ECON FINAL QUIZ QUES
Given the table below, what is the equilibrium price?
$95
According to your text book in chapter 17, the current national debt is approximately: a)
105 percent of GDP.
If the price in the economy is $2.50, the quantity supplied will be:
13
Given the market supply & demand curves and the quota illustrated below:
13 units will be supplied at a price of $ 2.50
The Federal Reserve System was founded in: a) 1933. b) 1929. c) 1935. d) 1913.
1913.
In Exhibit 21-1, the production possibilities curves of wheat and corn for Nabia and Pada are presented. Suppose Pada produces at point B on its PPC. How much corn is the country able to produce? a) 2 b) 6 c) 10 d) 15
2
In Exhibit 21-1, the production possibilities curves of wheat and corn for Nabia and Pada are presented. Suppose Nabia produces at point A on its PPC. How many units of wheat is the country able to produce? a) 60 b) 40 c) 15 d) 20
20
This function describes the: a) the demand curve b) the production function c) marginal revenue curve d) marginal cost curve
The production function
The shaded area in this graph represents which phase of the business cycle? a) recession b) trough c) peak d) expansion
recession
The equilibrium quantity for the market in the graph displayed below is:
30
Given the market supply & demand curves and the quota illustrated below:
9 units will be supplied at but at a price between $1.50 and $3.50
Which of the following is not a determinant of demand? a) A change in buyer expectations of future events b) A change in resource prices. c) A change in income d) A change in the price of a complementary good
A change in resource prices.
Which of the following is not a determinant of demand? a) A change in the price of the item in question. b) A change in tastes and preferences c) A change in the price of a substitute item. d) The number of buyers.
A change in the price of the item in question.
Which of the following is not a determinant of supply? a) The number of sellers. b) Resource Prices c) A change in the price of an alternative good the firm can produce. d) A change in the price of the item in question.
A change in the price of the item in question.
In Exhibit 4-2, which of the following might cause a shift from S1 to S2? a) An increase in input prices. b) A decrease in consumer prices. c) An increase in consumer income. d) A decrease in input prices.
A decrease in input prices.
In Exhibit 4-3, which of the following might cause a shift from S2 to S1? a) A decrease in technology. b) A decrease in input prices. c) An increase in input prices. d) An increase in consumer income.
A decrease in input prices.
Macroeconomics may be defined as: a) An exclusive focus on how major corporations work. b) A focus on the understanding of the operations of the economy as a whole. c) A focus on the individual economic unit. d) An exclusive focus on how government spending and taxes work.
A focus on the understanding of the operations of the economy as a whole.
A public good is defined as: a) A cost or benefit imposed on someone other than the producer or consumer of the good or service b) A good or service with two properties: Users collectively pay for the good and there is no way to bar people who do not pay (free riders) from consuming the good or service. c) A good or service with two properties: users collectively consume benefits, and there is no way to bar people who do not pay (free riders) from consuming the good or service. d) Any good or service produced by the government.
A good or service with two properties: users collectively consume benefits, and there is no way to bar people who do not pay (free riders) from consuming the good or service.
Perfect Competition is characterized by: a) A unique product b) Either a homogeneous or differentiated product c) A homogeneous product d) A differentiated product
A homogeneous product
Market failure may be defined as: a) A situation in which their is a shortage in the marketplace. b) A situation in which the market does not provide the price or quantity buyers or sellers want. c) A situation in market equilibrium results in too few or too many resources being used in the production of a good or service. d) A situation in which the price is too high.
A situation in market equilibrium results in too few or too many resources being used in the production of a good or service.
The Business Cycle may be defined as: a) Alternating periods of economic growth and contraction, which can be measured by changes in real GDP and unemployment. b) Alternating periods of economic growth and contraction, which can be measured by changes in real GDP. c) Alternating periods of economic growth and contraction, which can be measured by changes in nominal GDP and unemployment. d) Alternating periods of economic growth and contraction, which can be measured by changes in nominal GDP.
Alternating periods of economic growth and contraction, which can be measured by changes in real GDP.
A decrease in the interest rate, other things being equal, causes a(n): a) leftward shift of the demand curve for money. b) An increase in the quantity demanded for money, a movement along the demand curve for money. c) A decrease in quantity demanded for money, a movement along the demand curve for money. d) rightward shift of the demand curve for money.
An increase in the quantity demanded for money, a movement along the demand curve for money.
Market Failure will happen when: a) There are shortages in the marketplace b) There are surpluses in the marketplace c) Any of the underlying assumptions of Perfect Competition are broken. d) prices are changing in the marketplace
Any of the underlying assumptions of Perfect Competition are broken.
Which of the following is not one of the assumptions Monetary Theory makes? a) The velocity of money is stable and predictable b) Monetary flows are responsible for how the economy operates c) Demand creates supply d) Increases in the money supply will affect output first.
Demand creates supply
An economic resource may be defined as: a) Any tangible item produced that creates satisfaction for consumers and therefore has value. b) The study of how society chooses to allocate its scarce resources to the production of goods and services in order to satisfy unlimited wants. c) Anything that is capable of producing an economic good and indirectly satisfaction. d A simplified description of reality used to understand and predict the relationship between variables.
Anything that is capable of producing an economic good and indirectly satisfaction.
Which of the following functions on the graph below is Marginal Cost:
B
From the graph below, which function represents Fixed Cost.
C
Which of the following is an example of scarcity? a) Camden would like to have more designer clothes than he can afford. b) Benito is wealthy so he has everything he could ever want. c) Dennis takes as many vacations as he would like since he won the lottery. d) Adam has more than enough food to eat each day.
Camden would like to have more designer clothes than he can afford.
