Question 1

The principle that consumers and firms optimize

Accepted Answer

A)  is not helpful because some economic agents may behave irrationally. 
B)  is helpful because it allows us to analyze how economic agents respond to changes in their environment. 
C)  only applies to perfectly competitive markets. 
D)  is helpful because it determines the available technology. 
E)  is explained by their work-leisure choices. 
A)  is not helpful because some economic agents may behave irrationally. 
B)  is helpful because it allows us to analyze how economic agents respond to changes in their environment. 
C)  only applies to perfectly competitive markets. 
D)  is helpful because it determines the available technology. 
E)  is explained by their work-leisure choices.

Question 2

An increase in total factor productivity shifts the production function

Accepted Answer

A)  upward and increases the marginal product of labour. 
B)  upward and decreases the marginal product of labour. 
C)  downward and increases the marginal product of labour. 
D)  downward and decreases the marginal product of labour. 
E)  upward and increases the marginal product of capital. 
A)  upward and increases the marginal product of labour. 
B)  upward and decreases the marginal product of labour. 
C)  downward and increases the marginal product of labour. 
D)  downward and decreases the marginal product of labour. 
E)  upward and increases the marginal product of capital.

Question 3

Perfect substitutes will have

Accepted Answer

A)  straight line indifference curves. 
B)  reverse L-shaped indifference curves. 
C)  L-shaped indifference curves. 
D)  curved indifference curves, bowed in from the origin. 
E)  curved indifference curve, bowed out from the origin. 
A)  straight line indifference curves. 
B)  reverse L-shaped indifference curves. 
C)  L-shaped indifference curves. 
D)  curved indifference curves, bowed in from the origin. 
E)  curved indifference curve, bowed out from the origin.

Question 4

Two key properties of indifference curves are that an indifference curve slopes

Accepted Answer

A)  upward and is bowed out from the origin. 
B)  downward and is bowed out from the origin. 
C)  upward and is bowed in toward the origin. 
D)  downward and is bowed in toward the origin. 
E)  downward and is concave from the origin. 
A)  upward and is bowed out from the origin. 
B)  downward and is bowed out from the origin. 
C)  upward and is bowed in toward the origin. 
D)  downward and is bowed in toward the origin. 
E)  downward and is concave from the origin.

Question 5

An indifference curve is best defined as

Accepted Answer

A)  a boundary line between attainable and unattainable choices. 
B)  a concave curve that ranks preferred consumption bundles. 
C)  a boundary line defining production possibilities. 
D)  the set of all bundles that the consumer enjoys equally well. 
E)  the level of consumption where a consumer is indifferent to receiving more consumption. 
A)  a boundary line between attainable and unattainable choices. 
B)  a concave curve that ranks preferred consumption bundles. 
C)  a boundary line defining production possibilities. 
D)  the set of all bundles that the consumer enjoys equally well. 
E)  the level of consumption where a consumer is indifferent to receiving more consumption.

Question 6

When consumption and leisure are both normal goods, an increase in real dividend income minus taxation, the rational consumer

Accepted Answer

A)  increases consumption and increases leisure. 
B)  increases consumption and reduces leisure. 
C)  reduces consumption and increases leisure. 
D)  reduces consumption and reduces leisure. 
E)  increases consumption and increases work. 
A)  increases consumption and increases leisure. 
B)  increases consumption and reduces leisure. 
C)  reduces consumption and increases leisure. 
D)  reduces consumption and reduces leisure. 
E)  increases consumption and increases work.

Question 7

In the production function, Y = zF(K, Nd), total factor productivity is

Accepted Answer

A)  Y/K. 
B)  Y/ Nd. 
C)  F/Y. 
D)  z. 
E)  Y/Z. 
A)  Y/K. 
B)  Y/ Nd. 
C)  F/Y. 
D)  z. 
E)  Y/Z.

Question 8

A defense for the assumption that consumers maximize is that

Accepted Answer

A)  consumers never make mistakes. 
B)  mistakes by the consumer are not likely to last for a long time. 
C)  it allows for many possible outcomes. 
D)  mistaken consumers may receive counseling from the government. 
E)  mistakes by consumers only last for two periods. 
A)  consumers never make mistakes. 
B)  mistakes by the consumer are not likely to last for a long time. 
C)  it allows for many possible outcomes. 
D)  mistaken consumers may receive counseling from the government. 
E)  mistakes by consumers only last for two periods.

