Which product is most likely to be most price elastic?
A. Milk
B. Gasoline
C. Clothing
D. Automobiles
To the economist, total cost includes:
A. explicit and implicit costs, including a normal profit.
B. neither implicit nor explicit costs.
C. implicit, but not explicit, costs.
D. explicit, but not implicit, costs.
Assume that there is no way to prevent someone from using an interstate highway,
regardless of whether or not she helps pay for it. This characteristic is associated with:
A.rival goods.
B.complementary goods.
C.public goods.
D.capital goods.
From an economist’s point of view, costs:
A. consist only of explicit costs.
B. may or may not involve monetary outlays.
C. never reflect monetary outlays.
D. always reflect monetary outlays.
Which condition will encourage competition?
A. Government licensing requirements in order to enter an industry.
B. A small number of buyers and sellers in a market.
C. The freedom of sellers and buyers to enter or exit an industry.
D. The government serving as the only supplier of goods to consumers.
Which line in the above graph would best reflect the slope of the total demand for
money curve?
A. Line 4.
B. Line 3.
C. Line 2.
D. Line 1.
Refer to the above diagram. This firm’s average fixed costs are:
A. not shown.
B. the vertical distance between AVC and MC.
C. the vertical distance between AVC and ATC.
D. equal to the per unit change in MC.
The law of supply indicates that:
A. producers will offer more of a product at high prices than they will at low prices.
B. the product supply curve is downsloping.
C. consumers will purchase less of a good at high prices than they will at low prices.
D. producers will offer more of a product at low prices than they will at high prices.
If an American can purchase 40,000 British pounds for $90,000, the dollar rate of
exchange for the pound is:
A. $1.40.
B. $2.00.
C. $2.25.
D. $6.00.
Refer to the above diagram. The economy is at equilibrium at point B. What fiscal
policy would increase real GDP?
A. Increase aggregate demand from AD2 to AD1 by decreasing taxes.
B. Decrease aggregate demand from AD2 to AD3 by increasing government spending.
C. Decrease aggregate demand from AD2 to AD3 by decreasing government spending.
D. Increase aggregate demand from AD2 to AD3 by decreasing taxes.
The crowding-out effect of expansionary fiscal policy suggests that:
A. tax increases are paid primarily out of saving and therefore are not an effective fiscal
device.
B. increases in government spending financed through borrowing will increase the
interest rate and thereby reduce investment.
C. it is very difficult to have excessive aggregate spending in the U.S. economy.
D. consumer and investment spending always vary inversely.
Refer to the above supply and demand graph. Point A represents the current equilibrium
level of output of this product and point B represents the optimal level of output from
society’s perspective. The amount of the subsidy to be given to producers to correct this
externality problem would be:
A.AB.
B.GH.
C.EF.
D.IJ.
The production possibility curve:
A. is convex to the origin.
B. is based on the law of diminishing returns.
C. is the boundary between attainable and unattainable outputs.
D. reflects the mixed economy found with most economic systems.
Consider two countries that trade with each other. The degree of specialization
according to their respective comparative advantages will be greater if the countries
face:
A. constant costs.
B. high tariffs.
C. low unemployment rates.
D. increasing costs.
The unemployment rate in an economy is 6 percent. The total population of the
economy is 290 million and the size of the civilian labor force is 150 million. The
number of unemployed workers in this economy is:
A. 6 million.
B. 9 million.
C. 12 million.
D. 24 million.
If you owned a small farm, which of the following would be a fixed cost?
A. Harvest labor
B. Hail insurance
C. Fertilizer
D. Seed
The difference between the actual price that a producer receives and the minimum
acceptable price a producer is willing to accept is:
A. consumer surplus.
B. producer surplus.
C. allocative efficiency.
D. productive efficiency.
As the area between the Lorenz curve and diagonal gets smaller, 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.
Refer to the above supply and demand graph. Point A represents the current equilibrium
level of output of this product and point B represents the optimal level of output from
society’s perspective. If government decides to correct this externality with a subsidy to
consumers, then the:
A.demand curve will shift from D2 to D1.
B.supply curve will shift from S1 to S2.
C.demand curve will shift from D1 to D2.
D.supply curve will shift from S2 to S1.
A protective tariff will:
A. increase the sales of foreign exporters.
B. increase the price and sales of domestic producers.
C. increase the welfare of domestic consumers.
D. create an efficiency gain in the domestic economy.
Search and wait unemployment is another way to describe:
A. noncyclical unemployment.
B. cyclical unemployment.
C. frictional unemployment.
D. structural unemployment.
Contractionary fiscal policy is so named because it:
A. involves a contraction of the nation’s money supply.
B. necessarily reduces the size of government.
C. is aimed at reducing aggregate demand and thus achieving price stability.
D. is expressly designed to contract real GDP.
College students living off-campus frequently consume large amounts of boxed
macaroni and cheese. When they finish school and start their careers, their consumption
of this good frequently declines. This suggests that boxed macaroni and cheese is:
A. an inferior good.
B. a normal good.
C. a complementary good.
D. a substitute good.
Answer the next question on the basis of the following production possibilities data for
two countries, Alpha and Beta, which have populations of equal size.
The domestic opportunity cost of:
A. producing a ton of chips in Alpha is 1/5 of a ton of fish.
B. producing a ton of chips in Beta is 6 tons of fish.
C. catching a ton of fish in Alpha is 5 tons of chips.
D. catching a ton of fish in Beta is 6 tons of chips.
Checkable deposits are:
A. near-money.
B. token money.
C. legal tender.
D. a medium of exchange.
If m equals the maximum number of new dollars that can be created for a single dollar
of excess reserves and R equals the required reserve ratio, then for the banking system:
A. m = R – 1.
B. R = m/1.
C. R = m – 1.
D. m = 1/R.
If a firm increases all of its inputs by 10 percent and its output increases by 15 percent,
then:
A. it is encountering diseconomies of scale.
B. it is encountering economies of scale.
C. the law of diminishing returns is taking hold.
D. the firm’s long-run ATC curve will be rising.
The location of the supply curve of a product depends on:
A. the technology used to produce it.
B. the prices of resources used in its production.
C. the number of sellers in the market.
D. all of these.
Crowding out is the notion that:
A. since tax revenues vary directly with GDP, a rise in the level of GDP will increase
the budget surplus and limit expansion.
B. deficit financing will increase the demand for money, increase the interest rate, and
reduce the level of investment spending in the economy.
C. the cyclically adjusted budget is the best indicator of whether a budget deficit crowds
out investment.
D. the actual budget is the best indicator of whether a budget deficit crowds out saving.
Private goods are characterized by:
A.rivalry and excludability.
B.rivalry and nonexcludability.
C.nonrivalry and excludability.
D.nonrivalry and nonexcludability.