Econ 620 Final

When nominal GDP is $800 billion and, on average, each dollar is spent four times in the economy over a year, the quantity of money demanded for transactions purposes will be: A. $200 billion. B. $400 billion. C. $800 billion. D. $3,200 billion.

A. $200 billion.

Which set of fiscal policies would tend to offset each other? A. A decrease in government spending and taxes B. A decrease in government spending and no change in taxes C. An increase in government spending and a decrease in taxes D. A decrease in government spending and an increase in taxes

A. A decrease in government spending and taxes

Refer to the above diagram, which shows three demand curves for coffee. Which would cause the change in the demand for coffee illustrated by the shift from D1 to D3? A. A decrease in the price of tea B. An increase in consumer incomes C. A decrease in the price of sugar D. A technological improvement in the production of coffee

A. A decrease in the price of tea

Which is an expansionary money policy? A. Increase the money supply to shift the aggregate demand curve rightward. B. A. Increase the money supply to shift the aggregate demand curve rightward. C. Increase the money supply to shift the aggregate supply curve leftward. D. Decrease the money supply to shift the aggregate demand curve leftward.

A. Increase the money supply to shift the aggregate demand curve rightward.

Economic systems differ according to what two main characteristics? A. Ownership of resources and methods of coordinating economic activity. B. Quantity of output produced and who receives the output. C. Who produces the output and what technology is used to produce it. D. The system of government and the quantity of natural resources available.

A. Ownership of resources and methods of coordinating economic activity.

Inflationary pressure is a growing problem for the economy. Therefore, the Federal Reserve decides to pursue a policy to reduce the inflationary pressure. Which policy changes by the Fed would reinforce each other to achieve that objective? A. Selling government securities and raising the interest rate paid on excess reserves. B. Selling government securities and lowering the discount rate C. Buying government securities and raising the discount rate D. Buying government securities and lowering the reserve ratio

A. Selling government securities and raising the interest rate paid on excess reserves

An expansionary monetary policy lowers the Federal funds rate, increases the money supply, and lowers other interest rates. A. TRUE B. FALSE

A. TRUE

Expansionary fiscal policy during a recession means cutting taxes, increasing government spending, or taking both actions. A. TRUE B. FALSE

A. TRUE

The Phillips Curve suggests an inverse relationship between increases in the price level and the level of employment. A. TRUE B. FALSE

A. TRUE

Perfectly competitive markets explained on the basis of supply and demand: A. assume many buyers and many sellers of a standardized product. B. assume market power so that buyers and sellers bargain with one another. C. do not exist in the real-world economy. D. are approximated by markets in which a single seller determines price.

A. assume many buyers and many sellers of a standardized product.

If the Consumer Price Index falls from one year to the next, we can most conclusively say that the economy has experienced: A. deflation. B. disinflation. C. inflation. D. hyperinflation.

A. deflation.

In pure competition, price is determined where the industry: A. demand and supply curves intersect. B. total cost is greater than total revenue. C. demand intersects the firm's marginal cost curve. D. average total cost equals total variable costs.

A. demand and supply curves intersect.

A cause of the unequal distribution of income in the United States is: A. differences in preferences and risks. B. differences in noncash transfers. C. high expenditures for social insurance. D. a low benefit-reduction rate for income.

A. differences in preferences and risks.

The cyclically adjusted deficit as a percentage of GDP is 2 percent in year 1. This deficit becomes 3 percent of GDP in year 2. It can be concluded from year 1 to year 2 that: A. fiscal policy was expansionary B. fiscal policy was contractionary. C. the federal government is increasing taxes. D. the federal government is decreasing spending.

A. fiscal policy was expansionary

The asset demand for money and the rate of interest are: A. inversely related. B. directly related. C. unrelated. D. both stable.

A. inversely related.

In a duopoly, if one firm increases its price, then the other firm can: A. keep its price constant and thus increase its market share. B. keep its price constant and thus decrease its market share. C. increase its price and thus increase its market share. D. decrease its price and thus decrease its market share.

A. keep its price constant and thus increase its market share.

In an aggregate demand and aggregate supply graph, a contractionary fiscal policy can be best illustrated by a: A. leftward shift in the aggregate demand curve. B. rightward shift in the aggregate demand curve. C. rightward shift in the aggregate supply curve. D. movement along an existing aggregate supply curve.

