Question 1

Suppose the representative firm suddenly has less capital at its disposal. What happens to labor demand?

Accepted Answer

A)  It increases. 
B)  It stays the same. 
C)  It decreases. 
D)  We cannot tell. 
A)  It increases. 
B)  It stays the same. 
C)  It decreases. 
D)  We cannot tell.

Question 2

It is useful to assume that there is a single representative consumer because

Accepted Answer

A)  this is realistic. 
B)  this is a useful abstraction if we are interested in problems where distribution effects are not important. 
C)  this is the only model we know how to work with. 
D)  a model with one consumer is the same as one with many consumers. 
A)  this is realistic. 
B)  this is a useful abstraction if we are interested in problems where distribution effects are not important. 
C)  this is the only model we know how to work with. 
D)  a model with one consumer is the same as one with many consumers.

Question 3

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. 
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.

Question 4

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

Accepted Answer

A) xzF(xK, xNd)= zF(xK, xNd). B) xzF(xK, xNd) > zF(xK, xNd). C) xzF(xK, xNd) < zF(xK, xNd). D) xzF(xK, xNd) = zxF(K, Nd). A) xzF(xK, xNd)= zF(xK, xNd). B) xzF(xK, xNd) > zF(xK, xNd). C) xzF(xK, xNd) < zF(xK, xNd). D) xzF(xK, xNd) = zxF(K, Nd).

Question 5

The Solow residual is a measure of

Accepted Answer

A)  average labor productivity. 
B)  average capital productivity. 
C)  total factor productivity. 
D)  the rate of growth of real GDP. 
A)  average labor productivity. 
B)  average capital productivity. 
C)  total factor productivity. 
D)  the rate of growth of real GDP.

Question 6

The utility function captures

Accepted Answer

A)  how consumers interact. 
B)  how an individual consumer ranks consumption bundles. 
C)  how output is produced from labor and capital inputs. 
D)  how happy a consumer is about a given consumption bundle. 
A)  how consumers interact. 
B)  how an individual consumer ranks consumption bundles. 
C)  how output is produced from labor and capital inputs. 
D)  how happy a consumer is about a given consumption bundle.

Question 7

A consumer's real disposable income equals

Accepted Answer

A)  wage income plus consumption expenditures. 
B)  wage income plus profit income minus taxes. 
C)  total income minus profit income minus taxes. 
D)  total income minus wage income minus taxes. 
A)  wage income plus consumption expenditures. 
B)  wage income plus profit income minus taxes. 
C)  total income minus profit income minus taxes. 
D)  total income minus wage income minus taxes.

Question 8

A pure positive income shock leads to

Accepted Answer

A)  an increase in leisure and consumption. 
B)  an increase in leisure and work. 
C)  an increase in work and consumption. 
D)  an increase in leisure and taxes. 
A)  an increase in leisure and consumption. 
B)  an increase in leisure and work. 
C)  an increase in work and consumption. 
D)  an increase in leisure and taxes.

Question 9

A static decision is one that

Accepted Answer

A)  is made very slowly. 
B)  involves planning over one time period. 
C)  involves planning over exactly two time periods. 
D)  involves planning over more than one time period. 
A)  is made very slowly. 
B)  involves planning over one time period. 
C)  involves planning over exactly two time periods. 
D)  involves planning over more than one time period.

Question 10

Which of the following is false?

Accepted Answer

A)  a lump-sum tax does not depend on any action taken by a consumer. 
B)  in practice, no taxes are lump-sum. 
C)  lump-sum taxes are realistic. 
D)  all taxes have distorting effects on the behavior of economic agents. 
A)  a lump-sum tax does not depend on any action taken by a consumer. 
B)  in practice, no taxes are lump-sum. 
C)  lump-sum taxes are realistic. 
D)  all taxes have distorting effects on the behavior of economic agents.

Question 11

The time constraint for the consumer is

Accepted Answer

A)  the amount of time for decision making. 
B)  expressed as leisure time - time spent working = total time available. 
C)  expressed as leisure time - sleep time = time spent working. 
D)  expressed as leisure time + time spent working = total time available. 
A)  the amount of time for decision making. 
B)  expressed as leisure time - time spent working = total time available. 
C)  expressed as leisure time - sleep time = time spent working. 
D)  expressed as leisure time + time spent working = total time available.

Question 12

An increase in taxes has the following impact on the budget constraint

Accepted Answer

A)  a parallel move down. 
B)  a parallel move up. 
C)  a tilting to the left. 
D)  a tilting to the right. 
A)  a parallel move down. 
B)  a parallel move up. 
C)  a tilting to the left. 
D)  a tilting to the right.