The Macroeconomic model that focuses on real flows and maintains that "supply creates its' own demand" is; a) Monetary Theory b) Austrian School of Economics c) Keynesian Theory d) Classical Theory
Classical Theory
Thomas Malthus is associated with; a) Keynesian Theory b) Austrian School of Economics c) Monetary Theory d) Classical Theory
Classical Theory
Which macroeconomic model suggests that wages and prices will "automatically adjust to maintain full employment and output in the long run"? a) Monetary Theory b) Austrian School of Economics c) Classical Theory d) Keynesian Theory
Classical Theory
M2 is made up of; a) Coin and Currency in circulation and checking deposits b) Coin and Currency in circulation and in the possession of banks, checking deposits plus savings accounts, money market mutual funds, and time deposits < $100,000 c) Coin and Currency in the hands of banks d) Coin and Currency in circulation and checking deposits plus savings accounts, money market mutual funds, and time deposits < $100,000
Coin and Currency in circulation and checking deposits plus savings accounts, money market mutual funds, and time deposits < $100,000
The economic system that answers the What, How and For Whom questions using prices determined by a dictator or central authority is a: a) Command economy b) Market economy c) Private economy d) Traditional economy
Command economy
Which of the following correctly describes the difference between commodity money and fiat money? a) Commodity money can only be used to buy commodities such as grains or lumber, while fiat money can be used to buy anything. b) Fiat money is used during times of emergency, such as hurricanes or war, when the existing stock of commodity money is inadequate to purchase needed goods and services. c) Commodity money is either made out of a valuable commodity like silver or gold, or is redeemable for a valuable commodity. Fiat money is not. d) Fiat money has value based on the material from which it is made, while commodity money is accepted by law and not because of its tangible value.
Commodity money is either made out of a valuable commodity like silver or gold, or is redeemable for a valuable commodity. Fiat money is not.
Identify the change for the graph below:
Decrease in Supply
Normative Economics may be defined as: a) Discussions limited to the facts or description of economic models. b) Making use of language that elicits an emotional response or infers a value judgement. c) Discussions of economics that include appraisals of what is good or bad, right or wrong. d) Making arguments that make selective use of the facts, generally by presenting only one side of the story.
Discussions of economics that include appraisals of what is good or bad, right or wrong.
An oligopoly is characterized by: a) A differentiated product b) A homogeneous product c) A unique product d) Either a homogeneous or differentiated product
Either a homogeneous or differentiated product
"A market condition that occurs at any price for which the quantity demanded is exactly equal to the quantity supplied" is the definition for a) Equilibrium b) The Law of Demand c) The Law of Supply and the Law of Demand d) A perfectly competitive market
Equilibrium
For the graph below, identify the change in equilibrium:
Equilibrium price decreases, equilibrium quantity increases
For the graph below, identify the change in equilibrium:
Equilibrium price increases, equilibrium quantity increases
An economist at the University of Alaska at Anchorage has been asked to explain why the price of Alaskan crude oil has fallen recently. In order to develop a model, the professor should take which steps? a) Identify the problem, develop a model based on simplifying assumptions and test the model to formulate a conclusion. b) Ask people in Alaska why they are not purchasing oil. c) Gather data on crude oil prices and seemingly unrelated variables to look for associations, then formulate a hypothesis based on those unexpected associations. d) None of these. The oil industry is controlled by a cartel; therefore price changes in the industry cannot be explained using economic theories.
Identify the problem, develop a model based on simplifying assumptions and test the model to formulate a conclusion.
Identify the change for the graph below:
Increase in Demand
According to the monetarists, which of the following is true? a) A reduction in the money supply will cause consumers to increase spending. b) Instability in the money supply is the primary cause of economic instability. c) A reduction in the money supply will cause a proportional reduction in wages and prices, leaving output unchanged. d) A rapid growth rate of the money supply will lead to a rapid growth rate of real GDP.
Instability in the money supply is the primary cause of economic instability.
The long run Phillips curve: a) Is a vertical function. That is, there can be any inflation rate associated with an unemployment rate (primarily the full employment unemployment rate) b) Is a horizontal function. That is, there can be any unemployment rate associated with the inflation rate (primarily the natural rate of inflation) c) Is a quadratic function. That is, as the inflation rate falls, at first the unemployment rate rises, but then begins to fall. d) Is an inverse relationship between the inflation rate and the unemployment rate.
Is a vertical function. That is, there can be any inflation rate associated with an unemployment rate (primarily the full employment unemployment rate)
If the opportunity cost of producing cheese is higher in Greece than it is in Italy, then: a) Greece gives up fewer goods to produce cheese than Italy does. b) both Greece and Italy should produce cheese. c) Greece should specialize in producing cheese. d) Italy should specialize in producing cheese.
Italy should specialize in producing cheese.
Which of the following is an example of a negative externality? a) Sally buys coffee at McDonald's, spills some on her, and burns her arm. b) John plants fruit trees in his front yard, which attracts bees, which sting neighbor Mary. c) An employee of a chemical company spills acid on his arm, causing severe damage. d) A Japanese company begins to produce cars and earns large profits.
John plants fruit trees in his front yard, which attracts bees, which sting neighbor Mary.
John Maynard Keynes is associated with; a) Austrian School of Economics b) Keynesian Theory c) Monetary Theory d) Classical Theory
Keynesian Theory
The Macroeconomic model that focuses on real flows and maintains that "demand creates its' own supply" is; a) Keynesian Theory b) Austrian School of Economics c) Classical Theory d) Monetary Theory
Keynesian Theory
All firms will establish their profit maximizing output where: a) MC = AVC b) MR = ATC c) MC = MR d) MC = ATC
MC = MR
All firms will establish their profit maximizing output where: a) MR = ATC b) MC = AVC c) MC = MR d) MC = ATC
MC = MR
The Equation of Exchange is: a) MX = Net Exports b) GDP = C + I + G + XM c) MV = PQ d) QM = PV
MV = PQ
This function describes the: a) a demand curve b) marginal product curve c) the production function d) the marginal cost curve
Marginal product curve
The three functions of money are; a) M1, M2 and M3 b) Coin, Currency, Checking Accounts c) Medium of exchange, Unit of credit, Store of value d) Medium of exchange, Unit of account, Store of value
Medium of exchange, Unit of account, Store of value
Which one of the following transactions would be included in GDP? a) Mr. Doe donates $500 to his town's junior college scholarship fund. b) Ms. Bartolini pays $500 to fix the front end of her car damaged in a recent accident. c) Ms. Smith pays $5,000 to purchase 100 shares of Microsoft stock. d) Ms. Kim pays $50 for a used picture frame at a neighborhood garage sale.
Ms. Bartolini pays $500 to fix the front end of her car damaged in a recent accident.
Firms will have an economic loss when: a) P < ATC b) MR < ATC c) P < MC d) P < AVC
P < ATC
Using the graph below, which point represents an impossible point to operate on? a) Point D b) Point C only c) Points A and C d) Point B e) Point A only
Point B
Using the graph below, which point represents an efficient point to operate on? a) Point A only b) Point B c) Points A and C d) Point C only e) Point D
Points A and C
Impediments to market function is something that: a) Results (always) in multiple prices in the marketplace b) Prevents the supply curve and demand curve created by the model of the market from seeking equilibrium. c) Creates an "incorrect" market demand curve d) Creates an "incorrect" market supply curve.
