Econ 1301 Test Questions

If fixed cost are $2000 and average variable costs are $10, a firm producing 1000 units of its product has total cost of ________?

$12,000

An externality is:

A cost or benefit arising from an activity that falls on a third party.

The law of supply states that, other things staying the same, a decrease in the price of a canoe leads to:

A decrease in the quantity supplied of canoes.

Outsourcing is best defined as:

A firm hiring an outside specialist to take over a particular function of a business.

Which of the following is the best example of capital?

A gravel truck

It has been said that the initiation of protection of private property rights was instrumental in the creation of:

A prosperous middle class.

A tariff is:

A tax imposed on imports

At the beginning of a recession, as inventories rise, retailers:

All of the above except option A

The United States has a very high tariff place on sugar, As a result:

American candy manufactures have moved their plants to Canada.

A standard of value is defined as:

An agreed upon measure fro stating the prices of goods and services.

A medium of exchange is defined as:

Anything that is readily accepted in return for goods and services.

Diminishing marginal utility sets in because:

As you consume added units of a good, you become less interested in consuming one more unit of that good.

Which of the following shifts the supply curve for oranges?

Bad weather destroys half of this years orange crop.

Regarding the money supply, money is "created" when:

Banks make loans

To finance any budget, the US Treasury Department must:

Borrow by offering government securities to the public.

Joan quit her job as an accountant, where she was paid $45,000 per year. She started her own business. She rents tools and machines for $50,000 per year and pays a helper $10,000 per year in wages. These are her only cost. Her total revenue was $100,000 per year.

Both options a and b are correct.

A firm usually finances the acquisition of capital by:

Both options a. and c. are correct.

A change in nominal GDP from year to year includes changes in :

Both prices and quantities

Which of the following would not be part of the Fed's "tight" money policy?

Buy securities in the open market.

When the Fed conducts Open market operations, it is:

Buying and selling government securities by the Fed

Which of the following is the correct way to calculate GDP?

C+I+G+X-M=GDP

Economic growth can be measured by:

Calculating the year-to-year change in Real GDP

In the dollar-euro market, an increase in demand for euros will:

Cause the dollar to depreciate in value relative to the euro.

Of the following assets, which is the most liquid?

Checking accounts

Which of the following is a determining factor in the amount of American exports?

Comparative advantage of American-made goods over foreign-made goods.

Which of the following describes unemployment when retailers and factories lay off workers in response to decreased spending in the economy?

Cyclical

A trade ______ exist when _______ exceed _______.

Deficit; Imports; Exports

Car insurance and cars are complements. If the price of car insurance increases, then the:

Demand for cars decreases.

The interest rate charged b the Fed when a bank borrows reserves from the Fed is called the:

Discount Rate

If a small percent increase in price generates a big percent decrease in quantity demanded, we can say that demand is:

Elastic.

A "double coincidence of wants" is:

Eliminated with the use of money

Goods and services that the United States sells to other nations are called:

Exports

All of the following are barriers to entry except:

Extraordinarily high price of the product.

The interest rate charged by one bank when another bank borrows reserves from that bank is called the:

Federal Funds Rate

The most important body of the Federal Reserve System to carry out monetary policy is the :

Federal Open Market Committee.

Actual out-of-pocket payments by the firm are called:

Fixed cost.

In the short run, the firm cannot change the amount of capital it uses. Therefore, the cost of capital is a:

Fixed cost.

Most monopolies today are:

Found in government-regulated industries.

Which of the following is true about government borrowing to fund the budget deficit?

Government borrowing taps into the same pool of funds as private sector borrowing and could lead to "crowding out"

The dollar value of all final goods and services produced within the nation's borders in one year is a measurement of

Gross Domestic Product (GDP)

If a firm's ATC is greater than the price, then the firm:

Has an economic loss.

In a progressive tax system, _______ income earners pay a ______ of their income in taxes as their income rises.

High; higher percentage.

