All else constant, an improvement in technology at each scale of operation would
cause:
A) a movement up an industry’s LRAC curve.
B) a movement down an industry’s LRAC curve.
C) an upward shift of an industry’s LRAC curve.
D) a downward shift of an industry’s LRAC curve.
Which of the following statements is correct?
A) So long as a firm is sufficiently large, it will have some amount of market power,
regardless of the type of market in which it operates.
B) All else constant, a monopoly firm has more market power than a monopolistically
competitive firm.
C) The amount of market power a firm possesses is unrelated to the type of market in
which it operates.
D) The fact that the firms in an oligopoly are mutually interdependent means that
individual firms do not have any market power.
In the money market, an excess demand of money will:
A) increase the supply of bonds, increase bond prices, and decrease interest rates.
B) increase the supply of bonds, decrease bond prices, and decrease interest rates.
C) increase the supply of bonds, increase bonds prices, and increase interest rates.
D) increase the supply of bonds, decrease bond prices, and increase interest rates.
Which of the following is not a barrier to entry that is created by government?
A) Economies of scale.
B) Licenses.
C) Regulatory restrictions.
D) Patents.
Assuming there is a rise in supply of copper, if the market for copper is allowed to
adjust, the ultimate result will be:
A) an increase in price and an increase in the quantity demanded.
B) an increase in price and an increase in the quantity supplied.
C) a decrease in price and an increase in the quantity demanded.
D) a decrease in price and an increase in the quantity supplied.
If an industry is characterized by substantial diseconomies of scale, as a particular firm
in the industry expands its production capacity we will observe:
A) a decrease in marginal costs.
B) an increase in the marginal product of labor.
C) a decrease in the total fixed costs of production.
D) an increase in the average total costs of production.
The private financial market where banks borrow and loan reserves to meet the
minimum research requirements is called:
A) federal funds market.
B) loanable funds market.
C) discount loans market.
D) repo market.
The last time the U.S. Post Office raised its prices for mail service critics of the rate
increase argued that the Post Office’s revenues would actually decline as a result of the
price increase. It can be concluded that:
A) both groups believe demand is elastic, but for different reasons.
B) both groups believe demand is inelastic, but for different reasons.
C) the Post Office believes demand for mail service is elastic; opponents of the price
increase believe demand is inelastic.
D) the Post Office believes demand for mail service is inelastic; opponents of the price
increase believe demand is elastic.
The marginal propensity to consume is 0.50, marginal propensity to invest is 0.20, and
the marginal propensity to import is 0.05. What is the size of the multiplier?
A) 1.00
B) 2.86
C) 3.00
D) 0.50
An appreciation of the U.S. dollar would shift the:
A) aggregate demand curve rightward.
B) aggregate demand curve leftward.
C) aggregate supply curve rightward.
D) aggregate supply curve leftward.
Assume the firms in a perfectly competitive industry are initially in long-run
equilibrium and the cost of labor increases. How will the market adjust over time?
A) Firms will enter the market, causing price to rise until losses are eliminated.
B) Firms will enter the market, causing price to fall until positive profits are eliminated.
C) Firms will exit the market, causing price to rise until losses are eliminated.
D) Firms will exit the market, causing price to fall until positive profits are eliminated.
Which of the following statements is true of the relationship among the average cost
functions?
A) ATC = AFC – AVC
B) AVC = AFC + ATC
C) AFC = ATC + AVC
D) AFC = ATC – AVC
Holding everything else constant, a country’s imports will decrease if the:
A) country’s currency appreciates.
B) country’s currency depreciates.
C) country’s currency is revalued.
D) none of the above.
Assume the cost of certain inputs used to produce artificial Christmas trees increases
and, at the same time, the economy moves into a recession, causing the incomes of
consumers to decrease. Which of the following will happen to the equilibrium price and
quantity of artificial Christmas trees? (Assume artificial Christmas trees are normal
goods.)
A) Price will increase; quantity cannot be determined.
B) Price will decrease; quantity cannot be determined.
C) Quantity will increase; price cannot be determined.
D) Quantity will decrease; price cannot be determined.
The marginal propensity to save is defined as:
A) ΔC/ΔYd.
B) ΔS/ΔYd.
C) ΔYd/ΔC.
D) ΔYd/ΔS.
A decrease in the demand for dollars on the foreign exchange market, all else equal,
will result in:
A) appreciation of the U.S. dollar and depreciation of the foreign currency.
B) appreciation of the U.S. dollar and appreciation of the foreign currency.
C) depreciation of the U.S. dollar and depreciation of the foreign currency.
D) depreciation of the U.S. dollar and appreciation of the foreign currency.
File-sharing programs such as Napster, Kazaa, and iMesh make it possible for
individuals to exchange music files over the Internet. All else constant, which of the
following statements best describes how the development of these programs has
affected the retail market for new music CDs?
A) Demand for CDs has decreased, causing equilibrium price and quantity to decrease.
B) Demand for CDs has increased, causing equilibrium price and quantity to increase.
C) Demand for CDs has decreased, causing equilibrium price to decrease and
equilibrium quantity to increase.
D) Demand for CDs has increased, causing equilibrium price to increase and
equilibrium quantity to decrease.
In the mathematical formulation of the short-run production function:
A) the quantity of output is usually assumed to be fixed.
B) the quantity of capital employed is usually assumed to be fixed.
C) the quantity of both labor and capital employed are usually assumed to be fixed.
D) the quantity of both labor and capital must be allowed to vary so that output can vary
in the short run.
Decrease in personal income taxes will ________ the expenditure curve:
A) decrease.
B) increase.
C) not change.
D) none of the above.
All else held constant, an increase in foreign imports of cameras would cause the supply
of cameras in the United States to:
A) increase.
B) stay the same.
C) decrease.
D) cannot be determined with the information given.
In general, large current account deficits have to be financed by:
A) capital outflows abroad.
B) capital inflows from abroad.
C) trade barriers.
D) none of the above.