Question 1

If the slope of the indifference curve for goods X and Y is -2, then the marginal rate of substitution is

Accepted Answer

A)  0. 
B)  1/2. 
C)  2. 
D)  infinite. 
A)  0. 
B)  1/2. 
C)  2. 
D)  infinite.

Question 2

The equation for a budget line for goods X and Y, with Px being the price of X, Py being the price of Y, and B being the budget, can be written as:

Accepted Answer

A)  PxX + PyY = B. 
B)  PxX + PyY = 1 / B. 
C)  PxX = B + PyY. 
D)  PxX / PyY = 1 − B. 
A)  PxX + PyY = B. 
B)  PxX + PyY = 1 / B. 
C)  PxX = B + PyY. 
D)  PxX / PyY = 1 − B.

Question 3

The slope of the budget line is equal to the ratio of:

Accepted Answer

A)  marginal utilities. 
B)  money income to the price of the good on the horizontal axis. 
C)  money income to the price of the good on the vertical axis. 
D)  price of the good on the horizontal axis to the price of the good on the vertical axis. 
A)  marginal utilities. 
B)  money income to the price of the good on the horizontal axis. 
C)  money income to the price of the good on the vertical axis. 
D)  price of the good on the horizontal axis to the price of the good on the vertical axis.

Question 4

​ Exhibit 10A-1 Aggregate demand and supply model
 
Based on Exhibit 10A-1, when the aggregate demand curve shifts to the position AD2 and the economy is operating at point E2, the economy's position of long-run equilibrium corresponds to point:

Accepted Answer

A)  E 1 . 
B)  E 2 . 
C)  E 3 . 
D)  E 1  or E 3 . 
A)  E 1 . 
B)  E 2 . 
C)  E 3 . 
D)  E 1  or E 3 .

Question 5

Exhibit 6A-6 Consumer equilibrium
​
 
As shown in Exhibit 6A-6, movement from consumer equilibrium at point Y to point X is caused by a(n):

Accepted Answer

A)  increase in the price of good X. 
B)  decrease in the price of good X. 
C)  increase in the price of good Y. 
D)  decrease in the price of good Y. 
A)  increase in the price of good X. 
B)  decrease in the price of good X. 
C)  increase in the price of good Y. 
D)  decrease in the price of good Y.

Question 6

If Max's marginal rate of substitution for goods A and B is 3, then

Accepted Answer

A)  the price of good A exceeds the price of good B. 
B)  the marginal utility of good A is 3 and the marginal utility of good B is 3. 
C)  the ratio of the total utilities of good A and good B is 3. 
D)  Max is willing to give up 3 units of good A for 1 unit of good B. 
A)  the price of good A exceeds the price of good B. 
B)  the marginal utility of good A is 3 and the marginal utility of good B is 3. 
C)  the ratio of the total utilities of good A and good B is 3. 
D)  Max is willing to give up 3 units of good A for 1 unit of good B.

Question 7

Consumer equilibrium occurs where the budget line is tangent to the:

Accepted Answer

A)  lowest possible indifference curve. 
B)  highest possible indifference curve. 
C)  utility maximizing indifference curve. 
D)  utility equalization indifference curve. 
A)  lowest possible indifference curve. 
B)  highest possible indifference curve. 
C)  utility maximizing indifference curve. 
D)  utility equalization indifference curve.

Question 8

Assuming peaches are a normal good and consumer incomes rise, producer surplus in the peach market:

Accepted Answer

A)  increases. 
B)  decreases. 
C)  remains unchanged. 
D)  equals the deadweight loss increase. 
A)  increases. 
B)  decreases. 
C)  remains unchanged. 
D)  equals the deadweight loss increase.

Question 9

Producer surplus is the:

Accepted Answer

A)  amount by which the quantity supplied of a good exceeds the quantity demanded of a good. 
B)  value of the sum of producers' willingness to sell a good plus the price of the good. 
C)  measure of how much producers value a good. 
D)  value of the difference between the actual selling price of a good and the price producers are willing to sell it for on the supply curve. 
A)  amount by which the quantity supplied of a good exceeds the quantity demanded of a good. 
B)  value of the sum of producers' willingness to sell a good plus the price of the good. 
C)  measure of how much producers value a good. 
D)  value of the difference between the actual selling price of a good and the price producers are willing to sell it for on the supply curve.

