The nondiscriminating monopolist’s demand curve:
A. is less elastic than a purely competitive firm’s demand curve.
B. is perfectly elastic.
C. coincides with its marginal revenue curve.
D. is perfectly inelastic.
Which of the following will lead to an increase in aggregate demand?
A. A decrease in the price level.
B. An increase in the price level.
C. An increase in national incomes abroad.
D. An appreciation in the value of the U.S. dollar.
If the reserve ratio is 100 percent, the value of the monetary multiplier is:
A. 0.
B. 1.
C. 10.
D. 100.
One major barrier to entry under pure monopoly arises from:
A. the availability of close substitutes for a product.
B. ownership of essential resources.
C. the price taking ability of the firm.
D. diseconomies of scale.
A decrease in business taxes will most likely result in a(n):
A. decrease in aggregate demand and aggregate supply.
B. increase in aggregate demand and aggregate supply.
C. decrease in aggregate demand and increase in aggregate supply.
D. increase in aggregate demand and decrease in aggregate supply.
Which question is an illustration of a macroeconomic question?
A. Is a business unresponsive to the demands of consumers?
B. Is a consumer boycott an effective means of reducing product prices?
C. Is the level of employment in the economy sensitive to the level of consumer
spending?
D. Are oil companies engaging in a rip-off of consumers by charging exorbitantly high
prices for gasoline?
Which of the following is most likely to be a variable cost?
A. Fuel and power payments
B. Interest on business loans
C. Rental payments on IBM equipment
D. Real estate taxes
If a 10 percent increase in the price of product X causes the demand for product Y to
decrease by 15 percent, then:
A. X and Y are substitutes.
B. X and Y are complements.
C. X and Y are independent goods.
D. the demand for X is elastic.
Which of the following will not cause the demand for product K to change?
A. A change in the price of close-substitute product J
B. An increase in consumer incomes
C. A change in the price of K
D. A change in consumer tastes
The average cost curve of labor facing the monopsonist:
A. is the supply curve of labor.
B. lies below its supply curve.
C. lies above its supply curve.
D. is the marginal cost curve of labor.
In pure competition, the average revenue of a firm always equals:
A. marginal cost.
B. average total cost.
C. marginal revenue.
D. total revenue.
The strengths of monetary policy compared to fiscal policy are generally thought to
include all of the following except greater:
A. speed.
B. flexibility.
C. impact on taxation.
D. political acceptance.
Refer to the above diagram. A price of $60 in this market will result in:
A. equilibrium.
B. a shortage of 50 units.
C. a surplus of 50 units.
D. a surplus of 100 units.
Refer to the above table. It shows that:
A. income inequality increased after taxes and transfers are taken into account.
B. income inequality decreased after taxes and transfers are taken into account.
C. income received by the highest 20 percent of households increased after taxes and
transfers.
D. income received by the lowest 20 percent of households decreased after taxes and
transfers.
Economies and diseconomies of scale explain:
A. the profit-maximizing level of production.
B. why the firm’s long-run average total cost curve is U-shaped.
C. why the firm’s short-run marginal cost curve cuts the short-run average variable cost
curve at its minimum point.
D. the distinction between fixed and variable costs.
An increase in the price of aluminum increases the cost of producing aluminum
products and reduces the demand for aluminum workers. This decrease in labor demand
would be caused by which change in a determinant of labor demand?
A. A fall in labor productivity.
B. An increase in product demand.
C. A decrease in product demand.
D. An increase in the price of another resource.
A firm sells a product in a purely competitive market. The marginal cost of the product
at the current output of 1000 units is $2.50. The minimum possible average variable
cost is $2.00. The market price of the product is $2.50. To maximize profit or minimize
losses, the firm should:
A. continue producing 1000 units.
B. produce less than 1000 units.
C. produce more than 1000 units.
D. shut down.
Suppose the economy is at full employment with a high inflation rate. Which
combination of government policies is most likely to reduce the inflation rate?
A. Buy government securities in the open market and increase taxes.
B. Buy government securities in the open market and decrease taxes.
C. Sell government securities in the open market and increase government spending.
D. Sell government securities in the open market and decrease government spending.
Refer to the above graph of the representative firm in monopolistic competition. Point c
is the intersection of the:
A. marginal cost and marginal revenue curves.
B. marginal cost and average total cost curves.
C. marginal cost and demand curves.
D. average total cost and demand curves.
An industry experiencing increasing returns to scale and fixed factor prices will have a
long-run supply curve that is:
A. vertical.
B. horizontal.
C. upward sloping.
D. downward sloping.
Refer to the above table. The size of the M1 money supply is:
A. $1940.
B. $2080.
C. $2220.
D. $2730.
What are the payoffs in the typical duopoly game?
A. Increased economies of scale.
B. Increased barriers to entry.
C. Product differentiation.
D. Profits.
Refer to the above graph. If the interest rate falls from 4 percent to 3 percent, the supply
of money would have:
A. increased by $50 billion.
B. increased by $100 billion.
C. increased by $150 billion.
D. decreased by $50 billion.
An example of a public transfer payment is a(n):
A. airline pass giving price discounts to senior citizens.
B. monthly allowance from home for a college student.
C. gift of land from a wealthy relative.
D. veteran’s benefit payment.
Suppose there are two economies, Alpha and Beta, which have the same production
possibilities curves and are on the same point on each curve. If Beta then devotes more
resources to investment goods than consumer goods when compared to Alpha, then in
the future:
A. Alpha will experience greater economic growth than Beta.
B. Beta will experience greater economic growth than Alpha.
C. Alpha will not be able to achieve full employment or productive efficiency.
D. Beta will not be able to achieve full employment or productive efficiency
The production possibilities curve bows outward from the origin because:
A. opportunity costs decrease as the production of a good increases.
B. opportunity costs increase as the production of a good increases.
C. more production of one good results in more production of the other good.
D. resources are not of uniform quality.
In the following question you are asked to determine, other things equal, the effects of a
given change in a determinant of demand or supply for product X upon (1) the demand
(D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the equilibrium
quantity (Q) of X.
An increase in the tastes and preferences for X will:
A. increase S, decrease P, and increase Q.
B. decrease S, decrease P, and decrease Q.
C. increase D, increase P, and increase Q.
D. decrease D, decrease P, and decrease Q.
Refer to the above diagram. The highest price that buyers will be willing and able to
pay for 100 units of this product is:
A. $20.
B. $30.
C. $40.
D. $60.
If a factor of production has many close substitutes, we would expect that its price
elasticity of demand would be:
A. unity.
B. zero.
C. greater than one.
D. less than one but greater than zero.
An increase in nominal GDP will:
A. increase the transactions demand and total demand for money.
B. decrease the transactions demand and total demand for money.
C. increase the transactions demand for money but decrease the total demand for
money.
D. decrease the transactions demand for money but increase the total demand for
money.
The use of money for exchange:
A. increases the use of barter.
B. reduces consumer sovereignty.
C. increases the importance of a coincidence of wants.
D. encourages more specialization in production.