Macroeconomics Exam Materials
Course Introduction
Macroeconomics is a foundational course that examines the behavior and performance of an economy as a whole. This course explores key aggregate indicators such as GDP, inflation, unemployment, and economic growth, and analyzes the impact of government policies, monetary systems, and global influences on national and international economies. Students will develop an understanding of economic models and frameworks that explain cycles of expansion and contraction, policy interventions, fiscal and monetary policy, and the interplay between markets on a macro level. By the end of the course, students will be able to critically evaluate current macroeconomic issues and trends using relevant tools and concepts.
Recommended Textbook
Economics 4th Edition by Paul Krugman
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Chapter 1: First Principles
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Q1) To encourage people to retire later, because people usually exploit opportunities to make themselves better off, the government could:
A) reduce Social Security benefits.
B) raise the tax rate on older individuals.
C) engage in a public service campaign explaining the value of these employees to the economy.
D) increase Social Security benefits.
Answer: A
Q2) After swimming 100 laps at the pool, Erik decides to swim 10 more before lifting weights. This statement best represents this economic concept:
A) Resources are scarce.
B) The real cost of something is what you must give up to get it.
C) "How much" is a decision at the margin.
D) There are gains from trade.
Answer: C
Q3) Equity is the same as efficiency.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Economic Models- Trade-Offs and Trade
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Q1) In the circular-flow diagram, an organization that produces goods or services for sale is a:
A) market.
B) household.
C) factor.
D) firm.
Answer: D
Q2) Which of the following is a normative statement?
A) International trade leads to expanded consumption opportunities.
B) Higher expenditures on health care will reduce infant mortality rates.
C) To improve our economic security, we should reduce our dependence on oil imports.
D) Increased defense spending will lead to higher budget deficits.
Answer: C
Q3) Which of the following is a positive statement?
A) The poverty rate is 14%.
B) A high rate of inflation is the most important economic goal for the country.
C) Everyone in the country should save money for retirement.
D) Basketball players should not be paid higher salaries than teachers.
Answer: A
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Page 4
Chapter 3: Supply and Demand
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Sample Questions
Q1) A recent news story reported that the Organization of Petroleum Exporting Countries is expected to decrease the supply of oil next summer. Summer is traditionally a time of increased demand for oil because of vacation travel. What would be the combined effect of these two events on the summer market for gasoline?
A) an increase in the price and the quantity
B) an increase in the price and an unpredictable change in the quantity
C) an unpredictable change in both the price and the quantity
D) an unpredictable change in the price and a decrease in the quantity
Q2) (Figure: Shifts in Demand and Supply III) Look at the figure Shifts in Demand and Supply III. The figure shows how supply and demand might shift in response to specific events. Suppose consumer incomes increase. Which panel BEST describes how this will affect the market for designer boots, a normal good?
A) panel A
B) panel B
C) panel C
D) panel D
Q3) An increase in demand for good X can be caused by a decrease in the price of X.
A)True
B)False
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Page 5
Chapter 4: Consumer and Producer Surplus
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Sample Questions
Q1) Some smaller retailers often go out of business when Walmart opens a new store. The most likely reason for this development is that:
A) Walmart practices unfair pricing methods that reduce consumer surplus over time.
B) consumers in those areas receive no consumer surplus from Walmart.
C) consumers in those areas receive a larger consumer surplus from shopping at Walmart than from the smaller stores.
D) smaller stores increase prices to compete.
Q2) (Table: Willingness to Pay for Basketball Sneakers) The table Willingness to Pay for Basketball Sneakers shows each player's willingness to pay for basketball sneakers. Assume that each player wants to buy at most, one pair of sneakers. If the price of basketball sneakers is $125, which players will purchase sneakers?
A) Jamichael and Javon
B) Jamichael and Corey
C) Jamichael, Corey, and Rudy
D) Jamichael, Corey, Rudy, and Ray
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Chapter 5: Price Controls and Quotas- Meddling With Markets
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Sample Questions
Q1) The government might impose a price ceiling if _____ can make a strong moral or political argument for _____ prices.