Question 10

If Sam is willing to pay $50 for one unit of good X, $30 for a second, $20 for a third, $8 for a fourth, and the market price is $10, then Sam's consumer surplus is:

Accepted Answer

A)  $40 and he buys 1 unit of good X. 
B)  $60 and he buys 2 units of good X. 
C)  $70 and he buys 3 units of good X 
D)  $68 and he buys 4 units of good X. 
A)  $40 and he buys 1 unit of good X. 
B)  $60 and he buys 2 units of good X. 
C)  $70 and he buys 3 units of good X 
D)  $68 and he buys 4 units of good X.

Question 11

Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss
 
As shown in Exhibit 3A-1, if the quantity supplied is 2 million pounds of ground beef per year, the result is a deadweight loss represented by area:

Accepted Answer

A)  ABEC. 
B)  CEFD. 
C)  EGH. 
D)  BEF. 
A)  ABEC. 
B)  CEFD. 
C)  EGH. 
D)  BEF.

Question 12

Consumer surplus measures the value between the price consumers are willing to pay and the:

Accepted Answer

A)  producer surplus price. 
B)  deadweight gain price. 
C)  actual price paid. 
D)  preference price. 
A)  producer surplus price. 
B)  deadweight gain price. 
C)  actual price paid. 
D)  preference price.

Question 13

​
 
  Macro AD-AS Model
​ In Exhibit 10A-4, the level of real GDP represented by Y p :

Accepted Answer

A)  ​would be associated with considerable unemployment. 
B)  ​indicates that the economy is experiencing zero inflation. 
C)  ​indicates that the economy is experiencing a recessionary gap. 
D)  ​ is potential real GDP for this economy. 
A)  ​would be associated with considerable unemployment. 
B)  ​indicates that the economy is experiencing zero inflation. 
C)  ​indicates that the economy is experiencing a recessionary gap. 
D)  ​ is potential real GDP for this economy.

Question 14

Exhibit 1A-8 Straight line relationship
 
Which of the following would cause a shift in the relationship shown in Exhibit 1A-8?

Accepted Answer

A)  A fall in household incomes. 
B)  A fall in the price of pizza. 
C)  A fall in the quantity of pizza that people wish to purchase. 
D)  A rise in the price of pizza. 
A)  A fall in household incomes. 
B)  A fall in the price of pizza. 
C)  A fall in the quantity of pizza that people wish to purchase. 
D)  A rise in the price of pizza.

Question 15

Exhibit 6A-6 Consumer equilibrium
​
 
Given the budget lines and indifference curves shown in Exhibit 6A-6, if the budget line shifts, then the equilibrium points X and Y:

Accepted Answer

A)  result from a decrease in the price of good X. 
B)  result from a decrease in the consumer's budget. 
C)  are two points along a downward sloping demand curve for good X. 
D)  result from a decrease in the price of good Y. 
A)  result from a decrease in the price of good X. 
B)  result from a decrease in the consumer's budget. 
C)  are two points along a downward sloping demand curve for good X. 
D)  result from a decrease in the price of good Y.

Question 16

If the amount of time spent procrastinating and the performance on an exam are inversely related, then

Accepted Answer

A)  more procrastination leads to lower exam grades. 
B)  more procrastination leads to higher exam grades. 
C)  a graph with this relationship would be positively sloped. 
D)  the slope of the line reflecting this relationship will be 0. 
A)  more procrastination leads to lower exam grades. 
B)  more procrastination leads to higher exam grades. 
C)  a graph with this relationship would be positively sloped. 
D)  the slope of the line reflecting this relationship will be 0.

Question 17

​ Assume the economy is in short-run equilibrium at a real GDP above its potential real GDP. According to classical theory, which of the following policies should be followed?

Accepted Answer

A)  ​The Federal Reserve should use open market operations and buy U.S. government securities. 
B)  ​The Federal Reserve should not follow a fixed rule. 
C)  ​The federal government should cut taxes. 
D)  ​Fiscal policy and monetary policy should not be activist. 
A)  ​The Federal Reserve should use open market operations and buy U.S. government securities. 
B)  ​The Federal Reserve should not follow a fixed rule. 
C)  ​The federal government should cut taxes. 
D)  ​Fiscal policy and monetary policy should not be activist.

