The long-run supply curve for a competitive, decreasing-cost industry is downward
sloping.
The unemployment rate for managerial and professional workers tends to be high.
The selling of stock is debt financing for a corporation.
If the prices of imported resources increase, then aggregate supply will decrease.
In an economy, the value of inventories fell by $50 billion from year 1 to year 2. In
calculating total investment for year 2, national income accountants would increase it
by $50 billion.
The price of gold is volatile because the supply is highly elastic, so changes in demand
have a large effect on price.
Unanticipated inflation benefits debtors at the expense of creditors.
Numerous historical examples suggest that free trade promotes economic growth, and
that trade protectionism does not.
If the government presets a price that turns out to be above the actual equilibrium price,
a surplus will develop in the market.
Government purchases include expenditures for publicly owned capital such as schools
and highways that have long lifetimes.
The business cycle is so named because upswings and downswings in business activity
are equal in terms of duration and intensity.
If a nation has a balance of payments deficit and exchange rates are flexible, the price
of that nation’s currency in the foreign exchange markets will rise.
Supply refers to the amount of a product that a producer will offer in the market at some
particular price.
If a coin is token money, its face value is greater than its intrinsic value.
The supply of antiques is highly inelastic so increases in demand have a large effect on
increases in price.
If the reserve requirement is 10 percent, the money multiplier will be 10.
If demand increases and supply simultaneously decreases, equilibrium price will rise.
The operation of the “invisible hand” means the pursuit of private interests promotes
social interests in pure competition.
The Bureau of Census data on income distribution in the United States take into
account trends in lifetime income.
One general policy option to deal with a monopoly that obtains its position through
anticompetitive actions, exhibits economic inefficiency, and is long lasting is to break
up the firm.
The demand curve faced by a monopolistically competitive firm is more elastic than the
monopolist’s demand curve.
If a purely competitive firm is producing a level of output greater than its
profit-maximizing output, then marginal revenue is greater than marginal cost.
Assume that capital and labor are substitutes in production. The output effect of an
increase in the price of capital decreases the demand for labor.
Because in any period of time and in any region the quantity of pollutants that can be
absorbed by nature is fixed, the supply of pollutant rights will be perfectly elastic.
An increase in net exports reduces aggregate demand.
The supply of money increases when the public buys government securities from
commercial banks.
People who work part time but desire to work full time are considered to be officially
unemployed.
Comparative advantage can result from different climates, natural resource
endowments, and capital stocks in various countries.
In 2009, the United States provides about 8.5 percent of the world’s exports.
Import quotas produce the same amount of revenue for government as protective tariffs.
A price-discriminating monopolist will set a higher price when demand is more elastic
and a lower price when demand is less elastic.
If market demand increases and market supply decreases, the change in equilibrium
price is unpredictable without first knowing the exact magnitudes of the demand and
supply changes.
If a monopolistically competitive firm’s optimal level of output occurs where P < AVC,
it will shut down.
The total quantity of money demanded is determined by:
A. subtracting the asset demand for money from the transactions demand for money.
B. adding the transactions demand for money to the asset demand for money.
C. subtracting the transactions demand for money from nominal GDP.
D. adding the asset demand for money to nominal GDP.
Refer to the graphs above. For which graph is the supply perfectly inelastic?
A. Graph A
B. Graph B
C. Graph C
D. Graph D
Which statement about oligopoly is false?
A. Oligopolistic firms recognize their interdependence.
B. Prices in oligopoly are predicted to fluctuate widely and frequently.
C. A few firms play an important role in the sale of an identical or differentiated
product.
D. There is no single predicted pattern of action and reaction for oligopolists because
one firm’s behavior is a function of what its rivals do.
Which of the following is most likely to be an implicit cost for Company X?
A. Depreciation charges on company-owned equipment
B. Rental payments on IBM equipment
C. Payments for raw materials purchased from Company Y
D. Transportation costs paid to a nearby trucking firm
Among competing issues, the most important concern of economics is with the:
A. degree of competition in stock and bond markets in the economy.
B. efficient use of limited productive resources to satisfy economic wants.
C. issue of equality in the distribution of income and wealth among households.
D. budget deficits in the domestic economy and trade deficits in the international
economy.
Refer to the above graph. Which of the lines in the above diagram represent(s) a
progressive tax?
A. Both A and B
B. D only
C. C only
D. B only
The ability of Intel to spread product development costs over a larger number of units
of output arises from:
A. economies of scale.
B. diseconomies of scale.
C. minimum efficient scale.
D. constant returns to scale.
An auto rental company lowers the price of its rentals to increase its market share. The
price cut increases quantity demanded, but total revenue decreases. This result suggests
that over this price range, the demand for the auto rentals is:
A. elastic.
B. inelastic.
C. unit elastic.
D. perfectly elastic.
Refer to the above figure. If box A represents businesses and box B represents the
resource market in this circular flow model, then the real flow of goods, services, and
economic resources would be represented by flows:
A. (1), (3), (6), and (8).
B. (7), (5), (4), and (2).
C. (1), (2), (3), and (4).
D. (5), (6), (7), and (8).
The following data about a hypothetical economy are in billions of dollars.
