Economics
Which of the following is included in the calculated Gross Domestic Product?
A local ice cream store sells $17,000 worth of cones and sundaes on July 1.
With regard to the economy, the term negative inflation is synonymous with which of the following?
Deflation
Philosophers draw a distinction between _______, which describe the world as it is, and normative statements, which describe how the world should be.
Positive Statements
The lesson of _______ is to forget about the money that's irretrievably gone and instead to focus on the marginal costs and benefits of future options.
Sunk costs
In a discussion of economics, which of the following would exert the most influence on an individual firm's decision to hire workers?
The Macroeconomy
Investment (I) includes:
The amount spent on new factories and machinery.
Price elasticity of demand is defined as:
The percentage change in quantity demanded divided by the percentage change in price.
Whenever there is a surplus at a particular price, the quantity sold at that price will equal:
The quantity demanded at that price.
In long-run equilibrium, a perfectly competitive firm's short-run marginal cost curve crosses the long-run average cost curve at the lowest point on the long-run average cost curve.
True
State Sales taxes probably function as automatic stabilizers.
True
U.S. Treasury Notes, Bonds, and Bills are government securities guaranteed by the federal government.
True
Velocity of Circulation increase during hyperinflation.
True
A monopolized market is characterized by:
all of the above.
An oligopoly:
all of the above.
Perfect competition is defined as a market structure in which:
all of the above.
A cost or benefit of a good or action imposed on people (others) rather than the party responsible for the good or action is a(an)?
Externality
The percentage change in the price level from one time period to the next, whether the price level is measured in terms of money or as a price index, will be the ______.
Inflation rate
The ________ is based on the prices of merchandise that are exported or imported.
International Product Index
Which of the following is the best example of a public good?
National Defense
Many economists believe that the trend toward greater wage inequality across the U.S. economy was primarily caused by _______.
New Technologies
What happens in a perfectly competitive industry when economic profit is greater than zero?
New firms may enter the industry and all of the above.
The process of banks making loans in financial capital markets is intimately tied to the:
creation of money.
To determine whether two goods are substitutes or complements, an economist would estimate the __________.
cross-elasticity of demand
Which of the following is correct? The steel used to produce automobiles:
is an intermediate good.
Investment in human capital:
is characterized by both b) and c).
Over the long run, ________ per hour is the most important determinant of the average wage level in any economy.
productivity
Marginal product measures the change in:
the firm's output brought about by employing one additional unit of input.
Perfect competition and monopolistic competition are similar because under both market structures:
there are zero economic profits in the long run.
If monopolistic competitors must expect a process of entry and exit like perfectly competitive firms,
they will be unable to earn higher-than-normal profits in the long run.
A fishing boat owner brings 50,000 fish to market and the market price if $4 per fish. Her average variable cost of 50,000 fish is $1 per fish and the fixed cost of the boat is $100,000, what is her profit per fish?
$1
The fixed cost of producing 6 pizzas is shown to be equal to ______.
$100
As shown in Exhibit 4, in order to maximize its profit (or minimize its loss), what price should the monopoly charge for its product?
$120 per unit.
The marginal cost of the fourth pizza is shown to be equal to _____.
$17
I'MaPizzaCo. produces and sells specialty pizzas. Last year, it produced 8,000 mushroom, sausage and spinach pizzas and sold each one for $8. To produce these 8,000 specialty pizzas, the company incurred variable costs of $24,000 and a total cost of $40,000. I'MaPizzaCo's average fixed cost to produce 8,000 specialty pizzas was:
$2.00
As shown in Exhibit 9, the total cost of producing 4 units is ______.
$227
As shown in Exhibit 9, the marginal cost of producing the third unit is ______.
$24
In Exhibit 16, the firm should shut down in the short run if the market price of its product falls below ______.
$30 per unit
The average total cost of producing 5 pizzas is shown to be equal to ______.
$32
As shown in Exhibit 3, in order to maximize its profit, what price should GeneTech charge for its vaccine?
$35 per dose.
The equilibrium price per bushel of corn is what price:
$4
As presented in Exhibit 1, the short-run profit per unit of output for the monopolistic competitive firm is _____.
$5
If a perfectly competitive firm sells 10 units of output at a market price of $5 per unit, its marginal revenue per unit is _____.
$5
If the banking system gets $100 in new required reserves from the Fed and the required reserve is .2, then the maximum amount by which total deposits in the economy can increase is ______.
$500
Stealth bank has deposits of $600 million. It holds reserves of $30 million and government bonds worth $80 million. If the bank sells its loans at market value of $400 million, what will its total assets equal?
$510 million
If velocity (V) is 3 and the money supply (M) is $300 billion, then GDP is __________.
$900 billion
The variable cost of producing 4 pizzas is shown to be equal to ______.
$40
If a bank previously had zero excess reserves and receives a deposit of $100 and the required reserve ratio is .2, then the maximum amount of this $100 that the bank can lend is ______.
$80
The total cost of producing 3 pizzas is shown to be equal to ______.
$123
As presented in Exhibit 1, the short-run profit-maximizing output for the monopolistic competitive firm is ____________.
400 units per day.
In economy A, C + I + G + X - M equals $500 billion, indirect business taxes equals $50 billion and depreciation equals $25 billion. National income, therefore, equals ______.
425 billion
A firm can produce 450 gallons of milk per day with 4 workers and 500 gallons per day with 5 workers. The marginal product of the fifth worker expressed in gallons per worker per day, is ______.
50
In Exhibit 16, suppose the firm faces a price of $80 per unit. How much should the firm produce to earn the largest possible profit?
6 units per hour
The basket of goods in the Consumer Price Index consists of about ______ products; that is, several hundred specific products in over _____ broad-item categories.
80,000; 200
The basket of goods in the Consumer Price Index consists of about _______ products; that is, several hundred specific products in over _______ broad item categories.
80,000; 200
A person can be classified as unemployed if the person:
A, B & C.
The demand measure of GDP accounting adds together:
Consumption, investment, government purchases, and trade balance.
The circular flow diagram of economic activity is a model of the:
Flow of goods, services, and payments between households and firms.
For most high-income countries of the world, GDP ______ over time.
Has risen gradually.
