1)Monopolies Are Price Takers and Can Only Take One Price
Economics - 2006 RLC
1)Monopolies are price takers and can only “take” one price.
A) True
B) False
2)Corporations have limited liability advantages over other legal forms of business.
A) True
B) False
3)The Law of Demand states that as an individual’s income rises, the individual will buy more.
A) True
B) False
4)Taxes are more likely placed on price inelastic goods.
A) True
B) False
5)When economic profits are zero, entrepreneurs receive no money income.
A) True
B) False
6)Pollution is an example of an externality benefit.
A) True
B) False
7)Inflation is two consecutive quarters of rising GDP.
A) True
B) False
8)The Federal Reserve sells government securities to fight inflation.
A) True
B) False
9)The United States has its largest trade deficit with Japan.
A) True
B) False
10)China has surpassed the United States as the largest economy in the world.
A) True
B) False
11)A government set price ceiling below market prices will create a shortage.
A) True
B) False
12)A monopolistic competitive industry is controlled by one firm that sets prices.
A) True
B) False
13)Sole proprietorships produce most of the goods and services in the United States.
A) True
B) False
14)In terms of number, most firms are corporations.
A) True
B) False
15)A higher price indicates to buyers that the product is relatively scarcer.
A) True
B) False
16)Buying a bond gives the buyer a share in the ownership of the company.
A) True
B) False
17)Higher real interest rates in lending markets tend to increase borrowing, and decrease saving.
A) True
B) False
18)Decreasing the reserve requirement increases the money supply.
A) True
B) False
19)A normal profit is considered a payment in excess of the costs of production.
A) True
B) False
20)In competitive market structures, economic profits are always greater than zero in the long run.
A) True
B) False
21)Competitive markets tend to be efficient.
A) True
B) False
22)A progressive tax is one where taxes increase at a constant tax rate as income increases.
A) True
B) False
23)Most air pollution is in lower developed countries which do not have pollution control laws.
A) True
B) False
24)Government deficits are funded through the sale of corporate bonds.
A) True
B) False
25)Increased regulation of air pollution has decreased the cost of producing in the United States.
A) True
B) False
26)When supply decreases, the equilibrium price in the market will
A) increase.
B) fluctuate.
C) decrease.
D) stay the same.
27)When demand decreases, the equilibrium price in the market will
A) stay the same.
B) decrease.
C) increase.
D) fluctuate.
28)When demand decreases less than supply decreases, equilibrium price will
A) increase.
B) fluctuate.
C) decrease.
D) stay the same.
29)When supply decreases more than demand increases, equilibrium quantity will
A) decrease.
B) fluctuate.
C) increase.
D) stay the same.
30)Suppose two countries trade. Country A produces wheat and trades with Country B for corn. What is the likely outcome?
A) Both countries gain
B) Country A gains, country B loses
C) Country A loses, country B gains
D) Both countries lose
31)The federal funds rate is
A) the rate banks charge their best customers.
B) the rate for home equity lines of credit.
C) the rate the federal reserve charges commercial banks.
D) the rate banks charge each other on overnight loans.
32)To fight inflation, policymakers would
A) increase government spending and increase the money supply.
B) increase government spending and decrease the money supply.
C) decrease government spending and increase the money supply.
D) decrease government spending and decrease the money supply.
33)Which of the following approaches to pollution control have had the most dramatic results in decreasing pollution?
A) Lawsuits and individual bargaining
B) Individual bargaining
C) Regulation and individual bargaining
D) Markets for pollution rights and regulation
34)Which of the following market structures have economic profits competed away by new firms entering the industry in the long run?
A) Monopoly and pure competition
B) Monopolistic competition and oligopoly
C) Monopolistic competition and pure competition
D) Monopoly and oligopoly
35)Consumers expect a surplus for a product to develop in a market. What is the likely effect on consumers’ demand for this product today?
