2007-final-multiple-practice

2007-final-multiple-practice - 1. Macroeconomics seeks to...

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Unformatted text preview: 1. Macroeconomics seeks to understand a. economic growth, business cycles, and inflation. b. industry sales, marketing strategies and corporate growth. c. product demand, product cost, and profit maximization: d. public choices, private choices, and consumer maximization. 2. Suppose you purchased a 1999 model used car in 2006. Which of the following would be included in gross domestic product for 2006? a. The value ‘ofthe services of the car dealer who helped you buy the used car. b. The value in 2006 of the used car. 0. The original purchase price in 1999 of the car. d. The original purchase price in 1999 of the car minus depreciation. 3. Investment, as defined by economists, would include the purchase of a corporate bond. . government bond. ' : share of stock in ExxonMohil. computer by an accounting firm. 9953‘!” 4. Consider the following data (in billions of dollars) for an economy: Consumtion exenditures Investment exendith—es $300 Government urchases - $300 Government transfer a ents $400 Gross domestic product (in billions of dollars) for this economy equals a. $2,200 b. $2,100 c. $1,700 d. $1,400 5. The size of the underground economy would tend to increase if the government of a country a. decreased government regulations on businesses. b. increased income tax rates. c. legalized prostitution. d. legalized drugs. Consider the following data for a fictional economy that produces only two products: guns and butter. “rats 'cansi'rraaaces ‘Prine‘of i Butter nuanced. szééiofiBfiEt'er 2000 as $5: '40. - .2006 as $6 .60 $10 6. Refer to the table above. Real GDP for this fictional economy for 2006 using 2000 as the base year equals a. $1,140. b. $880. c. $690} d. $560. 7. The labor force equals the number of people a. employed. b. unemployed. c, employed plus unemployed. d. in the working-age population. 8. Frictional unemployment is the result of a. a persistent mismatch betWeen the skills and characteristics of workers and the requirements of the 1'0st , the search process of matching workers with jobs. the ups and downs in inflation. a slowdown in the economy. .r—m ova" 9. Economists consider full employment to occur when a. everyone who wants a job has a job. b. fiictionai unemployment equals zero. c. frictional unemployment and structural unemployment equal zero. d. all existing unemployment is either fiictional unemployment or structural unemployment. 10. Which'of the following would increase the unemployment rate? a. alaw making it illegal to work more than 35 hours per week b. a cut in unemployment compensation c._ an increase in unemployment insurance payments d. a decrease in the minimum wage 11. The substitution bias in the consumer price index refers to the idea that consumers a. Decrease the quantity they buy of products that increase most in price and increase the quantity they buy of products that increase least in price. b. Increase the quantity they buy of products that increase most in price and decrease the quantity they buy of products that increase least in price. c. Do not adjust their spending patterns when prices change. d. Substitute high-quality goods for low-quality goods. 12. The increase in quality bias in the consumer price index refers to the idea that consumers switch to high-quality products fiom low—quality products. consumers switch to low-quality products from high-quality products. consumers switch from discount stores to name-brand stores. the CPI does not fully adjust increases in product prices for quality improvements. 9953‘?” 13. Imagine that you borrow $5,000 for one year and at the end of the year you repay the $5,000 plus $600 of interest. If the inflation rate was 4%, what was the real interest rate you paid? a. 16 percent b. 12 percent c. 8 percent d. 6 percent 14. When actual inflation is less than expected inflation a. borrowers lose and lenders gain. 1). borrowers gain and lenders lose. 0. borrowers and lenders both gain. d. borrowers and lenders both lose. 15. If the growth rate of real GDP rises from 3% to 4%, the number of years required to double real GDP will decrease from . . es ‘9. 0 a. 23.3 years to 17.5 years. (l 7 b. 28.0 years to 21.0 years. - c. 11.2 years to 10.8 years. d. 25.0 years to 20 .6 years. 