A. leftward shift in the aggregate demand curve.

Since 1975, the distribution of personal income in the United States has: A. moved toward greater inequality. B. moved toward greater equality. C. remained about the same. D. fluctuated considerably.

A. moved toward greater inequality.

In imperfectly competitive industries, producers' agreements to restrict output tend to be unstable because each firm has an incentive to: A. produce more than its output quota. B. lower both its price and its output. C. raise prices above the cooperative price. D. establish competitive price and output levels.

A. produce more than its output quota.

The circular flow model shows that the goods and services produced by business firms are sold through: A. product markets. B. stock markets. C. money markets. D. resource markets.

A. product markets.

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.

A. ratchet effect.

Economic growth may be represented by a: A. rightward shift of the production possibilities curve. B. leftward shift of the production possibilities curve. C. production possibilities curve that remains fixed. D. point outside (to the right) of the production possibilities curve.

A. rightward shift of the production possibilities curve.

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.

A. to firms in all types of industries.

The discount rate is the interest rate at which commercial banks lend to their best corporate customers. A. TRUE B. FALSE

B. FALSE

Of the following groups, which had the highest incidence of poverty in 2016? A. Whites B. Hispanics C. Children under 18 D. Persons 65 or older

B. Hispanics

Over half of U.S. consumer expenditures are for what? A. Housing. B. Services. C. Nondurable goods. D. Durable goods.

B. Services.

The satisfaction or pleasure one gets from consuming a good or service is called: A. price B. Utility C. consumption D. preferences

B. Utility

The economy of North Korea would best be classified as: A. a laissez-faire economy. B. a command system. C. a capitalist economy. D. a market system.

B. a command system.

The principal-agent problem in corporations arises from: A. the fact that the principal objective of most corporations is to make profits and not to contribute to charity. B. a conflict of interest between corporate executives who manage the firm and stockholders who own the firm. C. the view that workers are agents who are not considered to be the principal asset of the corporations for which they work. D. a perspective that corporations are agents that represent the principal source of power for government and the national economy.

B. a conflict of interest between corporate executives who manage the firm and stockholders who own the firm.

The law of diminishing returns results in: A. an eventually rising marginal product curve. B. a total product curve that eventually increases at a decreasing rate. C. an eventually falling marginal cost curve. D. a total product curve that rises indefinitely.

B. a total product curve that eventually increases at a decreasing rate.

The total quantity of money demanded is determined by: A. subtracting the asset demand for money from the transactions demand for money. B. adding the transactions demand for money to the asset demand for money. C. subtracting the transactions demand for money from nominal GDP. D. adding the asset demand for money to nominal GDP.

B. adding the transactions demand for money to the asset demand for money.

A group of firms that produce the same or similar products is: A. a plant. B. an industry. C. a partnership. D. a multiplant firm.

B. an industry.

The long-run aggregate supply curve is vertical: A. because the rate of inflation is steady in the long run. B. because resource prices eventually rise and fall with product prices. C. because product prices tend to increase at a faster rate than resource prices. D. only when the money supply increases at the same rate as real GDP.

B. because resource prices eventually rise and fall with product prices.

The public debt is the sum of all previous: A. budget surpluses minus the current budget deficit of the federal government. B. budget deficits minus any budget surpluses of the federal government. C. expenditures of the federal government. D. budget deficits of the federal government.

B. budget deficits minus any budget surpluses of the federal government.

Crowding out is the notion that: A. since tax revenues vary directly with GDP, a rise in the level of GDP will increase the budget surplus and limit expansion. B. deficit financing will increase the demand for money, increase the interest rate, and reduce the level of investment spending in the economy C. the cyclically adjusted budget is the best indicator of whether a budget deficit crowds out investment. D. the actual budget is the best indicator of whether a budget deficit crowds out saving.

B. deficit financing will increase the demand for money, increase the interest rate, and reduce the level of investment spending in the economy

The Lorenz curve is a graph that shows the: A. distribution of wealth. B. degree of income inequality C. effect of discrimination on incomes D. trade-off between equality and efficiency.

B. degree of income inequality

In pure competition, marginal revenue is: A. equal to total revenue. B. equal to product price. C. less than product price. D. greater than product price.

B. equal to product price.

An example of a final good in national income accounts would be new: A. lawn mowers purchased by Cut-rite Mowers. B. flowers purchased by homeowner Violet Rose. C. chemicals purchased by Green Grass Lawn Care. D. Trees purchased by Wendy Birch's Garden Center.

