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ECO561 ECO/561 FINAL EXAM

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Question;1) 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 curve for peanuts has shifted to the right.;B. the demand for peanuts is elastic.;C. the demand for peanuts is inelastic.;D. no inference can be made as to the elasticity of demand for peanuts.;2) The advent of DVDs has virtually demolished the market for videocassettes.;This is an example of;A. capital accumulation.;B. the difference between normal and economic profits.;C. creative destruction.;D. derived demand.;3) If the demand for farm products is price inelastic, a good harvest will;cause farm revenues to;A. be unchanged.;B. either increase or decrease, depending on what happens to supply.;C. increase;D. decrease;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. The supply of and demand for clothing have grown by the same proportion.;B. There is no way to determine what has happened to supply and demand with;this information.;C. The supply of clothing has grown faster than the demand for clothing.;D. Demand for clothing has grown faster than the supply of clothing.;5) 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 demand for Mustangs increased between 2007 and 2008.;B. constitute an exception to the law of demand in that they suggest an;upsloping demand curve.;C. suggest that the demand for Mustangs decreased between 2007 and 2008.;D. suggest that the supply of Mustangs must have increased between 2007 and;2008.;6) Which of the following statements is true about productive and allocative;efficiency?;A. Society can achieve either productive efficiency or allocative efficiency;but not both simultaneously.;B. Productive efficiency and allocative efficiency can only occur together;neither can occur without the other.;C. Realizing allocative efficiency implies that productive efficiency has been;realized.;D. Productive efficiency can only occur if there is also allocative efficiency.;7) If a firm in a purely competitive industry is confronted with an equilibrium;price of $5, its marginal revenue;A. will be less than $5.;B. will be greater than $5.;C. may be either greater or less than $5.;D. will also be $5.;8) 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. less labor as a consequence of the output effect.;C. more labor as a consequence of the substitution effect.;D. more labor as a consequence of the output effect.;9) 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 can be sold at a constant price.;C. A. average product will be less than marginal product for any number of;workers hired.;D. the marginal products of successive workers must be sold at lower prices.;10) 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 $1,100.;C. are $2. 50.;D. are $1,250.;11) In which of the following industries are economies of scale exhausted at;relatively low levels of output?;A. concrete mixing;B. newspaper printing;C. aircraft production;D. automobile manufacturing;12) If a firm decides to produce no output in the short run, its costs will be;A. its fixed costs.;B. zero.;C. its marginal costs.;D. its fixed plus its variable costs.;13) 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. a purely competitive producer will hire less labor, but an imperfectly;competitive producer will not.;D. an imperfectly competitive producer may find it profitable to hire either;more or less labor.;14) A firm can hire six workers at a wage rate of $8 per hour but must pay $9;per hour to all of its employees to attract a seventh worker. The marginal wage;cost of the seventh worker is;A. $15.;B. $10.;C. $9.;D. $21.;15) A profit-maximizing firm will;A. expand employment if marginal revenue product equals marginal resource cost.;B. reduce employment if marginal revenue product exceeds marginal resource;cost.;C. expand employment if marginal revenue product exceeds marginal resource;cost.;D. reduce employment if marginal revenue product equals marginal resource cost.;16) Price exceeds marginal revenue for the pure monopolist because the;A. monopolist produces a smaller output than would a purely competitive firm.;B. demand curve is downsloping.;C. law of diminishing returns is inapplicable.;D. demand curve lies below the marginal revenue curve.;17) 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. the number of firms is too large to make collusion understandable.;D. neither allocative nor productive efficiency is achieved.;18) A competitive firm will maximize profits at that output at which;A. price exceeds average total cost by the largest amount.;B. total revenue and total cost are equal.;C. total revenue exceeds total cost by the greatest amount.;D. the difference between marginal revenue and price is at a maximum.;19) Which of the following is not a possible source of natural monopoly?;A. greater use of specialized inputs;B. simultaneous consumption;C. large-scale network effects;D. rent-seeking behavior;20) Advertising can impede economic efficiency when it;A. enables firms to achieve substantial economies of