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The above diagram implies that whenever a firm's demand curve is downsloping:
A. price discrimination is not possible.
B. monopolists will be more efficient than competitors.
C. the demand and marginal revenue curves will coincide.
D. marginal revenue is less than price.
With a regressive tax system, as the level of income increases in an economy, the
average tax rate will:
A. increase.
B. decrease.
C. remain constant.
D. either increase or decrease.
An economy is producing at the least-cost rate of production when:
A. price and the minimum average cost are equal.
B. marginal cost is greater than average total cost.
C. marginal revenue is greater than price.
D. price and marginal revenue are equal.
When a purely competitive industry is in long-run equilibrium, which statement is true?
A. Average total cost is less than marginal cost.
B. Price and average total cost are equal.
C. Marginal cost is at its maximum level.
D. Marginal revenue is greater than price.
The demand for labor would most likely become more elastic as a result of:
A. a decrease in the elasticity of the demand for the product that the labor produces.
B. an increase in the time for employers to make technological changes or purchase
new equipment.
C. a decrease in the proportion of labor costs to total costs.
D. an increase in the proportion of labor cost to total costs.
Which is necessary to make a trade in a barter economy?
A. Money.
B. Unlimited wants.
C. A medium of exchange.
D. A coincidence of wants.
What form of aid is used for food stamps (SNAP)?
A. Cash
B. Services
C. Vouchers
D. Insurance
Wage differentials occur for all the following reasons except:
A. homogeneous workers.
B. labor market imperfections.
C. noncompeting groups of workers.
D. compensating differences to offset nonmonetary differences in jobs.
Countries A and B produce only rubber bands and paper clips under the production
possibilities schedules shown below:
In country A the opportunity cost of 1 paper clip is:
A. 2 rubber bands
B. 1 rubber band
C. rubber band
D. rubber band
Which is a valid counterargument to use tariffs to protect high wages from cheap
foreign labor?
A. The benefits of such a policy will go to consumers, not workers.
B. The benefits of such a policy will go to businesses, not workers.
C. Wage rates in a nation are largely determined by productivity.
D. The economy may become overheated, thus increasing inflation.
The cyclically adjusted surplus as a percentage of GDP is 1 percent in year 1. This
surplus becomes 2 percent of GDP in year 2. It can be concluded from year 1 to year 2
that:
A. fiscal policy was expansionary.
B. fiscal policy was contractionary.
C. the federal government is decreasing taxes.
D. the federal government is increasing its spending.
A period of decline in total output, income, employment, and trade, lasting six months
or longer, is defined as a:
A. trough.
B. recession.
C. business cycle.
D. secular trend.
Refer to the above table. If demand is represented by columns (3) and (1) and supply is
represented by columns (3) and (4), equilibrium price and quantity will be:
A. $10 and 60 units.
B. $9 and 60 units.
C. $8 and 80 units.
D. $7 and 30 units.
Which product is made by an industry that best illustrates the concept of homogeneous
oligopoly?
A. Home computers
B. Cigarettes
C. Copper
D. Cars
Refer to the above figure. If box D represents the product market and flow (6)
represents consumption expenditures, then box C is:
A. households, flow (7) is revenue, and flow (8) is goods and services.
B. businesses, flow (7) is revenue, and flow (8) is goods and services.
C. households, flow (7) is goods and services, and flow (8) is revenue.
D. businesses, flow (7) is goods and services, and flow (8) is revenue.
Refer to the above graph, which shows four different Lorenz curves (I, II, III, and IV).
What point indicates that 60 percent of the households receive only 40 percent of the
income?
A. a
B. b
C. c
D. d
Refer to the above table. The marginal revenue from the third unit of output is:
A. $40.
B. $50.
C. $120.
D. $160.
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.
A decrease in the number of consumers of product X will:
A. decrease S, decrease P, and decrease Q.
B. increase D, increase P, and increase Q.
C. decrease D, decrease P, and decrease Q.
D. decrease D, decrease P, and increase Q.
Which antitrust act provided that parties could sue for and, if successful, collect triple
damages from monopolistic firms?
A. Wheeler-Lea Act
B. Clayton Act
C. Sherman Act
D. Celler-Kefauver Act
If the dollars held for transactions purposes are, on average, spent four times a year for
final goods and services, then the quantity of money people will wish to hold for
transactions is equal to:
A. 4 percent of nominal GDP.
B. 25 percent of nominal GDP.
C. nominal GDP multiplied times 4.
D. nominal GDP divided by 25.
Compared to pure competition, monopolistic competition:
A. provides greater product differentiation at the cost of some excess capacity.
B. offers less product differentiation but attains equal productive efficiency.
C. provides greater product differentiation and achieves greater productive efficiency.
D. offers less product differentiation and lower productive efficiency.
The strategy of establishing a price that prevents the entry of new firms is called:
A. a price war.
B. limit pricing.
C. price leadership.
D. setting a profit-maximizing price.
OPEC provides an example of:
A. an unwritten, informal understanding.
B. noncollusive oligopoly.
C. an international cartel.
D. a monopolistically competitive industry.
Consider a situation where the U.S. Congress wants to place a special tax on private
airplanes to increase tax revenue. This tax would be most effective in raising new tax
revenues if the price elasticity of:
A. supply is elastic.
B. supply is inelastic.
C. demand is elastic.
D. demand is inelastic.
Refer to the above graph. Assume that the economy is in a recession with a price level
of P2 and output level Q4. The government then adopts an expansionary fiscal policy to
shift the aggregate demand curve. What will be the most likely new equilibrium price
level and output?
A. P2 and Q4
B. P1 and Q1
C. P2 and Q2
D. P1 and Q3
In the short run, the monopolistically competitive firm will experience:
A. an economic profit, and also one in the long run.
B. a normal profit, but in the long run only an economic profit.
C. economic profits or losses, but in the long run only a normal profit.
D. economic profits or losses, but in the long run only an economic profit.
Which is most characteristic of a pure monopoly?
A. There is a dominant firm in a multifirm industry.
B. The firm produces a good or a service for which there are no close substitutes.
C. The firm has considerable control over the quantity of the output produced, but not
over price.
D. Exit from the industry is blocked but entry into the industry is relatively easy.
Refer to the above information. Marginal cost is:
A. .
B. .
C. .
D. .
The following diagram is a flexible exchange market for foreign currency:
Other things equal, a rightward shift of the supply curve would:
A. appreciate the euro.
B. cause a surplus of euros.
C. decrease the equilibrium quantity of euros.
D. appreciate the dollar.
If government set a minimum price of $50 in the above market, a:
A. shortage of 21 units would occur.
B. shortage of 125 units would occur.
C. surplus of 21 units would occur.
D. surplus of 125 units would occur.
The law of demand states that:
A. price and quantity demanded are inversely related.
B. the larger the number of buyers in a market, the lower will be product price.
C. price and quantity demanded are directly related.
D. consumers will buy more of a product at high prices than at low prices.
If a monopolized industry should become purely competitive without any change in
cost conditions:
A. both price and quantity produced will increase.
B. both price and quantity produced will decrease.
C. price will increase and quantity produced will decrease.
D. price will decrease and quantity produced will increase.
