Which statement about inflation is correct?
A. Families are always hurt by inflation.
B. Inflation “subsidizes” those who receive relatively fixed money income.
C. The redistributive effects of inflation are arbitrary with respect to people and groups
in society.
D. Inflation will decrease the real value of property assets and increase the real value of
fixed-value assets.
Some firms in the technology sector have achieved economies of scale because costs
have been reduced by:
A. price discrimination.
B. socially optimal pricing.
C. fair return pricing.
D. simultaneous consumption.
If a consumer has an income of $200, the price of X is $5, and the price of Y is $10, the
maximum quantity of X the consumer is able to purchase is:
A. 5.
B. 10.
C. 20.
D. 40.
In calculating the unemployment rate, part-time workers are:
A. counted as unemployed because they are not working full time.
B. counted as employed because they are receiving payment for work.
C. included in the labor force but not the unemployment rate.
D. treated the same as “discouraged” workers who are not actively seeking
employment.
The table below shows points from straight-line production possibilities schedules for
two countries and indicates that:
A. country B can produce more meat than country A.
B. country A has a comparative advantage in producing meat.
C. country B can produce more houses than country A.
D. country A has a comparative advantage in producing houses and meat.
Assume that a government is considering a new social program and may choose to
include in this program any number of four progressively larger projects. The marginal
cost and the marginal benefit of each of the four projects is provided in the table.
Refer to the above table and information. What project should the government select to
achieve the maximum net benefit?
A.A
B.B
C.C
D.D
Proponents of economic growth say that pollution:
A. is an inevitable by-product of growth.
B. occurs not because of growth, but because common properties are treated as free
goods.
C. declines as a country moves from agriculture to industry.
D. is detrimental to economic growth.
A worker who loses a job at a call center because business firms switch the call center
to another country is an example of:
A. frictional unemployment.
B. structural unemployment.
C. cyclical unemployment.
D. disguised unemployment.
If products A and B are complements and the price of B decreases, the:
A. demand curves for both A and B will shift to the left.
B. amount of B purchased will increase, but the demand curve for A will not shift.
C. demand for A will increase and the amount of B demanded will increase.
D. demand for A will decline and the demand for B will increase.
Refer to the above production possibilities curves. Curve (a) is the current curve for the
economy. Given production possibilities curve (a), point N suggests that the economy
is:
A. attaining full employment but not full production.
B. attaining full production but not full employment.
C. using its available resources inefficiently.
D. attaining both full employment and full production.
During a severe recession, we would expect output to fall the most in:
A. the health-care industry.
B. the clothing industry.
C. agriculture.
D. the construction industry.
When aggregate demand decreases, product prices, wage rates, and per-unit production
costs are inflexible downward because of a:
A. ratchet effect.
B. interest-rate effect.
C. real-balances effect.
D. foreign-purchases effect.
The rationing function of prices refers to the:
A. tendency of supply and demand to shift in opposite directions.
B. fact that ration coupons are needed to alleviate wartime shortages of goods.
C. capacity of a competitive market to equate the quantity demanded and the quantity
supplied.
D. ability of the market system to generate an equitable distribution of income.
To economists, the main difference between the short run and the long run is that:
A. the law of diminishing returns applies in the long run, but not in the short run.
B. in the long run all resources are variable, while in the short run at least one resource
is fixed.
C. fixed costs are more important to decision making in the long run than they are in the
short run.
D. in the short run all resources are fixed, while in the long run all resources are
variable.
The Fed directly sets:
A. the prime interest rate but not the Federal funds rate.
B. both the Federal funds rate and the prime interest rate.
C. neither the Federal funds rate nor the prime interest rate.
D. the discount rate and the prime interest rate.
Refer to the above diagram, in which Qf is the full-employment output. A
contractionary fiscal policy would be most appropriate if the economy’s present
aggregate demand curve were at:
A. AD0.
B. AD1.
C. AD2.
D. AD3.
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 St is the supply curve
with a tax. This figure indicates that there is (are):
A.positive externalities created in the production of this product.
