1. The marginal revenue curve for a perfectly competitive firm is ___________.

a. the same as its marginal cost curve

b. the same as its demand curve

c. perfectly inelastic

d. downward-sloping

2. Market power refers to the ability of ___________.

a. a firm to charge a price higher than the marginal cost of production

b. consumers to dictate what products should be produced

c. firm to advertise its product and succeed in selling more output

d. a firm to sell at a lower price than rival sellers

3. The size of a deadweight loss in a market is reduced by:

a. market price being close to marginal cost

b. creative destruction

c. government legislating a ceiling price

d. government legislating a price floor

4. In both monopolistically competitive and perfectly competitive industries:

a. there are many buyers and sellers

b. firms are price takers

c. there are high barriers to entry

d. firms produce products for which there are no close substitutes

5. To make the calculation of real GDP more accurate, in 1996 the BEA switched to using:

a. base-year prices

b. current prices

c. chain-weighted prices

d. market prices

6. Actual real GDP will be above potential GDP if:

a. firms are producing below capacity

b. inflation is rising

c. firms are producing at capacity

d. firms are producing above capacity

7. Changes in the price level:

a. decrease the level of aggregate supply in the long run

b. increase the level of aggregate supply in the long run only at very high levels of output

c. do not affect the level of aggregate supply in the long run

d. increase the level of aggregate supply in the long run

8. Workers and firms both expect that prices will be 3% higher next year than they are this year. As a result, ___________.

a. workers will be willing to take lower wages next year

b. the short-run aggregate supply curve will shift to the left as wages increase

c. the purchasing power of wages will rise if wages increase by 3%

d. aggregate demand will increase by 3%

9. Why does the short-run aggregate supply curve shift to the right in the long run, following a decrease in aggregate demand?

a. Workers and firms adjust their expectations of wages and prices upward and they accept lower wages and prices.

b. Workers and firms adjust their expectations of wages and prices downward and they accept lower wages and prices.

c. Workers and firms adjust their expectations of wages and prices downward and they push for higher wages and prices.

d. Workers and firms adjust their expectations of wages and prices upward and they push for higher wages and prices.

10. When people became less concerned with the underlying value of their houses and instead focused on the expectations of the prices of their houses increasing, ________ occurred.

a. stagflation

b. an automatic destabilizer

c. a housing bubble

d. a supply shock