Prevents the supply curve and demand curve created by the model of the market from seeking equilibrium.
All firms earn an economic profit when: a) Price > MC b) price > MR c) price > AVC d) Price > ATC
Price > ATC
If the demand for a good decreased, what would be the effect on the equilibrium price and quantity? a) Price would decrease, and quantity would decrease. b) Price would increase, and quantity would increase. c) Price would decrease, and quantity would increase. d) Price would increase, and quantity would decrease.
Price would decrease, and quantity would decrease.
When an external benefit is present: a) Resources are under-allocated to the production of the good because the actual market demand curve is too far to the left. b) Resources are under-allocated to the production of the good because the actual market supply curve is too far to the right. c) Resources are over-allocated to the production of the good because the actual market supply curve is too far to the left. d) Resources are over-allocated to the production of the good because the actual market demand curve is too far to the right.
Resources are under-allocated to the production of the good because the actual market demand curve is too far to the left.
Which of the following is true in a market economy? a) Information for production and distribution decisions pass directly to buyers from the government. b) Central planners determine answers to the basic economic questions. c) Resources are used efficiently. d) The distribution of wealth is equal.
Resources are used efficiently.
The basic components of the circular flow model include: a) Sectors, markets, flows b) markets and Goods & Services c) Sectors and markets d) People, markets, flows
Sectors, markets, flows
Unemployment caused by a mis-match of skills the individual has compared to the skills the economy needs is; a) Structural unemployment b) Cyclical unemployment c) Frictional unemployment d) Seasonal unemployment
Structural unemployment
Which of the following is not one of the philosophical approaches that the Austrian School of Economics takes? a) A process vs. point approach b) That the economy must be very closely regulated because there is so much fraud and unethical behavior c) Methodological Individualism d) A non-mathematical approach
That the economy must be very closely regulated because there is so much fraud and unethical behavior
Bill has $10 to spend on a Superman, Batman, or an X-Men T-shirt. Bill buys the Superman T-shirt and the Batman shirt was a close second choice. What is the opportunity cost? a) The X-Men T-shirt. b) The Batman T-shirt. c) Nothing, since he got his preferred choice. d) The amount he spent, $10.
The Batman T-shirt.
The question "Should children receive free lunch at school?" is an example of which fundamental economic question? a) The Why to Produce question. b) The What to Produce question. c) The For Whom to Produce question. d) The How to Produce question.
The For Whom to Produce question.
The question "Should bank withdrawals be conducted by tellers or ATMs?" is an example of which fundamental economic question? a) The What to Produce question. b) The How to Produce question. c) The For Whom to Produce question. d) The Why to Produce question.
The How to Produce question.
Which fundamental economic question requires society to choose the technological and resource mix used to produce goods? a) The Why to Produce question. b) The For Whom to Produce question. c) The What to Produce question. d) The How to Produce question.
The How to Produce question.
Which of the following is characteristic of a monopolistically competitive firm? a) The firm faces an inelastic demand curve. b) The firm produces a differentiated product. c) The firm faces an upward-sloping demand curve. d) The firm faces a horizontal demand curve.
The firm produces a differentiated product.
Which of the following statements best describes firms under monopolistic competition? a) There is little price or quality competition. b) There is only one firm so there is no competition. c) The firms compete, using quality, location, advertising, and price. d) Firms do not compete using advertising.
The firms compete, using quality, location, advertising, and price.
From the perspective of the circular flow model, the Austrian School of economics focuses on: a) Monetary flows generated from the Household sector b) The demand for consumer goods c) The flow of saving and borrowing d) Real flows of economic resources
The flow of saving and borrowing
The two sector flow model represents a good way to see how GDP is counted. What are the two methods or approaches to counting GDP? a) The expenditures and saving approaches b) The income and saving approach c) The real and the nominal approaches d) The incomes and expenditures approaches
The incomes and expenditures approaches
When the demand curve shifted from D% to D#; a) The interaction of supply and demand allows the economy to move to the new equilibrium. b) The price floor prevents the interaction of supply and demand to move to the new equilibrium, leaving a surplus in the economy. c) The price in the marketplace remains at the floor without a surplus or shortage d) The price floor prevents the interaction of supply and demand to move to the new equilibrium, leaving a shortage in the economy.
The interaction of supply and demand allows the economy to move to the new equilibrium.
GDP may be defined as: a) The intrinsic value of all final goods and services produced in a nation during a period of time, usually a year. b) The dollar value of all final goods and services produced in a nation during a period of time, including net income from foreign investments, usually a year. c) The market value of all final goods and services produced in a nation during a period of time, usually a year. d) The dollar value of all intermediate and final goods and services produced in a nation during a period of time, usually a year.
The market value of all final goods and services produced in a nation during a period of time, usually a year.
When the demand curve shifted from D# to D%; a) The interaction of supply and demand allows the economy to move to the new equilibrium because it causes a subsequent decrease in supply b) The interaction of supply and demand allows the economy to move to the new equilibrium because demand will shift again so that equilibrium price equals the price floor. c) The price floor prevents the interaction of supply and demand to move to the new equilibrium, leaving a surplus in the economy. d) The price floor prevents the interaction of supply and demand to move to the new equilibrium, leaving a shortage in the economy.
The price floor prevents the interaction of supply and demand to move to the new equilibrium, leaving a surplus in the economy.
In the intermediate range of the aggregate supply curve, if government spending increases caused the aggregate demand curve to shift outwards, which of the following is most likely to occur? a) Both the price level and real GDP will not change. b) The price level will rise, but real GDP will not change. c) The price level and real GDP will both rise. d) The price level will not change, but real GDP will increase.
The price level and real GDP will both rise.
If the item in question is T-shirts, which of the following is not a determinant of supply? a) An improved production process is introduced that uses fewer economic resources. b) The price of jeans, a complementary item. c) The price of the cotton used to make the shirt d) Corporate taxes are reduced
The price of jeans, a complementary item.