Refer to the above data. GDP in this economy is:
A. $6080 billion.
B. $6230 billion.
C. $6380 billion.
D. $6400 billion.
The following are national income account data for a hypothetical economy in billions
of dollars: gross private domestic investment ($320), imports ($35), exports ($22),
personal consumption expenditures ($2460), and government purchases ($470). What is
GDP in this economy?
A. $3250 billion.
B. $3263 billion.
C. $3237 billion.
D. $3290 billion.
Refer to the above graph. Demand is price-elastic between points:
A. A and B.
B. D and E.
C. F and G.
D. G and H.
Assume a firm closes down in the short run and produces no output. Under these
conditions:
A. TVC is positive, but TFC and TC are zero.
B. TFC is positive, but TVC and TC are zero.
C. TFC and TC are positive, but TVC is zero.
D. TFC, TVC, and TC will all be positive.
A college graduate who works at a firm is also working part-time on a master’s degree
in business and expects to be paid a higher wage after earning the degree. The basic
reason for this wage differential is:
A. efficiency wages.
B. compensating differences.
C. investment in human capital.
D. nonmonetary aspects of work.
There will be a surplus of a product when:
A. price is below the equilibrium level.
B. the supply curve is downward sloping and the demand curve is upward sloping.
C. the demand and supply curves fail to intersect.
D. consumers want to buy less than producers offer for sale.
Refer to the above graph. This economy is at equilibrium:
A. at point a.
B. at point b.
C. at price level P2 and output Q2.
D. at price level P1 and output Q1.
When a consumer wants to compare the price of one product with another, money is
primarily functioning as a:
A. store of value.
B. unit of account.
C. checkable deposit.
D. medium of exchange.
Other things equal, which of the following might shift the demand curve for gasoline to
the left?
A. The discovery of vast new tar sands oil reserves in Canada
B. The development of a low-cost electric automobile
C. An increase in the price of train and air transportation
D. A large decline in the price of automobiles
A Lorenz curve shows:
A. the tax and transfer trade-off.
B. how many households are living in poverty.
C. perfect income equality.
D. the distribution of income.
Refer to the above supply and demand graph for a public good. Point c on the graph
shows where the:
A.total benefit equals the total cost of the public good.
B.marginal benefit equals the marginal cost of the public good.
C.average benefit equals the average cost of the public good.
D.total benefit equals the marginal cost of the public good.
Refer to the graph above. If the price decreases from P3 to P2, then the loss in total
revenue is areas:
A. B + E and the gain in total revenue is areas H + I.
B. H + I and the gain in total revenue is areas A + B + C.
C. E + F + G and the gain in total revenue is areas H + I + J.
D. A + B + C + D and the gain in total revenue is areas E + F + G.
In the above graph, unemployment created by the minimum wage is:
A. B – A.
B. B – 0.
C. B – E.
D. 0.
Net exports is a positive number when:
A. gross private domestic investment is greater than depreciation.
B. depreciation is greater than gross private domestic investment.
C. a nation’s exports of goods and services exceed its imports.
D. a nation’s imports of goods and services exceed its exports.
Trade between individuals and between nations leads to:
A. greater self-sufficiency.
B. higher product prices.
C. lower living standards.
D. increased specialization.
For most producing firms:
A. marginal cost rises as output is carried to a certain level, and then begins to decline.
B. total costs rise as output is carried to a certain level, and then begin to decline.
C. average total costs decline as output is carried to a certain level, and then begin to
rise.
D. average total costs rise as output is carried to a certain level, and then begin to
decline.
On the above graph, if the oligopolist’s MC curve shifts from MC1 to MC2, the firm
will charge:
A. a higher price and total revenue will increase.
B. the same price and sell more output; total revenue will increase.
C. the same price and sell the same amount of output; total revenue will remain the
same.
D. a higher price and sell less output; it can’t be determined whether total revenue will
increase.
Assume that an economy has 50 workers, each of whom works 3000 hours per year. If
labor productivity is $8, total output for this economy will be:
A. $150,000.
B. $750,000.
C. $1,000,000.
D. $1,200,000.
The upward slope of the supply curve reflects the:
A. principle of specialization in production.
B. law of supply.
C. fact that price and quantity supplied are inversely related.
D. law of diminishing marginal utility.
Which would result in a decrease in the elasticity of demand for a particular resource?
A. A decrease in the rate at which the marginal product of that resource declines.
B. An increase in the elasticity of demand for the product that the resource helps to
produce.
C. A decrease in the percentage of the firm’s total costs accounted for by the resource.
D. An increase in the substitutability of other resources for the particular resource.
An industrial union:
A. is most concerned with decreasing the supply of workers in an industry.
B. organizes workers with similar skills or jobs in an industry.
C. organizes skilled and unskilled workers in an industry.
D. is most effective in a purely competitive industry.