MC Questions

At a given price not at the market equilibrium, the unexploited gains from trade are equal to

the area of the triangle between the market price and the equilibrium price

At the market equilibrium, the total gains from trade are equal to

the area of the triangle to the left of the equilibrium

When a monopolist maximizes social surplus, it produces an optimal Q where: A) AR = MC B) MR = MC C) D = AC D) AR = AC

A) AR = MC

In the loanable funds market, an increase in government borrowing will most likely A) Decrease bond prices and increase interest rates B) increase bond prices and decrease interest rates C) increase both bond prices and interest rates D) decrease both bond prices and interest rates

A) Decrease bond prices and increase interest rates

Which of the following statements is correct? A) When the marginal cost curve is above the average cost curve, the average cost curve must be rising B) When the marginal cost curve is below the average cost curve, the average cost curve must be rising C) When MR = MC, the average cost curve is at its minimum point D) When MR = P, the average cost curve is at its minimum point

A) When the marginal cost curve is above the average cost curve, the average cost curve must be rising

If prices are perfectly flexible, the economy will always be growing A) at its potential rate B) above its potential rate C) below its potential rate D) near its potential rate

A) at its potential rate

When the Federal Reserve buys bonds, the supply curve for bonds A) doesn't shift B) shifts outward C) shifts inward D) sometimes shifts outward, sometimes inward

A) doesn't shift

The Fisher effect indicates that an increase in the expected inflation rate will cause the real inflation rate to A) remain relatively constant B) increase by the same amount C) decrease by the same amount D) become unpredictable

A) remain relatively constant

Gun buyback programs will be less effective if the A) supply of guns is more elastic B) supply of guns is more inelastic C) demand for guns is more elastic D) demand for guns is more inelastic

A) supply of guns is more elastic

If Major League Baseball ticket prices rise by 15 percent, the number of tickets sold falls by 5 percent. The elasticity of demand is: A) -3 B) -1/3 C) -7.4 D) -0.75

B) -1/3

What effect will an investment tax credit have on interest rates and the quantity of savings? A) none, investment tax credits only affect the amount of taxes paid by firms B) Both interest rates and the quantity of savings will increase C) Interest rates will decrease and the quantity of savings will increase D) Interest rates will not change, but the quantity of savings decreases

B) Both interest rates and the quantity of savings will increase

A local university decides to double its enrollment over the next five years in order to increase tuition revenue. Which of the following would most likely occur in the market for rental housing in the surrounding community? A) a decrease in the price of rental housing B) an increase in the demand for rental housing C) a decrease in the supply of rental housing D) a population change leads to a change in quantity demanded, not demand

B) an increase in the demand for rental housing

The aggregate demand curve shows all the combinations of ______ that are consistent with a specified rate of spending growth A) employment rates and price levels B) inflation and real GDP growth rates C) production shocks and flexible prices D) money velocity and money supply

B) inflation and real GDP growth rates

What is the most harmful consequence to GDP from interest rate ceilings? A) lenders can't earn a normal market return B) investment falls, dragging down GDP and future growth C) consumption increases and savings get too high D) all of the above

B) investment falls, dragging down GDP and future growth

If producers form expectations that the price of their good will be lower in the near future, the supply curve will: A) shift to the left B) shift to the right C) not shift D) not shift, but there will be movement along the curve

B) shift to the right

The lifecycle theory of savings predicts that individuals will save during A) the early years of life B) the middle years of life C) the later years of life D) all phases of life

B) the middle years of life

Why do some economists think that GDP may overestimate the actual level of economic activity in an economy? A) There is no positive adjustment for the underground economy B) There is no negative adjustment for pollution C) It doesn't account for the distribution of income in a country D) There is no positive adjustment for leisure and well-being

B) there is no negative adjustment for pollution

If the price of cocoa rises by 20 percent, the quantity supplied of cocoa rises by 4 percent. What is the elasticity of supply? A) 5 B) 2 C) 0.2 D) 0.008

C) 0.2

An increase in the money growth will cause inflation to increase in A) the short run only B) the long run only C) both the short run and the long run D) neither

C) both the short run and the long run

M1 refers to A) currency B) currency plus total reserves held at the Fed C) currency plus checkable deposits D) currency, checkable deposits, savings deposits, money market mutual funds, and small-time deposits

C) currency plus checkable deposits

For a given nominal interest rate, an increase in the inflation rate will cause real interest rates to A) remain relatively constant B) increase C) decrease D) become unpredictable

C) decrease

If a monopolist faces a straight-line downward sloping demand curve, the price of the units it sells is always: A) greater than the average revenue B) equal to marginal revenue C) greater than marginal revenue D) less than the average revenue

C) greater than marginal revenue

When deciding whether or not to undertake an activity, economists compare: A) the total cost of the activity against the total benefit received B) the total benefit of the activity against the total cost of production C) the additional cost of the activity against the additional benefits received D) The average cost of the activity versus the total benefits received

C) the additional cost of the activity against the additional benefits received

If the government increases its spending, financing methods that can cause crowding out include I. raising individual income taxes II. raising corporate investment taxes III. selling bonds A) III B) I and II C) II and III D) I, II, and III

D) I, II, and III

The costs of inflation include I. wasted resources in association with price confusion II. higher tax burdens III. wealth redistribution from private citizens to the government A) I and II B) II and III C) I and III D) I, II, and III

D) I, II, and III

A subsidy is: A) similar to a reverse tax B) calculated as the price received by sellers minus the price paid by buyers C) paid for by taxpayers D) all of the answers are correct

D) all of the answers are correct

Trading in the market for loanable funds determines the equilibrium A) level of savings B) amount of borrowing C) interest rate D) all of these

D) all of these

Which of the following would be most likely to cause an increase in the demand for loanable funds? A) a decrease in the interest rate B) an increase in savings C) a decrease in consumption D) an increase in government borrowing

D) an increase in government borrowing

An increase in government spending growth will cause inflation to fall in A) the short run only B) the long run only C) both the short and long run D) neither the short nor the long run

D) neither the short run nor the long run

Which of the following would be consistent with the impact of a binding price ceiling? A) books are printed on higher quality paper B) full-service gas stations stay open for 24 hours C) New automobiles are painted with more coats of paint D) newspapers switch to a smaller font size to decrease bulk

D) news papers switch to a smaller font size in order to decrease bulk

Which of the following are factors that shift the demand curve? A) costs of production, price of the product, and subsidies B) income, population, tastes, and input prices C) expectations, opportunity costs, price of the product D) price of substitutes, tastes, price of compliments

D) price of substitutes, tastes, price of compliments

Which of the following is not a lag associated with fiscal policy: A) the time it takes to implement a policy once it's decided B) the time it takes to recognize a recession once the data are collected C) the time it takes to assess whether the policy has worked D) the time it takes to assess whether to use fiscal or monetary policy

D) the time it takes whether to use fiscal or monetary policy