1. (TCO 4) GDP tends to overstate economic well-being because ittakes into account
improvements in product quality over time.
expenditures undertaken to correct pollution.
illegal activities of individuals and businesses.
nonmark
2. (TCO1) Money is not considered to be an economic resourcebecause
as such, it is not productive.
money is not a free gift of nature.
money is made by man.
idle money balances do not earn interest income.
3. (TCO1) A point outside the production possibilities curve is
attainable, but there is not full employment.
attainable, but there is not optimal allocation.
unattainable because the economy is inefficient.
unattainable because of limited resources.
4. (TCO1) A basic characteristic of a command system is that
wages paid to labor are higher.
government owns most economic resources.
free markets are never permitted in a command economy.
government planners play a limited role in deciding what goods willbe produced.
5. (TCO 2) The rationale for the law of demand can best beunderstood on the basis of
diminishing marginal utility.
capitalist markets.
the invisible hand.
the rationing function of price.
6. (TCO 2) What combination of changes in supply and demand wouldmost likely increase the equilibrium quantity?
When supply increases and demand increases
When supply decreases and demand decreases
When supply decreases and demand increases
When supply increases and demand decreases
7. (TCO 2) When the price of movie tickets in a certain town wasreduced, the movie theaters’ revenues did not change. This suggeststhat the demand for movie tickets in that town has aprice-elasticity coefficient of
1.0.
greater than 1.
0.5.
zero.
8. (TCO 2) The elasticity of supply for a product will be 2 if:
A 1 percent decrease in the price causes a 0.2 percent decrease inquantity supplied
A 2 percent decrease in price causes a 1 percent decrease inquantity supplied
A 1 percent decrease in price causes a 2 percent decrease inquantity supplied
A 2 percent decrease in price causes a 2 percent decrease inquantity supplied
9. (TCO 2) Which is true for a purely competitive firm in short-runequilibrium?
The firm is making only normal profits.
The firm’s marginal cost is greater than its marginal revenue.
The firm’s marginal revenue is equal to its marginal cost.
A decrease in output would lead to a rise in profits.
10. (TCO 2) Consumers who clip and redeem discount coupons
exhibit the same price elasticity of demand for a given productthan consumers who do not clip and redeem coupons.
exhibit more price elasticity of demand for a given product thanconsumers who do not clip and redeem coupons.
exhibit less price elasticity of demand for a given product thanconsumers who do not clip and redeem coupons.
cause total revenue to decrease for firms that issue coupons fortheir products.
11. (TCO 3) In the kinked demand model of oligopoly, if one firmincreases its price, the most likely reaction of the other firmswill be to
decrease their prices.
increase their prices.
not change their prices.
reduce their quantity.
12. (TCO 3) The main difference between the short run and the longrun is that
firms earn zero profits in the long run.
the long run always refers to a time period of one year orlonger.
in the short run, some inputs are fixed.
in the long run, all inputs are fixed.
13.
(TCO 4) Refer to the diagram. The phases of the business cycle frompoints A to D are, respectively:
Graph Description I BELIEVE THIS IS THE CORRECT DIAGRAMATHOUGH IT WAS NOT LISTED SO PLEASE DOUBLE CHECKâŚ.
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