Assume that oranges and peaches can both be grown on the same land. An increase in the price of peaches, all other factors constant, will cause a(an):
Leftward shift of the supply curve for oranges.
The marginal benefit of a slice of pizza is the:
Maximum amount that a consumer is willing to pay for the slice.
The surgeon general announced recently that eating fruits significantly reduces the change of getting cancer. What will be the market effect on the price and quantity of fruit as a result of society's preference to eat more fruit:
Price increases; quantity increases.
Which of the following is an example of one of the major categories in the overall CPI?
Recreation
Which of the following would be classified in the M1 category of the money supply?
Demand Deposits
With respect to measuring the money supply, which of the following terms describes a checking account?
Demand Deposits
______ is the change in what is on the horizontal axis (quantity) divided by the change in what is on the vertical axis (price).
Elasticity
Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is:
The benefit to his grades from studying for an hour.
If demand is perfectly inelastic, then the demand curve will be vertical.
True
The act of buying a commodity in one market at a lower price and selling it in another market at a higher price is known as _______.
arbitrage
Opportunity cost is the value of the next best alternative which is always of equal or greater quality or value.
False
The Federal Deposit Insurance Corporation acts as a lender of last resort.
False
The fewer the substitutes for a good, the greater will be the value of the price elasticity of demand coefficient.
False
An abundance of rain (resource), all other factors constant, yields a major corn crop in the mid-west states. The result will be:
Supply curve shifts right; price decreases; quantity increases.
Since the late 1950s, economists have performed "growth accounting" studies in the United States. These have determined that ______ is typically the most important contributor to U.S. economic growth.
Technology
Factors which can cause the Supply curve to shift are:
Technology, Prices of Other Goods, Number of Sellers.
During a recession, if a government uses an expansionary fiscal policy to increase GDP, the:
aggregate supply curve will shift to the right.
Any given demand or supply curve is based on the ceteris paribus assumption that ________.
all else is held equal.
The assumption(s) made to construct a kinked-demand oligopoly model is (are) that:
all firms will follow a price decrease but will ignore any price increase.
Once I'MaPharmaCo. has received confirmation of the registration for its latest drug patent application, it will have created a monopoly for that product by restriction:
entry into the market.
If both the marginal cost and the average variable cost curves are U-shaped, at the point of minimum average variable cost, the marginal cost must be _______________.
equal to the average variable cost.
If the supply curve for a product is vertical, then the elasticity of supply is:
equal to zero
When the central bank decides to increase the discount rate, the:
interest rates increase.
The monopolistic competition market structure is characterized by:
many firms and differentiated products.
During the Great Depression of the 1930s, the unemployment rate reached more than ____ of the labor force.
25%
In Exhibit 1, between points b and c, the price elasticity of demand measures _______.
.636
When the price of bread increases by 3 percent, the quantity demanded of crackers increases by 2 percent. The cross elasticity of demand between crackers and bread is _____.
0.67
Suppose that Mimi plays golf 5 times per month when the price is $40 and 4 times per month when the price is $50. What is the price elasticity of Mimi's demand curve?
1.0
Suppose that when price is $10, quantity supplied is 20. When price is $6, quantity supplied is 12. The price elasticity of supply is _____.
1.0
Once every _______, the Census Bureau does a comprehensive survey of housing and residential finance.
10 years
The unemployment rate in a town in which 65,400 persons are employed and 11,000 are unemployed equals ________.
14.4%
If the price index moves from 107 to 110, the rate of inflation is:
2.8%
If nominal GDP is 1800 and the money supply is 450, then what is velocity?
4
In determining how to allocate a scarce resource in the production of goods or services, the question(s) which must be answered is/are:
A & B
In macroeconomics, _______ describes a situation in which two people each want to exchange some good or service that the other can provide.
A double coincidence of wants
In terms of microeconomic analysis, what is the function of "utils"?
A measurement of utility.
The supply curve of textbooks (which are produced using paper made from trees) will shift to the left in response to:
A sharp increase in the demand for and construction of wood-frame homes.
A change in demand results in:
A shift in the entire demand curve.
If the price of corn decreased to $2 per bushel, the immediate market effect on the amount of corn available results in:
A shortage
Which of the following lies primarily within the realm of macroeconomics?
A study of how tax cuts stimulate aggregate production.
In the short run, a firm should shut down its business if price is less than ______.
AVC
What distinguishes the real value of a statistic from the nominal value of a statistic?
Adjusting for inflation.
An example(s) of a potential economic problem which could result in government intervention would be:
All of the above.
Households supply which of the following to businesses with respect to the flow of goods and services:
All of the above.
Which of the following is considered to be a relatively weak tool of monetary policy?
Altering the discount rate
In the framework of an oligopoly, what strategy can work like a silent form of cooperation?
Always match other cartel firms' price cuts, but don't match price increases.
In macroeconomics, the connection from inputs to outputs for the entire economy is called _______.
An aggregate production function.
Which of the following would function as a store of value, and also provide a medium of exchange, and unit of account?
An estate.
To compare the GDP of two different countries with different currencies, it is necessary to use ______.
An exchange rate.
Which of the following results in a rightward shift of the market demand curve for labor?
An increase in demand for the firm's product.
________ occurs when circumstances have allowed several large firms to have all or most of the sales in an industry.
An oligopoly
Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect:
Andy's demand for beer to increase.
________ are a form of tax and spending rules that can affect aggregate demand in the economy without any additional change in legislation.
Automatic stabilizers
A situation where the level of output, scale and average costs are all rising is called:
Both A & B are correct.
The slope of the _______ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good.
Budget Constraint
The rise in unemployment that occurs because of a recession is known as cyclical unemployment, because it is closely tied to the ______.
Business Cycle
The nature of demand indicates that as the price of a good increases:
Buyers desire to purchase less of it.
Atlantic Bank is required to hold 10% of deposits as reserves. If the central bank increases the discount rate, how would Atlantic Bank respond?
By increasing its reserves.
The process of banks making loans in financial capital markets is intimately tied to the:
Creation of money.
Which of the following institutions determines the quantity of money in the economy as its most important task?
Central Bank
__________ that require the depositor to commit to leaving their funds in the bank for a certain period of time, in exchange for a higher rate of interest are also called __________.
