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A market with few entry barriers and with many firms that sell differentiated products is known as:
Select correct option:
Purely competitive
A monopoly
Monopolistically competitive (see page # 54)
Oligopolistic
The cross elasticity of demand of complements goods is:
Select correct option:
Less than 0. (see page # 21)
Equal to 0.
Greater than 0.
Between 0 and 1.
The production possibilities curve:
Select correct option:
Shows all combinations of goods that society most desires
Indicates that any combination of goods lying outside the curve is attainable
Separates all combinations of two goods that can be produced from those that cannot
Shows only those combinations of two goods that reflect "full production"
Reference:
The production possibilities curve is a frontier, indicating the maximum amount of one good achievable for a given amount of the other good. Only one of these combinations represents the combination society most desires and therefore represents "full production."
According to classical economists, the:
Select correct option:
Aggregate demand curve is downward sloping and the aggregate supply curve is vertical
Aggregate demand curve is downward sloping and the aggregate supply curve is upward sloping
Aggregate demand curve is vertical and the aggregate supply curve is upward sloping
Aggregate demand curve is vertical and the aggregate supply curve is horizontal
Reference:
-Revised handouts page # 108
From year 2002 to year 2003, personal income rose by $500 billion. If the Marginal Propensity to Consume = 0.9, then personal consumption expenditures rose by:
$45.0 billion.
$500 billion.
$450 billion.
$50 billion.
Reference and Explanation:
Personal consumption expenditure = 0.9 x 500 = 450 (page 127
handouts)
The ____________________ is a graph of the ____________________ of a good and the ____________________.
Supply curve, price, quantity supplied
Demand curve, price, quantity supplied
Supply curve, price, quantity demanded
Supply curve, quantity supplied, income of consumers
Reference and explanation:
Supply curve, price, quantity supplied
(page 13 handouts)
An economist will define the exchange rate between two currencies as the:
Select correct option:
Amount of one currency that must be paid in order to obtain one unit of another currency.
Difference between total exports and total imports within a country.
Price at which the sales and purchases of foreign goods takes place.
Ratio of import prices to export prices for a particular country.
Explanation:
An economist will define the exchange rate between two currencies as the amount of one currency that must be paid in order to obtain one unit of another currency. It is effectively the price of one currency in terms of another.
Inflation:
Select correct option:
Reduces both the purchasing power of the dollar and one's real income.
Reduces the purchasing power of the dollar and increases one's real income.
Reduces the purchasing power of the dollar but may have no impact on one's real income.
Increases the purchasing power of the dollar and reduces one's real income.
Reference:
A higher price level must reduce the purchasing power of the dollar. However, nominal incomes need not all increase at the same rate. Inflation tends to hurt those on fixed incomes, for example, while benefiting debtors.
Monopolistic competition and oligopoly share which characteristic?
Select correct option:
Free entry and exit from the industry
Strategic behavior
Standardized products
Advertising
Reference:
Advertising activities are to be expected whenever there is product differentiation or strategic interaction between firms.
The effect of a change in income on the quantity of the good consumed is called the:
Select correct option:
Income effect
Budget effect
Substitution effect
Real income effect
Reference:
The effect of a change in income on the quantity of the good consumed is called income effect.
Deflation is:
Select correct option:
An increase in the overall level of economic activity.
An increase in the overall price level.
A decrease in the overall level of economic activity.
A decrease in the overall price level.
Explanation:
Inflation is a situation in which there is a continuous rise in the general price level. Deflation is the opposite of inflation and occurs when the general level of prices falls.