16. Which of the following increases labor productivity? I a. accumulations of human capital b. increases in the availability of computers, factory buildings, tools, and other manufactured goods that are used to produce other goods and services c. inventions of new machinery, equipment, or software (1. all of the above 17. Potential reai GDP refers to a. the level of GDP attained when all firms are producing at capacity. b. the level of GDP attained by the country With the highest growth in real GDP in a given year. c. the difference between the highest level of real GDP per quarter and the lowest level of real GDP per quarter within any given year. ' d. the extent to which real GDP is above or below nominal GDP. 18. In addition to matching households that have excess funds with firms that want to borrow funds, what three key services do financial intermediaries provide for savers and borrowers? a. - information, profit, and interest b. high risk, high profit, and low savings c. risk-sharing, liquidity, and information d. bonds, stocks, and mutual funds 19. A government budget surplus from reduced government spending (no change in net taxes) will the level of investment in the economy and the level of saving (private plus public) in the economy. a. increase; decrease b. increase; increase c. decrease; increase d. decrease; decrease . Which of the following would encourage economic growth through increases in the capital stock? a. a change from an income tax to a consumption tax b. an increase in household savings c. a decrease in the government deficit d. all of the above 21. The period between a business cycle peak and a business cycle trough is called a. expansion. b. recession. c. diffusion. d. recalculation. during 22. Inflation tends to during the expansion phase of the business cycle and the recession phase of the business cycle. a. increase; decrease b. decrease; increase c. decrease; decrease further d. increase; increase further 23. You manage a small manufacturing company. You currently hire_4 employees who produce 20 units of output per day. If you hire another employee who increases output by an additional 3 units, which of the following is true? a. The next worker you hire will reduce profit. b. The next worker you hire will increase profit. ' c. You face diminishing returns to labor. d. None of the above are correct. 24. Because of diminishing returns, an economy can continue to increase real GDP per hour worked only if a. there are decreases in human capital. ‘3. the per-worker production function shifts downward. c. there continue to be decreases in capital per hour worked. d. there is technological change. 25. Technological improvements are more likely to occur if the economy is centrally planned. entrepreneurs are compensated for taking risks with higher profits. economic decisions are made by politicians rather than entrepreneurs. companies face little competition in their markets. .99?!” 26. Because firms can flee ride on the research and development of other firms a. firms choose a level of research and development where the marginal cost of research is equal to 4 i {(11153 the economy‘s marginal return of research. _ ‘ b. firms choose a level of research and development where the marginal cost of research is above the economy's marginal return of research. c. firms choose a level of research and development where the marginal cost of research is below the economy‘s marginal return of research. d. firms choose a level of research and development where the marginal cost of research is below the individual film's marginal return of research. 27. Creative destruction means that a. economic growth can only be sustained if capital depreciates rapidly. b. firms develop new products that replace old products in the economy, thereby encouraging economic growth. 0. knowledge capital can be created through a system of government subsidies for education and research and development. _ I ' d. research and development should only be financed if research and development is incremental (a result of making small changes to existing products). 28. Which of the following best explains why productivity growth in the United States has been faster than in other leading industrialized nations? a. There are fewer government regulations in the United States regarding the way firms can hire and fire workers. b. The financial systems of foreign countries are generally more efficient than those in the US. c. European countries have more flexible policies regarding the number of hours employees are permitted to work. ' (1. ob mobility in the United States is more restricted than it is in many foreign countries. 29. Which of the following equations best defines aggregate expenditure? a. C+I+NX b. C+I+G c. C+NX d. C+I+G+NX 30. If aggregate expenditure is real GDP then inventories will a. equal to ; not change b. above; fall c. below; rise (1. All of the above are correct. 31. How will an increase in the interest rate affect aggregate expenditure? 