Marginal product is:
A. the increase in total output attributable to the employment of one more worker.
B. the increase in total revenue attributable to the employment of one more worker.
C. the increase in total cost attributable to the employment of one more worker.
D. total product divided by the number of workers employed.
If there are positive externalities associated with the consumption of a good or service:
A.the private demand curve will overestimate the true demand curve.
B.the private demand curve will underestimate the true demand curve.
C.consumers will be willing to pay for all these benefits in private markets.
D.the market demand curve will be the vertical summation of the individual demand
costs.
Which of the following constitutes an implicit cost to the Johnston Manufacturing
Company?
A. Payments of wages to its office workers
B. Rent paid for the use of equipment owned by the Schultz Machinery Company
C. Depreciation charges on company-owned equipment
D. Economic profits resulting from current production
If Congress passes legislation to cut taxes and increase government spending to counter
the effects of a severe recession, this would be an example of a(n):
A. standardized budget.
B. contractionary fiscal policy.
C. expansionary fiscal policy.
D. budget surplus.
Consumers who clip and redeem discount coupons:
A. exhibit the same price elasticity of demand for a given product than consumers who
do not clip and redeem coupons.
B. exhibit more price elasticity of demand for a given product than consumers who do
not clip and redeem coupons.
C. exhibit less price elasticity of demand for a given product than consumers who do
not clip and redeem coupons.
D. cause total revenue to decrease for firms that issue coupons for their products.
One major aspect of the sociocultural-political environment of the United States that
has generally been conducive to economic growth is the:
A. enforcement of contracts by the market.
B. denial of the rights of property ownership.
C. favorable attitude toward work and risk-taking.
D. strict social regulation of production and progress.
A characteristic of monopolistically competitive industries is that:
A. there is product differentiation but only limited advertising of products by the
representative firm.
B. the entry and exit of firms causes the representative firm to break even in the long
run.
C. the representative firm is not very responsive to changes in consumer demand.
D. the representative firm produces at that level of output where marginal cost equals
minimum average total cost.
Which of the above diagrams illustrate(s) the effect of a decline in the price of irrigation
equipment on the market for corn?
A. B only
B. C only
C. B and C
D. D only
The following economy produces two products.
Refer to the above table. The marginal opportunity cost of the fourth unit of tanks is:
A. 200.
B. 300.
C. 350.
D. 650.
A decrease in the interest rate will cause a(n):
A. increase in the transactions demand for money.
B. decrease in the transactions demand for money.
C. decrease in the amount of money held as an asset.
D. increase in the amount of money held as an asset.
Which of the following arguments comes closest to constituting a legitimate economic
exception to the case for free trade?
A. The increase-domestic-employment argument
B. The cheap-foreign-labor argument
C. The diversification-for-stability argument
D. The infant-industry argument
A consumer price index attempts to measure changes in:
A. the prices of all goods and services produced by the U.S. economy.
B. the price of a select market basket of goods and services.
C. the spending patterns of all consumers in the United States.
D. the spending patterns of consumers worldwide.
The economy is experiencing inflation and the Federal Reserve decides to pursue a
restrictive money policy. Which actions by the Fed would be most consistent with this
policy?
A. Lowering the discount rate.
B. Lowering the reserve ratio.
C. Buying government securities.
D. Selling government securities.
Refer to the above graph. The profit-maximizing monopolist shown sets its output at:
A. 0V.
B. 0Y.
C. 0T.
D. 0X.
The legislation that prohibited “every contract, combination, . . . or conspiracy” that
limits competition is the:
A. Federal Trade Commission Act.
B. Clayton Act.
C. Celler-Kefauver Act.
D. Sherman Act.
The Lorenz curve is a graph that shows the:
A. distribution of wealth.
B. degree of income inequality.
C. effect of discrimination on incomes.
D. trade-off between equality and efficiency.
The graph above shows the production possibilities curve for an economy producing
two goods, X and Y. Which of the points on the graph indicate unemployed resources?
