3. If the wage that a competitive firm must pay its workers exceeds their value of marginal product,
the firm will
(A) decrease the quantity of labor it employs.
(B) increase the quantity of labor it employs.
(C) lower the price of the good.
(D) raise the price of the good.

4. In the national income accounts, the purchase of a new house counts as(A) consumption expenditure.(B) a transfer.(C) investment.(D) an addition to inventory.

5. The above table gives Sue's marginal utility schedules for sub sandwiches and Mountain Dew, the only products Sue consumes. Suppose the price of a sub sandwich is $4 each and the price of a Mountain Dew is $2 each. Sue's income is $12. If Sue is at a consumer equilibrium, she eats ________ sub sandwich(es) and drinks ________ Mountain Dews.(A) 0; 6 (B) 1; 4 (C) 2; 2 (D) 3; 0

6. An increase in a nation's population results in(A) a rightward shift in the labor demand curve.(B) a movement along the nation's production function.(C) a decrease in the full-employment quantity of labor.(D) an upward shift of the nation's production function.

7. In the above figure, suppose the demand for dollars permanently decreases to D2. To maintain the target, the Fed(A) can buy dollars.(B) can sell dollars.(C) must decrease the nation's net exports.(D) cannot permanently maintain the exchange rate target of 150 yen per dollar.

8. At the midpoint of a downward sloping straight-line demand curve, the demand(A) is elastic. (B) is unit elastic.(C) is inelastic. (D) has an elasticity exactly equal to zero.

9. An increase in government expenditure shifts the AD curve ________ and an increase in taxesshifts the AD curve ________.(A) rightward; rightward (B) rightward; leftward(C) leftward; rightward (D) leftward; leftward

10. When the Fed lowers the federal funds rate, aggregate demand(A) increases. (B) decreases.(C) stays the same. (D) could increase, decrease or stay the same.

11. The output gap can be used to estimate the extend to which the Fed misses its goal of(A) moderate long-term interest rates. (B) stable prices.(C) maximum employment. (D) monetary policy.

12. A bank creates money by(A) lending its excess reserves (B) purchasing currency from the Federal Reserve(C) buying bonds from the Federal Reserve (D) printing more checks

13. Ricardo buys cola and popcorn. Cola sells for $0.50 a can and popcorn sells for $1 per bag. He is in consumer equilibrium. The price of a cola jumps to $1 per can. In his new consumer equilibrium, Ricardo's(A) marginal utility of cola will be equal to his marginal utility of popcorn.(B) marginal utility per dollar spent will be 2.(C) total utility will be higher.(D) marginal utility of cola will decrease.

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