The total volume of business sales in our economy is several times as large as the GDP
because:
A. the GDP does not take taxes into account.
B. the GDP excludes intermediate transactions.
C. the GDP grossly understates the value of our annual output.
D. total sales are in money terms and GDP is always stated in real terms.
Other things equal, a tariff is:
A. superior to an import quota for Americans because a tariff increases the profits of
foreign producers.
B. inferior to an import quota for Americans because a tariff increases the profits of
domestic producers.
C. superior to an import quota for Americans because a tariff generates revenue for the
U.S. Treasury.
D. inferior to an import quota for Americans because a tariff generates revenue for the
U.S. Treasury.
There would be a unique product for which there are few close substitutes under which
market model?
A. Monopolistic competition
B. Pure competition
C. Pure monopoly
D. Oligopoly
An example of derived demand is the demand for:
A. new automobiles.
B. used automobiles.
C. labor used to produce automobiles.
D. foreign instead of domestic automobiles.
Economics can best be described as the study of:
A. how to increase the level of productive resources so there is maximum output in
society.
B. how to use productive resources to maximize income level.
C. how people, institutions, and society make choices under conditions of scarcity.
D. how business structures influence the allocation of income among firms.
The basic determinants of labor inputs (total hours of work) include:
A. economies of scale and technological advance.
B. education and training, and allocative efficiency.
C. the size of the labor force and average hours of work.
D. the quantity and quality of capital and human resources.
Demand-pull inflation is associated with a(n):
A. decrease in aggregate demand.
B. increase in aggregate demand.
C. increase in aggregate supply.
D. decrease in aggregate supply.
A Federal Reserve official notes: “A restrictive monetary policy can force a contraction
of the money supply, but an expansionary monetary policy may not achieve an
expansion of the economy.” The official has described the problem of the:
A. inflexibility of monetary policy tools.
B. change in taxes on monetary policy.
C. cyclical asymmetry of monetary policy.
D. political acceptability of monetary policy.
The Federal Reserve System is divided into:
A. 5 districts.
B. 7 districts.
C. 12 districts.
D. 15 districts.
Why do skilled workers generally earn more than unskilled workers?
A. The demand for unskilled labor is more inelastic than the demand for skilled labor.
B. Skilled labor has higher marginal revenue products than unskilled labor.
C. The demand for unskilled labor is greater than the demand for skilled labor.
D. The supply of skilled labor is greater than the supply of unskilled labor.
If the price elasticity of demand for a good is .75, the demand for the good can be
described as:
A. normal.
B. elastic.
C. inferior.
D. inelastic.
A decrease in aggregate supply means:
A. both the real domestic output and the price level would decrease.
B. the real domestic output would increase and rises in the price level would become
smaller.
C. the real domestic output would decrease and the price level would rise.
D. both the real domestic output and rises in the price level would become greater.
Which combination of factors would most likely increase aggregate demand?
A. An increase in household indebtedness and a decrease in foreign demand for
products.
B. An increase in consumer wealth and a decrease in interest rates.
C. An increase in personal taxes and a decrease in government spending.
D. An increase in business taxes and a decrease in profit expectations.
A market in which the money of one nation is exchanged for the money of another
nation is a:
A. resource market.
B. bond market.
C. stock market.
D. foreign exchange market.
The following are hypothetical exchange rates: 2 euros = 1 pound; $1 = 2 pounds. We
can conclude that:
A. $1 = 4 euros.
B. $1 = .5 euro.
C. 1 euro = $.50.
D. 1 euro = $2.
The lack of job information for workers would be an example of what explanation for
wage differentials among workers?
A. Noncompeting groups.
B. Compensating differences.
C. Market imperfections.
D. Principal-agent problems.
Compared to a purely competitive firm in long-run equilibrium, the monopolistic
competitor has a:
A. lower price and lower output.
B. higher price and lower output.
C. higher price and higher output.
D. price and output that may be higher or lower.
Compared to the purely competitive firm, a pure monopoly:
A. is able to use barriers to entry and maintain positive economic profits in the long run.
B. produces an equal amount of output but charges higher prices to cover all costs in the
market.