B. flowers purchased by homeowner Violet Rose.

A budget surplus means that: A. government expenditures are greater than revenues in a given year. B. government revenues are greater than expenditures in a given year. C. government revenues are greater than expenditures throughout time. D. government expenditures are falling and government revenues are rising.

B. government revenues are greater than expenditures in a given year.

When the distribution of income is adjusted for noncash transfers, the income distribution shows: A. perfect equality. B. greater equality. C. greater inequality. D. little, if any, change.

B. greater equality.

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.

B. higher price and lower output.

In an economy, the value of inventories rose from $100 billion in 2014 to $150 billion in 2015. In calculating total investment for 2015 compared to 2014, national income accountants would: A. decrease it by $50 billion. B. increase it by $50 billion. C. decrease it by $100 billion. D. increase it by $150 billion.

B. increase it by $50 billion.

Economists believe that the above-normal economic growth in the United States between 1995 and 2010 was caused primarily by: A. increases in the rate of personal saving. B. increased entrepreneurial activity, application of information technology, and global competition. C. rising federal budget surpluses that reduced real interest rates. D. expansionary monetary policy.

B. increased entrepreneurial activity, application of information technology, and global competition.

The crowding-out effect of expansionary fiscal policy suggests that: A. tax increases are paid primarily out of saving and therefore are not an effective fiscal device. B. increases in government spending financed through borrowing will increase the interest rate and thereby reduce investment. C. It is very difficult to have excessive aggregate spending in the U.S. economy. D. consumer and investment spending always vary inversely.

B. increases in government spending financed through borrowing will increase the interest rate and thereby reduce investment.

A demand curve: A. shows the relationship between price and quantity supplied. B. indicates the quantity demanded at each price in a series of prices. C. graphs as an upsloping line. D. shows the relationship between income and spending.

B. indicates the quantity demanded at each price in a series of prices.

When a firm produces less output, it can reduce: A. its fixed costs but not its variable costs. B. its variable costs but not its fixed costs. Correct C. average fixed cost. D. marginal revenue.

B. its variable costs but not its fixed costs. Correct

Supply-side economist Arthur Laffer has argued that: A. there is no empirically proven relationship between tax rates and incentives. B. large reductions in personal and corporate income taxes will increase aggregate supply much more than aggregate demand. C. the only way to eliminate inflation is to increase taxes to induce a recession severe enough to eliminate inflationary expectations. D. large cuts in income taxes will increase aggregate demand more than aggregate supply.

B. large reductions in personal and corporate income taxes will increase aggregate supply much more than aggregate demand.

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.

B. limited resources to satisfy unlimited economic wants.

The production possibilities curve bows outward from the origin because: A. opportunity costs decrease as the production of a good increases. B. opportunity costs increase as the production of a good increases. C. more production of one good results in more production of the other good. D. resources are not of uniform quality.

B. opportunity costs increase as the production of a good increases.

The aggregate demand curve is the relationship between the: A. price level and the sales of producers. B. price level and the purchasing of real domestic output. C. price level and the distribution of real domestic output. D. real domestic output bought and the real domestic output sold.

B. price level and the purchasing of real domestic output.

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.

B. product differentiation allows each firm some degree of monopoly power.

In 2007 the price of oil increased, which in turn caused the price of natural gas to rise. This can best be explained by saying that oil and natural gas are: A. complementary goods and the higher price for oil increased the demand for natural gas. B. substitute goods and the higher price for oil increased the demand for natural gas. C. complementary goods and the higher price for oil decreased the supply of natural gas. D. substitute goods and

B. substitute goods and the higher price for oil increased the demand for natural gas.

Market failures occur when: A. the government sets price floors and ceilings. B. the competitive market system under- or overallocates resources to production of goods. C. there are no externalities. D. goods are rival in consumption.

B. the competitive market system under- or overallocates resources to production of goods.

A major feature of a market system is that: A. there is economic equality. B. there is consumer sovereignty. C. there is full employment. D. all producers make profits.

B. there is consumer sovereignty.

In a free-market economy, a product that entails a spillover benefit will be: A. overproduced. B. underproduced. C. produced at the optimal level. D. associated only with goods and services provided by the government.

