The cornerstone of antitrust policy in the United States is generally considered to be the
Sherman Antitrust Act of 1890.
In the cause-effect chain, a restrictive money policy increases the money supply,
decreases the interest rate, increases investment spending, and increases aggregate
demand.
There are about 50,000 commercial banks in the United States in 2012.
The Federal funds rate is the interest rate banks charge their most creditworthy
customers.
Monopolistic competitors have some control over the price of their products.
Most of the public debt can be considered a public credit.
Half of the public debt is owned by foreign individuals and institutions.
Toothpaste and toothbrushes are substitute goods.
Brand names and packaging are forms of product differentiation under monopolistic
competition.
The U.S. poverty rate for African Americans is substantially higher than that for Asians.
Economic efficiency entails getting the smallest amount of output from a given level of
input of scarce resources.
Proponents of zero inflation argue that even mild inflation (1 to 3 percent) reduces the
economy’s real output.
A change in household indebtedness will cause a movement along an existing aggregate
demand curve.
The break-even point means that the firm is realizing economic profits.
Among the principal exports of the United States are chemicals and computers and
among the principal imports are automobiles and computers.
The real opportunity cost of producing product X is the amounts of products Y, Z, and
so forth, that might have been produced if resources had not been used to produce X.
Whenever there are negative or positive externalities, the Coase theorem suggests that it
is economically efficient for the government to intervene to resolve the externality
problem.
A monopolist seeks maximum profit per unit.
Actual reserves equal required reserves plus excess reserves.
Marginal analysis is the comparison of additional benefits with the additional costs.
The most frequently used instrument of the Federal Reserve System to control changes
in the money supply is the required reserve ratio.
A firm in a cartel typically cheats on its collusive agreement by raising its price and
restricting output more than it agreed to with other cartel members.
An oligopolist producing where MR > MC should lower its price and increase output to
maximize its profits.
Patents and copyrights were established by the government to reduce oligopoly and
monopoly power.
A purely competitive firm is a price maker, but a monopolist is a price taker.
In pure competition, the industry demand curve is infinitely price elastic.
The business cycle is best defined as alternating periods of increases and decreases in
the level of economic activity.
Exchange by barter requires a coincidence of wants.
More specialization in a market economy generally leads to the more efficient use of its
resources.
The demand for most agricultural goods is elastic. Consequently, an increase in supply
will increase the total income of producers of agricultural goods.
A decrease in aggregate demand will have no effect on the real equilibrium GDP of the
economy and will lower its price level.
Occupational licensing is a means of decreasing the supply of specific kinds of labor.
The types and quantities of public goods produced are determined through the political
process.
If an oligopolist’s competitors follow its price cuts but ignore its price increases, the
oligopolist will face a gap in its marginal revenue schedule.
On average, unionized workers realize wage rates 5 percent lower than those of
comparable nonunion workers.
Electronic money and smart cards will increase the problems for the Federal Reserve in
controlling the money supply.
When the supply of yen increases, other things being equal, the dollar will appreciate
against the yen.
A monopsonist in equilibrium will hire labor at a level where MRP = MRC > W.
The relative efficiency with which a nation can produce specific goods changes over
time.
The nominal interest rate is the sum of the real interest rate and the premium paid to the
lender to offset the expected rate of inflation.
The Board of Governors of the Federal Reserve System can increase commercial bank
reserves by:
A. increasing the discount rate.
B. increasing the reserve ratio.
C. decreasing the prime interest rate.
D. buying government securities in the open market.
Coins and paper money are:
A. debts of commercial banks and savings institutions.
B. debts of the federal government and government agencies.
C. credits of the federal government and government agencies.
D. credits of commercial banks and savings institutions.
The table below shows cost data for a firm that is selling in a purely competitive
market.
Refer to the above cost chart. If the marginal revenue is $6, what output should the firm
produce?
A. 10
B. 12
C. 14
D. 20
The more inelastic the demand for a resource, the:
A. less elastic its marginal revenue product curve.
B. more elastic its marginal revenue product curvem
C. greater the potential for resource substitution.
D. greater the productivity of the resource.
Many people believe that monopolies charge any price they want to without affecting
sales. Instead, the output level for a profit-maximizing monopoly is determined by:
A. Marginal cost = Demand.
B. Marginal revenue = Demand.
C. Average total cost = Demand.
D. Marginal cost = Marginal revenue.
The 12 Federal Reserve Banks can best be characterized as:
A. central banks, banker’s banks, and quasi-public banks.
B. regional banks, public banks, and member banks.
C. investment banks, banker’s banks, and public banks.
D. national banks, quasi-public banks, and investment banks.
In long-run equilibrium, a profit-maximizing firm in a monopolistically competitive
industry produces the quantity of output where:
A. AC = P, MR = MC = P.
B. AC < P, MR = MC = P.
C. AC < P, MR + MC < P.
D. AC = P, MR = MC < P.
Which set of events would most likely decrease aggregate demand?
