(Answered) Final Exams ECON 1580 Introduction to Economics Latest Fall 2022.
Final Exams ECON 1580 Introduction to Economics Question 1 If the price of chocolate-covered peanuts increases and the demand for strawberry licorice twists increases, this indicates that these two goods are: a. unrelated goods. b. superior goods. c. inferior goods. d. substitute goods. Question 2 A decrease in the demand facing a monopoly firm would _______ quantity and _______ price. The demand is inelastic. a. increase; increase b. increase; decrease c. decrease; increase d. decrease; decrease Question 3 Economic growth can be represented by: a. an increasing equilibrium output level b. a rightward shift of an economy's short-run aggregate supply curve. c. a rightward shift of an economy's long-run aggregate demand curve. d. a rightward shift of an economy's long-run aggregate supply curve. Question 4 A firm's total output times the price at which it sells that output is: a. net revenue. b. total revenue. c. average revenue. d. marginal revenue. Question 5 Suppose a bank has $10,000 in deposits and $1,000 in reserves. The required reserve ratio is 5%. Which of the following occurs if the required reserve ratio is increased to 10%? a. The bank's required reserves will decrease to $500. b. The bank's excess reserves will increase to $1,000. c. The bank's required reserves will increase to $1,000. d. The bank's ability to create loans increases by 5%. Question 6 In this exhibit (Consumer Equilibrium 3), assume that you are consuming the combination of goods at point K. Given budget constraint FL, utility can be increased by moving to point: a. F. b. G. c. H.d. I. Question 7 If the federal budget is initially balanced and government expenditures remain constant, then an increase in GDP will _________ tax revenues and create a budget _________. a. increase; surplus b. increase; deficit c. decrease; surplus d. decrease; deficit Question 8 In 1984, the Department of Justice reached an agreement with AT&T that: a. allowed AT&T to continue to provide local telecommunications service to established customers but prevented it from accepting any new customers. b. allowed the so-called Baby Bells to provide long-distance service to their local customers. c. separated AT&T from the regional Bell operating companies. d. led to significant degrees of competition and the reduction of monopoly power in local markets with most of the change coming within 10 years after the agreement. Question 9 An important determinant of the price elasticity of demand is the: a. time period. b. price of related goods. c. level of technology. d. quantity of the good supplied. Question 10 For a factor of production to be called capital it must: a. be produced. b. occur in the natural environment. c. be a part of human skill. d. be a result of a stock issue. Question 11 The congressional act that established the U.S. central banking system in 1913 was the: a. Federal Reserve Act. b. Gramm-Rudman Act. c. Employment Act. d. Humphrey-Hawkins Act. Question 12 The second of the three ranges of production is characterized by _______ marginal returns. a. increasing b. constant c. diminishing d. negative Question 13 Profit computed using explicit costs as the only measure of costs is:a. explicit profit. b. accounting profit. c. implicit profit. d. economic profit. Question 14 The branch of economics that examines the impact of choices on aggregates in the economy is: a. positive economics. b. normative economics. c. macroeconomics. d. microeconomics. Question 15 Generational accounting: a. is a method of assessing the impact of fiscal policy lags from one generation to another. b. measures the number of generations it takes to pay off the national debt at a given point in time. c. evaluates the impact of current fiscal policies on different generations in the economy, including future generations. d. is an accounting method that defers to the future, the cost of any government policy the rewards of which will be reaped in the future. Question 16 Which of the following statements is true about velocity? a. In the short run, velocity varies but in the long run, velocity is relatively constant. b. In the short run, velocity is relatively constant but in the long run, velocity varies. c. Velocity is relatively constant in the short run and in the long run. d. Velocity fluctuates with fluctuations in economic activity and changes in the growth rate of money supply. Question 17 This exhibit (Table 6-4), shows some output and income data for Manna Land. What is the value of Manna Land's net foreign income? a. –$100 billion b. $1,100 billion c. $100 billion d. $200 billion Question 18 Using the aggregate demand-aggregate supply model, predict what happens in the short run when there is