Econ Final Exam

Adding an independent variable to a regression model will always reduce the coefficient of determination.

False

Assuming that C = $6,200, I = $1,300, G = $1,100, Exports =$630, Imports = $750, and Depreciation = $600 (all in billions of dollars), GDP equals $7,880.

False

The intercept of the equation: Y = .09 + 1.5X is 1.5.

False

All else constant, as the barriers to entry into a particular market increase, so will the ability of firms in that market to earn above-average profits.

True

All else constant, if the central bank wants to slow the pace at which the economy is expanding, it should increase interest rates.

True

A goal of contractionary monetary policy is to: A. decrease the rate of growth of real GDP. B. increase the rate of growth of real GDP. C. increase inflation. D. None

A. decrease the rate of growth of real GDP.

The coefficient of determination is .90, the number of observations is 30, and a multiple regression model using 2 independent variables is estimated. What is the value of the adjusted coefficient of determination? A. .8926 B. .9000 C. .7500 D. .8000

A. .8926

The coefficient of determination will range between what values? A. 0 and 1 B. -1 and +1 C. -3 and +3 4. none the above

A. 0 and 1

Which of the following would be classified as a short-run decision? A. A firm's decision to decrease the amount of electricity used in day-to-day operations by encouraging employees to adopt conservation strategies, e.g., shut off lights when leaving a room. B. A restaurant's decision to increase the number of patrons it can accommodate by adding on a new dining room. C. A trucking firm's decision to move to a smaller facility. D. A university's decision to add a new residence hall.

A. A firm's decision to decrease the amount of electricity used in day-to-day operations by encouraging employees to adopt conservation strategies, e.g., shut off lights when leaving a room.

When calculating the price elasticity of demand, which of the following conditions must be satisfied? A. All other factors that influence demand must be held constant. B. Prices of related goods must be held constant but all other factors must be allowed to vary. C. Prices of related goods must be allowed to vary but all other factors must be held constant. D. All other factors than influence demand must be allowed to vary.

A. All other factors that influence demand must be held constant.

Open market purchase of government securities results in: A. An increase in bank reserves B. a decrease in bank reserves. C. an increase in interest rates. D. none of the above.

A. An increase in bank reserves

Which of the following would be an illustration of a microeconomic issue affecting U.S. auto manufacturers? A. An introduction of new, more fuel-efficient models by Japanese competitors B. A recession in Europe that causes U.S. auto exports to Europe to decline. C. A decline in the demand for new cars in the U.S. due to an economic downturn. D. An appreciation of the U.S. dollar relative to the Japanese yen.

A. An introduction of new, more fuel-efficient models by Japanese competitors

Assume that the U.S. dollar depreciates against the Japanese yen. What is the impact on aggregate expenditures and income? A. Both increase B. Both decrease C. Aggregate expenditure increases and income decreases. D. Aggregate expenditure decreases and income increases.

A. Both increase

Household consumption primarily depends on: A. Disposable income B. Interest rate C. Marginal propensity to report D. Credit card debt

A. Disposable income

If the percentage change in quantity demanded is greater than the percentage change in price, we would say that over this range, demand is: A. Elastic B. Unit Elastic C. Inelastic D. Perfectly inelastic

A. Elastic

The type of policy that involves changes in taxes or spending by the federal government is known as: A. Fiscal policy B. Monetary policy C. Strategic financial policy D. Federal policy

A. Fiscal policy

Which of the following is true of the relationship between the marginal cost function and the average total cost and average variable cost functions? A. If MC is greater than ATC and AVC, then ATC and AVC will increase. B. The ATC and AVC curves intersect the MC curve at minimum MC. C. The MC curve, ATC curve, and AVC curve all intersect at the same point. D. At each level of output, MC is equal to difference between AVC and ATC.

A. If MC is greater than ATC and AVC, then ATC and AVC will increase.

All else constant, as the amount of a firm's implicit costs increases, the difference between economic profit and accounting profit will: A. Increase B. Stay the same C. Decrease D. Cannot be determined

A. Increase

All else held constant, an increase in Asian imports of personal protective equipment (PPE) would cause the supply of personal protective equipment (PPE) in the United States to: A. Increase B. Stay the same C. Decrease D. Cannot be determined

A. Increase

An increase in the amount of competition with other firms that employ "best practices" would be likely to cause a particular firm's labor productivity to: A. Increase B. stay the same C. decrease D. cannot be determined

A. Increase

Which of the following is an example of an "implicit cost"? A. Interest that could have been earned on retained earnings used by the firm to finance expansion. B. The payment of rent by the firm for the building in which it is housed. C. The interest payment made by the firm for funds borrowed from a bank. D. The payment of wages by the firm.