Monetary policy may be defined as: a) The use of changes in the money supply (by the federal government) to influence the nation's output, employment, and price level. b) The use of government spending and taxes (by the federal government) to influence the nation's output, employment, and price level. c) The use of changes in the money supply (by the FED) to influence the nation's output, employment, and price level. d) The use of government spending only (by the federal government) to influence the nation's output, employment, and price level. e) The use of government spending and taxes (by the FED) to influence the nation's output, employment, and price level.
The use of changes in the money supply (by the FED) to influence the nation's output, employment, and price level.
Fiscal policy may be defined as: a) The use of government spending and taxes (by the FED) to influence the nation's output, employment, and price level. b) The use of government spending only (by the federal government) to influence the nation's output, employment, and price level. c) The use of changes in the money supply (by the federal government) to influence the nation's output, employment, and price level. d) The use of changes in the money supply (by the FED) to influence the nation's output, employment, and price level. e) The use of government spending and taxes (by the federal government) to influence the nation's output, employment, and price level.
The use of government spending and taxes (by the federal government) to influence the nation's output, employment, and price level.
Which of the following situations would not create a situation that leads to market failure? a) The wind generation industry, responding to an increase in subsidies, increases the supply of 10 megawatt wind generators leading to a surplus in the marketplace. b) The need to build a flod control and power plant dam on the Mississippi River c) Firms competing in a monopolistic competition market structure d) The creation of significant amounts of fly ash that covers everything in a 10 mile radius of a power plant.
The wind generation industry, responding to an increase in subsidies, increases the supply of 10 megawatt wind generators leading to a surplus in the marketplace.
Which of the following states the definition of supply? a) More of a good is supplied at a lower price. b) There is a negative relationship between the price of a good and the quantity offered for sale by suppliers. c) There is a positive relationship between the price of a good and the quantity offered for sale by suppliers. d) There is a positive relationship between the price of a good and the quantity that buyers want to purchase.
There is a positive relationship between the price of a good and the quantity offered for sale by suppliers.
Which of the following is true for the law of demand? a) Prices increase as more units of a product are demanded. b) Sellers increase the quantity of a good available as the price of the good increases. c) An increase in price results from false needs. d) There is an inverse relationship between the price of a good and the quantity of the good demanded.
There is an inverse relationship between the price of a good and the quantity of the good demanded.
Which of the following situations would not create a situation that leads to market failure? a) There is unanticipated demand for "X-box's" at Christmas which leads to severe shortages at toy stores. b) The need to build a flood control and power plant dam on the Colorado River c) A monopoly d) The creation of significant amounts of sulfur emissions by power plants.
There is unanticipated demand for "X-box's" at Christmas which leads to severe shortages at toy stores.
"The amount of satisfaction received from all the units of all the goods and services consumed." is the definition of:
Total Utility
When the U. S. federal government runs a budget deficit, it borrows money by selling: a) its gold reserves. b) Treasury bills, notes, and bonds. c) financial assets located in foreign banks. d) publicly owned land.
Treasury bills, notes, and bonds.
Monetary Theory makes the assertion that the economy: a) Wants to operate at full output and employment (though there may be short run situations in which the economy may not be at full output and employment) b) Will always operate at full output and employment c) There is no reason to believe that the economy will ever operate at full output and employment d) If the economy is to grow, it must always be accompanied by inflation
Wants to operate at full output and employment (though there may be short run situations in which the economy may not be at full output and employment)
Which of the following is the best example of an action that imposes an external cost? a) A rose garden on your property from which your neighbor gets much enjoyment. b) Deterioration in the average quality of a house you own as the result of poor maintenance. c) Water pollution from an upstream factory that increases the cost of providing clean water to downstream residents. d) Wear and tear on your car as the result of frequent use.
Water pollution from an upstream factory that increases the cost of providing clean water to downstream residents.
Which of the following statements is not true? a) When price elasticity of demand is very high, we say there is brand loyalty. b) The availability and price of substitutes affect the elasticity of demand for a good or service. c) Price elasticity of demand for basic foods is low. d) When goods have very low prices, the elasticity of demand is usually quite low.
When price elasticity of demand is very high, we say there is brand loyalty.
Which of the following is not one of the three fundamental economic questions? a) How to produce? b) Where to produce? c) What to produce? d) For whom to produce?
Where to produce?
Which of the following is a public good? a) A Delta airline flight b) The Ohio and Kansas turnpikes (toll roads) c) a flu shot d) a city park
a city park
What is the "unit of account" function of money? a) the function of money to be widely accepted I exchange for goods and services b) the quality of money not to be hoarded because of its commodity value c) a common measurement of the relative value of different goods and services d) the ability of money to hold value over time
a common measurement of the relative value of different goods and services
In the classical range of the aggregate supply curve, greater spending for consumer and investment goods results in: a) a higher price level. b) stagflation c) greater output. d) more unemployment.
a higher price level.
Which of the following is the best example of a quota? a) a $100-per-car fee imposed on all small imported cars b) a subsidy from the U.S. government to domestic manufacturers of men's suits so they can compete more effectively with foreign producers of men's suits c) a limit imposed on the number of men's suits that can be imported from a foreign country d) a tax placed on all small cars sold in the domestic market
a limit imposed on the number of men's suits that can be imported from a foreign country
Which of the following is not an example of an impediment to market function? a) a price ceiling b) a price floor c) quotas d) a shortage
a shortage
Using the graph below, at a price of $1.50, there is:
a shortage in the economy.
An economic model is defined as: a) a simplified representation of the way in which facts are related. b) a value judgement c) a presentation of all possible relevant real-world variables. d) data adjusted for irrational actions.
a simplified representation of the way in which facts are related.
Using the graph below, at a price of $2.00, there is:
a surplus in the economy.
We can find the market demand for pears by: a) adding the number of pears that producers are willing to sell. b) multiplying the number of people times the price of pears. c) adding the individual demand curves for pears. d) adding all the prices people are willing to pay for pears.
adding the individual demand curves for pears.
When deciding whether to buy a second car, marginal analysis indicates that the purchaser should compare the: a) additional benefits of the second car with the additional cost of the second car. b) dollar cost of the two cars with the potential income that the cars will generate. c) additional benefits expected from a second car with the cost of the two cars. d) benefits expected from two cars with the cost of both.
additional benefits of the second car with the additional cost of the second car.
Scarcity is a problem: a) of the poor, but not the rich. b) only in industrialized economies. c) measured by the amount of goods available. d) because human wants are unlimited while resources are limited.
because human wants are unlimited while resources are limited.
