1. The law of demand indicates that _____ [ a. when prices rise, the quantity demanded rises, b. when prices rise, the quantity demanded falls. c. when prices fall, the quantity supplied rises. [ d. when prices fall, the quantity supplied falls. [ & when prices rise, the quantity demanded stays the same. 2. If we say that the demand for a good has increased, we mean there has been () a. an upward movement along the demand curve. [ b. a downward movement along the demand curve. ) c aleftward shift of the demand curve d. a rightward shift of the demand curve. [ e. an increase in the slope of the demand curve. 3. When actual output exceeds potential output, [_] a. more resources become unemployed. ) b. prices remain constant. c. prices tend to increase. (] d. nominal GDP decreases. () e. resource prices decrease. 4 Derived demand refersto [ a. the demand curve derived from utility functions [ b. an individual demand curve derived from a market demand curve, [ & market demand curve derived from individual demand curves. d. the demand for a resource derived from the demand for the product produced by that resource. [ e. the demand for a product derived from the demand for the resource used to make that product 5. Which of the following is true for a monopolist? [ a Marginal revenue is maximized where demand is unit elastic. (] b. Total revenue is maximized where demand is inelastic_ c. Marginal revenue is negative where demand is inelastic. d. Total revenue is negative where demand is elastic. [ e Marginal revenue is lowest where demand is unit elasfic. 6_Aperiod of sustained decling in output in an economy is known as ain) [_] a. expansion. () b. stagnation. [ c. peak. d. trough. () e. contraction. 7. Firms in monopolistic competition and perfect competition typically __ () a. are price takers () b. produce identical products. [ . eamn zero economic profit in the long run (] d. face a downward-sloping demand curve. [ & face a downward-sloping total revenue curve at all rates of output. 8. The market interest rate i1s important to the investment decisions of firms _____ (] a only when funds are borrowed from financial intermediaries. [J b. only when firms have the monay to invest in capital. [ regardless of whether funds must be borrowed or firms have the funds on hand. [ d. only when firms have funds on hand and are ready to lend them. () &. only when firms purchase new equipment rather than a new building. 9. If two resources are substitutes _____ [C] a. one enhances another's productivity. [ b. an increase in the price of one will increase the demand for the other. [T c. anincrease in the price of one will increase the supply of the other. [ d. an increase in the price of one will decrease the demand for the other. [ e. adecrease in the price of one will increase the demand for the other. 10. How is GDP calculated? () a. by adding up the production of all goods and services in the economy [C] b. by adding up the cost of all goods and services in the economy [ c. by adding up the quantity of all goods and services in the economy [ d. by measuring the economy's price level during a particular year e. by subtracting the value of all goods and services produced by the government and the value of those produced by the private sector 11. A common determinant of both the price elasticity of demand and the price elasticity of supply for a productis _____ a. the availability of close substitutes for the product. [ b. the proportion of the consumer's budget spent on the product. (] c. the length of the adjustment peried under consideration. (] d. the additional cost of increasing production. [ e. the availability of complements to the product. 12. The law of demand implies that _____ [ a. price and quantity demanded are positively related. b. price and quantity demanded are inversely related. 7] c. price and quantity supplied are inversely related. () d. price and quanlity supplied are positively related. [T} e. price and quanlity demanded are not related. 13. Afirm in an oligopoly experiences economies of scale if (7] a. average cost declines as output increases. (] b. marginal cost declines as output increases. [ c total cost increases as output increases (] d. average returns decline as output increases. e. marginal revenue increases as output increases 14. Suppose a perfectly competitive constant-cost industry is in long-run equilibrium when market demand increases. What will probably happen to a firm in this industry in the long run? [ a There will be no change in the equilibrium price. () b. The equilibrium price will be higher in the long run. [ c. The equilibrium price will be lower in the long run. (] d. Itwill charge the same equilibrium price but will reduce its output e. Itwill experience higher average total costs and will reduce its output 15. The law of supply implies that [T a. price and quantity demanded are positively related. (1 b. price and quantity demanded are inversely related. [ c. price and quantity supplied are inversaly related. d. price and quantity supplied are positively related [0 e. price and quantity demanded are not related. 