Econ 2000 Final

A monopolistically competitive industry shares some of the same characteristics as perfect competition including: -many firms making economic profit in the long run - easy entry and exit -identical products -both B and C

easy entry and exit

When monopolies exist because economies of scale prevail over the entire range of demand: -they will charge prices too low to achieve the efficient level of output -even then, economists insist that they do not serve a useful role -economists suggest that we may want to regulate their production and pricing, but we may not want to give up their cost advantages -ATC is likely to exceed price

economists suggest that we may want to regulate their production and pricing, but we may not want to give up their cost advantages

the ratio of the percentage charge in a dependent variable to the percentage change in an independent variable, all other things unchanged: - total revenue -production possibilities -elasticity -slope

elasticity

Goods and services produced in the domestic economy and sold abroad are called: -net exports -exports -imports -transfer payments

exports

a person who mistakenly assumes that because one event follows another, the second event results from the first commits the fallacy of: -division -addition -composition -false cause

false cause

perfect competition is a model of the market that assumes all of the following except: -a large number of firms -firms face downward-sloping demand curves -firms produce identical goods -many buyers

firms face downward-sloping demand curves

Suppose the demand curve has a slope equal to negative 1. The price of elasticity of demand at any point on this demand curve is: -infinite -equal to zero -greater than 1, but less than infinite -not described by any of the above

not described by any of the above

a set of rules that specify the ways in which the resources for which they are defined may be used are: -public goods -quasi-public goods -property rights -free-rider rights

property rights

a period of falling real GDP is a(n) -peak -trough -expansion -recession

recession

the opportunity cost of something is: - greater during periods of rising prices -equal to the money cost -less during periods of falling prices -what is given up to acquire it

what is given up to acquire it

which of the following statements is true? I. the CPI is computed using a fixed basket of goods II. the implicit price deflator is computed a fixed basket of goods III. The CPI and the implicit price deflator can be used to calculate inflation -1,2, and 3 -1 and 2 only -1 and 3 only -2 and 3 only

-1 and 3 only

Linda sells her economics textbook to Ejere for $40. Ejere pays Linda with a check, which she deposits in her checking account in West Bank. Which statement below describes the check-clearing process -Linda's bank gain $40 in checkable deposits and loses $40 in reserves. Ejere's bank gains $40 in reserves and loses $40 in deposits -Linda's bank loses $40 in checkable deposits and gains $40 in reserves. Ejere's bank gains $40 in checkable deposits and loses $10,000 in reserves -Ejere's bank loses $40 in both reserves and checkable deposits. Linda's bank gains $40 in both checkable deposits and reserves -Ejere's bank loses $40 in reserves and gains $10,000 in checkable deposits. Linda's bank loses $40 in both reserves and checkable deposits

-Ejere's bank loses $40 in both reserves and checkable deposits. Linda's bank gains $40 in both checkable deposits and reserves

In the long run, a country's material standard of living is determined by I. its output relative to its population II. its income relative to its population III. the amount of money supply relative to its population IV. the average level of prices and the average income of its population - all of the items listed -I only -I and II only -I and IV only

-I and II only

a contractionary fiscal policy I. decreases a government budget deficit or increases a government budget surplus II. include tax cuts III.may include discretionary cuts in transfer payment -I,II, and III -I and II only -I and III only -II and III only

-I and II only

Which of the following items serve as a store of value? I. cash in your pocket II.the balance in your checking account III.an original Picasso painting IV.a $1,000 corporate bond -I and II -I, II, and III -I,II, and IV -I,II,III, and IV

-I,II,III, and IV

an industry with external costs produces: -a quantity of output that is the socially ideal quantity -a smaller quantity of output than the socially ideal quantity -a larger quantity of output than the socially ideal quantity - the socially ideal quantity of output if a specific subsidy is given to buyers

-a larger quantity of output than the socially ideal quantity

an unemployed person is - one who is eligible to work but choose not to work -one who is not working -a person without a job who is actively searching and available for work -one who can only find jobs that are below his abilities

-a person without a job who is actively searching and available for work

The functions of money are -a conductor of economic activity, a medium of exchange, and a store of value -a medium of exchange, a store of value, and a factor of production -a store of value, a medium of exchange and a determinant of investment -a store of value, a unit of account, and a medium of exchange