A. D only
B. E only
C. E and A only
D. B and C only
Refer to the above graph. If the interest rate is 3 percent, the supply of money would be:
A. $100 billion.
B. $150 billion.
C. $200 billion.
D. $250 billion.
Allocative and productive efficiency are achieved under the market structure of:
A. oligopoly.
B. pure competition.
C. pure monopoly.
D. monopolistic competition.
The goal of product differentiation and advertising in monopolistic competition is to
make:
A. the firm allocatively efficient even if it is not productively efficient.
B. the firm productively efficient even if it is not allocatively efficient.
C. price less of a factor and product differences more of a factor in consumer purchases.
D. price more of a factor and product differences less of a factor in consumer purchases.
Which of the following statements is most consistent with the benefits-received
principle of taxation?
A. A childless couple should not be required to pay taxes for the support of public
schools.
B. Prosperous corporations should pay substantial taxes even if they use few
government goods and services.
C. The best tax is the income tax.
D. People with high incomes should pay more taxes than people with low incomes.
Specialization and trade are beneficial to society because:
A. the output of economic goods may be increased with no increase in resources.
B. scarce resources are utilized more efficiently.
C. a division of labor lowers prices for products.
D. all of these are correct.
What is one major measure of economic growth?
A. The rise in the price level.
B. The fall in the rate of unemployment.
C. Changes in interest rates.
D. Changes in real GDP.
If the demand curve for product B shifts to the right as the price of product A declines,
then:
A. both A and B are inferior goods.
B. A is a superior good and B is an inferior good.
C. A is an inferior good and B is a superior (or “normal”) good.
D. A and B are complementary goods.
In 2009, about what percentage of households had personal income of $100,000 or
more?
A. 3 percent
B. 8 percent
C. 16 percent
D. 20 percent
What is a major reason for growing income inequality in the United States?
A. Higher marginal tax rates.
B. Unemployment benefits.
C. More skilled workers.
D. Import competition.
Refer to the above graph of a representative firm in monopolistic competition. What
does line 1 represent?
A. Demand
B. Marginal cost
C. Marginal revenue
D. Average total cost
Assume that when there is no crowding out, an increase in government spending
increases GDP by $100 billion. If there had been partial crowding out, then GDP would
have:
A. increased by more than $100 billion.
B. increased by less than $100 billion.
C. increased by $100 billion.
D. not increased.
It is the custom for paper mills located alongside the Layzee River to discharge waste
products into the river. Operators of hydroelectric generating plants on the river find
they must clean up the river’s water before it flows through their equipment.
Refer to the above information. If nothing is done to correct this situation:
A.there will be an overallocation of resources to the production of electricity.
B.there will be an underallocation of resources to the production of paper goods.
C.there will be an overallocation of resources to the production of paper goods.
D.the price of electricity will be lower than it should be.
Which of the following statements best describes the 12 Federal Reserve Banks?
A. They are privately owned and privately controlled central banks whose basic goal is
to provide an ample and orderly market for U.S. Treasury securities.
B. They are privately owned and publicly controlled central banks whose basic function
is to minimize the risks in commercial banking in order to make it a reasonably
profitable industry.
C. They are privately owned and publicly controlled central banks whose basic goal is
to control the money supply and interest rates in promoting the general economic
welfare.
D. They are privately owned and publicly controlled central banks whose basic goal is
to earn profits for their owners.
If the average level of nominal income in a nation is $44,000 and the price level index
is 175, the average real income would be about:
A. $18,857.
B. $25,143.
C. $44,000.
D. $77,000.
Which of the following does not explain why specialization increases output?
A. Specialization capitalizes on differences in ability.
B. Specialization promotes self-sufficiency and independence.
C. Specialization fosters learning by doing.
D. Specialization saves time by eliminating shifting between tasks.
Refer to the above table. The size of the M1 money supply is:
A. $979 billion.
B. $1236 billion.
C. $1415 billion.
D. $1618 billion.
GDP measured using current prices is called:
A. nominal GDP.
B. real GDP.
C. constant GDP.
D. deflated GDP.