Question 18

Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss
 
As shown in Exhibit 3A-1, if the market is in equilibrium, then ____ represents total surplus.

Accepted Answer

A)  ABEFD 
B)  ABEC 
C)  EFG 
D)  BEF 
A)  ABEFD 
B)  ABEC 
C)  EFG 
D)  BEF

Question 19

One reason for the short-run aggregate supply curve (SRAS) is:

Accepted Answer

A)  a fixed CPI market basket. 
B)  perfect knowledge of workers. 
C)  fixed-wage contracts. 
D)  the upward-sloping production function. 
A)  a fixed CPI market basket. 
B)  perfect knowledge of workers. 
C)  fixed-wage contracts. 
D)  the upward-sloping production function.

Question 20

Suppose two variables are directly related. If one variable rises, then the other variable:

Accepted Answer

A)  also rises. 
B)  falls. 
C)  remains unchanged. 
D)  reacts unpredictably. 
A)  also rises. 
B)  falls. 
C)  remains unchanged. 
D)  reacts unpredictably.

Exam 31: Understanding Direct and Inverse Relationships between Variables

If the slope of the indifference curve for goods X and Y is -2, then the marginal rate of substitution is

The equation for a budget line for goods X and Y, with Px being the price of X, Py being the price of Y, and B being the budget, can be written as:

The slope of the budget line is equal to the ratio of:

​ Exhibit 10A-1 Aggregate demand and supply model Based on Exhibit 10A-1, when the aggregate demand curve shifts to the position AD2 and the economy is operating at point E2, the economy's position of long-run equilibrium corresponds to point:

Exhibit 6A-6 Consumer equilibrium ​ As shown in Exhibit 6A-6, movement from consumer equilibrium at point Y to point X is caused by a(n):

If Max's marginal rate of substitution for goods A and B is 3, then

Consumer equilibrium occurs where the budget line is tangent to the:

Assuming peaches are a normal good and consumer incomes rise, producer surplus in the peach market:

Producer surplus is the:

If Sam is willing to pay $50 for one unit of good X, $30 for a second, $20 for a third, $8 for a fourth, and the market price is $10, then Sam's consumer surplus is:

Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss As shown in Exhibit 3A-1, if the quantity supplied is 2 million pounds of ground beef per year, the result is a deadweight loss represented by area:

Consumer surplus measures the value between the price consumers are willing to pay and the:

​ Macro AD-AS Model ​ In Exhibit 10A-4, the level of real GDP represented by Y p :

Exhibit 1A-8 Straight line relationship Which of the following would cause a shift in the relationship shown in Exhibit 1A-8?

Exhibit 6A-6 Consumer equilibrium ​ Given the budget lines and indifference curves shown in Exhibit 6A-6, if the budget line shifts, then the equilibrium points X and Y:

If the amount of time spent procrastinating and the performance on an exam are inversely related, then

​ Assume the economy is in short-run equilibrium at a real GDP above its potential real GDP. According to classical theory, which of the following policies should be followed?

Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss As shown in Exhibit 3A-1, if the market is in equilibrium, then ____ represents total surplus.

One reason for the short-run aggregate supply curve (SRAS) is:

Suppose two variables are directly related. If one variable rises, then the other variable:

Introducing the Economic Way of Thinking

Production Possibilities Opportunity Cost and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution Poverty and Discrimination

Antitrust and Regulation

Environmental Economics

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits Surpluses and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less Developed Countries

Filters

The equation for a budget line for goods X and Y, with P_x being the price of X, P_y being the price of Y, and B being the budget, can be written as:

Exhibit 10A-1 Aggregate demand and supply model Based on Exhibit 10A-1, when the aggregate demand curve shifts to the position AD₂ and the economy is operating at point E₂, the economy's position of long-run equilibrium corresponds to point:

Exhibit 6A-6 Consumer equilibrium As shown in Exhibit 6A-6, movement from consumer equilibrium at point Y to point X is caused by a(n):

Macro AD-AS Model In Exhibit 10A-4, the level of real GDP represented by Y _p :

Exhibit 6A-6 Consumer equilibrium Given the budget lines and indifference curves shown in Exhibit 6A-6, if the budget line shifts, then the equilibrium points X and Y:

Assume the economy is in short-run equilibrium at a real GDP above its potential real GDP. According to classical theory, which of the following policies should be followed?