- •Preparatory questions on Basics of Economic Theory
- •D) productivity increases
- •B) Consumer utility
- •B) Redistributing income to make a market outcome more equitable or fair
- •A) 48-60 years
- •E) 15-20 years
- •B) Consumer utility
- •C) The pricing system
- •B) Redistributing income to make a market outcome more equitable or fair
- •A) 48-60 years
- •E) 15-20 years
B) Redistributing income to make a market outcome more equitable or fair
C) Increasing the level of externalities in the economy
D) Performing central control functions in a market economy
E) Making a market less competitive by forcing firms from the market
Suppose more men decided to stay at home to raise their pre-school age children. We would expect:
the labor force participation rate for males to decrease.
the labor force participation rate for males to remain the same.
the impact on the labor force participation rate for males to be unpredictable.
the labor force participation rate for males to increase.
E) the labor force participation rate for females to decrease.
Intermediate goods and services:
A) Are counted in gross domestic product (GDP).
B) Are not counted in gross domestic product (GDP) because they have no value to consumers.
C) Are not counted in GDP because that would constitute double counting.
D) Are counted in national income but not in gross domestic product (GDP).
E) Are not counted in gross national product (GNP) because they have no value to consumers.
Define Kuznets cycles by their duration (trough to trough or peak to peak):
A) 48-60 years
B) 3 years
C) 9-10 years
D) within a year
E) 15-20 years
The average product of labour characterizes:
A) labour productivity;
B) productivity of the capital;
C)total output;
D) number of workers;
E) tariff rate.
A market economy relies on:
A) decentralized choices coordinated by Adam Smith's "invisible hand."
B) centralized choices coordinated by Adam Smith's "invisible hand."
C) decentralized choices coordinated by the "visible hand" of authority.
D) centralized choices coordinated by the "visible hand" of authority.
E) centralized choices coordinated by the "visible hand" of individuals.
Economics is primarily the study of:
A) how society manages its scarce resources.
B) how to operate a business successfully.
C) how to make money in the stock market.
D) the methods that government might use to transform a scarce good into an economic good.
E) how to earn money
What ever must be given up to obtain some item is:
A) an explicit cost.
B) an implicit cost
C) a historical cost.
D) an accounting cost.
E) an opportunity cost.
A decrease in the price level indicates:
A) that the economy has experienced deflation.
B) the existence of inflation.
C) a decline in real GDP.
D) that either inflation or deflation may exist.
E) a decline in real GNP.
Which of the following variables is the key ingredient in improving the standard of living of the average citizen?
A) low inflation
B) productivity increases
C) high inflation
D) population growth
E) low unemployment rates
A change in which of the following will cause a movement along the supply curve?
A) a change in the state of technology
B) a change in taxes
C) a change in expectations about future prices
D) a change in the price of the good
E) no change in the price of the good
Whenever the price of a good is below the equilibrium price, we know that:
A) a surplus exists.
B) a shortage exists.
C) quantity supplied exceeds quantity demanded.
D) the market is in equilibrium.
E) government interferes the prices.
Which of the following is the most likely example of an inferior good?
A) a passenger van
B) an imported beer
C) notebook computers
D) a component stereo system
E) a 20-inch black and white TV
To say that a market is in equilibrium implies that:
A) producers are earning a profit.
B) the quantity that buyers are willing and able to buy equals the quantity that sellers are willing and able to sell.
C) the market allocates goods fairly.
D) the government is not intervening.
E) the government is intervening.
When the price of bananas increases, consumption of apples increases. Which of the following conclusions can be drawn?
A) Bananas are an inferior good compared to apples.
B) The goods are complements.
C) The goods are substitutes.
D) The supplies of bananas and apples are interrelated.
E) The goods are not related.
31. For a monopolist:
A) P = MR = MC.
B) P < MR = MC.
C) P > MR = MC.
D) P = MR < MC.
E) P > MR > MC.
32. What is the difficulty with marginal cost pricing?
A) The firm has no incentive to keep costs low.
B) A firm typically earns only economic profit under marginal cost pricing.
C) Once a regulator sets a rate base and an allowable rate of return, it is impossible to calculate the appropriate price.
D) Commissions are typically captured by consumer groups.
E) A firm earns accounting profit under marginal pricing.
33. Price discrimination:
A) is practiced by competitive firms as well as by those with monopoly power.
B) refers to the practice of selling the several good at same prices to different customers.
C) occurs when a company charges a higher price for high-cost goods than for low-cost goods.
D) is always illegal.
E) refers to the practice of selling the same good at different prices to different customers.
An increase in the price of a complementary good will result in:
A) an increase in equilibrium price and a decrease in equilibrium quantity of the related good.
B) a decrease in both the equilibrium price and the equilibrium quantity of the related good.
C) an increase in both the equilibrium price and the equilibrium quantity of the related good.
D) a decrease in equilibrium price and an increase in equilibrium quantity of the related good.