A) Decrease
B) Stay the same
C) Fluctuate
D) Increase
36)What is the correct fiscal policy when a recession is caused by a decrease in aggregate demand?
A) Decrease government spending and increase taxes
B) Increase government spending and increase taxes
C) Increase government spending and decrease taxes
D) Decrease government spending and decrease taxes
37)Suppose demand and supply increase by equal amounts. What happened to the equilibrium price?
A) Price increases
B) Price stays the same
C) Price fluctuates
D) Price decreases
38)Firms maximize profits when producing where?
A) Price=average cost
B) Marginal revenue=marginal cost
C) Price=average variable cost
D) Marginal profit=marginal loss
39)Suppose the price of crude oil rises, what effect will this likely have on supply of gasoline?
A) Supply will fluctuate
B) Increase supply
C) Supply stays the same
D) Decrease supply
40)Which market structure is most likely economically efficient?
A) Oligopoly
B) Pure competition
C) Monopoly
D) Monopolistic competition
41)When price rises on a price inelastic good, what happens?
A) Quantity demanded decreases, but by a smaller percentage
B) Demand decreases
C) Quantity demanded increases
D) Quantity demanded decreases, but by a larger percentage
42)Suppose the real income of workers rises, what is the likely response of demand for inferior goods?
A) Demand fluctuates
B) Demand increases
C) Demand decreases
D) Demand stays the same
43)The United States’ four largest trading partners are:
A) Canada, China, Japan, and Mexico.
B) Canada, China, Saudi Arabia, and Korea.
C) Canada, Italy, Germany, and France.
D) Canada, China, Germany, and Japan.
44)A vertical supply curve has an elasticity of supply of
A) one.
B) negative one.
C) zero.
D) infinity.
45)Suppose the governments of the world raise business taxes, what is the likely effect on supply?
A) Supply stays the same
B) Supply increases
C) Supply decreases
D) Supply fluctuates
46)In the long run, if the dollar appreciates and the yen depreciates,
A) U.S. imports from Japan will decrease.
B) U.S. exports to Japan will increase.
C) U.S. imports from Japan will increase.
D) Japanese imports from the U.S. will increase.
47)Suppose the real income of workers rises, what is the likely response to the demand for normal goods?
A) Demand decreases
B) Demand stays the same
C) Demand increases
D) Demand fluctuates
48)If the dollar appreciates versus the yen, the following is true:
A) the yen buys fewer dollars.
B) nothing happens to the value of the yen, just the value of the dollar.
C) the dollar buys fewer yen.
D) the yen buys more dollars.
49)Which of the following describes a tariff?
A) Bureaucratic regulations which make it more difficult for imports to cross borders.
B) Taxes placed on imports.
C) Limits on the number of imports crossing the borders.
D) Subsidies on exports.
50)Tom and Pam can both paint and do accounting. Pam is better at both. She is ten times the painter and five times the accountant. According to comparative advantage, what should each specialize in?
A) Tom paints, Pam does accounting
B) Pam paints and does accounting, Tom does nothing
C) Pam paints, Tom does accounting
D) Pam paints, Tom paints
51)Increased government regulations will likely have what effect on the costs of production and supply in product markets?
A) Costs increase, supply decreases
B) Costs decrease, supply increases
C) Costs increase, supply increases
D) Costs decrease, supply decreases
52)The Law of Supply says the following about price and quantity:
A) when price increases, quantity supplied increases.
B) when price increases, quantity supplied decreases.
C) when price increases, quantity supplied stays the same.
D) when price decreases, quantity supplied increases.
53)In the long run, economic profits are possible in which market structures?
A) Monopoly and oligopoly
B) Monopoly and pure competition
C) Oligopoly and monopolistic competition
D) Monopoly and monopolistic competition
54)The optimal level of pollution for society is when
A) the marginal benefits of pollution equal the marginal costs of pollution.
B) the profits for firms is maximized.
C) there is zero pollution.