Certificates of Deposit; Time Deposits
Which of the following would be classified as a differentiated product produced by a monopolistic competitor?
Chanel No. 5
The relationship between hamburgers and fries, coffee and cream, or oil and gasoline are good examples of products/resources which are:
Complement goods.
If the cost of fertilizer decreases, then the price of corn will:
Decrease
If the price of beef increases (all other factors constant), the quantity demanded at the higher price will:
Decrease
As a result of a trade agreement with less world buyers (all other factors constant), the U.S. will be exporting 20 million less bushels of corn to Mexico and Brazil this year. The result will be:
Demand curve shifts left; equilibrium price decreases.
The most liquid type of bank account is?
Demand deposit
Which of the following is most unlikely to present a barrier to entry into a market?
Deregulation
The law of _________ explains why people and societies rarely make all-or-nothing choices.
Diminishing Marginal Utility
________ occur when the marginal gain in output diminishes as each additional unit of input is added.
Diminishing marginal returns
Substitution and income effects of a change in price of a good may be used to explain the:
Direct relationship between income and demand.
What term is used to describe the interest rate charged by the central bank when it makes loans to commercial banks?
Discount Rate
In order to calculate marginal cost, the change in ______ is divided by the amount of change in quantity.
Either total cost or variable cost
If the supply curve for housing is perfectly inelastic, then a reduction in demand will cause the equilibrium price to:
Fall and the equilibrium quantity to stay the same.
A kinked demand curve is based on the actions of an oligopolist to follow a price increase but not a price reduction.
False
A monopolist will charge a lower price and produce more output than if it was operating in a competitive market.
False
In order to avoid double counting, statisticians just count the _______.
Final goods and services
In modern economies, ______ receive money from savers and provide funds to borrowers.
Financial Intermediaries
Which of the following terms is used to describe the set of policies that relate to government spending, taxation, and borrowing?
Fiscal Policies
_______ happens when the economy is producing at its potential and unemployment is at the natural rate of unemployment.
Full employment GDP
_________ happens when the economy is producing at its potential and unemployment is at the natural rate of unemployment.
Full employment GDP
Which of the following statements is true?
GDP includes spending on recreation and travel, but it does not cover leisure time.
Net national product equals ________.
GDP minus capital consumption allowances (depreciation).
A nation's prosperity is sometimes measured in terms of ______.
GDP per capita
When economists are sketching examples of demand and supply, it is common to sketch a demand or supply curve that is close to vertical, and then refer to that curve as ______.
Inelastic
When a new college graduate enters the labor force for the first time and over a two month period of time fails to find a job, he or she is, according to employment statisticians;
In the labor force but unemployed.
The short run is a period time;
In which a firm uses at least one fixed input.
When economists attempt to predict the spending patterns of U.S. households, they will typically view the _______ as a primary determining factor that influences the individual consumption choices that each will make.
Income level of each household.
Improvements in the productivity of labor will tend to:
Increase wages.
Which of the following is most likely to contribute to economic growth as measured by GDP per capita?
Increased capital formation.
Which of the following is correct?
Increased education adds to the stock of human capital, not unlike building factories adds to the stock of physical capital.
Which of the following is not a monetary policy action?
Increasing taxes in the economy.
Why is productivity growth considered to be the most important factor in the AD/ASAD/AS model?
It shifts the AS curve in the long-term.
Who is the current chairman of the Board of Governors of the Federal Reserve System?
Janet Yellen
A 10 percent increase in income leads to a 15% decrease in the quantity of macaroni and cheese demanded but no change in the price of macaroni and cheese. From this information, we can assume:
Macaroni is an inferior good and price elasticity of supply is infinite.
Which of the following is omitted in a barter transaction?
Money
__________ serves society in three functions; medium of exchange, unit of account, and store of value.
Money
________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling.
Price Floors
A recent technology change allows farmers to produce more cotton on the same amount of land. The result on the price and quantity of cotton is:
Price decreases; quantity increases.
Laws or policies which result in different effects than what was initially expected illustrates:
Principle of Unintended Consequences
Over the long run, _______ per hour is the most important determinant of the average wage level in any economy.
Productivity
_______ is output per hour in the business sector.
Productivity
Which of the following is described as an innovative and nontraditional method used by the Federal Reserve to expand the quantity of money and credit during the recent U.S. recession?
Quantitative easing
As the ______ substitute for low-skill labor becomes available, the demand curve for low-skill labor will shift to the left.
Technology
As the ________ complement for high-skill labor becomes cheaper, the demand curve for high-skill labor will shift to the right.
Technology
Shifting the cost or benefit of a tax to somebody else other than the person or entity responsible for paying the tax is an example of:
The incidence of tax.
The unemployment rate is:
The number of unemployed divided by the labor force.
Potential GDP in the U.S. will be unaffected by ______.
The unemployment rate
What do goods like gasoline, tobacco, and alcohol typically share in common?
They are all subject to government excise taxes.
Transfer payments are not included in net national product because:
They are not payments for goods and services.
The total cost curve is the sum of the _________________.
Total fixed and total variable cost curves.
______ is calculated by taking the quantity of everything that is sold and multiplying it by the sale price.
Total revenue
The gap between exports and imports in a nation's economy is called the ______.
Trade Balance
__________ are included in the aggregate amount of MI money current in curculation.
Traveler's checks
The unemployment rate measures:
Unemployed workers as a percentage of the labor force.
Frictional unemployment is:
Unemployment that is due to normal turnover in the labor market.
In macroeconomics, a ______ describes the common way in which market values are measured in an economy.
Unit of Account
Scarcity exists because of:
Unlimited wants and limited resources.
In microeconomic terms, the ability of a good or a service to satisfy wants is called:
Utility
The general pattern that consumption of the first few units of any good tends to bring a higher level of ______ to a person than consumption of later units is a common pattern.
Utility
Say's Law argues that a given ______ must create an equivalent ______ somewhere else in the economy.
Value of supply; Value of demand
In a free market economy, firms operating in a perfectly competitive industry are said to have only one major choice to make. Which of the following correctly sets out that choice?
What quantity to produce.
Which of the following statements is true?