B. underproduced.

The unemployment rate in an economy is 7.5 percent. The total population of the economy is 250 million and the size of the civilian labor force is 180 million. The number of employed workers in this economy is: A. 13.5 million. B. 15.7 million. C. 166.5 million. D. 174.6 million.

C. 166.5 million.

Which of the following will not cause the demand for product K to change? A. A change in the price of close-substitute product J B. An increase in consumer incomes C. A change in the price of K D. A change in consumer tastes

C. A change in the price of K

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

C. Buying government securities and raising the discount rate

Which antipollution policy would be least likely to make use of cost-benefit analysis? A. Creating a market for pollution rights. B. Charging polluters an emission fee. C. Enacting legislation that bans pollution. D. Using private bargaining when the property rights are clearly defined, the number of people involved is small, and negotiation costs are small.

C. Enacting legislation that bans pollution.

To internalize the external costs of pollution is to: A. levy taxes on manufacturing firms located in crowded urban areas. B. auction off pollution rights to those willing to pay the most for them. C. Make the polluter pay all of the costs associated with the polluting activity. D. require that private citizens rather than taxpayers pay for the harmful effects of pollution.

C. Make the polluter pay all of the costs associated with the polluting activity.

Which market model has the least number of firms? A. Monopolistic competition B. Pure competition C. Pure monopoly D. Oligopoly

C. Pure monopoly

In which industry is monopolistic competition most likely to be found? A. Utilities B. Agriculture C. Retail trade D. Automobiles

C. Retail trade

Which condition will encourage competition? A. Government licensing requirements in order to enter an industry. B. A small number of buyers and sellers in a market. C. The freedom of sellers and buyers to enter or exit an industry. D. The government serving as the only supplier of goods to consumers.

C. The freedom of sellers and buyers to enter or exit an industry.

Which contributes more to the reduction of income inequality? A. Taxes B. Wealth C. Transfer payments D. Earned income tax credits

C. Transfer payments

If two goods are complements: A. they are consumed independently. B. an increase in the price of one will increase the demand for the other. C. a decrease in the price of one will increase the demand for the other. D. they are necessarily inferior goods.

C. a decrease in the price of one will increase the demand for the other.

The fundamental objective of monetary policy is to assist the economy in achieving: A. a rapid pace of economic growth. B. a money supply that is based on the gold standard. C. a full-employment, noninflationary level of total output. D. a balanced budget consistent with full employment.

C. a full-employment, noninflationary level of total output.

The basic difference between the short run and the long run is that: A. all costs are fixed in the short run, but all costs are variable in the long run. B. the law of diminishing returns applies in the long run but not in the short run. C. at least one resource is fixed in the short run, while all resources are variable in the long run. D. economies of scale may be present in the short run but not in the long run.

C. at least one resource is fixed in the short run, while all resources are variable in the long run.

A shift to the right in the demand curve for product A can be most reasonably explained by saying that: A. consumer incomes have declined and they now want to buy less of A at each possible price. B. the price of A has increased and, as a result, consumers want to purchase less of it. C. consumer preferences have changed in favor of A so that they now want to buy more at each possible price. D. the price of A has decreased and, as a result, consumers want to purchase more of it.

C. consumer preferences have changed in favor of A so that they now want to buy more at each possible price.

In 2000, McDonald's introduced the "McSalad Shaker." It turned out to be an unsuccessful product. In the marketplace for fast-food products, this lack of success is an example of: A. normal profit. B. economic costs. C. consumer sovereignty D. medium of exchange.

C. consumer sovereignty

An increase in the price of a product will reduce the amount of it purchased because: A. supply curves are upsloping. B. the higher price means that real incomes have risen. C. consumers will substitute other products for the one whose price has risen. D. consumers substitute relatively high-priced for relatively low-priced products.

C. consumers will substitute other products for the one whose price has risen.

An increase in the money supply usually: A. increases the interest rate and increases aggregate demand. B. increases the interest rate and decreases aggregate demand. C. decreases the interest rate and increases aggregate demand. D. decreases the interest rate and decreases aggregate demand.

C. decreases the interest rate and increases aggregate demand.

The long-run equilibrium position of a monopolistically competitive firm is where average costs are: A. constant. B. increasing. C. decreasing. D. at their minimum point.

C. decreasing.

The Lorenz curve is helpful in visualizing the: A. trade-off between unemployment and inflation. B. relationship between the prices received and paid by farmers. C. degree of inequality in the distribution of income. D. relationship between education and income.

