Refer to the above graph. The long-run aggregate supply curve would be represented by
which line?
A. 1
B. 2
C. 3
D. 4
The basic economic argument for greater income equality is that:
A. an equal distribution of income is the logical outcome of any tax-transfer program.
B. because citizens enjoy political equality, they are also entitled to economic equality.
C. a more equal distribution of income will tend to maximize incentives to work, invest,
and assume risk.
D. a more equal distribution of a given amount of income will increase the total utility
of consumers.
If Congress raised taxes on businesses, this action would:
A. increase per-unit production costs and thus increase aggregate demand.
B. increase per-unit production costs and thus increase aggregate supply.
C. increase per-unit production costs and thus decrease aggregate supply.
D. increase aggregate demand and increase aggregate supply.
Which of the following is most likely to be an inferior good?
A. Fur coats
B. Ocean cruises
C. Used clothing
D. Steak
The upward slope of the short-run aggregate supply curve is based on the assumption
that:
A. nominal wages and other resource costs do not respond to price level changes.
B. nominal wages and other resource costs do respond to price level changes.
C. nominal wages are greater than real wages.
D. nominal wages are less than real wages.
By consumer sovereignty we mean that:
A. government is responsible for protecting consumer interests.
B. consumers determine what goods and services are produced.
C. businesses decide what the consumer will buy.
D. all goods and services are produced by consumers.
The most frequently used monetary device for achieving price stability is:
A. open-market operations.
B. the discount rate.
C. the reserve ratio.
D. the prime interest rate.
If a price-discriminating monopolist sells the same product in two markets but charges a
higher price in market X and a lower price in market Y, the pricing difference indicates
that demand is:
A. more elastic in market X than market Y.
B. less elastic in market X than market Y.
C. less elastic in market Y than market X.
D. the same in both markets X and Y.
From an economic perspective, when consumers leave a fast food restaurant because
the lines to be served are too long, they have concluded the:
A. marginal cost of waiting is less than the marginal benefit of being served.
B. marginal cost of waiting is greater than the marginal benefit of being served.
C. management is exhibiting irrational behavior by not maximizing profits.
D. management is making an assumption that other things are equal.
When firms in an industry reach an agreement to fix prices, divide up market share, or
otherwise restrict competition, they are using the strategy of:
A. interindustry competition.
B. limit pricing.
C. price leadership.
D. collusion.
Refer to the above graph. At output level H, the area of economic profit is:
A. BAEF.
B. ACG.
C. 0AEH.
D. BCGF.
Which combination of fiscal policy actions would be most stimulative for an economy
in a deep recession?
A. Increase in taxes and government spending
B. Decrease in taxes and government spending
C. Increase in taxes and decrease in government spending
D. Decrease in taxes and increase in government spending
Which of the following pairs of goods is most likely to have a positive
cross-price-elasticity of demand?
A. Steak and hamburger.
B. Fighter jets and pencils.
C. Hamburgers and hamburger buns.
D. College professors and textbooks.
If a particular bank regularly announces changes in its interest rate schedules before its
competitors, which then set rates very close to those announced by that bank, this could
be described as:
A. markup pricing.
B. predatory pricing.
C. price leadership.
D. explicit price collusion.
As the area between the Lorenz curve and diagonal gets larger, the Gini ratio:
A. rises to reflect greater equality.
B. rises to reflect greater inequality.
C. falls to reflect greater inequality.
D. falls to reflect greater equality.
Which is an example of a noncash transfer?
A. An inheritance of $1 million
B. Payments for labor services rendered
C. Postage stamps
D. Medicare
A television report states: “The Federal Reserve will lower the discount rate for the
fourth time this year.” This report indicates that the Federal Reserve is most likely
trying to:
A. reduce inflation.
B. save the banking industry.
C. stimulate the economy.
D. improve the savings rate.
Henry wants to buy a book. The economic perspective suggests that Henry will buy the
book if:
A. the book will give him utility.
B. his income is high.
C. the marginal cost of the book is greater than its marginal benefit.
D. the marginal benefit of the book is greater than its marginal cost.
The economy is experiencing a low rate of economic growth and the Fed decides to
pursue an expansionary money policy. Which set of actions by the Fed would be most
consistent with this policy?
A. Selling government securities and lowering the discount rate.
B. Selling government securities and raising the discount rate.
C. Buying government securities and raising the discount rate.
D. Buying government securities and lowering the discount rate.
The price elasticity of demand for a textbook is estimated to be 1 no matter what the
price or quantity demanded. In this case:
A. a 10 percent increase in price will result in a 10 percent increase in the quantity
demanded.
B. a 10 percent increase in price will result in a 10 percent decrease in the quantity
demanded.
C. an increase in price will decrease the total revenue of sellers.
D. a decrease in price will increase the total revenue of sellers.
When a purely competitive firm is in long-run equilibrium and is allocatively efficient:
A. total revenue is at a maximum.
B. marginal cost equals marginal revenue.
C. average variable cost equals marginal cost.
D. total cost is at a minimum.
Refer to the above graph. It shows short-run cost curves for a competitive firm. At what
price would the firm break even?
A. P1
B. P2
C. P3
D. P4
Refer to the above diagrams that show identical marginal utility from income curves for
Singer and Catalano. If a given income of $20,000 is initially distributed so that Singer
receives $15,000 and Catalano $5000:
A. no judgment can be made as to the effect of a redistribution of income on total
utility.
B. this initial distribution of income is maximizing the combined total utility of the two
consumers.
C. the combined total utility of the two consumers can be increased by redistributing
income from Catalano to Singer.
D. the combined total utility of the two consumers can be increased by redistributing
income from Singer to Catalano.
An increase in the money supply usually:
A. increases the interest rate and increases aggregate demand.
B. increases the interest rate and decreases aggregate demand.
C. decreases the interest rate and increases aggregate demand.
D. decreases the interest rate and decreases aggregate demand.
Total revenue for producing eight units of output is $48. Total revenue for producing
nine units of output is $63. Given this information, the:
A. average revenue for producing nine units is $1.
B. average revenue for producing nine units is $15.
C. marginal revenue for producing the ninth unit is $1.
D. marginal revenue for producing the ninth unit is $15.
The main function of the Federal Reserve System is to:
A. serve as the fiscal agent for the federal government.
B. supervise the operation of member banks.
C. clear checks from member banks.
D. control the money supply.
If the demand curve facing a firm is perfectly elastic, then:
A. its marginal revenue will equal price.
B. its marginal revenue schedule will decrease at an increasing rate.
C. its marginal revenue schedule decreases twice as fast as the demand curve.
D. it can increase its total revenue by lowering the price of its product.
If an economy is being “productively efficient,” then that means the economy is:
A.producing the products most wanted by society.
B.fully employing all economic resources.
C.maximizing the returns to factors of production.
D.using the least costly production techniques.
When a bank loan is repaid, the supply of money:
A. is constant, but its composition will have changed.
B. is decreased.
C. is increased.
D. may either increase or decrease.
The idea that firms and resource suppliers, while seeking to further their own
self-interests in a market economy, also promote the public interest describes:
A. the guiding function of prices.
B. capital accumulation.
C. the “invisible hand.”
D. “dollar votes.”