The opportunity cost to a city for using local tax revenues to construct a new park is the: a) dollar cost of the old park. b) dollar cost of constructing the new park. c) best alternative foregone by building the park. d) increased taxes necessary to pay for maintenance of the new park.
best alternative foregone by building the park.
In the intermediate range of the aggregate supply curve, higher aggregate demand will increase: a) real GDP without raising the price level. b) the price level but reduce real GDP. c) both the price level and real GDP. d) the price level without affecting real GDP.
both the price level and real GDP.
When a product is defined as homogeneous, a) sellers have an incentive to charge a price higher than the market price. b) sellers are indifferent as to the quantity of the product they sell. c) buyers are indifferent as to which seller's product they buy. d) buyers prefer one seller's product to another's.
buyers are indifferent as to which seller's product they buy.
Suppose an economist tests the theory that when the price of leather increases, fewer pairs of shoes are produced. He observes more shoes being produced when the price of leather increases. At the same time, a new production technology allowed for more shoes to be produced in less time. He has a) cannot test his theory because his observations violate the ceteris paribus assumption. b) built a model with too many variables. c) used normative economics to answer a positive question. d) has confused association and causation.
cannot test his theory because his observations violate the ceteris paribus assumption.
Suppose an economist tests the theory that when the price of leather increases, fewer pairs of shoes are produced. He observes more shoes being produced when the price of leather increases. At the same time, a new production technology allowed for more shoes to be produced in less time. He has a) cannot test his theory because his observations violate the ceteris paribus assumption. b) has confused association and causation. c) built a model with too many variables. d) used normative economics to answer a positive question.
cannot test his theory because his observations violate the ceteris paribus assumption.
Suppose a monopolist and a perfectly competitive firm have the same cost curves. The monopolistic firm would: a) charge a lower price than the perfectly competitive firm. b) charge a higher price than the perfectly competitive firm. c) refuse to operate in the short run unless an economic profit could be made. d) charge the same price as the perfectly competitive firm.
charge a higher price than the perfectly competitive firm.
Specialization and trade allow an economy to expand its: a) consumption possibilities. b) technological advantage. c) absolute advantage. d) production possibilities.
consumption possibilities.
The two tendencies of a firm in a cartel are the incentive to: a) cheat and avoid collusion and the incentive to raise price to maximize the firm's share of profits. b) cheat to maximize joint profits and the incentive to raise prices. c) cooperate to maximize joint profits and to cheat on the agreement in order to increase the firm's share of the profit. d) increase output in order to minimize per-unit cost and the incentive to reduce price in order to maximize joint profit.
cooperate to maximize joint profits and to cheat on the agreement in order to increase the firm's share of the profit.
The subject of economics is primarily the study of: a) the government decision-making process. b) how to operate a business successfully. c) how to make money in the stock market. d) decision-making because of the problem of scarcity.
decision-making because of the problem of scarcity.
If we observe a decrease in the price of a good and a decrease in the amount of the good bought and sold, this could be explained by a(an): a) decrease in the demand for the good. b) decrease in the supply of the good. c) increase in the supply of the good. d) increase in the demand for the good.
decrease in the demand for the good.
As the marginal propensity to consume (MPC) decreases, the spending multiplier: a) becomes undefinable b) remains constant c) decreases d) increases
decreases
The item in question is a luxury car. The price of gasoline, a complementary good increases. Which of the following happens?
demand for the luxury car decreases
The law of demand is illustrated by a demand curve that is: a) vertical b) horizontal c) down-ward sloping d) upward-sloping
downward-slopping
Exit of existing firms will occur in a monopolistic competitive industry until: a) marginal revenue equals marginal cost. b) marginal cost equals zero. c) marginal revenue equals zero. d) economic profit equals zero.
economic profit equals zero.
Which barrier to entry results in the creation of a natural monopoly? a) ownership of a vital resource b) patents and copyrights c) legal barriers like government franchises d) economies of scale
economies of scale
If the percentage change in the quantity demanded of a good is greater than the percentage change in price, price elasticity of demand is: a) elastic b) inelastic c) perfectly inelastic d) perfectly elastic
elastic
The Monetary Control Act of 1980: a) eliminated many forms of competition among financial institutions. b) required banks to make home loans. c) eliminated all interest rate ceilings. d) created sharper distinctions among various financial institutions.
eliminated all interest rate ceilings.
When a nation totally bans trade with another country, it is imposing a(n): a) tariff b) quota c) embargo d) trade tax
embargo
A nation benefits from international trade if it: a) exports goods for which it is a low opportunity cost producer. b) imports goods for which it is a low opportunity cost producer. c) imports more than it exports. d) exports more than it imports.
exports goods for which it is a low opportunity cost producer.
A lower price elasticity of demand coefficient occurs when: a) the market is broadly defined. b) many substitutes exist. c) few substitutes exist. d) the quantity demanded is more responsive.
few substitutes exist.
Which of the following is not a component in the two sector circular flow model? a) The Resource or Factor Market b) real flows c) business sector d) government sector
government sector
In the long run, price elasticities of demand are usually a) greater than they are in the short run because consumers have time to adjust. b) less than they are in the short run because real prices fall over time. c) the same as they are in the short run because tastes don't change. d) less than they are in the short run because prices rise over time.
greater than they are in the short run because consumers have time to adjust.
Perfect Competition may _______________ profits and may _____________ economic loses in the long run. a) have economic, not have b) not have, not have normal c) not have normal, have d) have normal, not have
have normal, not have
The theory of comparative advantage suggests that nations should produce a good if they: a) can produce more of the good than any other nation. b) have the lowest opportunity cost. c) have the most resources. d) have the lowest wages.
have the lowest opportunity cost.
A monopoly may _______________ economic profits and may _____________ economic loses in the short run. a) have, have b) have, not have c) not have, have d) not have, not have
have, have
Perfect Competition may _______________ economic profits and may _____________ economic loses in the short run. a) have, have b) have, not have c) not have, have d) not have, not have
have, have
Suppose the economy is on the classical range of the aggregate supply curve and has a problem with inflation. According to Keynesian theory, which of the following is an appropriate discretionary fiscal policy to use in this situation? a) less government regulation b) higher taxes c) a reduction in the money supply d) increase federal spending
higher taxes
The purely Keynesian long run aggregate supply curve is: a) horizontal b) vertical c) upward slopping d) downward slopping
horizontal
A supply curve: a) has a negative slope. b) illustrates the positive relationship between price and quantity supplied. c) illustrates the negative relationship between price and quantity supplied. d) is based on the assumption of a stable demand curve.
illustrates the positive relationship between price and quantity supplied.
