ECON125

ECON125-HK2. ECONOMICS FOR MANAGERS (ECON125-HK2) > TAKE ASSESSMENT: EXAM 1

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1
Which of the following economic systems abolishes all private property?
communism
socialism
fascism
all of the above
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2
The profit motive is one characteristic of a command economy.
True
False
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3
In a market system, the government enforces laws ensuring that private enterprises and
conditions of competition will prevail.
True
False
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4
The most common type of business in the United States is the corporation.
True
False
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5
Laissez-faire is a policy of no government intervention in the economic activities of individuals
and businesses.
True
False
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6
In a partnership, each partner’s liability is limited to his or her contribution to the partnership.
True

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False
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7
There are no government-regulated markets in the U.S. economy.
True
False
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8
Which of the following is not among the United States’ economic goals?
full employment
stable prices
healthy economic growth
equal distribution of income
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9
Under the U.S. market system, land and capital goods are owned mainly by
the federal government
individuals and firms
local governments
state governments
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10
The biggest disadvantage of a sole proprietorship is the lack of distinction between the
business and the owner.
True
False
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In the United States, marketing cooperatives are most commonly found in the agriculture
industry.
True
False
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12
Self-interest is a major tenet of economic liberalism.

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True
False
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13
Which of the following is considered a command economy?
communism
socialism
fascism
all of the above
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14
Economics is considered a physical science.
True
False
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15
The difference between a capital good and a consumer good depends on
the purpose for which it is used
how it was produced
what it is
how quickly it is used up
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16
Positive economics deals with “what is” as opposed to “what ought to be.”
True
False
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17
Production is the creation or addition of utility.
True
False
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18
Consumption is the ultimate end of economic activity.

True
False
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19
The relationship between the price of a book and the number of volumes purchased would
be an example of microeconomics.
True
False
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20
An example of a macroeconomic model is
the price of chicken influences the quantity of chicken bought
the size of the total national output depends on the size of total spending
the output of a product is influenced by the cost of production for the product
all of the above
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21
The largest share of the total income of the United States is currently being distributed in the
form of
interest
rent
wages
profits
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22
Which of the following areas of study is included in the field of macroeconomics?
electricians’ wage rates
monopolistic pricing
price of automobiles
general price level
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23
The total value of the goods and services produced over a period of time represents an
economy’s
planned savings

total income
total wealth
capital
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24
Stocks and bonds are counted as part of total wealth.
True
False
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25
The stock of labor talents and skills is known as
a public good
the functional distribution
human capital
enterprise
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26
One cause for the uneven standard of living throughout the world is the uneven distribution
of resources.
True
False
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27
In exercising the principle of comparative advantage, a nation with no absolute advantage
should produce a commodity in which it faces a lower opportunity cost than its trading
partners face.
True
False
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28
Government regulations which affect entrepreneurial activities within a nation also affect
total output and the standard of living.
True
False
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29
A need to make choices exists because of
scarcity of resources
the abundance of goods
unlimited human needs and wants
both (a) and (c)
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30
The principle of comparative advantage applies to
individuals only
business firms only
nations only
individuals, businesses, and nations
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31
Economics can be defined as the study of choices.
True
False
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32
Suppose that Country A has an absolute advantage over country B in the production of both
wheat and cloth. The opportunity cost of 1 unit of wheat is 2 units of cloth in Country A and 3
units of cloth in Country B. If each country specializes in producing the good in which it is
relatively more efficient and then trades for the other good, it follows that
all the resulting gains in consumption will go to Country A
all the resulting gains in consumption will go to Country B
each country will experience half the resulting gains in consumption
the allocation of the resulting consumption gains will be determined by bargaining
between the two countries.
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33
Exercising the principle of comparative advantage between nations primarily involves
specialization
transportation costs
currency exchange rates
domestic income tax rates