E) no change in the complements and substitutes.
34. A change in which of the following will cause a movement along the supply curve?
A) a change in the state of technology
B) a change in taxes
C) a change in expectations about future prices
D) a change in the price of the good
E) no change in the price of the good
35. Whenever the price of a good is below the equilibrium price, we know that:
A) a surplus exists.
B) a shortage exists.
C) quantity supplied exceeds quantity demanded.
D) the market is in equilibrium.
E) government interferes the prices.
36. Which of the following is the most likely example of an inferior good?
A) a passenger van
B) an imported beer
C) notebook computers
D) a component stereo system
E) a 20-inch black and white TV
37. To say that a market is in equilibrium implies that:
A) producers are earning a profit.
B) the quantity that buyers are willing and able to buy equals the quantity that sellers are willing and able to sell.
C) the market allocates goods fairly.
D) the government is not intervening.
E) the government is intervening.
38. When the price of bananas increases, consumption of apples increases. Which of the following conclusions can be drawn?
A) Bananas are an inferior good compared to apples.
B) The goods are complements.
C) The goods are substitutes.
D) The supplies of bananas and apples are interrelated.
E) The goods are not related.
39. A market economy relies on:
A) Decentralized choices coordinated by the "visible hand" of authority.
B) Decentralized choices coordinated by Adam Smith's "invisible hand."
C) Centralized choices coordinated by the "visible hand" of authority.
D) Centralized choices coordinated by the "visible hand" of individuals.
E) Centralized choices coordinated by Adam Smith's "invisible hand."
40.An increase in the price of a complementary good will result in:
A) An increase in both the equilibrium price and the equilibrium quantity of the related good.
B) An increase in equilibrium price and a decrease in equilibrium quantity of the related good.
C) A decrease in both the equilibrium price and the equilibrium quantity of the related good.
D) No change in the complements and substitutes.
E) A decrease in equilibrium price and an increase in equilibrium quantity of the related good.
41. Define Kondratiev cycles by their duration:
A) 3 years
B) 48-60 years
C) within a year
D) 9-10 years
E) 15-20 years
Inflation refers to:
A) an increase in some prices in the economy.
B) an increase in the overall level of prices in the economy.
C) a continuing fluctuation in the overall level of prices in the economy.
D) a persistent increase in the amount of goods, which can be purchased with a given amount of money.
E) an decrease in all prices in the economy.
As output increases, we know that:
A) Fixed costs decline.
B) Marginal cost first increase than decreases.
C) Total costs decline.
D) Average variable costs decline.
E) Average fixed costs decline.
A monopoly may arise for which of the following reasons?
A) Too many buyers
B) Firms can only produce a similar product
C) Government antitrust laws
D) A lot of people own a key resource
E) A single firm owns a key resource
When the price of bananas increases, consumption of apples increases. Which of the following conclusions can be drawn?
A) Bananas are an inferior good compared to apples.
B) The goods are complements.
C) The goods are substitutes.
D) The supplies of bananas and apples are interrelated.
E) The goods are not related.
Suppose the price of cigarettes increases. If the demand for cigarettes is price inelastic, then the revenue of the cigarette industry will:
A) Increase.
B) Decrease.
C) Remain unchanged.
D) Decrease initially, but then increase as people get used to the higher prices.
E) Change in an unpredictable way.
Income elasticity determines whether goods are:
A) Price elastic or not.
B) Elastic or inelastic.
C) Individual or collective.
D) Substitutes or complements.
E) Normal or inferior.
The one word that best describes elasticity is:
A) Income.
B) Price.
C) Responsiveness.
D) Reaction
E) Contraction
The price elasticity of demand will tend to be higher for goods with more substitutes because:
A) Goods with many substitutes tend to be inexpensive.
B) As the price of substitutes rises, the quantity demanded will increase greatly.
C) Buyers can buy alternatives to the good in question.
D) The cross-price elasticity of demand will be low.
E) Buyers can never buy alternatives to the good in question.
A change in which of the following will cause a movement along the supply curve?
A) A change in the state of technology
B) A change in taxes
C) A change in expectations about future prices
D) A change in the price of the good
E) No change in the price of the good
Price discrimination:
A) Is practiced by competitive firms as well as by those with monopoly power.
B) Refers to the practice of selling the several good at same prices to different customers.
C) Occurs when a company charges a higher price for high-cost goods than for low-cost goods.
D) Is always illegal.
E) Refers to the practice of selling the same good at different prices to different customers.
A decrease in the price level indicates:
A) That the economy has experienced deflation.
B) The existence of inflation.
C) A decline in real GDP.
D) That either inflation or deflation may exist.
E) A decline in real GNP.
Profit equals:
A) price minus average cost.
B) total revenue minus total cost.
C) total revenue minus average cost.
D) price times quantity.
E) total cost minus total revenue.
The ability of a commodity to satisfy the needs of consumers due to some physical or other qualities is called:
A) Consumption value of a commodity