When marginal productivity of a variable input is falling, then marginal costs of production must be rising.
In economics, the demand for a good refers to the amount of the good that people:
Will buy at various prices.
If the government for the state of Washington collects $65.8 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be:
a budget deficit.
If a supplier faces a perfectly horizontal demand curve and sets his price slightly higher than the demand curve itself, he can expect _________________.
a complete loss of revenues.
When a Central Bank takes action to decrease the money supply and increase the interest rate, it is following:
a contractionary monetary policy.
All of the following are financial intermediaries except:
a department store's credit card division.
A firm that holds a monopoly position in the market place is ____________.
a price maker.
The GDP gap is the difference between _________.
actual and potential GDP.
The marginal revenue curve for a monopolist ________ the market demand curve.
always lies beneath
In macroeconomics, the connection from inputs to outputs for the entire economy is called ________.
an aggregate production function
The federal government levies __________ on people who pass assets __________, either after death or during life.
an estate and gift tax; to the next generation
The government can use _______ in the form of ________ to increase the level of aggregate demand in the economy.
an expansionary fiscal policy; an increase in government spending
If demand is price elastic, a decrease in price causes:
an increase in total revenue.
In computing GDP, it is essential to:
avoid double counting.
Political considerations make:
both B and D.
Temperatures have persisted below freezing levels in Florida throughout the months of December and January. As a result, demand for electricity sharply increased and the price of electricity rose sharply. The price of coal also rose. In these circumstances, any resulting shifts in the supply curves for coal miners and electricity producers:
can also be interpreted as shifts of their respective marginal cost curves.
Variable inputs are defined as any resource that:
can be changed as output changes
Specialization
can lead to an increase in overall production.
The number of cases of Coca-Cola bought increased by 50 percent when the price of pretzels declined by 10 percent. Assuming other factors are held constant, Coca-Cola and pretzels are classified as ______.
complements
For a monopolistic firm, the demand for its product is ___________.
completely inelastic
A good is classified as inferior if:
consumers buy less when income rises.
Another term used to describe negative inflation is:
deflation
The labor ______ curve(s) will shift _______ if there is an increase in productivity or an increase in the demand for the final product.
demand; right
In the first chapter of The Wealth of Nations, Smith introduces the idea of the _____, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers.
division of labor
Which of the following is correct? Inflation can:
do all of the above.
Copyright protection legislation provides protection for original works:
during the author's life plus 70 years.
Suppose an oil cartel has an agreement to restrict members' production in order to maintain a price of $30 per barrel. A single cartel member may want to cheat and exceed its quota so that it can _________________.
earn a bigger profit.
The neighborhood ice cream shop finds that when it charges $3 per ice cream cone, its total revenues are $90,000. It has total variable costs of $30,000 and total fixed costs of $40,000. From this we can infer the:
economic profits are $20,000.
When ______ exist, doubling of all inputs will result in more than doubling output, which means ___________.
economies of scale; a larger factory can produce at a lower average cost than a smaller company.
If earnings or wages are rising slower than prices, living standards are ______.
falling
When the Federal Reserve announces that it is implementing a new interest rate policy, the _________ will be affected.
federal funds rate
In modern economies, _________ receive money from savers and provide funds to borrowers.
financial intermediaries
A firm's _______ consist of expenditures that must be made before production starts that typically, over the short run, ________ regardless of the level of production.
fixed costs; do not change,
A perfectly competitive industry is a ______.
hypothetical extreme.
For a monopolist to practice price discrimination, one necessary condition is that the product offered for sale must be ________.
impossible or difficult to resell
Economic profit can be derived from calculating total revenues minus all of the firm's costs,
including its opportunity costs.
Which of the following is correct? Nominal GDP:
is the GDP the economy could produce at full employment.
A nation can achieve higher economic growth if:
it devotes more resources to research and development.
When banks hold excess reserves because they don't see good lending opportunities:
it negatively affects contractionary monetary policy.
Other things being equal, a _______ supply of workers tends to _______ real wages.
larger; decrease
If total utility is falling, marginal utility is _______.
negative
The number of CDs purchased increased by 50 percent when consumer income increased by 10 percent. Assuming other factors are held constant, CDs would be classified as __________.
normal goods.
Perfect competition and monopoly stand at _______ of the spectrum of competition.
opposite ends
A university student who is enrolled in school full-time and not seeking employment is considered:
out of the labor force.
In contrast to a perfectly competitive firm, a monopolist earns:
positive economic profit in the long run.
The maximum quantity that an economy can produce, given its existing levels of labor, physical capital, technology, and institutions, is called:
potential GDP.
If a decrease in the price of football tickets increases the total revenue of the athletic department, this is evidence that demand is ________.
price elastic
Since it is always a negative number, economists use the convention of taking the absolute value of _______________.
price elasticity of demand.
In a monopolistically competitive market, the rule for maximizing profit is to set MR = MC, which means:
price is higher than marginal revenue.
The downward slope of the demand curve again illustrates the pattern that as _______ rises, _______ decreases.
price, quantity demanded
Fixed costs are important because, at least in the ______, the firm ______.
short run; cannot alter them
In the ______, if profits are not possible, the perfectly competitive firm will seek out the quantity of output where ______.
short run; losses are smallest
Normal profit is a term for ___________.
the minimum profit to keep a firm in operation
Normal profit is a term for:
the minimum profit to keep a firm in operation
When the central bank decides it will sell bonds using open market operations:
the money supply decreases.
The natural rate of unemployment prevails when:
the number of unfilled jobs is matched by the number of qualified workers.
When entry occurs in a monopolistically competitive industry,
the perceived demand and marginal revenue curves for each firm will shift to the left.
As depicted in __________, it is necessary to give up some of one good to gain more of the other good.
the production possibilities frontier
Macroeconomics topics do not usually include:
the profit maximizing decisions of an individual manufacturer.
Which of the following is not counted as part of GDP?
the purchase of 100 shares of AT&T stock by your grandfather.
According to the basic quantity equation of money, if price and output fall while velocity increases, then:
the quantity of money will fall.
Which of the following is correct? Nominal GDP is:
the same as "GDP in current dollars".
