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1. Fish teeth can function as money as long as they are seen to be a medium of exchange.

	1.	True
	2.	False

1 points

Question 2

The value of money is determined by the Board of Governors of the Federal Reserve System.

	1.	True
	2.	False

1 points

Question 3

Velocity is the number of times per year the average dollar is spent in relation to GDP.

	1.	True
	2.	False

1 points

Question 4

The ease of converting an asset to its value in cash or spendable funds is referred to as liquidity.

	1.	True
	2.	False

1 points

Question 5

National banks are chartered by the federal government and must belong to the Federal Reserve System.

	1.	True
	2.	False

1 points

Question 6

The expression "dual banking system" refers to the fact that commercial banks can both accept deposits and make loans.

	1.	True
	2.	False

1 points

Question 7

In the U.S., each state is a separate Federal Reserve district.

	1.	True
	2.	False

1 points

Question 8

Commercial banks maintain reserve accounts with Federal Reserve banks to reap the benefits of the high interest rates paid on those accounts.

	1.	True
	2.	False

1 points

Question 9

When a check is deposited in a financial institution and cleared through the Fed, that financial institution gains reserves.

	1.	True
	2.	False

1 points

Question 10

The Depository Institutions Deregulation and Monetary Control Act of 1980 allows only commercial banks to offer interest-bearing checking accounts.

	1.	True
	2.	False

1 points

MV = PQ is the equation of exchange.

	1.	True
	2.	False

1 points

Question 2

In the equation of exchange, an increase in M always causes an increase in Q, and a decrease in M always causes a decrease in P.

	1.	True
	2.	False

1 points

Question 3

If a bank has $100 million in actual reserves and $80 million in required reserves, it may make new loans of up to $20 million.

	1.	True
	2.	False

1 points

Question 4

The money supply is increased when loans are made by financial depository institutions.

	1.	True
	2.	False

1 points

Question 5

With a reserve requirement of 25 percent, an injection of $100 million of new excess reserves into the economy could cause the money supply to expand by $400 million.

	1.	True
	2.	False

1 points

Question 6

The interest rate charged by a depository institution for all loans is set by the Federal Reserve.

	1.	True
	2.	False

1 points

Question 7

Lowering the reserve requirement is a tight money policy.

	1.	True
	2.	False

1 points

Question 8

The prime rate is the rate paid by financial depository institutions to borrow reserves from the Fed.

	1.	True
	2.	False

1 points

Question 9

Buying securities by the Fed would decrease excess reserves held by financial depository institutions.

	1.	True
	2.	False

1 points

Question 10

The Fed has generally not followed a philosophy of increasing excess reserves to finance government deficits.

	1.	True
	2.	False

1. After all long-run adjustments have been completed, a firm in a competitive industry will produce that level of output where average total cost is at a minimum.

	a.	True
	b.	False

1 points

Question 2

The long-run supply curve for a decreasing-cost industry is downsloping.

	a.	True
	b.	False

1 points

Question 3

Marginal cost is a measure of the alternative goods which society forgoes in using resources to produce an additional unit of some specific product.

	a.	True
	b.	False

1 points

Question 4

Because the equilibrium position of a purely competitive seller entails an equality of price and marginal costs, competition produces an efficient allocation of economic resources.

	a.	True
	b.	False

1 points

Question 5

Refer to the above diagram. If this firm is producing at the profit-maximizing level of output in the short run, then it is achieving productive and allocative efficiency.

	a.	True
	b.	False

1 points

Question 6

When entrepreneurs in competitive industries successfully innovate to lower production costs, it usually results in long-run economic profits for the firm.

	a.	True
	b.	False

1 points

Question 7

The process by which new firms and new products destroy existing dominant firms and their products is called creative destruction.

	a.	True
	b.	False

1 points

Question 8

Which of the following distinguishes the short run from the long run in pure competition?

	a.	Firms can enter and exit the market in the long run, but not in the short run.
	b.	Firms attempt to maximize profits in the long run, but not in the short run.
	c.	Firms use the MR=MC rule to maximize profits in the short run, but not in the long run.
	d.	The quantity of labor hired can vary in the long run, but not in the short run.

