Exam all
The monopolist earns economic profit by setting price at the point where marginal revenue equals marginal cost. T F
F
A carbon tax levied on producers would increase the cost of production, shifting the supply curve to the left. T F
T
A decrease in demand causes a decrease in equilibrium price, which, in turn, decreases quantity supplied. T F
T
A nation can accelerate economic growth by: A. increasing its production of capital goods in excess of the capital being worn out in the production process B. increasing its production of consumer goods in excess of the capital being worn out in the production process C. increasing its production of capital goods that matches the capital being worn out in the production process D. decreasing its production of capital goods in excess of consumer goods being purchased in the nation
a
A price ceiling is defined as: A. a legally established maximum price a seller can charge B. a legally established minimum price a seller can charge C. a legally established average price a seller can charge D. a legally established minimum price a buyer needs to pay
a
Which of the following items is considered a stock variable? A. Bank balance B. Income C. Consumption D. Saving
a
Net domestic product is equal to GDP minus: A. indirect business taxes B. depreciation C. personal taxes D. retained earnings E. direct business taxes
b
The law of _________ marginal utility explains why consumers will buy more of a good only if its price decreases, ceteris paribus. A. increasing B. diminishing C. constant D. multiple
b
A cap and trade scheme in effect makes the supply curve of carbon-emission permits: A. elastic B. inelastic C. perfectly elastic D. perfectly inelastic
d
A decrease in the money supply: A. lowers the interest rate, causing a decrease in investment and a decrease in GDP B. lowers the interest rate, causing a decrease in investment and an increase in GDP C. raises the interest rate, causing an increase in investment and a decrease in GDP D. raises the interest rate, causing an increase in investment and an increase in GDP E. raises the interest rate, causing a decrease in investment and a decrease in GDP
e
'Cyclical unemployment' refers to unemployment caused by recurring changes in hiring due to recurring changes in weather conditions, demand and/or production patterns. T F
f
AW Phillips and Milton Friedman argue that there is an inverse relationship between unemployment and inflation in the long run. T F
f
Economists value economic growth, which is an expansion in national output measured by the quarterly or annual percentage increase in a nation's real GDP, because it increases the standards of living for citizens in the country.
t
'Capital adequacy' refers to the requirement that a bank must always maintain a certain minimal reserve level of highly liquid assets to cover any short-run demands from its many depositors and other creditors. T F
F
A firm can always achieve economies of scale by expanding its output and plant size. T F
F
A monopolist maximises economic profit by charging different users different prices according to their willingness to pay. T F
F
A rise in the general price level resulting from an excess of total spending over supply is also known as demand-push inflation. T F
F
A rise in the price of a good will always result in a decrease in the amount spent on that good. T F
F
As a price taker, a monopolistically competitive firm sets its price at the point where marginal cost equals marginal revenue. T F
F
Economic profit equals total revenue minus explicit costs. T F
F
Economists use GDP as a measure of economic welfare because it provides useful information on the distribution, kind and quality of products produced and consumed in the T F
F
GDP at factor cost equals GDP at market prices plus indirect taxes less subsidies. T F
F
Gains from trade can only be realised through voluntary exchanges in markets. T F
F
If the price system is allowed to function without interference and a surplus occurs, quantity demanded will fall and quantity supplied will rise as the price falls to its equilibrium level. T F
F
If the supply of houses is perfectly elastic, the introduction of the first-home owners' grant will increase the demand and price for houses in the housing market. T F
F
Removing stamp duties increase the supply and demand of houses, resulting in lower house prices. T F
F
Rent control is a form of price ceiling that creates a shortage in the rental market. T F
F
Suppose that influenza occurs in New Zealand during three different months, and Australia's exports to New Zealand increase during each of these months. One can conclude that influenza causes an increase in Australia's exports to New Zealand. T F
F
The immediate impact of the global financial and economic crisis (GFEC) was that it shifted the aggregate supply curve inward. T F
F
The imposition of a tax on sellers of a product normally results in an increase in market price, which is less than the full amount of the tax, with the tax burden falling only on the buyers. T F
F
The long-run average cost curve for a natural monopoly exhibits the usual U-shaped pattern - namely, the average cost initially falls, before rising beyond a certain level of output. T F
F
The main difference between perfect competition and monopolistic competition is that the former sells differentiated products and the latter sells a homogeneous product. T F
F
The money financing of a budget deficit occurs when the securities a government sells to pay for the deficit are purchased by the commercial banks. T F
F
The short-run supply curve for a perfectly competitive firm is its marginal cost curve above the maximum point on its average cost curve. T F
F
The term ceteris paribus means that all factors influencing an event, except one, are changing at the same time. T F
F
There is no opportunity cost associated with attending a seminar where you receive a free lunch. T F
F
Unlike the Solow growth model, population growth is assumed to be endogenous, and is regarded as the main engine of growth in the endogenous growth model. T F
F
A perfectly competitive firm facing a short-run loss should stay in operation, provided the market price is high enough to cover the average variable cost. T F
T
A quintessential difference between perfect competition and monopoly is that the marginal revenue curve is horizontal under perfect competition, but downward-sloping under monopoly. T F
T
Economics is the study of how society chooses to allocate its scarce resources. T F
T
For goods with an inelasticity of demand, a decrease in the price of the good will result in a decrease in total revenue. T F
T
In the short run, when a perfectly competitive firm operates so that its marginal cost is less than its average total cost, its average total cost will be falling. T F
T
Including the external costs of pollution from coal seam gas production would shift the supply curve of coal seam gas to the left, resulting in fewer coal seam gas wells and higher coal seam gas prices. T F
T
The chain volume measure of GDP provides a more reliable measure on the size of the economy than nominal GDP. T F
T
The term 'inferior good' refers to any good or service for which there is a direct relationship between changes in income and demand for the good. T F
