Which is one of the conditions that must be realized before a seller finds that price
discrimination is workable?
A. The demand for the product is perfectly elastic so any price can be charged for the
product.
B. The seller must be able to segregate buyers based on a willingness to pay.
C. The buyer must be able to resell the product at a higher price to other consumers.
D. The product must be a service because demand is more elastic for services.
The level of total spending is the immediate determinant of the:
A. ratio of private to public goods production.
B. level of real output and employment.
C. size of the labor force.
D. inflation rate.
Which is regarded as an automatic stabilizer in the economy?
A. Interest rates
B. Exchange rates
C. The inflation rate
D. The progressive income tax
The aggregate demand curve is the relationship between the:
A. price level and the sales of producers.
B. price level and the purchasing of real domestic output.
C. price level and the distribution of real domestic output.
D. real domestic output bought and the real domestic output sold.
Which would be a qualification to the view that oligopoly is allocatively and
productively inefficient?
A. Less foreign competition has stimulated more price competition in oligopolies.
B. Oligopolies are less technologically competitive so they lose market share.
C. Oligopolies may purposely keep prices below short-run profit-maximizing levels to
bolster barriers to entry.
D. The more collusive practices of oligopolies lead to more profit-sharing among firms
in the industry.
Over a 10-year period, the Consumer Price Index doubled. On the basis of this
information we can say that the average annual rate of inflation over this period was
approximately:
A. 10 percent.
B. 9 percent.
C. 7 percent.
D. 5 percent.
Other things equal, which reduces competition in an industry?
A. Patent laws
B. Freedom of entry for new firms
C. An increase in the number of producers
D. An increase in the number of buyers
Which statement is correct? The long-run supply curve for a purely competitive:
A. decreasing-cost industry is upsloping.
B. increasing-cost industry is perfectly elastic.
C. increasing-cost industry is upsloping.
D. increasing-cost industry is less elastic than the industry’s short-run supply curve.
A binding price ceiling means that:
A. there is currently a surplus of the relevant product.
B. government is imposing a legal price that is typically below the equilibrium price.
C. government wants to stop a deflationary spiral.
D. government is imposing a legal price that is typically above the equilibrium price.
Checkable deposits are included in:
A. M1 but not in M2.
B. M2 but not in M1.
C. both M1 and M2.
D. neither M1 nor M2.
A negative cross-price-elasticity of demand for two products indicates that they are:
A. substitutes.
B. complements.
C. independent goods.
D. normal goods.
Which of the following actions by the Fed will increase commercial bank lending
potential?
A. Raising the reserve ratio.
B. Increasing the Federal funds rate target.
C. Expanding the amount of reserves available through the term auction facility.
D. Selling bonds to commercial banks and the public.
Increases in the value of a product to each user, including existing users, as the total
number of users rises are called:
A. information cascades.
B. learning effects.
C. network effects.
D. scale economies.
In which of the following U.S. cities is one of the 12 Federal Reserve Banks located?
A. New York City
B. Seattle
C. Miami
D. Denver
Other things being equal, a firm in a cartel will most likely cheat on a price-fixing
agreement by:
A. increasing price and restricting its output.
B. organizing promotions of the product.
C. secretly increasing sales to a large number of small customers.
D. secretly lowering price and increasing sales to a few customers.
Firms in an industry cannot earn long-run economic profits if:
A. fixed costs are zero.
B. the number of firms in the industry is fixed.
C. there is free entry and exit of firms in the industry.
D. production costs for a given level of output are minimized.
Refer to the above graphs. A price increase from $20 to $40 causes quantity demanded
to decrease from 100 units to 50 units. Which graph best illustrates the price elasticity
of demand for this good?
A. Graph A
B. Graph B
C. Graph C
D. Graph D
Refer to the graph above. If demand decreased:
A. quantity would stay the same and price would increase.
B. quantity would stay the same and price would decrease.
C. price would stay the same and quantity would decrease.
D. price would stay the same and quantity would increase.
Assume an economy is producing only one product. Year 2 is the base year. Output and
price data for a five-year period are given.
Refer to the above data. If year 2 is chosen as the base year, then in determining real
GDP, nominal GDP for:
A. years 3, 4, and 5 must be inflated.
B. years 1 and 2 must be deflated.
C. year 2 must be deflated.
D. year 1 must be inflated.
Gross domestic product (GDP) is equal to personal consumption expenditures:
A. plus gross private domestic investment, minus government spending, and plus net
exports.
B. plus gross private domestic investment, plus government spending, and minus net
exports.
C. minus gross private domestic investment, plus government spending, and plus net
exports.
D. plus gross private domestic investment, plus government spending, and plus net
exports.
The natural rate of unemployment:
A. means that the economy will always operate at its natural rate.
B. means that the economy will always realize its potential output.
C. is equal to the total of frictional and structural unemployment.
D. is a fixed unemployment rate that does not change over time.
The demand curve faced by a monopolistically competitive firm:
A. is more elastic than the monopolist’s demand curve.
B. is less elastic than the monopolist’s demand curve.
C. will shift outward as new firms enter the industry.
D. is more elastic than the demand curve faced by the purely competitive firm.
Approximately how many commercial banks are there in the United States as of 2012?
A. 21,000
B. 14,200
C. 10,800
D. 7300
Refer to the above graphs, in which the numbers in parentheses near the AD1, AD2, and
AD3 labels indicate the level of investment spending associated with each curve,
respectively. All numbers are in billions of dollars. The interest rate and the level of
investment spending in the economy are at point D on the investment demand curve. To
achieve the long-run goal of a noninflationary full-employment output Qf in the
economy, the Fed should:
A. decrease aggregate demand by increasing the interest rate from 2 to 4 percent.
B. decrease aggregate demand by increasing the interest rate from 4 to 6 percent.
C. increase aggregate demand by decreasing the interest rate from 4 to 2 percent.
D. increase the level of investment spending from $120 billion to $150 billion.
Which measures the changes in the prices of a “market basket” of some 300 goods and
services purchased by typical urban consumers?
A. The GDP price index.
B. The Consumer Price Index.
C. The Retail Trade survey.
D. The Survey of Manufactures.
Which would be the best item to use for an analogy to describe elastic demand?
A. A roller coaster
B. An Ace bandage for a knee injury
C. Rubber tie-downs to hold items in the back of a truck
D. The production of aluminum in an aluminum plant
The Council of Economic Advisers gives economic advice to the:
A. president.
B. U.S. Senate.
C. U.S. House of Representatives.
D. Federal Reserve System.
With a progressive tax system, as the level of income increases in an economy, the
average tax rate will:
A. decrease.
B. increase.
C. remain the same.
D. decrease, increase, or remain the same.
At an equilibrium level of output in a pure monopoly:
A. P = MC and P = minimum ATC.
B. P = MC and P > minimum ATC.
C. P > MC and P > minimum ATC.
D. P > MC and P = minimum ATC.
The following economy produces two products.
Refer to the above table. A change from possibility C to B means that:
A. 1 unit of steel is given up to get 75 units of wheat.
B. 2 units of steel are given up to get 75 units of wheat.
C. 1 unit of steel is given up to get 15 more units of wheat.
D. 2 units of steel are given up to get 15 more units of wheat.
The demand curve for a product might shift as the result of a change in:
A. consumer tastes.
B. consumer incomes.
C. the prices of related goods.
D. all of these.
When gross private domestic investment exceeds depreciation, it can be concluded that:
A. net investment is positive.
B. net investment is negative.
C. the economy is exporting more than it imports.
D. the economy is importing more than it exports.