Economics Exam In Tutorial Library

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TITLE: Economics Exam

CLASS / COURSE: Economics

QUESTION DESCRIPTION:

 
 
 
1) A leftward shift in the supply curve of product X will increase equilibrium price to a greater extent the: 
A.
 
larger the elasticity of demand coefficient.
B.
 
more elastic the supply curve.
C.
 
more elastic the demand for the product.
D.
 
more inelastic the demand for the product.
 
2) Suppose that the price of peanuts falls from $3 to $2 per bushel and that, as a result, the total revenue received by peanut farmers changes from $16 to $14 billion. Thus: 
A.
 
the demand for peanuts is inelastic.
B.
 
the demand for peanuts is elastic.
C.
 
the demand curve for peanuts has shifted to the right.
D.
 
no inference can be made as to the elasticity of demand for peanuts.
 
3) If the demand for farm products is price inelastic, a good harvest will cause farm revenues to: 
A.
 
decrease
B.
 
increase
C.
 
be unchanged.
D.
 
either increase or decrease, depending on what happens to supply.
 
4) Suppose that in the clothing market, production costs have fallen, but the equilibrium price and quantity purchased have both increased. Based on this information we can conclude that: 
A.
 
Demand for clothing has grown faster than the supply of clothing.
B.
 
The supply of clothing has grown faster than the demand for clothing.
C.
 
The supply of and demand for clothing have grown by the same proportion.
D.
 
There is no way to determine what has happened to supply and demand with this information.
 
5) Which of the following statements is true about productive and allocative efficiency? 
A.
 
Productive efficiency can only occur if there is also allocative efficiency.
B.
 
Realizing allocative efficiency implies that productive efficiency has been realized.
C.
 
Society can achieve either productive efficiency or allocative efficiency, but not both simultaneously.
D.
 
Productive efficiency and allocative efficiency can only occur together; neither can occur without the other.
 
6) Suppose that in 2007 Ford sold 500,000 Mustangs at an average price of $18,800 per car; in 2008, 600,000 Mustangs were sold at an average price of $19,500 per car. These statements: 
A.
 
suggest that the supply of Mustangs must have increased between 2007 and 2008.
B.
 
suggest that the demand for Mustangs decreased between 2007 and 2008.
C.
 
suggest that the demand for Mustangs increased between 2007 and 2008.
D.
 
constitute an exception to the law of demand in that they suggest an upsloping demand curve.
 A firm that is motivated by self interest should: 
A.
 
always use large amounts of the most productive inputs and small amounts of the least productive inputs in producing its output.
B.
 
hire each input so the productivity of each is equal at the margin.
C.
 
always use large amounts of cheap inputs and small amounts of expensive inputs in producing its output.
D.
 
employ the combination of resources that will produce the profit-maximizing output at the minimum cost.
 
8) If a firm is selling in an imperfectly competitive product market, then: 
A.
 
the marginal products of successive workers can be sold at higher prices.
B.
 
the marginal products of successive workers must be sold at lower prices.
C.
 
the marginal products of successive workers can be sold at a constant price.
D.
 
A. average product will be less than marginal product for any number of workers hired.
 
9) If technology dictates that labor and capital must be used in fixed proportions, an increase in the price of capital will cause a firm to use: 
A.
 
less labor as a consequence of the substitution effect.
B.
 
more labor as a consequence of the output effect.
C.
 
less labor as a consequence of the output effect.
D.
 
more labor as a consequence of the substitution effect.
 
10) If a firm decides to produce no output in the short run, its costs will be: 
A.
 
its fixed costs.
B.
 
its fixed plus its variable costs.
C.
 
zero.
D.
 
its marginal costs.
 
11) In the short run the Sure-Screen T-Shirt Company is producing 500 units of output. Its average variable costs are $2.00 and its average fixed costs are $.50. The firm's total costs: 
A.
 
are $750.
B.
 
are $1,250.
C.
 
are $1,100.
D.
 
are $2.50.
 