A) demanders; lower B) suppliers; lower C) demanders; higher
D) suppliers; higher
Q2) (Figure: Market I) Look at the figure Market I. If a price floor of $15 is imposed on this market and the government chooses to purchase the surplus, the government must buy _____ units of the good and spend a total amount of _____ on its purchase.
A) 5; $75
B) 10; $150
C) 9; $135
D) 9; $81
Q3) A maximum price set below the equilibrium price is a:
A) demand price.
B) supply price.
C) price floor.
D) price ceiling.
Q4) How does a price ceiling cause deadweight loss in the market?
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Chapter 6: Elasticity
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Q1) (Figure: The Demand for e-Books) Look at the figure The Demand for e-Books. What is the price elasticity of demand (by the midpoint method) when the price increases from $6 to $8?
A) 0.55
B) 0.5
C) 2.33
D) 0.67
Q2) The price elasticity of demand for ground beef has been estimated to be 1.0. If mad cow disease strikes the United States and a large percentage of the cattle are removed from the market, how will that affect total expenditures on ground beef, all other things equal?
A) Total expenditures will remain unchanged.
B) Total expenditures will fall by more than 1%.
C) Demand will fall by 1%, but total expenditures will fall by less than 1%.
D) Total expenditures will rise.
Q3) The price elasticity of demand is the ratio of the percent change in quantity demanded to the percent change in price as one moves along the demand curve.
A)True
B)False
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Page 8
Chapter 7: Taxes
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Sample Questions
Q1) Cigarette taxes have eliminated the wedge between the demand price for cigarettes and the supply price of cigarettes.
A)True
B)False
Q2) If personal income up to and including $30,000 is not taxed, income of $30,001 to $60,000 is taxed at 10%, and income over $60,000 is taxed at 25%, then a family earning an income of $100,000 will pay an AVERAGE tax rate of:
A) 5%.
B) 10%.
C) 13%.
D) 25%.
Q3) _____ taxes are paid on wages.
A) Income
B) Profits
C) Property
D) Sales
Q4) The argument for progressive taxes is based on the ability-to-pay principle.
A)True
B)False
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Chapter 9: The Rational Consumer
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Sample Questions
Q1) On a sparsely populated island, high-speed Internet service would have a _____ marginal utility than in New York City, while in New York City quiet evenings would carry a _____ marginal utility than on a deserted island.
A) lower; higher
B) higher; lower
C) lower; lower
D) higher; higher
Q2) (Figure and Table: The Budget Line) Look at the figure and table The Budget Line. _____ in the price of clams would rotate the budget line along the _____ axis _____ the origin.
A) An increase; horizontal; away from B) A decrease; horizontal; away from
C) An increase; vertical; toward D) A decrease; vertical; away from
Q3) Whatever the relevant time, Molly's spending will be _____ by her _____.
A) unlimited; marginal utility
B) limited; marginal utility
C) limited; budget
D) unlimited; budget
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Chapter 8: International Trade
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Q1) The United States can produce wine domestically, but it can also import wine if the world price is lower than the domestic price. If the United States imports wine, consumer surplus will _____ by _____ the _____ in producer surplus; total surplus will _____.
A) increase; less than; decrease; decrease B) increase; the same amount as; decrease; stay constant
C) decrease; less than; increase; increase
D) increase; more than; decrease; increase
Q2) In a single year, Argentina can raise 100 tons of beef or produce 1,000 boxes of tulips. In the same growing season, Venezuela can raise 50 tons of beef or produce 750 boxes of tulips. When the two countries begin trading beef for tulips, we expect the price of beef in Venezuela:
A) to fall.
B) to rise.
C) to remain at the autarky price.
D) to be 15 boxes of tulips.
Q3) Some advocates of trade protection in the domestic market for steel argue that it is needed to protect domestic steelworkers' jobs. Why are economists usually unconvinced by this argument?
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Chapter 10: Decision Making by Individuals and Firms
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Q1) If the marginal benefit received from consuming a good is greater than the marginal cost of production:
A) society's well-being can be improved if production increases.