16. Melissa is a self-employed lawyer who chooses a higher-priced restaurant that is 2 miles away from her home over a cheaper restaurant that is 15 miles away from her home Which of the following is the most likely explanation for her behavior [T a. The opportunity cost of her time is very low. [ b. She does not take the time taken to travel to the restaurants into consideration. [ c. She does not like to cook L] d. The prices at the more expensive restaurant understate the opportunity cost of eating there. [ e. The higher cost of the more expensive restaurant is offset by the higher opportunity cost of the cheaper restaurant. 17 Irving R Associates is granted a patent for a new product for which there are no close substitutes. Which of the following conditions must be true at the profit-maximizing output produced by this firm? (] a Price is equal to marginal cost. b. Average cost is less than marginal cost. ) Marginal revenue is equal to marginal cost. d. Marginal revenue is less than average variable cost [} e. Price is greater than average revenue. 18. The slope of the total revenue curve for a perfectly competitive firm equals (1 a marginal revenue. O b. economic profit () accounting profit. d. average revenue e. nommal profit 19. Hans can do 4 loads of laundry and type 6 pages per hour. Heidi can do 12 loads of laundry and type 8 pages per hour. Hans's opportunity cost of doing one load of laundry is a equal to typing 12 papers b. equal to typing & papers. [ equal to typing 1 1/2 pages. [ d. equal to typing 2/3 of a page. e. impassible to compute without additional information. 20. Along a linear demand curve, as the price increases from zero, a. demand decreases b. demand increases. [ quantity demanded increases. [ d. total revenue first increases but eventually decreases. (] e. total revenue first decreases but eventually increases. 21. Miguel buys 1 pizza per week when the price is $10, and buys 2 when the price is $7. Miguel is demonstrating ___ a. demand. b. supply. 0 the law of demand. [ d. the law of supply. e that he likes pizza 22 The smaller the marginal propensity to save, other things constant, [ a. the smaller the marginal propensity to consume. [ b. the larger the multiplier. [ the smaller the multiplier. () d. the flatter the consumption function (] e. the steeper the saving function. 23 All other things constant, if a proportion of a consumer's budget is spent on a good, the demand for the good will be more and the consumer will purchase a substitute instead. () a. greater; price elastic [ b. smaller; unit elastic [[) smaller, price elastic [} d. greater; price inelastic e. greater, stable 24 Asunkcost a can only be measured in monetary terms. [ b.is a cost that has already been incurred and cannot be recovered. [ should influence a person's choice if that person is a marginal decision maker, d. lowers the efficiency of production, ) e. should not be considered when making economic decisions. 25. Macroeconomics studies a. the different costs associated with production. b. the price and output decisions made by different industries. c. the overall performance of the economy. (] d. the role of a market in determining an efficient outcome () e. the role of input suppliers in determining the price and quantity of output. A 26. Ten cases of spring water are sold for $6 each, and the marginal product of the last unit of labor is 5. If the price of a case increases from $6 to $8, then the marginal revenue product of the last unit of labor would [ a. decrease by $10. () b.increase by $40. [ c. decrease by $30. () d. increase by $10. e increase by $20. 27 If a price reduction leads to an increase in total revenue, demand is _____ a. perfectly inelastic. [ b.inelastic. ) C. unit elastic. () d. elastic. [ e. perfectly elastic. 28. Which of the following illustrates the law of diminishing marginal utility? a. The marginal utility of Diane's second Coke is greater than the marginal utility of her third pretzel, other things constant () b. The marginal utility of Diane's second Coke is greater than the marginal utility of Ken's third pretzel, other things constant [} . The marginal utility of Diane's second Coke is greater than the marginal utility of her third Coke, other things constant. [ d. The total utility of one Coke is greater than the total ufility of two Cokes, other things constant. e The marginal utility of Diane's second Coke is greater than the marginal utility of Ken's third Coke, other things constant. 29 Afirm is likely to be an oligopolist, a.that faces a horizontal demand curve b. that maximizes profit by producing a level of output at which marginal revenue exceeds marginal cost c. that produces a significant share of market output before low average costs can be achieved d. that acts as a price taker e that earns zero economic profit in the long run 30. A beneficial supply shock such as a breakthrough in technology a. lowers the price level and increases output [ b. lowers the price level and decreases output c.raises the price level and increases output. d.raises the price level and decreases output. [ e. has no effect on either the long-run or the short-run aggregate supply curves. 31. An oligopaly consists of a a few independent firms. (] b. a few interdependent firms. | . many interdependent firms. [ d. many independent firms. m e. only one firm. 32. Other things constant, which of the following would shift the supply curve of a good to the left? () a. anincrease in the price of that good ) b. a decrease in the price of an alternative good [ . animprovement in technology used in producing the good 1 d.an increase in the cost of an important resource used to produce the good [J e. anincrease in the number of producers of the good