If the economy is producing less than its potential GDP, ________ will show a larger deficit than the actual budget.
the standardizes employment budget
In the equation, GDP = C + I + G + X - M, G refers to:
the value of local, state, and federal government purchases of final goods plus services provided, not including transfer payments.
As represented in Exhibit 1, the maximum long-run economic profit earned by this monopolistic competitive firm is ______.
zero
When the curve that envelops the series of possible short-run average total cost curves is horizontal, this means that there are _________.
constant returns to scale.
Assume a monopolist charges a price corresponding to the intersection of the marginal cost and marginal revenue curves. If this price is between its average variable cost and average total cost curves, the firm will:
continue to operate in the short run.
_______ implies that pressure for price increases reaches across _______ markets, not just one.
inflation; most
Each of the following is one of the main functions of money except:
instrument of credit.
The basic difference between macroeconomics and microeconomics is:
microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.
Which of the following is an example of one of the major categories in the overall CPI?
recreation
Aggregate supply curves are _________ for low levels of output, and __________ for high levels of output.
relatively flat; relatively steep
The total fixed cost curve:
remains constant regardless of output.
Two factors that complicate the calculation of the inflation rate are:
substitution and quality/new product bias
One of the reasons that a rise in the price of a fixed basket of goods over time tends to overstate the rise in a consumer's true cost of living, is:
substitution bias
The most commonly cited measure of inflation in the United States is:
the Consumer Price Index (CPI).
Marginal utility is measured by:
the change in total utility for a 1-unit change in the quantity consumed.
Josh's weekly budget for lunch is $24. He eats only pizza and burgers. Each pizza costs $6 and each burger costs $3. Josh knows that 2 pizzas and 4 burgers will give him a utility of 8. What is Josh's utility-maximizing point?
2 pizzas, 4 burgers
During the last two centuries, the average rate of growth of GDP per capita in the leading industrialized countries has averaged about _______ per year.
2%
Of the world's population of 6.7 billion people, _______ are scraping by on incomes that average less than $2 per day.
2.6 billion
In the United States, a pharmaceutical company's exclusive patent rights last for ________.
20 years.
In the base period, a market basket costs $200. In the current period, the same market basket costs $400. The price index for the current year is ______.
200
A farm can produce 10,000 bushels of wheat per year with 5 workers and 13,000 bushels with 6 workers. The marginal product of the sixth worker for this farm is _________.
3,000 bushels
A government annually collects $230 billion in tax revenue and allocates $70 billion to military spending. What percentage of this government's budget is spent on its military?
30.43%
The marginal utilities associated with the first 4 units of consumption of good Y are 10, 12, 9 and 7, respectively. What is the total utility associated with the third unit?
31
Eric is maximizing his total utility through his choices of two goods: clothes and food. His marginal utility of clothes is 60 and his marginal utility of food is 12. The price of clothes is $20. What is the price of food?
4
Refer to Exhibit 5. The demand schedule and cost schedule for a monopolist are provided. Which output level maximizes profit?
4
As shown in Exhibit 4, in order to maximize its profit (or minimize its loss), how much output should the monopoly produce?
4 units per hour.
If the unemployment rate is 8 percent, then this means:
8 percent of the labor force is unemployed.
If the unemployment rate is 6 percent and the number of persons unemployed is 6 million, then the number of people employed is equal to:
94 million
If the price of corn increased to $5 per bushel, the immediate market effect on the amount of corn available results in:
A surplus
Which of the following statements is true?
Consumer equilibrium is a combination of goods and services consumed which maximizes total utility from a given budget.
The GDP deflator is a price index that includes the following components of GDP:
Consumption, Investment, Government plus Exports minus Imports
The GDP deflator is a price index that includes the following components of GDP:
Consumption, Investment, Government plus Exports minus Imports.
The type of unemployment that occurs because of a recession is called:
Cyclical Unemployment
The leader of a federal political party made the following campaign promise: "My administration will increase national defense without requiring sacrifices elsewhere in the economy." The promise can be kept if:
Either b) or c) occurs, but not as a result of a).
Demand is said to be ________ when the quantity demanded is very responsive to changes in price.
Elastic
The demand schedule for a good:
Indicates the quantities that will be purchased at alternative market prices.
The ______ describes a situation where sufficient credit is available, but the economy experiences a reduction in consumption and investment.
Interest rate effect
As the aggregate price level in an economy rises, _______.
Interest rates increase
The ______ budget constraint shows the tradeoff between present and future consumption.
Intertemporal choice
_________ is a small category that refers to the goods produced by one business that have yet to be sold to consumers, and are either still sitting in warehouses and on store shelves.
Inventories
In an AD/AS model, the point where the economy has excess capacity is called the:
Keynesian zone of the AS curve.
Economists refer to the relationship that a higher price leads to a lower quantity demanded as the _______.
Law of Demand
The statement "as more of a good is consumed, the utility a person derives from each additional unit diminishes" is known as the _____________.
Law of Diminishing Marginal Utility.
If you were to survey central bankers from around the world and ask them what they believe the primary task of monetary policy should be, what would the most popular answer likely be?
Fighting Inflation
If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that:
Goods X and Y are complement goods.
In the _______, households receive goods and services and pay firms for them.
Goods and Services Market
Final goods or services used to compute GDP refer to:
Goods and services purchased by ultimate users.
In a command economy, the _____ either makes most economic decisions itself or at least strongly influence how the decisions are made.
Government
The two main tools of macroeconomic policy include monetary policy, and fiscal policy, which involves ______ spending.
Government
Assume that a wealthy buyer, Mr. Hunt, declares that he will purchase any amount of silver at a price of $125 an ounce. In Exhibit 4, which graph illustrates the shape of the demand curve for silver?
Graph A
If Evelyn uses her debit card to buy an iPod, then the money to pay the retailer will come from:
Her M1 funds.
Why are some producers forced to sell their products at the prevailing market price?
High degree of similarity to competitor's products.
In the long run, the most important source of increase in a nation's standard of living is a:
High rate of economic growth.
A perfect elastic supply curve is:
Horizontal
Consumption is the purchase of goods and services by:
Households
Which of the following is generally accepted as a valid criticism of the production of useful goods and services?
