Reference no: EM131106034
1. Suppose an oligopoly consists of two firms. Firm A lowers price and Firm B responds by lowering its price by the same amount. If average costs and industry output remain the same, which of the following will occur?
A) Barriers to entry will come tumbling down and new firms will enter.
B) The profits of the two firms will remain the same.
C) The profits of the two firms will increase.
D) The profits of the two firms will decrease
2. If GDP falls,
A) income and production must both rise.
B) income must rise, but production may rise or fall.
C) income and production must both fall.
D) none of the above.
3. Capacity utilization increases. What is the impact on aggregate expenditures and income?
A) Both increase.
B) Both decrease.
C) Aggregate expenditure increases and income decreases.
D) Aggregate expenditure decreases and income increases
4. In the short-run along the horizontal portion of the short-run aggregate supply curve, an increase in the budget deficit and an expansionary monetary policy would:
A) increase both the price level and real income.
B) increase real income only.
C) increase the price level only.
D) none of the above
5. In the money market, an excess demand of money will:
A) increase the supply of bonds, increase bonds prices, and increase interest rates.
B) increase the supply of bonds, decrease bond prices, and decrease interest rates.
C) increase the supply of bonds, increase bond prices, and decrease interest rates.
D) increase the supply of bonds, decrease bond prices, and increase interest rates
6. To maximize joint profits, a cartel must determine the level of output at which:
A) joint marginal revenue equals the marginal cost of the smallest member of the cartel.
B) the horizontally sum of the members marginal cost curves is at a minimum.
C) joint marginal revenue equals the marginal cost of the largest member of the cartel.
D) marginal revenue equals joint marginal cost
7. When the cross price elasticity between good X and other related goods is positive and very low, firm X can be assumed to have:
A) minimal market power.
B) moderate market power.
C) virtually no market power.
D) a significant amount of market power.
8. An increase in the supply of dollars on the foreign exchange market will result in:
A) appreciation of the U.S. dollar and depreciation of the foreign currency.
B) appreciation of the U.S. dollar and appreciation of the foreign currency.
C) depreciation of the U.S. dollar and depreciation of the foreign currency.
D) depreciation of the U.S. dollar and appreciation of the foreign currency
9. According to the information presented in the text the bottled water market could best be characterized as:
A) a monopolistically competitive market.
B) an oligopoly.
C) a perfectly competitive market.
D) a monopoly.
10. Over time Americans have chosen to cook less at home and dine out more. This change in behavior:
A) reduces GDP.
B) increases GDP.
C) does not affect GDP.
D) none of the above 11. An increase in wealth would shift the:
A) aggregate demand curve rightward.
B) aggregate demand curve leftward.
C) aggregate supply curve rightward.
D)aggregate supply curve leftward.
12. Which of the following is not cited as a reason for a firm to pursue a group pricing strategy?
A) To attract and lock in additional customers.
B) To minimize its total costs of production.
C) To create network externalities.
D) To increase its total profit
13. . Jim, a U.S. citizen, works only in Croatia. The value added to production from his employment is:
A) included only in U.S. GDP.
B) included in only Croatian GNP.
C) included only in U.S. GNP.
D) not included in either U.S. GDP or U.S. GNP 14. . Exports are:
A) negatively related to the level of foreign income and negatively related to the exchange rate.
B) positively related to the level of foreign income and positively related to the exchange rate.
C) positively related to the level of foreign income and negatively related to the exchange rate.
D) negatively related to the level of foreign income and positively related to the exchange rate.
15. The labor force is 100 million and the unemployment rate is 5 percent. One million people quit looking for a job. What is it called when an individual leaves the labor force, and in this case what is the new unemployment rate?
A) Discouraged worker, 4.04 percent.
B) Discouraged worker, 3 percent.
C) Discouraged worker, 5.05 percent.
D) Encouraged worker, 5 percent.
16. Under a fixed exchange rate system, the central bank of a country experiencing a balance of payments surplus will:
A) increase the demand for dollars to prevent a currency appreciation.
B) increase the supply of dollars to prevent currency depreciation.
C) increase the supply of dollars to prevent a currency appreciation.
D) increase the demand for dollars to prevent currency depreciation
17. An increase in the price level will shift the aggregate demand curve:
A) rightward.
B) leftward.
C) both.
D) none of the above.
18. In the foreign exchange market, foreign residents wishing to purchase U.S. exports or U.S. real and financial assets must:
A) demand U.S. dollars by supplying U.S. dollars.
B) demand U.S. dollars by supplying their foreign currency.
C) supply U.S. dollars by demanding their foreign currency.
D) none of the above 19. Net exports are:
A) negatively related to domestic income, positively related to income in the rest of the world, and positively related to currency appreciation.
B) positively related to domestic income, positively related to income in the rest of the world, and positively related to currency depreciation.
C) positively related to domestic income, positively related to income in the rest of the world, and positively related to currency appreciation.
D) negatively related to domestic income, positively related to income in the rest of the world, and positively related to currency depreciation.
20. Higher prices and price increases combined with lower real output and income, resulting from a major increase in input prices in the economy is called:
A) stagflation.
B) deflation.
C) inflation.
D) none of the above.
21. If there is an autonomous decrease in spending (a leftward shift in the aggregate demand curve) and the Fed wishes to hold real income constant, then the Fed would:
A) decrease the money supply yielding a leftward shift in the aggregate demand curve.
B) increase the money supply yielding a rightward shift in the aggregate demand curve.
C) hold the money supply constant.
D) none of the above.