C. degree of inequality in the distribution of income.

From the economist's perspective, "market failures" basically arise when: A. the quantity demanded for a good or service is greater than the quantity supplied of the good or service. B. the quantity supplied of a good or service is greater than the quantity demanded for a good or service. C. demand and supply do not accurately reflect all the benefits and all the costs of production. D. the market system is unable to adapt to or to accommodate change.

C. demand and supply do not accurately reflect all the benefits and all the costs of production.

Because of free riders, the demand for a public good: A. gets expressed in the market, but the good does not get produced by private sellers. B. does not get expressed in the market, but the good does get produced by private sellers. C. does not get expressed in the market, and the good does not get produced by private sellers. D. gets expressed in the market, and the good does get produced by private sellers.

C. does not get expressed in the market, and the good does not get produced by private sellers.

The debate over income distribution focuses on the trade-off between: A. unemployment and economic freedom. B. equality and utility. C. economic efficiency and equality. D. unemployment and economic growth.

C. economic efficiency and equality.

In the short run, the monopolistically competitive firm will experience: A. an economic profit, and also one in the long run. B. a normal profit, but in the long run only an economic profit. C. economic profits or losses, but in the long run only a normal profit. Correct D. economic profits or losses, but in the long run only an economic profit.

C. economic profits or losses, but in the long run only a normal profit.

If Congress passes legislation to cut taxes and increase government spending to counter the effects of a severe recession, this would be an example of a(n): A. cyclically adjusted budget. B. contractionary fiscal policy. C. expansionary fiscal policy. D. budget surplus.

C. expansionary fiscal policy.

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.

C. how people, institutions, and society make choices under conditions of scarcity.

Increased government spending for investments such as highways or harbors financed by increasing the public debt would most likely: A. crowd out future public investment. B. reduce the economy's future productive capacity. C. increase the amount of public capital stock in the future. D. increase the amount of private capital stock in the future.

C. increase the amount of public capital stock in the future.

If a monopolistically competitive industry is in long-run equilibrium, a firm in that industry might be able to increase its economic profits by: A. decreasing the price of its product. B. increasing the price of its product. C. increasing the demand for its product. D. decreasing the demand for its product.

C. increasing the demand for its product.

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.

C. is a temporary maximum point.

Contractionary fiscal policy is so named because it: A. involves a contraction of the nation's money supply. B. necessarily reduces the size of government. C. is aimed at reducing aggregate demand and thus achieving price stability. D. is expressly designed to contract real GDP.

C. is aimed at reducing aggregate demand and thus achieving price stability.

A market: A. exhibits upsloping demand and downsloping supply curves. B. entails the exchange of goods but not services. C. is an institution or mechanism that brings together buyers and sellers. D. always requires face-to-face contact between buyer and seller.

C. is an institution or mechanism that brings together buyers and sellers.

If average total cost is declining, then: A. marginal cost must be greater than average total cost. B. the average fixed cost curve must lie above the average variable cost curve. C. marginal cost must be less than average total cost. D. total cost must also be declining.

C. marginal cost must be less than average total cost.

In pure competition, the average revenue of a firm always equals: A. marginal cost. B. average total cost. C. marginal revenue D. total revenue.

C. marginal revenue

The term "scarcity" in economics can refer to the fact that: A. economic wants are limited and resources are abused. B. even in the richest country some people go hungry. C. no country can produce enough products to satisfy everybody's economic wants. D. it is impossible to produce too much of any particular good or service in a market economy.

C. no country can produce enough products to satisfy everybody's economic wants.

Implicit costs are: A. regarded as costs by accountants but not by economists. B. payments that a firm makes to other firms or individuals who supply resources to it. C. nonexpenditure costs. D. costs that vary proportionately with output.

C. nonexpenditure costs.

The demand curve shows the relationship between: A. money income and quantity demanded. B. price and production costs. C. price and quantity demanded. D. consumer tastes and the quantity demanded.

C. price and quantity demanded.

If a good that generates negative externalities were priced to account for spillover costs, then its: A. price would decrease and its output would increase. B. output would increase, but its price would remain constant. C. price would increase and its output would decrease. D. price would increase, but its output would remain constant.

C. price would increase and its output would decrease.

Inflation accompanied by falling real output and employment is known as: A. Laffer's law B. Okun's law. C. stagflation. D. the Phillips Curve.