The Monetary Control Act of 1980 extended the Fed's authority to: a) impose required-reserve ratios on all depository institutions. b) carry out a massive federal bailout of failed savings and loan institutions. c) control the discount rate. d) control the federal funds rate.
impose required-reserve ratios on all depository institutions.
If the mpc=.75 and government spending is increased by $100 billion, then the equilibrium level of output in the economy will: a) decrease by $400 billion b) decrease by $500 billion c) increase by $400 billion d) increase by $100 billion e) increase by $75 billion
increase by $400 billion
If the mpc=.80 and government spending is increased by $100 billion, then the equilibrium level of output in the economy will: a) decrease by $500 billion b) increase by $400 billion c) increase by $80 billion d) increase by $500 billion e) increase by $100 billion
increase by $500 billion
If we observe a decrease in the price of a good and an increase in the amount of the good bought and sold, this could be explained by a(n): a) increase in the demand for the good. b) decrease in the supply of the good. c) increase in the supply of the good. d) decrease in the demand for the good.
increase in the supply of the good.
International trade has the potential to ____ the availability of goods and services to ____. a) increase; all nations b) decrease; all nations c) increase; nations that have an absolute advantage in the production of a good or service d) increase; those nations who export more than they import
increase; all nations
If the percentage change in the quantity demanded of a good is less than the percentage change in price, price elasticity of demand is: a) inelastic b) perfectly inelastic c) elastic d) unitary elastic
inelastic
In the _______ range of the aggregate supply curve, expansionary fiscal policy that causes aggregate ______ to increase will lead to a higher price level and a higher equilibrium level of real GDP. a) intermediate, supply b) keynesian, supply c) intermediate, demand d) classical, demand
intermediate, demand
The law of demand refers to the: a) inverse relationship between the price of a good and the quantity of a good that people are willing to buy. b) increase in the quantity of a good available when its price increases. c) inverse relationship between the price of a good and the quantity offered for sale. d) price increase that results from an increase in demand for a good of limited supply.
inverse relationship between the price of a good and the quantity of a good that people are willing to buy.
A country is said to have an absolute advantage in the production of a good when: a) it specializes in the production of the good. b) its opportunity cost of producing the good is lower than another country. c) it can produce the good using fewer resources than another country. d) it has a favorable exchange rate compared to another country's currency.
it can produce the good using fewer resources than another country.
Comparative advantage explains why a nation will benefit from trade when: a) its trading partners are experiencing offsetting losses. b) it exports more than it imports. c) it exports goods for which it is a high-opportunity cost producer, while importing those for which it is a low-opportunity cost producer. d) it exports goods for which it is a low-opportunity cost producer, while importing those for which it is a high-opportunity cost producer.
it exports goods for which it is a low-opportunity cost producer, while importing those for which it is a high-opportunity cost producer.
If an economy is operating at a point inside the production possibilities curve, a) its resources are not being used efficiently. b) opportunity costs are decreasing as more of one good is traded for the other good. c) technology has improved. d) there is full employment of all resources.
its resources are not being used efficiently.
According to monetarists, which of the following would be most important for the control of inflation? a) the imposition of price controls b) keeping the growth rate of the money supply low and steady c) a steady increase in the size of the budget deficit d) a steady increase in federal expenditures
keeping the growth rate of the money supply low and steady
Which macroeconomic model suggests that unemployment is caused by a lack of aggregate demand? a) classical theory b) keynesian theory c) monetary theory d) austrian school of economics
keynesian theory
The services of farmers are an example of: a) capital b) entrepreneurship c) a natural resource d) labor
labor
Which of the following would an economist classify as capital? a) 100 shares of Microsoft stock b) lawyer's personal computer. c) $50 bill. d) credit card.
lawyer's personal computer.
Economic indicators, like unemployment claims and the average workweek, which change before real GDP changes, are called _____________ economic indicators. a) leading b) lagging c) structural d) coincident
leading
If the price elasticity of demand for a luxury is 2.6, then the price elasticity of demand for a necessity is expected to be a) greater than 2.6. b) less than 2.6. c) perfectly elastic d) equal to 2.6
less than 2.6.
A supply schedule shows the relationship between: a) demand and supply b) supply and income c) price and income d) quantity supplied and price
quantity supplied and price
An increase in the quantity demanded of a good is most often due to: a) higher prices. b) an increase in wages paid to workers. c) a decrease in the price of a substitute good. d) lower prices.
lower prices.
Economics is the study of how people: a) make choices to produce and consume goods and services. b) develop value systems. c) establish social institutions that maximize well-being. d) vote for political leaders.
make choices to produce and consume goods and services.
The economic system that answers the What, How and For Whom questions using prices determined by the interaction of supply and demand is a: a) soviet economy. b) market economy c) traditional economy d) command economy
market economy
Scarcity: a) will likely be eliminated as technology continues to expand. b) is not an issue addressed in economics. c) exists because resources are unlimited while human wants are limited. d) means we are unable to have as many goods and services or as much time for activities as we would like to have.
means we are unable to have as many goods and services or as much time for activities as we would like to have.
The study of microeconomics and macroeconomics differ in that: a) microeconomics studies the actions of households and macroeconomics studies the actions of business firms. b) microeconomics examines the whole economy while macroeconomics studies the individual units of the economy. c) microeconomics is concerned with the domestic economy and macroeconomics is concerned only with the international economy. d) microeconomics examines the individual markets of the economy while macroeconomics studies the whole economy.
microeconomics examines the individual markets of the economy while macroeconomics studies the whole economy.
The economic system in which the basic economic questions are answered through markets with some government intervention is a: a) command economy b) mixed economy c) market economy d) planned economy
mixed economy
A rational decision maker always chooses the option for which marginal benefit is: a) unrelated to marginal cost. b) less than marginal cost. c) equal to marginal cost. d) more than marginal cost.
more than marginal cost.
