ECON125-HK2.

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

  Question 1

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Which of the following economic systems abolishes all private property?

communism

socialism

fascism

all of the above

  Question 2

2 points  

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The profit motive is one characteristic of a command economy.

True

False

  Question 3

2 points  

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In a market system, the government enforces laws ensuring that private enterprises and conditions of competition will prevail.

True

False

  Question 4

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The most common type of business in the United States is the corporation.

True

False

  Question 5

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Laissez-faire is a policy of no government intervention in the economic activities of individuals and businesses.

True

False

  Question 6

2 points  

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In a partnership, each partner’s liability is limited to his or her contribution to the partnership.

True

False

  Question 7

2 points  

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There are no government-regulated markets in the U.S. economy.

True

False

  Question 8

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Which of the following is not among the United States’ economic goals?

full employment

stable prices

healthy economic growth

equal distribution of income

  Question 9

2 points  

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Under the U.S. market system, land and capital goods are owned mainly by

the federal government

individuals and firms

local governments

state governments

  Question 10

2 points  

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The biggest disadvantage of a sole proprietorship is the lack of distinction between the business and the owner.

True

False

  Question 11

2 points  

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In the United States, marketing cooperatives are most commonly found in the agriculture industry.

True

False

  Question 12

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Self-interest is a major tenet of economic liberalism.

True

False

  Question 13

2 points  

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Which of the following is considered a command economy?

communism

socialism

fascism

all of the above

  Question 14

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Economics is considered a physical science.

True

False

  Question 15

2 points  

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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

  Question 16

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Positive economics deals with “what is” as opposed to “what ought to be.”

True

False

  Question 17

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Production is the creation or addition of utility.

True

False

  Question 18

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Consumption is the ultimate end of economic activity.

True

False

  Question 19

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The relationship between the price of a book and the number of volumes purchased would be an example of microeconomics.

True

False

  Question 20

2 points  

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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

  Question 21

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The largest share of the total income of the United States is currently being distributed in the form of

interest

rent

wages

profits

  Question 22

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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

  Question 23

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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

  Question 24

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Stocks and bonds are counted as part of total wealth.

True

False

  Question 25

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The stock of labor talents and skills is known as

a public good

the functional distribution

human capital

enterprise

  Question 26

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One cause for the uneven standard of living throughout the world is the uneven distribution of resources.

True

False

  Question 27

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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

  Question 28

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Government regulations which affect entrepreneurial activities within a nation also affect total output and the standard of living.

True

False

  Question 29

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A need to make choices exists because of

scarcity of resources

the abundance of goods

unlimited human needs and wants

both (a) and (c)

  Question 30

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The principle of comparative advantage applies to

individuals only

business firms only

nations only

individuals, businesses, and nations

  Question 31

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Economics can be defined as the study of choices.

True

False

  Question 32

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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.

  Question 33

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Exercising the principle of comparative advantage between nations primarily involves

specialization

transportation costs

currency exchange rates

domestic income tax rates

  Question 34

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An example of technological development is to increase output through

raising pay

working longer hours

hiring more workers

using better machines

  Question 35

2 points  

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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

  Question 36

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A nation needs an abundance of all productive resources in order to attain a high standard of living.

True

False

  Question 37

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To solve their basic long-term economic problems, developing countries primarily need

food

clothing

technical assistance

shelter

  Question 38

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A surplus quantity will occur when

quantity demanded is greater than quantity supplied

price is above equilibrium

demand is elastic

price is below equilibrium

  Question 39

2 points  

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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

  Question 40

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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

  Question 41

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The more substitutes for a good, the more elastic its demand tends to be.

True

False

  Question 42

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A demand curve generally

is a straight horizontal line

is a straight vertical line

slopes downward to the right

slopes downward to the left

  Question 43

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The quantity supplied and price tend to vary

inversely

independently

in an unrelated fashion

directly

  Question 44

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Price elasticity of demand tends to be greater for substitute items than for complementary goods.

True

False

  Question 45

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To maintain a price below the equilibrium price,

demand must increase

supply must increase

the government must set a ceiling price

supply must decrease

  Question 46

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An increase in demand will cause the demand curve to

move to the right

move to the left

become more vertical

become more horizontal

  Question 47

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Price ceilings usually create surpluses since supply is increased.

