Price elasticity of supply decreases the longer the time period.
When the public debt is held by foreigners, it is not a real burden on real domestic
output.
Depreciation of the dollar relative to foreign currencies will tend to increase net exports
and aggregate demand.
The long-run supply curve for a competitive, decreasing-cost industry is upsloping.
Critics contend that the crowding-out effect will be minimal when the economy is in a
recession.
The major difference between a tariff and a quota on an imported product is that a tariff
produces revenue for the government.
Both collusive and noncollusive oligopoly models suggest that price changes will be
relatively infrequent in these types of industries.
Property rights have a positive effect in a market economy because they encourage
owners to maintain their property.
When there is an increase in aggregate demand, there will be an increase in the price
level but not in the level of output or employment.
The strength of labor demand and the rightward position of the labor demand curve
differ greatly among occupations due to differences in how much various occupational
groups contribute to their firm’s revenue.
To adjust nominal GDP for a given year to obtain real GDP, it is necessary to divide
nominal GDP by the price index (expressed in hundredths) for that year.
Public assistance programs provide benefits for those who are unable to earn income
because of permanent disabilities, or have no or very low income and also have
dependent children.
If the price level rises from 125 to 150 from one year to the next, then the rate of
inflation that year is 15 percent.
An increase in quantity supplied might be caused by an increase in production costs.
Government purchases are the largest component of aggregate expenditures in the
United States.
An increase in taxes and a decrease in government spending would be characteristic of
a contractionary fiscal policy.
Patents and licenses are barriers to entry.
If the marginal benefits of the output from resources devoted to the production of a
product are greater than the marginal costs, then there has been an overallocation of
resources to the production of that product.
In an economy, the value of inventories rose from $275 billion in 2009 to $300 billion
in 2010. In calculating total investment for 2010, national income accountants would
increase it by $25 billion.
The aggregate demand curve shows that when the price level rises, the quantity of real
GDP demanded decreases.
Personal consumption expenditures only include expenditures for durable and
nondurable goods and services.
Interest payments as a percent of GDP reflect the level of taxation (average tax rate)
required to service the public debt.
The principal-agent problem arises in corporations because the interests of the owners
or stockholders are aligned with the chief executives who run the corporations for the
owners.
A price ceiling set by government will increase the equilibrium price and quantity in a
market.
Unlike sole proprietorship and partnerships, the corporation has a life independent of its
owners and officers.
A division of labor enhances society’s output by permitting people to take advantage of
existing differences in their abilities and skills.
If the quantity demanded for good A increases from 40 to 60 when price decreases from
$9 to $7, price elasticity of demand in this price range is 1.6.
In the long run, typical firms that are monopolistically competitive earn economic
profits.
In short-run equilibrium, a competitive firm cannot earn economic profits.
The U.S. full-employment unemployment rate is currently thought by most economists
to be 8 percent.
If the price of a product increases from $10 to $12 and the quantity demanded decreases
from 40 to 30, then according to the total-revenue test, the product is price elastic in this
price range.
The Federal Open Market Committee (FOMC) regulates markets and enforces antitrust
laws to keep markets open and competitive.
In the circular flow model, there is a money flow of economic resources and finished
goods and services and a real flow of income and consumption expenditures.
In the price range where demand is elastic, an increase in price will result in a gain in
total revenue.
In the market system, prices tend to guide resources from less important to more
important uses.
Autos and chemicals are in units of one million
Refer to the above tables. Assume that prior to specialization and trade Germany and
the United States both choose production possibility C. Now if each specializes
according to its comparative advantage, the resulting total gains from specialization and
trade will be:
A. 8 units of autos.
B. 6 units of autos.
C. 6 units of autos and 8 units of chemicals.
D. 8 units of autos and 6 units of chemicals.
The market demand curve for a public good:
A.is derived in the same manner as demand curves for private goods.
B.is derived by horizontally summing all individual demand curves.
C.shows the total value that all individuals place on each unit of the good.
D.shows the total number of units that would be produced by the private sector at each
possible price.
What will the elasticity of resource demand be if unit wages rise by 8 percent and the
number of employed workers falls by 5 percent?
A. 0.63.
B. 1.60.
C. 2.90.
D. 4.00.
Bank net worth is the:
A. measure of the profitability of the bank.
B. value of the bank’s vault cash and loan portfolio.
C. claims of the owners of the bank against bank assets.
D. claims of the nonowners of the bank against bank assets.
Fixed cost is:
A. the cost of producing one more unit of capital, say, machinery.
B. any cost that does not change when the firm changes its output.
C. average cost multiplied by the firm’s output.
D. usually zero in the short run.
An increase in aggregate demand would be most likely caused by a decrease in:
A. the wealth of consumers.
B. consumer confidence.
C. expected future prices.
D. the tax rates on household income.
The knowledge and skills that make workers productive are referred to by economists
as:
A. human capital.
B. increasing returns.
C. resource allocation.
D. simultaneous consumption.
Economists distinguish between the short run and the long run by noting that:
A. no inputs can be varied in the long run.
B. some inputs cannot be varied in the short run.
C. input prices are subject to fluctuations in the short run.
D. output prices are subject to fluctuations in the long run.
Assume that the economy is in a recession and there is a budget deficit. A strict
balanced-budget amendment that would require the federal government to balance its
budget during a recession would be:
A. expansionary and worsen the effects of the recession.
B. contractionary and worsen the effects of the recession.
C. contractionary and counter the effects of the recession.
D. expansionary and counter the effects of the recession.
Diseconomies of scale mean that:
A. a firm’s long-run average total cost curve is declining.
B. a firm’s long-run average total cost curve is rising.
C. the advantages of specialization are being more fully realized.
D. a given increase in inputs results in a more-than-proportionate increase in output.
A college graduate using the summer following graduation to search for a job would
best be classified as:
A. not officially a member of the labor force.
B. a part of structural unemployment.
C. a part of cyclical unemployment.
D. a part of frictional unemployment.
Refer to the above diagram. A decrease in quantity demanded is depicted by a:
A. move from point x to point y.
B. shift from D1 to D2.
C. shift from D2 to D1.
D. move from point y to point x.
Using the data in the above table, what percentage of households made less than
$35,000?