3. Consumption and planned investment will fall, so aggregate expenditure will fall. h. Consumption and planned investment will rise, so aggregate expenditure will rise. c. Consumption will fall, and planned investment will rise, so aggregate expenditure will fail. d. Consumption will rise, and planned investment will fall, so the impact on aggregate expenditure is uncertain. R 31 4§¥de2ree line 7 13.. 7 exp enditure, , . . . . C-F_I,+G+_NX'%AE 4131111011 «RE 32. Based on the graph aboVe, what is aggregate expenditure when real GDP is $4 trillion? a. less than $4 trillion b. more than $4 trillion 0. equal to $4 trillion . (1. may be more or less than $4 trillion depending on the size of unplanned inventory changes at that point 33. Refer to the graph above. If the economy starts at a reai GDP of $4 trillion, how will'the economy reach macroeconomic equilibrium? a. Firms will experience an unplanned increase in inventories, production will rise, and GDP will rise until GDP is equal to aggregate expenditure. b. Firms will experience an unplanned decrease in inventories, production will rise, and GDP will ' rise until GDP is equal to aggregate expenditure. . , c. Firms will experience an unpianned decrease in inventories, production will fali, and GDP will fall until GDP is equal to aggregate expenditure. d; Finns will experience and unplanned increase in inventories, production will fall, and GDP will fall until GDP is equal to aggregate expenditure. .' 1353116131? {trillions‘ef 4800 dollars}, 34. In the graph above, a move from point A to point C would be caused by a decrease in a. the price level. b. government purchases. c. personal income taxes. {1. household expectations of their future incomes. 35. In the graph above, a move from point A to point B would be caused by a decrease in a. price level. . - b. government purchases. c. personal income taxes. d. household expectations of their future income "RENEE ,,E(t1511isns Bf .Qflm. dollars) . 36. Refer to the figure above. The economy’S'GDP could find itself below potential GDP in short-run macroeconomic equilibrium as aresult of a. a decrease in the exchange rate of the dollar relative to foreign currencies. b. an increase in oil prices. C. a decrease in personal income taxes. (1. a decrease in business taxes. 37. Refer to the figure above. In the adjustment of the economy in the long run fiom a recession back to potential GDP, workers and firms will adjust their expected future price level , which will cause wages and prices to I . a. downward; decrease b. downward; increase (3. upward; decrease d. upward; increase 38. In the dynamic aggregate demand and aggregate supply model, which of the following would causa inflation? ‘ a. Aggregate demand shifts to the right by less than short-run aggregate supply. b. Aggregate demand shifts to the left while short-run aggregate supply sbifis to the right. c. Aggregate demand shifis to the right by more than long-run aggregate supply. d. Aggregate demand shifts to the right by less than longurun aggregate supply. 39. The best definition of money is: how much you make. the sum of all of your wealth minus your debts. What you spend over some period of time. any asset that people generally accept in exchange for goods and services. 999‘s» 40. Which of the following functions of money would be most violated if inflation were high? unit of account store of value certificate of gold medium of exchange ‘ F3 one 41. >—] he Ml meaSure of the money supply equals paper money plus coins. currency outside banks plus checking account balances. currency outside banks plus checking account balances plus traveler's checks. currency outside banks plus checking account balances plus traveler's checks plus savings account balances. 999‘?” 42. Consider the following simplified balance sheet for abank: Racer-me:- -H;_ : Loans; If the required reserve ratio is 10 percent, the bank can make a maximum loan of a. $2,000. _ b. $5,000. ‘iS'Upuc x I073 .. 5-, W0 c. $6,300. ' m a g M =- ; m d. $45,000. MSW”! v I _ 43. Open market operations refer to the purchase or sale of to control the money supply_ corporate bonds and stocks by the Federal Reserve U.S. Treasury securities by the Federal Reserve corporate bonds and stocks by the U.S. Treasury U.S. Treasury securities by the U.S. Treasury 999‘?“ 44. The sale of Treasury securities by the Federal Reserve will in general not change the money supply. not change the quantity of reserves held by banks. increase the quantity of reserves held by banks. decrease the quantity of reserves held by banks. 999‘?” 45. The money demand curve has a _ a. negative slope because an increase in the interest rate decreases the quantity of money demanded. _ T b. positive SIOpe because an increase in the interest rate increases the quantity of money demanded. 