One of the major motivations for labor resistance to productivity enhancing changes in
a production process is the resulting threat to job security.
Policymakers often use the natural rate of unemployment as a basis in policy
formulations.
In many areas of the country, electricity customers pay a set per unit price for each of
the first X kilowatts and a lower per unit price for any additional kilowatts of electricity
consumed in a month. This is an illustration of second-degree price discrimination.
Macroeconomics is concerned with the behavior of all of the firms in a particular
industry, while microeconomics focuses on a single firm in the same industry.
If there is a current account surplus, then there is a financial account deficit.
According to the text, much of the increase in productivity that has occurred more
recently in the fast food industry was the result of improvements in capital and
technology.
Assume that at the current level of output produced by a perfectly competitive firm, MR
= $7.50 and MC = $6. In order to maximize its profit, the firm should increase output.
A sterilized central bank intervention does not affect the domestic money supply.
A closer relationship exists between GDP and nonresidential investment than between
business profits and investment spending.
A decrease in personal taxes would shift the aggregate demand curve rightward.
Capacity utilization increases. What is the impact on aggregate expenditures and
income?
A) Both increase.
B) Both decrease.
C) Aggregate expenditure increases and income decreases.
D) Aggregate expenditure decreases and income increases.
The type of policy that involves interest rates and the availability of loanable funds is
known as:
A) fiscal policy.
B) monetary policy.
C) strategic financial policy.
D) federal policy.
The function of money that enables individuals to exchange goods and services in a
common unit of account is called:
A) medium of exchange.
B) store of value.
C) unit of account.
D) measure of power.
Suppose an oligopoly consists of two firms. Firm A lowers price and Firm B responds
by lowering its price by the same amount. If average costs and industry output remain
the same, which of the following will occur?
A) The profits of the two firms will increase.
B) The profits of the two firms will decrease.
C) The profits of the two firms will remain the same.
D) Barriers to entry will come tumbling down and new firms will enter.
A measure of absolute price changes that excludes changes in energy and food prices is
called:
A) fringe rate of inflation.
B) core rate of inflation.
C) overall inflation.
D) none of the above.
In which of the following situations would each of the members be responsible for
producing an equal share of the total amount of output sold by the cartel engaged in
joint profit maximization?
A) When the amount of revenue generated by each member of the cartel is the same.
B) When there are no economies of scale in production.
C) When each member of the cartel is using the same scale of production.
D) When marginal costs of production are the same for each of the members of the
cartel.
Institutions that accept deposits from individuals and organizations, against which
depositors can write checks on demand for their market transactions and that use these
deposits to make loans are called:
A) depository institutions.
B) financial market institutions.
C) insurance companies.
D) none of the above.
Assuming the inverse demand function for good Z can be written as P = 90 – 3Q, the
corresponding total revenue function is:
A) 6Q.
B) 90 – 6Q.
C) 90 – 3Q.
D) 90Q – 3Q2.
In 2003, China’s control of the value of the yuan became an economic and political
issue for the U.S. because:
A) increased U.S. exports to China.
B) decreased U.S. exports to China.
C) increased China imports from the U.S.
D) none of the above.
In February 2002, the euro/dollar exchange rate was 1.20, and in May 2002, the
euro/dollar exchange rate was 1.10. What happened to the exchange rate during this
period?
A) Euro appreciated against the dollar.
B) Euro depreciated against the dollar.
C) Dollar appreciated against the euro.
D) Both B and C.
An increase in the discount rate would:
A) decrease bank borrowing of reserves and reflect an expansionary monetary policy.
B) decrease bank borrowing of reserves and reflect a contractionary monetary policy.
C) increase bank borrowing of reserves and reflect an expansionary monetary policy.
D) increase bank borrowing of reserves and reflect a contractionary monetary policy.
Exports are:
A) positively related to the level of foreign income and negatively related to the
exchange rate.
B) positively related to the level of foreign income and positively related to the
exchange rate.
C) negatively related to the level of foreign income and negatively related to the
exchange rate.
D) negatively related to the level of foreign income and positively related to the
exchange rate.
For the simple case of a production function with two inputs in which the inputs are
perfect complements, each isoquant is represented by:
A) a vertical line.
B) a horizontal line
C) a downward sloping straight line.
D) a line that forms a right angle.
Which of the following is not a characteristic of an oligopolistic industry?
A) Substantial barriers to entry.
B) The output produced by the firms in the industry may be homogeneous or
differentiated.
C) A small number of large firms.
D) One dominant firm and low entry barriers.