A. Interest that could have been earned on retained earnings used by the firm to finance expansion.

If a country's national government wants to stimulate spending in the economy, it should: A. decrease taxes and increase government spending. B. increase taxes and decrease government spending. C. decrease taxes and government spending

A. decrease taxes and increase government spending.

Which of the following is a plausible reason that restaurants offer "Senior Citizen Discounts"? A. Senior citizens tend to have relatively more elastic demands for restaurant meals than other consumer groups. B. Senior citizens tend to have relatively more inelastic demands for restaurant meals. than other consumer groups. C. Senior citizens are not very sensitive to changes in prices. D. Senior citizens are frequent victims of price discrimination.

A. Senior citizens tend to have relatively more elastic demands for restaurant meals than other consumer groups.

An increase in the number of buyers in the market for Google Home devices would cause the market demand curve for Google Home devices to: A. Shift right B. Shift left C. stay the same because market demand doesn't depend on the number of buyers. D. shift left or right depending on whether the new buyers purchase more or less than existing customers at each price.

A. Shift right

Which of the following statements concerning the long-run average cost (LRAC) curve is correct? A. The LRAC curve represents the least-cost input combination of inputs for producing each level of output. B. The LRAC curve represents the least-cost input combination of inputs for producing each level of output. C. The short-run cost curve at the minimum point of the LRAC curve represents the least-cost plant size for all levels of output. D. As output increases, the amount of capital employed by the firm is held constant along the LRAC curve.

A. The LRAC curve represents the least-cost input combination of inputs for producing each level of output.

Which of the following best describes the influence of successful advertising on the market for aspirin? A. The market demand curve shifts to the right, creating a shortage at the original equilibrium price. B. Individuals' demand curves shift to the right, but the market demand curve remains at its original position. C. The market supply curve shifts to the right, creating a surplus at the original equilibrium price. D. The market supply curve for aspirin shifts to the right, causing equilibrium price to decrease.

A. The market demand curve shifts to the right, creating a shortage at the original equilibrium price.

In which of the following cases would the price elasticity of demand be expected to increase? A. The number of close substitutes for the good increases. B. The time period under consideration decreases. C. The cost of the good relative to total income decreases. D. The supply of the good increases.

A. The number of close substitutes for the good increases.

Which of the following would have the least amount of influence on the founder of T. Pawl's Brewery's choice of which inputs to employ in a production process? A. The price of a competitor's output. B. The technology of the production process. C. The marginal productivity of the inputs that can be used in the production process. D. The prices of the inputs that can be used in the production process.

A. The price of a competitor's output.

Which of the following statements is correct? A. The use of Census data is especially useful and cost-effective in targeted marketing. B. Census data are considered more reliable than data collected via direct consumer surveys because people are more likely to provide accurate responses to government census takers. C. While the use of census data in targeting marketing can provide relatively accurate information, experience has shown that it has the disadvantage of increasing marketing costs by a substantial amount. D. While census data are considerably less expensive than data obtained via direct consumer surveys, they are also considerably less reliable.

A. The use of Census data is especially useful and cost-effective in targeted marketing.

All else constant, all of the following would cause the demand curve for a good to shift except: A. a change in the cost of producing the good B. a change in the price of a related good C. a change in consumer's incomes. D. a change in the number of buyers

A. a change in the cost of producing the good

If desired spending is less than output, then firms: A. accumulate their inventories and cut production. B. deplete their inventories and cut production. C. deplete their inventories and increase production. D. accumulate their inventories and increase production.

A. accumulate their inventories and cut production.

The payment of wages by a firm is an example of: A. an explicit cost of production. B. an implicit cost of production. C. an irreversible cost of production. D. a long-run cost of production.

A. an explicit cost of production.

In the money market, an excess supply of money will: A. increase the demand for bonds, increase bond prices, and decrease interest rates. B. increase the demand for bonds, decrease bond prices, and decrease interest rates. C. decrease the demand for bonds, increase bonds prices, and increase interest rates. D. decrease the demand for bonds, decrease bond prices, and increase interest rates.

