ECO 561 Sample Final Exam

ECO 561 Sample Final Exam

1) In a market economy the distribution of output will be determined primarily by:

2) Suppose that the price of peanuts falls from $3 to $2 per bushel and that, as a result, the total revenue received by peanut farmers changes from $16 to $14 billion. Thus:

3) If the demand for farm products is price inelastic, a good harvest will cause farm revenues to:

4) Suppose that in the clothing market, production costs have fallen, but the equilibrium price and quantity purchased have both increased. Based on this information we can conclude that:

5) Which of the following statements is true about productive and allocative efficiency?

6) Suppose that in 2007 Ford sold 500,000 Mustangs at an average price of $18,800 per car; in 2008, 600,000 Mustangs were sold at an average price of $19,500 per car. These statements:

7) If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue:

8) If a profit-seeking competitive firm is producing its profit-maximizing output and its total fixed costs fall by 25 percent, the firm should:

9) A firm that is motivated by self interest should:

10) Which of the following represents a long-run adjustment?

11) In the short run the Sure-Screen T-Shirt Company is producing 500 units of output. Its average variable costs are $2.00 and its average fixed costs are $.50. The firm’s total costs:

12) If a firm decides to produce no output in the short run, its costs will be:

13) Paying an above-equilibrium wage rate might reduce unit labor costs by:

14) The real wage will rise if the nominal wage:

15) Construction workers frequently sponsor political lobbying in support of greater public spending on highways and public buildings. One reason they do this is to:
16) A competitive firm will maximize profits at that output at which:

17) An industry comprised of a small number of firms, each of which considers the potential reactions of its rivals in making price-output decisions is called:

18) In the long-run, a profit-maximizing monopolistically competitive firm sets it price:

19) Nonprice competition refers to:

20) One would expect that collusion among oligopolistic producers would be easiest to achieve in which of the following cases?

21) Which of the following is not a possible source of natural monopoly?

22) Monopolistic competition means:

23) The term oligopoly indicates:

24) Suppose that an industry is characterized by a few firms and price leadership. We would expect that:

25) Other things equal, a price discriminating monopolist will:

26) Those who contend that oligopolists are less likely than more competitive firms to engage in R&D say that:

27) The profit-maximizing output of a pure monopoly is economically inefficient because in equilibrium:

28) The industries or sectors of the economy in which business cycle fluctuations tend to affect output the most are:

29) Suppose that nominal wages fall and productivity rises in a particular economy. Other things equal, the aggregate:

30) If personal taxes were decreased and resource productivity increased simultaneously, the equilibrium:

31) Suppose the price level is fixed, the MPC is .5, and the GDP gap is a negative $100 billion. To achieve full-employment output (exactly), government should:

32) Given the annual rate of inflation, the “rule of 70” allows one to:

33) A price index is:

34) Stabilizing a nation’s price level and the purchasing power of its money can be achieved:

35) Other things equal, a decrease in the real interest rate will:

36) If the Fed were to purchase government securities in the open market, we would anticipate:

37) An increase in interest rates in the United States will lead to:

38) ___________ purchasing power parity states that the difference between changes over time in product-price levels in two countries will be offset by the change in the exchange rate over this time.

39) Suppose that US prices rise 4 percent over the next year while prices in Mexico rise 6%. According to the purchasing power parity theory of exchange rates, what should happen to the exchange rate between the dollar and the peso?