To compute the change in equilibrium in the economy as a result of a change in government spending, you would: a) divide the change in government spending by the tax multiplier b) divide the change in government spending by the spending multiplier c) multiply the change in government spending by the spending multiplier. d) multiply the change in government spending by the tax multiplier e) multiply the change in government spending by the balanced budget mutiplier
multiply the change in government spending by the spending multiplier.
Which of the following groups is not excluded from the civilian labor force? a) newly employed b) disabled c) discouraged workers d) institutionalized people
newly employed
Which of the following is the best example of a nonrenewable resource? a) oil b) forests c) clean air d) solar power
oil
From the Aggregate Supply curve shown above, in which range does output increase by the full amount of the tax multiplier?
range B
In a price leadership oligopoly model, a) the firms abandon a profit-maximizing goal. b) a cartel of leading firms determines price and industry output. c) the industry in consortium with the government determines price and output. d) one firm is the price leader and all other firms follow.
one firm is the price leader and all other firms follow.
The amount of a good that must be given up to produce another good is the concept of: a) efficiency. b) scarcity. c) opportunity cost. d) specialization.
opportunity cost.
The highest valued alternative that must be given up in order to choose an option is called the: a) scarcity expense. b) opportunity cost. c) utility cost. d) accounting cost.
opportunity cost.
An entrepreneur is a(n): a) business organization that uses inputs to produce output. b) organizer who seeks profitable opportunities and is willing to accept risks. c) depot or warehouse for commercial products. d) individual who has much education.
organizer who seeks profitable opportunities and is willing to accept risks.
According to marginal analysis, you should choose to do something if the extra benefit: a) outweighs the extra cost. b) is positive. c) exceeds the benefits of the previous time spent on the activity. d) will change the outcome.
outweighs the extra cost.
A(n) ____ can be used to demonstrate why a competitive oligopoly tends to result in a low-price strategy that does not maximize mutual profits. a) payoff matrix b) interdependence index c) gini coefficient d) herfindahl index
payoff matrix
When the interest rate falls, a) the quantity of money people will hold decreases. b) people shift out of holding interest-yielding bonds into holding money. c) investment spending decreases. d) the opportunity cost of holding money rises.
people shift out of holding interest-yielding bonds into holding money.
Price elasticity of demand refers to the ratio of the: a) percentage change in price of a good in response to a percentage change in quantity demanded. b) percentage change in price of a good to a percentage increase in income. c) percentage change in the quantity demanded of a good to a percentage change in its price. d) percentage change in the quantity demanded of a good to a percentage change in income.
percentage change in the quantity demanded of a good to a percentage change in its price.
Price elasticity of demand refers to the ratio of the: a) percentage change in the quantity demanded of a good to a percentage change in income. b) percentage change in price of a good to a percentage increase in income. c) percentage change in price of a good in response to a percentage change in quantity demanded. d) percentage change in the quantity demanded of a good to a percentage change in its price.
percentage change in the quantity demanded of a good to a percentage change in its price.
Which of the following market structures is a price taker? a) Monopolistic competition b) oligopoly c) monopoly d) perfect competition
perfect competition
The best definition of inflation is a(n): a) persistent increase in the general level of prices as measured by a price index. b) increase in the price of one important commodity such as food. c) increase in the purchasing power of the dollar. d) decrease in the general price level.
persistent increase in the general level of prices as measured by a price index.
One reason that people hold money is to pay for unexpected car repairs and other unpredictable expenses. This motive for holding money is called: a) precautionary demand. b) transactions demand. c) speculative demand. d) noncyclical demand.
precautionary demand.
In the short run, a firm will stay in business as long as: a) price equals average revenue. b) price exceeds average variable cost. c) price is less than average variable cost. d) marginal revenue is greater than or equal to marginal cost.
price exceeds average variable cost.
In Exhibit 14-7, if aggregate demand increases from AD1 to AD2, a) output and prices will decrease. b) prices alone will increase. c) output and prices will increase. d) output alone will increase.
prices alone will increase.
In Exhibit 14-7, if aggregate demand increases from AD1 to AD2, a) prices alone will increase. b) output alone will increase. c) output and prices will increase. d) output and prices will decrease.
prices alone will increase.
According to classical theory, if the aggregate demand curve decreased and the economy experienced unemployment, then: a) the supply of money would increase until the economy returned to full employment. b) the government must increase spending to restore full employment. c) the economy would remain in this condition indefinitely. d) prices and wages would fall quickly to restore full employment.
prices and wages would fall quickly to restore full employment.
A monopolist will maximize profits by: a) producing the output where marginal revenue equals marginal cost, just as a perfectly competitive firm will. b) producing the output where price equals marginal cost, while a perfectly competitive firm will produce where marginal revenue equals marginal cost. c) setting his price at the level that will maximize per-unit profit, while a perfectly competitive firm will minimize per-unit loss. d) setting his price as high as possible, while a perfectly competitive firm will take price from the market.
producing the output where marginal revenue equals marginal cost, just as a perfectly competitive firm will.
As new firms enter a monopolistic competitive industry, it can be expected that: a) the output of existing firms will increase. b) profits of existing firms will increase. c) market price will increase. d) profits of existing firms will decrease.
profits of existing firms will decrease.
The Federal Reserve System: a) was created by and is owned by the government. b) pursues independent fiscal policy at the behest of Congress. c) pursues an independent monetary policy which can conflict with the government's economic policy. d) never acts to control inflation.
pursues an independent monetary policy which can conflict with the government's economic policy.
The seven members of the Board of Governors serve 14-year terms to: a) reduce political influence. b) provide steady employment. c) prevent illegal appointments. d) inhibit independent decisions.
reduce political influence.
Under both perfect competition and monopoly, a firm: a) sets marginal cost equal to marginal revenue. b) will shut down in the short-run if price falls short of average total cost. c) is a price maker d) is a price taker
sets marginal cost equal to marginal revenue.
A firm operating in a perfectly competitive market is a price taker because: a) each firm's product is perceived as different. b) setting a price higher than the market price results in zero sales. c) each firm has a significant market share. d) the market demand curve is perfectly elastic.
setting a price higher than the market price results in zero sales.
Price ceilings set below the equilibrium create: a) shortages b) externalities c) surpluses d) unemployment
shortages
Which of the following describes the monopoly market structure? a) many firms that are price makers b) few firms operating as price takers c) single firm that is a price maker d) single firm operating as a price taker
single firm that is a price maker
Comparative advantage indicates that: a) a nation can gain from trade only when its trading partners are not low-wage countries. b) a nation can gain from trade only if it is not at an absolute disadvantage in producing all goods. c) countries should export products for which they are high-opportunity cost producers. d) specialization and exchange will permit trading partners to maximize their joint consumption.
specialization and exchange will permit trading partners to maximize their joint consumption.