A. increase the demand for bonds, increase bond prices, and decrease interest rates.

Over time Americans have chosen to cook less at home and dine out more. This change in behavior: A. increases GDP. B. reduces GDP. C. does not affect GDP. D. none of the above

A. increases GDP.

The opportunity cost of hold real money balances is the: A. intrest rate B. price level C. all the above D. none of the above

A. intrest rate

The function of money that enables individuals to exchange goods and services in a common unit of account is called: A. medium of exchange. B. store of value. C. unit of account. D. measure of power.

A. medium of exchange.

Short-run macroeconomic policies concentrate on: A. minimizing fluctuations around potential GDP B. Maximizing fluctuations around potential GDP C. incentives for increasing productivity and the potential output of the economy. D. None

A. minimizing fluctuations around potential GDP

The key characteristic of an oligopolistic market is: A. mutual interdependence among firms in the market B. the absence of market power by any one firm. C. ease of entry into, and exit out of, the market.

A. mutual interdependence among firms in the market

Macroeconomics studies the following topics: A. national output, the inflation rate, and the trade deficit. B. the price of Facebook stock and wage differences. C. differences in market structure. D. All the above

A. national output, the inflation rate, and the trade deficit.

The capacity utilization rate is the ratio of ________ to ________. A. production; capacity B. capacity; production C. capacity; potential GDP D. none

A. production; capacity

Assume there is an improvement in technology that increases the marginal product of each unit of labor. This would have the effect of: A. reducing the average total cost, average variable cost, and marginal cost of production. B. increasing the average total cost, average variable cost, and marginal cost of production. C. reducing the average variable cost and marginal cost of production, but average total cost would be unchanged. D. reducing the average total cost and average variable cost of production, but marginal cost would be unchanged.

A. reducing the average total cost, average variable cost, and marginal cost of production.

Compared to the GDP deflator, the consumer price index measures: A. the labor force B. the employed C. the unemployed D. none of the above

A. the labor force

The "law of diminishing marginal returns" applies to: A. the short run, but not the long run. B. the long run, but not the short run. C. both the short run and the long run. D. neither the short run nor the long run.

A. the short run, but not the long run.

A car dealer wants to get rid of the stock of last year's model. Assume that the dealer knows from past experience that the price elasticity of demand for cars is unitary (= 1). If the price of the cars is currently $20,000 and the dealer wants to increase the quantity demanded from 30 units to 50 units, what must the new price be if the dealer is to sell the 20 additional cars? A. $10,000 B. $12,000 C. $16,000 D. $18,000

B. $12,000

Suppose the price of movies seen at a theater rises from $12 per couple to $20 per couple. The theater manager observes that the rise in price causes attendance at a given movie to fall from 300 persons to 200 persons. What is the arc price elasticity of demand for movies? A. 0.5 B. 0.8 C. 1.0 D. 1.2

B. 0.8

The currency deposit ratio, c, is 0.10. The reserve requirement, rr, is 0.08. The excess reserve ratio, e, is 0.05. What is the size of the money multiplier? A. 4.70 B. 4.78 C. 4.75 D. 4.00

B. 4.78

The reserve requirement is 0.20. What is the simple deposit multiplier? A. 1 B. 5 C. 0.10 D. 100

B. 5

Business taxes increase. What is the impact on aggregate expenditures and income? A. Both increase B. Both decrease C. Aggregate expenditure increases and income decreases. D. Aggregate expenditure decreases and income increases.

B. Both decrease

Which of the following inputs is most likely to be "fixed" in the short run? A. Labor B. Capital C. Energy D. Raw Material

B. Capital

The range of values in which we can be confident that the true regression coefficient lies within a given degree of probability is called a: A. Prediction interval B. Confidence interval C. Logistic regression D. None of the above

B. Confidence interval

So long as a firm is enjoying increasing marginal returns, a one unit increase in output will cause marginal costs to ________ and total costs to ________. A. increase; increase B. Decrease; increase C. increase; decrease D. decrease; decrease

B. Decrease; increase

As the price of milk increases, what would reasonably be expected to happen to the equilibrium price and equilibrium quantity of cereal? A. Equilibrium price would increase and equilibrium quantity would decrease B. Equilibrium price and quantity would both decrease. C. Equilibrium price would decrease and equilibrium quantity would increase. D. Equilibrium price and quantity would both increase.

B. Equilibrium price and quantity would both decrease.

Consumer debt increases. What is the impact on aggregate expenditures and income? A. both increase B. both decrease C. Aggregate expenditure increases and income decreases. D. Aggregate expenditure decreases and income increases.