T
Unlike a perfectly competitive firm, which produces at the lowest point of its long-run average cost curve, a monopolistically competitive firm produces at the point where its long-run average cost curve intersects the demand curve. T F
T
A sharp fall in investment in Australia will most likely result in the RBA: A. buying securities to decrease the cash rate B. selling securities to decrease the cash rate C. selling securities to increase the cash rate D. buying securities to increase the cash rate E. letting market forces bring the market back to equilibrium
a
According to Monetarists: A. if the money supply is expanding too much, higher rates of inflation will be inevitable B. if the money supply is expanding too slowly, the unemployment rate will decline C. if the money supply is expanding too slowly, prices will grow D. if the money supply is shrinking, higher rates of inflation will be likely E. if the money supply is expanding too much, higher rates of inflation will be likely
a
According to classical economists, sustained involuntary unemployment is not possible because: A. wages are flexible B. wages are fixed C. prices of goods and services will rise, providing the incentive for employers to hire more people D. demand will create its own supply
a
According to the monetary policy transmission mechanism, an expansionary monetary policy will ________ money supply, leading to __________ investment and, eventually, shift the aggregate demand curve to the ___________. A. increase; higher; right B. increase; lower; right C. increase; higher; left C. decrease; higher; right
a
Aggregate expenditures are best summarised as: A. C + I + G + (X - M) B. C + I + G + (X + M) C. C + I - G + (X - M) D. C - I + G + (X - M)
a
As price decreases and we move down further along a linear demand curve, the price elasticity of demand will: A. approach zero B. increase C. stay the same D. approach infinity E. decrease
a
At the level of output where the marginal cost and marginal revenue curves intersect, a monopolist's demand curve passes above its average total cost curve. The firm will: A. be making a profit B. stay in operation in the short run, but then shut down C. shut down in the short run D. increase its price E. be making a loss
a
Carbon emissions represent a _______ externality. Firms that produce carbon-intensive outputs will charge prices that are________ and produce a level of output that is _________ compared to the socially desirable level market outcome. A. negative; too low; too high B. negative; too low; too low C. positive; too low; too high D. positive; too low; too low
a
Ceteris paribus, the implementation of an emissions trading scheme which places a price on carbon emission will, in the short run: A. increase the price of carbon-intensive outputs B. increase the output of carbon-intensive outputs C. reduce the prices consumers pay for carbon-intensive outputs D. bring no change to the level of carbon emissions
a
Ceteris paribus, the removal of stamp duties will: A. increase the supply of houses B. decrease the demand for houses C. raise the price elasticity of demand for houses D. make the price elasticity of supply of houses perfectly inelastic
a
Credible monetary policy: A. reduces the impact on output and unemployment during disinflation by the central bank B. makes wages and prices perfectly flexible C. prevents inflation shocks D. has no effect on people's expectations of inflation
a
Demand is elastic if: A. the percentage change in quantity is greater than percentage change in price B. the percentage change in price is greater than percentage change in quantity C. the percentage change in quantity demand is zero D. the percentage change in price is zero
a
Disinflation refers to: A. a reduction in the rate of inflation B. an increase in the general price level of goods and services in the economy C. a decrease in the general price level of goods and services in the economy D. a decrease in the price of any specific product
a
Economists prefer: A. emissions trading over regulation B. emissions trading with regulation C. regulation over emissions trading D. regulation over the carbon tax E. regulation over everything else
a
Expansionary monetary policy is: A. reducing interest rates by increasing money supply B. increasing interest rates by increasing money supply C. reducing interest rates by decreasing money supply D. increasing interest rates by decreasing money supply E. reducing interest rates by increasing government spending
a
GDP does not include: A. the sale of a used car or an existing house B. the sale of a new computer C. the sale of a glass to be installed in an existing house D. the sales commission paid to the salesperson of a used car or an existing house
a
GDP: A.is the nominal value of all the final goods and services produced within the borders of a nation B.includes intermediate and final goods and services C.minus an allowance for depreciation of fixed capital equals GNP D.is a less-than-perfect measure of social wellbeing because it does not include exports and imports E.is the real value of all the final goods and services produced within the borders of a nation
a
Globalisation raises the unemployment rate in Australia by 3 per cent.' This would be considered a: A. positive statement B. normative statement C. political statement D. ridiculous statement
a
If good X is an inferior good, a decrease in consumer income, ceteris paribus, will shift the: A. demand curve for good X to the right B. demand curve for good X to the left C. supply curve for good X to the right D. supply curve for good X to the left E. there will be no change to the market for good X
a
If the income elasticity for iPhone X is 0.3, a 10 per cent increase in consumer income will lead to a: A. 3 per cent increase in the demand for iPhone X B. 10 per cent increase in the demand for iPhone X C. 20 per cent increase in the demand for iPhone X D. 30 per cent increase in the demand for iPhone X
a
If you look for a job for 18 months after graduation, but fail to generate an offer, even after lowering your expectations, the economy is probably in the business cycle phase called a: A. recession B. peak C. boom D. recovery E. expansion
a
Implicit costs are the __________ costs of using resources owned by the individual or the firm. A. opportunity B. marginal C. average D. variable
a
In perfect competition, the firm's marginal revenue equals the price that determines the position of the firm's _____________ curve. A. horizontal demand B. vertical demand C. horizontal supply D. vertical supply
a
In the economy is operating along the intermediate range of the aggregate supply curve, an increase in government spending will result in: A. higher price level and higher real GDP B. higher price level and lower real GDP C. lower price level and higher real GDP D. lower price level and lower real GDP
a
In the long term, the quantity theory of monetary predicts that monetary policy: A. has no effect on real variables B. can influence productivity and growth C. only affects real variables D. has no effect on nominal or real variables
a