C. stagflation.

Shares of ownership in corporations are referred to as: A. limited liability. B. collateral. C. stocks. D. bonds.

C. stocks.

Proponents of economic growth make all of the following arguments except: A. growth is the basic means of improving living standards. B. it is easier to reduce poverty when the economy is growing than when it is not. C. there is a direct relationship between a growing real GDP and rising pollution. D. growth provides an economic environment favorable to education and self-fulfillment.

C. there is a direct relationship between a growing real GDP and rising pollution.

In a capitalistic economy: A. consumers are not sovereign. B. markets are not competitive. C. there is a reliance on the market system. D. the government owns the means of production.

C. there is a reliance on the market system.

The average household income in the United States in 2016 was: A. $25,000. B. $37,231. C. $56,025. D. $83,143.

D. $83,143

Which is necessary to make a trade in a barter economy? A. Money B. Unlimited wants C. A medium of exchange D. A coincidence of wants

D. A coincidence of wants

The steel and automobile industries would be examples of which market model? A. Monopolistic competition B. Pure competition C. Pure monopoly D. Oligopoly

D. Oligopoly

Which is a characteristic of monopolistic competition? A. Standardized product B. A relatively small number of firms C. Absence of nonprice competition D. Relatively easy entry

D. Relatively easy entry

Which of the following is not one of the causes of the unequal distribution of income in the United States? A. Ability differences B. Job preferences and job risks C. Education and training D. The dispersion of market power

D. The dispersion of market power

Issues of the distribution of goods and services and incomes in a competitive market system are the primary topic of which fundamental question? A. What goods and services will be produced? B. How will the goods and services be produced? C. How will the system promote progress? D. Who will get the goods and services?

D. Who will get the goods and services?

The economy of South Korea would best be classified as: A. a command system. B. socialism. C. pure capitalism. D. a market system.

D. a market system.

A basic assumption used in most economic theories is that: A. what is true for a part of the whole must also be true for the whole. B. as price decreases, quantity demanded will decrease. C. whatever goes up must come down. D. all other things remain the same.

D. all other things remain the same.

A profit-maximizing firm in the short run will expand output: A. until marginal cost begins to rise. B. until total revenue equals total cost. C. until marginal cost equals average variable cost. D. as long as marginal revenue is greater than marginal cost.

D. as long as marginal revenue is greater than marginal cost.

The economy is said to be fully employed when there is no: A. unemployment. B. structural unemployment. C. frictional unemployment. D. cyclical unemployment.

D. cyclical unemployment.

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.

D. declines continually as output increases.

If the Federal Reserve raises the interest rate on excess reserves, this will: A. expand the money supply. B. encourage commercial banks to lend excess reserves. C. decrease the prime interest rate. D. discourage commercial banks from lending excess reserves.

D. discourage commercial banks from lending excess reserves.

If there is allocative efficiency in a purely competitive market for a product, the maximum price consumers are willing to pay is: A. less than marginal benefit. B. greater than marginal cost. C. equal to the amount of efficiency or deadweight losses. D. equal to the minimum price producers are willing to accept.

D. equal to the minimum price producers are willing to accept.

Economic profits are calculated by subtracting: A. explicit costs from total revenue. B. implicit costs from total revenue. C. implicit costs from normal profits. D. explicit and implicit costs from total revenue.

D. explicit and implicit costs from total revenue.

An increase in the money supply is likely to decrease: A. prices. B. nominal income. C. money demand. D. interest rates.

D. interest rates.

Cost-push inflation occurs because of a: A. rightward shift in the aggregate demand curve. B. leftward shift in the aggregate demand curve. C. rightward shift in the aggregate supply curve. D. leftward shift in the aggregate supply curve.

D. leftward shift in the aggregate supply curve.

Economists fear deflation because: A. falling prices make firms more susceptible to bankruptcy. B. consumers anticipating further price declines will delay purchases. C. falling revenue increases the likelihood that workers will be laid off. D. of all these reasons.

D. of all these reasons.

With allocative efficiency: A. the state of technology—or methods used to produce output—does not change. B. the available supplies of factors of production are fixed in both quantity and quality. C. production of any particular mix of goods and services occurs in the least costly way. D. production of any particular mix of goods and services is that mix most wanted by society.