Question 9

If the real wage is equal to 8 widgets, and only an integer number of workers can be hired, The Gizmo Company should hire

Accepted Answer

A)  2 workers. 
B)  3 workers. 
C)  4 workers. 
D)  5 workers. 
E)  6 workers. 
A)  2 workers. 
B)  3 workers. 
C)  4 workers. 
D)  5 workers. 
E)  6 workers.

Question 10

A barter economy

Accepted Answer

A)  cannot be a market economy. 
B)  is an economy without monetary exchange. 
C)  is an economy with no business firms. 
D)  is not a competitive economy. 
E)  is a competitive economy. 
A)  cannot be a market economy. 
B)  is an economy without monetary exchange. 
C)  is an economy with no business firms. 
D)  is not a competitive economy. 
E)  is a competitive economy.

Question 11

In a one-period economy, real consumption

Accepted Answer

A)  is always less than disposable income. 
B)  is typically greater than disposable income. 
C)  is exactly equal to disposable income. 
D)  can be greater than, less than, or equal to disposable income. 
E)  can be less than savings. 
A)  is always less than disposable income. 
B)  is typically greater than disposable income. 
C)  is exactly equal to disposable income. 
D)  can be greater than, less than, or equal to disposable income. 
E)  can be less than savings.

Question 12

Constant returns to scale means that, given any constant x > 0,

Accepted Answer

A)  xY = zF(xK, xNd). 
B)  xY > zF(xK, xNd). 
C)  xY d). 
A)  xY = zF(xK, xNd). 
B)  xY > zF(xK, xNd). 
C)  xY d).

Question 13

A good is inferior for a consumer if

Accepted Answer

A)  it is never included in his or her consumption bundle. 
B)  its consumption rises when income rises. 
C)  its consumption falls when income rises. 
D)  some minimal level of the good must be consumed to assure the consumer's survival. 
E)  the assumption of "more is always preferred to less" holds. 
A)  it is never included in his or her consumption bundle. 
B)  its consumption rises when income rises. 
C)  its consumption falls when income rises. 
D)  some minimal level of the good must be consumed to assure the consumer's survival. 
E)  the assumption of "more is always preferred to less" holds.

Question 14

An increase in total factor productivity

Accepted Answer

A)  changes neither the slope nor the position of the production function. 
B)  changes the slope but not the position of the production function. 
C)  changes the position but not the slope of the production function. 
D)  changes both the slope and the position of the production function. 
E)  keeps the marginal product of labour constant. 
A)  changes neither the slope nor the position of the production function. 
B)  changes the slope but not the position of the production function. 
C)  changes the position but not the slope of the production function. 
D)  changes both the slope and the position of the production function. 
E)  keeps the marginal product of labour constant.

Question 15

A lump-sum tax is a tax that

Accepted Answer

A)  can be avoided by strategic behaviour. 
B)  does not depend on the actions of the economic agent being taxed. 
C)  does not depend on the actions of the government. 
D)  distorts economic decisions. 
E)  depends on the quantity of taxable goods consumers purchase. 
A)  can be avoided by strategic behaviour. 
B)  does not depend on the actions of the economic agent being taxed. 
C)  does not depend on the actions of the government. 
D)  distorts economic decisions. 
E)  depends on the quantity of taxable goods consumers purchase.

Question 16

The property of diminishing marginal rate of substitution follows from the property that the indifference curve is

Accepted Answer

A)  downward sloping. 
B)  upward sloping. 
C)  bowed in toward the origin. 
D)  bowed out from the origin. 
E)  concave from the origin. 
A)  downward sloping. 
B)  upward sloping. 
C)  bowed in toward the origin. 
D)  bowed out from the origin. 
E)  concave from the origin.

Question 17

The construct of a representative firm is most helpful in describing the behaviour of all of the firms in the economy when

Accepted Answer

A)  there are constant returns to scale. 
B)  there are increasing returns to scale. 
C)  there are decreasing returns to scale. 
D)  the marginal product of labour is increasing in the amount of labour input. 
E)  the marginal product of labour is decreasing in the amount of labour input. 
A)  there are constant returns to scale. 
B)  there are increasing returns to scale. 
C)  there are decreasing returns to scale. 
D)  the marginal product of labour is increasing in the amount of labour input. 
E)  the marginal product of labour is decreasing in the amount of labour input.

