Refer to the above payoff matrix. If both firms operate independently and do not
collude, the most likely profit is:
A. $175 million for firm A and $175 million for firm B.
B. $250 million for firm A and $250 million for firm B.
C. $200 million for firm A and $325 million for firm B.
D. $325 million for firm A and $200 million for firm B.
Refer to the above graph, in which Dt is the transactions demand for money, Dm is the
total demand for money, and Sm is the supply of money. The transactions demand for
money in this money market is:
A. $125.
B. $175.
C. $250.
D. $325.
Under which market model are the conditions of entry the most difficult?
A. Monopolistic competition
B. Pure competition
C. Pure monopoly
D. Oligopoly
Which is an example of a negative externality?
A.An increase in the value of land you own when a nearby development is completed
B.The costs paid by a company to build an automated factory
C.Decreased property values in a neighborhood where several houses are burglarized
D.The higher price you pay when you buy a heavily advertised product
Which would be included in the definition of the money supply? Currency and
checkable deposits owned by:
A. the Federal Reserve Banks.
B. the U.S. Treasury.
C. commercial banks.
D. the public.
Inflation caused by an increase in aggregate spending is referred to as:
A. cost-push inflation.
B. demand-push inflation.
C. demand-pull inflation.
D. hyperinflation.
How is the economic perspective reflected in lines for fast food?
A. Customers select the shortest line because they have perfect information.
B. Customers select the shortest line because they believe it will reduce their time cost
of obtaining food.
C. Lines will typically be of unequal length because of the inefficiencies in counter
service.
D. The set of food choices is often too complex for customers and thus creates long
lines.
Suppose the price elasticity of supply for crude oil is 2.5. How much would price have
to rise to increase production by 20 percent?
A. 8 percent
B. 12.5 percent
C. 20 percent
D. 45 percent
Which is an example of a change in productivity that decreases labor demand?
A. A financial crisis in Asian nations reduces the demand for exports to Asia, thus
decreasing the demand for domestic workers in the computer industry.
B. Tattoos fade in popularity, thus decreasing the demand for tattoo artists.
C. More government regulation decreases output per worker in the fast food industry,
thus decreasing demand for fast food workers.
D. An increase in the price of construction equipment reduces the demand for
construction equipment operators.
A rise in prices of imported resources will cause aggregate:
A. supply to increase.
B. demand to increase.
C. supply to decrease.
D. demand to decrease.
“Excludability” means that:
A.sellers can restrict the benefits of a good to those who pay for it.
B.buyers can restrict other buyers from making purchases in that market.
C.when one person buys a good, it is not available for others to buy.
D.government can prevent consumers from buying the good.
In pure competition, price is determined where the industry:
A. demand and supply curves intersect.
B. total cost is greater than total revenue.
C. demand intersects the firm’s marginal cost curve.
D. average total cost equals total variable costs.
Assume that there is a 25 percent reserve ratio and that the Federal Reserve buys $200
million worth of government securities. If the securities are purchased from the public,
then this action has the potential to increase bank lending by a maximum of:
A. $600 million, and also by $600 million if the securities are purchased directly from
commercial banks.
B. $800 million, and also by $800 million if the securities are purchased directly from
commercial banks.
C. $600 million, but by $800 million if the securities are purchased directly from
commercial banks.
D. $800 million, but only by $600 million if the securities are purchased directly from
commercial banks.
The major reason that presidents of major corporations receive an average salary of
over $1 million a year and truck drivers receive an average salary of about $55,000 a
year can best be explained by:
A. discrimination.
B. lack of job information.
C. compensating differences.
D. noncompeting labor groups.
Refer to the above data. If the price in this market was $4:
A. the market would clear; quantity demanded would equal quantity supplied.
B. buyers would want to purchase more wheat than is currently being supplied.
C. farmers would not be able to sell all their wheat.
D. there would be a shortage of wheat.
Refer to the above diagram. A shift in the production possibilities curve from AB to CD
is most likely due to:
A. the use of the economy’s resources in an efficient way.
B. an increase in the spending of business and consumers.
C. an increase in government purchase of the economy’s output.
D. an increase in the quantity and quality of labor resources.
Refer to the above diagram. A decrease in demand is depicted by a:
A. move from point x to pointy.
B. shift from D1 to D2.
C. shift from D2 to D1.
D. move from point y to point x.
The following diagram is a flexible exchange market for foreign currency:
Other things equal, a rightward shift of the demand curve would:
A. depreciate the dollar.
B. appreciate the dollar.
C. reduce the equilibrium quantity of euros.
D. depreciate the euro.
The greater the legal reserve ratio, the:
A. higher the spending multiplier.
B. lower the spending multiplier.
C. lower the money multiplier.
D. higher the money multiplier.
In the kinked-demand model of a noncollusive oligopoly, if one firm decreases its price,
the most likely reaction of the other firms will be to:
A. decrease their prices.
B. increase their prices.
C. not change their prices.
D. fix prices.
Refer to the above graph. Which of the lines in the above diagram represent(s) a
proportional tax?
A. Both A and B
B. D only
C. C only
D. B only
If there is a shortage of product X:
A. fewer resources will be allocated to the production of this good in the future.
B. the price of the product will rise.
C. the price of the product will decline.
D. the supply curve will shift to the left and the demand curve to the right, eliminating
the shortage.
An example of a monopolistically competitive industry would be:
A. steel.
B. soybeans.
C. electricity.
D. retail clothing.
As of 2012, the economy of Hong Kong most closely approximates:
A. socialism.
B. a command economy.
C. pure capitalism.
D. a market economy.
What has been the range of the decline in real output for U.S. recessions since 1950?
A. -0.5 percent to -4.9 percent
B. -5.0 percent to -9.9 percent
C. -10.0 percent to -14.9 percent
D. -15.0 percent to -19.9 percent
If net private domestic investment is a negative number in a given year, this means that:
A. imports into the economy exceeded exports.
B. the economy was experiencing economic growth that year.
C. more private capital goods were used up that year than were produced.
D. fewer private capital goods were used up that year than were produced.
The descriptions give the responses of four individuals to a Bureau of Labor Statistics
(BLS) survey of employment.
1) Mollie just graduated from college and is now looking for work. She has had three
job interviews in the past month.
2) George works in an automotive assembly plant. He was laid off six months ago as
the economy weakened. He expects to return to work in several months when national
economic conditions improve.
3) Jeanette worked as an aircraft design engineer for a company that produces military
aircraft until she lost her job last year when the federal government cut defense
spending. She has been looking for similar work for a year, but no company seems
interested in her aircraft design skills.
4) Ricardo lost his job last year when his company downsized and laid off middle-level
managers. He tried to find another job for a year but was unsuccessful and quit looking
for work.
Refer to the above information. Which individual is structurally unemployed?
A. 1
B. 2
C. 3
D. 4
Which varies directly with the interest rate?
A. The opportunity cost of holding money.
B. The transactions demand for money.
C. The asset demand for money.
D. The level of investment.
Which is designed to provide cash assistance to families with children?
A. SSI
B. FFS
C. TANF
D. Social Security
A major characteristic of monopolistic competition is:
A. mutual interdependence.
B. a high degree of collusion among firms.
C. a relatively large number of firms selling the product.
D. relatively easy entry into an industry but a relatively difficult exit from the industry.