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34
An example of technological development is to increase output through
raising pay
working longer hours
hiring more workers
using better machines
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35
An economy’s production possibilities curve could shift outward as a result of a(n)
increased level of technology
reduction in the quantity of capital goods
decrease in the production of goods
decrease in the amount of available resources
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36
A nation needs an abundance of all productive resources in order to attain a high standard
of living.
True
False
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37
To solve their basic long-term economic problems, developing countries primarily need
food
clothing
technical assistance
shelter
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38
A surplus quantity will occur when
quantity demanded is greater than quantity supplied
price is above equilibrium
demand is elastic
price is below equilibrium
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39
A change in demand would be illustrated by
a drop in price, which causes people to buy more
an increase in price, which causes people to buy less
a change in people’s preferences that causes them to buy either more or less than
before
all of the above
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40
If 12 units of a good are sold when the price is $1 per unit, and 8 units are sold at a price of
$1.50 per unit, then demand is
elastic
inelastic
of indeterminate elasticity
unit elastic
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41
The more substitutes for a good, the more elastic its demand tends to be.
True
False
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42
A demand curve generally
is a straight horizontal line
is a straight vertical line
slopes downward to the right
slopes downward to the left
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43
The quantity supplied and price tend to vary
inversely
independently
in an unrelated fashion
directly
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44
Price elasticity of demand tends to be greater for substitute items than for complementary
goods.
True
False
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45
To maintain a price below the equilibrium price,
demand must increase
supply must increase
the government must set a ceiling price
supply must decrease
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46
An increase in demand will cause the demand curve to
move to the right
move to the left
become more vertical
become more horizontal
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47
Price ceilings usually create surpluses since supply is increased.
True
False
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48
Price floors can create shortages if price floors are above market prices.
True
False
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49
When the supply of a product increases but the demand for the product remains unchanged,
the equilibrium price of the product will
fall, and equilibrium quantity will decrease

be unaffected
first rise and then return to the original price level
fall, and equilibrium quantity will increase
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50
On a price/quantity graph, a straight horizontal demand curve
has zero price elasticity
is perfectly elastic
is perfectly inelastic
is perfectly unit elastic

ECON125-HK2. ECONOMICS FOR MANAGERS (ECON125-HK2) > TAKE ASSESSMENT: EXAM 2

Question
1

A firm is making a profit under conditions of monopolistic competition if, at the equilibrium
output,
AR is above MR
MR is above AR
AR is above AVC
AR is above ATC
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2
Firms in monopolistic competition sell a similar but differentiated product.
True
False
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3
A major characteristic of a monopoly is the ability of the monopolist to influence price.
True
False
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4
The Federal Trade Commission
prevents mergers that substantially lessen competition

rules on the antitrust activities of labor unions
issues patents
polices deceptive advertising
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5
If a monopolist lowers its price from $45 to $42 in order to increase its sales volume, marginal
revenue
equals $45
equals $42
is less than $42
is between $45 and $42
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6
The first act to declare monopolies illegal in the United States was the
Sherman Antitrust Act
Clayton Act
Federal Trade Commission Act
Robinson-Patman Act
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7
One company that retained its monopoly position for years through control of raw materials
was
Aluminum Company of America (ALCOA)
Proctor & Gamble
Ford Motor Company
U.S. Steel
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8
Monopsony is a market condition in which there is only one seller.
True
False
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9
If firms in monopolistic competition are earning short-run profits,
barriers to entry will allow the profits to continue in the long run

total supply in the market will decrease in the long run as firms reduce output to keep
prices high
the entry of new firms will eliminate the profits in the long run
each existing firm will experience an increase in its average revenues in the long run
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10
Oligopoly is a market structure in which
there are only two sellers
there are relatively few producers
no firm can influence price
there are many producers
Question 11
All firms in monopolistic competition must sell at the same price.
True
False
Question
12
The major characteristic of a monopoly is
the degree of control over price it can exercise
its ability to produce numerous products
its price elasticity of demand
its source of revenue
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13
Under which type of market structure is the firm’s pricing decision the most difficult?
perfect competition
monopoly
monopolistic competition
oligopoly
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14
Under perfect competition, if a firm is suffering a loss,
MR exceeds ATC
AR equals AVC
AR equals ATC

AR is less than ATC
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15
The difference between the price firms would be willing to accept for their goods and the
price they actually receive is called
consumer surplus
consumer efficiency
allocative efficiency
producer surplus
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16
In the long run, under conditions of perfect competition, market forces come into play to
enhance profits
increase demand
eliminate profits
separate MR and AR
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17
Under conditions of perfect competition, an individual producer
always maximizes output
operates where MR equals MC
never suffers a loss
operates where MR is greater than MC
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18
If all firms adhere to the conditions of perfect competition, short-run losses are avoided.
True
False
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19
If a firm in a perfectly competitive industry is producing at a point where TR equals TC and
the market demand increases, then the firm will be making
economic profits; it will expand output
economic profits; output will not change
normal profits; output will expand

