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Resources are efficiently allocated when production occurs at that output at which:
A. P equals MR.
B. P equals AVC.
C. P exceeds MR.
D. P equals MC.
Refer to the above graph. Under purely competitive conditions in the sale of output and
hiring of labor services, the wage rate will be:
A. W1 and Q1 workers will be hired.
B. W2 and Q2 workers will be hired.
C. W2 and Q1 workers will be hired.
D. W3 and Q1 workers will be hired.
Refer to the above graph. If the interest rate is 1 percent, the supply of money would be:
A. $100 billion.
B. $150 billion.
C. $200 billion.
D. $250 billion.
The economy has an annual inflation rate of 3.5 percent. It will take approximately how
many years for the price level to double?
A. 10 years
B. 20 years
C. 25 years
D. 30 years
The most effective form of business organization for raising money to finance the
expansion of its facilities and capabilities is a:
A. partnership.
B. corporation.
C. conglomerate.
D. sole proprietorship.
Which would be most characteristic of oligopoly?
A. Easy entry into the industry.
B. Many large producers.
C. Product standardization.
D. Mutual interdependence.
Suppose that real domestic output in an economy is 300 units, the quantity of inputs is
50, and the price of each input is $9. If the price of each input decreased from $9 to $7,
productivity would:
A. decrease and aggregate supply would decrease.
B. increase and aggregate supply would increase.
C. remain unchanged and aggregate supply would increase.
D. remain unchanged and aggregate supply would decrease.
An important routine function of the Federal Reserve Bank is to:
A. supervise the liquidation of the assets of bankrupt state banks.
B. help large commercial banks develop correspondent relationships with smaller
commercial banks.
C. advise commercial banks as to the most profitable ways of reinvesting profits.
D. provide facilities by which commercial banks and thrift institutions may collect
checks.
Suppose that real domestic output in an economy is 300 units, the quantity of inputs is
50, and the price of each input is $9. If productivity increased such that 400 units are
now produced with the quantity of inputs still equal to 50, then per-unit production
costs would:
A. increase and aggregate demand would decrease.
B. decrease and aggregate demand would increase.
C. decrease and aggregate supply would decrease.
D. decrease and aggregate supply would increase.
Money eliminates the need for a coincidence of wants primarily through its use as a:
A. unit of account.
B. medium of exchange.
C. store of value.
D. standard of confidence.
Which is an illustration of a microeconomic question?
A. What is the current national rate of unemployment?
B. Is the economy experiencing a declining rate of inflation?
C. Will a new type of television set increase the number of buyers?
D. Is the production of goods and services in the economy greater this year than last
year?
In the Microsoft antitrust case, a federal court ruled to break up the company on the
basis of the:
A. firm's market behavior.
B. firm's large market share.
C. size of the corporation.
D. firm's effect on the stock market.
What is a positive effect of advertising?
A. It reduces economic efficiency in the economy.
B. It promotes economic concentration in industry.
C. It is designed to persuade rather than inform consumers.
D. It provides information that reduces search costs.
Which definition(s) of the money supply include(s) only items that are directly and
immediately usable as a medium of exchange?
A. M1
B. M2
C. Neither M1 nor M2
D. M1 and M2
The Soviet Union economy of the 1980s would best be classified as:
A. a market system.
B. pure capitalism.
C. laissez-faire capitalism.
D. a command system.
Suppose a few powerful firms control all production in an industry and face identical
demand and cost schedules. If they successfully collude and maximize joint profits,
then price, output, and profit levels in the industry will be the same as those in:
A. pure monopoly.
B. regulated monopoly.
C. monopolistic competition.
D. an oligopoly with a kinked-demand curve.
Refer to the above data. What is the elasticity of demand between the prices of $3 and
$2?
A. 0.22
B. 0.40
C. 0.56
D. 1.22
Private car alarm systems with red blinking lights would tend to:
A.decrease the likelihood of car thefts to all car owners.
B.increase the likelihood of car thefts to all car owners.
C.redistribute the likelihood of a car theft from those car owners with such a device to
those car owners without such a device.
D.offer a positive externality to those car owners who did not pay for the device.
If an oligopolist's demand curve has a "kink" in it, then:
A. the oligopolist's marginal cost curve has a break in it.
B. the oligopolist need not fear entry into the industry by new firms.
C. the oligopolist's competitors will not react to its price changes, either up or down.
D. over some interval, a change in the oligopolist's marginal cost will not cause a
change in the oligopolist's profit-maximizing price.
Refer to the above table. In relation to column (3), a change from column (2) to column
(1) would indicate a(n):
A. increase in demand.
B. decrease in demand.
C. increase in supply.
D. decrease in supply.
Refer to the above data. The total variable cost of producing 5 units is:
A. $61.
B. $48.
C. $37.
D. $24.
Fixed cost is $24, the cost of zero units of output. At 5 units of output, total costs are
$61, so variable costs are $37 (i.e., 61 - 24).
The greater the degree of inequality in the size distribution of income, the more bowed
will be the Lorenz curve toward the:
A. upper left-hand corner.
B. upper right-hand corner.
C. lower right-hand corner.
D. lower left-hand corner.
The primary goal of economic activities is to:
A. expand the production of goods and services.
B. equalize the distribution of consumer income and wealth.
C. make the most efficient use of scarce productive resources.
D. reallocate resources from consumption to production in the economy.
An example of a public assistance program, as distinct from a social insurance program,
would be:
A. Medicare.
B. Social Security.
C. unemployment compensation.
D. Supplemental Security Income.
The marginal cost curve intersects the average total cost curve in monopolistic
competition:
A. at the market price.
B. at the minimum average total cost.
C. to the left of the minimum average total cost.
D. to the right of the minimum average total cost.
Refer to the above table. The size of the M2 money supply is:
A. $2054 billion.
B. $2696 billion.
C. $5899 billion.
D. $6792 billion.
A fall in the price of capital goods will shift the aggregate:
A. demand curve leftward.
B. demand curve rightward.
C. supply curve rightward.
D. supply curve leftward.
Productive efficiency refers to:
A. cost minimization, where P = minimum ATC.
B. production, where P = MC.
C. maximizing profits by producing where MR = MC.
D. setting TR = TC.
If product prices were stated in terms of gallons of milk, then milk would be
functioning primarily as:
A. fiat money.
B. legal tender.
C. a store of value.
D. a unit of account.
Which of the following is a short-run adjustment?
A. A local bakery hires two additional bakers.
B. Six new firms enter the plastics industry.
C. The number of farms in the United States declines by 5 percent.
D. BMW constructs a new assembly plant in South Carolina.