0. negative slope because an increase in the price level decreases the quantity of money demanded. V d. positive slope because an increase in the price level increases the quantity of money demanded. 46. When the Federal Reserve increases the money supply, at the previous equilibrium interest rate households and firms will now have ' l a. more money than they want to hold. b. less money than they want to hold. c. the amount of money that they want to hold. d. to sell Treasury bills. 47. The interest rate that banks charge other banks for overnightloans is the .' prime rate. discount rate. federal funds rate. Treasury bill rate. Page An increase in interest rates a. ’9. decreases investment spending on machinery, equipment, and factories, but increases censumption spending on durabie goods and net exports. decreases investment spending on machinery, equipment, and factories, and consumption spending on durable goods, but increases net exports. _ decreases hivestment spending on machinery, equipment, and factories, consumption spending on durable goods, and net exports. increases investment spending on machinery, equipment, and factories, consumption spending on durable goods, and net exports. 49. The ability of the Federal Reserve to use monetary policy to affect economic variables such as real GDP ultimately depends upon its ability to affect a. b. C. d. Tax rates. Real interest rates. Nominal interest rates. Foreign exchange rates. Entities?! GE??? is 50. In the graph above, if the economy is at point A in year I and is expected to go to point B in year 2, the Federal Reserve would most likely 51. a. 'b. c. (1. increase interest rates. decrease interest rates. not change interest rates. decrease the inflation rate. Which of the following would be classified as fiscal policy? 999‘!” The federal government passes tax cuts to encourage firms to reduce air pollution. The Federal Reserve cuts interest rates to stimulate the economy. A state government cuts taxes to help the economy of the state. The federal government cuts taxes to stimulate the economy. 52. Automatic stabilizers refer to 53. a. b. the money supply and interest rates that automatically increase or decrease along with the business cycle. ' government spending and taxes that automatically increase or decrease along with the business cycle. changes in the money supply and interest rates that are intended to achieve macroeconomic policy objectives. changes in federal taxes and purchases that are intended to achieve macroeconomic policy objectives. Since the Social Security system began in 1935, the mun’oer of workers per retireerhas 999‘s stayed roughly the same. ' continually risen. continually declined. risen and declined with different generations. 54. 55. 56. 57. 58. 59. 60. 61. The aggregate demand curve will Shlfl to the right panes me me: (apprise SRA'SI': ._d'Efl' ' .5355! Hunter .._.-(ranas=ar I'lflflfl' doting In the graph above, if the economy is at point A in year i and is expected to go to point B in year 2, the Congress and the president would most likely decrease government spending. increase government spending. increase oil prices. increase taxes. 999‘!” Which of the following would increase the size of the government purchases multiplier? a. an increase in the tax rate ‘9. an increase in the quantity of imports purchased by households from an increase in income 0. a decrease in the amount spend on consumption spending by households fiom an increase in income - d. a decrease in the amount saved by households Earn an increase in income the initial decrease in taxes. a. by less than h. by more than c. by the same amount (1. sometimes by more thanand other times by less than Unemployment is currently: a. 3% or less b. More than 3% but less than 4% , c. More’than 4% but less than 5% (3. More than 5% but less than 6% c. More than 6% The real growth rate of GDP over the last year is currently: a. 3% or less. I). More than 3% but less than 4%. c. More than 4% but less than 5%. (1. More than 5% but less than 6%. ' e. More than 6%. Inflation as measured by the consumer price index is currently: 3% or less. More than 3% but less than 4%. More than 4% but less than 5%. More than 5% but less than 6%. More than 6%. 