When the excess capacity problem under monopolistic competition becomes greater,
there will be:
A. a narrower range of consumer choice.
B. fewer advertisements and promotions.
C. a wider range of consumer choice.
D. more entry by firms into the market.
Allocative efficiency means that:
A.the law of increasing opportunity costs has reached a maximum.
B.the least costly methods are being used to produce goods and services.
C.resources are being devoted to the production of goods and services most desired by
society.
D.the amount of other products that must be sacrificed to obtain production of a given
product is at a minimum.
In pure competition, the demand for the product of a single firm is perfectly:
A. elastic because the firm produces a unique product.
B. inelastic because the firm produces a unique product.
C. elastic because many other firms produce the same product.
D. inelastic because many other firms produce the same product.
What do economies of scale, the ownership of essential raw materials, and patents have
in common?
A. They must all be present before price discrimination can be practiced.
B. They are all barriers to entry.
C. They all help explain why a monopolist’s demand and marginal revenue curves
coincide.
D. They all help explain why the long-run average cost curve is U-shaped.
When the supply curve of labor is upward sloping, the marginal cost curve of labor
facing the monopsonist:
A. lies above the supply curve of labor.
B. is the supply curve of labor that it faces.
C. lies below and parallel to the supply curve of labor.
D. lies above and parallel to the supply curve of labor.
Which nation has significantly increased its international trade in recent years to
become an important trading nation?
A. Algeria
B. Argentina
C. China
D. Colombia
The data in the table show the marginal costs and marginal benefits to a city for five
different levels of pollution control.
Refer to the above table. What would cause the optimal level of pollution abatement to
be 600 tons?
A.An increase in marginal costs by $150,000 at each level
B.An increase in marginal benefits by $200,000 at each level
C.A decrease in marginal costs by $150,000 at each level
D.A decrease in marginal benefits by $100,000 at each level
Refer to the above diagram. Assume that G and T2 are the relevant curves, the economy
is currently at A, and the full-employment GDP is B. This economy has a(n):
A. cyclically adjusted budget surplus.
B. actual budget deficit.
C. cyclically adjusted budget deficit.
D. actual budget surplus.
Use the figure below to answer the following questions:
In the above figure, curves 1, 2, 3, and 4 represent the:
A. ATC, MC, AFC, and AVC curves respectively.
B. MC, AFC, AVC, and ATC curves respectively.
C. MC, ATC, AVC, and AFC curves respectively.
D. ATC, AVC, AFC, and MC curves respectively.
Which would most likely shift the aggregate supply curve? A change in:
A. consumer expectations.
B. government spending.
C. excess capacity in business.
D. prices of imported resources.
Natural monopolies result from:
A. patents.
B. copyrights.
C. control over an essential natural resource.
D. extensive economies of scale in production.
A nation that devotes more of its resources to capital investment is likely to:
A. shift outward its production possibilities curve.
B. shift inward its production possibilities curve.
C. increase the slope of its production possibilities curve.
D. decrease the slope of its production possibilities curve.
If the cross-price-elasticity of goods X and Y is negative, then the sales of X move:
A. in the same direction as the price of Y, and X and Y are complementary goods.
B. in the opposite direction as the price of Y, and X and Y are complementary goods.
C. in the opposite direction as the price of Y, and X and Y are substitute goods.
D. in the same direction as the price of Y, and X and Y are substitute goods.
Which is a major criticism of a monopoly as a source of allocative inefficiency?
A. A monopolist fails to expand output to the level where the consumers’ valuation of
an additional unit is just equal to the monopolist’s opportunity cost.
B. A monopolist has no incentive to produce efficiently because even the inefficient
monopolist can be assured of economic profits.
C. A monopolist will always make profits and that means that prices are too high.
D. A monopolist has an unfair advantage because it can purchase labor at a lower price
than competitive firms in other industries.