B) society's well-being can be improved if production decreases.
C) society's well-being cannot be improved by changing production.
D) the market is producing too much of the good.
Q2) (Table: Marginal Benefit of Sweatshirts) Look at the table Marginal Benefit of Sweatshirts. The marginal benefit of producing the third sweatshirt is:
A) $31.
B) $16.
C) $15.
D) $14.
Q3) (Table: Marginal Benefit of Sweatshirts) Look at the table Marginal Benefit of Sweatshirts. The marginal benefit of producing the second sweatshirt is:
A) $31.
B) $16.
C) $15.
D) $14.
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Chapter 11: Perfect Competition and the Supply Curve
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Sample Questions
Q1) The demand curve for a perfectly competitive firm is:
A) perfectly inelastic.
B) perfectly elastic.
C) downward-sloping.
D) relatively but not perfectly elastic.
Q2) A perfectly competitive firm's demand curve is perfectly elastic at the market-determined price.
A)True
B)False
Q3) The shut-down point in the short run is:
A) the point at which economic profit is zero.
B) the minimum point of AVC.
C) the intersection of the MC and ATC curves.
D) the minimum point of AFC.
Q4) Zoe's Bakery determines that P < ATC and P > AVC. In the short run, Zoe should:
A) continue to operate even though she is taking an economic loss.
B) continue to operate, as she is making an economic profit.
C) shut down immediately, as she is taking an economic loss.
D) raise the price until she has maximized her profits.
Q5) Why are perfectly competitive firms described as price takers?
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Chapter 12: Monopoly
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Sample Questions
Q1) If a monopoly can engage in perfect price discrimination, then its marginal revenue is equal to price, in contrast to the usual situation for a monopoly, in which price is higher than marginal revenue.
A)True
B)False
Q2) (Table: Demand for Lenny's Coffee) Look at the table Demand for Lenny's Coffee. Lenny's Café is the only source of coffee for hundreds of miles in any direction. If Lenny increases the quantity sold from five cups to six, his marginal revenue will be:
A) $4.
B) $24.
C) -$1.
D) $5.
Q3) When a monopolist practices price discrimination, compared to a single-price monopolist, monopoly profits will:
A) remain the same.
B) increase.
C) decrease.
D) increase initially, and then return to their original level.
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Chapter 13: Oligopoly
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Sample Questions
Q1) Oligopoly is a market structure characterized by:
A) independence in decision making.
B) interdependence: each firm's decision affects the profit of the other firms.
C) substantial diseconomies of scale.
D) a large number of small firms.
Q2) Which of the following Herfindahl-Hirschman indices is most likely to indicate a perfectly competitive market?
A) 100
B) 1,800
C) 10,000
D) 100,000
Q3) Collusive agreements are typically difficult for cartels to maintain because each firm can increase profits by:
A) producing more than the quantity that maximizes joint profits.
B) producing less than the quantity that maximizes joint profits.
C) charging more than the price that maximizes joint cartel profits.
D) advertising less than will maximize joint cartel profits.
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Chapter 14: Monopolistic Competition and Product
Differentiation
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Sample Questions
Q1) If monopolistically competitive firms are earning positive economic profits in the short run, then in the long run:
A) firms will leave the industry.
B) the demand curves faced by existing firms will move to the right.
C) economic profits will increase.
D) economic profits will be reduced to zero.
Q2) In a monopolistically competitive industry:
A) a firm maximizes profits when MR = MC yet P > MC.
B) people would be better off if output were reduced.
C) output could be increased without an increase in total cost.
D) to maximize profits, firms set MR = MC, and people would be better off if output were reduced.
Q3) (Figure: Firms in Monopolistic Competition) In panel (A) of the figure Firms in Monopolistic Competition, economic profit per unit is:
A) KL.
B) LO.
C) MN.
D) NO.