Keynes called the money that people hold to make routine day-to-day purchases the: A. transactions demand for holding money B. precautionary demand for spending money C. speculative demand for holding money D. store of value demand for holding money E. asset demand for holding money
a
Nominal GDP refers to a value of all final goods and services produced in a period based on: A. the prices existing during the time period of production B. the prices existing in a selected base year C. the prices existing in some selected reference year D. the prices existing in the year 2000
a
Oligopolists face a _________ demand curve. A. kinked B. horizontal C. vertical D. hyperbolic
a
Other things being equal, an increase in the rate of interest causes a(n): A. upward movement along the demand for money curve B. downward movement along the demand for money curve C. rightward shift of the demand for money curve D. leftward shift of the demand for money curve E. shift in neither the demand nor the supply curve for money
a
Perfectly competitive markets are characterised by: A. a large number of small producers and small consumers B. very strong barriers to entry and exit C. a large number of small producers and large consumers D. many different products E. a small number of small producers and small consumers
a
Regulation can encourage firms to: A. introduce processes that reduce emissions per unit of output more than without the regulation B. increase the output because firms have limited competition C. increase emissions as their output declines D. adopt emissions intensive technologies E. adopt emission extensive technologies
a
Supply-side economists believe that the best way to increase real output and employment is to: A. use policy to increase the supply of labour and investment B. increase the money supply C. increase the level of government expenditure D. increase disposable income levels so that increased consumer spending leads to a multiplier effect on aggregate demand
a
The Solow model of economic growth considers ________ an exogenous variable. A. technological change B. saving C. consumption D. labour
a
The bond price ______ when there is an excess quantity of money demanded, but ________ where is an excess quantity of money supplied in the economy. A. falls; rises B. rises; remains constant C. rises; falls D. falls; remains constant
a
The characteristics used to define the market structure include: A. the number of sellers, the type of product and entry conditions B. the number of sellers, the type of product and geographic locations C. the number of sellers, the type of product and cultural differences D. the number of sellers, the type of product and language barriers
a
The demand curve for a monopolistic competitive firm is _____ elastic than for a perfectly competitive firm and _____ elastic than for a monopolist. A. less; more B. more; less C. more; more D. less; less
a
The formula GDP = C + I + G + (X - M) is also known as: A. the expenditure approach to measuring GDP B. the income approach to measuring GDP C. the value-added approach to measuring GDP D. the gross national expenditure to measuring GDP
a
The gap between actual and potential GDP measures the ____________ to the nation of reduced production of _______ goods and services from operating at less than full employment. A. opportunity cost; real B. opportunity cost; nominal C. production cost; real D. production cost; nominal
a
The law of diminishing returns states that: A. beyond some point, the marginal product decreases as additional units of a variable factor are added to a fixed factor B. beyond some point, the marginal product decreases as fewer units of a variable factor are added to a fixed factor C. beyond some point, the marginal cost decreases as additional units of a variable factor are added to a fixed factor D. beyond some point, the marginal product decreases as additional units of variable factors are added to a fixed factor
a
The marginal-average rule states that when marginal cost is _______, average cost _______. When marginal cost equals average cost, average cost is at its _______ point. A. below; falls; minimum B. below; falls; maximum C. above; falls; minimum D. above; falls; maximum
a
The monopolist's demand and marginal revenue curves: A. are exactly the same B. are completely different C. coincide only at one unit of output D. cross
a
The perfectly competitive industry's short-run market supply curve can be obtained by ________ summation of the short-run supply curves of all firms in the industry. A. horizontal B. vertical C. incremental D. incidental
a
Which of the following can create demand-pull inflation? A. Excessive aggregate spending B. Sharply rising oil prices C. Higher labour costs D. Recessions and depressions E. A lack of aggregate supply
a
Which of the following components of aggregate demand is most sensitive to changes in expectations and interest rates? A. Investment B. Government spending C. Imports D. Exports
a
Which of the following conditions represents the long-run perfectly competitive equilibrium? A. Price = marginal revenue = marginal cost B. Price = long-run average variable cost C. Short-run average fixed cost = short-run average variable cost D. Short-run average variable cost = long-run average cost
a
Which of the following gives the correct steps for building an economic model? A. Identify the problem; develop a model based on simplified assumptions; collect data and test the model B. Collect data and test the model; develop a model based on simplified assumptions; identify the problem C. Identify the problem; collect data and test the model; develop a model based on simplified assumptions D. Develop a model based on simplified assumptions; identify the problem; collect data and test the model
a
Which of the following is not a characteristic of perfect competition? A. Firms produce slightly different products. B. Firms have perfectly elastic demand curves. C. Firms can easily enter the industry. D. Firms have no control over the price that they charge.
a
Which of the following is not considered a principal function of money? A. Means of barter B. Unit of account C. Medium of exchange D. Store of value
a
Which of the following is not one of the three fundamental economic questions? A. When to produce B. For whom to produce C. How to produce D. What to produce
a
Which of the following properties must hold true for marginal propensities to consume and save? A. The sum of marginal propensities to consume and save must equal one. B. The sum of marginal propensities to consume and save must be greater than one. C. The sum of marginal propensities to consume and save must equal zero. D. The sum of marginal propensities to consume and save must be smaller than one.
a
Which of the following statements is most relevant to the GDP gap as a socially undesirable outcome? A. The GDP gap is deemed socially undesirable because it represents the opportunity cost to the nation from operating at less-than-full employment. B. The GDP gap is deemed socially undesirable because it suggests a weak international economy. C. The GDP gap is deemed socially undesirable because it represents higher production cost to the nation from operating at less-than-full employment. D. The GDP gap is deemed socially undesirable because it represents the political cost to the nation from operating at less-than-full employment.