B. both decrease

Assume Audi is capable of producing both large and small cars and is operating at full capacity. Assume the price of large cars increases due to a shift in consumers' preferences toward large cars and away from smaller cars. What would reasonably be expected to happen to the equilibrium price and quantity of the automaker's small cars? A. Equilibrium price would increase and equilibrium quantity would decrease. B. Equilibrium price and quantity would both decrease. C. Equilibrium price would decrease and equilibrium quantity would increase. D. Equilibrium price and quantity would both increase.

B. Equilibrium price and quantity would both decrease.

The primary responsibility of conducting monetary policy rests with the: A. Board of Governors. B. Federal Open Market Committee. C. Federal Deposit Insurance Corporation. D. U.S. Treasury.

B. Federal Open Market Committee.

Open market purchases and sales are conducted at the: A. Federal Reserve Bank of Kansas City. B. Federal Reserve Bank of New York. C. Federal Reserve Bank of Chicago. D. Federal Reserve Bank of St. Louis.

B. Federal Reserve Bank of New York.

The interest rate that commercial banks charge each other for loans of reserves to meet their minimum reserve requirements is called: A. Treasury bill rate B. Federal funds rate C. Prime interest rate D. none

B. Federal funds rate

Within the circular flow model, which of the following is not represented as a flow of funds into firms? A. Foreign purchases of goods and services. B. Income payments C. Consumption spending D. Government purchases

B. Income payments

What is the difference between inflation and deflation? A. Inflation is a sustained decrease in the price level whereas deflation is a sustained increase in the price level. B. Inflation is a sustained increase in the price level whereas deflation is a sustained decrease in the price level. C. Inflation is a measure of relative prices whereas deflation is a sustained increase in the price level. D. none

B. Inflation is a sustained increase in the price level whereas deflation is a sustained decrease in the price level.

________ investment is more volatile than other forms of investment spending because this type of investment can be changed relatively quickly. A. Business fixed B. Inventory C. Residential D. Capital

B. Inventory

Which of the following statements is correct? A. Evidence strongly suggests that legislatively mandated input combinations have greatly reduced production costs in many industries. B. Legislating input combinations in a particular industry can bias the decision making of the firm's managers and could lead to higher-than-necessary costs of production. C. Legislating input combinations in a particular industry has little or no effect on the decision making of the firm's managers. D. Legislating input combinations in a particular industry is preferred to relying on market forces to determine the cost-minimizing combination of inputs to a production process.

B. Legislating input combinations in a particular industry can bias the decision making of the firm's managers and could lead to higher-than-necessary costs of production.

If electricity demand is inelastic, and electric rates increase, which of the following is likely to occur? A. Quantity demanded will fall by a relatively large amount. B. Quantity demanded will fall by a relatively small amount. C. Quantity demanded will rise in the short run, but fall in the long run. D. Quantity demanded will fall in the short run, but rise in the long run.

B. Quantity demanded will fall by a relatively small amount.

All of the following are non-price factors that influence demand except: A. Tastes and preferences B. Quantity supplied C. Income D. The prices of related goods

B. Quantity supplied

Taxes levied on a firm's earnings ________ the effective cost of funds. A. lower B. Raise C. no effect D. None

B. Raise

Measuring expenditures and income with the price level held constant, so that any changes in these values represent changes in the actual amount of goods, services, and income is denoted in ________ terms. A. nominal B. Real C. Constant dollar D.All the above

B. Real

Which of the following would be considered an example of a macroeconomic problem? A. Should microsoft reduce the price of its Windows operating system? B. Should the federal government extend the eligibility period for unemployment benefits? C. Should tesla eliminate one of its production shifts? D. Should bank of America increase the interest rate it charges its credit card customers?

B. Should the federal government extend the eligibility period for unemployment benefits?

In which of the following situations would reliance on expert opinion as a basis for a managerial decision be most preferred? A. When the product can be packaged with a variety of price and quality combinations. B. When the business in question serves as a supplier of inputs to other businesses, especially in multi-product situations where other strategies may be prohibitively expensive. C. When the level of economic activity can have a significant effect on the demand for the firm's output. D. When the product being marketed is relatively new.

B. When the business in question serves as a supplier of inputs to other businesses, especially in multi-product situations where other strategies may be prohibitively expensive.

Gross Domestic Product (GDP) is defined as the market value of: A. all goods and services sold during the year by domestic and foreign producers. B. all final consumer goods produced during the year by domestic and foreign suppliers. C. all intermediate goods produced during the year by domestic and foreign suppliers.