C. is efficient from society’s perspective because it has big plants and it uses the newest
possible production technology.
D. will always become competitive in the long run because positive economic profits
will induce competitors into the market.
The first, second, and third workers employed by a firm add 24, 18, and 9 units to total
product respectively. Therefore, the:
A. marginal product of the third worker is 9.
B. total product of the three workers is 54.
C. average product of the three workers is 18.
D. marginal product of the first worker is 18.
If nominal GDP decreases, this will:
A. increase the transactions demand and total demand for money.
B. decrease the transactions demand and total demand for money.
C. increase the transactions demand for money but decrease the total demand for
money.
D. decrease the transactions demand for money but increase the total demand for
money.
A decrease in net exports will cause a(n):
A. decrease in aggregate demand.
B. increase in aggregate demand.
C. increase in aggregate supply.
D. decrease in aggregate supply.
Why do oligopolists use product development and advertising?
A. They are less easily duplicated than price cuts as a competitive strategy.
B. They enhance the public good by providing information and new products.
C. They contribute to productive and allocative efficiency in markets.
D. They create conditions for mutual interdependence and support.
If the average level of nominal income in a nation is $45,000 and the price level index
is 180, the average real income would be about:
A. $15,000.
B. $20,000.
C. $25,000.
D. $30,000.
Which of the following statements is correct about measuring collective demand for
public and private goods?
A.Public good demand is found by horizontally adding individual demand curves;
private good demand is found by vertically adding individual demand curves.
B.Private good demand is found by horizontally adding individual demand curves;
public good demand is found by vertically adding individual demand curves.
C.Both public and private good demand are found by horizontally adding individual
demand curves.
D.Both public and private good demand are found by vertically adding individual
demand curves.
As of 2012, approximately what percentage of U.S. firms are sole proprietorships?
A. 18 percent.
B. 50 percent.
C. 72 percent.
D. 84 percent.
Which market model is characterized by many firms, differentiated products, and
relatively easy entry?
A. Pure competition
B. Pure monopoly
C. Monopolistic competition
D. Oligopoly
Average fixed cost:
A. equals marginal cost when average total cost is at its minimum.
B. may be found for any output by adding average variable cost and average total cost.
C. graphs as a U-shaped curve.
D. declines continually as output increases.
Demand and marginal revenue curves are downward sloping for monopolistically
competitive firms because:
A. there is free entry and exit.
B. product differentiation allows each firm some degree of monopoly power.
C. there are a few large firms in the industry and each acts as a monopolist.
D. mutual interdependence among all firms in the industry leads to collusion.
Assume the demand schedule for product C is downsloping. If the price of C falls from
$2.00 to $1.75:
A. a smaller quantity of C will be demanded.
B. a larger quantity of C will be demanded.
C. the demand for C will increase.
D. the demand for C will decrease.
Refer to the above graph for a firm in pure competition. Line A represents:
A. total revenue.
B. average revenue.
C. average total cost.
D. average fixed cost.
Refer to the graph above. Which statement is correct?
A. The demand curve is perfectly elastic.
B. The demand curve is perfectly inelastic.
C. The supply curve is perfectly elastic.
D. The supply curve is perfectly inelastic.
Which of the following represents a long-run adjustment?
A. A farmer uses an extra dose of fertilizer on his corn crop.
B. Unable to meet foreign competition, a U.S. watch manufacturer sells one of its
branch plants.
C. A steel manufacturer cuts back on its purchases of coke and iron ore.
D. A supermarket hires four additional clerks.
Which is a major feature of the market system?
A. Government-established prices in all markets
B. Reallocation of all resources from private to public uses
C. The right to own private property and control resource uses
D. Central planning by government to provide goods and services
Which of the following is correct?
A. The federal tax system is regressive, while the state and local tax systems are
progressive.
B. Both the federal tax system and the state and local tax systems are regressive.
C. The federal tax system is progressive, while the state and local tax systems are
regressive.
D. Both the federal tax system and the state and local tax systems are progressive.