1 points

Question 9

Which of the following conditions is true for a purely competitive firm in long-run equilibrium?

	a.	P > MC = minimum ATC.
	b.	P > MC > minimum ATC.
	c.	P = MC = minimum ATC.
	d.	P < MC < minimum ATC.

1 points

Question 10

The process by which new firms and new products replace existing dominant firms and products is called:

	a.	monopolistic competition.
	b.	mergers and acquisitions.
	c.	process innovation.
	d.	creative destruction.

1. The number of single-person households in the U.S. has been decreasing in recent decades.

True

False

1 points

Question 2

The size of households in the U.S. has been decreasing in recent years.

True

False

1 points

Question 3

Households headed by college graduates are among those with the highest average incomes in the U. S

True

False

1 points

Question 4

A durable good has a useful lifetime of more than one year.

True

False

1 points

Question 5

A sole proprietor cannot raise funds by issuing stocks and bonds.

True

False

1 points

Question 6

The majority of total business receipts in the U.S. goes to corporations.

True

False

1 points

Question 7

Most U.S. businesses are organized as corporations.

True

False

1 points

Question 8

A holding company is a corporation formed for the purpose of owning or holding shares of stock in other corporations.

True

False

1 points

Question 9

A conglomerate merger occurs when one firm in a market acquires a competing firm in the same market.

True

False

1 points

Question 10

It is generally assumed in economics that the main goal of a business is to maximize profit or minimize loss.

True

False

1. If the marginal cost of carrying out the first unit of an activity is $100 and the marginal cost of carrying out the second unit is $200, then the total cost of carrying out two units of the activity is $300.

	1.	True
	2.	False

1 points

Question 2

An individual will maximize his or her satisfaction from an activity by carrying it out to the point where marginal benefit exceeds marginal cost by the greatest amount.

	1.	True
	2.	False

1 points

Question 3

Marginal benefit always equals marginal cost at the activity level where total benefit equals total cost.

	1.	True
	2.	False

1 points

Question 4

If the marginal benefit from an activity were greater than its marginal cost, net benefit would be increased by carrying out more of the activity.

	1.	True
	2.	False

1 points

Question 5

A business maximizing its profit operates where marginal revenue exceeds marginal cost by the greatest amount.

	1.	True
	2.	False

1 points

Question 6

If marginal revenue exceeds marginal cost at a particular level of output, then profit can be increased by increasing the level of output.

	1.	True
	2.	False

1 points

Question 7

A negative externality causes persons who are not involved in an action to experience lower costs or prices because the action was performed.

	1.	True
	2.	False

1 points

Question 8

A rational person would never willingly remain less than fully informed on an issue to be decided in an election.

	1.	True
	2.	False

1 points

Question 9

According to the Law of Diminishing Marginal Utility, the second unit of a good consumed always adds less to total satisfaction than was added by the first unit consumed.

	1.	True
	2.	False

1 points

Question 10

An accountant's estimate of earned profit is typically lower than an economist's estimate.

	1.	True
	2.	False

1. If two firms are in the same industry, then they must also be in the same producing sector of the economy.

	1.	True
	2.	False

1 points

Question 2

A production function is a list of outputs that a firm produces.

	1.	True
	2.	False

1 points

Question 3

If a firm's total cost is greater than zero when its output is zero, it is operating in the short run.

	1.	True
	2.	False

1 points

Question 4

Over the short run, total cost tends to increase rapidly at first, and then slowly as large levels of output are reached.

	1.	True
	2.	False

1 points

Question 5

When average total cost is less than marginal cost, average total cost is rising.

	1.	True
	2.	False

1 points

Question 6

Diminishing returns can be avoided by increasing the use of variable factors of production.

	1.	True
	2.	False

1 points

Question 7

Economies of scale can result from a firm's taking greater advantage of capital equipment as its output grows.

	1.	True
	2.	False

1 points

Question 8

Increased time required to pass communications through an organization as it grows in size is an example of a diseconomy of scale.

	1.	True
	2.	False

1 points

Question 9

In the short run all production costs are either fixed or variable in amount.

	1.	True
	2.	False

1 points

Question 10

Average fixed cost continually decreases as the level of output increases.

True

false

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