B.negative externalities created in the production of this product.
C.an underallocation of resources to product production.
D.a surplus of the good produced.
The demand for labor will most likely increase when the price of a:
A. complementary input increases, provided the substitution effect is greater than the
output effect.
B. substitute input decreases, provided the output effect is greater than the substitution
effect.
C. substitute input increases, provided the output effect is greater than the substitution
effect.
D. substitute input decreases, provided the substitution effect is greater than the output
effect.
The relationship between quantity supplied and price is _____ and the relationship
between quantity demanded and price is _____.
A. direct, inverse
B. inverse, direct
C. inverse, inverse
D. direct, direct
The following list contains factors that are related to the aggregate demand curve.
Refer to the above information. A change in net export spending would most likely be
caused by changes in:
A. 2 and 3.
B. 5 and 6.
C. 7 and 8.
D. 6 and 9.
Proponents of the notion of a “political business cycle” suggest that:
A. the cyclically adjusted budget is a better indicator of the state of the economy than
the actual budget.
B. cyclical swings in the economy are produced by the inherent instability found in
capitalist economies.
C. a possible cause of economic fluctuations is due to the use of fiscal policy for
political purposes.
D. there is a trade-off among goals that tends to make the economic policies of state and
local governments procyclical.
The table below shows cost data for a firm that is selling in a purely competitive
market.
Refer to the above cost chart. The lowest output level on this firm’s short-run supply
curve is:
A. 10.
B. 12.
C. 16.
D. 20.
Refer to the figure above. Over the $5-$6 range, demand is:
A. unitary elastic.
B. perfectly elastic.
C. elastic.
D. inelastic.
The market model with the largest number of firms is:
A. oligopoly.
B. pure monopoly.
C. pure competition.
D. monopolistic competition.
The basic economic problem is essentially one of deciding how to make the best use of:
A. limited resources to satisfy limited economic wants.
B. limited resources to satisfy unlimited economic wants.
C. unlimited resources to satisfy unlimited economic wants.
D. unlimited resources to satisfy limited economic wants.
Suppose that in 2008 Ford sold 500,000 Mustangs at an average price of $18,800 per
car; in 2009, 600,000 Mustangs were sold at an average price of $22,500 per car. These
statements:
A. suggest that the demand for Mustangs decreased between 2008 and 2009.
B. suggest that the supply of Mustangs must have increased between 2008 and 2009.
C. suggest that the demand for Mustangs increased between 2008 and 2009.
D. constitute an exception to the law of demand in that they suggest an upsloping
demand curve.
The table below shows cost data for a firm that is selling in a purely competitive
market.
Refer to the above cost chart. Which output level will the firm never produce?
A. 10
B. 12
C. 16
D. 20
Human capital refers to:
A. the skills and knowledge that enable a worker to be productive.
B. machinery used by labor in production.
C. the accumulated financial wealth of households.
D. physical capital owned by households rather than businesses.
In the diagram above, Cheri’s budget line shifts outward from AB to CD. Which
statement below is consistent with this shift?
A. Both prices double; her income doubles.
B. Her income is reduced; no change in either price.
C. Both prices are reduced by 50 percent; her income is reduced by less than 50
percent.
D. Both the price of good 1 and Cheri’s income increase; there is no change in the price
of good 2.
There would be some control over price within rather narrow limits in which market
model?
A. Monopolistic competition
B. Pure competition
C. Pure monopoly
D. Oligopoly
Refer to the figure above. The elasticity of supply for a product will be 2 when:
A. a 1 percent decrease in the price causes a 0.2 percent decrease in quantity supplied.
B. a 2 percent decrease in price causes a 1 percent decrease in quantity supplied.
C. a 1 percent decrease in price causes a 2 percent decrease in quantity supplied.
D. a 2 percent decrease in price causes a 2 percent decrease in quantity supplied.