9999'!» “There was never yet philosopher that could endure the toothache patiently.” a. Hamlet ‘0. Henry IV . c. Much Ado About Nothing d. As You Like It For the probability of an adverse event to be considered a matter of risk (not uncertainty), it is necessary that the event'be: a. Well defined event b. Sufficient sample size c. Accepted statistical procedure (1. A1} of the above are ll) 62. The external accounts of the United States reveal: a. The US has a large deficit in goods and services along with a large international capital deficit. b. The US has a large surplus in goods and services along with a large international capital deficit. c. The US has a large surplus in goods and services along with a large international capital surplus. d. The US has a large deficit in goods and services along with a large international capital surplus 63. The fundamental question in economics is how to a. eliminate poverty. b. make the best use of scarce resources to satisfy our unlimited wants. c. how to reduce the consumption of oil in wealthy nations. d. find more resources to satisfy everyone's wants. 64. An example of a capital input is a. furniture and fittings in a store. b. stocks, bonds, and money market mutual fimds. c. deposits of crude oil in the ground. d. all of the above 35. When economists say that people act rationally, they mean that People rarely make errors when they are looking out for themselves. People select only those activities that minimize their costs. l’eople consider only the benefits when making a decision. People consider both the relevant costs and relevant benefits of a decision and select actions for which relevant benefit exceeds or at best, equal the relevant cost. 999‘?” 66. Javier has spent $400 purchasing and restoring a piece of antique furniture that he expect to sell for $800 once the job is complete. Alter he has spent $400, he discovers that he needs an additional part, which will cost $200, in order to complete the restoration. Javier can sell the piece of furniture as it is now for $300. What should he do? a. Javier should complete the restoration and sell the piece of furniture. ‘1). Javier should cut his losses and take the $300. c. Javier should never sell something for less than it costs. d. It doesn’t matter which action Javier takes; the outcome is the same either way. 57. The difference between a positive economic analysis and a nonnative economic analysis is a. Positive analysis deals with issues that improve the welfare of individuals while nonnative analysis deals with issues that are subjective to interpretation. b. Positive analysis reaches conclusions based on verifiable statements while normative analysis reaches conclusions based on opinions. ‘ c. Positive analysis cannot be tested While normative analysis can be tested. d. Positive analysis adopts an optimistic forecast for an economy while normative analysis adopts a conservative forecast for an economy. r . 68. Refer to the figure above. The bowed out shape of the production possibilities frontier demonstrates that a. trucks cost more than Wheat. b. wheat costs more than trucks. _ c. the opportunity cost of additional trucks increases as the economy produces more and more of them. d. the opportunity cost of additional trucks remains constant as the economy produces more and more of them. ll "Ii-7— 69. Refer to the figure above. The choice of producing at point C over point D for this economy would g be based on V a. technical efficiency. b. where marginal opportunity cost is at the lowest. c; the preferences of the consumers. d. filli employment of resources. 70. It takes Rosie, a seamstress, 3/4 hour to hem a pair of pants and 1 hour to hem a skirt. What is the opportunity cost of hemrning a pair of pants in terms of a skirt? , a. 3/4 of a skirt b. 1 1/3 skirt c. 1 skirt (1. 1 1/4 skirt 71. The basis for the reliance on markets in modern economics can be traced back to 3. Adam Smith. b. the founding fathers of the United States. c. Benjamin Franklin. d. John Maynard Keynes 72. If we say that demand has increased, we mean that ' a. the demand curve has shifted to the left. b. there has been a movement upwards along a given demand curve. 0. the demand curve has shifted to the right. d. there has 1oeen a movement downward along a given demand curve. 5 73. The substitution effect of a price change refers to a. the shift of the demand curve when the price of a substitute good changes. b. the movement along the demand curve due to a change in relative prices. c. the movement along the demand curve due to a change in purchasing power brought about by the price change. d. the shift in the demand curve due to a change in purchasing power brought about by the price change. 74. if a decrease in income results in an increase in 1the demand for macaroni, then macaroni is a. . a neutral good. b. a necessity. c. a normal good. (1. an inferior good. 75. An increase in the price of MP3 players will result in a(n) a. Smaller quantity of MP3 players supplied. in. . Larger quantity of MP3 players supplied. c. Decrease in the demand for MP3 players. d. Increase in the supply of MP3 players. 