Economic Inquiry - Final Exam

1.

1 point

Suppose a monopolist is able to charge each customer a price equal to that customer's willingness-to-pay for the product. Then the monopolist is engaging in

marginal cost pricing

arbitrage pricing

voodoo economics

perfect price discrimination

2.

1 point

Which of the following is a way to compute GDP?

add up wages paid to all workers

add up the quantities of all final goods and services

add up the market values of all final goods and services

add up the difference between the market values of all final goods and services and then subtract the costs of producing those goods and services

3.

1 point

One problem with government operation of monopolies is that

a benevolent government is likely to be interested in generating profits for political gain

monopolies typically have rising average costs

the government typically has little incentive to reduce costs

a government-regulated outcome will increase the profitability of the

4.

1 point

Which of the following industries is least likely to exhibit the characteristic of free entry?

restaurants

municipal water and sewer

soybean farming

selling running apparel

5.

1 point

Which of the following is not an example of a barrier to entry?

Mighty Mitch's Mining Company owns a unique plot of land in Tanzania, under which lies the only large deposit of Tanzanite in the world

A pharmaceutical company obtains a patent for a specific high blood pressure medication

A musician obtains a copyright for her original song

An entrepreneur opens a popular new restaurant

6.

1 point

If net exports is a negative number for a particular year, then

the value of firms' inventories declined over the course of the year

consumption exceeded the sum of investment and government purchases during the year

the value of goods sold to foreigners exceeded the value of foreign goods purchased during the year

the value of foreign goods purchased exceeded the value of goods sold to foreigners during the year

7.

1 point

After the terrorist attacks on 9/11, governments within the US raised expenditures to increase security at airports. These purchases of goods and services are

not included in GDP since they do not represent production

not included in GDP since the government collects taxes to pay for them

included in GDP since government expenditures on goods and services are included in GDP

included in GDP only to the extent that the federal government, rather than state or local governments, paid for them

8.

1 point

The collection of statutes aimed at curbing monopoly power is called

the 14th amendment

the Clayton Act

the Sherman Act

antitrust law

9.

1 point

A monopolist can sell 200 units of output for $36 per unit. Alternatively, it can sell 201 units of output for $35.80 per unit. The marginal revenue of the 201st unit of output is

$-4.20

$-0.20

$4.20

$35.80

10.

1 point

If an economy's GDP falls, then it must be the case that the economy's

income falls and saving rises

income and saving both fall

income falls and expenditure rises

income and expenditures both fall

11.

1 point

Price discrimination is the business practice of

bundling related products to increase total sales

selling the same good at different prices to different customers

pricing above marginal cost

hiring marketing experts to increase consumers' brand loyalty

12.

1 point

Which of the following is always measured in prices form a base-year?

both nominal and real GDP

nominal but not real GDP

real but not nominal GDP

neither nominal nor real GDP

13.

1 point

One difference between a perfectly competitive firm and a monopoly is that a perfectly competitive firm produces where

marginal cost equals price, while a monopolist produces where price exceeds marginal cost

marginal cost equals price, while a monopolist produces where marginal cost exceeds price

price exceeds marginal cost, while a monopolist produces where marginal cost equals price

marginal cost exceeds price, while a monopolist produces where marginal cost equals price

14.

1 point

Countries with low GDP per person tend to have

lower rates of child malnutrition

fewer infants with low birth weight

higher rates of infant mortality

more access to safe drinking water

15.

1 point

When existing firms in a competitive market are profitable, an incentive exists for

new firms to seek government subsidies that would allow them to enter the market

new firms to enter the market, even without governmental subsidies

existing firms to raise prices

existing firms to increase production

16.

1 point

The market demand curve for a monopolist is typically

unit price elastic

downward sloping

horizontal

vertical

17.

1 point

If the prices of all goods and services produced in the economy rose while the quantity of all goods and services stayed at the same, which would rise?

both real GDP and nominal GDP

real GDP but not nominal GDP

nominal GDP but not real GDP

neither nominal GDP nor real GDP

18.

1 point

Laura is a gourmet chef who runs a small catering business in a competitive industry. Laura specializes in making wedding cakes. Laura sells 20 wedding cakes per month. Her monthly total revenue is $5,000. The marginal cost of making a wedding cake is $300. In order to maximize profits, Laura should

make more than 20 wedding cakes per month.

make fewer than 20 wedding cakes per month.

continue to make 20 wedding cakes per month.

We do not have enough information with which to answer the question.

19.

1 point

According to the circular-flow diagram GDP

can be computed as either the revenue firms receive form the sales of goods and services or the payments they make to factors of production

can be computed as the revenue firms receive from the sales of goods and services but not as the payments they make to factors of production

can be computed as payments firms make to factors of production but not as revenues they receive from the sales of goods and services

cannot be computed as either the revenue fr

20.

1 point

Gross domestic product measures

income and expenditures

income but not expenditures

expenditures but not income

neither income nor expenditures

21.

1 point

When a single firm can supply a product to an entire market at a lower cost than could two or more firms, the industry is called a

resource industry

exclusive industry

government monopoly

natural monopoly

22.

1 point

The term economists use to describe a situation in which the economy's overall price level is rising is

growth

inflation

recession

expansion

23.

1 point

GDP does not reflect

the value of leisure

the value of goods and services produced at home

the quality of the environment

All of the above are correct

24.

1 point

A recession has traditionally been defined as a period during which

nominal GDP declines for two consecutive quarters

nominal GDP declines for four consecutive quarters

real GDP declines for two consecutive quaters

real GDP declines for four consecutive quarters

25.