Environmental Pollution
Whether the economy is in a recession is illustrated in the AD/AS model by how close the ______ is to the potential GDP line.
Equilibrium
Whether the economy is in a recession is illustrated in the AD/AS model by how close the _________ is to the potential GDP line.
Equilibrium
The _______ is the only price where quantity demanded is equal to quantity supplied.
Equilibrium Price
The _________ is the quantity where quantity demanded and quantity supplied are equal at a certain price.
Equilibrium Quantity
The definition of market equilibrium states that at the _______, the quantity of labor demanded by employers will equal the quantity supplied.
Equilibrium Wage
A recent national census shows an increase in the average family median income. What is the effect of more income on the equilibrium price and demand curve for automobiles?
Equilibrium price increases; Demand curve shifts right.
The most prevalent type of economic model or firm which meets most business and society needs or wants is _________.
Monopolistic competition
Philosophers draw a distinction between positive statements, which describe the world as it is, and _________, which describe how the world should be.
Normative statement
The term "full employment GDP" is synonymous with which of the following?
Potential GDP
The maximum quantity that an economy can produce, given its existing levels of labor, physical capital, technology, and institutions, is called:
Potential GDP.
The "law of supply" functions in labor markets; that is, a higher _______ for labor leads to a higher quantity of labor supplied.
Price
Due to a rare plant fungus, a shortage in the Colombian coffee bean crop causes the price of coffee to increase. What will be the effect on the price and quantity of tea (a substitute)?
Price increases; quantity increases.
Consider the market demand and supply for wheat. A lack of rain (resource) has resulted in a below average volume of wheat available. However, studies indicate that consumers preferences for whole wheat flour products is increasing due to a more health conscious society. What is the effect on the price and quantity of wheat?
Price increases; quantity indeterminate.
The value of what is produced per worker, or per hour worked, is called ______.
Productivity
To achieve a high standard of living, a nation should:
Promote economic growth.
A supply curve is a graphical illustration of the relationship between price, shown on the vertical axis, and _______, shown on the horizontal axis.
Quantity
When economists talk about supply, they are referring to a relationship between price received for each unit sold and the _______.
Quantity Supplied
In an AD/AS model:
Real GDP is shown on the horizontal axis.
As taxpayer's income increases, the total amount of taxes paid decreases, is known as a:
Regressive tax.
In most markets, the buying and selling decisions of households and businesses are based on what type of prices:
Relative prices.
A more efficient means of processing algae to produce an anticancer drug is discovered. As a result, the supply curve for the drug will:
Shift to the right, decreasing the price of the drug.
Which of the following is true for perfect competition, monopolistic competition, and monopoly?
Short-run profits are maximized when marginal cost equals marginal revenue.
Suppose a monopolist's demand curve lies below its average variable cost curve. The firm will:
Shut down.
Which of the following is a market structure of monopoly?
Single firm that is a price maker.
Which of the following best illustrates a perfectly competitive market?
Soybean farmers
________ results when an economy experiences high unemployment and high inflation at the same time.
Stagflation
The unemployment rate may underestimate the true extent of unemployment if:
Many people become discouraged and cease looking for work.
Most choices involve _____, which involves comparing the benefits and costs of choosing a little more or a little less of a good.
Marginal Analysis
As a person receives more of a good, the _______ from each additional unit of the good declines.
Marginal Utility
The term ______ refers to the additional utility provided by one additional unit of consumption.
Marginal Utility
Most real-world choices aren't about getting all of one thing or another, instead, most choices involve _______, which involves comparing the benefits and costs of choosing a little more or a little less of a good.
Marginal analysis
______ refers to the additional revenue gained from selling one more unit.
Marginal revenue
A decrease in consumer preference for a product, other things being equal, will cause:
Market demand to shift to the left.
Which of the following institutions oversees the safety and stability of the U.S. banking system?
The Federal Reserve
_______ is a term which refers to the widespread use of power-driven machinery and the economic and social changes that resulted in the first half of the 1800s.
The Industrial Revolution
__________ is a term which refers to the widespread use of power-driven machinery and the economic and social changes that resulted in the first half of the 1800s.
The Industrial Revolution
A summary of the flow of goods and services from businesses (producers) to households and the flow of factors of production (resources) from households to businesses is known as:
The circular-flow diagram.
Which of the following is true?
The expansions and contractions of real world business cycles last varying lengths of time and often differ in magnitude.
When consumers and businesses have greater confidence that they will be able to repay in the future, _________.
The quantity demanded of financial capital at any given interest rate will shift to the right.
GDP is:
The value of all final goods and services produced domestically.
How do apple growers react to the news of medical research findings that suggest that eating apples leads to greater health benefits than were previously known?
They increase the quantity of apples supplied.
Increased investment alone will guarantee economic growth.
This is a false statement, because economic growth hinges on the quality and type of investment as well as the human capital and improvements in technology.
In macroeconomics, _________ denotes the relationship between the total quantity of goods and services and the price level for output.
aggregate demand (AD)
A perfectly competitive firm in the short-run maximizes its profit by producing the output where:
all of the above
If the average product for six workers is fifteen and the marginal product of the seventh worker is eighteen, then ______________.
average product is rising.
If the central bank decreases the amount of reserves banks are required to hold from 20% to 10%, then:
both the money multiplier and the supply of money in the economy will increase.
In Exhibit 16, if the market price of its product is $50 per unit, then the firm will ________.
break even
A __________ is created each time the federal government spends more than it collects in taxes in a given year.
budget deficit
Cyclical unemployment arises when:
business activity in the macroeconomy declines.
The type of unemployment that occurs because of a recession is called:
cyclical unemployment
When the government passes a new law that explicitly changes overall tax or spending levels, it is enacting:
discretionary fiscal policy.
If both the marginal cost and the average variable cost curves are U-shaped, at the point of minimum average variable cost, the marginal cost must be:
equal to the average variable cost.
For most high-income countries of the world, GDP __________ over time
has risen gradually
If the price level of what firms produce is rising across an economy, but the costs of production are constant, then:
higher profits will induce expanded production.
