100 200 300 400 500 Micro Potpourri Macro Potpourri

B 100 A single-price monopolist’s marginal revenue is equal to its price less than its price greater than its price negative when it maximizes revenues zero when it maximizes profit B

200 When marginal product exceeds average product, which of the following must be true? Average product is increasing. Average product is decreasing. Marginal product is increasing. Total product is decreasing. Total product is at its maximum. A

C 300 Marginal revenue product is defined as the change in income that occurs when an individual works additional hours change in total revenue that occurs when one additional unit of the good is produced change in total revenue that occurs when one additional unit of an input is employed total revenue divided by the quantity of labor employed change in total cost that occurs when one additional unit of input is employed C

400 The allocation of resources in a market economy is described by which of the following statements? The government decides which goods will be produced and which consumers will receive them. Buyers and sellers exchange goods and services on a voluntary basis. Prices and costs help producers decide whether they are producing too little or too much of a good. I only II only III only I and III only II and III only E

C The average total cost to the firm of producing 2 units of output is $35 $85 $95 $100 $130 500 C

If the product price is $85, how many units of output must the firm produce in order to maximize profits? 3 4 5 6 100 D

200 Assume that the government implements a deficit-reduction policy that results in changes in aggregate income and output. Then the Federal Reserve engages in monetary policy actions that reverse the changes in income and output caused by fiscal government spending, the required reserve ratio, and the discount rate is most consistent with these policies. Taxes Gov’t Spending RRR Discount Rate Increase Increase Decrease Increase Increase Decrease Decrease No change Increase Decrease Increase Decrease Decrease Increase No change Increase Decrease Decrease Decrease Increase B

300 If the economy is operating at full employment and there is a substantial increase in the money supply, the quantity theory of money predicts an increase in the velocity of money real output interest rates unemployment the price level E

400 Which of the following would cause the United States dollar to increase in value to the Japanese yen? An increase in the money supply in the United States An increase in interest rates in the United States An increase in the United States trade deficit with Japan The United States purchase of good on the open market The sale of $2 billion dollars worth of Japanese television sets to the United States B

500 Assume that the supply of loanable funds increases in Country X. The international value of Country X’s currency and Country X’s exports will most likely change in which of the following ways? Int’l Value of X’s Currency X’s Exports Decrease Decrease Decrease Increase Increase Decrease Increase Increase Not change Not change B

100 On the basis of the graph above, which of the following statements concerning changes in the demand for and supply of tomatoes is correct? If both the demand and supply increase, the price of tomateos will definitely increase. If both the demand and supply decrease, the quantity of tomatoes wold will definitely increase. If the demand decreases while supply increase, price of tomatoes willdefinitely increase. If the demand decreases while the supply increases, the quantity of tomatoes sold will definitely decrease. If the demand increases while the supply decreases, theprcie of tomatoes will definitely increase. E

200 Which of the following best illustrates the concept of consumer surplus? A thirsty athlete pays $0.85 for a cold drink when she would have gladly paid $1.50 for the drink. An individual who is willing to accept a job at $7.50 per hour is offered $7.00 per hour. An individual pays the sale price of $15.00 for the same shirt that the individual refused to purchase earlier at $18.00. An individual finds that the price of artichokes, a food she dislikes , has been reduced by 50 percent. A woodcarver has a marginal cost of $5.00 for a unit of output, but sells that unit oat $6.00 A

300 Which of the following factors can cause a firm’s cost curves to shift upward? An increase in wages. An increase in the firm’s output. An increase in the output price. A decrease in the firm’s output. A decrease in the price of energy. A

The diagram shows a perfectly competitive firm’s short-run cost curves The diagram shows a perfectly competitive firm’s short-run cost curves. If the price of the output increases from $8 to $10, the profit-maximizing firm will Continue producing 15 units because ATC is at a minimum Continue producing 15 units because ATC is equal to marginal cost Increase output to 20 units because this is the output at which price equals ATC Increase output to 18 units because this is the output at which price equals MC Decrease output to 10 units because this is the output at which average variable cost is at a minimum 400 D

500 Which of the following statements is true about a firm that sells its output in a perfectly competitive market? The demand for its product is a downward-sloping function. The firm will earn zero economic profits in long-run equilibrium. Advertising is an important tool of the firm. The firm will increase its total economic profits if it charges a price that is lower than the market price. The marginal revenue the firm receives from selling an additional unit of output will be different from the price at which it sells that unit. B

100 Which of the following will most likely occur in an economy if more money is demanded than is supplied? The amount of investment spending will increase. Interest rates will decrease. Interest rates will increase. The demand curve for money will shift to the left. The demand curve for money will shift to the right. C

Which of the following is true of an economy with the production possibilities frontier shown? Point Q is attainable but undesirable. Point R is unattainable but desirable. A technological improvement in the production of watches would move the economy from point T to point P. The opportunity cost of moving from point S to point T is the number of watches give up. There is unemployment at point T because workers in the watch industry are without jobs. D 200

A 300 Increases in real income per capita are made possible by Improved productivity A high labor/capital ratio Large trade surpluses Stable interest rates High protective tariffs A

400 Which of the following would most likely lead to a decrease in aggregate demand, that is, shift the aggregate demand curve leftward? A decrease in taxes A decrease in interest rates An increase in household savings An increase in household consumption An increase in business firms’ purchases of capital equipment from retained earnings C

500 Which of the following measures might be used to reduce a federal budget deficit? Raising taxes Reducing federal spending Lowering interest rates I only II only III only I and III only I, II, and III E

100 One justification for government regulation of a monopoly is that the unregulated monopoly Earns a normal profit Pays its workers a lower wage than if the market were competitive Has a very elastic demand curve Charges a price higher than a competitive market price Sells too much of the product D

200 Which of the following is most likely to shift the demand for aircraft mechanics to the right? An increase in the demand for air travel An increase in the price of a license necessary for aircraft mechanics A decrease in the price of a license necessary for aircraft mechanics A decrease in the demand for air travel A decrease in the marginal productivity of aircraft mechanics A

300 If the production of a good results in a positive externality, the government might be able to improve economic efficiency in this market by Eliminating private production of the good Imposing a tax on private producers Promoting the export of the surplus output Initiating antitrust action Granting a subsidy to private producers E

400 All of the following are sources of inequality in the distribution of personal income EXCEPT Progressive income taxes Discrimination in employment Differences in personal motivation Differences in educational level attained Differences in abilities A

500 An outward shift in the production possibilities curve of an economy can be caused by an increase in Unemployment The labor force Inflation Output Demand B

100 If the nominal interest rate is 6 percent and the expected inflation rate is 4 percent, the real interest rate is 10 percent 6 percent 4 percent 2 percent -2 percent D

B 200 Supply side economists argue that A cut in high tax rates results in an increased deficit and thus increases aggregate supply Lower tax rates provide positive work incentives and thus shift the aggregate supply curve to the right. The aggregate supply of goods can only be increased if the price level falls Increased government spending should be used to stimulate the economy The government should regulate the supply of imports B

300 If the dollar cost of the British pound decreases, United States imports from and exports to the United Kingdom will change in which of the following ways? Imports Exports Increase Decrease Increase Increase Increase No change Decrease Decrease Decrease Increase A

400 An economy that is fully employing all its productive resources but allocating less to investment than to consumption will be at which of the following positions on the production possibilities curve? A B C D E C

500 The United States government defines an individual as unemployed if the person Does not hold a paying job Has been recently fired Works part-time but needs full-time work Is without a job but is looking for work Wants a job but is not searching because he or she thinks none is available   D