12) What do wages paid to blue-collar workers, interest paid on a bank loan, forgone interest, and the purchase of component parts have in common? 
A.
 
None are either implicit or explicit costs.
B.
 
All are opportunity costs.
C.
 
All are implicit costs.
D.
 
All are explicit costs.
 
13) Construction workers frequently sponsor political lobbying in support of greater public spending on highways and public buildings. One reason they do this is to: 
A.
 
increase the demand for construction workers.
B.
 
increase the elasticity of demand for construction workers.
C.
 
increase the price of substitute inputs.
D.
 
restrict the supply of construction workers.
 
14) If the wage rate increases: 
A.
 
a purely competitive and an imperfectly competitive producer will both hire less labor.
B.
 
an imperfectly competitive producer will hire less labor, but a purely competitive producer will not.
C.
 
an imperfectly competitive producer may find it profitable to hire either more or less labor.
D.
 
a purely competitive producer will hire less labor, but an imperfectly competitive producer will not.
 
15) Paying an above-equilibrium wage rate might reduce unit labor costs by: 
A.
 
increasing voluntary worker turnover.
B.
 
increasing the cost to workers of being fired for shirking.
C.
 
increasing the supply of labor.
D.
 
permitting the firm to attract lower-quality labor.
16) Oligopoly is difficult to analyze primarily because: 
A.
 
output may be either homogenous or differentiated.
B.
 
the price and output decisions of any one firm depend on the reactions of its rivals.
C.
 
neither allocative nor productive efficiency is achieved.
D.
 
the number of firms is too large to make collusion understandable.
 
17) In the long-run, a profit-maximizing monopolistically competitive firm sets it price: 
A.
 
equal to marginal revenue.
B.
 
below marginal cost.
C.
 
equal to marginal cost.
D.
 
above marginal cost.
 
18) An industry comprised of a small number of firms, each of which considers the potential reactions of its rivals in making price-output decisions is called: 
A.
 
pure monopoly.
B.
 
oligopoly.
C.
 
pure competition.
D.
 
monopolistic competition.
 
19) Pure monopolists may obtain economic profits in the long run because: 
A.
 
of barriers to entry.
B.
 
of rising average fixed costs.
C.
 
marginal revenue is constant as sales increase.
D.
 
of advertising.
 
20) One would expect that collusion among oligopolistic producers would be easiest to achieve in which of the following cases? 
A.
 
a rather large number of firms producing a homogeneous product
B.
 
a very small number of firms producing a homogeneous product
C.
 
a very small number of firms producing a differentiated product
D.
 
a rather large number of firms producing a differentiated product
 
21) The practice of price discrimination is associated with pure monopoly because: 
A.
 
monopolists usually realize economies of scale.
B.
 
most monopolists sell differentiated products.
C.
 
monopolists have considerable ability to control output and price.
D.
 
it can be practiced whenever a firm's demand curve is downsloping.
 
22) The term oligopoly indicates: 
A.
 
a few firms producing either a differentiated or a homogeneous product.
B.
 
an industry whose four-firm concentration ratio is low.
C.
 
many producers of a differentiated product.
D.
 
a one-firm industry.
 
23) Monopolistic competition means: 
A.
 
many firms producing differentiated products.
B.
 
a few firms producing a standardized or homogeneous product.
C.
 
a large number of firms producing a standardized or homogeneous product.
D.
 
a market situation where competition is based entirely on product differentiation and advertising.
 
24) A monopolistically competitive industry combines elements of both competition and monopoly. The monopoly element results from: 
A.
 
product differentiation.
B.
 
mutual interdependence in decision making.
C.
 
high entry barriers.
D.
 
the likelihood of collusion.
 
25) The profit-maximizing output of a pure monopoly is economically inefficient because in equilibrium: 
A.
 
marginal cost exceeds price.
B.
 
price exceeds marginal cost.
C.
 
marginal revenue equals marginal cost.
D.
 
price equals minimum average total cost.
 