A. A reduction in the excess capital of the existing capital stock.
B. A reduction in business and personal tax rates.
C. An increase in investment spending.
D. An increase in personal income tax rates.
You are the newly appointed sales manager of the Rock Record Company and have
been charged with the task of increasing revenues. Your economics consultants tell you
that at present price and output levels, price elasticity of demand for your product is less
than one. You should:
A. decrease prices.
B. increase prices.
C. hold prices constant and increase supply.
D. cut advertising expenditures to decrease the demand for these records.
The cyclically adjusted surplus as a percentage of GDP is 1 percent in year 1. This
surplus becomes a deficit of 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 mismatch between the geographic location of workers and the location of job
openings would result in what type of unemployment?
A. Wait
B. Cyclical
C. Frictional
D. Structural
Refer to the above diagram. A shortage of 160 units would be encountered if price was:
A. $1.10, that is, $1.60 minus $.50.
B. $1.60.
C. $1.00.
D. $.50.
Refer to the above diagram. The economy is at equilibrium at point C. What fiscal
policy would increase real GDP?
A. Increase aggregate demand from AD2 to AD1 by decreasing taxes.
B. Decrease aggregate demand from AD2 to AD3 by increasing taxes.
C. Increase aggregate demand from AD1 to AD2 by increasing government spending.
D. Make no change because the economy is at or near its full-employment level of real
output.
Refer to the above graph. The profit-maximizing monopolist shown sets its price and
output at:
A. 0J and 0V, respectively.
B. 0G and 0Y, respectively.
C. 0G and 0V, respectively.
D. 0H and 0X, respectively.
Which is assumed to be most limited in scope under a market system?
A. Freedom of enterprise.
B. Freedom of choice.
C. Competition.
D. Government.
In an economy that has stationary production capacity:
A. the consumption of private fixed capital exceeds gross investment.
B. no capital goods are being produced.
C. gross investment is zero.
D. net investment is zero.
If there is an increase in labor productivity:
A. the production possibilities curve would shift outward and the long-run aggregate
supply curve would shift rightward.
B. the production possibilities curve would shift inward and the long-run aggregate
supply curve would shift leftward.
C. the production possibilities curve would shift outward and the long-run aggregate
supply curve would shift leftward.
D. the production possibilities curve would shift inward and the long-run aggregate
supply curve would shift rightward.
If the AC curve in the above graph represents the minimum of the average total cost
curve, then examples of X-inefficiency would best be represented by point:
A. A at output level Q1 and point D at output level Q1.
B. A at output level Q1 and point B at output level Q2.
C. E at output level Q2 and point F at output level Q3.
D. D at output level Q1 and point C at output level Q3.
Any activity designed to transfer income or wealth to a particular individual or firm at
society’s expense is called:
A. patent protection.
B. X-inefficiency.
C. price discrimination.
D. rent-seeking.
Differences in “job preferences” and “job risks”:
A. illustrate the trade-off between equality and efficiency.
B. can be used to broaden the concept of income.
C. result from government transfer programs.
D. are a cause of income inequality.
Which of the following provides retirement income to qualified retirees?
A. Medicare
B. Supplemental Security Income (SSI)
C. Social Security
D. SNAP
If a union argues that a price cut will boost revenues of the firm and management
argues that the opposite is true, then the price elasticity of demand is:
A. unit-elastic from the union’s perspective and unit-inelastic from management’s
perspective.
B. perfectly inelastic from the union’s perspective and perfectly elastic from
management’s perspective.
C. elastic from the union’s perspective; inelastic from management’s perspective.
D. inelastic from the union’s perspective; elastic from management’s perspective.
A headline reads: “Steel industry suffers slump as import competition increases;
unemployment rises.” This type of unemployment can best be characterized in
economic terms as:
A. frictional.
B. structural.
C. cyclical.
D. natural.
As it relates to international trade, dumping:
A. is a form of price discrimination illegal under U.S. antitrust laws.
B. is the practice of selling goods in a foreign market at less than cost.
C. constitutes a general case for permanent tariffs.
D. is defined as selling more goods than allowed by an import quota.
In 2010, the public debt was about:
A. $4.27 trillion.
B. $7.61 trillion.
C. $13.60 trillion.
D. $11.02 trillion.
Negative economic growth can be shown as a:
A. rightward shift of the production possibilities curve.
B. leftward shift of the production possibilities curve.
C. movement from a point on the production possibilities curve to one outside of it.
D. movement from one point on the production possibilities curve to another point on
the curve.
The asset demand for money and the rate of interest are:
A. inversely related.
B. directly related.
C. unrelated.
D. both stable.
A monopolistically competitive firm in the short run is producing where price is $3.00
and marginal cost is $1.50. To maximize profits:
A. the firm should continue to produce this quantity.
B. the firm should increase output and decrease price.
C. the firm should decrease output and increase price.
D. the firm should produce the level of output where marginal revenue is $1.50.
Purely competitive firms are assumed to:
A. advertise.
B. be price takers.
C. sell where marginal cost is minimized.
D. confront demand curves that are perfectly inelastic.
Assume that an economy has 1500 workers, each working 2000 hours per year. If the
average real output per worker-hour is $20, then total output or real GDP will be:
A. $3 million.
B. $30 million.
C. $45 million.
D. $60 million.
Which is not one of the conditions for the Coase theorem to hold?
A.The ownership of property is clearly defined.
B.The number of people involved is small.
C.The amount of money disputed is minor.
D.The costs of bargaining are negligible.