a
Which of the following statements provides an accurate depiction of the difference between the short run and the long run? A. In the short run, there is at least one fixed input. B. The short run refers to a period that is less than a year, whereas the long run is over a year. C. In the short run, all inputs are allowed to vary. D. In the short run, only fixed input matters in the production function.
a
Which of the following statements represents the unintended consequences of the first-home owner's grant on housing prices? A. An inelastic supply curve of houses leads to an increase in housing prices, potentially making houses more unaffordable. B. A unitary supply curve of houses leads to an increase in housing prices, potentially making houses more unaffordable. C. A perfectly elastic supply curve of houses leads to an increase in housing prices, potentially making houses more unaffordable. D. A kinked supply curve of houses leads to leads to an increase in housing prices, potentially making houses more unaffordable.
a
Which of the following would most likely not cause market demand for a normal good to decline? A. An increase in the price of a substitute B. An increase in the price of a complement C. A decline in consumer income D. Consumer expectations that the good will go on sale in the near future
a
Which of the following would not be a macroeconomic policy? A. Eliminating business cycles B. Lessening extreme fluctuations of business cycles C. Reducing the severity of recessions D. Achieving economic growth consistent with community needs
a
Why are sellers willing to sell more at a higher price? A. A higher price allows sellers to cover an increased opportunity cost associated with producing and supplying a larger quantity. B. A higher price negates the law of diminishing marginal utility. C. A higher price shifts the demand curve leftward. D. A higher price shifts the supply curve rightward.
a
'It is not fair to increase the federal minimum wage because it causes an increase in unemployment among teenagers.' This is a(n): A. correct statement of positive economics B. correct statement of normative economics C. testable value judgement D. incorrect statement of positive economics E. incorrect statement of normative economics
b
A farmer is deciding whether or not to add fertiliser to her crops. If the farmer adds 1 kilogram of fertiliser per hectare, the value of the resulting crops will rise from $80 to $100 per hectare. According to marginal analysis, the farmer should add fertiliser if it costs less than: A. $12.50/kg B. $20/kg C. $80/kg D. $100/kg E. $19/kg
b
A firm has total fixed costs of $100 000 and total variable costs of $90 000 at an output of one unit. How much is marginal cost at an output of one unit? A. $10 000 B. $90 000 C. $100 000 D. $190 000
b
A monopolist maximises total revenue by setting quantity at: A. the upper segment of a straight-line demand curve B. the mid-point of a straight-line demand curve C. the lower segment of a straight-line demand curve D. the point at which the straight-line demand curve intersects the quantity axis
b
A tax collected from sellers can be fully shifted to buyers in the unlikely case that demand is: A. perfectly elastic B. perfectly inelastic C. unitary elastic D. inelastic
b
According to the net-exports effect, as the price level falls relative to the rest of the world: A. foreigners buy fewer Australian goods B. foreigners buy more Australian goods C. the aggregate demand curve shifts to the left D. the aggregate demand curve shifts to the right E. the aggregate supply curve shifts to the right
b
An increase in capital investment today: A. immediately shifts out the production possibilities frontier (PPF) D. immediately shifts in the PPF B. shifts out the PPF in the future C. shifts in the PPF in the future
b
As shown in the graph above, the firm will produce in the short run if the price per unit is at least equal to: A. $10 B. $15 C. $20 D. $30 E. $40
b
Ceteris paribus, an increase in taxes will: A. shift down the supply curve B. shift up the supply curve C. cause a downward movement along the supply curve D. cause an upward movement along the supply curve
b
During the intermediate range of the aggregate supply curve, the government can combat inflation by ________ government spending, which shifts the aggregate demand (AD) curve to the __________. A. reducing; right B. reducing; left C. raising; right D. raising; left
b
Economic growth may be represented by a(n): A. leftward shift of a production possibilities curve B. outward shift of a production possibilities curve C. movement along a production possibilities curve D. production possibilities curve that remains fixed E. leftward pivot of a production possibilities curve
b
Economics is the study of how people: A. vote for political leaders who decide what is to be produced B. make choices to produce and consume goods and services in the presence of scarcity C. establish social institutions that maximise wellbeing D. develop value systems that affect their consumption choices E. form customs and traditions that influence consumption
b
For a price floor to work, the price must be set: A. below its equilibrium level in the market B. above its equilibrium level in the market C. at its equilibrium level in the market D. double its equilibrium level in the market
b
If a competitive firm suffers loss, it should: A. always shut down B. shut down if its losses are greater than total fixed costs C. shut down if its total fixed costs are greater than losses D. raise its price E. shut down if its losses are greater than total variable costs
b
If a farmer adds 1 kilogram of fertiliser per hectare, the value of the resulting crops rises from $80 to $100 per acre. According to marginal analysis, the farmer should add fertiliser if it costs less than: A. $12.50/kg B. $20.00/kg C. $80/kg D. $100/kg
b
If a woman marries her gardener and he keeps maintaining her garden after they are married, then the value of GDP: A. falls, but it is hard to say by how much B. falls by the value of the services provided C. is unchanged as the total value of goods and services is unchanged D. rises, by the value of the services provided E. rises, but it is hard to say by how much
b
If margarine and butter are substitutes, then their cross-elasticity coefficient will be: A. strictly greater than 1 B. positive C. equal to zero D. negative E. strictly less than 1