D) the pollution is externalized.
55)Trade barriers will
A) provide more goods and services for consumers.
B) increase domestic efficiency.
C) decrease world prices for products.
D) increase domestic prices.
56)Short run economic profits in purely competitive markets will result in
A) exit of firms.
B) entry of new firms and the competing away of economic profit.
C) barriers to entry which will prevent entry, and profits will stay the same.
D) entry of new firms and the elimination of existing firms.
57)Short run losses in competitive markets will result in
A) barriers to entry.
B) entry of firms to gain market share.
C) exit of firms.
D) entry of new firms and the elimination of existing firms.
58)Which of the following describes a quota?
A) A subsidy for exports
B) A minimum amount (of an import) allowed to cross a border
C) A maximum amount (of an import) allowed to cross a border
D) A tax on imports
59)Suppose Singapore can out produce Malaysia in shoes and in computers. Suppose Singapore and Malaysia have the following opportunity costs: Singapore 1 million shoes = 2 million computers, Malaysia 1 million shoes = 1 million computers. What would each country produce?
A) Singapore computers, Malaysia computers, no shoes
B) Singapore shoes, Malaysia shoes, no computers
C) Singapore shoes, Malaysia computers
D) Singapore computers, Malaysia shoes
60)Suppose the Federal Reserve implements discretionary monetary policy to fight inflation. Which of the following would they do?
A) Sell government securities, raise the reserve requirement, lower interest rates
B) Sell government securities, raise the reserve requirement, raise interest rates
C) Buy government securities, raise the reserve requirement, lower interest rates
D) Buy government securities, lower the reserve requirement, lower interest rates
61)Expansionary fiscal policy will likely cause a
A) budget surplus.
B) balanced budget.
C) budget deficit.
D) trade surplus.
62)Expansionary fiscal policy, which leads to higher interest rates and less private investment, is called the
A) deficit effect.
B) interest rate effect.
C) export effect.
D) crowding out effect.
63)Contractionary fiscal policy is used to fight
A) recession.
B) inflation.
C) fiscals.
D) deflation.
64)An expansionary monetary policy will likely have what effect on the nominal interest rate?
A) Increase the interest rate
B) No effect on the interest rate
C) The interest rate will decrease temporarily, then return to its original level.
D) Decrease the interest rate
65)An easy money or expansionary monetary policy is used to fight
A) recession.
B) inflation.
C) deficits.
D) disinflation.
66)An expansionary fiscal policy will
A) decrease taxes and increase government spending.
B) decrease taxes and decrease government spending.
C) increase taxes and increase government spending.
D) increase taxes and decrease government spending.
67)The implicit cost of an entrepreneur is a payment equal to a(n)
A) normal profit.
B) monopoly profit.
C) economic profit.
D) windfall profit.
68)An economic profit is equal to?
A) Revenue minus average cost
B) Price minus average cost
C) Total revenue minus total cost
D) Total revenue minus average cost
69)Getting rid of environmental laws will
A) increase supply in product markets.
B) decrease pollution.
C) decrease supply in product markets.
D) have no effect on pollution or supply.
70)A minimum wage will most likely result in
A) more employment and a shortage of jobs.
B) less employment and a shortage of workers.
C) more employment and a surplus of workers.
D) less employment and a surplus of workers.
71)In competitive labor markets, workers
A) are exploited.
B) are paid more than they are worth.
C) are frequently not paid.
D) are paid equal to their contribution to a firm’s revenue.
72)The following describes a monopsony:
A) a competitive labor market.
B) a market which pays fair wages.
C) a single firm controlling the product market.
D) a labor market controlled by a single firm.
73)The following describes a proportional tax:
A) tax rate stays the same no matter what income level.
B) tax rate rises as income rises.
C) tax amount goes down as income rises.
D) tax amount stays the same no matter what income level.
74)Entitlement spending is that portion of budget referred to as
A) interest payments.
B) discretionary spending.