76. Suppose that in a free market, 15,000 patients receive a kidney transplant. Although the organ is donated to the patients, the price of a transplant is still a hefty $250,000 to cover hospital and doctors‘ fees. An advocate of medical/care reform-argues that the government should put aamaximum price of $80,000 on kidney transplants to make the surgery more affordable. Suppose patients will die without a kidney transplant. What is likely to happen if a ceiling of $80,000 is imposed, ceteris paribus? Compared to the free market outcome with no government intervention, the price ceiling benefits all patients in need of the surgery. more doctors will be willing to perform the surgery. more kidneys will now be donated. more patients will now die. 9-9.0“? l2 he figure below shows the demand and supply curves for the almond market. The government believes that the price is too low and tries to help almond growers by setting a price floor at Pc. t i 1 a .1 _ p“ 9"” satfi‘éas'ltééé’i /7. Refer to the figure above. What is the area that represents producer surplus aficr the imposition of the price floor? a. A + B + E b.B+E c. B + E + F d.B+C+D+E 78. Refer to the figure above. What is the area that represents the dcadweight loss afier the imposition of h the price floor? a. F + G b.C+D+F+G c. C + D d. C + D + G 79. Refer to the figure above. Suppose the market is initially in equilibrium at price P0 and now the government imposes a tax on every unit sold. Which of the following statements best describes the impact of the tax? For a given demand curve, D0, the producer bears a greater share of the tax burden if the supply curve is S]. the producer bears a greater share of the tax burden if the supply curve is 80. the producer's share burden of the tax burden is the same whether the supply curve is SD or S 1. the producer bears the entire burden of the tax if the supply curve is SO and the consumer bears the entire burden of the tax if the supply curve is 31. 9.0er An externality a. Accrues to someone who is not part of a market transaction, either the production or the consumption of a product. :1. Enhances market efficiency. 0. Is a private cost or benefit. (1. Refers to a disequilibrium in the market. 81. Which of the following statements is correct? a. Marginal private cost is the cost generated by the private market for the resources used to produce the good. _ b. Marginal social cost includes the marginal damages that do not get added in to the producer’s cost considerations. c. Marginal private costs are made up of the costs of resources used to produce the good and the cost of the marginal damages incurred in the production of the good. d. A andB are correct. 13 82. Public goods are an example of market failure because these goods a. tend to generate social costs in excess of private costs. b. impose negative externalities. c. must be funded by taxes only. d. cannot be easily produced and sold in private In efficient output level. arkets in a way that achieves the economically 83. Which of the following is a way to address the tragedy of the commons? 3. Remove the commons and assign property rights to a single party b. Restrict access to the common resources through taxes or quotas c. Restrict access to the commons through community norms and laws d. Institute a system of tradeable permits for the right to use the commons. e. All of the above are ways to address the tragedy of the commons. 84. When the price of tortilla chips rose by 10 percent, the quantity of tortilla chips sold fell 4 percent. This indicates that the demand for tortilla chips is - a. Price inelastic. ‘0. Price elastic. G. Unit price elastic d. Perfectly inelastic. in the stock market, and your objective is to' maximize reveals that the economy will be slowing down it would be best to purchase stock in companies 85. Suppose you are considering buying stock your net worth. Furthermore, your study of the market over the next several months. Under these conditions, that produce a. Inferior goods the demand'for which is income inelastic. b. Normal goods the demand for which is income inelastic. c. Inferior goods‘thgjor Which is income elastic. d. Normal goods the demand for which is income elastic. 86. In order to prove that Motrin and Ibuprofen are substitutes, one would test the and get a a. Cross-price elasticity; positive number b. Cross-price elasticity; negative number c. Price elasticity of demand; number greater than 1 (in absolute value} d. Price elasticity of demand; number less than 1 (in absolute value) 87. If output in the walkie—talkie market increases by 5 percent when prices increase by 12 percent, then a. Supply is inelastic. b. Supply is elastic. c. There will be a small rightward shift of the supply curve. d. There will be a large rightward shift of the supply curve. 