-a store of value, a unit of account, and a medium of exchange

in the long run: -all inputs are fixed -inputs are neither variable nor fixed -at least one input is variable and one input is fixed -all inputs are variable

-all inputs are variable

An increase in demand, with no change in supply, will lead to _______ in the equilibrium quantity and ______ in equilibrium price -an increase; an increase -increase; decrease -decrease; increase -decrease; decrease

-an increase; an increase

imperfectly competitive markets include: -a category where many firms sell identical products -an industry with a few firms, producing a similar product, and in some cases an identical product -a category where P=MR=MC is the profit maximizing condition -monopolies

-an industry with a few firms, producing a similar product, and in some cases an identical product

the long-run average cost curve is tangent to an infinite number of: -total cost curves -marginal cost curves -average variable cost curves -average total cost curves

-average total cost curves

on the spectrum of market structures, monopolistic competition lies: -at the same location as monopoly -at the same location as perfect competition -between perfect competition and monopoly -to the left of both perfect competition and monopoly

-between perfect competition and monopoly

the use of government expenditures and taxes to influence the level of economics activity is called -deficit management policy -debt management policy -financial policy -fiscal policy

-debt management policy

Which of the following is the major problem with deflation? -money loses value so rapidly that economic agents will be reluctant to hold money -economic agents tend to put off purchases in anticipation of lower prices for goods and services, leading to a downward spiral in economic activity -low prices for goods and services tend to result in massive shortages in most markets -money supply cannot keep pace with consumption spending

-economic agents tend to put off purchases in anticipation of lower prices for goods and services, leading to a downward spiral in economic activity

which of the following would not be included in the measurement of GDP? -federal government payments for jeeps -a purchase of California win by a Canadian firm -employers' payments for employee's medical insurance -transactions in the underground economy

-federal government payments for jeeps

people who are in the process of changing jobs are counted as: -frictionally unemployed -underemployed -structurally unemployed -cyclically unemployed

-frictionally unemployed

the value of income generated by the production of a given value of final goods and services is called -gross domestic income -net factor output -net foreign factor income -gross personal product

-gross domestic income

Economics, generally speaking, is primarily concerned with: - the operation of the bond and stock markets -the issues of income inequality or income equality -how people choose among the alternative available to them -ceteris paribus, the scientific method, and the margin

-how people choose among the alternative available to them

If the economy experiences an inflationary gap, a contractionary monetary policy will_____ real GDP and ______ the price level. -increase, increase -increase, decrease -decrease, increase -decrease, decrease

-increase, decrease

economists know that a particular good can be classified as an inferior good it a(n) _______ in buyers' income causes a(n)_________ -increase; increase in demand -increase; increase in quantity demanded -increase; decrease in demand -decrease; decrease in demand

-increase; decrease in demand

When the net benefits of all economic activities are maximized, economists say the allocation of resources is _______ . -inefficient -incorrect -efficient -poorly done

-inefficient

the satisfaction consumers derive from their consumption of an additional unit is: -marginal benefit -production advantage -efficiency enhancement -net profit

-marginal benefit

in our society, a good for which exclusion is NOT possible is: -medical services -military defense -toll highways -buses and trains

-military defense

in general, the higher the concentration ratio in an industry, the: -greater the ratio of MC to ATC -lower the ratio of MC to ATC -less firms need to pay attention to individual rivals -more firms need to pay attention to individual rivals

-more firms need to pay attention to individual rivals

which of the following is true in a perfectly competitive market? -one unit of a good or service cannot be differentiated from any other on any basis -brand preferences exist but are very slight -barriers to entry are relatively strong -information is costly

-one unit of a good or service cannot be differentiated from any other on any basis

the terms inflation and deflation -refer to what is happening to the average level of prices -refer to what is happening to particular prices -refer to a decrease in the price of gas or an increase in the price of gas -refers to an increase in the price of gas and a decrease in the price of gas

-refer to what is happening to the average level of prices

public policies towards monopoly in the United States consists of: -laws outlawing all of them -regulation of natural monopolies -government takeover if monopoly profit exceeds a certain level -forcing monopoly industries to become perfectly competitive

-regulation of natural monopolies

the major tools of monetary policy available to the Federal reserve system are: -reserve requirements, margin regulations, and moral suasion -reserve requirements, open-market operations, and the discount rate -open-market operations, margin regulations, and moral suasion -the discount rate, margin regulations, and moral suasion