If a country's GDP increases, but its debt also increases during that year, then the country's debt to GDP ratio for the year will ______ in proportion to the magnitude of the changes.
increase or decrease
If the demand for software engineers _______ slower than does supply, then wages of software engineers will _______.
increases; fall
When a price, wage, or interest rate is adjusted automatically with inflation, it is said to be _________.
indexed
A monopoly sets a market price that is higher than the marginal cost of production. This fact implies that a monopoly's allocation of resources is ______.
inefficient
A perfectly elastic demand curve has an elasticity coefficient of ______.
infinity
The percentage change in the price level from one time period to the next, whether the price level is measured in terms of money or as a price index, will be the _________.
inflation rate
The _______ describes a situation where sufficient credit is available, but the economy experiences a reduction in consumption and investment.
interest rate effect
As the aggregate price level in an economy rises, _________.
interest rates increase.
Assume a monopolist's marginal cost and marginal revenue curves intersect and the demand curve passes above its average total cost curve. The firm will:
make an economic profit.
Under perfect competition, any profit-maximizing producer faces a market price equal to its ______.
marginal costs
The perceived demand curve for a group of competing oligopoly firms will appear kinked as a result of their commitment to:
match price cuts, but not price increases.
Under both perfect competition and monopoly, a firm:
maximizes profit by setting marginal costs equal to marginal revenue.
At the point where the marginal revenue equals zero for a monopolist facing a straight-line demand curve, total revenue is ___________.
maximum
Shopping malls typically lease retail space to a large number of clothing stores. When this group of retailers competes to sell similar but not identical products, they engage in what economists call ____________.
monopolistic competition
The single most common form of competition in the U.S. is:
monopolistic competition among firms with differentiated products.
A characteristic of an oligopoly is:
mutual interdependence in pricing decisions.
In uncertain economic times, _________ serves as a way of preserving economic value that can be spent or consumed in the future.
owning gold
Government _______ regulations specify that inventors will maintain exclusive legal rights to their respective inventions for _______.
patent; a limited time
The elasticity of supply is defined as the ______ change in quantity supplied divided by the ______ change in price.
percentage; percentage
A __________ policy will cause a greater share of income to be collected from those with high incomes than from those with lower incomes.
progressive tax
If government tax policy requires Bill to pay $20,000 in taxes on annual income of $200,000 and Paul to pay $10,000 in tax on annual income of $100,000, then the tax policy is:
proportional
A ___________ is calculated as a flat percentage of income earned, regardless of level of income.
proportional tax
A central bank that desires to reduce the quantity of money in the economy can:
raise the reserve requirement.
Suppose that an individual consumes just two goods: Big Macs and milkshakes. In order to reach consumer equilibrium, the individual must arrange the consumption of Big Macs and milkshakes so that the:
ratio of marginal utility to price is the same for both goods for the last dollar spent on each good.
In an AD/AS model:
real GDP is shown on the horizontal axis.
Economists typically measure economic growth by tracking:
real GDP per capita.
If South Dakota's governor reports a budget surplus in 2011, that state government likely:
received more in taxes than it spent in that year.
When the share of individual income tax collected by the government from people with higher incomes is smaller than the share of tax collected from people with lower incomes, then the tax is __________.
regressive
The term _________ describes the proportion of deposits that the bank must hold in the form of reserves that are not loaned out or invested in bonds.
reserve ratio
Diseconomies of scale exist over the range of output for which the long-run average cost curve is ______.
rising
A perfectly competitive firm's short-run supply curve is the:
segment of the marginal cost curve above the minimum level of average variable cost.
In long-run equilibrium, a perfectly competitive firm produces the level of output at which:
short-run average total cost and long-run average cost are at a minimum.
Economic production has fallen to less than full potential due to inadequate incentives for firms to produce. The duration of this economic condition will likely be ________.
short-term
The time lag for monetary policy is typically __________ the time lag for fiscal policy.
shorter than
The responsiveness of suppliers to changing prices is called the ___________.
supply elasticity
Since the late 1950s, economists have performed "growth accounting" studies in the United States. These have determined that _______ is typically the most important contributor to U.S. economic growth.
technology
The quantitative easing policies adopted by the Federal Reserve are usually thought of as:
temporary emergency measures.
Investment (I) includes:
the amount spent on new factories and machinery.
Inflation can be calculated in terms of how the overall cost of ______ changes over time.
the basket of goods
Inflation can be calculated in terms of how the overall cost of ________ changes over time.
the basket of goods
Tombstones are produced in a monopolistic competitive market. One producer, Rolling Stones, sells 20 tombstones a week at a price of $500 each. Its average total cost of $600 per tombstone. From this information we can tell that:
this producer is losing $2000 a week.
Insofar as government public policy is concerned, the best way to battle unemployment would be _______.
to minimize recessions.
The conceptual measure of the satisfaction a person obtains by consuming all the units of a good or service during a given time period is ________.
total utility
The gap between exports and imports in a nation's economy is called the ________.
trade balance
Money is anything widely accepted with the exchange of goods and services.
true
The demand curve always has a negative slope.
true
The law of comparative advantage is the best use/employment of a resource, or, that it is better for people to specialize in those activities in which their advantages over other people are greatest.
true
When increasing oil prices cause aggregate supply to shift to the left, then:
unemployment and inflation increase.
The marginal cost curve is generally ______, because diminishing marginal returns implies that additional units are _______.
upward-sloping; more costly to produce
When faced with an economic loss, a competitive firm will shut down its operation in the short run.
False
Are markets always in equilibrium?
No, but if there is no outside interference, they tend to move toward equilibrium.
In Exhibit 3, how much vaccine should GeneTech produce to maximize its profit?
300 doses per hour.
A monopoly earns the most profit by charging a price where demand is inelastic.
False
A perfectly competitive market is characterized by highly advertised goods.
False
Automobiles and gasoline are examples of Substitute Goods.
False
Banks usually hold substantial excess reserves to make sure that their reserves do not fall below what is required, because it is difficult for banks to acquire reserves on a short-term basis if they are short.
False
Cartels are generally legal in the United States.
False
Ceteris paribus is Latin which means "greater risk yields greater gain".
False
Factors of production or resources can be divided into the three categories - land, labor, and stocks.
False
If total utility increases from 10 to 15 for the second unit of a good consumed, the marginal utility of the second unit is 25.