88. Which of the following types of firms have unlimited liabilities? a. A sole proprietorship b. A partnership c. A corporation d. A and B only summer-.11 intermediaries are which savers can indirectly provide funds to borrowers. a. Financial institutions through b. Financial institutions through which savers can provide firnds directly to borrowers. c. The same thing as financial markets. d. Another term for financial assets. Ou u ut Per Labor Hour Cheese - Wine liters) I 90. Refer to the table above. Which country has an absolute advantage in cheese production? a. England b- Portugal c. Both d. Neither 14 91. Refer to the table above. The opportunity of 1 titer of wineifor Portugai is a. 1 1A pounds of cheese. b. 4/5 pounds of cheese. 0. 4 pounds ofcheese. d. 3 pounds of cheese. 92. Refer to the figure above. The tariff revenue collected by the government equals the area a. D + E + F ' b. E c. B + D + E + F d. C + D + B + F 93. Refer to the figure above. With the tariff in place, the U.S. a. Imports 16 million pounds. b. Imports 9 million pounds. 0. Imports 15 million pounds. d. Exports 31 million pounds. 94. The national-security argument for protectionism holds that 21. Nearly all industries can make some claim to strategic importance so such trade restrictions can get out of hand. b. Some goods are vital to national security and therefore should be insulated from foreign competitors to ensure that a domestic supply of these goods is available in the event of an international conflict. 0. Increases in economic surplus outweighs the decrease in consumer surplus. d. PDWBrflll nations like the US. must not export defense—related products to prevent foreign countries fi‘om copying the technologies in these products. 95. The additional utility that George receives from consuming one more slice of pizza is called a. Marginal utility. ‘0. Average utility. c. Total utility. d. Diminishing utility. Jay has $7 to spend on burgers and Pepsi. The price of a burger is $2 and the price of a can of Pepsi is $1. Quantity of Total Utility P ‘ _I Si 7 96. Refer to the table above. What is Jay’s optimal consumption bundle? a. 2 burgers and 3 Pepsis b. l burger and 2 Pepsis c. 3 burgers and 1 Pepsi d. 3 burgers and 2 Pepsis 97. Refer to the table above. HJay could eat all the burgers he wants for free, how many burgers will he consume? a. 7 burgers 6 burgers S burgers 3 burgers 99.0“ 98. Costs that have already been incurred and which cannot be recovered (to any significant degree) are known as a. Sunk costs. b. Foregone cost. c. Variable cost. d. Fixed cost. 99. Which of the following statements best describes the economic short run? a. It is a period of one year or less. b. It is the time period during which firms are flee to vary all their inputs. c. It is the time period during which some inputs are fixed and some inputs are variable. d. It is the period during which fixed inputs become variable because of depreciation. 100. In a small confectionery that hires 4 workers, hiring a 5th worker actually lowers totat output. Which of the following statements is false? a. The marginal product of the fifth worker is negative. b. The average product of the fifth worker must be negative. c. Currently, the marginal cost of hiring the fifth workers outweighs the marginal benefit. d. The slope of the production fimction is negative. The figure below shows the cost structure for a firm. 'Gas: . - {dollars . perusal!) . ' = ' '50 106 - - ' . " .tmotmu 101. Refer to the Figure above. When output tevel is 100, average fixed cost is a. $8 b. $10 c. $5 (1. Cannot be determined from the diagram 102. Economics of scale occur when a. Long-run average cost falls as new firms enter the industry. b. Long-run average cost falls as one firm expands plant size. c. Short-run average cost falls as one firm expands plant size. :1. ' Long-run average cost rises as one firm expands plant size. 103. Which of the following is the best example of perfectly competitive producer? The average corn farmer in Illinois Taco Bell restaurant Ford Motors I UPS 9-9575” 16 '_perun'ii' sic: " $59 -.f-"1‘°°L_'.'- ' . . _ 9km 104. Refer to the Figure above. Suppose market price facing this competitive firm is $6.311 the Short The firm produces Q=lGO and incurs a 1055 less than its fixed cost. The firm shuts down and incurs a loss equal to its fixed cost. The firm produces between 60 and 100 units and incurs a loss less than its fixed cost. The output level cannot be determined because we have no information on marginal revenue. P-‘F’P‘Pg '7 Cost ac . ' ATC 7 AVG ~' in" I llltl. 