidy.
national risk aversion.
An increase in the U.S. demand for imports will _____ the supply of dollars and lead
the dollar to _____.
increase; appreciate
decrease; appreciate
increase; depreciate
decrease; depreciate
The change in total revenue depends on the elasticity of demand. Please prove the
following concept based on the definition of elasticity.
If demand is elastic (=2), a 1% price cut increases the quantity sold by more than
1% and total revenue increases.
The change in total revenue depends on the elasticity of demand. Please prove the
following concept based on the definition of elasticity.
If demand is inelastic (=0.5), a 1% price cut increases the quantity sold by less than
1% and total revenue decreases.
Originally, Sara’s income is $12 a week. The price of popcorn is $3 a bag, and the price
of cola is $3 a can. Now suppose that the price of cola falls to $1.50 a can and the price
of popcorn and Sara’s income remain the same. The figure illustrates Sara’s
preferences.
Find two points on Sara’s demand curve for cola
Originally, Sara’s income is $12 a week. The price of popcorn is $3 a bag, and the price
of cola is $3 a can. Now suppose that the price of cola falls to $1.50 a can and the price
of popcorn and Sara’s income remain the same. The figure illustrates Sara’s
preferences.
Find the substitution effect of the price change
The economy of Mainland has the following aggregate demand and supply schedules:
What are the values of real GDP and the price level in Mainland in a short-run
macroeconomic equilibrium?
The economy of Mainland has the following aggregate demand and supply schedules:
When aggregate demand increase by $100billion, how do real GDP and the price
level change in the short run?
You are given the following information about the economy of Zeeland:
Autonomous consumption expenditure is $100billion, and the marginal propensity to
consume is 0.9. Investment is $460billion, government purchases of goods and services
are $400billion, and net taxes are a constant $400 billion--- they do not vary with
income.
What is the equation that describes the aggregate expenditure curve?
You are given the following information about the economy of Zeeland:
Autonomous consumption expenditure is $100billion, and the marginal propensity to
consume is 0.9. Investment is $460billion, government purchases of goods and services
are $400billion, and net taxes are a constant $400 billion--- they do not vary with
income.
If investment falls to $360billion, what is the change in equilibrium expenditure and
what is the size of the multiplier?
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