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Chapter 15: Externalities
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Q1) (Table: Externalities from Parks) The table Externalities from Parks shows the marginal social benefit and the marginal social cost of preserving various amounts of land in a city for a public park. If 1 acre is dedicated to the park, this outcome is _____ because
A) efficient; MSB = MSC
B) efficient; MSB > MSC
C) inefficient; MSB > MSC
D) inefficient; MSB < MSC
Q2) Suppose government officials have set an emissions tax to reduce pollution. Assume the optimal tax would be $500 but government officials have set the tax at $900. At the equilibrium with the $900 tax:
A) there will be too much pollution.
B) the marginal social cost of pollution will be less than $900.
C) the marginal social benefit of pollution will be $900.
D) the marginal social benefit of pollution will be more than $900.
Q3) When individuals take external costs and benefits into account:
A) there are no external costs.
B) they internalize the externality.
C) the government should intervene in the market.
D) the market will not reach an efficient solution.
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Chapter 16: Public Goods and Common Resources
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Q1) The tendency of people or firms to consume a public good without paying for it is called the _____ problem.
A) free-cost
B) free-rider
C) free-goods
D) free-market
Q2) If the market produces an efficient level of a good, then we know that the good must be _____ and _____ in consumption.
A) nonexcludable; nonrival
B) nonexcludable; rival
C) excludable; nonrival
D) excludable; rival
Q3) Which of the following goods is most likely a common resource?
A) the Super Bowl
B) a public park
C) a pair of pants
D) the fire department
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Chapter 17: The Economics of the Welfare State
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Q1) Some nations, including Canada, have adopted a health care system in which the government pays the medical bills. This is known as a(n) _____ system.
A) employment-based
B) private health insurance
C) means-tested
D) single-payer
Q2) The poverty line is adjusted each year to reflect:
A) changes in the cost of living.
B) changes in the size of the average family.
C) the long-term rise in the average standard of living.
D) changes in the cost of living and changes in the size of the average family.
Q3) Suppose ABC Health is a private health insurance company that offers an identical policy to all customers. Each customer pays a premium equal to the average consumer's annual medical expenses. This is a system that has the potential to fail because of the _____ problem.
A) adverse selection
B) income inequality
C) single-payer
D) equity versus efficiency
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Page 19
Chapter 18: Factor Markets and the Distribution of Income
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Q1) According to the marginal productivity theory of income distribution, in a competitive economy each factor of production is paid its equilibrium value of the marginal product.
A)True
B)False
Q2) An increase in the demand for autoworkers may come about because of all of the following EXCEPT a(n):
A) increase in the price of cars.
B) decrease in the market wage rate.
C) increase in the productivity of autoworkers.
D) increase in the supply of other factors that autoworkers use in production.
Q3) A firm's demand curve for labor will shift because of:
A) a decrease in the wage rate.
B) an increase in the wage rate.
C) changes in preferences and the cultural norms that define how much we work.
D) a change in the product's price.
Q4) If an individual labor supply curve is negatively sloped, the substitution effect dominates the income effect.
A)True
B)False
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Chapter 19: Uncertainty, Risk, and Private Information
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Q1) Buying a warranty on a new television is an example of paying to avoid risk. A)True B)False
Q2) Private information leads _____ to expect hidden problems in items offered for sale, leading to _____ prices and to the best items being kept off the market. A) buyers; high B) buyers; low C) sellers; high D) sellers; low
Q3) (Table: Natasha's Total Utility) Look at the table Natasha's Total Utility. Natasha earns $50,000 per year but faces losing $20,000 of it if she is late with her work. If there is a 25% probability that Natasha will be late with her work and her income will then equal $30,000, her expected income is:
A) $32,500.
B) $38,200.
C) $40,500.
D) $45,000.
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Chapter 20: Macroeconomics- the Big Picture
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Q1) In recent times, the U.S. government has been trying to help the economy through one of the worst economic slumps ever. The policies used are based on _____ theory.
A) Keynesian
B) classical
C) supply-side
D) trickle-down
Q2) A recession leads to all of the following EXCEPT:
A) higher unemployment.
B) reduced output.
C) reduced income and living standards.
D) higher employment.
Q3) A business cycle is a:
A) very deep and prolonged economic downturn.
B) period in which output and employment are rising.
C) period in which output and employment are falling.