1.. , '4 I‘ 4.036 '- '_ A - Quantity ' 105. Refer to the Figure above. Suppose the market price is $120. Is the firm making a profit/loss? a. Profit represented by the area A. ‘0. Profit represented by the area A + B. c. Loss represented by the area A. d. It breaks even. 106. Which ofthe following statements is true about the long-rim competitive equilibrium? a. A long run equilibrium can only be achieved in constant-cost industries. in. Once an industry achieves tong run equilibrium, industry output is fixed forever. c. The long run equilibrium outcome is not economically efficient. d. Each firm earns zero economic profits. 107. Which of the following is not a characteristic of monopolistic competition? a. Inability to influence price b. A relatively large number of firms c. Low barriers to entry d. Product differentiation 108. A market structure in which there are a few interdependent firms selling differentiated or homogeneous products is called a. Perfect competition. b. Oligopoly. c. Monopoly. d. MonoPolistic competition. 1 109. Ifa monopoly charges the market price of $14 per unit, Its marginal revenue is $14, and its average revenue is less. a. b. Its average revenue is $14, and its marginal revenue is less. c. Its average revenue is $14, and its marginal revenue is $14. (1. None of the above. l7 ' Price and . ‘ 7 _.Coe't ($1 - MG ‘ ' 'Avo Bertram . o ' do: _' '. _ Quantiw.lj'I-'. 110. Refer to the figure above. lfthe monopolist is charging price P* for output Q*, in order to maximize profit or minimize loss in the short run, it should ' a. Continue to produce because a monopolist always earns a profit b. - Shut down because price is greater than marginal cost. c. Continue to produce because price is greater than average variable cost. d. Shut down because price is less than average total cost. .i some "' and r- - 7539' — >'~.ez".:;a [we .va 111. Refer to the figure above. The profit-maximizing output and price for the monopolist are a. Output E 62; price = $24 b. Output 5 62; price = $18 0. Output 2 83; price = $22 d. Output fi 104; price = $20.80 112. Refer to the figure above. The monopolist is making a profit of a. $0 . b. $248 c. $372 d. $170 113. The Law of One Price states that Iftransaction costs are zero, identical goods should sell for the same price everywhere. a. b. If transaction costs are zero, firms must sell their products at marginal cost. 0. Iftransaction costs are zero, all firms must earn the same profit margin. (1. There must be no differences in the cost of producing identical goods by different producers. 114. A price-discriminating firm charges the highest price to The group with the largest demand The group with the most elastic demand The group with the least elastic demand a. b. c. d. The group with demand that is of unitary elasticity . 115. Transaction costs refer to a. The costs in time and other resources that parties incur in the process of agreeing to and carrying out an exchange of goods or services. b. The implicit cost of production. c. The raw material cost of production; d. The cost of transporting goods from one destination to another. 18 x _116. Which of the following factor of production is the most important in terms of contribution to a nation’s total income? Land a. ‘0. Corporate profits c. Capital d. Labor 117. The term “derived demand” refers to a. The demand for financial products called derivatives. b. The demand for a factor of production that is derived from the demand for the good the factor produces. c. ' A firm’s estimated demand curve derived from historical sales data d. A demand curve that derives from the availability of resources. 118. Hotspur Incorporated, a manufacturer of microwaves, is a price taker in both the input and output market. To maximize its profit, Hotspur will hire labor up to the point where ' a. Marginal revenue product of labor = wage rate. b. The marginal product of labor is no longer positive. 0. A11 economies of scale have been exhausted. d. Marginalrevenue product of labor r= output price. ' i119. Which of the following factors is likely to increase labor’s productivity? _ a. Increases in human capital Advancements in technology “ c. Increase in the wage rate d. A and B only e. A, B and C 120. The opportunity cost of is . a. Labor; the wage rate b. Leisure; the wage rate c. Labor; forgone consumption d. Leisure; forgone consumption ...
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This note was uploaded on 10/24/2009 for the course ECE 126 taught by Professor Ooi during the Spring '07 term at Lehigh University .

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2007-final-multiple-practice - 1. Macroeconomics seeks to...

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