True

False

  Question 48

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Price floors can create shortages if price floors are above market prices.

True

False

  Question 49

2 points  

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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

  Question 50

2 points  

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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

2 points  

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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

  Question 2

2 points  

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Firms in monopolistic competition sell a similar but differentiated product.

True

False

  Question 3

2 points  

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A major characteristic of a monopoly is the ability of the monopolist to influence price.

True

False

  Question 4

2 points  

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The Federal Trade Commission

prevents mergers that substantially lessen competition

rules on the antitrust activities of labor unions

issues patents

polices deceptive advertising

  Question 5

2 points  

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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

  Question 6

2 points  

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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

  Question 7

2 points  

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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

  Question 8

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

True

False

  Question 9

2 points  

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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

  Question 10

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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

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All firms in monopolistic competition must sell at the same price.

True

False

  Question 12

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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

  Question 13

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Under which type of market structure is the firm’s pricing decision the most difficult?

perfect competition

monopoly

monopolistic competition

oligopoly

  Question 14

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Under perfect competition, if a firm is suffering a loss,

MR exceeds ATC

AR equals AVC

AR equals ATC

AR is less than ATC

  Question 15

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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

  Question 16

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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

  Question 17

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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

  Question 18

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If all firms adhere to the conditions of perfect competition, short-run losses are avoided.

True

False

  Question 19

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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

normal profits; output will not change

  Question 20

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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

  Question 21

2 points  

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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

  Question 22

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A prime example of perfect competition is the U.S. auto industry.

True

False

  Question 23

2 points  

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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

  Question 24

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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

  Question 25

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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

  Question 26

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According to the simple circular flow concept, whenever planned investment is less than planned saving

inventories accumulate

output increases

prices rise

employment increases

  Question 27

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In the circular flow, investment refers to spending on

government bonds

certificates of deposit

capital goods

consumer goods

  Question 28

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Inventory accumulation occurs whenever

output is less than spending

output exceeds spending

investment exceeds saving

a deficit budget occurs

  Question 29

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A decrease in investment can cause a decrease in the price level without affecting total output.

True

False

  Question 30

2 points  

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In the circular flow, nonprofit institutions are

counted as businesses

excluded

treated separately

counted as households

  Question 31

2 points  

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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

  Question 32

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An increase in planned savings always results in an increase in planned investment.

True

False

  Question 33

2 points  

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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

  Question 34

2 points  

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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

  Question 35

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If inventories are accumulating, income must be greater than spending.

True

False

  Question 36

2 points  

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Whenever exports exceed imports (and other planned injections equal other planned leakages), the economy

remains stable

expands

contracts

deflates

  Question 37

2 points  

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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

  Question 38

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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

  Question 39

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In a mature industry, all firms operate with constant returns to scale.

True

False

  Question 40

2 points  

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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

  Question 41

2 points  

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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

  Question 42

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The major factor accounting for diseconomies of scale is management inefficiency.

True

False

  Question 43

2 points  

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Average revenue (AR) is equal to

total revenue/output

total revenue minus total cost

price per unit

both (a) and (c)

  Question 44

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The average fixed cost remains constant even in the long run.

True

False

  Question 45

2 points  

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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

  Question 46

2 points  

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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

  Question 47

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The production function relates outputs to inputs.

True

False

  Question 48

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As units of input are added to the productive process, the marginal product

increases

decreases

remains the same

declines then rises

  Question 49

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The average product decreases any time the marginal product is decreased.

True

False

  Question 50

2 points  

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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

  Question 1

2 points  

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If planned investment decreases, the multiplier will decrease the equilibrium income.

True

False

  Question 2

2 points  

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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)

  Question 3

2 points  

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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

  Question 4

2 points  

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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

  Question 5

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Keynes recommended the use of government deficit spending to overcome widespread unemployment.

True

False

  Question 6

2 points  

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According to the Keynesian analysis, as income increases, the marginal propensity to consume will rise.

True

False

  Question 7

2 points  

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Say’s Law states that

supply is greater than demand

supply is less than demand

demand generates supply

supply generates demand

  Question 8

2 points  

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The time lags lead monetarists to contend that monetary policy is counterproductive.