1 point

The price and quantity relationship in the table is most likely a demand curve faced by a firm in a

monopoly.

concentrated market.

competitive market.

strategic market.

26.

1 point

The production decisions of perfectly competitive firms follow one of the Ten Principles of Economics, which states that rational people

consider sunk costs

equate prices to the average costs of production

prefer to purchase products from smaller rather than larger firms

think at the margin

27.

1 point

If a firm in a perfectly competitive market triples the quantity of output sold, then total revenue will

more than triple.

less than triple.

exactly triple.

Any of the above may be true depending on the firm's labor productivity.

28.

1 point

According to the circular-flow diagram GDP

can be computed as either the revenue firms receive form the sales of goods and services or the payments they make to factors of production

can be computed as the revenue firms receive from the sales of goods and services but not as the payments they make to factors of production

can be computed as payments firms make to factors of production but not as revenues they receive from the sales of goods and services

cannot be computed as either the revenue fr

29.

1 point

The deadweight loss associated with a monopoly occurs because the monopolist

maximizes profits

produces an output level less than the socially optimal level

produces an output level greater than the socially optimal level

equates marginal revenue with marginal cost

30.

1 point

When existing firms in a competitive market are profitable, an incentive exists for

new firms to seek government subsidies that would allow them to enter the market

new firm to enter the market, even without government subsidies

existing firms to raise prices

existing firms to increase production

31.

1 point

Which of the following would be most likely to have monopoly power?

a long-distance telephone service provider

a local cable TV provider

a large department store

a gas station

32.

1 point

If in some year real GDP was $5 trillion and the GDP deflator was 200, what was nominal GDP?

$2.5 trillion

$10 trillion

$40 trillion

$100 trillion

33.

1 point

When deciding what price to charge consumers, the monopolist may choose to charge them different prices based on the customers'

geographical location

age

income

All of the above are correct

34.

1 point

Profit maximizing firms in competitive industries with free entry and exit face a price equal to the lowest possible

marginal cost of production

fixed cost of production

total cost of production

average total cost of production

35.

1 point

The GDP deflator is the ratio of

real GDP to nominal GDP multiplied by 100

real GDP to the inflation rate multiplies by 100

nominal GDP to real GDP multiplied by 100

nominal GDP to the inflation rate multiplied by 100

36.

1 point

If a competitive firm is currently producing a level of output at which revenue exceeds marginal cost, then

a one-unit increase in output will increase the firm's profit.

a one-unit decrease in output will increase the firm's profit.

total revenue exceeds total cost.

total cost exceeds total revenue.

37.

1 point

Consumption consists of spending by households on goods and services, with the exception of

purchases of intangible services

purchases of durable goods

purchases of new houses

spending on education

38.

1 point

A monopolist maximizes profits by

producing an output level where marginal revenue equals marginal cost

charging a price equal to marginal revenue and marginal cost

charging a price where marginal cost equals average total cost

Both a and b are correct

39.

1 point

If total spending rises from one year to the next, then

the economy must be producing a larger output of goods and services

goods and services must be selling at higher prices

either the economy must be producing a larger output of goods and services, and services must be selling at higher prices or both

employment or productivity must be rising

40.

1 point

In the economy of Ukzten in 2010, consumption was $5,000, exports were $100, government purchases were $900, imports were $200, and investment was $1,000. What was Ukzten's GDP in 2010?

$6,700

$6,800

$7,000

$7,200

41.

1 point

In the long run, a firm will exit a competitive industry if

total revenue exceeds total cost

the price exceeds average total cost

average total cost exceeds the price

Both a and b are correct

42.

1 point

Which of the following is a way to compute GDP?

add up wages paid to all workers

add up the quantities of all final goods and services

add up the market values of all final goods and services

add up the difference between the market values of all final goods and services and then subtract the costs of producing those goods and services

43.

1 point

Macroeconomics study

the decisions of individual households and firms.

the interaction between households and firms.

economy-wide phenomena

regulations imposed on firms and unions.

44.

1 point

A firm has market power if it can

maximize profits.

minimize profits.

influence the market price of the good it sells.

hire as many workers as it needs at the prevailing wage rate.

45.

1 point

Which of the following statements is correct?

Both a competitive firm and a monopolist are price takers

Both a competitive firm and a monopolist are price makers

A competitive firm is a price takers, whereas a monopolist is a price maker

A competitive firm is a price maker, whereas a monopolist is a price taker

46.

1 point

Changes in real GDP reflect

only changes in prices

only changes in the amounts being produced

both changes in prices and changes in the amounts being produced

neither changes in prices nor changes in the amounts being produced

47.

1 point

Which of the following is not a characteristic of a monopoly?

barriers to entry

one seller

one buyer

a product without close substitutes

48.

1 point

Which of the following statistics is usually regarded as the best single measure of a society's economic well-being?

the unemployment rate

the inflation rate

gross domestic product

the trade deficit

49.

1 point

A key characteristic of a competitive market is that

government antitrust laws regulate competition.

producers sell nearby identical products.

firms minimize total cost.

firms have price setting power.

50.

1 point

International studies of the relationship between GDP per person and quality of life measures such as life expectancy and literacy rates show that larger GDP per person is associated with

a longer life expectancy and a lower percentage of the population that is literate

longer life expectancy and a higher percentage of the population that is literate

very nearly the same life expectancy and a lower percentage of the population that is literate

very nearly the same life expectancy and a higher percentage of the population that is literate