Dumping of goods abroad:
A. constitutes a general case for permanent tariffs.
B. may be part of a firm’s price discrimination strategy.
C. may be part of a nation’s strategy to rectify its trade deficit.
D. drives up prices of the dumped goods.
The empirical data indicate that the tax system and the transfer programs of the
government:
A. increase the degree of inequality in the distribution of income.
B. make no change in the degree of inequality in the distribution of income.
C. reduce the degree of inequality in the distribution of income.
D. affect the distribution of wealth, not income.
In firm X, labor costs are 85 percent of production costs, while in firm Y labor costs are
40 percent of production costs. A 20 percent increase in wages would increase
production costs by:
A. 23 percent in firm X and 20 percent in firm Y.
B. 19 percent in firm X and 15 percent in firm Y.
C. 15 percent in firm X and 6 percent in firm Y.
D. 17 percent in firm X and 8 percent in firm Y.
In firm X, production costs would increase by 0.85 * 0.2 = 0.17 (i.e., 17 percent),
whereas in firm Y production costs would increase by 0.4 * 0.2 = 0.08 (i.e., 8 percent).
When taxes and transfer payments are taken into account, the distribution of income in
the United States:
A. is unchanged.
B. is less equally distributed.
C. is more equally distributed.
D. becomes more beneficial for the wealthy.
Other things being equal, an expansion of commercial bank lending:
A. changes the composition, but not the size, of the money supply.
B. is desirable during a period of demand-pull inflation.
C. reduces the money supply.
D. increases the money supply.
A study of mass transit systems in American cities revealed that long-run revenues
generally decline after substantial fare increases. This suggests that:
A. the demand for mass transit is price-elastic in the long run.
B. the demand for mass transit is price-inelastic in the long run.
C. mass transit service deteriorates in the long run as price rises.
D. there are few good substitutes for such systems in urban areas.
Refer to the above diagram. A decrease in supply is depicted by a:
A. move from point x to point y.
B. shift from S1 to S2.
C. shift from S2 to S1.
D. move from point y to point x.
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. If the original balance sheet was for the commercial banking
system, rather than a single bank, loans and checkable deposits could have been
expanded by a maximum of:
A. $8000.
B. $15,000.
C. $48,000.
D. $25,000.
When demand increases, in the short run the purely competitive firm:
A. will spend more on advertising.
B. will earn higher profits or experience smaller losses.
C. will experience no change in costs as it steps up production.
D. can alter available inputs and output as well as the size of the plant.
A surplus of a product will arise when price is:
A. above equilibrium, with the result that quantity demanded exceeds quantity supplied.
B. above equilibrium, with the result that quantity supplied exceeds quantity demanded.
C. below equilibrium, with the result that quantity demanded exceeds quantity supplied.
D. below equilibrium, with the result that quantity supplied exceeds quantity demanded.
Earnings from wealth:
A. contribute to income inequality.
B. are the major source of family income.
C. are becoming more equal in the society.
D. are primarily the result of advanced education.
The following data about a hypothetical economy are in billions of dollars.
Refer to the above data. Personal consumption expenditures are approximately what
percent of GDP in this economy?
A. 67 percent.
B. 70 percent.
C. 72 percent.
D. 75 percent.
Which of the above diagrams illustrate(s) the effect of a decline in the price of personal
computers on the market for computer software?
A. A only
B. A and D
C. B only
D. D only
When the price level falls:
A. the demand for money rises.
B. there is a decrease in spending that is sensitive to interest-rate changes.
C. there is a decrease in the quantity of goods demanded as net exports.
D. holders of financial assets with fixed money values increase their spending.
The table shows the aggregate demand and aggregate supply schedule for a
hypothetical economy.
Refer to the above table. Using the original data from the table, if the quantity of real
domestic output demanded increased by $3000 and the quantity of real domestic output
supplied increased by $1000 at each price level, the new equilibrium price level and
quantity of real domestic output would be:
A. 350 and $8000.
B. 300 and $9000.
C. 250 and $8000.
D. 200 and $7000.
Assuming competitive markets with typical supply and demand curves, which of the
following statements is correct?