True

False

  Question 9

2 points  

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The classical doctrine assumed that the normal equilibrium position for the economy was at full employment.

True

False

  Question 10

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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

  Question 12

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The multiplier is the reciprocal of the marginal propensity to consume.

True

False

  Question 13

2 points  

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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

  Question 14

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The bulk of the M1 money supply is made up of

silver dollars and gold bars

checkable deposits

travelers checks

money market funds

  Question 15

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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

  Question 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

  Question 17

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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

  Question 18

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If a worker’s money wage increases at a faster pace than the CPI, his or her real wage will rise.

True

False

  Question 19

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The Treasury issues all paper currency today.

True

False

  Question 20

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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

  Question 21

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Included in the official U.S. money supply are

U.S. government bonds

corporate stocks

checkable deposits

all of the above

  Question 22

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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

  Question 23

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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

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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

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The value or purchasing power of the dollar can be obtained by dividing $1 by the CPI.

True

False

  Question 26

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Stored value and smart cards are forms of electronic banking.

True

False

  Question 27

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Each Federal Reserve Bank has its own board of directors.

True

False

  Question 28

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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

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All members of the Board of Governors are members of the Fed’s Open Market Committee.

True

False

  Question 30

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The Federal Reserve System was established in

1980

1913

1864

1791

  Question 31

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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

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By buying government securities, the Federal Open Market Committee adds to member banks’ reserves.

True

False

  Question 33

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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

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The members of the Board of Governors of the Federal Reserve System are appointed by the U. S. President.

True

False

  Question 35

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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

  Question 36

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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

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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 movement of brokerage houses and large corporations into traditional banking activities

all of the above

  Question 38

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If a Federal Reserve Bank wanted to tighten the money supply, it would

lower the reserve requirement

buy securities in the open market

raise the discount rate

lower the discount rate

  Question 39

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The existence of undistributed corporate profits tends to cause

NNP to be smaller than GDP

national income to be larger than personal income

national income to be smaller than NNP

personal income to be larger than disposable personal income

  Question 40

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National income is equivalent to total earnings in the form of wages, rent, interest, and profits.

True

False

  Question 41

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The GDP counts durable goods only during their year of production.

True

False

  Question 42

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Imports constitute a minus figure in national income accounting.

True

False

  Question 43

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GDP overstates national income because it does not make any adjustment for national debt.

True

False

  Question 44

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The national income accounts for the United States are prepared by the

Bureau of Labor Statistics

U.S. Department of Commerce

Federal Reserve Board

President Council of Economic Advisors

  Question 45

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Excluded from the GDP are

military services

postal services

medical services

nonmonetary transactions

  Question 46

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The difference between GDP and final sales equals

depreciation

exports

imports

net inventory change

  Question 47

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In dollar value, the nominal GDP in the United States is in the vicinity of

between 3 and 4 billion

between 4 and 5 billion

between 4 and 5 trillion

between 10 and 12 trillion

  Question 48

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The GDP and NI figures are not equal because

business profits are included in GDP but not in NI

depreciation and indirect taxes are included in GDP but not in NI

all taxes must be deducted from GDP to arrive at NI

none of the above

  Question 49

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Current disposable income can be adjusted for price changes and population changes to yield real per capita disposable income.

True

False

  Question 50

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Personal consumption expenditures account for approximately two-thirds of the GDP in the United States.

True

False

ECON125-HK2. ECONOMICS FOR MANAGERS (ECON125-HK2) > TAKE ASSESSMENT: EXAM 4

  Question 1

2 points  

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U.S. workers have

neither substantial geographic nor occupational mobility

both substantial geographic and occupational mobility

substantial geographic mobility but not occupational mobility

substantial occupational mobility but not geographic mobility

  Question 2

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Many economists believe that increases in the minimum wage tend to create a labor surplus.

True

False

  Question 3

2 points  

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The rate of unemployment that can be expected from normal frictional unemployment in an otherwise fully employed labor force is known as the

natural rate of unemployment

full-employment unemployment rate

structural unemployment rate

Humphrey-Hawkins unemployment rate

  Question 4

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If workers are changing jobs voluntarily and it takes a while for them to find new jobs, they are an example of

structural unemployment

frictional unemployment

technological unemployment

none of the above