The organization created to oversee the provisions of multilateral trade agreements,
resolve disputes under the international trade rules, and meet periodically to consider
further trade liberalization is called the:
A. International Monetary Fund (IMF).
B. World Trade Organization (WTO).
C. Common Market Organization (CMO).
D. International Trade Commission (ITC).
Major increases in oil prices in the mid-1970s and in the late 1970s created:
A. an increase in long-run aggregate supply.
B. a reduction in the unemployment rate.
C. adverse aggregate supply shocks.
D. beneficial aggregate demand shocks.
The ratchet effect means that:
A. when aggregate supply increases, the price level decreases.
B. when aggregate supply decreases, the price level increases.
C. when aggregate demand decreases, the price level remains constant.
D. when aggregate demand increases, the price level remains constant.
In a purely competitive industry, which of the following could cause a firm’s marginal
revenue product for an economic resource to increase?
A. An increase in demand for the firm’s product.
B. A reduction in the price of the resource.
C. An increase in the elasticity of the firm’s supply curve.
D. A decrease in the price of the product produced by the resource.
Which is a barrier to entry?
A. Close substitutes
B. Diseconomies of scale
C. Government licensing
D. Price-taking behavior
The economic inefficiency of monopolistic competition means that:
A. industries tend to evolve into oligopolies rather than become more competitive.
B. industries spend money on advertising and sales promotion.
C. firms produce at an output short of, and charge a price greater than, minimum
average total cost.
D. firms do not maximize profits at the MC equals MR output.
A reduction in the redistribution of income:
A. lowers the poverty rate for people.
B. raises people’s standard of living.
C. results in more income inequality.
D. results in less income inequality.
Consider a society that is producing inside its production possibilities frontier. This
society could best achieve efficiency in its production of output by:
A. distributing incomes more equally.
B. fully employing all available resources.
C. increasing the levels of wages and prices.
D. producing relatively more capital goods and relatively fewer consumer goods.
Answer the question based on the following price and output data over a five-year
period for an economy that produces only one good. Assume that year 2 is the base
year.
In determining real GDP for year 1:
A. nominal GDP in year 1 should be inflated.
B. nominal GDP in years 1 and 2 should be deflated.
C. the price index number in year 1 is 95.
D. the price index number in year 1 will be greater than 100.
Refer to the above graph. What combination would most likely cause a shift from AD1
to AD3?
A. An increase in taxes and an increase in government spending
B. A decrease in taxes and an increase in government spending
C. An increase in taxes and a decrease in government spending
D. A decrease in taxes and a decrease in government spending
Refer to the above graph. If a curve shifted from (d) to (b), then the Gini ratio would:
A. increase.
B. decrease.
C. remain constant.
D. become negative.
The data in the table show the marginal costs and marginal benefits to a city for five
different levels of pollution control.
Refer to the above table. If the marginal benefit of pollution abatement increased by
$150,000 at each level because of the community’s newfound desire to attract cleaner
industry, then the optimal level of pollution abatement in tons would be:
A.600.
B.700.
C.800.
D.900.
Which is a reason why there is no advertising by individual firms under pure
competition?
A. Firms produce a homogeneous product.
B. The quantity of the product demanded is very large.
C. The market demand curve cannot be increased.
D. Firms do not make long-run profits.
At the profit-maximizing level of output, a monopolist will always operate where:
A. price is greater than marginal cost.
B. price is greater than average revenue.
C. average total cost equals marginal cost.
D. total revenue is greater than total cost.
When changes to taxes and spending occur in the economy without explicit action by
the federal government, such policy is:
A. cyclical.
B. variable.
C. discretionary.
D. nondiscretionary.
The following economy produces two products.
Refer to the above table. According to the production possibilities schedule, a
combination of four tanks and 650 autos is:
A. attainable and involves an efficient use of society’s resources.
B. attainable, but would not be in the best interests of a strong national defense.
C. not attainable because it is not listed in the schedule.
D. not attainable because society does not have sufficient resources to produce this
combination.