Question 18

In a one-period economy, the expression for the budget constraint is

Accepted Answer

A)  C = w(Ns + l) + $\pi$ - T. 
B)  C = wNs + $\pi$ - T. 
C)  C = w(h + l) + $\pi$ - T. 
D)  C = wl = wh + $\pi$ - T. 
E)  C = w(Ns + l) + $\pi$ + T. 
A)  C = w(Ns + l) + $\pi$ - T. 
B)  C = wNs + $\pi$ - T. 
C)  C = w(h + l) + $\pi$ - T. 
D)  C = wl = wh + $\pi$ - T. 
E)  C = w(Ns + l) + $\pi$ + T.

Question 19

We typically assume that

Accepted Answer

A)  both consumption and leisure are normal goods. 
B)  consumption is a normal good and leisure is an inferior good. 
C)  consumption is an inferior good and leisure is a normal good. 
D)  both consumption and leisure are inferior goods. 
E)  both consumption and leisure and complimentary goods. 
A)  both consumption and leisure are normal goods. 
B)  consumption is a normal good and leisure is an inferior good. 
C)  consumption is an inferior good and leisure is a normal good. 
D)  both consumption and leisure are inferior goods. 
E)  both consumption and leisure and complimentary goods.

Question 20

An increase in the real wage

Accepted Answer

A)  represents a pure substitution effect. 
B)  represents a pure income effect. 
C)  represents a combination of income and substitution effects. 
D)  causes a parallel shift in the consumer's budget line. 
E)  leads to no change in labour supply. 
A)  represents a pure substitution effect. 
B)  represents a pure income effect. 
C)  represents a combination of income and substitution effects. 
D)  causes a parallel shift in the consumer's budget line. 
E)  leads to no change in labour supply.

The principle that consumers and firms optimize

An increase in total factor productivity shifts the production function

Perfect substitutes will have

Two key properties of indifference curves are that an indifference curve slopes

An indifference curve is best defined as

When consumption and leisure are both normal goods, an increase in real dividend income minus taxation, the rational consumer

In the production function, Y = zF(K, N^d), total factor productivity is

A defense for the assumption that consumers maximize is that

If the real wage is equal to 8 widgets, and only an integer number of workers can be hired, The Gizmo Company should hire

A barter economy

In a one-period economy, real consumption

Constant returns to scale means that, given any constant x > 0,

A good is inferior for a consumer if

An increase in total factor productivity

A lump-sum tax is a tax that

The property of diminishing marginal rate of substitution follows from the property that the indifference curve is

The construct of a representative firm is most helpful in describing the behaviour of all of the firms in the economy when

In a one-period economy, the expression for the budget constraint is

We typically assume that

An increase in the real wage

Introduction

Measurement

Business Cycle Measurement

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity among Countries and Endogenous Growth

A Two-Period Model: The Consumption–Savings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

A Monetary Intertemporal Model: Money, Banking, Prices, and Monetary Policy

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: A Deeper Look

Filters

Exam 4: Consumer and Firm Behaviour: The Work–Leisure Decision and Profit Maximization

The principle that consumers and firms optimize

An increase in total factor productivity shifts the production function

Perfect substitutes will have

Two key properties of indifference curves are that an indifference curve slopes

An indifference curve is best defined as

When consumption and leisure are both normal goods, an increase in real dividend income minus taxation, the rational consumer

In the production function, Y = zF(K, Nd), total factor productivity is

A defense for the assumption that consumers maximize is that

If the real wage is equal to 8 widgets, and only an integer number of workers can be hired, The Gizmo Company should hire

A barter economy

In a one-period economy, real consumption

Constant returns to scale means that, given any constant x > 0,

A good is inferior for a consumer if

An increase in total factor productivity

A lump-sum tax is a tax that

The property of diminishing marginal rate of substitution follows from the property that the indifference curve is

The construct of a representative firm is most helpful in describing the behaviour of all of the firms in the economy when

In a one-period economy, the expression for the budget constraint is

We typically assume that

An increase in the real wage

Introduction

Measurement

Business Cycle Measurement

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity among Countries and Endogenous Growth

A Two-Period Model: The Consumption–Savings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

A Monetary Intertemporal Model: Money, Banking, Prices, and Monetary Policy

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: A Deeper Look

Filters

In the production function, Y = zF(K, N^d), total factor productivity is