Unemployment is usually ______ for low-skilled jobs and ________ for high-skilled jobs.

High; low

When two firms that serve the same set of customers merge it is called a _________ merger.

Horizontal

In the short-run, a firm must decide _________, while in the long run, it can decide _________.

How many to produce this week, How big a facility to build.

The opportunity cost of the owner's assets, time , and effort are:

Implicit cost

Goods and services that the United States buys from other nations are called:

Imports

The primary determining factor that drives consumption spending is:

Income

The idea that restricting international trade saves jobs is:

Incorrect because more jobs are created due to international than are eliminated.

In the dollar-euro market, an increase in demand for dollars will:

Increase its price in euros.

Producing a combination of goods is represented by a point inside the PPC is:

Inefficient and attainable

Society's Institutional PPC is _________ it physical PPC because ________.

Inside, society does not desire to make all out use of its resources and technology

The opportunity cost of attending college:

Is higher for people with greater current earnings potential.

When a society goes into an overheated economy:

It moves to a point outside it's institutional PPC

Money gets its value from

Its purchasing power

If wages rise with no increase in productivity or product demand, the firm will:

Lay off some workers.

Congress imposes a price ceiling in the market for gasoline. It is below the equilibrium price. This will:

Lead to a shortage of gasoline.

At macro equilibrium:

Leakages must equal injections.

The benefit-cost decision for the acquisition of capital:

Lower interest rates will cause more investment projects to qualify.

A nation, a business firm, or a person has a comparative advantage in a good when it has a _______ cost of producing the good.

Lower opportunity

The next step is considered to worthwhile taking if:

MB>MC

The profit-maximizing quantity to produce can be found where:

MR=MC

Market power is defined as a firm's ability to:

Manipulate the market price.

The Federal Reserve conducts monetary policy, which is best defined as:

Manipulating the size and growth of the money supply to improve economic performance.

The added cost of obtaining one more unit of a good is called:

Marginal cost

The added satisfaction obtained from consuming one more unit of a good is called:

Marginal utility

Individuals decide for themselves in a:

Market capitalist economy.

Which of the following is a characteristic of oligopoly?

Market share is sometimes more important than profit maximization.

Which of the following has the most market power?

Monopoly

The economy will grow faster if:

More capital goods are produced because capital goods are resources.

Society says that goods with ________ externalities are _________.

Negative, over-produced

A public good is _______ in consumption and ________.

Non-rival, non-exclusionary.

The minimum payment the landowner will accept to put his land into use is called:

Normal rent

Which of the following best describes the economic concept of a "free rider" problem?

Once provided, a public good can be used by everybody "for free"

Society's PPC will push outward if:

Options A and B are both correct, option C is not.

Assume the equilibrium price for an apartment in Plano is $1000 a month. City council imposes a price ceiling of $775 a month on the Plano apartment market to help low income people. This leads to:

Options c and d are both correct.

The capital account deals mainly with:

Overseas investments made by Americans and foreigners.

A good example of a negative externality is ________.

Pollution

The long-run trend in real GDP is:

Positive-about 3 to 3.5 percent per year

In a recession:

Real GDP usually decreases

Long-run economic decline can occur in a society when

Resource availability is decreased

In a free market, we can expect the price to:

Rise when there is a shortage and fall when there is a surplus.

Imposing a tariff on a good leads to a ______ in the price of the good and ________ in imports.

Rise; decrease.

A private good is ______ in consumption and _______.

Rival, exclusionary.

Which of the following is an example of monopolistic competition?

San Francisco's Chinese restaurants.

Which of the types of unemployment is the most predictable and of the least concern?

Seasonal

A perfectly competitive firm can:

Sell as much as it produces at the prevailing market price.

Which of the following would not be part of the Fed's "easy" money policy?

Sell securities in the open market

Business firms ________ goods and services in the _____ market.

Sell; product.

Fractional reserve banking requires

Set aside fixed portion of each deposit and not loan that amount out.