D) short-run alternation between economic upturns and downturns.
Q4) What are Keynesian policies?
Q5) What is long-run economic growth, and why is it so important for a nation's economy?
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Chapter 21: Gdp and the Consumer Price Index
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Q1) Enchanté Inc., a designer clothing company, buys $400 worth of silk and $30 worth of accessories to produce each dress. If the value added by Enchanté is equal to $200, then according to the value-added approach, the price of the designer dress should be:
A) $630.
B) $230.
C) $200.
D) $830.
Q2) The total value of all final goods and services produced in a given year, calculated using the prices of a selected base year is:
A) real GDP.
B) nominal GDP.
C) net exports.
D) consumption spending.
Q3) If real GDP rises while nominal GDP falls, then prices on average have:
A) risen.
B) fallen.
C) stayed the same.
D) decreased and then been offset by an equal increase.
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Chapter 22: Unemployment and Inflation
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Q1) It is generally accepted that a binding minimum wage does all of the following EXCEPT:
A) decrease the quantity of labor demanded.
B) increase unemployment.
C) increase the amount of labor supplied.
D) decrease the amount of labor supplied.
Q2) If the wage rate is $20 per hour and the price level is 2, then the real wage is $40 per hour.
A)True
B)False
Q3) The inflation rate for the current year is the percentage change in the price level from the previous year.
A)True
B)False
Q4) The natural rate of employment is achieved when:
A) the actual rate of unemployment is zero.
B) it is above the actual rate of unemployment.
C) the quantity of labor supplied is equal to the quantity of labor demanded.
D) there is no cyclical unemployment.
Q5) Explain the difference between shoe-leather costs and menu costs of inflation.
Page 24
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Chapter 23: Long-Run Economic Growth
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Q1) Economists are optimistic that growth can continue in the face of resource scarcity because:
A) the oil industry vastly understates the level of oil reserves.
B) prices of scarce resources fall and provide incentives to use more of those resources.
C) prices of scarce resources rise and provide incentives to find alternative energy sources.
D) resource scarcity no longer limits economic growth.
Q2) From the standpoint of economic growth, banks are important to:
A) fight inflation.
B) keep interest rates low.
C) channel savings into investment.
D) channel investment into savings.
Q3) (Scenario: Productivity) Look at the scenario Productivity. How much has growing physical capital per worker contributed to productivity growth?
A) 6%
B) 5.4%
C) 2%
D) 1.6%
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Chapter 24: Savings, Investment Spending
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Q1) A random walk is:
A) the unpredictable movement over time of a variable.
B) the predicted fluctuations of a known variable.
C) the movement of GDP growth per capita in the long run.
D) a description of the economic fluctuations in the short run.
Q2) A decrease in the level of business opportunity will generally _____ the loanable funds demand curve.
A) not change
B) left-shift
C) cause a movement along D) right-shift
Q3) Of all types of financial assets, transactions costs are likely to be the lowest for loans.
A)True
B)False
Q4) The value of all accumulated savings of a household is called:
A) wealth.
B) income.
C) debt.
D) wages.
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Chapter 25: Fiscal Policy
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Q1) If a government's debt is increasing but its GDP is increasing faster, the government's:
A) total debt is falling.
B) ratio of debt to GDP is falling.
C) deficit is falling.
D) ability to pay is falling.
Q2) Which of the following is the largest source of tax revenue for the U.S. federal government?
A) personal income taxes
B) corporate profit taxes
C) sales taxes
D) social insurance taxes
Q3) Policy makers use a contractionary fiscal policy when they want to close:
A) a recessionary gap.
B) any kind of output gap.
C) an inflationary gap.
D) an open economy.
Q4) A fiscal year for the federal government runs from January 1 to December 31.
A)True
B)False
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Chapter 26: Money, Banking, and the Federal Reserve System
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Q1) In the United States, only the U.S. Treasury can create money.
A)True
B)False
Q2) When countries replaced gold and silver coins with paper money exchangeable for certain amounts of precious metals, the monetary system evolved from using _____ money to using _____ money.