-reserve requirements, open-market operations, and the discount rate

if a monopoly is forced to charge a price =MC -output will fall -resource allocation will improve -the monopoly will incur an economic loss -all of the above would occur

-resource allocation will improve

The law of increasing opportunity costs is a result of the fact that: -the value of the dollar has declined over time -wage rates rise as the economy reaches full employment -consumers tend to value a good more when they don't have much of it -resources are not equally productive in all output categories

-resources are not equally productive in all output categories

the Fed can increase the federal funds rate by -selling government securities which increases bank reserves -selling government securities which decreases bank reserves -buying government securities which increases bank reserves -buying government securities which decreases bank reserves

-selling government securities which decreases bank reserves

A firm owner by one individual is called a -corporation -partnership -sole proprietorship -none of the above

-sole proprietorship

which of the following statements concerning insurance for health-care services is true? -most workers purchase their own insurance -state governments are the providers of medicare and medicaid -in the US, only private firms provide health insurance -subscribers to insurance plans may pay a small percentage of the cost of the health care they consume

-subscribers to insurance plans may pay a small percentage of the cost of the health care they consume

What are the two making bodies of the federal reserve? -the board of governors and the US congress -the board of governors and the Federal Open Market committee -the board of governors and the presidents office -the federal open market committee and the US congress

-the board of governors and the Federal Open Market committee

which of the following statements is true regarding the government budget? -the government budget has been in deficit since the 1960s -the government budget has been in deficit since WWII except for a brief period between 1998 and 2001 -the government's budget was generally in surplus until the 1980s, then mostly in deficit since except for a brief period between 1998 and 2001 -the government's budget was generally in surplus in the 1960s, then mostly in deficit since except for a brief period between 1998 and 2001

-the government's budget was generally in surplus in the 1960s, then mostly in deficit since except for a brief period between 1998 and 2001

In the second of the three ranges of production: -the total production curve has an increasing slope -the marginal product curve has a negative slope -the marginal product curve intersects with the total product curve -marginal product is negative

-the marginal product curve has a negative slope

a statement that best reflects an evaluation of monopoly firms is that: -they have a great deal of market power -they are economically efficient -consumers are given more choice, lower costs, and higher quality -competition should replace all monopolies

-they have a great deal of market power

Which of the following statements is true about fiscal policy lags? -automatic stabilizers have a much shorter impact lag than discretionary fiscal policy -although the recognition lag is equally long for discretionary fiscal policy and for the automatic stabilizers, the latter avoid implementation lag because automatic stabilizers are triggered automatically -unlike discretionary fiscal policy, automatic stabilizers respond automatically to changes in the economy, thus avoiding the recognition and implementation lags -although automatic stabilizers have a much shorter lag, discretionary fiscal policy instruments have a more potent impact on the economy because they are more precise

-unlike discretionary fiscal policy, automatic stabilizers respond automatically to changes in the economy, thus avoiding the recognition and implementation lags

The costs associated with variable factors of production are ______ costs and the costs associate with _____ factors of production are ______ costs. -variable;fixed;fixed -fixed;variable;variable -variable;fixed;variable -fixed;fixed;fixed

-variable;fixed;fixed

a trade barrier whereby foreign firms agree to limit the quantity of exports to a particular country is called a -quota -tariff -non tariff barrier -voluntary export restriction

-voluntary export restriction

The HHI for an industry with 10,000 firms that have a 0.01 percent share of the market is: -0 -1 -10 -100

1

Suppose that the expected exam scores from studying economics for 0,1,2, or 3 hours are 65, 80, 90, and 95 points, respectively, while the expected exam scores for studying 0,1,2, or 3 hours of accounting are 50,65,70, and 70 pointsm respectively. With 3 total hours of study time, your combined scores can reach a maximum of ________ points. -145 -150 -155 -165

155

Suppose that the expected exam scores from studying economics for 0,1,2, or 3 hours are 65,80,90, and 95 points, respectively, while the expected exam scores for studying 0,1,2, or 3 hours of accounting are 50,65,70, and 70 points, respectively. With 3 total hours of study time, your combined scores can be maximized by spending ________ hours studying economics

2

Using the percentage change from the mean, if the quantity demanded decreases by 10% as the price increased by 5% what is the numerical value of the arc elasticity>

2

diminishing marginal returns for the first four units of a variable input is exhibited by the total product sequence: -5,4,3,2 -5,5,5,5 -5,9,12,14 -5,10,15,20

5,9,12,14

Suppose velocity =5, money supply=$200, and price =$2. What is the value of real GDP? -10 -40 -400 -500

500

If opportunity costs are included in the calculation of profits, which is larger, accounting profits or economic profits?