A. An increase in supply with a decrease in demand will result in an increase in price.
B. An increase in supply with no change in demand will result in an increase in price.
C. An increase in supply with no change in demand will result in a decline in sales.
D. An increase in demand with no change in supply will result in an increase in sales.
Which is not characteristic of a product with relatively inelastic demand?
A. The good is regarded by consumers as a necessity.
B. There are a large number of good substitutes for the good.
C. Buyers spend a small percentage of their total income on the product.
D. Consumers have had only a short time period to adjust to changes in price.
The slope of the immediate-short-run aggregate supply curve is based on the
assumption that:
A. both input and output prices are fixed.
B. neither input nor output prices are fixed.
C. input prices are flexible, but output prices are fixed.
D. input prices are fixed, but output prices are flexible.
Using the data in the above table, what percentage of households made less than
$15,000?
A. 5 percent
B. 6 percent
C. 11 percent
D. 23 percent
The idea that the desires of resource suppliers and producers to further their own
self-interest will automatically further the public interest is known as:
A. consumer sovereignty.
B. the invisible hand.
C. derived demand.
D. profit maximization.
Assume that an economy has 2000 workers, each working 4000 hours per year. If the
average real output per worker-hour is $10, then total output or real GDP will be:
A. $20 million.
B. $40 million.
C. $80 million.
D. $100 million.
If a 5 percent fall in the price of a product causes the quantity demanded of the product
to increase by 10 percent, the demand is:
A. inelastic.
B. elastic.
C. unit elastic.
D. perfectly elastic.
The equality-efficiency trade-off refers to:
A. the conflict between risk averters and risk takers.
B. the willingness of Congress to abandon existing welfare programs in favor of a
comprehensive plan to increase education and training for low-income persons.
C. possible conflicts between the goals of economic efficiency and greater income
equality.
D. the difference between the goals of income equality and equality of economic
opportunity.
The U.S. demand for euros is:
A. downsloping because, at lower dollar prices for euros, Americans will want to buy
more European goods and services.
B. downsloping because, at higher dollar prices for euros, Americans will want to buy
more European goods and services.
C. downsloping because the dollar price of euros and the euro price of dollars are
directly related.
D. upsloping because a higher dollar price of euros makes European goods and services
more attractive to Americans.
To understand the quantitative significance of the public debt relative to the economy, it
should be:
A. divided by the Social Security trust fund.
B. multiplied by the size of the population.
C. measured as a percentage of GDP.
D. compared to the value of imports and exports.
Refer to the above graph. A nation that has an income distribution of perfect equality
would be represented by the above curve:
A. a.
B. b.
C. c.
D. d.
A firm sells a product in a purely competitive market. The marginal cost of the product
at the current output of 500 units is $1.50. The minimum possible average variable cost
is $1.00. The market price of the product is $1.25. To maximize profit or minimize
losses, the firm should:
A. continue producing 500 units.
B. produce less than 500 units.
C. produce more than 500 units.
D. shut down.
What is the economic meaning of the expression that “there is no such thing as a free
lunch”?
A. It refers to “free-riders,” who do not pay for the cost of a product but who receive the
benefit from it.
B. It means that economic freedom is limited by the amount of income available to the
consumer.
C. It means there is an opportunity cost when resources are used to provide “free”
products.
D. It indicates that products only have value because people are willing to pay for them.
The data embodied in the above diagrams suggest that:
A. Italy should export X and Greece should export Y.
B. Greece should export X and Italy should export Y.
C. Production in both countries is subject to increasing costs.
D. Italy should import both X and Y from Greece.
If the wage rate in a purely competitive labor market increases, it will cause the:
A. marginal resource cost curve for a single competitive firm in the industry to shift
rightward.
B. marginal resource cost curve for a single competitive firm in the industry to shift
leftward.
C. labor supply curve for a single competitive firm to shift downward.
D. labor supply curve for the industry to shift rightward.
The kinked-demand curve is based upon the assumption that an oligopolist’s rivals will:
A. ignore a price cut but follow a price increase.
B. follow both a price cut and a price increase.
C. ignore both a price cut and a price increase.
D. follow a price cut, but ignore a price increase.