Question 1: Suppose that in the clothing market, production costs have fallen, but the equilibrium priceand quantity purchased have both increased. Based on this information you can concludethat

• The supply of clothing has grown faster than the demand for clothing
• Demand for clothing has grown faster than the supply of clothing
• The supply of and demand for clothing have grown by the same proportion
• There is no way to determine what has happened to supply and demand with thisinformation

Question 2: Camille's Creations and Julia's Jewels both sell beads in a competitive market.If at the market price of $5, both are running out of beads to sell (they can'tkeep up with the quantity demanded at that price), then we would expect bothCamille's and Julia's to:

• Raise their price and reduce their quantity supplied
• Raise their price and increase their quantity supplied
• Lower their price and reduce their quantity supplied
• Lower their price and increase their quantity supplied

Question 3: In which of the following industries are economies of scale exhausted atrelatively low levels of output?

• Aircraft production
• Automobile manufacturing
• Concrete mixing
• Newspaper printing

Question 4: The average cost curves (AVC and ATC) should be minimized

• Where MC = ATC and MC = AVC]
• Where FC = ATC and FC = AVC
• Where TC starts to increase at a faster rate
• Where ATC = AVC

Question 5: If the wage rate increases,

• A purely competitive producer will hire less labor, but an imperfectly competitive producerwill not
• An imperfectly competitive producer will hire less labor, but a purely competitive producerwill not
• A purely competitive and an imperfectly competitive producer will both hire less labor]
• An imperfectly competitive producer may find it profitable to hire either more or less labor

Question 6: The real wage will rise if the nominal wage

• Falls more rapidly than the general price level
• Increases at the same rate as labor productivity
• Increases more rapidly than the general price level
• Falls at the same rate as the general price level

Question 7: Construction workers frequently sponsor political lobbying in support of greater public spending on highways and public buildings. One reason they dothis is to

• Restrict the supply of construction workers
• Increase the elasticity of demand for construction workers[
• Increase the demand for construction workers
• Increase the price of substitute inputs

Question 8:  Paying an above-equilibrium wage rate might reduce unit labor costs by

• Permitting the firm to attract lower-quality labor[
• Increasing the cost to workers of being fired for shirking]
• Increasing voluntary worker turnover
• Increasing the supply of labor

Question 9: A good real-world example of monopolistic competition is

• Lawyers
• Gas stations
• Time warner cable
• Groceries stores

Question 10: An industry comprising a small number of firms, each of which considers thepotential reactions of its rivals in making price-output decisions, is called

• Monopolistic competition
• Oligopoly
• Pure monopoly
• Pure competition

Question 11: Price is constant or given to the individual firm selling in a purelycompetitive market because

• The firm's demand curve is downward sloping
• Of product differentiation reinforced by extensive advertising[
• Each seller supplies a negligible fraction of total supply
• There are no good substitutes for its product

 Question 12: The most important pricing strategy for a perfectly competitive firm is

• Minimizing cost
• Maximizing sales
• Product differentiation
• Advertising

Question 13: Which of the following is a nonprice barrier of entry?

• Huge sunk cost
• Discounts
• Product differentiation
• Advertising

Question 14: A third-degree price discrimination can be applied to which of the followingmarket structures?

• A monopoly
• An oligopoly
• A monopolistic competition
• A perfect competition

Question 15: Investing in R&D is more likely to occur in markets where

• Firms have monopoly power protected by regulatory barriers
• Markets are closely competitive markets with close to zero economic profits
• Markets are oligopoly markets with strong collusion agreements
• Markets are monopolistic competitive markets

Question 16: All economies of scale are achieved at the minimum of

• Average total cost
• Total cost
• Average variable cost
• Average fixed cost

Question 17: Inflation is undesirable because it

• Arbitrarily redistributes real income and wealth
• Invariably leads to hyperinflation
• Usually is accompanied by declining real gdp
• Reduces everyone's standard of living in the same proportion

Question 18: An economy's aggregate demand curve shifts leftward or rightward by more than changes in initial spending because of the

• Net export effect
• Wealth effect
• Real-balances effect
• Multiplier effect

Question 19: Suppose productivity rises in a particular economy, but wages stay thesame. Other things equal,

• The demand curve will shift leftward
• The supply curve will shift rightward
• The supply curve will shift leftward
• Expenditures curve will shift rightward

Question 20: If personal taxes were decreased and resource productivity increased simultaneously, the equilibrium

• Output would rise
• Output would fall
• Price level would necessarily fall
• Price level would necessarily rise

Question 21: Expansionary fiscal policy is so named because it

• Involves an expansion of the nation's money supply
• Can only be attained by expanding government consumption
• Is aimed at achieving greater price stability
• Can motivate an expansion of real gdp

Question 22: Suppose the price level is fixed, the MPC is .5, and the GDP gap is a negative$100 billion. To achieve full-employment output (exactly), government should

• Increase government expenditures by $100 billion
• Increase government expenditures by $50 billion
• Reduce taxes by $50 billion
• Reduce taxes by $200 billion

Question 23: GDP understates the value of output produced by an economy because it

• Includes transactions that do not take place in organized markets, such as home cookedmeals
• Includes environmental degradation caused by increased output production[
• Excludes value added from the underground economy, such as tips taken under the table
• Excludes the value of the wages and benefits of government employee

Question 24: Other things equal, a decrease in the real interest rate will

• Shift the investment demand curve to the right
• Shift the investment demand curve to the left
• Move the economy upward along its existing investment demand curve
• Move the economy downward along its existing investment demand curve

Question 25: Other things equal, a decrease in corporate income taxes will

• Decrease the market price of real capital goods
• Have no effect on the location of the investment demand curve
• Shift the investment demand curve to the right
• Shift the investment demand curve to the left

Question 26: Inflation in U.S. prices will cause

• An increase in the demand for U.S. dollars and an appreciation in the exchange rate
• An increase in the supply of U.S. dollars and a depreciation in the exchange rate
• A decrease in the demand for U.S. dollars and a depreciation in the exchange rate
• A decrease in the supply of U.S. dollars and an appreciation in the exchange rate

Question 27: The quantity theory of money states that

• The money supply divided by the velocity of money equals the price level divided by real output
• The money supply times the velocity of money equals the price level times real output
• The money supply times the price level equals real output divided by the velocity of money
• The money supply times the price level equals real output times the velocity of money

Question 28: Suppose that U.S. prices rise 4% over the next year while prices in Mexicorise 6%. According to the purchasing power parity theory of exchange rates,what should happen to the exchange rate between the dollar and the peso?

• The dollar should depreciate.
• The peso should appreciate.
• The peso should depreciate.
• The dollar will be revalued.

Question 29: A rise in the domestic interest rate leads to capital

• Outflows and exchange rate appreciation
• Outflows and exchange rate depreciation
• Inflows and exchange rate depreciation
• Inflows and exchange rate appreciation

Question 30: A firm under monopolistic competition will earn

• A positive economic profit as it has some monopoly power
• Zero economic profit as it sets p = mc
• Zero economic profit as its p = atc
• A positive economic profit as it sets mc = mr