B. all final consumer goods produced during the year by domestic and foreign suppliers.

The amount of money a firm pays to lease a building it uses for office space is called: A. the full opportunity cost of production. B. an explicit cost. C. a real cost of production. D. an implicit cost.

B. an explicit cost.

An increase in the discount rate would: A. decrease bank borrowing of reserves and reflect an expansionary monetary policy. B. decrease bank borrowing of reserves and reflect a contractionary monetary policy. C. increase bank borrowing of reserves and reflect an expansionary monetary policy. D. increase bank borrowing of reserves and reflect a contractionary monetary policy.

B. decrease bank borrowing of reserves and reflect a contractionary monetary policy.

An increase in the reserve requirement would: A. decrease excess reserves and reflect an expansionary monetary policy. B. decrease excess reserves and reflect a contractionary monetary policy. C. increase excess reserves and reflect an expansionary monetary policy. D. increase excess reserves and reflect a contractionary monetary policy.

B. decrease excess reserves and reflect a contractionary monetary policy.

Assume the company, Abbas Incorporated, uses two inputs, capital and labor. All else constant, an increase in the price of labor would create an incentive for the company to: A. substitute labor for capital in its production function. B. substitute capital for labor in its production function. C. hire more capital and labor. D. hire less capital while holding the amount of labor employed constant.

B. substitute capital for labor in its production function.

A decrease in price will result in an increase in total revenue if: A. the percentage change in quantity demanded is less than the percentage change in price. B. the percentage change in quantity demanded is greater than the percentage change in price. C. demand is inelastic. D. the consumer is operating along a linear demand curve at a point at which the price is very low and the quantity demanded is very high.

B. the percentage change in quantity demanded is greater than the percentage change in price.

Assume a factory that currently employs 25 workers and owns a factory with 10,000 square feet of floor space is considering doubling the size of its factory. Economists would classify this as: A. the quantity of output is usually assumed to be fixed. B. the quantity of capital employed is usually assumed to be fixed. C. the quantity of both labor and capital employed are usually assumed to be fixed. D. the quantity of both labor and capital must be allowed to vary so that output can vary in the short run.

B. the quantity of capital employed is usually assumed to be fixed.

Marginal revenue equals 0 when: A. total revenue is increasing B. total revenue is at its max C. total revenue is decreasing D. None of the above

B. total revenue is at its max

If marginal propensity to save equals 0.50, then the marginal propensity to consume is: A. 1.25 B. 0.50 C. 0.70 D. 1.00

B.0.50

Assume the demand for a good is price inelastic, i.e., ed < 1 (in absolute value). This means that if price decreases by 50 percent, quantity demanded will: A. Increase by more than 50% B. decrease by more than 50% C. increase by less than 50% D. Decrease by less than 50%

C. increase by less than 50%

In year one, the GDP deflator is 100 and in year two 110. If nominal GDP in year two is $300 billion, what is real GDP for year two? A. $200 billion. B. $100 billion. C. $272.73 billion. D. $220 billion.

C. $272.73 billion.

If $1000 was deposited in a bank and the reserve requirement is 0.20, how much is available for loans? A. $900 B. $910 C. $800 D. $930

C. $800

Which of the following is the best example of "depreciation"? A. An individual worker becoming tired at the end of an eight-hour work day. B. The notion that individuals obtain less utility from paying taxes than giving to charities. C. A truck used by a pizzeria to make deliveries is worth less at the end of one year. D. A rise in prices depreciating the value of consumers' real incomes.

C. A truck used by a pizzeria to make deliveries is worth less at the end of one year.

Which of the following statements is correct? A. In the short run, if a firm chooses to produce no output (i.e., shut down) its total costs of production will equal its total fixed costs. B. If a firm decides to shut down, its short-run total costs will equal 0. C. As a firm increases output in the short run, the change in total costs is equal to the change in total variable costs. D. A firm minimizes its total costs of production when average variable cost is minimized

C. As a firm increases output in the short run, the change in total costs is equal to the change in total variable costs.

