A monopolistically competitive industry is like a purely competitive industry in that:
A. each industry produces a standardized product.
B. nonprice competition is a feature in both industries.
C. neither industry has significant barriers to entry.
D. firms in both industries face a horizontal demand curve.
Refer to the above diagram. A contractionary fiscal policy can best be represented by a:
A. shift in the aggregate demand curve from AD1 to AD2.
B. shift in the aggregate demand curve from AD3 to AD2.
C. shift in the aggregate demand curve from AD1 to AD3.
D. movement along the aggregate demand curve.
If firms enter a purely competitive industry, then in the long run this change will shift
the industry:
A. demand curve to the left, and the market price will decrease.
B. demand curve to the right, and the market price will increase.
C. supply curve to the right, and the market price will decrease.
D. supply curve to the left, and the market price will increase.
What is the most likely effect of the development of television, videocassette players,
and rental movies on the movie theater industry?
A. Decreased costs of producing movies
B. Increased demand for movie theater tickets
C. Movie theater tickets become an inferior good
D. Increased price elasticity of demand for movie theater tickets
A monopolistically competitive firm is operating at a short-run level of output where
price is $21, average total cost is $15, marginal cost is $13, and marginal revenue is
$13. In the short run this firm should:
A. reduce product price.
B. increase the level of output.
C. decrease the level of output.
D. make no change in the level of output.
Which is included in the expenditures approach to GDP?
A. Spending on meals by consumers at restaurants.
B. Spending on used clothing by consumers at garage sales.
C. The monetary value of stocks and bonds owned by investors.
D. The monetary value of used trucks purchased by construction companies.
The set of fiscal policies that would be most contractionary would be a(n):
A. increase in government spending and taxes.
B. decrease in government spending and taxes.
C. increase in government spending and a decrease in taxes.
D. decrease in government spending and an increase in taxes.
Assume product A is an input in the production of product B. In turn product B is a
complement to product C. We can expect a decrease in the price of A to:
A. increase the supply of B and increase the demand for C.
B. decrease the supply of B and increase the demand for C.
C. decrease the supply of B and decrease the demand for C.
D. increase the supply of B and decrease the demand for C.
Suppose that tacos and pizza are substitutes, and soda and pizza are complements. We
would expect an increase in the price of pizza to:
A. reduce the demand for tacos and increase the demand for sodas.
B. reduce the demand for soda and increase the demand for tacos.
C. increase the demand for both soda and tacos.
D. reduce the demand for both soda and tacos.
Fiscal policy refers to the:
A. manipulation of government spending and taxes to stabilize domestic output,
employment, and the price level.
B. manipulation of government spending and taxes to achieve greater equality in the
distribution of income.
C. altering of the interest rate to change aggregate demand.
D. fact that equal increases in government spending and taxation will be contractionary.
A major feature of a market system is that:
A. there is economic equality.
B. there is consumer sovereignty.
C. there is full employment.
D. all producers make profits.
Refer to the above graphs. A short-run equilibrium that would produce losses for a
monopolistically competitive firm would be represented by graph:
A. A.
B. B.
C. C.
D. D.
Suppose some firms exit a monopolistic competition industry. We would expect the
demand curve of a firm already in the industry to:
A. shift to the left.
B. shift to the right.
C. become more elastic.
D. remain the same since entering firms serve other customers in the market.
A supply factor in economic growth would be:
A. a fall in the efficient use of resources.
B. a rise in the rate of resource depletion.
C. an increase in the quantity of labor.
D. an increase in consumption spending.
Elasticity of supply will increase when:
A. the number of producers selling a product decreases.
B. producers are given less time to respond to price changes.
C. the number of consumers wanting to purchase a product increases.
D. it becomes easier to substitute one factor of production for another in a
manufacturing process.
