ECO 561 Economics Final Exam Answers
1). If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue:
2). A firm that is motivated by self interest should:
3). If price is above the equilibrium level, competition among sellers to reduce the resulting:
4). Camille’s Creations and Julia’s Jewels both sell beads in a competitive market. If at the market price of $5, both are running out of beads to sell (they can’t keep up with the quantity demanded at that price), then we would expect both Camille’s and Julia’s to:
5). Since their introduction, prices of DVD players have fallen and the quantity purchased has increased. This statement:
6). In a market economy the distribution of output will be determined primarily by:
7). In a competitive market economy firms will select the least-cost production technique because:
8). Suppose that the price of peanuts falls from $3 to $2 per bushel and that, as a result, the total revenue received by peanut farmers changes from $16 to $14 billion. Thus:
9). If technology dictates that labor and capital must be used in fixed proportions, an increase in the price of capital will cause a firm to use:
10). In which of the following industries are economies of scale exhausted at relatively low levels of output?
11). If a firm decides to produce no output in the short run, its costs will be:
12). Which of the following represents a long-run adjustment?
13). Paying an above-equilibrium wage rate might reduce unit labor costs by:
14). A firm can hire six workers at a wage rate of $8 per hour but must pay $9 per hour to all of its employees to attract a seventh worker. The marginal wage cost of the seventh worker is:
15). Price exceeds marginal revenue for the pure monopolist because the:
16). Oligopoly is difficult to analyze primarily because:
17). A competitive firm will maximize profits at that output at which:
18). Nonprice competition refers to:
19). competition between aluminum and steel in the manufacture of automobile parts.
Advertising can impede economic efficiency when it:
20). Which of the following is not a possible source of natural monopoly?
21). Suppose that an industry is characterized by a few firms and price leadership. We would expect that:
22). When economists view technological change as internal to the economy, they mean that it:
23). Firm X develops a new product and gets a head start in its production. Other firms try to produce a similar product but discover they have higher average total costs than the existing firm. This situation illustrates:
24). In the long run a pure monopolist will maximize profits by producing that output at which marginal cost is equal to:
25). If personal taxes were decreased and resource productivity increased simultaneously, the equilibrium:
26). Suppose that nominal wages fall and productivity rises in a particular economy. Other things equal, the aggregate:
27). Suppose the price level is fixed, the MPC is .5, and the GDP gap is a negative $100 billion. To achieve full-employment output (exactly), government should:
28). Expansionary fiscal policy is so named because it:
29). Stabilizing a nation’s price level and the purchasing power of its money can be achieved:
30). Suppose that US prices rise 4 percent over the next year while prices in Mexico rise 6%. According to the purchasing power parity theory of exchange rates, what should happen to the exchange rate between the dollar and the peso?