Question 13

The optimal consumption bundle is the point representing a consumption-leisure pair that is on the

Accepted Answer

A)  lowest possible indifference curve and is on or outside the consumer's budget constraint. 
B)  lowest possible indifference curve and is on or inside the consumer's budget constraint. 
C)  highest possible indifference curve and is on or outside the consumer's budget constraint. 
D)  highest possible indifference curve and is on or inside the consumer's budget constraint. 
A)  lowest possible indifference curve and is on or outside the consumer's budget constraint. 
B)  lowest possible indifference curve and is on or inside the consumer's budget constraint. 
C)  highest possible indifference curve and is on or outside the consumer's budget constraint. 
D)  highest possible indifference curve and is on or inside the consumer's budget constraint.

Question 14

When consumption and leisure are both normal goods,after 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. 
A)  increases consumption and increases leisure. 
B)  increases consumption and reduces leisure. 
C)  reduces consumption and increases leisure. 
D)  reduces consumption and reduces leisure.

Question 15

In macroeconomic analysis,the representative consumer

Accepted Answer

A)  denotes the consumer with the average amount of income. 
B)  plays the role of a stand-in for all consumers in the economy. 
C)  is the consumer who bargains with firms for all workers in the economy. 
D)  is always a misleading fiction. 
A)  denotes the consumer with the average amount of income. 
B)  plays the role of a stand-in for all consumers in the economy. 
C)  is the consumer who bargains with firms for all workers in the economy. 
D)  is always a misleading fiction.

Question 16

The questions below deal with the Gizmo Company, which has the following production function.
  
-The marginal product of the fourth gizmo worker hired is

Accepted Answer

A)  1. 
B)  3. 
C)  5. 
D)  10. 
A)  1. 
B)  3. 
C)  5. 
D)  10.

Question 17

The questions below deal with the Gizmo Company, which has the following production function.
  
-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. 
A)  2 workers. 
B)  3 workers. 
C)  4 workers. 
D)  5 workers.

Question 18

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. 
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.

Question 19

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

Question 20

We consider the preferences of the consumer because

Accepted Answer

A)  we want to understand the consumer's reaction to changing circumstances. 
B)  we want to determine the best marketing strategy. 
C)  the government wants to make the best consumption and leisure choice. 
D)  the firm needs to determine what to produce. 
A)  we want to understand the consumer's reaction to changing circumstances. 
B)  we want to determine the best marketing strategy. 
C)  the government wants to make the best consumption and leisure choice. 
D)  the firm needs to determine what to produce.

Suppose the representative firm suddenly has less capital at its disposal. What happens to labor demand?

It is useful to assume that there is a single representative consumer because

The principle that consumers and firms optimize

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

The Solow residual is a measure of

The utility function captures

A consumer's real disposable income equals

A pure positive income shock leads to

A static decision is one that

Which of the following is false?

The time constraint for the consumer is

An increase in taxes has the following impact on the budget constraint

The optimal consumption bundle is the point representing a consumption-leisure pair that is on the

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

In macroeconomic analysis,the representative consumer

The questions below deal with the Gizmo Company, which has the following production function. -The marginal product of the fourth gizmo worker hired is

The questions below deal with the Gizmo Company, which has the following production function. -If the real wage is equal to 8 widgets,and only an integer number of workers can be hired,the Gizmo company should hire

An increase in the real wage

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

We consider the preferences of the consumer because

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

Money, Banking, Prices, and Monetary Policy

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking

Inflation, the Phillips Curve, and Central Bank Commitment

Filters

Exam 4: Consumer and Firm Behavior: The Work-Leisure Decision and Profit Maximization

Suppose the representative firm suddenly has less capital at its disposal. What happens to labor demand?

It is useful to assume that there is a single representative consumer because

The principle that consumers and firms optimize

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

The Solow residual is a measure of

The utility function captures

A consumer's real disposable income equals

A pure positive income shock leads to

A static decision is one that

Which of the following is false?

The time constraint for the consumer is

An increase in taxes has the following impact on the budget constraint

The optimal consumption bundle is the point representing a consumption-leisure pair that is on the

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

In macroeconomic analysis,the representative consumer

The questions below deal with the Gizmo Company, which has the following production function. -The marginal product of the fourth gizmo worker hired is

The questions below deal with the Gizmo Company, which has the following production function. -If the real wage is equal to 8 widgets,and only an integer number of workers can be hired,the Gizmo company should hire

An increase in the real wage

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

We consider the preferences of the consumer because

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

Money, Banking, Prices, and Monetary Policy

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking

Inflation, the Phillips Curve, and Central Bank Commitment

Filters