The economic profit would be larger. The accounting profit is figured out by total revenue-total costs. Economic profit is found by total revenue- (explicit costs+ implicit costs), which is also the opportunity costs.

provided there are not external benefits or costs, resources are efficiently allocated when: -P=MR -P=AVC -P=MC -MC=AVC

P-MC

which is the following is not capital? -a computer in the office of an accountant - a migrant worker in the fields of California -a wrench in an auto repair shop -a new machine used for producing microchips

a migrant worker in the fields of California

"Smokers are more likely to be murdered than nonsmokers". This statement is an example of: - the fallacy of unintended consequences - a positive economic statement - a normative economic statement - a value judgment

a positive economic statement

What is a production possibilities frontier?

a production possibilities frontier is a curve that shows what it means to use resources to their full amount and how to use them efficiently. It can also suggest important ideas for trade or international trade.

by specializing in the production of particular goods in which it has a comparative advantage, a nation is: -less likely to make efficient use of available resources -less likely to engage in international trade -able to become self-sufficient -able to operate efficiently

able to operate efficiently

the market for health care is characterized by which of the following? -significant third-party payments -a falling fraction of the total cost the consumers of health care actually pay - dramatic increase in costs because of technological advances in medical care -all of the above

all of the above

in the market for personal computers and in the stock market: -supply and demand shifts change prices and quantities -persistent shortages and surpluses rarely exist -in response to shifts in supply and demand, equilibrium is restored quickly -all of the above are true

all of the above are true

If the price of mozzarella cheese (an ingredient in pizza) declines due to a major technological breakthrough in the dairy industry, there would be: -a decrease in the supply of pizza -an increase in the supply of pizza -an increase in the quantity of pizza supplied -no change in the supply of pizza

an increase in the supply of pizza

a firm's shut-down point is the minimum value of: -total cost -average variable cost -average total cost -marginal cost

average total cost

Variable cost divided by the quantity of output produced is: -marginal cost - average total cost -average fixed cost -average variable cost

average variable cost

An economist might say that the United States doesn't have enough oil spills in its rivers if it were determined that: -fewer than 1 million fish were being killed by oil spill each year -the marginal benefits of more oil pollution in the river outweighed the marginal cost of preventing or cleaning up the oil spill pollution -the marginal benefits of less oil pollution in the river were less than the marginal cost of reducing the amount of oil spilled at that level -both B and C would lead an economist to that condition

both B and C would lead an economist to that condition

A term that means "all other things unchanged"

ceteris paribus

a statement that best reflects an evaluation of a monopoly firms is that: -they are economically efficient -they have little or no market power -consumers are given more choice, lower costs, and higher quality - competition should not replace all monopolies

competition should not replace all monopolies

the largest component of M1 is -checkable deposits -credit card balances -currency -savings deposit

currency

When the percentage change in the quantity demanded is less than the percentage change in price: -demand is price elastic -demand is price inelastic - an increase in price will result in lower total revenue -total revenue will be zero at the midpoint of a linear demand curve

demand is price inelastic

resources from nature that can be used to produce other goods and services are called: -money -natural resources -labor-capital

natural resources

After graduation from college you will receive a substantial increase in your income from a new job. If you decide that you will purchase more T-bone steak and less hamburger, then for you hamburger would be considered a(n): -normal good -substitute -complementary -inferior good

inferior good

water is considered a scarce good rather than a free good because - it has alternative uses - it does not have alternative uses -scarce goods are less expensive than free goods -free goods are more expensive than scarce goods

it has alternative uses

suppose that the United states imposes a tariff of $500 on Japanese cars. The most likely effect will be to increase cars in the United states by: -less than $500 per car, and decrease the price of cars in Japan than $500 per car -$500 per car -more than $500 per car -less than $500 per car without affecting the price of cars in japan

less than $500 per car, and decrease the price of cars in Japan than $500 per car