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normal profits; output will not change
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20
In perfect competition, if the market price is at the same level as the minimum point of the
firm’s average total cost curve, the best the firm can hope for is to break even.
True
False
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21
In a perfectly competitive industry, if TR exceeds TC, then in the long run
firms will exit the industry
new firms will enter the industry
there will be no change in the number of firms
the market supply will shift to the left
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22
A prime example of perfect competition is the U.S. auto industry.
True
False
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23
Elaine’s firm is in a perfectly competitive industry. Why doesn’t Elaine try to sell more of her
product by lowering its price below the market price?
her demand curve is not elastic
doing so would be considered unethical price chiseling
her competitors would not allow it
she can sell all she wants at the market price
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24
Which of the following is correct when the perfectly competitive firm is producing its long-run
equilibrium output level?
MR equals MC
AR equals ATC
P equals MC
all of the above

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25
Under conditions of perfect competition, short-run equilibrium does not necessarily exist
where
profit is maximized or loss minimized
MR = AR
MR = MC
MR = ATC
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26
According to the simple circular flow concept, whenever planned investment is less than
planned saving
inventories accumulate
output increases
prices rise
employment increases
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27
In the circular flow, investment refers to spending on
government bonds
certificates of deposit
capital goods
consumer goods
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28
Inventory accumulation occurs whenever
output is less than spending
output exceeds spending
investment exceeds saving
a deficit budget occurs
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29
A decrease in investment can cause a decrease in the price level without affecting total
output.
True
False

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30
In the circular flow, nonprofit institutions are
counted as businesses
excluded
treated separately
counted as households
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31
During a period of unemployment, a deficit budget will most likely have which of the
following effects on business activity?
increase total output
cause prices to rise
have a neutral effect
cause prices and total output to fall
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32
An increase in planned savings always results in an increase in planned investment.
True
False
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33
If the federal government spends less than it receives from taxes,
it has a surplus budget with injections exceeding leakages
it has a deficit budget with injections exceeding leakages
it has a deficit budget with leakages exceeding injections
it has a surplus budget with leakages exceeding injections
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34
In the simple circular flow model, if planned I exceeds planned S, then
the economy is not at equilibrium
the size of the circular flow is increasing
if the economy is at full employment, then prices will rise
all of the above
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35
If inventories are accumulating, income must be greater than spending.
True
False
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36
Whenever exports exceed imports (and other planned injections equal other planned
leakages), the economy
remains stable
expands
contracts
deflates
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37
Which of the following statements concerning the circular flow model is (are) correct?
an increase in planned savings always generates an increase in planned
investment spending
planned investment spending is an injection into the circular flow
increased investment always results in decreased savings
all of the above
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38
It is true that a stable economy occurs when
total injections into the circular flow are large enough to make up for government tax
leakages
total leakages from the circular flow are great enough to offset the effects of
government spending
total planned leakages from the circular flow are exactly equal to total planned
injections into the circular flow
actual saving is equal to planned investment
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39
In a mature industry, all firms operate with constant returns to scale.
True
False
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40
If the accounting profit equals $200,000 and implicit costs equal $40,000, the economic
profit equals
$240,000
$200,000
$160,000
$40,000
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41
If the firm produces one more unit of output and total cost rises from $1,000 to $1,050,
marginal cost is
$1,050
$1,000
$2,050
$50
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42
The major factor accounting for diseconomies of scale is management inefficiency.
True
False
Question
43
Average revenue (AR) is equal to
total revenue/output
total revenue minus total cost
price per unit
both (a) and (c)
Question
44
The average fixed cost remains constant even in the long run.
True
False
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45
A production function is

a technique for determining the most profitable rate of output
the relationship between a combination of inputs and a quantity of output
an important factor in determining the shape of the long-run supply curve
all of the above
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46
If the selling price of a product is $10, the average total cost is $8, and total sales are 5,000
units, the total profit will be
$5,000
$8,000
$10,000
$20,000
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47
The production function relates outputs to inputs.
True
False
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48
As units of input are added to the productive process, the marginal product
increases
decreases
remains the same
declines then rises
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49
The average product decreases any time the marginal product is decreased.
True
False
Question
50
If output changes in fixed proportion to a change in all of a firm’s productive resources, the
firm has
constant marginal returns

constant returns to scale
decreasing marginal returns
decreasing returns to scale

ECON125-HK2. ECONOMICS FOR MANAGERS (ECON125-HK2) >

TAKE ASSESSMENT: EXAM 3

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1
If planned investment decreases, the multiplier will decrease the equilibrium income.
True
False
Question
2
The change in the level of planned spending that results from a change in the price level is
indicated by the movement of the economy along a given
aggregate expenditure curve
aggregate demand curve
aggregate supply curve
both (a) and (b)
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3
In the Keynesian model, whenever unplanned inventory increases occur in the economy,
production is likely to
speed up slowly
slow down
remain unchanged
speed up immediately
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4
If planned construction investment increases by $30 billion and the MPC is two-thirds, total
output will increase by
$30 billion
$20 billion
$45 billion
$90 billion
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5
Keynes recommended the use of government deficit spending to overcome widespread

