1)
Suppose that in the clothing market, production costs have fallen, but the
equilibrium price and quantity purchased have both increased. Based on this
information you can conclude that
A. the supply of clothing has grown faster
than the demand for clothing
B. demand for clothing has grown faster
than the supply of clothing
C. the supply of and demand for clothing
have grown by the same proportion
D. there is no way to determine what has
happened to supply and demand with this information
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2)
Camille's Creations and Julia's Jewels both sell beads in a competitive market.
If at the market price of $5, both are running out of beads to sell (they can't
keep up with the quantity demanded at that price), then we would expect both Camille's
and Julia's to:
A. raise their price and reduce their
quantity supplied
B. raise their price and increase their
quantity supplied
C. lower their price and reduce their
quantity supplied
D. lower their price and increase their
quantity supplied
3)
In which of the following industries are economies of scale exhausted at
relatively low levels of output?
A. Aircraft production
B. Automobile manufacturing
C. Concrete mixing
D. Newspaper printing
4)
The average cost curves (AVC and ATC) should be minimized
A. where MC = ATC and MC = AVC
B. where FC = ATC and FC = AVC
C. where TC starts to increase at a faster
rate
D. where ATC = AVC
5)
If the wage rate increases,
A. a purely competitive producer will hire
less labour, but an imperfectly competitive producer will not
B. an imperfectly competitive producer will
hire less labour, but a purely competitive producer will not
C. a purely competitive and an imperfectly
competitive producer will both hire less labour
D. an imperfectly competitive producer may
find it profitable to hire either more or less labour
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6)
The real wage will rise if the nominal wage
A. falls more rapidly than the general
price level
B. increases at the same rate as labor
productivity
C. increases more rapidly than the general
price level
D. falls at the same rate as the general
price level
7)
Construction workers frequently sponsor political lobbying in support of
greater public spending on highways and public buildings. One reason they do this
is to
A. restrict the supply of construction
workers
B. increase the elasticity of demand for
construction workers
C. increase the demand for construction
workers
D. increase the price of substitute inputs
8)
Paying an above-equilibrium wage rate might reduce unit labour costs by
A. permitting the firm to attract
lower-quality labour
B. increasing the cost to workers of being
fired for shirking
C. increasing voluntary worker turnover
D. increasing the supply of labour
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9) A
good real-world example of monopolistic competition is
A. lawyers
B. gas stations
C. Time Warner Cable
D. groceries store
10)
An industry comprising a small number of firms, each of which considers the potential
reactions of its rivals in making price-output decisions, is called
A. monopolistic competition
B. oligopoly
C. pure monopoly
D. pure competition
11)
Price is constant or given to the individual firm selling in a purely competitive
market because
A. the firm's demand curve is downward
sloping
B. of product differentiation reinforced by
extensive advertising
C. each seller supplies a negligible
fraction of total supply
D. there are no good substitutes for its
product
12)
The most important pricing strategy for a perfectly competitive firm is
A. minimizing cost
B. maximizing sales
C. product differentiation
D. advertising
13)
Which of the following is a nonprice barrier of entry?
A. Huge sunk cost
B. Discounts
C. Product differentiation
D. Advertising
14)
A third-degree price discrimination can be applied to which of the following market
structures?
A. A monopoly
B. An oligopoly
C. A monopolistic competition
D. A perfect competition
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15)
Investing in R&D is more likely to occur in markets where
A. firms have monopoly power protected by
regulatory barriers
B. markets are closely competitive markets
with close to zero economic profits
C. markets are oligopoly markets with
strong collusion agreements
D. markets are monopolistic competitive markets
16)
All economies of scale are achieved at the minimum of
A. average total cost
B. total cost
C. average variable cost
D. average fixed cost
17)
Inflation is undesirable because it
A. arbitrarily redistributes real income
and wealth
B. invariably leads to hyperinflation
C. usually is accompanied by declining real
GDP
D. reduces everyone’s standard of living in
the same pro
portion
18)
An economy’s aggregate demand curve shifts leftward or rightward by more than
changes in initial spending because of the
A. net export effect
B. wealth effect
C. real-balances effect
D. multiplier effect
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19)
Suppose productivity rises in a particular economy, but wages stay the same.
Other things equal,
A. the demand curve will shift leftward
B. the supply curve will shift rightward
C. the supply curve will shift leftward
D. expenditures curve will shift rightward
20) If personal taxes were decreased and
resource productivity increased simultaneously, the equilibrium
A. output would rise
B. output would fall
C. price level would necessarily fall
D. price level would necessarily rise
21)
Expansionary fiscal policy is so named because it
A. involves an expansion of the nation's
money supply
B. can only be attained by expanding
government consumption
C. is aimed at achieving greater price
stability
D. can motivate an expansion of real GDP
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22)
Suppose the price level is fixed, the MPC is .5, and the GDP gap is a
negative$100 billion. To achieve full-employment output (exactly), government
should
A. increase government expenditures by $100
billion
B. increase government expenditures by $50
billion
C. reduce taxes by $50 billion
D. reduce taxes by $200 billion
23)
GDP understates the value of output produced by an economy because it
A. includes transactions that do not take
place in organized markets, such as home cooked meals
B. includes environmental degradation
caused by increased output production
C. excludes value added from the
underground economy, such as tips taken under the table
D. excludes the value of the wages and
benefits of government employee
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24)
Other things equal, a decrease in the real interest rate will
A. shift the investment demand curve to the
right
B. shift the investment demand curve to the
left
C. move the economy upward along its
existing investment demand curve
D. move the economy downward along its existing
investment demand curve
25)
Other things equal, a decrease in corporate income taxes will
A. decrease the market price of real
capital goods
B. have no effect on the location of the
investment demand curve
C. shift the investment demand curve to the
right
D. shift the investment demand curve to the
left
26)
Inflation in U.S. prices will cause
A. an increase in the demand for U.S.
dollars and an appreciation in the exchange rate
B. an increase in the supply of U.S.
dollars and a depreciation in the exchange rate
C. a decrease in the demand for U.S.
dollars and a depreciation in the exchange rate
D. a decrease in the supply of U.S. dollars
and an appreciation in the exchange rate
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27)
The quantity theory of money states that
A. the money supply divided by the velocity
of money equals the price level divided by real output
B. the money supply times the velocity of
money equals the price level times real output
C. the money supply times the price level
equals real output divided by the velocity of money
D. the money supply times the price level
equals real output times the velocity of money
28)
Suppose that U.S. prices rise 4% over the next year while prices in Mexicorise
6%. According to the purchasing power parity theory of exchange rates,what
should happen to the exchange rate between the dollar and the peso?
A. The dollar should depreciate.
B. The peso should appreciate.
C. The peso should depreciate.
D. The dollar will be revalued.
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29)
A rise in the domestic interest rate leads to capital
A. outflows and exchange rate appreciation
B. outflows and exchange rate depreciation
C. inflows and exchange rate depreciation
D. inflows and exchange rate appreciation
30)
A firm under monopolistic competition will earn
A. a positive economic profit as it has
some monopoly power
B. zero economic profit as it sets P = MC
C. zero economic profit as its P = ATC
D. a positive economic profit as it sets MC
= MR
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