The statement that “tariffs are needed to protect American firms from foreign producers
that sell excess goods in the American market at less than cost” would be most closely
associated with which tariff argument?
A. Cheap foreign labor
B. Protection against dumping
C. Diversification for stability
D. Increased domestic employment
The graph above represents a(n):
A. decreasing-cost industry: firms may be paying lower prices for their inputs when the
industry expands.
B. increasing-cost industry: firms may be paying higher prices for their inputs when the
industry expands.
C. competitive, break-even industry: the long-run supply curve is upward sloping as it
must be according to the law of supply.
D. constant-cost industry: prices of the inputs stay the same, and other production costs
are constant as the industry expands.
The major problem facing the economy is high unemployment and weak economic
growth. The inflation rate is low and stable. Therefore, the Federal Reserve decides to
pursue a policy to increase the rate of economic growth. Which policy changes by the
Fed would tend to offset each other in trying to achieve that objective?
A. Selling government securities and raising the discount rate
B. Selling government securities and raising the reserve ratio
C. Buying government securities and raising the discount rate
D. Buying government securities and lowering the reserve ratio
Exclusive unionism has the economic effect of:
A. strengthening the bargaining position of an industrial union.
B. weakening the bargaining position of a craft union.
C. decreasing the supply of labor.
D. increasing the demand for labor.
The total output of a firm will be at a maximum where:
A. MP is at a maximum.
B. AP is at a minimum.
C. MP is zero.
D. AP is at a maximum.
Refer to the figure above. Over the $5-$6 range, the elasticity of demand using the
midpoint formula is:
A. 0.22.
B. 0.88.
C. 1.00.
D. 1.16.
Which is an example of a differentiated oligopoly?
A. The beer industry.
B. The primary aluminum industry.
C. The polyester fiber industry.
D. The cement industry.
Assume the Fed creates excess reserves in the banking system by buying government
bonds, but banks do not make more loans because economic conditions are bad. This
situation is a problem of:
A. cyclical asymmetry.
B. a restrictive money policy.
C. the net export effect.
D. a decrease in the Federal funds rate.
Which statement best describes a command economy?
A. The production of goods and services is determined primarily by markets, but the
allocation of goods and services is determined primarily by government.
B. The production of goods and services is determined primarily by government, but
the allocation of goods and services is determined primarily by markets.
C. The production and allocation of goods and services is determined primarily through
markets.
D. The production and allocation of goods and services is determined primarily through
government.
Which of the following is correct?
A. When borrowers repay bank loans, the money supply is increased.
B. When borrowers take out bank loans, the money supply is decreased.
C. A single commercial bank can legally lend an amount greater than its excess
reserves.
D. The actual reserves of a commercial bank equal its excess reserves plus its required
reserves.
Answer the next question based on the following consolidated balance sheet for the
commercial banking system. Assume the required reserve ratio is 12 percent. All figures
are in billions of dollars.
Refer to the above data. The commercial banking system has excess reserves of:
A. $32 billion.
B. $36 billion.
C. $42 billion.
D. $60 billion.
Refer to the above diagram, which shows demand and supply conditions in the
competitive market for product X. If the initial demand and supply curves are D0 and
S0, equilibrium price and quantity will be:
A. 0F and 0C respectively.
B. 0G and 0B respectively.
C. 0F and 0A respectively.
D. 0E and 0B respectively.
Under conditions of pure monopoly:
A. there are close substitutes.
B. there is no advertising.
C. the firm is a price taker.
D. entry is blocked.
Refer to the above graph. This monopolistically competitive firm is:
A. suffering an economic loss.
B. earning an economic profit.
C. allocatively and productively efficient.
D. neither allocatively nor productively efficient.
Which piece of federal legislation aims to prevent monopolization and restraint of
trade?
A. Sherman Act
B. Clayton Act
C. Wheeler-Lea Act
D. Federal Trade Commission Act
The MR = MC profit maximization rule applies:
A. to firms in all types of industries.
B. only when the firm is a “price taker.”
C. only to monopolies.
D. only to purely competitive firms.
According to the text, what is the largest source of earned income for U.S. households?