a general decrease in raw materials cost. a. The aggregate supply curve shifts right; the aggregate demand curve is not affected; price level decreases; real GDP increases.b. The aggregate supply curve shifts left; the aggregate demand curve is not affected; price level increases; real GDP decreases. c. The aggregate demand curve shifts right; the aggregate supply curve is not affected; price level and real GDP increase. d. The aggregate demand curve shifts left; the aggregate supply curve is not affected; price level and real GDP decrease. Question 19 The income effect of a price change is described by which of the following statements? a. When the price of a good falls, consumers have an implicit increase in income and can now buy more of the good. b. When the price of a good falls, consumers will now substitute this lower priced good for more higher priced goods. c. The income effect is the relative change in the amount of a good consumed when the price of another good changes. d. The income effect shows how a change in income at a given price will affect the quantity of a good purchased. Question 20 The slope of the total product curve is: a. fixed product. b. average product. c. marginal product. d. implicit product. Question 21 Suppose that the price elasticity of demand for grapefruit is -2.8. The introduction of a new variety that is cheaper to grow should cause consumer expenditures for grapefruit to: a. rise. b. fall. c. remain unchanged. d. it is not possible to answer with the information given. Question 22 All other things unchanged, a tax on a product that leads to an increase in the cost of production would: a. lead to an increase in supply. b. lead to a decrease in demand. c. result in an increased price. d. lead to a decrease in supply. Question 23 Which of the following exemplifies the outlet bias in the computation of the CPI? a. Roxanna refuses to shop at factory outlet stores because she says that the layouts of the stores are too chaotic and therefore is too time-consuming. b. Yu-Jen does most of her family's shopping at Costco instead of Safeway because the prices at Costco are more competitive. c. Katie prefers to buy her groceries at Whole Foods because they carry a wide selection of organic produce.d. Diana does her holiday shopping when she travels to China to take advantage of the "great deals" on most items. Question 24 Freema withdraws $1,000 from her checking account to purchase a $1,000 time-deposit. As a result of her transaction: a. M1 and M2 decrease. b. M1 decreases and M2 increases. c. M1 decreases and M2 is unaffected. d. M1 and M2 are unaffected. Question 25 Assume an economy is operating on its production possibilities curve, which shows the production of military and civilian goods. If the output of military goods is increased, the output of civilian goods: a. will increase too. b. will not change. c. must decrease. d. may increase or decrease. Question 26 A feature of monopoly that leads to unfavorable consequences is that it: a. reduces income inequality. b. sets marginal cost equal to price. c. produces more output than if perfectly competitive firms characterized the same industry. d. charges a higher price than if perfectly competitive firms characterized the same industry. Question 27 In large shopping areas, the retail market is most illustrative of: a. monopolistic competition. b. monopoly. c. perfect competition. d. perfect oligopoly. Question 28In this exhibit (Figure 7-4), for the economy represented in the figure: a. the real wage rate is higher than full-employment real wage. b. the real wage rate is lower than full-employment real wage. c. the nominal wage rate is higher than full-employment nominal wage. d. the nominal wage rate is higher than full-employment real wage. Question 29 The short run is a period that is: a. less than one week. b. less than one month. c. long enough in which to vary output but not plant capacity. d. long enough in which to make all economic adjustments. Question 30 What is the relationship between average household income and standard of living? a. There is no relationship. Increasing average income says nothing about income distribution. b. Rising income enables households to acquire more of the goods and services that improve their material standard of living. c. Rising income tends to increase the crime rate and violence, thereby lowering a country's standard of living. d. There is no relationship. Standard of living depends on productivity not household income. Question 31 In this exhibit (Profit Maximization for a Firm in Monopolistic Competition), suppose that an innovation reduces a firm's fixed costs and reduces cost from ATC to ATC' before the innovation reduced the cost, the firm's maximum economic profit was: a. $0. b. $30. c. $750. d. $4,500. Question 32 Following an income-compensated price change, you decide to decrease the quantity of ice cream purchased each month when the price increases and purchase more frozen yogurt instead. This is an indication of the: a. substitution effect. b. utility effect. c. income effect. d. consumption effect.Question 33 In this exhibit (Monopoly Through Collusion), given the duopoly industry illustrated in the exhibit, if the two firms colluded to maximize their combined economic profits, the market price they would set would be _______ and combined economic profits of the firms would be _______ . a. P2; given by the area of the rectangle bounded by OP1CQ4 b. P1; P1P3AF c. P1; given by the area of the rectangle bounded by 0P3AQ1 d. P2; given by the area of the rectangle bounded by P1P2BG Question 34 Suppose a country has a national debt of $5,000 billion, a GDP of $20,000 billion, and a budget surplus of $130 billion. How much will its new national debt be? a. $5,130 billion b. $4, 870 billion c. $15,130 billion d. $19, 870 billion Question 35 Which of the following reduces the duration of frictional unemployment? a. retraining unemployed workers to equip them with new skills b. subsidizing firms that are willing to train new entrants in the labor market c. establishing employment agencies which give out information about job vacancies d. establishing labor unions which will protect workers from being laid off. Question 36 The incorrect presumption that because two events tend to occur together, one must cause the other is the: a. confusion of economists.b. blunder of science. c. fallacy of false cause. d. error of inclusion. Question 37 Towards the end of the twentieth century, some of the world's more affluent countries experienced robust growth. Which of the following is not linked to high growth performance? a. encouragement of competitive behavior b. private sector research and development c. strict regulations in labor markets, for example strict employment protection legislation d. liberal trade policies Question 38 If an industry's long-run supply curve is upward sloping, the industry is characterized by: a. increasing cost. b. decreasing cost. c. constant cost. d. high overhead cost. Question 39 The cost of the Great Depression between 1929 and 1942 was a loss of: a. more than the United States ultimately spent on World War II. b. over $15 trillion in today's dollars. c. the output that otherwise would have been produced by the 50 percent of the nation's workers who had lost their jobs. d. both B and C are true. Question 40 The cross price elasticity of demand for substitutes goods is: a. negative. b. positive. c. equal to 1. d. positive only for normal goods. Question 41 Which of the following statements is true? I. Small differences in rates of economic growth can lead to large differences in levels of potential output over time. II. From the perspective of the rule of 72, small differences in rates of economic growth between two countries will not significantly affect their respective standards of living. III. Countries that have higher population growth rates are likely to see higher economic growth rates because increases in population lead to increases in the size of the labor force. a. I and III b. II and III c. I only d. II only e. III only Question 42The supply curve for the firm in perfect competition: a. is the MC curve above the minimum of ATC. b. tells the quantity produced at each price. c. must result in a price greater than MR. d. shows the outputs at which the firm makes an economic profit. Question 43 The value of gross domestic product (GDP) differs from the value of gross national product (GNP) when: a. net exports are excluded from GDP but included in GNP. b. production in one country employs factors of production owned by residents of other countries. c. production in one country employs only factors of production owned by its residents. d. when domestic firms that produce in factories abroad are exempt from paying domestic taxes. Question 44 Gross domestic product: a. is a flow variable. b. is a stock variable. c. could be either a flow variable or a stock variable depending on the time period considered. d. is neither a flow nor a stock variable; it is a statistic. Question 45 Which of the following statements is true of the economy in the long run? In the long run, I. real GDP eventually moves to potential because all wages and prices are assumed to be flexible. II. the economy can achieve its natural level of employment and potential output at any price level. III. there is no cyclical unemployment. a. I only b. I and II only c. I and III only d. I, II, and III Question 46In this exhibit (Simultaneous Shifts in Demand and Supply), D1 and S1 are original