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ECON - 561 - Final Exam Answered
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ECON - 561 - Final Exam ECON - 561 - Final Exam ECON - 561 - Final Exam Answered
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1) In a market economy the distribution of output will be determined primarily by:A. a social consensus as to what distribution of income is most equitable.
B. government regulations that provide a minimum income for all.
C. the quantities and prices of the resources that households supply.
D. consumer needs and preferences
2) In a competitive market economy firms will select the least-cost production technique
because:
A. "dollar voting" by consumers mandates such a choice.
B. this will prevent new firms from entering the industry.
C. to do so will maximize the firms' profits.
D. such choices will result in the full employment of available resources.
3) The advent of DVDs has virtually demolished the market for videocassettes. This is an
example of:
A. the difference between normal and economic profits.
B. capital accumulation.
C. derived demand.
D. creative destruction.
4) Which of the following statements is true about productive and allocative efficiency?
A. Productive efficiency and allocative efficiency can only occur together; neither can occur
without the other.
B. Productive efficiency can only occur if there is also allocative efficiency.
C. Society can achieve either productive efficiency or allocative efficiency, but not both
simultaneously.
D. Realizing allocative efficiency implies that productive efficiency has been realized.
5) If price is above the equilibrium level, competition among sellers to reduce the resulting:
A. shortage will increase quantity demanded and decrease quantity supplied.
B. shortage will decrease quantity demanded and increase quantity supplied.
C. surplus will decrease quantity demanded and increase quantity supplied.
D. surplus will increase quantity demanded and decrease quantity supplied.
6) Since their introduction, prices of DVD players have fallen and the quantity purchased
has increased. This statement:
A. constitutes an exception to the law of supply in that they suggest a downward sloping supply
curve.
B. suggests that the demand for DVD players has increased.
C. constitutes an exception to the law of demand in that they suggest an upward sloping demand
, curve.
D. suggests that the supply of DVD players has increased
7) If a profit-seeking competitive firm is producing its profit-maximizing output and its
total fixed costs fall by 25 percent, the firm should:
A. increase its output.
B. not change its output.
C. reduce its output.
D. use more labor and less capital to produce a larger output.
8) If a firm in a purely competitive industry is confronted with an equilibrium price of $5,
its marginal revenue:
A. will be greater than $5.
B. will also be $5.
C. will be less than $5.
D. may be either greater or less than $5.
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:
A. less labor as a consequence of the output effect.
B. more labor as a consequence of the output effect.
C. less labor as a consequence of the substitution effect.
D. more labor as a consequence of the substitution effect.
10) If a firm decides to produce no output in the short run, its costs will be:
A. zero.
B. its fixed plus its variable costs.
C. its fixed costs.
D. its marginal costs.
11) What do wages paid to blue-collar workers, interest paid on a bank loan, forgone
interest, and the purchase of component parts have in common?
A. None are either implicit or explicit costs.
B. All are opportunity costs.
C. All are implicit costs.
D. All are explicit costs.
12) In the short run the Sure-Screen T-Shirt Company is producing 500 units of output. Its
average variable costs are $2.00 and its average fixed costs are $.50. The firm's total costs:
A. are $1,100.
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