Optimal decisions are made on the basis of
a. rate of growth in total profit.
b. average cost and average revenue figures.
c. impact on market share.
d. marginal cost and marginal revenue figures.
If the price of a good is below the equilibrium price,
a. suppliers will find inventories building; they will cut output and raise prices.
b. suppliers will find inventories being depleted. They will increase production and
raise prices.
c. the demand curve will shift down until an equilibrium is established at the existing
price.
d. the supply curve will shift up until an equilibrium is established at the existing price.
Price elasticity of demand is defined as
a. slope divided by price.
b. percentage change in price divided by percentage change in quantity demanded.
c. percentage change in quantity demanded divided by percentage change in price.
d. the inverse of the price elasticity of supply.
A line that slopes downward from left to right has a positive slope.
a. True
b. False
Barter is a system of
a. trade without the use of money.
b. trading one good for another.
c. the double coincidence of wants.
d. All of the above are correct.
If the economy experiences an unplanned inventory accumulation at the full
employment level of GDP, then the economy is in a(n)
a. inflationary gap.
b. hyperinflation.
c. recessionary gap.
d. full employment gap.
In the long run, a monopolistically competitive firm earns small economic profits.
a. True
b. False
A normal good is a good whose quantity demanded
a. rises when its price falls.
b. falls when the price of a related good falls.
c. falls when the consumer’s total utility rises.
d. rises when the consumer’s real income increases.
To maintain a balanced budget during the sag in personal spending in 2008 could cause
a
a. further increase in aggregate demand and inflation.
b. further increase in aggregate demand and unemployment.
c. further decrease in aggregate demand and a recession.
d. further decrease in aggregate demand and inflation.
George Washington’s troops at Valley Forge were almost destroyed by price controls.
a. True
b. False
The slope of a line with rise of five and run of two is positive.
a. True
b. False
While specialization and exchange were very important to Adam Smith in 1776, they
have largely lost their importance in the 21st century.
a. True
b. False
In the period from 1996-2000, the United States economy experienced the unusual
combination of
a. high unemployment and high inflation.
b. high unemployment and low inflation.
c. low unemployment and high inflation.
d. low unemployment and low inflation.
Price level changes have their greatest effect on consumers’
a. income.
b. wealth.
c. debt.
d. expectations.
Outputs include goods but not services.
a. True
b. False
If the MPP of labor is 60 and the price of labor per period is $20, the MPP of machinery
is 75 and the price of the machinery per period is $25, in order to achieve optimal input
proportions the firm should use
a. more labor and less machinery.
b. more machinery and less labor.
c. more labor with the same amount of machinery.
d. the current combination.
Open market operations have their initial effect on bank
a. lending.
b. reserves.
c. profits.
d. revenues.
The payroll tax receipts
a. are used to reduce the national debt.
b. are invested in private business for future payments.
c. pay off current recipients of Social Security payments.
d. go directly into a trust fund for investment in private businesses.
Economic rent is the payment made to a factor of production above the amount
necessary to induce any of that factor to be supplied at its present employment.
a. True
b. False
The speed with which money circulates through the economy is called the
a. oversimplified multiplier.
b. velocity of circulation.
c. exchange rate.
d. money multiplier.
The gains made against poverty by President Lyndon Johnson’s “War on Poverty” were
largely reversed by:
a. welfare cuts
b. an elimination of many jobs to overseas manufacturing facilities
c. slower economic growth
d. all of the above.
e. a and c only
The cable and subscription TV business is plagued with the problem of “signal theft.”
People use illegal receivers to capture the company’s signal without paying.
Enforcement of the company’s property right is very expensive. This problem emerges
because TV signals are basically
a. economic goods.
b. invisible goods.
c. depletable goods.
d. public goods.
The concept of “random walk” applies most closely to predictions of
a. consumer demand for a product after a price increase.
b. the effects of a tax on the supply of oil.
c. the effects of transfer payments on labor supply.
d. the price of a particular stock one year from now.
Pure monopoly is not studied because of its descriptive realism, but because it is a
stepping stone toward more realistic models.
a. True
b. False
Which of the following statements is correct?
a. Theory and hypothesis are interchangeable terms for the same thing.
b. A hypothesis may result from a tested and confirmed theory.
c. A theory may result from a tested and confirmed hypothesis.
d. A hypothesis is a theory whose formulation relies on mathematics.
Exchange rates in what is termed the “medium run”
a. will be altered by an economic upswing because consumers buy more goods
including imports when disposable income goes up.
b. will be unaffected by economic changes in personal income or consumption
spending.
c. will appreciate for a country having an economic boom when others are not.
d. All of the above are correct.
The price elasticity of a horizontal demand curve is always
a. infinitely large.
b. zero.
c. one.
d. increasing as price increases.
In 2008, the Fed utilized expansionary monetary policy which was made
a. more effective as banks held more excess reserves.
b. less effective as banks held more excess reserves.
c. more effective as banks held less excess reserves.
d. less effective as banks held less excess reserves.
A diagram is a good example of a(n)
a. hypothesis.
b. abstraction.
c. theory.
d. concept.
e. instrumentation.
In the United States, most workers
a. work for government of some sort.
b. produce raw materials for manufacturing.
c. work in agriculture and farming.
d. produce services rather than goods.
Future generations will be hurt by a high national debt if incurring the debt
a. was done to pay Social Security recipients.
b. resulted in heavy commitments to bail out business firms.
c. increased formation of capital.
d. slowed the formation of capital.
One of the following is not a characteristic of perfect competition. Which is it?
a. Firms advertise to increase their market share.
b. Profits are low in the long run.
c. Consumers pay little attention to brand names.
d. Firms pay no attention to their competitors’ output levels.
As one moves down a straight-line demand curve, the elasticity decreases.
a. True
b. False