Suppose the demand for meals at a medium-priced restaurant is elastic. If the management of the restaurant is considering raising prices, it can expect the total revenues the restaurant earns to: A. Increase B. stay the same C. Decrease D. cannot be determined

C. Decrease

Long-run macroeconomic policies concentrate on: A. Minimizing fluctuations around potential GDP B. Maximizing fluctuations around potential GDP C. Incentives for increasing productivity and the potential of the economy D.None

C. Incentives for increasing productivity and the potential of the economy

Assume that when the price of good Z is increased from $5 to $6, the total revenue earned increases from $600 to $690. Based on this information, we can conclude that over this range, demand for Z is: A. Elastic B. Unit Elastic C. Inelastic D. Perfectly inelastic

C. Inelastic

If the percentage change in quantity demanded is less than the percentage change in price, we would say that over this range, demand is: A. Elastic B. Unit elastic C. Inelastic D. Perfectly elastic

C. Inelastic

For the U.S. economy, the largest expenditure category is: A. Gov expenditures B. Net export expenditures C. Personal consumption expenditures D. Investment expenditures

C. Personal consumption expenditures

The assumed goal of the firms that operate in each of the four market structures discussed in the text is to maximize: A. sales B.revenue C. Profits D. Price

C. Profits

Generally speaking, the inclusion of transportation costs in the total costs of production has the effect of causing the LRAC curve to: A. Shift down B. Flatten out C. Shift up D. Become steeper over the range on economies of scale

C. Shift up

Which of the following is true of the typical relationship between marginal product (MP) and average product (AP)? A. If MP is greater than AP, then AP is falling. B. The AP curve intersects the MP curve at minimum MP. C. The MP curve intersects the AP curve at maximum AP. D. If MP is less than AP, then AP is increasing.

C. The MP curve intersects the AP curve at maximum AP.

In the context of a production function, the remote order takers in the fast food industry would be classified as: A. a fixed input B. a marginal input C. a variable input D. an inframarginal input

C. a variable input

Fred is considering opening a ski shop in Colorado. Assume Fred will incur the following costs: building rent = $100,000/year, inventory = $250,000/year, energy = $50,000/year, and labor (one clerk) = $10,000/year. In addition, Fred's current income as a computer programmer is $40,000 per year. Assuming Fred would earn $460,000 in revenues, he could expect to earn: A. an accounting profit of $10,000 per year. B. an accounting profit of $60,000 per year. C. an economic profit of $10,000 per year. D. an economic profit of $50,000 per year.

C. an economic profit of $10,000 per year.

As we move down a linear demand curve, the absolute value of the price elasticity of demand: A. increase B. Stay the same C. decrease D. Cannot be determined

C. decrease

A decrease in the real money supply can result from: A. increase in the nominal money supply or an increase in the price level. B. increase in the nominal money supply or a decrease in the price level. C. decrease in the nominal money supply or an increase in the price level. D. decrease in the nominal money supply or a decrease in the price level.

C. decrease in the nominal money supply or an increase in the price level.

For a particular production function, over the range of output where marginal product rises as units of the variable input are added to the fixed input, marginal cost will be: A. increasing B. constant C. decreasing D. cannot be determined

C. decreasing

If desired spending exceeds output, then firms: A. accumulate their inventories and cut production. B. deplete their inventories and cut production. C. deplete their inventories and increase production. D. accumulate their inventories and increase production.

C. deplete their inventories and increase production.

In a circular-flow diagram, total income and total expenditures in an economy are: A. equal because firms are ultimately owned by households. B. equal only if there is no saving. C. equal because every transaction has a buyer and a seller. D. always equal because some people's income is not for production.

C. equal because every transaction has a buyer and a seller.

Zoran, a Croatian citizen, only works in the United States. The value added to production from his employment is: A. Include in Croatian GDP B. included only in U.S. GDP. C. included only in U.S. GNP. D. not included in either U.S. GDP or U.S. GNP.

C. included only in U.S. GNP.

Information on the price elasticity of demand is particularly important to managerial decision making because: A. the higher the price elasticity of demand for a product is, the more profitable it will be to produce more of it. B. depending on the elasticity coefficient, decision makers will immediately know if a price change will cause profits to increase or decrease. C. it allows one to predict how total revenue will respond, i.e., increase or decrease, to a change in price. D. as the price elasticity coefficient approaches one, profits will increase.

C. it allows one to predict how total revenue will respond, i.e., increase or decrease, to a change in price.

All else constant, as the price of petroleum increases relative to the prices of other inputs to the production process, in their effort to minimize their total costs of production, we can expect to see firms employ: A. less of each of the inputs of production. B. more petroleum and less of the other inputs to production. C. less petroleum and more of the other inputs to production. D. the same amount of petroleum since there are no substitutes for petroleum.