A. Wages and salaries.
B. Interest.
C. Proprietors’ income.
D. Corporate profits.
The TANF program is designed to:
A. increase the minimum wage.
B. shift people from welfare to employment.
C. provide medical insurance to poverty level workers.
D. provide income to the blind and disabled.
Which would definitely not be an example of price discrimination?
A. A theater charges children less than adults for a movie.
B. Universities charge higher tuition for out-of-state residents.
C. A doctor charges for services according to the income of patients.
D. An electric power company charges less for electricity used during hours when
production costs are lower.
A major criticism of the welfare system that led to recent reforms is that welfare
payments:
A. encourage overuse of the medical system.
B. create dependency on government programs.
C. give strong incentives for people to change jobs.
D. fail to provide a minimum income for young children.
The individual firm that hires labor under competitive conditions faces a labor supply
curve that:
A. slopes downward to the right.
B. is perfectly elastic.
C. is perfectly inelastic.
D. is of unit elasticity.
The domestic opportunity cost of producing a television in the United States is 20
bushels of wheat. In Korea, the domestic opportunity cost of producing a television is
10 bushels of wheat. In this case:
A. Korea has a comparative advantage in the production of wheat.
B. the United States has a comparative advantage in the production of televisions.
C. mutual gains from trade can be obtained if the United States imports televisions from
Korea and Korea imports wheat from the United States.
D. mutual gains from trade can be obtained if the United States imports wheat from
Korea and Korea imports televisions from the United States.
If the price of product L increases, the demand curve for close-substitute product J will:
A. shift downward toward the horizontal axis.
B. shift to the left.
C. shift to the right.
D. remain unchanged.
Which is an example of a change in product demand that increases labor demand?
A. Access to computers increases the productivity of mail-order businesses, thus
increasing the demand for their workers.
B. Tourism increases in popularity, increasing the demand for workers at tourist resorts.
C. A decrease in the price of trucks decreases the cost of transporting goods, thus
increasing the demand for truckers.
D. A change in work rules increases output per worker in the auto industry, thus
increasing the demand for auto workers.
In November 2008, General Motors produced a car that was delivered to a local
dealership in December 2008. The auto was sold to Sharon Smith for personal use in
February 2009. Following national income accounting practices, this car would be
counted as:
A. consumption in 2008 and consumption in 2009.
B. consumption in 2008 and investment in 2009.
C. disinvestment in 2008 and consumption in 2009.
D. investment in 2008 and disinvestment in 2009.
A product market is in equilibrium:
A. when there is no surplus of the product.
B. when there is no shortage of the product.
C. when consumers want to buy more of the product than producers offer for sale.
D. where the demand and supply curves intersect.
In general, the amount of X-inefficiency in an industry:
A. increases as the amount of competition increases.
B. increases as the amount of competition decreases.
C. decreases as the amount of competition stays the same.
D. has no relationship to the amount of competition in an industry.
Movie theaters charge lower prices to see a movie in the afternoon than in the evening
because there is an:
A. inelastic supply of movies in the evening.
B. elastic demand to see movies in the evening.
C. elastic demand to see movies in the afternoon.
D. inelastic demand to see movies in the afternoon.
If the Congress passes legislation to decrease government spending to control
demand-pull inflation, then this would be an example of:
A. automatic stabilizers.
B. an expansionary fiscal policy.
C. a contractionary fiscal policy.
D. a nondiscretionary fiscal policy.
Refer to the above figure. In the short run, this monopolist will:
A. shut down.
B. produce 0A.
C. produce 0B.
D. produce 0C.
Answer the question based on the following price and output data over a five-year
period for an economy that produces only one good. Assume that year 2 is the base
year.
The percentage increase in real GDP from year 2 to year 4 is:
A. 40 percent.
B. 60 percent.
C. 80 percent.
D. 100 percent.