ECON 304 WITH 148 EXAM QUESTIONS & CORRECT
ANSWERS
The circular flow model shows that households use income for:
A) consumption, saving, and factor payments.
B) consumption, taxes, and factor payments.
C) taxes, saving, and factor payments.
D) consumption, taxes, and saving. - ANSWER-D) consumption, taxes, and saving
In the circular flow diagram, firms receive revenue from the _____ market, which
is used to purchase inputs in the _____ market.
A) goods; financial
B) factor; financial
C) goods; factor
D) factor; goods - ANSWER-C) goods; factor
In the circular flow model, households receive income from the _____ market and
save through the _____ market.
A) goods; financial
B) factor; financial
C) goods; factor
D) factor; goods - ANSWER-B) factor; financial
In the long run, the level of national income in an economy is determined by its:
A) factors of production and production function.
B) real and nominal interest rate.
,C) government budget surplus or deficit.
D) rate of economic and accounting profit. - ANSWER-A) factors of production
and production function
An economy's factors of production and its production function determine the
economy's:
A) labor force participation rate.
B) budget surplus or deficit.
C) population growth rate.
D) output of goods and services. - ANSWER-D) output of goods and services
In the long run, what determines the level of total production of goods and services
in an economy?
A) the interest rate and the amount of national saving
B) the quantity of capital, quantity of labor, and production technology
C) consumption, investment, and government spending
D) the marginal products of capital and labor, constant returns to scale, and
competition - ANSWER-B) the quantity of capital, quantity of labor, and
production technology
The two most important factors of production are:
A) goods and services.
B) labor and energy.
C) capital and labor.
D) saving and investment. - ANSWER-C) capital and labor
Unlike the real world, the classical model with fixed output assumes that:
,A) all factors of production are fully utilized.
B) all capital is fully utilized but some labor is unemployed.
C) all labor is fully employed but some capital lies idle.
D) some capital lies idle and some labor is unemployed. - ANSWER-A) all factors
of production are fully utilized
A production function is a technological relationship between:
A) factor prices and the marginal product of factors.
B) factors of production and factor prices.
C) factors of production and the quantity of output produced.
D) factor prices and the quantity of output produced. - ANSWER-C) factors of
production and the quantity of output produced
The production function feature called "constant returns to scale" means that if we:
A) multiply capital by z1 and labor by z2, we multiply output by z3.
B) increase capital and labor by 10 percent each, we increase output by 10 percent.
C) increase capital and labor by 5 percent each, we increase output by 10 percent.
D) increase capital by 10 percent and increase labor by 5 percent, we increase
output by 7.5 percent. - ANSWER-B) increase capital and labor by 10 percent
each, we increase output by 10 percent
If an increase of an equal percentage in all factors of production results in an
increase in output of the same percentage, then a production function has the
property called:
A) constant marginal product of labor.
B) increasing marginal product of labor.
C) constant returns to scale.
, D) increasing returns to scale. - ANSWER-C) constant returns to scale
If bread is produced by using a constant returns to scale production function, then
if the:
A) number of workers is doubled, twice as much bread will be produced.
B) amount of equipment is doubled, twice as much bread will be produced.
C) amounts of equipment and workers are both doubled, twice as much bread will
be produced.
D) amounts of equipment and workers are both doubled, four times as much bread
will be produced. - ANSWER-C) amounts of equipment and workers are both
doubled, twice as much bread will be produced
At any particular point in time, the output of the economy:
A) is fixed because the supplies of capital and labor and the technology are fixed.
B) is fixed because the demand for goods and services is fixed.
C) varies because the supplies of capital and labor vary.
D) varies because the technology for turning capital and labor into goods and
services varies. - ANSWER-A) is fixed because the supplies of capital and labor
and the technology are fixed
The neoclassical theory of distribution:
A) was developed by Karl Marx.
B) is rejected by most economists today.
C) shows that the national income of an economy is not equal to total output.