D. production of any particular mix of goods and services is that mix most wanted by society.

In the circular economic flow diagram, households: A. make consumption expenditures and pay for land, labor, and capital. B. make consumption expenditures and receive goods and services. C. buy resources and receive goods and services. D. receive money income and supply resources.

D. receive money income and supply resources.

The purpose of the ceteris paribus assumption used in economic analysis is to: A. make sure that all relevant factors are considered. B. avoid making normative statements. C. avoid making positive statements. D. restrict the analysis to the effect of a single economic factor.

D. restrict the analysis to the effect of a single economic factor.

A movement along the production possibilities curve would imply that: A. the labor force has grown. B. productivity has increased. C. productivity has declined. D. society has chosen a different set of outputs.

D. society has chosen a different set of outputs.

A definition of the gross domestic product (GDP) is: A. personal consumption expenditures, gross private domestic investment, and net exports. B. the sum of wage and salary compensation of employees, interest income, and rental income. C. the market value of all intermediate goods and services produced by the economy in one year. D. the market value of final goods and services produced by the economy in one year.

D. the market value of final goods and services produced by the economy in one year.

Macroeconomics is the study of economics from the standpoint of: A. individual economic units. B. a typical firm. C. a typical household. D. the overall economy.

D. the overall economy.

If an economy is being "productively efficient," then that means the economy is: A. producing the products most wanted by society. B. fully employing all economic resources. C. maximizing the returns to factors of production. D. using the least costly production techniques.

D. using the least costly production techniques.

Which of the following would not shift the demand curve for beef? A. A widely publicized study that indicates beef increases one's bad cholesterol levels B. A reduction in the price of cattle feed C. An effective advertising campaign by pork producers D. A change in the incomes of beef consumers

A reduction in the price of cattle feed

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

A. direct, inverse

The long-run supply curve under pure competition will be: A. downsloping in a decreasing-cost industry and upsloping in an increasing-cost industry. B. horizontal in a constant-cost industry and downsloping in an increasing-cost industry. C. vertical in a constant-cost industry and upsloping in a decreasing-cost industry. D. upsloping in an increasing-cost industry and vertical in a constant-cost industry.

A. downsloping in a decreasing-cost industry and upsloping in an increasing-cost industry.

When the federal government uses taxation and spending actions to stimulate the economy, it is conducting: A. fiscal policy. B. incomes policy. C. monetary policy. D. employment policy.

A. fiscal policy.

A characteristic of monopolistically competitive industries is that: A. there is product differentiation but only limited advertising of products by the representative firm. B. the entry and exit of firms causes the representative firm to break even in the long run. C. the representative firm is not very responsive to changes in consumer demand. D. the representative firm produces at that level of output where marginal cost equals minimum average total cost.

B. the entry and exit of firms causes the representative firm to break even in the long run.

The optimal level of pollution in society occurs whenever: A. there is no pollution. B. the marginal benefit of pollution control equals the marginal cost. C. the total benefit of pollution control equals the total cost of pollution. D. the average cost of cleaning up the pollution is greater than the marginal cost of cleanup.

B. the marginal benefit of pollution control equals the marginal cost.

A movement along the aggregate demand curve would be caused by a change in: A. the quantity of real output demanded. B. the price level. C. an aggregate demand determinant. D. an appreciation in the value of the U.S. dollar.

B. the price level.

Graphically, the market demand curve is: A. steeper than any individual demand curve that is part of it. B. greater than the sum of the individual demand curves. C. the horizontal sum of individual demand curves. D. the vertical sum of individual demand curves.

C. the horizontal sum of individual demand curves.

When diseconomies of scale occur: A. the long-run average total cost curve falls. B. marginal cost intersects average total cost. C. the long-run average total cost curve rises. D. average fixed costs will rise.

C. the long-run average total cost curve rises.

One policy dilemma posed by cost-push inflation is that: A. an increase in aggregate demand will increase inflation and the unemployment rate simultaneously. B. tax rates can be reduced without lowering tax revenues. C. the reduction of aggregate demand to restrain inflation will cause a further reduction in the real GDP. D. the adjustment of aggregate demand can neither increase real GDP nor reduce inflation.

C. the reduction of aggregate demand to restrain inflation will cause a further reduction in the real GDP.

An increase in government spending will cause a(n): A. increase in aggregate supply. B. decrease in aggregate supply. C. decrease in aggregate demand. D. increase in aggregate demand.

D. increase in aggregate demand.