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Differences in ability are one reason for income differences in the United States.
A monopolist will always charge the highest price it can get.
A price ceiling in a competitive market will result in persistent surpluses of a product.
The concept of consumer sovereignty refers to situations in which consumers are
represented on the board of directors of large corporations.
When a competitive firm is in long-run equilibrium, its accounting profits are greater
than zero.
The additional taxes needed to pay the interest on the public debt reduce incentives to
work, save, invest, and bear risks.
Value added can be determined by adding the purchase of intermediate products to the
value of the sales of final products.
When marginal costs decrease, a monopolist will usually lower its price and increase its
level of output.
A change in business taxes and regulation can affect input prices and aggregate supply.
If the relative costs of producing two goods differ in two countries, international trade
will be mutually advantageous.
Tariffs discourage imports and encourage exports.
Specialization in production can occur based on geographic advantages.
Productivity growth is a minor source of improvements in real wage rates and the
standard of living.
Deflation is a decline in the price level.
Minimum efficient scale occurs at the smallest level of output at which a firm can
minimize long-run average costs.
If taxation becomes more progressive, the built-in stability in the economy will
increase.
In long-run equilibrium, a monopolistically competitive firm will produce where P >
MR = MC > minimum ATC.
An increase in real interest rates will increase aggregate demand.
In the U.S. economy, housing accounts for over half of all consumer expenditures.
Demand tends to be elastic at higher prices and inelastic at lower prices.
The payment of interest on the public debt probably decreases income inequality.
When you use money to purchase groceries, money is functioning as a store of value.
The natural rate of unemployment in the United States is about 4 to 5 percent.
From 2001 to 2011, the U.S. economy has experienced three recessions.
An individual bank can safely lend out a multiple of its excess reserves, but the banking
system can safely lend out only an amount equal to the excess reserves in the banking
system.
In a monopoly, price is less than minimum average total cost.
The actual and cyclically adjusted budgets will be equal when the economy is at full
employment.
The greater the progressivity of the tax system, the less is the built-in stability of the
economy.
Game theory analysis of oligopolistic behavior suggests that oligopolists will benefit
from collusion.
In most cases, a monopolist practicing price discrimination will earn more economic
profit.
The production possibilities for country X are either 6000 bushels of soybeans or
10,000 bushels of wheat. The production possibilities for country Y are 2000 bushels of
soybeans and 4000 bushels of wheat. Which of the following is true?
A. Country Y should specialize in the growing of soybeans according to the principle of
comparative advantage.
B. Country X is the least-cost producer of wheat.
C. The domestic opportunity cost of wheat production is lower in country Y.
D. The high cost producer of soybeans is country X.
Refer to the above data. Average product is at a maximum when:
A. five workers are hired.
B. four workers are hired.
C. three workers are hired.
D. two workers are hired.
Which statement best describes a capitalist economy?
A. Society determines production and the allocation of goods and services only through
markets.
B. Government policies determine the production and the allocation of goods and
services.
C. Government policies determine the production, but not the allocation, of goods and
services.
D. The role of individual self-interest is relatively unimportant because government
makes most economic decisions.
A decrease in the rate of interest would:
A. decrease the opportunity cost of holding money.
B. increase the transactions demand for money.
C. decrease the asset demand for money.
D. decrease the price of bonds.
Implicit and explicit costs are different in that:
A. explicit costs are relevant only in the short run.
B. implicit costs are relevant only in the short run.
C. the latter refer to nonexpenditure costs and the former to out-of-pocket costs.
D. the former refer to nonexpenditure costs and the latter to out-of-pocket costs.
Which combination of fiscal policy actions would be most contractionary for an
economy experiencing severe demand-pull inflation?
A. Increase in taxes and government spending
B. Decrease in taxes and government spending
C. Increase in taxes and decrease in government spending
D. Decrease in taxes and increase in government spending
Refer to the above graph. Which factor will shift AD1 to AD2?
A. The real-balances effect.
B. An increase in productivity.
C. The foreign purchase effect.
D. An increase in investment spending.
Which is characteristic of the market system?