b
If the RBA wishes to increase interest rates in the economy, it will: A. lower the overnight cash rate B. sell government securities C. buy government securities D. increase the money supply
b
If the government simultaneously increases its spending by $400 million and raises taxes by $400 million, by how much will these policies change the aggregate demand in the economy? A. Decrease by $400 million B. Increase by $400 million C. Decrease by $200 million D. Increase by $600 million
b
If your nominal income increased by 5 per cent, and CPI rose by 6 per cent, what happened to your real income? A. Increased by 1 per cent B. Decreased by 1 per cent C. Increased by 2 per cent D. Decreased by 2 per cent
b
In a circular flow model of an open economy, the dollar value of all _________ from the income flow equals the dollar value of all _________ of spending. A. injections; leakages B. leakages; injections C. injections; injections D. leakages; leakages
b
In the long run, a monopolistically competitive firm: A. makes economic profit B. makes no economic profit due to the absence of entry barriers C. realises economies of scale D. loses money
b
Information lags of monetary policy are caused by: A. the delay between when a change in monetary policy is implemented and the time at which it has its effect on the economy B. the time it takes for policymakers to obtain the necessary information about the current phase of the business cycle C. the time it takes for policymakers to decide on appropriate policy responses D. the delay that occurs before policy activism is introduced
b
Jan is an engineer working for the roads department in a small town in New South Wales. When the government cut spending, Jan and 99 others were laid off. The only other business in the town is growing grapes to be made into raisins, but the growers refuse to hire laid-off engineers, knowing they will leave at the first opportunity. The unemployment Jan is experiencing is: A. cyclical B. structural C. permanent D. frictional E. seasonal
b
Nominal income is: A. the actual number of dollars received over the period of time, adjusted for changes in the CPI B. the actual number of dollars received over the period of time C. the actual number of dollars received over the period of time, adjusted for changes in the GDP D. the real number of dollars received over the period of time E. the actual number of dollars received over the period of time, adjusted for changes in the inflation rate
b
The industry supply curve typically: A. includes all costs including social costs B. does not include the external costs C. only includes external costs D. includes internal and external costs E. includes both public and private costs
b
The minimum wage law in the labour market is considered a form of: A. price ceiling B. price floor C. price anchor D. price discrimination
b
What happens to quantity demanded when price increases? A. It rises. B. It falls. C. It stays the same. D. It cannot be determined whether it rises, falls or stays the same.
b
What happens to the production possibilities frontier (PPF) when an economy grows over time? A. The PPF shifts inward. B. The PPF shifts outward. C. Points along the PPF move upward. D. Points along the PPF move downward.
b
What is the cause of a bowed-out shaped (concave to the origin) production possibilities frontier (PPF)? A. The law of diminishing returns B. The law of increasing opportunity costs C. The law of demand D. The law of supply
b
When the long-run supply curve in a perfectly competitive industry is upward-sloping: A. the industry is a decreasing-cost industry B. the industry is an increasing-cost industry C. the industry is a constant-cost industry D. the industry is a high-cost industry
b
When the supply curve fails to include negative external costs, the equilibrium price is artificially ______ and the equilibrium quantity artificially ______. A. low; low B. low; high C. high; low D. high; high
b
Which barrier to entry results in the creation of a natural monopoly? A. Legal barriers like government franchises B. Economies of scale C. Ownership of a vital resource D. Patents and copyrights E. Economies of scope
b
Which of the following is a normative statement? A. An increase in the demand for Australian goods strengthens the Australian dollar. B. The 2018 federal budget should be fair to every taxpayer. C. A decrease in the interest rate stimulates consumption and investment. D. An increase in the supply of apples reduces the price of apples, ceteris paribus.
b
Which of the following is most likely to be studied by a microeconomist? A. The effects of government policy on the output level in Australia B. The effects of a natural disaster on the supply of apple in Australia C. The effects of 'Brexit' on the Australian economy D. The effects of a burst of the housing bubble in Australia
b
Which of the following is not an automatic stabiliser? A. Unemployment benefits B. Salaries of government ministers C. Social welfare payments that are means-tested D. Progressive income taxes
b
A bank can create money by: A. buying public-sector securities B. getting its borrowers to repay their loans C. extending new loans to their customers D. printing more cheques
c
A fall in the market price of a product will lead to: A. supply in the market being reduced B. the quantity supplied in the market to rise C. the quantity supplied in the market to fall D. more of the good to be supplied at every price
c
A firm in a monopolistically competitive market is able to be a price maker by: producing a homogenous product reducing the price of its product to drive competitors out of the market differentiating its product creating barriers to entry
c
A person who wants to work but has given up searching for work because he or she believes there will be no job offers would be officially classified as: A. unemployed B. employed C. discouraged D. underemployed
c
According to the information provided in the above graph, if the Rudd Ice Company is a monopoly and is currently charging a price of $10, what would you advise Rudd to do? A. Stay where he is currently operating because he is charging the profit- maximising price. B. Increase price and increase output. C. Decrease price and increase output. D. Increase output and hold price constant. E. Decrease price and decrease output.
