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(TCO 1. 1) Opportunity cost is best defined as (Points : 4) m arginal cost minus marginal benefit. t he time spent on an economic activity. ------- the value of the best forgone alternative. t he money cost of an economic decision. 2. (TCO1) Which of the following is considered to be an entrepreneur? (Points : 4) -------- Self-employed person M BA graduate hired by a fi rm to be its CEO P roduction-line worker Customer of a fi rm 3. (TCO1) A point on the production possibili ties curve is (Points : 4) a ttainable and resources are fully employed. ------- attainable, but resources are unemployed. u nattainable, but resources are unemployed. u nattainable and resources are fully employed. 4. (TCO1) A basic characteristic of a command system is that (Points : 4) wages paid to labor are higher. ---------- government owns most economic resources. f ree markets are never permit ted in a command economy. government planners play a limited role in deciding what goods will be produced. 5. (TCO 2) The demand curve is a representation of the relationship between the quantity of a p roduct demanded and (Points : 4) supply. wealth. ------- price. i ncome. 6. (TCO 2) A decrease in supply and a decrease in demand will (Points : 4) i ncrease price and affect the equilibrium quantity in an indeterminate way. decrease the equilibrium quantity and decrease price. i ncrease the equilibrium quantity and affect price in an indeterminate way. --------- decrease the equilibrium quantity and affect price in an indeterminate way. 7. (TCO 2) Chuck Grim has a price elasticity of demand for beer of 1.2. Suppose that the p rice of beer is increased by 10 percent. What will happen to the total amount Chuck spends on beer? (Points : 4) I t will not change. ----- I t will decrease. I t will increase. I t is impossible to tell. 8. (TCO 2) Which of the following factors will make the demand for a product relatively elastic? (Points : 4) --------There are few substitutes. T he time interval considered is long. T he good is considered a necessity. Purchases of the good require a small portion of consumers' budgets. 9. (TCO 2) A purely competitive fi rm's output is such that its marginal cost is $4 and m arginal revenue is $5. Assuming profit maximization, the fi rm should (Points : 4) cut its price and raise its output. r aise its price and cut output. leave price unchanged and raise output. -------- leave price unchanged and cut output. 10. (TCO 2) Which case below best represents a case of price discrimination? (Points : 4) A n insurance company offers discounts to safe drivers. --------A major airline sells t ickets to senior citizens at lower prices than to other passengers. A p rofessional baseball team pays two players with identical batting averages different salaries. A u tility company charges less for electricity used during "off-peak" hours, when it does not have to operate i ts less-efficient generating plants. 11. (TCO 3) A major reason that fi rms form a cartel is to (Points : 4) r educe the elasticity of demand for the product. enlarge market the share for each producer. m inimize the costs of production. -------- maximize joint profits. 12. (TCO 3) In the short run, output (Points : 4) ------------ is absolutely fixed. can vary as the result of using a fixed amount of plant and equipment more or less i ntensively. may be altered by varying the size of plant and equipment which now exist in the i ndustry. can vary as the result of changing the size of existing plants and by new fi rms entering or leaving the industry. 13. ( TCO 4) Refer to the diagram. The phases of the business cycle from points A to D are, r espectively: G raph Description (Points : 4) Peak, recession, expansion, t rough T rough, recovery, expansion, peak E xpansion, recession, t rough, peak ------------- Peak, recession, t rough, expansion 14. (TCO 4) Official unemployment rate statistics may (Points : 4) overstate the amount of unemployment by including part-time workers in the calculations. u nderstate the amount of unemployment by excluding part-t ime workers in the calculations. overstate the amount of unemployment because of the presence of "discouraged" workers who are not actively seeking employment. --------- understate the amount of unemployment because of the presence of "discouraged" workers who are not actively seeking employment. 15. (TCO 4) To avoid multiple counting in national income accounts (Points : 4) --------- only final goods and services should be counted. i ntermediate goods and services should be counted. both final and intermediate goods and services should be counted. p rimary, intermediate, and final goods and services should be counted. 16. (TCO 4) Nominal GDP differs from real GDP because (Points : 4) nominal GDP is based on constant prices. r eal GDP is based on current prices. r eal GDP results from adjusting for changes in the price level. -------- nominal GDP results from adjusting for changes in the price level. 17. (TCO 6) Fiscal policy is enacted through changes in (Points : 4) i nterest rates and the price level. t he supply of money and foreign exchange. u nemployment and inflation. ------- taxation and government spending. 18. (TCO 6) Refer to the figure. The economy is at equilibrium at Point B. What would expansionary fiscal policy do? G raph Description (Points : 4) ------- Shift aggregate demand from AD2 to AD1 Shift aggregate demand from AD2 to AD3 Move the economy from Point B downward along AD2 Move the economy from Point B upward along AD2 19. (TCO 6) The American Recovery and Reinvestment Act of 2009 is a clear example of (Points : 4) nondiscretionary expansionary fiscal policy. nondiscretionary contractionary fiscal policy. d iscretionary contractionary fiscal policy. ------discretionary expansionary fiscal policy. 20. (TCO 6) If people expected that a tax cut was temporary, then this fiscal policy's effect on the economy will tend to be (Points : 4) s tronger. weaker. ------ the exact opposite of what was intended. as the mult iplier effect would predict. Page: 1 2 3 T ime Remaining: ... View Full Document

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