Question 1

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A monopolist must produce a good for which there are no close substitutes.

Select one:

a.

true

b.

false

Question 2

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Monopsony is a market condition in which there is only one seller.

Select one:

a.

true

b.

false

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If faced with the same cost conditions as a perfectly competitive firm, a monopoly will

Select one:

a.

charge a lower price than the perfectly competitive firm.

b.

charge a higher price than the perfectly competitive firm.

c.

charge the same price as the perfectly competitive firm.

d.

refuse to operate in the short run unless an economic profit can be made.

Question 4

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The major characteristic of a monopoly is

Select one:

a.

the degree of control over price it can exercise.

b.

its ability to produce numerous products.

c.

its price elasticity of demand.

d.

its source of revenue.

Question 5

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A firm that is a price maker can

Select one:

a.

limit output and raise prices.

b.

ignore the law of demand.

c.

ignore the elasticity of the demand for the product.

d.

both limit output and raise prices and ignore the elasticity of the demand for the product.

Question 6

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A bilateral monopoly has a single buyer on one side of the market and a single seller on the other side.

Select one:

a.

true

b.

false

Question 7

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An oligopsony exists when

Select one:

a.

a few sellers dominate a market.

b.

a few buyers dominate a market.

c.

a single buyer dominates a market.

d.

a single seller dominates a market.

Question 8

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Refer to the table below for a prisoner's dilemma. Frank and George are arrested and charged with armed robbery. They are isolated in separate interrogation rooms and therefore are not allowed to engage in collusion to collectively deny committing the crime. The table shows the four possible outcomes for denial and confession for Frank and George. The payoff to Frank is in the upper corner of each box, and the payoff to George is in the lower corner of each box. The most likely outcome is

Select one:

a.

for both to confess and spend 5 years in prison.

b.

for both to deny and spend 2 years in prison.

c.

for George to deny and spend 10 years in prison and Frank to confess and spend 1 year in prison.

d.

for George to confess and spend 1 year in prison and Frank to deny and spend 10 years in prison.

Question 9

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When one firm lowers its price, its gain in sales at the expense of other firms is known as

Select one:

a.

administered sales.

b.

the substitution effect.

c.

the collusive effect.

d.

product differentiation.

Question 10

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The rule of reason states that monopolies that behave well are still illegal.

Select one:

a.

true

b.

false

Question 11

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In 1911, the Supreme Court established the rule of reason. This rule held that

Select one:

a.

the Sherman Antitrust Act made only unreasonable restraints of trade illegal.

b.

the Court was entering a new deductive stage of reasoning.

c.

the Sherman Antitrust Act made the mere size of a firm an offense.

d.

All of these.

Question 12

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An administered price is a price

Select one:

a.

set by overall demand and supply.

b.

established by a seller.

c.

set by the government.

d.

determined through collective bargaining.

Question 13

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To determine the number of workers hired, the firm

Select one:

a.

looks to where MRP

b.

the wage rate.

c.

looks to the point of maximum difference between MRP and the wage rate.

d.

looks to the point of maximum MRP.

e.

looks to the point of MRP

f.

0.

Question 14

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Underemployment occurs when workers

Select one:

a.

are not employed.

b.

are working at jobs that do not require their full skill or productivity.

c.

work part-time although they want to work full-time.

d.

are working at jobs that do not require their full skill or productivity AND work part-time although they want to work full-time.

Question 15

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The total labor force includes all persons in the noninstitutional population who are either working or seeking work.

Select one:

a.

true

b.

false

Question 16

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If sales in an industry decline,

Select one:

a.

demand for additional labor also declines.

b.

demand for additional labor increases.

c.

demand for additional labor stays the same.

d.

the unemployment rate definitely falls.

Question 17

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The U.S. unemployment rate excludes unemployed workers who are not actively seeking work.

Select one:

a.

true

b.

false

Question 18

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If you are "between jobs," you are considered to be

Select one:

a.

frictionally unemployed.

b.

seasonally unemployed.

c.

cyclically unemployed.

d.

structurally unemployed.

Question 19

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Household wealth refers to

Select one:

a.

human capital.

b.

the flow assets.

c.

net worth.

d.

the flow of income.