supply and demand curves, and S2 and D2 are new curves. In this market, the change in supply may have resulted from: a. wage increases for the workers. b. an improvement in technology. c. a decrease in the number of sellers. d. all of the above. Question 47 Which of the following is the best measure for comparing the standard of living across countries? a. productivity b. gross national product c. real gross national product d. real gross national product per person Question 48 The economic way of thinking includes: a. attention paid to the opportunity costs involved in any choice. b. the assumption that individuals choose to average out some objective. c. concern with the biological make up of decision makers. d. emphasis on how choices affect total values rather than marginal values. Question 49 In a competitive market, when price is below the equilibrium price, there will be pressure for the price to: a. fall. b. stay the same. c. rise. d. change only if demand and/or supply change. Question 50 The congressional act that established the U.S. central banking system in 1913 was the: a. Federal Reserve Act. b. Gramm-Rudman Act. c. Employment Act. d. Humphrey-Hawkins Act. Question 51 Which of the following is true regarding a budget constraint? a. The budget constraint indicates that consumers desire more income. b. The budget constraint indicates that there are limits on the consumption possibilities for a consumer. c. The budget constraint is based on some, but not all of the prices for goods that consumers may want to buy. d. All of the above statements describe the budget constraint. Question 52 Marginal cost is the change in: a. total cost resulting from a 1-unit change in a variable input. b. total cost resulting from a 1-unit change in quantity.c. total cost resulting from a 1-unit change in average cost. d. average cost resulting from a 1-unit change in quantity. Question 53 The current rate of unemployment of 5 percent is too high. This is a _______ statement. a. normative b. ceteris paribus c. positive d. fallacy of false cause Question 55 If your local government gives you the exclusive right to sell breakfast bagels in your community, your monopoly would result from: a. sunk costs. b. location. c. economies of scale. d. government restrictions. Question 55 In this exhibit (Figure 12-2), if discretionary fiscal policy is used to eliminate the gap, policy actions will: a. shift the aggregate demand curve to the left until long-run equilibrium is restored at a price level, Pj and output level, Yp . b. shift the aggregate demand curve and the short-run aggregate supply curve to the left until longrun equilibrium is restored at a price level Pk and output level, Yp . c. shift the aggregate demand curve to the left until long-run equilibrium is restored at a price level, Pr and output level, Yp . d. shift the short-run aggregate supply curve to the left until long-run equilibrium is restored at a price level, Pr and output level, Yp . Question 56 Which of the following will not lead to economic growth?a. increased immigration b. restrictions on international trade c. introduction of faster computers d. opening all federal lands to mining Question 57 In this exhibit (Figure 7-7), suppose the economy is initially in short-run equilibrium at point K. If the policy-makers adopt a nonintervention policy, over time, I. Real wages will fall as long as unemployment remains above the natural rate. II. Lower nominal wages will result in a gradual shift from SRAS2 to SRAS1. III. Long-run equilibrium will be established at Yp and Ph . a. I, II, and III b. I and II only c. II and III only d. III only Question 58 The value of a unit of money, such as the dollar, always varies: a. directly with the price of gold. b. inversely with the price of gold. c. inversely with the average price of gold and silver. d. inversely with the average level of prices. Question 59 When the Federal Reserve conducts open market transactions, it: a. buys or sells corporate bonds in the bond market. b. issues government bonds to raise funds for the government. c. makes credit available to financial institutions in crises. d. buys or sells previously issued government bonds. Question 60In this exhibit (The Supply of Videotape Rentals), a decrease in the number of rental stores supplying videotape rentals would result in a change illustrated by: a. the move from n to o in Figure (a). b. the move from p to q in Figure (b). c. the move from s to t in Figure (c). d. the move from u to v in Figure (d).
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final exams econ 1580 introduction to economics
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if the price of chocolate covered peanuts increases and the demand for strawberry licorice tw