A) commodity; fiat
B) commodity-backed; fiat
C) commodity; commodity-backed
D) fiat; commodity-backed
Q3) Which of the following combinations of assets is considered to be money?
A) currency in circulation, checkable bank deposits, and credit cards
B) currency in circulation, checkable bank deposits, and traveler's checks
C) currency in circulation and in bank vaults, checkable bank deposits, and traveler's checks
D) currency in circulation and in bank vaults, checkable bank deposits, and credit cards
Q4) The monetary base is currency in circulation plus bank reserves.
A)True
B)False
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Chapter 27: Monetary Policy
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Q1) If Congress places a $5 tax on each ATM transaction, there will likely be:
A) a movement up a stationary money demand curve.
B) a movement down a stationary money demand curve.
C) a shift to the left of the money demand curve.
D) a shift to the right of the money demand curve.
Q2) (Figure: Monetary Policy and the AD-SRAS Model) Look at the figure Monetary Policy and the AD-SRAS Model. If the economy is in an inflationary gap at point h, it can move to point i as a result of:
A) an increase in the money supply.
B) a reduction in the discount rate.
C) a decrease in the money supply.
D) purchases of government securities in the open market.
Q3) If an economy is operating at an aggregate output level above its potential output level, the Federal Reserve may:
A) conduct an open market sale.
B) conduct an open market purchase.
C) lower the federal funds rate target.
D) decrease government spending.
Q4) What is the goal of expansionary monetary policy, and how does it work in the short run?
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Chapter 28: Inflation, Disinflation, and Deflation
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Q1) When economists state that there is a zero bound on nominal interest rates, they mean that:
A) the real interest rate cannot go below zero.
B) the nominal interest rate cannot go below zero.
C) the real interest rate can very well be negative.
D) the nominal interest rate can always go below zero.
Q2) When an economy has debt deflation:
A) aggregate demand increases, since the real debt burden is reduced.
B) aggregate demand is not affected, since real variables are not affected.
C) aggregate demand decreases as borrowers' real debts increase, which leads to less spending.
D) the economy moves quickly to its potential output.
Q3) The classical model of the price level is most likely to be a good approximation of reality during periods of:
A) recession.
B) high unemployment.
C) low inflation.
D) high inflation.
Q4) Explain the political asymmetry associated with policies that can cause or cure inflation.
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Chapter 29: Crises and Consequences
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Q1) If the government guarantees liabilities of financial institutions other than deposits:
A) those financial institutions will have the incentive to engage in overly risky behavior.
B) those financial institutions will have the incentive to engage in less risky behavior.
C) the Federal Reserve will be forced to raise reserve requirements.
D) the economy will be pushed close to the zero bound on interest rates.
Q2) The Dodd-Frank bill affected derivatives by:
A) prohibiting them.
B) requiring that the issuer guarantee 50% of the purchaser's investment.
C) allowing them to be purchased and sold only by the Federal Reserve.
D) requiring that they be traded in transparent markets.
Q3) A repo is a long-term loan.
A)True
B)False
Q4) Why are banking-crisis recessions so bad?
Q5) Explain the trade-off between rate of return and liquidity. How do banks affect the trade-off?
Q6) Explain how shadow banks, which don't take deposits, can have bank runs.
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Chapter 30: Macroeconomics- Events and Ideas
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Q1) A policy maker who aims at maintaining unemployment at 5% while the NAIRU for this economy is 4% will most likely find the economy running into:
A) deflation.
B) inflation.
C) a much higher output level.
D) a much lower unemployment level.
Q2) Keynesian economists didn't oppose monetary policy, but they felt that it was ineffective in fighting a recession.
A)True
B)False
Q3) Keynesian economics was mostly concerned with the short run.
A)True
B)False
Q4) Proponents of the theory of rational expectations contend that:
A) people make rational forecasts using all existing information.
B) business cycles are generally caused by shifts in aggregate demand.
C) full employment is rarely achieved.
D) stickiness of prices is the primary cause of inflation.
Q5) Why did the adoption of Keynesian economics come out of the Great Depression?