Question 20

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The Lorenz curve shows the

Select one:

a.

percent of families on the vertical axis and percent of income on the horizontal axis.

b.

percent of families on the horizontal axis and the cumulative percent of income on the vertical axis.

c.

cumulative percent of income on the vertical axis and the cumulative percent of families on the horizontal axis.

d.

cumulative percent of families on the vertical axis and the cumulative percent of income on the horizontal axis.

Question 21

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The New Economy is one of

Select one:

a.

durable goods.

b.

services.

c.

information.

d.

manufacturing.

Question 22

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The Lorenz curve of perfect equality is a

Select one:

a.

vertical line.

b.

upward sloping line from the origin.

c.

U-shaped line.

d.

horizontal line.

Question 23

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Many who leave welfare cash assistance programs to work

Select one:

a.

earn less than the minimum wage.

b.

earn a high enough wage to raise a family out of poverty.

c.

continue to receive in-kind transfers, such as food stamps.

d.

earn $20 per hour.

Question 24

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Compared to the Gini coefficient for income distribution, the value of the Gini coeffi-cient for the distribution of wealth would be

Select one:

a.

higher.

b.

lower.

c.

zero.

d.

nearly identical.

Question 25

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The size of the circular flow

Select one:

a.

measures the level of household purchases from business.

b.

measures the level of income and output.

c.

increases if there are more planned leakages.

d.

measures the level of prices.

Question 26

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To reduce personal income to disposable personal income,

Select one:

a.

indirect business taxes are deducted.

b.

corporate income taxes are deducted.

c.

personal taxes are deducted.

d.

All of these.

Question 27

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The difference between GDP and final sales equals

Select one:

a.

depreciation.

b.

exports.

c.

imports.

d.

net inventory change.

Question 28

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The current-dollar GDP can be converted into a constant-dollar GDP by

Select one:

a.

adding a price index.

b.

subtracting a price index.

c.

multiplying by a price index.

d.

dividing by a price index.

Question 29

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The total resource cost of goods and services produced by the U.S. economy is known as

Select one:

a.

real GDP.

b.

personal income.

c.

national wealth.

d.

national income.

Question 30

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The total earnings arising from the production of the GDP is known as

Select one:

a.

real GDP.

b.

national income.

c.

personal income.

d.

discretionary income.

Question 31

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The term "recession" refers to a

Select one:

a.

period of decline in real GDP over two consecutive quarters.

b.

fall in the general level of real wages over two consecutive quarters.

c.

fall in the CPI over two consecutive quarters.

d.

fall in the rate of increase of real per capita GDP.

Question 32

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Measuring the intensity of the business cycle requires

Select one:

a.

adding seasonal variations to cyclical fluctuations.

b.

adding seasonal variations and random fluctuations to cyclical changes.

c.

eliminating seasonal variations and identifiable random forces from the data.

d.

multiplying the trend by the cyclical fluctuations.

Question 33

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Business cycles

Select one:

a.

no loner exist in the new economy.

b.

can be eliminated with the appropriate use of fiscal and monetary policies.

c.

are usually of equal intensity and length.

d.

are a natural consequence of the workings of a free market economy.

Question 34

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The impact of hurricanes on the level of business activity in North Carolina is an ex-ample of

Select one:

a.

seasonal variation.

b.

internal force.

c.

cyclical fluctuation.

d.

random fluctuation.

Question 35

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During the contraction phase of the business cycle,

Select one:

a.

prices fall relative to costs, reducing profit margins.

b.

costs fall relative to prices, reducing profit margins.

c.

prices fall relative to costs, increasing profit margins.

d.

costs fall relative to prices, increasing profit margins.

Question 36

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The aggregate demand curve is the sum of individual demand curves in the economy.

Select one:

a.

true

b.

false

Question 37

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The higher the propensity to save, the larger the size of the multiplier.

Select one:

a.

true

b.

false

Question 38

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In the Keynesian model, if planned investment exceeds planned saving at full-employment output,

Select one:

a.

unemployment is likely to develop.

b.

government spending may be needed to balance the economy.

c.

inflation is likely to occur.

d.

None of these.

Question 39

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The classical economic doctrine held that the normal equilibrium position of the economy was one of

Select one:

a.

rising interest rates.

b.

some unemployment.

c.

rising prices.

d.

full employment.

Question 40

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One major difference between Keynesian analysis and classical theory is that the classical theory assumes

Select one:

a.

a market economy.

b.

an agricultural economy.

c.

full employment as a norm.

d.

a constant money supply.