D) is a theory of how national income is divided among the factors of production. -
ANSWER-D) is a theory of how national income is divided among the factors of
production
ANSWERS
The circular flow model shows that households use income for:
A) consumption, saving, and factor payments.
B) consumption, taxes, and factor payments.
C) taxes, saving, and factor payments.
D) consumption, taxes, and saving. - ANSWER-D) consumption, taxes, and saving
In the circular flow diagram, firms receive revenue from the _____ market, which
is used to purchase inputs in the _____ market.
A) goods; financial
B) factor; financial
C) goods; factor
D) factor; goods - ANSWER-C) goods; factor
In the circular flow model, households receive income from the _____ market and
save through the _____ market.
A) goods; financial
B) factor; financial
C) goods; factor
D) factor; goods - ANSWER-B) factor; financial
In the long run, the level of national income in an economy is determined by its:
A) factors of production and production function.
B) real and nominal interest rate.
,C) government budget surplus or deficit.
D) rate of economic and accounting profit. - ANSWER-A) factors of production
and production function
An economy's factors of production and its production function determine the
economy's:
A) labor force participation rate.
B) budget surplus or deficit.
C) population growth rate.
D) output of goods and services. - ANSWER-D) output of goods and services
In the long run, what determines the level of total production of goods and services
in an economy?
A) the interest rate and the amount of national saving
B) the quantity of capital, quantity of labor, and production technology
C) consumption, investment, and government spending
D) the marginal products of capital and labor, constant returns to scale, and
competition - ANSWER-B) the quantity of capital, quantity of labor, and
production technology
The two most important factors of production are:
A) goods and services.
B) labor and energy.
C) capital and labor.
D) saving and investment. - ANSWER-C) capital and labor
Unlike the real world, the classical model with fixed output assumes that:
,A) all factors of production are fully utilized.
B) all capital is fully utilized but some labor is unemployed.
C) all labor is fully employed but some capital lies idle.
D) some capital lies idle and some labor is unemployed. - ANSWER-A) all factors
of production are fully utilized
A production function is a technological relationship between:
A) factor prices and the marginal product of factors.
B) factors of production and factor prices.
C) factors of production and the quantity of output produced.
D) factor prices and the quantity of output produced. - ANSWER-C) factors of
production and the quantity of output produced
The production function feature called "constant returns to scale" means that if we:
A) multiply capital by z1 and labor by z2, we multiply output by z3.
B) increase capital and labor by 10 percent each, we increase output by 10 percent.
C) increase capital and labor by 5 percent each, we increase output by 10 percent.
D) increase capital by 10 percent and increase labor by 5 percent, we increase
output by 7.5 percent. - ANSWER-B) increase capital and labor by 10 percent
each, we increase output by 10 percent
If an increase of an equal percentage in all factors of production results in an
increase in output of the same percentage, then a production function has the
property called:
A) constant marginal product of labor.
B) increasing marginal product of labor.
C) constant returns to scale.
, D) increasing returns to scale. - ANSWER-C) constant returns to scale
If bread is produced by using a constant returns to scale production function, then
if the:
A) number of workers is doubled, twice as much bread will be produced.
B) amount of equipment is doubled, twice as much bread will be produced.
C) amounts of equipment and workers are both doubled, twice as much bread will
be produced.
D) amounts of equipment and workers are both doubled, four times as much bread
will be produced. - ANSWER-C) amounts of equipment and workers are both
doubled, twice as much bread will be produced
At any particular point in time, the output of the economy:
A) is fixed because the supplies of capital and labor and the technology are fixed.
B) is fixed because the demand for goods and services is fixed.
C) varies because the supplies of capital and labor vary.
D) varies because the technology for turning capital and labor into goods and
services varies. - ANSWER-A) is fixed because the supplies of capital and labor
and the technology are fixed
The neoclassical theory of distribution:
A) was developed by Karl Marx.
B) is rejected by most economists today.
C) shows that the national income of an economy is not equal to total output.
D) is a theory of how national income is divided among the factors of production. -
ANSWER-D) is a theory of how national income is divided among the factors of
production