c
According to the national income identity, which of the following conditions must always hold? A. Current account balance = capital account balance B. Current account deficit = capital account deficit C. Current account deficit = capital account surplus D. Current account surplus = capital account surplus
c
All points along the production possibilities frontier are: A. unattainable combinations of two goods B. minimum possible combinations of two goods C. efficient maximum possible combinations of two goods D. a combination of two goods given that not all available resources are used E. efficient minimum possible combinations of two goods
c
Assume that household consumption is $500 billion, gross private domestic investment is $200 billion, government expenditure is $200 billion, and net exports are -$10 billion. The GDP is: A. $910 billion B. $900 billion C. $890 billion D. $700 billion E. $500 billion
c
Bus services often offer lower prices for students and pensioners because: A. they have a more inelastic demand for bus services B. it is the morally right thing to do C. they have a higher elasticity for bus services than the adult working population D. they have a higher willingness to pay E. they have a less elastic demand for bus services
c
Compared with perfect competition, oligopolists are likely to: A. earn zero economic profit in the long run C. spend less resources on advertising to differentiate their products C. over-produce and charge higher prices D. over-produce and charge lower prices
c
If a government's revenues exceed its spending level, it will have: A. created a national debt B. a budget deficit C. a budget surplus D. a burden of debt
c
If the GDP gap is zero, we can conclude that: A. unemployment is zero B. frictional unemployment is zero C. cyclical unemployment is zero D. seasonal unemployment is zero E. structural unemployment is zero
c
If the RBA implements an expansionary monetary policy, it will have to: A. sell government securities to increase the money supply and reduce interest rates B. sell government securities to decrease the money supply and reduce interest rates C. buy government securities to increase the money supply and reduce interest rates D. buy government securities to decrease the money supply and reduce interest rates
c
If the government imposes an excise tax with the aim of raising revenue, it should place the tax on goods: A. where demand is price-elastic B. that have numerous substitutes C. that are necessities D. where supply is price-elastic
c
If you expect the interest rate to fall in the future and have decided to park your financial wealth in fixed-interest bonds, what is the motive behind your decrease in money demand? A. Precautionary motive B. Transactions motive C. Speculative motive D. Altruistic motive
c
Monetary policy is the action of the Reserve Bank of Australia (RBA) in initially changing: A. the demand for money B. aggregate demand C. the money supply D. real GDP
c
Scarcity is a problem: A. because human wants are limited while resources are limited B. because human wants are limited while resources are unlimited C. because human wants are unlimited while resources are limited D. because human wants are unlimited while resources are unlimited E. that only poor people face
c
Suppose that X and Y are substitute goods. If the price of good X increases, we can expect: A. the demand curve for good X to shift to the left B. an upward movement along the demand curve for good Y C. the demand curve for good Y to shift to the right D. a downward movement along the demand curve for good Y E. the demand curve for good Y to shift to the left
c
The crowding-out effect may not be significant if: A. the government borrowing is used to fund the government's own current consumption spending B. government borrowing causes interest rates to rise C. additional government spending stimulates private consumption spending D. government borrowing subdues private-sector demand
c
The demand for a product is likely to become more price-elastic in the long run because: A. it takes time for all consumers to realise that the product's price has changed B. sellers always increase the prices of their products over time C. new substitutes are likely to become available D. the supply of most products usually increases over time
c
The goal of full employment is to operate an economy at an unemployment rate equal to: A. zero B. the sum of seasonal and frictional unemployment C. zero cyclical unemployment D. the government's announced target
c
The level of GDP that could be produced at full employment is: A. potential real GNP B. potential nominal GNP C. potential real GDP D. potential GDP E. potential nominal GDP
c
The number of satellite dishes increased by 50 per cent when the average monthly price of cable television increased by 10 per cent. Assuming that other factors are held constant, satellite dishes and cable television are classified as: A. complements B. unrelated goods C. substitutes D. social goods E. independent goods
c
The official definition of unemployment: A. overstates the unemployment rate by not accounting for underemployed workers B. understates the unemployment rate by not accounting for members of the armed forces C. understates the unemployment rate by not accounting for discouraged workers D. overstates the unemployment rate by not accounting for discouraged workers E. is an accurate measure of the level of underutilisation in the economy
c
Which of the following characteristics does not describe a monopoly market structure? A. A single seller B. A unique product C. No scope for economies of scale D. Significant barriers to entry
c
Which of the following characteristics sets apart an oligopoly market structure from other types of market structure? A. Oligopolistic firms earn economic profit in the long run. B. Oligopolistic firms sell homogenous or differentiated products. C. Oligopolistic firms need to consider mutual interdependence. D. Oligopolistic firms are protected by high barriers to entry.
c
Which of the following is likely to cause a decrease in the demand for oil? A. An increase in the demand for combustion-engine cars B. A decrease in the supply of electric cars C. A decrease in the supply of combustion-engine cars D. An increase in the price of oil
c
Which of the following is most likely to be studied by a macroeconomist? A. The effects on a university student of abolishing the minimum wage B. The effects on the banking industry of financial deregulation C. The effects on investment of an increase in the overnight cash rate by the Reserve Bank of Australia D. The effects on Australia Post employees of privatising Australia Post
c
Which of the following is not a function of the Reserve Bank of Australia (RBA)? A. Conducting monetary policy B. Providing banking services to other banks C. Controlling government spending policy D. Monitoring non-bank financial institutions
c
Which of the following is not a resource? A. Land B. Labour C. Money D. Capital E. Entrepreneurship
c
Which of the following is not an assumption underlying the production possibilities frontier (PPF) model? A. Resources are fixed. B. Resources are fully utilised. C. There is technological change. D. There is no technological change.
c
Which of the following statements is incorrect? A. The production possibilities frontier (PPF) shows the maximum combinations of two outputs that an economy can produce given its available resources and technology. B. All the points along the PPF show the maximum output levels and represent the most efficient outcomes for an economy. C. It is possible for an economy to operate beyond its PPF. D. Scarcity limits an economy to points on or below its PPF.
c
Which of the following statements is not an accurate depiction of cost formulas in the short run? A. Total cost increases with output. B. Marginal cost increases beyond a certain level of output. B. Average fixed cost increases with output. C. Average total cost exhibits a U-shaped pattern with respect to output.
c
Which of the following statements is not an accurate description of the elasticity of demand? A. The coefficient of elastic demand is greater than one. B. The coefficient of inelastic demand is less than one. C. The coefficient of perfectly elastic demand is zero. D. The coefficient of unitary inelastic demand is one.