scale.;B. reduces brand loyalty.;C. increases entry barriers.;D. increases consumer awareness of substitute products.;21) 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 differentiated product;C. a rather large number of firms producing a differentiated product;D. a very small number of firms producing a homogeneous product;22) Monopolistic competition means;A. many firms producing differentiated products.;B. a large number of firms producing a standardized or homogeneous product.;C. a market situation where competition is based entirely on product;differentiation and advertising.;D. a few firms producing a standardized or homogeneous product.;23) In an oligopolistic market;A. the four largest firms account for 20 percent or less of total sales.;B. products may be standardized or differentiated.;C. one firm is always dominant.;D. the industry is monopolistically competitive.;24) Suppose that an industry is characterized by a few firms and price;leadership. We would expect that;A. price would exceed both marginal cost and average total cost.;B. price would equal marginal cost.;C. price would equal average total cost.;D. marginal revenue would exceed marginal cost.;25) 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 total cost.;C. marginal revenue.;D. average cost.;26) Those who contend that oligopolists are less likely than more competitive;firms to engage in R&D say that;A. entry barriers enable oligopolists to sustain the profits they gain from;innovation.;B. Oligopolists have little incentive to introduce costly new technology and;produce new products when they currently are earning large economic profit;using existing technol-ogy and selling existing products.;C. the undistributed profits of oligopolists give them a source of readily;available, relatively low cost funds for financing R & D.;D. the large size of oligopolists' R&D departments allow them to use very;specialized, expensive R&D equipment and employ teams of specialized;researchers.;27) Other things equal, a price discriminating monopolist will;A. produce a larger output than a nondiscriminating monopolist.;B. produce a smaller output than a nondiscriminating monopolist.;C. produce the same output as a nondiscriminating monopolist.;D. realize a smaller economic profit than a nondiscriminating monopolist.;28) Suppose that nominal wages fall and productivity rises in a particular;economy. Other things equal, the aggre-gate;A. supply curve will shift rightward.;B. supply curve will shift leftward.;C. expenditures curve will shift downward.;D. demand curve will shift leftward.;29) Inflation is undesirable because it;A. invariably leads to hyperinflation.;B. usually is accompanied by declining real GDP.;C. reduces everyone's standard of living.;D. arbitrarily redistributes real income and wealth.;30) The industries or sectors of the economy in which business cycle;fluctuations tend to affect output the most are;A. services and nondurable consumer goods.;B. clothing and education.;C. capital goods and durable consumer goods.;D. military goods and capital goods.;31) 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. structurally unemployed.;B. frictionally unemployed.;C. not a member of the labor force.;D. cyclically unemployed.;32) Real GDP measures;A. current output at base year prices.;B. base year output at current prices.;C. base year output at current exchange rates.;D. current output at current prices.;33) Expansionary fiscal policy is so named because it;A. necessarily expands the size of government.;B. is aimed at achieving greater price stability.;C. is designed to expand real GDP.;D. involves an expansion of the nation's money supply.;34) In a fractional reserve banking system;A. the monetary system must be backed by gold.;B. banks can create money through the lending process.;C. the Federal Reserve has no control over the amount of money in circulation.;D. bank panics cannot occur.;35) 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. the supply of money declines by the amount of the loan.;B. the supply of money is increased by $5,000.;C. the Metro Bank acquires reserves from other banks.;D. a claim has been "demonetized.;36) Stabilizing a nation's price level and the purchasing power of its money;can be achieved;A. only with monetary policy.;B. only with fiscal policy.;C. with neither fiscal nor monetary policy.;D. with both fiscal and monetary policy.;37) An unexpected increase in the money supply of 10% will cause the short-run;exchange rate to;A. Depreciate by less than 10%.;B. Depreciate by more than 10%.;C. Appreciate by less than 10%.;D. Appreciate by more than 10%.;38) ___________ 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. Partial;B. Relative;C. Absolute;D. Full;39) The quantity theory of the demand for money states that a country?s money;supply is proportional to;A. The real level of gross domestic product.;B. The exchange rate.;C. The money value of gross domestic product.;D. The domestic interest rate.

 

Paper#55325 | Written in 18-Jul-2015

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