C. less petroleum and more of the other inputs to production.

Consider the production function for bottled water. All of the following would be considered variable inputs except: A. the plastic bottles B. The water the bottles are filled with C. the machine used to fill each bottle D. the electricity used to power the machine used to fill the bottles

C. the machine used to fill each bottle

All else constant, as more fast-food joints substitute alternative burger toppings, e.g., caramelized onions, guacamole for pickles, the market price of pickles would be expected to: A. Increase B. Stay the same C. Decrease D. Cannot be determined

C.Decrease

If the local pizzeria raises the price of a medium pizza from $6 to $10 and quantity demanded falls from 700 pizzas a night to 100 pizzas a night, the arc price elasticity of demand for pizzas is: A. 0.67 B. 1.5 C. 2.0 D. 3.0

D. 3.0

You are given the following consumption function C = 50 + .80YD. What is the amount of autonomous consumption expenditures? A. 75 B. 100 C. 5 D.50

D. 50

Which of the following statements is false? A. Economic costs include the opportunity costs of the resources owned by the firm. B. Accounting costs typically include only explicit costs C. Economic profit will always be less than accounting profit if resources owned and used by the firm have any opportunity costs. D. Accounting profit is equal to total revenue minus implicit costs.

D. Accounting profit is equal to total revenue minus implicit costs.

GDP can increase from one year to the next by: A. increases in prices while quantities of goods and services are constant. B. increases in the quantities of goods and services produced while prices remain constant. C. both prices and quantities of goods and services increase. D. All the above

D. All the above

If an industry is characterized by substantial diseconomies of scale, as a particular firm in the industry expands its production capacity we will observe: A. A decrease in marginal costs B. An increase in the marginal product of labor C. A decrease in the total fixed costs of production D. An increase in the average total costs of production

D. An increase in the average total costs of production

Assume that after the fifth worker, each additional worker a firm hires is less productive than the previous worker. Based on this information, we can conclude that beyond the fifth worker, the average product of labor will: A. Increase B. Stay the same C. Decrease D. Cannot be determined

D. Cannot be determined

A home theater system and an HD television would be considered an example of: A. Substitute goods B. Supply goods C. Inferior goods D. Complementary goods

D. Complementary goods

The labor force is 100 million and the unemployment rate is 5 percent. One million people quit looking for a job. What is it called when an individual leaves the labor force, and in this case what is the new unemployment rate? A. Encouraged worker, 5 percent. B. Discouraged worker, 5.05 percent. C. Discouraged worker, 3 percent. D. Discouraged worker, 4.04 percent.

D. Discouraged worker, 4.04 percent.

The aggregate expenditure in an open economy is defined as: A. E = C + I + G. B. E = C + I + G + X. C. E = C × I × G × X - M. D. E = C + I + G + X - M.

D. E = C + I + G + X - M.

In which of the following market structures would X-inefficiency be most likely to exist? A. Perfect competition. B. Monopolistic competition. C. Oligopoly D. Monopoly

D. Monopoly

Suppose an apartment complex is converted to an owner occupied condominium. Suppose that the estimated value of the condominium owners' housing services is now the same as their former rent. A. GDP increases. B. GDP decreases. C. GDP is unaffected because neither the rent nor the estimate of the value of housing services is included in GDP. D. None of the above

D. None of the above

The interest rate that banks charge on loans to their best customers is called the: A. federal funds rate B. Discount rate C. Mortgage interest rate D. Prime rate

D. Prime rate

In the market for a normal good, what is the ultimate market reaction of suppliers to an increase in the incomes of consumers? A. Suppliers do not react, because a change in income shifts the demand curve, not the supply curve. B. The supply curve shifts to the right. C. The supply curve shifts to the left. D. Quantity supplied increases as the equilibrium moves along the supply curve due to a rise in the demand.

D. Quantity supplied increases as the equilibrium moves along the supply curve due to a rise in the demand.

Assume the cost of certain inputs used to produce artificial Christmas trees increases and, at the same time, the economy moves into a recession, causing the incomes of consumers to decrease. Which of the following will happen to the equilibrium price and quantity of artificial Christmas trees? (Assume artificial Christmas trees are normal goods.) A. Price will increase; quantity cannot be determined. B. Price will decrease; quantity cannot be determined. C. Quantity will increase; price cannot be determined. D. Quantity will decrease; price cannot be determined.