c
Which of the following will shift the aggregate demand curve to the right? A. Consumers becoming more pessimistic about the future B. A decrease in government spending C. An increase in business optimism D. A decrease in business optimism E. A fall in the inflation rate
c
A common outcome of rent controls is: A. increasing rents received by landlords B. rising property values C. encouraging landlords to overspend for maintenance D. lower quality of housing E. falling property values
d
A decrease in supply means that: A. demand will increase by the same amount B. the quantity demanded will increase C. there is a movement down and to the left along the supply curve D. the quantity supplied at every price will decrease E. the supply curve will shift down at every price
d
A firm in a perfectly competitive market faces: A. its own upward-sloping demand curve B. its own downward-sloping demand curve C. a market demand curve D. a perfectly elastic demand curve E. an elastic demand curve
d
According to Keynes, what is the most important determinant of households' spending on goods and services? A. Price levels B. Interest rates C. Autonomous consumption D. Disposable income E. Fiscal policy settings
d
According to supply-side economists, lowering corporate income taxes: A. results in wage hikes for employees but no economic growth B. moves society toward greater income equality C. restricts investment and economic growth D. stimulates investment and economic growth E. results in wage cuts for employees and economic growth
d
An externality is: A. always a benefit to the recipient B. always a detriment to the recipient C. an activity that occurs in a business which is unknown to management D. an unintended benefit or cost imposed on third parties as a result of economic activity E. is always a cost to the recipient
d
As we move down the upper segment of a straight-line demand curve, price elasticity of demand ________ and total revenue ________. A. rises; rises B. rises; falls C. falls; falls D. falls; rises
d
Assume that a computer is a normal good. An increase in consumer income, other things being equal, would: A. cause an upward movement along the demand curve for computers B. cause a downward movement along the demand curve for computers C. shift the demand curve for computers to the left D. shift the demand curve for computers to the right E. have no effect on the market for computers
d
Economic models are based on: A. microeconomic analysis B. the assumption that all variables are held constant C. normative economics D. scientific method
d
If a perfectly competitive firm receives a marginal revenue of $10 for its product and the minimum average variable cost is $11, then the firm should, in the short run: A. reduce the level of output its produces B. increase the level of output it produces C. neither increase nor decrease the level of output it produces D. shut down
d
If sellers charge $8 for a good and the market-clearing price for the good is $12, this will lead to: A. a shortage, which will then lead sellers to lower their price B. a surplus, which will then lead sellers to increase their price C. a surplus, which will then lead sellers to lower their price D. a shortage, which will then lead sellers to increase their price
d
If the economy is experiencing unemployment, the most appropriate government policy would be to shift the aggregate: A. demand curve by using a tax increase coupled with spending cuts B. demand curve by using a tax increase coupled with more spending C. demand curve by using a tax cut coupled with spending cuts D. demand curve by using a tax cut coupled with more spending E. supply curve by using a tax cut coupled with more spending
d
In the upward-sloping segment of the aggregate supply curve: A. increases in output are linked to decreases in the price level B. increasing prices drag down resource costs C. producers can hire more workers without having to raise the wage rate D. firms are willing to pay higher wages to get more labour E. households are willing to pay higher prices to get more goods
d
Marginal product and marginal cost are: A. unrelated B. related in a positive way C. related in an obtuse way D. related in an inverse way
d
Monopoly is argued to be an inefficient outcome for an economy because of all the following, except that: A. consumers face a higher price B. consumers face a lower output C. consumers face price discrimination D. consumers face constant product innovation
d
Other things being equal, a decreased supply of natural resources would be represented on a production possibilities curve by a(n): A. movement off the curve to a point inside the curve B. movement down along the curve C. movement up along the curve D. inward shift of the entire curve E. outward shift of the entire curve
d
Price floors are instituted because the government wants to: A. increase demand B. increase quantity demanded C. raise tax revenue D. increase quality supplied E. increase supply
d
Suppose that the inflation rate during a year is 5 per cent. During that year, you deposited $500 in your bank account and received an annual nominal interest rate of 10 per cent. What is the real purchasing power of your deposit at the end of the year? A. $500 B. $550 C. $525 D. $523
d
The 'crowding out' of private investment is associated with: A. a reduction in profitable investment opportunities due to a recession B. increased competition from foreign investors in Australian markets C. higher interest rates resulting from a declining rate of saving D. higher interest rates resulting from increased borrowing by the federal government E. higher interest rates resulting from increased borrowing by the private sector
d
The RBA believes that by keeping inflation low and steady it can assist with: A. the achievement of low prices over the medium to long term B. the achievement of slow and steady economic growth over the medium to long term C. the achievement of full unemployment and slow and steady economic growth over the medium to long term D. the achievement of full employment and high economic growth over the medium to long term E. the achievement of full employment over the medium to long term
d
The downward-sloping segment of a long-run average cost curve illustrates: A. economies of scale for large-sized firms B. economies of scale for medium-sized firms C. that a firm has not yet achieved economies of scale D. economies of scale for both large and medium-sized firms
d
The non-monetary or demographic consequences of unemployment may include: A. social disharmony B. societal problems caused by high youth unemployment C. the erosion of workplace skills D. all of the above
d
The time before information about the current phase of economic activity in the real world becomes available is called the: A. delay time B. appropriate time C. important time D. information lag E. administration lag
d
The use of legislative standards as a means of regulating carbon emissions may result in: A. a carbon emitter reducing its output B. the short-run costs of production of a carbon emitter rising C. a carbon emitter being forced to adopt pollution control equipment or low carbon-emitting production processes D. all of the above
d
Transfer payments are an example of a(n): A. discretionary stabiliser B. countercyclical stabiliser C. pro-cyclical stabiliser D. automatic stabiliser E. non-discretionary stabiliser
d
What effect would an oil price shock have on an economy? A. The rate of inflation would fall as aggregate demand fell. B. The aggregate demand curve would shift inward. C. The rate of unemployment would rise as the aggregate supply curve shifted outward. D. The rate of inflation would rise as the aggregate supply curve shifted inward.
