Archives: Quiz

The quantity demanded of a product increases as its price declines because the: A. lower price shifts the demand curve rightward. B. lower price shifts the demand curve leftward. C. lower price results in an increase in supply. D. demand […]

The cyclically adjusted deficit is the difference between annual government expenditures and tax revenues that would have occurred if the economy was: A. in a recession. B. at full employment. C. at the peak of a business cycle. D. at […]

If a firm doubles its output in the long run and its unit costs of production decline, we can conclude that: A. technological progress has occurred. B. economies of scale are being realized. C. the firm is encountering diminishing returns. […]

Suppose the world economy is composed of just two countries: A and B. Each can produce steel or chemicals but at different levels of economic efficiency. The domestic production possibilities curves are shown in the graphs below. Refer to the […]

When the Federal Reserve acts to ease money and credit in the economy, then the aggregate: A. supply curve will shift to the right. B. supply curve will shift to the left. C. demand curve will shift to the right. […]

Which would indicate that a firm is operating under conditions of pure competition and is being productively efficient? A. It is making economic profits in the long run. B. Marginal cost equals average variable cost. C. It produces at the […]

Refer to the above graphs, in which the numbers in parentheses near the AD1, AD2, and AD3 labels indicate the level of investment spending associated with each curve, respectively. All numbers are in billions of dollars. The level of investment […]

Refer to the above diagram, in which Qf is the full-employment output. If the economy’s current aggregate demand curve is AD0, it is experiencing: A. a positive GDP gap. B. a negative GDP gap. C. inflation. D. an adverse supply […]

As the firm in the above diagram expands from plant size #3 to plant size #5, it experiences: A. increasing returns. B. economies of scale. C. diseconomies of scale. D. constant costs. If personal income taxes and business taxes increase, […]

If the rate of exchange for a pound is $4, the rate of exchange for the dollar is: A. pound. B. 4 pounds. C. $.25. D. $1.00. Refer to the above graphs. Which pairs of budget constraints represent only an […]

The functions of money are to serve as a: A. resource allocator, method for accounting, and means of income distribution. B. unit of account, store of value, and medium of exchange. C. determinant of consumption, investment, and government spending. D. […]

Which product is most likely to be most price elastic? A. Milk B. Gasoline C. Clothing D. Automobiles To the economist, total cost includes: A. explicit and implicit costs, including a normal profit. B. neither implicit nor explicit costs. C. […]

Refer to the above diagram. A surplus of 160 units would be encountered if price was: A. $1.10, that is, $1.60 minus $.50. B. $1.60. C. $1.00. D. $.50. A natural monopoly exists when: A. unit costs are minimized by […]

The wages and salaries that people earn differ partly because of differences in: A. wealth. B. ability. C. Social Security payments. D. in-kind transfer payments. Economic resources in the capitalist system are brought together by: A. government units. B. entrepreneurs. […]

Suppose that real domestic output in an economy is 2400 units, the quantity of inputs is 60, and the price of each input is $30. The per-unit cost of production is: A. $0.25. B. $0.50. C. $0.75. D. $2.00. Of […]

Cost-push inflation may be caused by: A. a decline in per-unit production costs. B. a decrease in wage rates. C. a negative supply shock. D. an increase in resource availability. GDP in an economy is $11,130 billion. Consumer expenditures are […]

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 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 […]

A peak in the business cycle: A. occurs when the unemployment rate is its greatest. B. occurs when the inflation rate is its lowest. C. is a temporary maximum point. D. is a temporary minimum point. If the price of […]

The table below shows the cyclically adjusted budget deficit as a percentage of GDP over a five-year period. Refer to the above information. In which year was fiscal policy expansionary? A. Year 2 B. Year 3 C. Year 4 D. […]

The above diagram implies that whenever a firm’s demand curve is downsloping: A. price discrimination is not possible. B. monopolists will be more efficient than competitors. C. the demand and marginal revenue curves will coincide. D. marginal revenue is less […]

Answer the next question on the basis of the following table, which indicates the dollar price of libras, the currency used in the hypothetical nation of Libra. Assume that a system of freely floating exchange rates is in place. Suppose […]

The unemployment rate in an economy is 12 percent. The civilian labor force is 50 million. The number of employed workers in the economy is: A. 6 million. B. 24 million. C. 42 million. D. 44 million. Which fundamental question […]

In the long run: A. all costs are variable costs. B. all costs are fixed costs. C. variable costs equal fixed costs. D. fixed costs are greater than variable costs. What does TARP stand for? A. Toxic Asset Rescue Program. […]

A basic characteristic of a command system is that: A. wages paid to labor are higher. B. government owns most economic resources. C. markets function mostly free from government intervention. D. government planners play a limited role in deciding what […]

Monopolistically competitive firms have a: A. horizontal demand curve. B. perfectly inelastic demand curve. C. perfectly elastic demand curve. D. downward-sloping demand curve. Investment, as defined in national income accounts, would include: A. additions to business inventories. B. personal consumption […]

