An expansionary monetary policy, all else equal, will:
A) depreciate the domestic currency.
B) appreciate the domestic currency.
C) all of the above.
D) none of the above.
Because firms produce a differentiated product, each of the firms in a monopolistically
competitive market faces a demand curve that is:
A) perfectly elastic.
B) perfectly inelastic.
C) downward sloping.
D) perfectly elastic or perfectly inelastic depending on whether the firm’s output is a
luxury or a necessity.
According to one study, the price elasticity of demand for restaurant meals is -2.27.
This implies that if restaurants want to increase their total revenues they should:
A) increase prices.
B) decrease prices.
C) leave prices unchanged.
D) cannot be determined with the information given.
The negatively-sloped part of the long-run average total cost curve is due to which of
the following?
A) Diseconomies of scale.
B) Diminishing returns.
C) The difficulties encountered in coordinating the many activities of a large firm.
D) The increase in productivity that results from specialization.
Which of the following would have the greatest positive impact on a country’s domestic
economy?
A) An increase in spending on imports from other countries.
B) An increase in spending by foreigners on the country’s exports.
C) A decrease in the confidence of foreign investors in the country’s economy.
D) A decrease in the incomes of consumers in foreign countries.
Under a fixed exchange rate system, the central bank of a country experiencing a
balance of payments deficit will:
A) increase the supply of the domestic currency to prevent currency depreciation.
B) increase the demand for the domestic currency to prevent currency depreciation.
C) increase the supply of domestic currency to prevent a currency appreciation.
D) increase the demand for domestic currency to prevent a currency appreciation.
In which of the following cases would the price elasticity of demand be expected to
increase?
A) The number of close substitutes for the good increases.
B) The time period under consideration decreases.
C) The cost of the good relative to total income decreases.
D) The supply of the good increases.
Firms in an oligopoly market will have a more difficult time maintaining price
coordination when:
A) demand for the firms’ products remains stable.
B) the firms’ cost structures are similar.
C) the firms’ products are highly differentiated.
D) each firm controls the same share of the market.
The Justice Department is most likely to oppose a proposed merger on the basis of the
Herfindahl-Hirschman Index when the post-merger HHI is:
A) less than 100.
B) less than 1000.
C) between 1000 and 1800.
D) greater than 1800.
The OPEC oil shocks in 1973-1974 are an example of:
A) favorable supply shock, shifting the short-run aggregate supply curve rightward.
B) favorable supply shock, shifting the short-run aggregate supply curve leftward.
C) adverse supply shock, shifting the short-run aggregate supply curve rightward.
D) adverse supply shock, shifting the short-run aggregate supply curve leftward.
If $1000 was deposited in a bank and the reserve requirement is 0.10, how much is
available for loans?
A) $900
B) $910
C) $920
D) $930
Which of the following is not a type of “lock-in” that acts as a barrier to entry into a
particular market?
A) Pricing at or below the average cost of production.
B) Purchases of durable goods.
C) Loyalty programs.
D) Specialized suppliers.
Suppose a perfectly competitive firm is in long-run equilibrium and there is a decrease
in demand. Suppose also that the firm operates in an industry in which the prices of
productive inputs vary with the level of output, increasing when output increases and
decreasing when output decreases. Which of the following will occur at the new
long-run equilibrium?
A) Price will be lower than it was at the initial long-run equilibrium.
B) Price will be the same as it was at the initial long-run equilibrium.
C) Price will be higher than it was at the initial long-run equilibrium.
D) The industry supply function will shift to the right.
When the marginal revenue resulting from a decrease in price is negative, demand for
the product is:
A) elastic.
B) unit elastic.
C) inelastic.
D) cannot be determined without more information.
Which of the following would have the least amount of influence on a manager’s choice
of which inputs to employ in a production process?
A) The price of a competitor’s output.
B) The technology of the production process.
C) The marginal productivity of the inputs that can be used in the production process.
D) The prices of the inputs that can be used in the production process.
Assume a perfectly competitive firm is producing 500 units of output, P = $7, ATC of
the 500th unit is $6, marginal cost of the 500th unit = $7, and AVC of the 500th unit =
$5. Based on this information, the firm is:
A) earning an economic profit of $500.
B) earning an economic profit of $1,000.
C) incurring a loss of $500.
D) incurring a loss of $1,000.
How many Federal Reserve District Banks are there?
A) 5
B) 7
C) 12
D) 1
According to the text, the price elasticity of demand for oranges has been estimated to
be -0.62. This implies that a doubling of the price of oranges would cause the quantity
demanded of oranges to:
A) increase by 6.2 percent.
B) decrease by 6.2 percent.
C) increase by 62 percent.
D) decrease by 62 percent.
The amount of money a firm pays to lease a building it uses for office space is called:
A) the full opportunity cost of production.
B) an explicit cost.
C) a real cost of production.
D) an implicit cost.
An economy that has a domestic and a foreign sector is called:
A) a mixed economy.
B) an open economy.
C) a closed economy.
D) a command economy.
Which of the following statements is definitely true when price is less than average total
cost for a firm producing the profit-maximizing level of output in the short run?
A) The firm is running a loss in an accounting sense, so that total revenue is less than
total explicit costs.
B) The firm will minimize its losses by shutting down.
C) The firm will be earning negative total revenue.
D) The firm is incurring an economic loss.
All else constant, as the amount of a firm’s implicit costs increases, the difference
between economic profit and accounting profit will:
A) increase.
B) stay the same.
C) decrease.
D) cannot be determined without more information.
Cross-section data observed at several points in time are called inverted data.
An adverse oil price increase will shift the short-run aggregate supply curve:
A) leftward.
B) rightward.
C) will not shift.
D) none of the above.
Which of the following approaches to understanding and predicting consumer behavior
does not actually solicit any information from any potential customers?
A) Test marketing.
B) Conjoint analysis.
C) Analysis of historical data.
D) Expert opinion.
Managers in firms with market power can:
A) not influence price.
B) develop strategies that involve both the demand and supply sides of the market.
C) only focus on the demand side of the market.
D) none of the above.
The primary responsibility of conducting monetary policy rests with the:
A) Board of Governors.
B) Federal Open Market Committee.
C) Federal Deposit Insurance Corporation.
D) U.S. Treasury.
When demand is elastic, the marginal revenue resulting from a decrease in price is:
A) positive.
B) zero.
C) negative.
D) cannot be determined without more information.
All else constant, an increase in the price of labor would cause the total amount of
output that can be produced with a fixed amount of spending to ________. This would
result in a movement to a ________ isoquant.
A) increase; lower
B) increase; higher
C) decrease; lower
D) decrease; higher
“Learning by doing” has the effect of causing:
A) a movement down the LRAC curve.
B) a movement up the LRAC curve.
C) the LRAC curve to shift up.
D) the LRAC curve to shift down.
Assume a firm produces 500 units of a good by using two inputs, capital and labor,
whose per unit prices are $10 and $4. Assume also that the marginal physical product of
the last unit of capital is 30 and the marginal physical product of the last unit of labor is
10. Is this firm minimizing its costs of producing 500 units of output?
A) No, because the marginal products of the two inputs are not equal.
B) No, because the MRTS and the price ratio for the two inputs are not equal.
C) No, because the prices of the two inputs are not equal.
D) The answer cannot be determined without more information.