D. Quantity will decrease; price cannot be determined.

The negatively-sloped part of the long-run average total cost curve is likely due to which of the following? A. Diseconomies of scale. B. Diminishing returns. C. The difficulties encountered in coordinating the many activities of a large firm. D. The increase in productivity that results from specialization.

D. The increase in productivity that results from specialization.

Which of the following is not a determinant of a firm's cost functions? A. The production function. B. The price of labor. C. The productivity of the firm's capital stock. D. The price of the firm's output.

D. The price of the firm's output.

Assume a firm is currently producing 100 units of output, total fixed costs are $10,000, and average variable costs are $8. Based on this information we can conclude, with certainty, that the firm's: A. marginal costs are $8 B. Total variable costs are $8000 C. Average fixed costs are $2 D. Total costs are $10,800

D. Total costs are $10,800

Which of the following statements regarding historical costs is correct? A. Historical costs represent what the firm paid for an input when it was purchased, adjusted for inflation. B. Historical costs vary depending on the method of depreciation a firm uses. C. Historical costs are a good indicator of the current opportunity cost of a piece of capital. D. Using historical costs can cause true economic profit to be under or over stated.

D. Using historical costs can cause true economic profit to be under or over stated.

In which of the following situations would a firm be more likely to rely on a capital-intensive method of production? A. When the rate of technological innovation is low. B. When capital is relatively expensive. C. When the firm's output cannot be produced using the assembly line method of production. D. When labor supply is limited relative to the available amount of capital.

D. When labor supply is limited relative to the available amount of capital.

In the market for designer shoes, an increase in demand is illustrated by: A. a movement up the demand curve. B. a movement down the demand curve. C. a shift of the demand curve to the left. D. a shift of the demand curve to the right.

D. a shift of the demand curve to the right.

All else constant, an increase in productivity has the effect of causing: A. the marginal product of labor to increase and no effect on the average product of labor. B. the average product of labor to increase and no effect on the marginal product of labor. C. the marginal product of labor to increase and the average product of labor to decrease. D. both the marginal and average product of labor to increase.

D. both the marginal and average product of labor to increase.

Government expenditures are considered autonomous in the model meaning that changes are the result of: A. Changes in real income B. Changes in inflation C. Changes in unemployment D. changes in policy decisions

D. changes in policy decisions

Appreciation of the U.S. dollar will ________ exports and ________ imports, other things equal. A. increase; increase B. increase; decrease C. decrease; decrease D. decrease; increase

D. decrease; increase

The ability of a financial asset to be used to immediately make transactions is called: A. store of value. B. medium of exchange. C. illiquidity. D. liquidity.

D. liquidity.

In the money market, a decrease in money demand will: A. result in a rightward shift in the money demand curve increasing interest rates. B. result in a rightward shift in the money demand curve decreasing interest rates. C. result in a leftward shift in the money demand curve increasing interest rates. D. result in a leftward shift in the money demand curve decreasing interest rates.

D. result in a leftward shift in the money demand curve decreasing interest rates.

To compute GDP: A. simply sum the number of final goods and services. B. sum the cost of producing final goods and services. C. use a weighted average by a survey regarding how much people value different goods and services. D. sum the market values of final goods and services.

D. sum the market values of final goods and services.

The last time the U.S. Post Office raised its prices for mail service critics of the rate increase argued that the Post Office's revenues would actually decline as a result of the price increase. It can be concluded that: A. both groups believe demand is elastic, but for different reasons. B. both groups believe demand is inelastic, but for different reasons. C. the Post Office believes demand for mail service is elastic; opponents of the price increase believe demand is inelastic. D. the Post Office believes demand for mail service is inelastic; opponents of the price increase believe demand is elastic.

D. the Post Office believes demand for mail service is inelastic; opponents of the price increase believe demand is elastic.

The coefficient of determination is the proportion of the variation that is not explained by the regression model.

False

With respect to prices, at the macroeconomic level attention is focused on relative price, while at the microeconomic level attention is focused on absolute prices.

False

Assume a monopolistically competitive firm comes up w/ a new innovation that allows it too earn above-normal economic profits. Given the nature of the market in which it operates, over time those profits will be competed away as new competitors enter the market

True

Reliance on expert opinion to predict consumer behavior has the advantage of being a relatively low cost approach to gathering information. In many situations, however, it is subject to several sources of bias that can undermine its reliability.

True

When using expert opinion, consumer surveys, test marketing, and price experiments to analyze consumer behavior, managers must consider how to isolate the effect of different variables that influence demand.

True