A decrease in taxes would shift the:
A) aggregate demand curve rightward.
B) aggregate demand curve leftward.
C) aggregate supply curve rightward.
D) aggregate supply curve leftward.
The market value of all currently produced final goods and services within a county in a
given period of time by domestic and foreign supplied resources is called:
A) GNP.
B) GDP.
C) NNP.
D) none of the above.
Expansionary monetary policy is achieved by:
A) decreasing the amount of bank reserves and lowering the federal funds rate.
B) decreasing the amount of bank reserves and raising the federal funds rate.
C) increasing the amount of bank reserves and lowering the federal funds rate.
D) increasing the amount of bank reserves and raising the federal funds rate.
Refer to Scenario 3. The marginal cost of producing the sixth unit of output is:
A) $33.33 (approximate).
B) $55.
C) $200.
D) $250.
Which of the following is not cited as one of the factors that accounts for the large-scale
production that exists in many sectors of the economy?
A) Economies of scale.
B) Advertising and image differentiation.
C) The minimum efficient scale of operation in many industries is quite high relative to
market demand.
D) Risk spreading.
In an open economy with global capital markets and mobile capital:
A) a country has control over both its domestic money supply and exchange rate.
B) a country has control of either its domestic money supply or exchange, but not both.
C) a country only has control over its domestic money supply.
D) a country only has control over its exchange rate.
A decrease in the real money supply can result from:
A) increase in the nominal money supply or an increase in the price level.
B) increase in the nominal money supply or a decrease in the price level.
C) decrease in the nominal money supply or an increase in the price level.
D) decrease in the nominal money supply or a decrease in the price level.
Assume a group of firms has formed a cartel and the cartel is in engaged in joint profit
maximization. As such, each firm, acting in its own interests, has an incentive to expand
production up to the point at which:
A) its marginal cost equals the marginal revenue earned by the cartel.
B) its marginal cost equals the cartel-determined price of the product being sold.
C) its marginal revenue equals the cartel’s marginal costs of production.
D) its marginal cost equals the cartel-determined marginal revenue from the good being
sold.
A movement down along a given isoquant causes the marginal rate of technical
substitution to:
A) increase.
B) stay the same.
C) decrease.
D) cannot be determined without additional information.
The monetary base consists of:
A) currency plus reserves.
B) currency plus required reserves.
C) currency plus excess reserves.
D) currency plus demand deposits.
The soft drink industry can best be described as:
A) an oligopoly.
B) a monopoly.
C) perfectly competitive.
D) monopolistically competitive.
At the point on the demand curve at which marginal revenue = 0, the absolute value of
the coefficient of the price elasticity of demand is:
A) > 1.
B) = 1.
C) < 1.
D) = 0.
Assume declining profits in the market for Internet service force several firms in the
area to drop out of the market. Which of the following best describes the effect of the
reduction in the number of service providers and the subsequent adjustment of the
market to the new equilibrium price and quantity?
A) Quantity supplied would decrease, creating excess supply at the initial equilibrium
price. Demand would then decrease until quantity demanded and quantity supplied are
once again equal.
B) Quantity supplied would decrease, creating excess demand at the initial equilibrium
price. Demand would then decrease until quantity demanded and quantity supplied are
once again equal.
C) Supply would increase, creating excess demand at the initial equilibrium price. Price
would then rise, causing quantity demanded to decrease and quantity supplied to
increase until a new equilibrium is reached.
D) Supply would decrease, creating excess demand at the initial equilibrium price.
Price would then rise, causing quantity demanded to decrease and quantity supplied to
increase until a new equilibrium is reached.
The combination of rising inflation and higher unemployment is called:
A) recession.
B) expansion.
C) stagflation.
D) deflation.
Economic variables that generally turn down before a recession begins and turn back up
before the recovery starts are called:
A) leading indicators.
B) coincident indicators.
C) lagging indicators.
D) none of the above.
If capital inflows decrease due to higher interest rates in other countries and large
amounts of import spending, there will be:
A) upward pressure on a country’s exchange rate.
B) downward pressure on a country’s exchange rate.
C) no pressure on a country’s exchange rate.
D) none of the above.
Average weekly hours in manufacturing is an example of a:
A) leading indicator.
B) coincident indicator.
C) lagging indicator.
D) none of the above.
Marginal revenue is equal to:
A) the change in price divided by the change in output.
B) the change in quantity divided by the change in price.
C) the change in P x Q due to a one unit change in output.
D) price, but only if the firm is a price searcher.