The satisfaction consumers derive from their consumption of an additional unit is: -marginal benefit -production advantage -efficiency enhancement -not profit

marginal benefit

economists concerned about the behavior of individual households,firms, and industries are studying: -microeconomics -macroeconomics -neither macroeconomics or microeconomics -the 'forest' of economic behavior rather than the 'trees'

microeconomics

in large shopping areas, the retail market is most illustrative of: -monopolistic competition -monopoly -perfect competition -perfect oligopoly

monopolistic competition

For a firm producing at any level of output lower than the most profitable one, an increase in output adds: -more to total cost than to total revenue -more to total revenue than to total cost -the same amount to total revenue as to total cost -to total revenue but not to total cost

more to total revenue than to total cost

most electric, gas, and water companies are examples of: -unregulated monopolies -natural monopolies -restricted-input monopolies -sun-cost monopolies

natural monopolies

The price elasticity of demand for lettuce has been estimated to be -2.58. If an insect infestation destroys 10 percent of the nation's lettuce crop, how will that affect total expenditures on lettuce, all other things unchanged -total expenditures will remain unchanged -total expenditures will fall -total expenditures will rise -not enough information is given to answer the question

not enough information is given to answer the question

the notion that there is a trade off between inflation and unemployment is expressed as a -phillips curve -keynes curve -schumpeter curve -friedman curve

phillips curve

for markets to operate efficiently, it is necessary that private marginal cost: -be equal to output quantity -equal the cost of output -plus external cost be equal to output price -minus external cost be equal to output price

plus external cost be equal to output price

If the total revenue goes up when price falls, the price elasticity of demand is said to be: -price inelastic -unit price elastic -price elastic -positive

price elastic

a firm that faces a downward-sloping demand curve is a: -price setter -quantity minimizer -quantity taker -price taker

price setter

a perfectly competitive firm is a : -price taker -price searcher -cost maximizer -quantity taker

price taker

economists assume that firms seek to maximize: -sales -profits -costs -all of the above

profits

One source of high health care costs is the: -relatively large fraction of health care expenditures paid directly by patients -relatively large fraction of health care expenditures paid by third-party payers. -system of prospective reimbursement payments -deficiency in the available of diagnostic tests

relatively large fraction of health care expenditures paid by third-party payers.

Making a statement about an equitable or inequitable distribution of income: -requires a value judgement -involves efficiency judgement -involves positive judgments -requires the measurement of demand and supply curves

requires a value judgment

Economics is a..

social science

which of the following statements concerning insurance for health-care services is true? -most workers purchase their own insurance -state governments are the providers of medicare and medicaid -in the united states, only private firms provide health insurance -subscribers to insurance plan may pay a small percentage of the cost of the health care they consume

subscribers to insurance plan may pay a small percentage of the cost of the health care they consume

suppose your firm has spend several decades establishing a well known brand name through advertising. If other firms are prevented from entering your industry because of high adverting expenses, your monopoly would result from: -sunk costs -location -economies of scale -government restriction

sunk costs

a decrease in supply is caused by: -a decrease in resource prices -an increase in the number of sellers in the market -suppliers' expectations of higher prices in the future -an advancement in the technology for producing the good

suppliers' expectations of higher prices in the future

when public goods are provided by private firms, with no government involvement, we expect that: -the equilibrium quantity will be less than would be efficient -the equilibrium quantity will be greater than would be efficient -the equilibrium quantity will be the efficient quantity -their profits will be excessive

the equilibrium quantity will be less than would be efficient

the price elasticity of demand for soft drinks has been estimated to be -0.55. If the government enacts a major increase in the tax on imported sugar, how will that effect the total expenditures on soft drinks, all other things unchanged? -total expenditures will remain unchanged -total expenditures will fall -total expenditures will rise -people will buy Pepsi instead of coke

total expenditures will rise

If you employ 20 workers in the production of picture frames, the way to determine the quantity of output these workers can produce is through a(n): -profit function -indifference curve -budget constraint -total product curve

total product curve

Which of the following is true? -price and average revenue are never equal -price and marginal revenue are seldom equal under conditions of perfect competition -when a firm is operating under perfectly competitive market conditions, price and marginal cost will always be equal if the firm is maximizing profits -average revenue equals price times quantity

when a firm is operating under perfectly competitive market conditions, price and marginal cost will always be equal if the firm is maximizing profits

in long-run equilibrium, economic profits in a perfectly competitive industry are: -positive -zero -negative -indeterminate

zero