False
In response to a price change for good Y, if the cross-elasticity of demand for good Y is negative, good X and good Y are substitutes.
False
In the short-run, total fixed costs always exceed total variable costs.
False
Microeconomics studies the economic decision-making and allocation of resources of whole countries smaller than the U.S.
False
Money prices are expressed in terms of commodities or goods, products, and services.
False
The law of diminishing marginal returns causes a firm's short-run marginal cost curve to be s-shaped.
False
The number of sellers in the market is a factor which can shift the demand curve.
False
The production of small volumes of output more cheaply than large volumes of the same output can be referred to as "Economics of Scale".
False
If banks increase their reserves above required reserves, then the money supply falls even though the Fed does not change the monetary base or money supply.
True
If the real interest rate increases but the nominal rate is the same, then the expected rate of inflation has decreased.
True
In the long run, marginal cost must equal marginal revenue for a monopolistic competitive firm, but not at the minimum point of the long-run average cost curve.
True
Interest rates are basically the price of money or the cost of funds.
True
Macroeconomics is the study of the economy in the large or examines the economy as a whole.
True
Marginal cost is calculated by dividing the change in total cost by the change in total output.
True
Normative economics is the study of "what ought to be" in the economy.
True
The "law of increasing costs" states that as more of a commodity (good or service) is produced, the opportunity cost per unit will increase.
True
The vertical distance between the average total cost curve and the average variable cost curve at any given output level equals average fixed cost at that particular output level.
True
A typical _________ fiscal policy allows government to decrease the level of aggregate demand, through increases in taxes.
contractionary
The form of legal protection intended to prevent reproduction of original works is referred to as ________ law.
copyright
As the price of chicken decreases, people start eating more chicken rather than beef (a substitute). The result causes the demand curve for beef to:
Shift to the left.
A technological improvement in the production of good X causes the:
Supply curve for X to shift to the right.
Which barrier to entry results in the creation of a natural monopoly?
Economies of scale.
Regardless of whether you are looking through the microeconomics microscope or the macroeconomics telescope, the fundamental subject material of the interconnected _____ doesn't change.
Economy
Ethiopia has a GDP of $8 billion (measured in U.S. dollars) and a population of 55 million. Costa Rica has a GDP of $9 billion (measured in U.S. dollars) and a population of 4 million. Calculate per capita GDP for each country.
Ethiopia = $145.00 Costa Rica = $2,250.00
If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. This is known as ________.
Excess Demand
Government purchases of goods and services from the private sector, which makes the resources (goods/services) no longer available for private use is known as:
Exhaustive expenditures.
Factors which can cause the Demand curve to shift are:
Expectations, Prices of Related Goods, Number of Buyers.
Gross Domestic Product equals $1.2 trillion. If consumption equals $690 billion, investment equals $200 billion, and government spending equals $260 billion, then:
Exports exceed imports by $50 billion.
An inferior good is a product:
For which demand decreases as income increases.
The development of a nationwide computerized job bank listing of all job openings would be most likely to reduce:
Frictional Unemployment
Which of the following terms is considered to be a narrow definition of the money supply that includes, among other things, currency?
M1
One reason some economists prefer net national product (NNP) to gross domestic product (GDP) is that:
NNP excludes or subtracts depreciation and is a better measure of new goods and services.
______ is calculated by taking ______ and then subtracting the value of how much physical capital is worn out, or reduced in value because of aging, over the course of a year.
NNP; GNP
______ are economists who generally emphasize the importance of aggregate supply in determining the size of the macroeconomy over the _____.
Neoclassical economists; long run
Which of the following is a traditional tool used by the Fed during recessions?
Open market operations
Attending college is a case where the ________ exceeds the monetary cost.
Opportunity Cost
In many cases, it is reasonable to refer to the ________ as the price.
Opportunity cost
Reginald looked for work for six months but could not find a job to his liking. He now spends his time at the beach. For purposes of employment he is considered:
Out of the Labor Force.
A university student who is enrolled in school full-time and not seeking employment is considered:
Out of the labor force.
Following the assumption that firms maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency?
Output will be too small and its price too high.
In uncertain economic times, ______ serves as a way of preserving economic value that can be spent or consumed in the future.
Owning gold
Which of the following terms is used to describe the proportion of deposits that banks are legally required to deposit with the central bank?
Reserve Requirements
_______ are funds that the bank keeps on hand that are not loaned out or invested in bonds.
Reserves
Utility is most closely defined by which of the following terms?
Satisfaction
Which of the following will have the greatest influence on the slope of the demand curve in a single market model?
Substitute goods
Economists are able to determine total utility by:
Summing up the marginal utilities of each unit consumed.
If Keynes' Law applies during economic contractions and Say's Law applies during economic expansion, how will the three goals of macroeconomics be affected?
Trade-offs and connections may differ in the short run and the long run.
A decrease in government spending will decrease aggregate demand (AD) and cause prices to decrease or put pressure on prices to decrease.
True
A general increase in relative prices is known as inflation.
True
A market is any place or method which allows buyers and sellers to come together for the purpose to exchange (Buy or Sell) goods or services.
True
A perfectly competitive firm is a price taker, but a monopoly is a price maker.
True
A utility-maximizing consumer equalizes marginal utilities per dollar spent across all goods.
True
As the price of a good increases, the quantity of that good purchased/consumed decreases (all other factors constant), describes the Law of Demand.
True
As the price of one good or service increases, the demand for another good increases, is an example of Substitute Goods.
True
Changes in fiscal policy can cause changes in total economic output or growth due to the effects or changes on aggregate demand.
True
Economics is the study of the allocation of scarce resources among competing ends (individuals, societies, businesses, etc.), which produce, exchange or consume goods or services.
True
How to allocate scarce resources is the "economic problem".
True
If a firm's marginal cost exceeds its average cost, then its average cost must be rising.
True
If at some output level for a firm, price exceeds average total cost, then the firm is earning an economic profit.
True
The price elasticity of demand for a vertical demand curve is _______.
perfectly inelastic.
If a paper mill shuts down its operations for three months so that it produces nothing, its _______ will be reduced to zero?
variable costs