Which is one of the conditions that must be realized before a seller finds that price discrimination is workable? A. The demand for the product is perfectly elastic so any price can be charged for the product. B. The seller […]

A monopolistically competitive industry is like a purely competitive industry in that: A. each industry produces a standardized product. B. nonprice competition is a feature in both industries. C. neither industry has significant barriers to entry. D. firms in both […]

Other things equal, if a full-employment economy reallocated a substantial quantity of its resources to capital goods, we would expect: A. present consumption to rise. B. future consumption to fall. C. a lower rate of growth of real GDP. D. […]

Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in a specific year. If the firm sold 100,000 units of its output at $50 per unit, its accounting: A. profits were $100,000 and its […]

Which combination of fiscal policy actions would most likely be offsetting? A. Increase in taxes and government spending B. Decrease in taxes and increase in government spending C. Increase in taxes but no change in government spending D. Decrease in […]

If nominal GDP in one year is $5000 billion and the price index is 135, the real GDP that year is $3704 billion. Only the bondholders of a corporation have the right to vote for a corporation’s directors. Answer: FALSE […]

The public debt is the accumulation of all deficits and surpluses that have occurred through time. An expansionary monetary policy lowers the Federal funds rate, increases the money supply, and lowers other interest rates. Answer: TRUE The larger the number […]

The cornerstone of antitrust policy in the United States is generally considered to be the Sherman Antitrust Act of 1890. In the cause-effect chain, a restrictive money policy increases the money supply, decreases the interest rate, increases investment spending, and […]

Competitive firms are price takers largely because of intensive advertising by their competitors. A decrease in government spending and taxes would be an example of fiscal policies that reinforce each other. Answer: FALSE About one-fourth of all American households have […]

The long-run supply curve for a competitive, decreasing-cost industry is downward sloping. The unemployment rate for managerial and professional workers tends to be high. Answer: FALSE The selling of stock is debt financing for a corporation. Answer: FALSE If the […]

Sales taxes on consumer goods are regressive because poor people consume a larger proportion of their incomes than do rich people. The market demand curve for a pure public good shows the total value that all individuals place on each […]

A large public debt will not bankrupt the federal government because it can refinance the debt or increase taxes to pay it. The gross domestic product (GDP) is the market value of all goods and services produced by the economy […]

The four factors of production are land, labor, capital, and government services. Monetary policy is subject to less political pressure than fiscal policy. Answer: TRUE Built-in stability refers to the fact that net tax revenues vary inversely with the level […]

Price elasticity of supply decreases the longer the time period. When the public debt is held by foreigners, it is not a real burden on real domestic output. Answer: FALSE Depreciation of the dollar relative to foreign currencies will tend […]

Relatively high rates of U.S. inflation will increase the supply of, and decrease the demand for, dollars in foreign currency markets. The transactions demand for money will decrease when aggregate income decreases. Answer: TRUE Commercial banks monetize claims when they […]

There tends to be a high positive correlation between the rate of productivity growth and the rate of economic growth. In the short run, a competitive firm will not produce unless price is equal to average total costs. Answer: FALSE […]

Differences in ability are one reason for income differences in the United States. A monopolist will always charge the highest price it can get. Answer: FALSE A price ceiling in a competitive market will result in persistent surpluses of a […]

The crowding-out effect occurs when an expansionary fiscal policy increases the interest rate, decreases investment spending, and weakens fiscal policy. An expansionary monetary policy may be more effective than a restrictive monetary policy because commercial banks may decide to hold […]

The crowding-out effect of an expansionary fiscal policy is likely to be fully or partially offset during a recession. The government receives all of the benefits associated with the production of a public good. Answer: False The concave, or bowed-out, […]

The MOST obvious environmental factor affecting people’s behavior is the: A.socio-cultural context. B.economic. C.climate. D.legal and regulatory. The First Corporation is willing to face the political risks and high tariff barriers that characterize Third World markets in order to establish […]

Which of the following did 3M have to do with its organization structure in order to take advantage of its European operations? A.It created small export departments for each European country. B.It had the product managers report to the pan-European […]

Which of the following assumes greater importance after a firm has committed resources to operations in a foreign market? A.Tariff barriers B.Exit barriers C.Local content regulations D.Embargoes In keeping with its global “politically correct” policy, the ads that reached rural […]

All of following statement about sales subsidiaries are true EXCEPT: A.it involves relatively low levels of capital investment. B.it is fundamentally similar to a wholly owned manufacturing subsidiary. C.it involves taking control of the marketing in the country. D.it manages […]

In foreign market purchase decisions, _____ is/are often decisive. A.brand equity B.social and cultural norms C.pricing deals D.packaging Tropicana Dole Beverages International, now a unit of PepsiCo entered into Argentina because of all of the following EXCEPT: A.its strong economy. […]