If the benefit of hiring a worker exceeds the cost of hiring that worker, the firm:

Should increase hiring in order to increase profit.

When demand for workers in each skill field increases, wages rise ______ in low-skilled jobs and __________ for high-skilled jobs.

Slowly, fast

The three major forms of business organization in the United States are:

Sole proprietorship, partnership and corporation.

A quota is defined as a

Specific maximum amount that can be imported.

If income distribution is made more equal by imposition of new tax laws, it is likely that the ______ will _______.

Standard of living, decrease.

When you read the price tag on an article of clothing, money is functioning as a

Standard of value.

Which of the following describes unemployment that occurs because an employer, reacting to changes in technology or in the market, reorganizes the firm and eliminates jobs?

Structural

Which of the following describes unemployment when a skilled worker finds himself or herself out of work because the job needing that skill is eliminated?

Structural

In the market for cell phones, which of the following causes a shift of the demand curve to the left?

Studies show that cell phone use causes brain cancer.

Auto workers receive a wage increase. How does that affect the supply curve for automobiles?

Supply curve shifts left

Who are the principle participants in self-correction?

The 300 million members of the U.S. society

Which of the following is consistent with the concept of a full employment goal?

The Institutional PPC

In most industries, the relationship between the demand curve and the marginal revenue curve is:

The MR curve slopes downward twice as fast as the demand curve.

The principle determinant for the elasticity of supply is:

The amount of time the supplier has to respond to a price change.

When the current account has a negative balance:

The capital account has a positive balance.

A small special interest group can obtain a benefit from the government because:

The cost associated with that benefit will spread out over a large number of taxpayers.

A firms demand for workers is derived from:

The demand for the firms product.

As it pertains to money, liquidity can be defined as:

The ease with which an asset can be spent

In most societies, a prosperous "middle class" was developed when:

The individual's right to own and keep private property was honored.

The cost of capital is:

The interest rate that has to be paid to borrow funds.

Adam Smith, in his book "The Wealth of Nations", identified this wealth to be:

The productive capacity of the nation's people

A harmful effect of inflation is:

The purchasing power of one's income falls.

The business cycle tracks:

The short-run ups and downs of the economy

The opportunity cost of increasing one's work hours is:

The value the worker places on the foregone leisure time.

When the capital account has a positive balance this means that:

There is a dollar inflow into the U.S. due to foreign investment in American assets.

People act rationally when?

They think before they act.

Macro equilibrium can occur with abnormally low unemployment when:

Total spending is less than the economy's capability to produce.

Macro equilibrium can occur with high unemployment when:

Total spending is less than the economy's capability to produce.

In the US, income is distributed

Unequally based primarily on the demand for the income earner's resources.

We must make decisions in order to:

allocate our scarce resources to fulfill our most valued unmet wants and needs.

A combination of goods represented by a point lying outside the PPC is:

attainable only if economic growth occurs

Computers from Dell and from Acer are substitutes. If the price of a Dell computer decreases, then

demand for acer computers decreases.

The three policy tools that the Fed can use to carry out monetary policy are setting the:

discount rate; open market operations; and setting the required reserve ratio

Producing a combination of goods represented by a point on the PPC is:

efficient and attainable

The current account deals mainly with:

exports and imports.

A person is considered to be unemployed if he or she:

is not working but is actively seeking work.

Which of the following is true? Marginal revenue:

is the additional revenue received when the firm sells one more unit of the product.

The four categories of resources are...

labor, land, entrepreneurship and capital

Why is there an economic role for government?

modern society becomes impatient with the slow progress of the private sector's self correction to "fix" the economy

When we are forced to make choices we are facing the concept of:

scarcity

For the US economy, the long run trend in economic growth is:

up

The amount of satisfaction obtained from consuming a specific item at one particular time is:

utility.

In a market society, producers will produce products based on:

what they can make the cheapest.

If the price of a good rises and your income does not:

you cannot buy as much of the product as you did before.