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Chapter 31: Open-Economy Macroeconomics
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Q1) Suppose that on January 1 the exchange rate was 15 Mexican pesos per U.S. dollar. On December 31 of that year, a person needed 11 pesos to buy a dollar. Over the course of that year, did the dollar appreciate or depreciate against the peso? Did the change in the exchange rate make U.S. goods and services more or less attractive to Mexican consumers? Explain.
Q2) If the euro depreciates, then a Chevrolet will be cheaper for Italians.
A)True
B)False
Q3) If a country with a floating exchange rate follows a contractionary monetary policy, with everything else remaining unchanged, it leads to a(n) _____ in interest rates and a(n) _____ in the currency.
A) increase; depreciation
B) decrease; appreciation
C) decrease; depreciation
D) increase; appreciation
Q4) If the U.S. dollar changes from $1 = 1 to $0.80 = 1:
A) the dollar has depreciated relative to the euro.
B) the dollar has been fixed by the United States and the euro bloc.
C) the dollar has appreciated relative to the euro.
D) U.S. goods are now cheaper in the eurozone.
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Chapter 32: Graphs in Economics
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Q1) (Figure: Hot Drinks Sold and Temperature) Look at the figure Hot Drinks Sold and Temperature. If we move from point J to point L in the figure, the outside temperature has ______ degrees and the number of hot drinks sold has ______.
A) decreased by 30; increased by 30
B) increased by 20; decreased by 20
C) increased by 30; decreased by 30
D) increased by 40; decreased by 40
Q2) (Figure: Slope) Look at the figure Slope. In the graph, the slope of the line between points A and B is:
A) +8.
B) -8.
C) -2.
D) +2.
Q3) (Figure: Consumption of Pizza and Tacos) Look at the figure Consumption of Pizza and Tacos. The figure shows the number of tacos and pizza slices Matt can eat in a day.
The best estimate of the slope between point A and point B is -4.
A)True
B)False
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Chapter 33: Toward a Fuller Understanding
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Q1) The present value of a painting that you expect to sell for $500 in three years is $405.22 if the annual interest rate is 5%.
A)True
B)False
Q2) (Table: Present Value of Projects A, B, C, and D) Look at the table Present Value of Projects A, B, C, and D. If the annual interest rate is 2%, which project do you choose?
A) A
B) B
C) C
D) D
Q3) If a firm considering the purchase of an asset determines that the asset's net present value is greater than zero, then _____ the asset will _____ profits.
A) not buying; increase
B) purchasing; increase
C) purchasing; decrease
D) not buying; decrease
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Chapter 34: Consumer Preferences and Consumer Choice
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Q1) Mario sees popcorn and pretzels as perfect substitutes. He is always willing to substitute 3 cups of popcorn for 1 cup of pretzels. His indifference curves for popcorn and pretzels are _____, and at the optimal consumption bundle his marginal rate of substitution of popcorn for pretzels is _____.
A) right angles; 3
B) right angles; 0.33
C) straight lines; 3
D) straight lines; 0.33
Q2) If combination A lies on a higher indifference curve than combination B and combination B lies on a higher indifference curve than combination C, it must be that the total utility associated with combination A is _____ the total utility associated with combination C.
A) less than
B) more than
C) equal to
D) more than or equal to
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Chapter 35: Indifference Curve Analysis of Labor Supply
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Q1) (Figure: Rita's Time Allocation Budget Line) Look at the figure Rita's Time Allocation Budget Line. It is based on 80 hours available for labor and leisure. Her hourly wage is:
A) $5.60.
B) $7.00.
C) $8.00.
D) $10.00.
Q2) (Figure: Joanna's Time Allocation Budget Line) Joanna's Time Allocation Budget Line depicts what happens when she can choose how to spend 40 hours. If Joanna's wage rate increases and she ends up working MORE hours:
A) leisure became relatively more expensive.
B) leisure became relatively less expensive.
C) leisure did not change in price.
D) she does not know how to allocate her time effectively.
Q3) If an individual's wage rate decreases, the substitution effect will cause the individual to work fewer hours.
A)True
B)False
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