ECON A 379 Quiz 1

If demand is inelastic, then price and total revenue are directly related.

Technological innovations are not necessarily major scientific breakthroughs.

The substitution effect of an increase in the wage rate influences a worker to consuming more leisure.

Unemployment insurance typically replaces a worker’s full earnings.

If your assets are highly liquid, this means you can make transactions on short notice.

Credit cards are regularly used in economic exchanges, so credit card balances are included in the definition of money.

The government can break up monopolies under federal antitrust legislation.

The price elasticity of demand for business travel tends to be greater than that of leisure travel.

A larger labor force will allow the economy to produce more total output.

The Bretton Woods exchange rate system was replaced by a gold standard.

Taxes and transfer payments automatically reduce fluctuations in real GDP and thereby stabilize the economy without any need for decisions from Congress or the White House.

Firms that expend resources for lobbying that could have been used for productive services are engaging in rent-seeking behavior.

If a 10% increase in price increases the quantity supplied by 15%, the price elasticity of supply is 0.67.

When federal government spending amounts to less than tax revenues, the federal government runs a budget deficit.

When people expect inflation, they assume that prices are going to increase at a certain rate and factor this into their decision making.

The Act which outlawed price discrimination for the purpose of reducing competition was the
A) Sherman Act.
B) Clayton Act.
C) Robinson-Patman Act.
D) Celler-Kefauver Act.

Workers often have ________ contracts and so their wages are ________.
A) long-term; flexible
B) long-term; sticky
C) short-term; sticky
D) short-term; flexible

Table 7.2
Table 7.2 contains price, demand, and cost data for the Capri Theater, the only first-run movie theater in a small town. What is its revenue from non-students under the single price policy?
A) $300
B) $360
C) $450
D) $540

Figure 14.2
A movement from point d to point c could be caused by a(n)
A) increase in government spending.
B) increase in the price of oil.
C) increase in taxes.
D) increase in short-run aggregate supply.

Figure 8.4
Figure 8.4 depicts demand and costs for a monopolistically competitive firm. If the firm’s demand curve shifts to the left as more firms enter the market,
A) the firm’s average cost will be higher at the new profit maximizing output level.
B) the firm’s average cost will be lower at the new profit maximizing output level.
C) the firm’s average cost will remain the same at the new profit maximizing output level.
D) There is not sufficient information.

Steel workers laid off from their jobs as the result of a recession are considered
A) structurally unemployed.
B) cyclically unemployed.
C) frictionally unemployed.
D) seasonally unemployed.

If the seller knows more about the good than the buyer knows there exists
A) an externality.
B) asymmetric information.
C) moral hazard.
D) a public goods problem.

The cross-price elasticity between good X and good Y is positive. Other things being equal, if the price of X rises
A) quantity of Y demanded decreases.
B) quantity of Y demanded increases.
C) a consumer spends more on good Y than on good X.
D) a consumer spends more on good X than on good Y.

In the case of perfectly elastic demand, the demand curve is
A) upward sloping.
B) downward sloping.
C) vertical.
D) horizontal.

Figure 6.1 shows the cost structure of a firm in a perfectly competitive market. If the market price is $40 and the firm is currently producing the profit maximizing output level, the firm’s profit is
A) $7,200.
B) $9,000.
C) $27,000.
D) $36,000.

From time to time, the Federal Reserve buys back government bonds from the private sector through a process called
A) bond recall procedures.
B) open market purchases.
C) backflip bond investments.
D) voluntary redemption procedures.

Even when the Obama administration succeeds with its effort to gain Congressional approval for its stimulus proposals, it will still take time for these policies to actually work. The time it takes for these policies to work is known as
A) inside lags.
B) outside lags.
C) automatic stabilization.
D) crowding out.

What would be a way for the Federal Reserve to slow down the economy when it is growing too quickly or is inflationary?
A) print more money
B) buy back government bonds on the open market
C) sell more government bonds
D) encourage the stock market

Explain liabilities and assets as they relate to a bank’s balance sheet.

When is it a good decision to hire a celebrity endorser of your product?

Suppose that someone deposits $10,000 into a bank. Assuming a reserve requirement ratio of 20%, what will be the eventual increase in checking account balances?

Some states have laws that require that used car dealers give buyers a 30-day period during which they can return cars that are discovered to be lemons (low-quality). Whom do laws like this help? Whom do they hurt?

Do inventions have to be major technological breakthroughs to affect the efficiency of producing goods? Explain.

What are the main features of the Robinson-Patman Act?

What are the four components of M1?

Describe the changes in the variables that will cause demand for a product to increase, shifting the demand curve to the right.