26) In the long run a pure monopolist will maximize profits by producing that output at which marginal cost is equal to: 
A.
 
average variable cost.
B.
 
average cost.
C.
 
marginal revenue.
D.
 
average total cost.
 
27) Firm X develops a new product and gets a head start in its production. Other firms try to produce a similar product but discover they have higher average total costs than the existing firm. This situation illustrates: 
A.
 
learning-by-doing.
B.
 
spillover costs.
C.
 
diminishing marginal returns.
D.
 
diseconomies of scale.
28) If personal taxes were decreased and resource productivity increased simultaneously, the equilibrium: 
A.
 
price level would necessarily fall.
B.
 
output would rise.
C.
 
price level would necessarily rise.
D.
 
output would fall.
 
29) If the U.S. unemployment rate is 9 percent, we can infer that: 
A.
 
actual GDP is in excess of potential GDP.
B.
 
the economy is in the expansion phase of the business cycle.
C.
 
actual GDP is equal to potential GDP.
D.
 
potential GDP is in excess of actual GDP.
 
30) Inflation is undesirable because it: 
A.
 
usually is accompanied by declining real GDP.
B.
 
arbitrarily redistributes real income and wealth.
C.
 
reduces everyone's standard of living.
D.
 
invariably leads to hyperinflation.
 
31) Expansionary fiscal policy is so named because it: 
A.
 
is aimed at achieving greater price stability.
B.
 
involves an expansion of the nation's money supply.
C.
 
is designed to expand real GDP.
D.
 
necessarily expands the size of government.
 
32) Real GDP measures: 
A.
 
base year output at current prices.
B.
 
current output at current prices.
C.
 
base year output at current exchange rates.
D.
 
current output at base year prices.
 
33) Kara voluntarily quit her job as an insurance agent to return to school full-time to earn an MBA degree. With degree in hand she is now searching for a position in management. Kara presently is: 
A.
 
frictionally unemployed.
B.
 
cyclically unemployed.
C.
 
not a member of the labor force.
D.
 
structurally unemployed.
34) Stabilizing a nation's price level and the purchasing power of its money can be achieved: 
A.
 
with both fiscal and monetary policy.
B.
 
only with fiscal policy.
C.
 
with neither fiscal nor monetary policy.
D.
 
only with monetary policy.
 
35) Other things equal, a 10 percent decrease in corporate income taxes will: 
A.
 
shift the investment-demand curve to the right.
B.
 
decrease the market price of real capital goods.
C.
 
shift the investment-demand curve to the left.
D.
 
have no effect on the location of the investment-demand curve.
 
36) Assume the Standard Internet Company negotiates a loan for $5,000 from the Metro National Bank and receives a checkable deposit for that amount in exchange for its promissory note (IOU). As a result of this transaction: 
A.
 
a claim has been "demonetized."
B.
 
the supply of money declines by the amount of the loan.
C.
 
the Metro Bank acquires reserves from other banks.
D.
 
the supply of money is increased by $5,000.
 
37) ___________ purchasing power parity states that the difference between changes over time in product-price levels in two countries will be offset by the change in the exchange rate over this time. 
A.
 
Relative
B.
 
Partial
C.
 
Absolute
D.
 
Full
 
38) An increase in interest rates in the United States will lead to: 
A.
 
Capital inflows into the United States.
B.
 
Outflows of capital from the United States.
C.
 
A decrease in the demand for dollar-denominated financial assets.
D.
 
Depreciation of the dollar.
 
39) Suppose that US prices rise 4 percent over the next year while prices in Mexico rise 6%. According to the purchasing power parity theory of exchange rates, what should happen to the exchange rate between the dollar and the peso? 
A.
 
The peso should depreciate.
B.
 
The peso should appreciate.
C.
 
The dollar will be revalued.
D.
 
The dollar should depreciate.
 

 

 

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SUBJECTS / CATEGORIES:
1. Business Economics
2. Economics
3. Microeconomics
4. Macroeconomics

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