C) military spending.
D) mandatory spending.
75)The Federal Government collects most of its tax revenue from
A) corporate income tax.
B) excise tax.
C) payroll tax.
D) personal income tax.
76)The Federal Government’s biggest expenditure is on
A) pensions and income security.
B) health.
C) interest on the debt.
D) national defense.
77)Local Government’s biggest expenditure is on
A) housing.
B) highways.
C) sewage and garbage.
D) education.
78)Local Government collects most of its tax revenue from
A) state income taxes.
B) sales taxes.
C) estate taxes.
D) property taxes.
79)State Government collects most of its tax revenue from
A) state income tax.
B) estate tax.
C) property tax.
D) sales tax.
80)Which of the following best describes pure competition?
A) Easy entry, differentiated product
B) Lots of firms, barriers to entry
C) Standardized product, barriers to entry
D) Easy entry, standardized product
81)Which of the following best describes monopoly?
A) Barrier to entry, lots of firms
B) Easy entry, one firm
C) Price chooser, one firm
D) Price chooser, lots of firms
82)Monopolies tend to
A) be less inefficient.
B) charge cheaper prices than competitive industries.
C) restrict output, and charge higher prices than competitive industries.
D) produce more than competitive industries.
83)In pure monopoly, firms maximize profits
A) at the highest price possible.
B) at the lowest price possible.
C) where marginal revenue equals marginal cost.
D) at the same price as in pure competition.
84)The merger of two firms with unrelated products is called a
A) conglomerate merger.
B) vertical merger.
C) horizontal merger.
D) multinational.
85)If the price of DVDs increase and consumers buy fewer DVD players,
A) DVDs and DVD players are substitutes.
B) DVDs and DVD players are inferior goods.
C) DVDs and DVD players are normal goods.
D) DVDs and DVD players are complements.
86)If the price of coffee increases and this results in the demand for tea increasing,
A) coffee and tea are inelastic.
B) coffee and tea are complements.
C) coffee and tea are substitute goods.
D) coffee and tea are addictive goods.
87)Which market structure is a price taker?
A) Monopolistic competition
B) Oligopoly
C) Pure monopoly
D) Pure competition
88)Which of the following describes a sole proprietorship?
A) A business owned and operated by one person
B) A franchise
C) Two or more partners operating a business
D) A legal entity separate from the shareholders
89)A business failure resulting in the owners also losing their homes is likely
A) a partnership.
B) a limited liability company.
C) a franchise.
D) a corporation.
90)In pure competition, firms are
A) price choosers.
B) price takers.
C) price indifferent.
D) price lovers.
91)When examining the money stock, M1 refers to
A) currency and checkable deposits.
B) savings, currency, and time deposits.
C) savings deposits and checkable deposits.
D) savings and currency.
92)Gross Investment refers to
A) government spending on public goods.
B) business spending on capital.
C) individuals purchasing stocks and bonds.
D) retirement accounts.
93)Which legal form of business may issue stock?
A) Corporations
B) Unincorporated firms
C) Sole proprietorships
D) Partnerships
94)Firms which produce the same final product and merge are called
A) conglomerate mergers.
B) extra mergers.
C) horizontal mergers.
D) vertical mergers.
95)Which of the following best describes the sources of investment funds available to corporations?
A) Reinvested profits and personal savings
B) Stocks, bonds, reinvested profits, and bank loans
C) Bank loans and stocks
D) Personal savings
96)Stocks are often considered
A) lagging indicators.
B) leading indicators.
C) coincident indicators.
D) random variables.
97)Which of the following describes oligopolies best?
A) Small firms, price competitors
B) Large firms, nonprice competitors
C) Large firms, price competitors
D) Small firms, mutually interdependent
98)Which if the following best describes monopolistic competition?
A) Barrier to entry, one firm
B) Easy entry, differentiated product
C) Barrier to entry, differentiated product
D) Easy entry, one firm