(Applying the Analysis) Proponents of a value-added tax (VAT) claim that a VAT:
A. is progressive, leading to a more equitable distribution of income.
B. equalizes the tax burden between buyers and sellers of goods.
C. is proportional, so all income groups pay a fair share.
D. penalizes consumption and encourages savings and investment.
Answer the next question based on the following consolidated balance sheet for the
commercial banking system. Assume the required reserve ratio is 12 percent. All figures
are in billions of dollars.
Refer to the above data. The claims of owners in the commercial banking system are
equal to:
A. $60 billion.
B. $100 billion.
C. $135 billion.
D. $150 billion.
Refer to the above graph. It shows the cost curves for a competitive firm. At output
level 20, the marginal cost is:
A. $0.60.
B. $0.90.
C. $1.05.
D. $1.20.
Macroeconomics focuses on:
A. the individual units that make up the whole of the economy.
B. studies of how individual markets and industries are organized.
C. total output and the general level of prices in the economy.
D. how a business determines how much output to produce.
An unusually large crop of coffee beans would:
A. increase the supply of coffee.
B. increase the price of coffee.
C. decrease the quantity of coffee consumed.
D. increase the price of tea.
Refer to the above diagram. A binding government-set price floor is best illustrated by:
A. price A.
B. quantity E.
C. price C.
D. price B.
Assume the demand curve for product X shifts to the right. This might be caused by:
A. a decline in income if X is an inferior good.
B. a decline in the price of Z if X and Z are substitute goods.
C. a change in consumer tastes that is unfavorable to X.
D. an increase in the price of Y if X and Y are complementary goods.
If Z is an inferior good, an increase in money income will shift the:
A. supply curve for Z to the left.
B. supply curve for Z to the right.
C. demand curve for Z to the left.
D. demand curve for Z to the right.
A product’s ability to satisfy a large number of consumers at the same time is called:
A. network effects.
B. rent-seeking.
C. simultaneous consumption.
D. consumer sovereignty.
Which would be characteristic of monopolistic competition?
A. A potential for price-fixing through collusion.
B. Relatively small market share for each firm.
C. Mutual interdependence among the few firms.
D. Product standardization.
Which will not directly be a determinant of the price elasticity of demand for labor?
A. The price of labor.
B. The substitutability of other resources for labor.
C. The elasticity of demand for the product it produces.
D. The total cost of labor as a proportion of the total cost of producing units of output.
How would many economists view inefficiency in oligopoly?
A. P > MC and P = minimum ATC
B. P = MC and P > minimum ATC
C. P = MC and P = minimum ATC
D. P > MC and P > minimum ATC
The last year there was a surplus in the actual federal budget was in:
A. 2001.
B. 2002.
C. 2003.
D. 2004.
The benefits-received principle of taxation is most evident in:
A. inheritance taxes.
B. excise taxes on gasoline.
C. personal income taxes.
D. corporate income taxes.
The cyclically adjusted deficit as a percentage of GDP is 2 percent in year 1. This
deficit becomes 3 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 increasing taxes.
D. the federal government is decreasing spending.
If the Fed buys government securities from commercial banks in the open market:
A. the Fed gives the securities to the commercial banks, and commercial banks pay for
them by writing checks that increase their reserves at the Fed.
B. the Fed gives the securities to the commercial banks, and commercial banks pay for
them by writing checks that decrease their reserves at the Fed.
C. commercial banks give the securities to the Fed, and the Fed pays for them by
increasing the reserves of commercial banks at the Fed.
D. commercial banks give the securities to the Fed, and the Fed pays for them by
decreasing the reserves of commercial banks at the Fed.
In moving along a stable demand curve, which of the following is not held constant?
A. Price of the product for which the demand curve is relevant
B. Price expectations
C. Consumer incomes
D. Prices of complementary goods
A normal good is one:
A. whose amount demanded will increase as its price decreases.
B. whose amount demanded will decrease as its price decreases.
C. whose demand curve will shift leftward as incomes rise.
D. the consumption of which varies directly with incomes.