d
What happens to the market equilibrium when the government reduces company taxes? A. Lower company taxes shift up the supply curve, leading to a higher equilibrium price in the market, ceteris paribus. B. Lower company taxes shift down the supply curve, leading to a higher equilibrium price in the market, ceteris paribus. C. Lower company taxes shift up the supply curve, leading to a lower equilibrium price in the market, ceteris paribus. D. Lower company taxes shift down the supply curve, leading to a lower equilibrium price in the market, ceteris paribus.
d
What should a nation do when it has already reached its 'Golden Rule' of saving? A. Increase saving to improve production factor accumulation. B. Decrease saving to improve production accumulation. C. Raise investment to improve production factor accumulation. D. Leave the saving rate unchanged to avoid an unnecessary fall in consumption.
d
When there are positive externalities associated with the consumption of a good, we can expect: A. the private demand curve to lie above the social demand curve B. the private supply curve to lie below the social supply curve C. the private supply curve to lie above the social supply curve D. the private demand curve to lie below the social demand curve E. the private demand curve is the social demand curve
d
Which of the following determinants will not lead to a change in demand for a good? A. The number of buyers B. Tastes and preferences C. Income D. The price of the underlying good
d
Which of the following fiscal policy action would not be useful to combat a recession? A. The government increases its spending on the transportation system. B. The government increases its spending on the healthcare system. C. The government increases its spending on environmental programs. D. The government increases personal and company taxes.
d
Which of the following goods is likely to have the most elastic demand curve? A. Tobacco products B. Petrol C. Medical care D. Honda civics E. Honda cars
d
Which of the following is a coincident indicator? A. CPI data B. Industrial production C. Building approvals D. Retail sales E. Wholesale sales
d
Which of the following is not a leading indicator? A. Average work week B. Stock prices C. Money supply D. Unemployment duration
d
Which of the following is not supported by economists to combat the problem of climate change? A. Carbon tax to reduce emissions B. Emissions trading scheme C. 'Cap and trade' scheme D. Do nothing and rely solely on market-based outcome E. Government research to reduce emissions
d
Which of the following is not the main cause of the rising housing prices in Australia? A. First-home owners' grant B. Growing population C. Increases in stamp duty D. Decrease in the supply of houses
d
Which of the following policies is not an ideal solution for solving the market failure in coal seam gas production? A. Increased taxes and charges B. Regulation C. Payment of full compensation D. A complete ban on coal seam gas drilling
d
Which of the following statements is false? A. The use of one typical consumption 'basket' tends to overstate the consumer price index (CPI) for certain groups of society. B. CPI often fails to take into account changes in quality. C. CPI ignores the impact of the substitution effect. D. CPI increases with the size of the population.
d
Which of the following statements is incorrect with respect to the GDP as a measure of economic welfare? A. GDP is not a good measure of economic welfare because it neglects the value of leisure. B. GDP is not a good measure of economic welfare because it neglects the underground economy. C. GDP is not a good measure of economic welfare because it neglects the value of non-market transactions. D. GDP is not a good measure of economic welfare because it overstates the size of the economy.
d
Which of the following statements is not an accurate depiction of business cycles? A. Business cycles vary in duration and intensity. B. Business cycles follow the pattern of peak, recession, trough and expansion. C. Business cycles occur at an irregular interval. D. Business cycles are rare events in developed countries.
d
Which of the following statements is not an accurate depiction of monopolistic competition? A. A monopolistic firm makes zero economic profit in the long run. B. A monopolistic firm faces a downward-sloping demand curve as a result of product differentiation. C. A monopolistic firm practises price discrimination to maximise economic profit in the short run. D. A monopolistic firm faces a downward-sloping long-run average cost curve.
d
Which resource is not an example of capital? A. Equipment B. Machinery C. Physical plants D. Stocks or bonds
d
Which statement is true about economic profit in the long run? A. Both the monopolist and the perfect competitor make one. B. Neither the monopolist nor the perfect competitor makes one. C. Only the perfect competitor makes one. D. Only the monopolist makes one.
d
Which statement is true about price discrimination? A. Price discrimination is equally applicable in perfect competition and in monopoly. B. Price discrimination allows customers to engage in arbitrage. C. Price discrimination maximises economic profit because the monopolist faces a horizontal demand curve. D. Price discrimination occurs when the monopolist can charge different prices to different customers without affecting its cost curves.
d
Why is the aggregate demand curve downward-sloping? A. Wealth effect B. Interest-rate effect C. Net exports effect D. All of the above
d
An increase in government spending will increase aggregate demand, leading to a rise in real GDP and employment. T F
f
An increase in the supply of liquidity to the financial system causes liquidity surplus and people to sell bonds. This, in turn, decreases interest rates. T F
f
Average work week, new building approvals, stock prices and money supply are known as coincident indicators.
f
Credit cards are considered a form of money because they are used widely to pay for purchases and increase the convenience and efficiency of conducting transactions.
f
In Australia, by law, only the 'Big Four' banks are required to have a positive balance in their exchange settlement accounts with the Reserve Bank of Australia (RBA). T F
f
Keynesian economics is the theory that changes in the growth of the money supply directly determine changes in prices, real GDP and employment. T F
f
The cyclical adjusted budget deficit is the budget deficit that would occur if real GDP equalled potential GDP. T F
f
When the RBA targets an interest rate, the money supply curve is vertical. T F
f
In terms of the components of the money supply, M1 is considered more liquid than M3 or Broad Money. T F
t
In the intermediate segment of the aggregate supply curve, the equilibrium real GDP changes by less than then change in spending times the spending multiplier. T F
t
The economy can remain at levels of production below those required to maintain full employment for long periods, resulting in involuntary unemployment. T F
t