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unemployment.
True
False
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6
According to the Keynesian analysis, as income increases, the marginal propensity to
consume will rise.
True
False
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7
Say’s Law states that
supply is greater than demand
supply is less than demand
demand generates supply
supply generates demand
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8
The time lags lead monetarists to contend that monetary policy is counterproductive.
True
False
Question
9
The classical doctrine assumed that the normal equilibrium position for the economy was at
full employment.
True
False
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10
According to the Keynesian analysis, equilibrium occurs at the point where total aggregate
expenditure equals total output.
True
False
Question 11

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In the Keynesian model, the most important influence on planned consumption is
the interest rate
expectations
disposable income
the price level
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12
The multiplier is the reciprocal of the marginal propensity to consume.
True
False
Question
13
Aggregate expenditure in the U.S. economy includes spending for U.S. output by
households and businesses, but not governments
households, businesses, and the federal government, but not state and local
governments
households, businesses, and all governments except foreign ones
households, businesses, and governments, both domestic and foreign
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14
The bulk of the M1 money supply is made up of
silver dollars and gold bars
checkable deposits
travelers checks
money market funds
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15
If a new cash deposit creates excess reserves of $5,000 and the required reserve ratio is 10
percent, the banking system can increase the money supply by a maximum of
$50,000
$500
$5,000
$4,500
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16

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An increase in the velocity of money can have an effect similar to that of an increase in the
money supply.
True
False
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17
If a bank has $60,000 in legal reserves and is subject to a 10 percent reserve requirement, it
could have outstanding checkable deposits to the extent of
$60 million
$600,000
$6 million
$60,000
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18
If a worker’s money wage increases at a faster pace than the CPI, his or her real wage will
rise.
True
False
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19
The Treasury issues all paper currency today.
True
False
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20
Funds that earn a fixed rate of interest and must be held for a stipulated period of time are
known as
checkable deposits
time deposits
savings deposits
money market funds
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21
Included in the official U.S. money supply are

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U.S. government bonds
corporate stocks
checkable deposits
all of the above
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22
The U.S. money supply measure that consists of currency plus travelers checks and
checkable deposits is referred to as
M1
M2
M3
M1 + M2
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23
The quantity theory of money assumes that
the national economy tends to operate at less than full
the velocity of money is unstable
the national economy tends to operate at full employment
the velocity of money varies with changes in interest rates
Question
24
If the CPI in City A is 150 and the CPI in City B is 135,
the dollar has greater purchasing power in City B
prices are higher in City A than they are in City B
City B must be using a different base year
none of the above
Question
25
The value or purchasing power of the dollar can be obtained by dividing $1 by the CPI.
True
False
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26
Stored value and smart cards are forms of electronic banking.
True

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27
Each Federal Reserve Bank has its own board of directors.
True
False
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28
The First Bank of the United States was chartered by
the federal government
the state of New York
the city of New York
Suffolk County
Question
29
All members of the Board of Governors are members of the Fed’s Open Market Committee.
True
False
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30
The Federal Reserve System was established in
1980
1913
1864
1791
Question
31
Members of the Board of Governors are
appointed by Congress
selected by the U.S. President
elected by member banks
selected by the U.S. Treasury Department
Question
32
By buying government securities, the Federal Open Market Committee adds to member

banks’ reserves.
True
False
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33
The Board of Governors of the Federal Reserve System is
under the jurisdiction of the U.S. President
responsible to the Secretary of the U.S. Treasury
independent within the U.S. government
responsible to the Council of Economic Advisors
Question
34
The members of the Board of Governors of the Federal Reserve System are appointed by
the U. S. President.
True
False
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35
Various studies have recommended changes in the Federal Reserve structure and policy
that include
having Congress set the discount rate
placing monetary policy in the control of Congress
dissolving the Board of Governors
making each appointment to the Board of Governors a lifetime appointment
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36
If the Federal Open Market Committee desired to tighten credit, it would
buy securities in the open market
sell securities in the open market
lower the discount rate
raise the discount rate
Question
37
Competition in U.S. banking has been increased by

the expansion of interstate banking
the expansion of foreign bank branches into the United States
the movemen...