A. 5 percent
B. 12 percent
C. 35 percent
D. 51 percent
Which case below best represents a case of price discrimination?
A. An insurance company offers discounts to safe drivers.
B. A major airline sells tickets to senior citizens at lower prices than to other
passengers.
C. A professional baseball team pays two players with identical batting averages
different salaries.
D. A utility company charges less for electricity used during “off-peak” hours, when it
does not have to operate its less-efficient generating plants.
Refer to the above graph. The level of output at which this firm will produce is:
A. 0A.
B. 0B.
C. 0C.
D. 0K.
The intersection of the aggregate demand and aggregate supply curves determines the:
A. shape of the aggregate supply curve.
B. shape of the aggregate demand curve.
C. per-unit cost of production in the economy.
D. equilibrium level of real domestic output and prices.
If the economy is in a recession and prices are relatively stable, then the discretionary
fiscal policy or policies that would most likely be recommended to correct this
macroeconomic problem would be:
A. increased government spending or increased taxation, or a combination of the two
actions.
B. increased government spending or decreased taxation, or a combination of the two
actions.
C. increased government spending or increased taxation, but not a combination of the
two actions.
D. decreased government spending or decreased taxation, or a combination of the two
actions.
One defining characteristic of pure monopoly is that:
A. the monopolist is a price taker.
B. the monopolist uses advertising.
C. the monopolist produces a product with no close substitutes.
D. there is relatively easy entry into the industry, but exit is difficult.
A $70 price tag on a sweater in a department store window is an example of money
functioning as a:
A. unit of account.
B. standard of deferred payments.
C. store of value.
D. medium of exchange.
Price floors and price ceilings:
A. both cause shortages.
B. both cause surpluses.
C. cause the supply and demand curves to shift until equilibrium is established.
D. interfere with the rationing function of prices.
The Lorenz curve is helpful in visualizing the:
A. trade-off between unemployment and inflation.
B. relationship between the prices received and paid by farmers.
C. degree of inequality in the distribution of income.
D. relationship between education and income.
An expenditure on education and training that improves the skills and therefore the
productivity of workers is:
A. an efficiency wage.
B. a compensating difference.
C. a pay-for-performance plan.
D. an investment in human capital.
Given the table below, what is the short-run profit-maximizing level of output for the
firm?
A. 2 units
B. 3 units
C. 4 units
D. 5 units
A market:
A. exhibits upsloping demand and downsloping supply curves.
B. entails the exchange of goods but not services.
C. is an institution or mechanism that brings together buyers and sellers.
D. always requires face-to-face contact between buyer and seller.
Which statement concerning monopolistic competition is false?
A. In the long run P = AC > MC.
B. Firms may experience losses in the short run.
C. Firms differentiate their products, but the products are relatively substitutable.
D. Firms may experience positive economic profits in the long run since barriers to
entry are significant.
Assume a purely competitive increasing-cost industry is initially in long-run
equilibrium but then there is a decrease in consumer demand. After all economic
adjustments to this new situation have taken place, product price will be:
A. higher, but total output will be lower.
B. lower, and total output will be lower.
C. higher, and total output will be higher.
D. lower, but total output will be higher.
Which is an example of an automatic stabilizer? As real GDP decreases, income tax
revenues:
A. increase and transfer payments decrease.
B. decrease and transfer payments increase.
C. and transfer payments decrease.
D. and transfer payments increase.
Refer to the above graph. If the interest rate rises from 2 percent to 3 percent, the supply
of money would have:
A. decreased by $50 billion.
B. decreased by $100 billion.
C. decreased by $150 billion.
D. increased by $50 billion.
Refer to the above table. In relation to column (3), a change from column (5) to column
(4) would indicate a(n):
A. increase in demand.
B. decrease in demand.
C. increase in supply.
D. decrease in supply.
In the kinked-demand model of noncollusive oligopoly, each firm thinks the demand
curve below the going price is:
A. more elastic than the demand curve above the going price.
B. less elastic than the demand curve above the going price.
C. more elastic than the marginal revenue curve above the going price.
D. less elastic than the marginal revenue curve above the going price.
Which would be considered part of wealth?
A. Wages and salaries
B. Rental payments
C. Profits from a corporation
D. Corporate stock holdings
As the economy declines, the collection of personal income tax revenues automatically
falls. This relationship best describes how the progressive income tax system:
A. increases crowding out in the economy.
B. decreases real interest rates in the economy.
C. offsets the timing problem for fiscal policy.
D. provides built-in stability for the economy.
Based on the graph above, what is the difference between the purely competitive
equilibrium level of output and the pure monopolist equilibrium level of output?
A. 5
B. 20
C. 70
D. 90
Which product is a leading export of the United States?
A. Steel
B. Clothes
C. Chemicals
D. Petroleum
The process in which workers do specialized tasks to make a product is referred to as:
A. a coincidence of wants.
B. roundabout production.
C. freedom of choice.
D. division of labor.