Keynes called the money people hold in order to buy bonds, stocks, or other nonmoney financial assets the: a) unit of account demand for holding money. b) precautionary demand for holding money. c) speculative demand for holding money. d) transactions demand for holding money.
speculative demand for holding money.
The item in question is an economy car. I've developed a new piece of equipment that allows me to produce the same number of cars with far fewer resources. Which of the following happens?
supply for the economy car increases
A tax levied on imported goods is called a(n): a) excise tax b) tariff c) foreign profits tax d) quota
tariff
The infant-industry argument about tariffs argues that: a) if a newly established domestic industry can survive in the short run, a tariff should be levied to protect it from foreign competition in the long run. b) permanent tariffs should be levied on foreign products that compete with those produced by newly established domestic industries. c) tariffs should be levied on foreign products that compete with new domestic industries only in the short run. d) it is unfair to levy tariffs on items intended for use by infants.
tariffs should be levied on foreign products that compete with new domestic industries only in the short run.
What is the "store of value" function of money? a) a common measurement of the relative value of different goods and services b) the ability of money to hold value over time c) the quality of money not to be hoarded because of its commodity value d) the function of money to be widely accepted I exchange for goods and services
the ability of money to hold value over time
In economics, the term marginal refers to: a) man-made resources as opposed to natural resources. b) holding everything else constant in the analysis. c) the change or difference from a current situation. d) the satisfaction a consumer receives from a good.
the change or difference from a current situation.
One of the problems created by price floors set above the equilibrium is: a) the effect on firm profitability. b) firms don't have incentives to reduce costs. c) the creation of surplus. d) how to cope with the shortages.
the creation of surplus.
The national debt is: a) the difference between a nation's exports and imports of goods and services. b) equal to the current size of the budget deficit. c) the cumulative effect of all past budget deficits and surpluses of the federal government. d) the sum of the personal debt of all citizens in the United States.
the cumulative effect of all past budget deficits and surpluses of the federal government.
One problem with the unemployment rate is that: a) underemployment is measured in the calculation. b) the data includes part-time workers as fully employed. c) teen workers are excluded from the statistics. d) discouraged workers are included in the calculation.
the data includes part-time workers as fully employed.
GDP does not count: a) the estimated value of homemaker production. b) state and local government purchases. c) changes in inventories. d) spending for new homes.
the estimated value of homemaker production.
What is the "medium of exchange" function of money? a) the ability of money to hold value over time b) the quality of money not to be hoarded because of its commodity value c) the function of money to be widely accepted I exchange for goods and services d) a common measurement of the relative value of different goods and services
the function of money to be widely accepted I exchange for goods and services
Public goods are usually provided by: a) internal markets b) the government c) private industry d) private citizens
the government
A production possibility curve (graph) bows outward because of: a) unemployment b) the law of increasing opportunity costs. c) inefficiency d) scarcity
the law of increasing opportunity costs.
A competitive market economy is unlikely to provide an efficient quantity of some public goods because: a) private production of public goods generally results in a large amount of profit, which is difficult for a firm to effectively pay out to shareholders. b) the technology involved in the production of public goods makes it difficult for private firms to produce them even though, once produced, they could be marketed efficiently. c) only the government has the vast resources necessary to produce public goods. d) the nature of public goods makes it difficult for producers to withhold them from nonpaying consumers.
the nature of public goods makes it difficult for producers to withhold them from nonpaying consumers.
The law of demand states that: a) there is an increase in the need for a good as the price of the good increases. b) as the price of a good increases, more units are demanded. c) there is a negative relationship between the price of a good and the quantity of the good demanded. d) there is a direct relationship between the price of a good and the quantity of the good produced.
there is a negative relationship between the price of a good and the quantity of the good demanded.
When the value of our goods exports is less than the value of our goods imports, a) there will be domestic unemployment. b) foreign currency reserves must fall. c) there will be an unfavorable balance of trade. d) the value of the dollar must fall.
there will be an unfavorable balance of trade.
Which of the following is not an argument used in favor of protectionism? a) to reduce prices paid by domestic consumers b) to protect an "infant" industry c) to preserve national security d) to protect against "unfair" competition because of cheap foreign labor
to reduce prices paid by domestic consumers
Marginal revenue is the change in: a) The change in price a firm can charge brought about by selling one more unit of output. b) total revenue brought about by selling one more unit of output. c) total profit brought about by selling one more unit of output. d) output brought about by a $1 change in product price.
total revenue brought about by selling one more unit of output.
A point outside the production possibilities curve represents a combination of goods that is: a) inefficient b) unattainable c) attainable d) efficient
unattainable
The unemployment rate equals the number of persons: a) unemployed divided by the population age 16 and over. b) unemployed divided by the number employed. c) not working divided by the population age 16 and over. d) unemployed divided by the number in the labor force.
unemployed divided by the number in the labor force.
"The satisfaction, or pleasure, that people receive from consuming a good or service." is the definition of:
utility
Which of the following best illustrates perfect competition? a) orange growers setting quotas under the Sunkist cooperative b) wheat farming c) General Motors advertising campaign for its cars d) Coca-Cola and Pepsi battling for market share
wheat farming
Cost-push inflation occurs: a) because of excess total spending. b) when there are increases in production costs. c) when "too much money is chasing too few goods." d) at or close to full employment.
when there are increases in production costs.
A worker would be hurt least by inflation when the: a) worker is protected by fixed annual increases in wages and benefits in an employment contract. b) price level increases but at a decreasing rate. c) worker is protected by a cost-of-living adjustment clause in an employment contract. d) worker anticipates inflation and increases savings at the bank.
worker is protected by a cost-of-living adjustment clause in an employment contract.
The main explanation for why the cheap foreign labor argument is a poor reason for restricting international trade is that: a) workers who get paid less tend to have lower productivity than those who get paid more. b) specialization and free trade usually raise the prices of all the traded goods, so that the workers can get paid more. c) all firms and workers gain when there are no restrictions on international trade. d) infant industries such as steel and automobiles need to be protected.
workers who get paid less tend to have lower productivity than those who get paid more.