Cost-push inflation may be caused by:
A. a decline in per-unit production costs.
B. a decrease in wage rates.
C. a negative supply shock.
D. an increase in resource availability.
GDP in an economy is $11,130 billion. Consumer expenditures are $7735 billion,
government purchases are $1989 billion, and gross investment is $1410 billion. Net
exports are:
A. +$53 billion.
B. -$47 billion.
C. -$4 billion.
D. -$161 billion.
Refer to the above graphs, in which the numbers in parentheses near the AD1, AD2, and
AD3 labels indicate the level of investment spending associated with each curve,
respectively. All numbers are in billions of dollars. The interest rate and the level of
investment spending in the economy are at point C on the investment demand curve. To
achieve the long-run goal of a noninflationary full-employment output Qf in the
economy, the Fed should:
A. increase aggregate demand by increasing the interest rate.
B. decrease aggregate demand by increasing the interest rate.
C. increase aggregate demand by decreasing the interest rate.
D. make no change in the interest rate.
Fiscal policy is enacted through changes in:
A. interest rates.
B. the supply of money.
C. unemployment and inflation.
D. taxation and government spending.
Economic profits are calculated by subtracting:
A. explicit costs from total revenue.
B. implicit costs from total revenue.
C. implicit costs from normal profits.
D. explicit and implicit costs from total revenue.
A definition of the gross domestic product (GDP) is:
A. personal consumption expenditures, gross private domestic investment, and net
exports.
B. the sum of wage and salary compensation of employees, interest income, and rental
income.
C. the market value of all intermediate goods and services produced by the economy in
one year.
D. the market value of final goods and services produced by the economy in one year.
Price discrimination is:
A. always legal.
B. always illegal.
C. only illegal if it hurts consumers more than nondiscrimination.
D. only illegal if used to lessen or eliminate competition.
Which would not be characteristic of a capitalist economy?
A. Government ownership of the factors of production.
B. Competition and unrestricted markets.
C. Reliance on the market system.
D. Free enterprise and choice.
The data below relate to a pure monopolist and the product it produces. What is the
profit-maximizing output and price for this monopolist?
A. P = $12; Q = 5
B. P = $14; Q = 4
C. P = $16; Q = 3
D. P = $18; Q = 2
To maximize profit, the monopolist sets MC equal to or less than MR. This occurs at Q
= 4, where MC = $7 (i.e., $40 – $33) and MR = 8 (i.e., 56 – 48).
In 2009, an unattached individual would be defined as living in poverty if his or her
income was less than:
A. $10,956.
B. $11,243.
C. $14,654.
D. $15,726.
The market system is said to be characterized by “consumer sovereignty.” This is
because:
A. a large number of consumer goods are produced.
B. the prices of consumer goods are regulated by government.
C. consumer goods are more profitable than investment goods.
D. of the major role of consumers in determining what goods are produced.
One feature of pure monopoly is that the demand curve:
A. is vertical.
B. is horizontal.
C. slopes upward.
D. slopes downward.
Allocative efficiency occurs when the:
A. minimum of average total cost equals average revenue.
B. minimum of average total cost equals marginal revenue.
C. marginal cost equals the marginal benefit to society.
D. marginal revenue equals marginal benefit to society.
If you are told that the government had an actual budget deficit of $50 billion, then you
would:
A. know that fiscal policy was expansionary.
B. know that fiscal policy was contractionary.
C. know that fiscal policy was producing a cyclical deficit.
D. not be able to determine the direction of fiscal policy from the information given.
When producing a good generates negative externalities, the private market for that
good tends to produce too:
A.much of the product at too low a price.
B.much of the product at too high a price.
C.little of the product at too low a price.
D.little of the product at too high a price.
Tickets to a university football game always sell out. In this case, the:
A. demand for tickets is highly inelastic.
B. demand for tickets is highly elastic.
C. supply of tickets is highly inelastic.
D. supply of tickets is highly elastic.
The Lojack is an example of a product that:
A.produces a positive externality.
B.produces a negative externality.
C.contributes to global warming.
D.contributes to illegal gambling on cards.
A firm should always continue to operate at a loss in the short run if:
A. the firm will show a profit.
B. the owner enjoys helping her customers.
C. it can cover its variable costs and some of its fixed costs.
D. the firm cannot produce any other products more profitably.
Refer to the above graph. If the production possibilities curve of an economy shifts
from AB to CD, it is most likely caused by:
A. a decrease in the price level.
B. allocative efficiency.
C. technological progress.
D. full employment of resources.
Refer to the above graph. If the supply of money was $150 billion, the interest rate
would be:
A. 2 percent.
B. 3 percent.
C. 4 percent.
D. 5 percent.
A recession is a decline in:
A. the full-employment unemployment rate over a year.
B. the natural rate of unemployment.
C. GDP that lasts six months or longer.
D. GDP that lasts one year or longer.
If a business decreased the price of its product from $10 to $9 when demand was price
inelastic, then total revenues would:
A. decrease.
B. increase.
C. remain unchanged.
D. be perfectly inelastic.
The satisfaction or pleasure one gets from consuming a good or service is called:
A. price.
B. utility.
C. consumption.
D. preferences.
When society overallocates resources to a product it means that the:
A. investment in the product is declining.
B. opportunity cost of the product is decreasing.
C. marginal benefit is greater than the marginal cost.
D. marginal benefit is less than the marginal cost.
In a two-nation world, comparative advantage means that one nation can produce:
A. a product with fewer inputs than the other nation.
B. a product at lower average cost than the other nation.
C. a product at a lower domestic opportunity cost than the other nation.
D. more of a product than the other nation.
Which of the following will generate a demand for country X’s currency in the foreign
exchange market?
A. Travel by citizens of country X in other countries
B. The desire of foreigners to buy stocks and bonds of firms in country X
C. The imports of country X
D. Charitable contributions by country X’s citizens to citizens of developing nations
Refer to the above diagram. If the production possibilities curve of an economy shifts
from AB to EF, it is most likely the result of what factor affecting economic growth?
A. A supply factor.
B. A demand factor.
C. An efficiency factor.
D. An allocation factor.
Michelle transfers $4000 from her savings account to her checking account. What effect
is this change likely to have on M1 and M2?
A. M1 decreases and M2 increases.
B. M1 increases and M2 decreases.
C. M1 increases and M2 stays the same.
D. M2 increases and M1 stays the same.
The air pollution policy of the United States has historically been one of:
A.taxation of products that produce air pollution.
B.government subsidies to reduce emissions from factories.
C.direct controls in the form of uniform emission standards.
D.the internal and external trading of pollution rights in a market.
Refer to the above supply and demand graph. In the graph, point A is the current
equilibrium level of output of this product and point B is the optimal level of output
from society’s perspective. S is the supply curve without a tax and Stis the supply curve
with a tax. If government corrects this externality problem with a tax so that all the
costs are included in the cost of production, then the product price will be set at point:
A.G.
B.F.
C.E.
D.D.
Refer to the above graph. If the supply of money was $50 billion, the interest rate
would be:
A. 2 percent.
B. 3 percent.
C. 4 percent.
D. 5 percent.
The above diagram is best described as an idealized:
A. business cycle.
B. cyclical variation.
C. recession cycle.
D. prosperity cycle.
Which is true of price discrimination?
A. Successful price discrimination will provide the firm with lower total profits than if
it did not discriminate.
B. Successful price discrimination will provide the firm with more profit than if it did
not discriminate.
C. Successful price discrimination will generally result in a lower level of output than
would be the case under a single-price monopoly.
D. It exists when price differences depend critically on differences in the costs of
production of serving different groups of buyers.