A. Unselfish individuals.
B. Centralized decision making.
C. Free enterprise and choice.
D. Government ownership of the means of production.
Banks destroy money when they:
A. buy government bonds.
B. accept deposits of cash into checkable accounts.
C. fail to reissue loans that are paid off.
D. clear checks against another bank.
A unique feature of oligopolies, when compared with other industry types, is:
A. low barriers to entry.
B. standardized products.
C. diminishing marginal returns.
D. mutual interdependence.
If the prices of imported resources decrease, then this event would most likely:
A. decrease aggregate supply.
B. increase aggregate supply.
C. increase aggregate demand.
D. decrease aggregate demand.
In the circular flow model, households:
A. buy products and resources.
B. sell products and resources.
C. buy products and sell resources.
D. sell products and buy resources.
A characteristic of a purely competitive labor market would be:
A. many firms competing in hiring workers.
B. firms hiring different types of labor.
C. wage-maker behavior by the firms.
D. price-maker behavior by the firms.
The price level has doubled in 35 years. The approximate annual percentage rate of
increase in the price level over this period has been:
A. 50 percent.
B. 20 percent.
C. 5 percent.
D. 2 percent.
Answer the next question on the basis of the following five schedules, all of which
represent income tax schedules for an economy. All figures are in billions of dollars.
Which of the above schedules represent(s) a progressive tax?
A. V only
B. III and V
C. II and III
D. III only
The Board of Governors of the Federal Reserve has ____ members.
A. 5
B. 7
C. 9
D. 14
A purely competitive firm is producing at the point where its marginal cost equals the
price of its product. If the firm increases its output, then total revenue will:
A. increase and profits will increase.
B. decrease and profits will increase.
C. increase and profits will decrease.
D. decrease and profits will decrease.
In a competitive market the equilibrium price and quantity occur where:
A. the downsloping demand curve intersects the upsloping supply curve.
B. the upsloping demand curve intersects the downsloping supply curve.
C. consumers and suppliers bargain to a mutually acceptable price.
D. quantity demanded exceeds quantity supplied or vice versa.
Use the following balance sheet for the ABC National Bank in answering the next
question. Assume the required reserve ratio is 20 percent.
Refer to the above data. Assuming the bank loans out all of its remaining excess
reserves as a checkable deposit, and has a check cleared against it for that amount, its
reserves and checkable deposits will now be:
A. $25,000 and $122,000 respectively.
B. $22,000 and $110,000 respectively.
C. $32,000 and $115,000 respectively.
D. $22,000 and $105,000 respectively.
A headline states: "Real GDP falls again as the economy slumps." This condition is
most likely to produce what type of unemployment?
A. Structural
B. Cyclical
C. Frictional
D. Natural
In 2009, about what percentage of households had personal income of
$50,000-$74,999?
A. 2 percent
B. 5 percent
C. 11 percent
D. 18 percent
Refer to the above graph. Which factor will shift AS1 to AS2?
A. An increase in real interest rates.
B. A decrease in business subsidies.
C. An increase in input prices.
D. A decrease in business taxes.
Refer to the above diagrams, in which the numbers in parentheses near the AD1, AD2,
and AD3 labels indicate the level of investment spending associated with each curve.
All figures are in billions. The interest rate in the economy is 4 percent. What should
the Fed do to achieve a noninflationary full-employment level of real GDP (Qf)?
A. Increase the money supply from $75 to $150 billion.
B. Increase the money supply from $150 to $225 billion.
C. Decrease the money supply from $225 to $150 billion.
D. Make no change in the money supply.
Refer to the above diagram, which shows demand and supply conditions in the
competitive market for product X. If supply is S1 and demand D0, then:
A. at any price above 0G a shortage would occur.
B. 0F represents a price that would result in a surplus of AC.
C. a surplus of GH would occur.
D. 0F represents a price that would result in a shortage of AC.
When total product is increasing at an increasing rate, marginal product is:
A. positive and increasing.
B. positive and decreasing.
C. constant.
D. negative.
Suppose you own $50,000 of personal property, $5,000 of stock in General Statics
Corporation, a $10,000 savings account, and $20,000 of government bonds. If General
Statics goes bankrupt, the most you could lose is:
A. $50,000.
B. $5,000.
C. $35,000.
D. $85,000.
The production of agricultural products such as wheat or corn would best be described
by which market model?
A. Monopolistic competition
B. Pure competition
C. Pure monopoly
D. Oligopoly
Refer to the above diagram. A shift from AS1 to AS2 would be consistent with what
economic event in U.S. history?
A. Demand-pull inflation in the late 1960s.
B. Cost-push inflation in the mid-1970s.
C. Full-employment in the late 1990s.
D. Recession in 2001.
If a company owns plants at various stages of the production process, this is called:
A. an industry.
B. a conglomerate.
C. a vertically integrated firm.
D. a multiplant firm.
Using the data in the above table, what percentage should be reported in blank D of
column 3?
A. 21
B. 35
C. 85
D. 94
