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1. Allocative efficiency means that
a. Consumers get the most goods at the lowest prices possible.
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c. A small number of sellers coordinate products and prices.
d. Government lowers taxes.
2. Which of the following is an example of variable costs for a business?
a. hourly wages.
b. cost of business licenses.
c. cost of purchasing a business vehicle.
d. rent
3. The U.S. dollar has
a. A fixed exchange rate.
b. A fixed purchasing power parity.
c. A fixed, overvalued exchange rate.
d. a floating exchange rate.
4. Price discrimination is a situation where a producer
a. charges different prices in different markets.
b. charges the same price in different markets.
c. colludes with other companies on setting the same price in all markets.
d. All of the above.
5. Which of the following describes the inflation-unemployment trade off?
a. Monetary policies that expand the money supply and lower interest rates will lower inflation and unemployment.
b. Monetary policies that expand the money supply and raise interest rates will lower inflation and unemployment.
c. Fiscal policies that increase government spending and lower unemployment will cause inflation.
d. Fiscal policies that increase government spending and lower unemployment will lower inflation.
6. Which of the following describes the short-run time production period?
a. Firms can vary only one of the inputs in the production process.
b. Firms can vary all inputs into the production process.
c. Firms cannot vary any of the inputs into the production process.
d. Firms can choose to go out of business.
7. Which statement about the loanable funds market is NOT correct?
a. The market suppliers are the savers and the buyers are the borrowers.
b. The price of loanable funds is the real interest rate.
c. Loanable funds are provided by savers to borrowers to spend on investment goods and services.
d. The loanable funds theory describes changes in short-term interest rates.
8. The law of demand states that
a. with an increase in the price, the quantity demanded increases.
b. with an increase in the price, the quantity demanded decreases.
c. with an increase in price, demand falls.
d. with an increase in price, demand rises.
9. Which of these conditions does NOT characterize perfect competition?
a. a large number of buyers and sellers act independently.
b. firms produce identical products and are “price takers.”
c. information is “imperfect,” allowing individuals or firms to pay more for products than their costs of production.
d. individuals are motivated by self-interest, not societal welfare.
10. Which of the following is an example of a non-rival and non-excludable good?
a. A movie ticket
b. A public highway
c. A free cookie at the bakery
d. A private petting zoo
11. An expansionary fiscal policy is when
a. the government lowers spending and raises taxes.
b. the Federal Reserve buys bonds on the open market.
c. the government increases spending and lowers taxes.
d. The Federal Reserve sells bonds on the open market.
12. Monoplistic competition describes
a. A market structure with a large number of relatively small competitors.
b. Each firm has a large amount of control over supply and prices.
c. A small number of sellers coordinate products and prices.
d. A single firm dominates supply and determines prices.
13. Select the correct statement about fiat money.
a. Fiat money is tied to a fixed quantity of gold and therefore protects against inflation.
b. Fiat money eliminates the need for monetary policy and the Federal Reserve?s role in managing the money supply.
c. All fiat money is a type of soft currency that trades only within the issuing country.
d. The U.S. dollar is fiat money.
14. Which of the following is NOT an example of a demand shift?
a. A salary increase at her job leads the employee to increase spending on vacation travel.
b. A shoe store sale leads to higher demand for its shoes.
c. A safety recall of the Honda Prius leads to lower demand for the Honda Civic.
d. An increase in coffee bean prices leads to a fall in demand for lattes.
15. A price ceiling on items like apartment rents or meat is likely to lead to
a. Supply exceeding demand.
b. An increase in production.
c. Demand exceeding supply.
d. A decrease in demand.
16. Opportunity cost is:
a. the money a business loses in a bad investment.
b. the value of the best foregone opportunity.
c. the price an individual pays for making a mistake.
d. opportunity knocks but once; if you miss your chance it will never come again.
17. Liquidity preference is
a. is the demand for goods and services that can be easily sold for cash.
b. is the demand for holding cash money rather than bonds or other assets.
c. increases when interest rates rise.
d. causes interest rates to rise when liquidity preference falls.
18. The amount of pollution and the cost of pollution abatement are optimal when
a. The marginal social benefit of production is less than the marginal social cost of production.
b. The marginal social benefit of production equals the marginal social cost of production.
c. The marginal social benefit of production exceeds the marginal social cost of production.
d. The marginal social benefit of production equals the marginal cost of production.
19. Which of the following is NOT important in spurring faster economic growth?
a. Compulsory education.
b. Ownership of private property.
c. Population growth.
d. Lower taxes.
20. Margarine and butter can both be used as a spread on toast. This means that they are:
a. complements.
b. substitutes.
c. inferior goods.
d. none of the above.