ECO 561 Final Exam

1) Suppose that in the clothing market, production costs have fallen, but the
equilibrium price and quantity purchased have both increased. Based on this
information you can conclude that

the supply of clothing has grown faster than the demand for clothing

demand for clothing has grown faster than the supply of clothing

the supply of and demand for clothing have grown by the same proportion

there is no way to determine what has happened to supply and demand with this
information

2) 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:

raise their price and reduce their quantity supplied

raise their price and increase their quantity supplied

lower their price and reduce their quantity supplied

lower their price and increase their quantity supplied

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3) In which of the following industries are economies of scale exhausted at
relatively low levels of output?

Aircraft production

Automobile manufacturing

Concrete mixing

Newspaper printing

4) The average cost curves (AVC and ATC) should be minimized

where MC = ATC and MC = AVC

where FC = ATC and FC = AVC

where TC starts to increase at a faster rate

where ATC = AVC

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5) If the wage rate increases,

a purely competitive producer will hire less labour, but an imperfectly competitive
producer will not

an imperfectly competitive producer will hire less labour, but a purely competitive
producer will not

a purely competitive and an imperfectly competitive producer will both hire less
labour

an imperfectly competitive producer may find it profitable to hire either more or

less labour

6) The real wage will rise if the nominal wage

falls more rapidly than the general price level

increases at the same rate as labor productivity

increases more rapidly than the general price level

falls at the same rate as the general price level

7) Construction workers frequently sponsor political lobbying in support of

greater public spending on highways and public buildings. One reason they do
this is to

restrict the supply of construction workers

increase the elasticity of demand for construction workers

increase the demand for construction workers

increase the price of substitute inputs

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8) Paying an above-equilibrium wage rate might reduce unit labour costs by

permitting the firm to attract lower-quality labour

increasing the cost to workers of being fired for shirking

increasing voluntary worker turnover

increasing the supply of labour

9) A good real-world example of monopolistic competition is

lawyers

gas stations

Time Warner Cable

groceries store

10) An industry comprising a small number of firms, each of which considers the
potential reactions of its rivals in making price-output decisions, is called

monopolistic competition

oligopoly

pure monopoly

pure competition

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11) Price is constant or given to the individual firm selling in a purely competitive
market because

the firm's demand curve is downward sloping

of product differentiation reinforced by extensive advertising

each seller supplies a negligible fraction of total supply

there are no good substitutes for its product

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12) The most important pricing strategy for a perfectly competitive firm is

minimizing cost

maximizing sales

product differentiation

advertising

13) Which of the following is a nonprice barrier of entry?

Huge sunk cost

Discounts

Product differentiation

Advertising

14) A third-degree price discrimination can be applied to which of the following

market structures?

A monopoly

An oligopoly

A monopolistic competition

A perfect competition

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15) Investing in R&D is more likely to occur in markets where

firms have monopoly power protected by regulatory barriers

markets are closely competitive markets with close to zero economic profits

markets are oligopoly markets with strong collusion agreements

markets are monopolistic competitive markets

16) All economies of scale are achieved at the minimum of

average total cost

total cost

average variable cost

average fixed cost

17) Inflation is undesirable because it

arbitrarily redistributes real income and wealth

invariably leads to hyperinflation

usually is accompanied by declining real GDP

reduces everyones standard of living in the same pro

portion

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18) An economys aggregate demand curve shifts leftward or rightward by more
than changes in initial spending because of the

net export effect

wealth effect

real-balances effect

multiplier effect

19) Suppose productivity rises in a particular economy, but wages stay the same.
Other things equal,

the demand curve will shift leftward

the supply curve will shift rightward

the supply curve will shift leftward

expenditures curve will shift rightward

20) If personal taxes were decreased and resource productivity increased

simultaneously, the equilibrium

output would rise

output would fall

price level would necessarily fall

price level would necessarily rise

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21) Expansionary fiscal policy is so named because it

involves an expansion of the nation's money supply

can only be attained by expanding government consumption

is aimed at achieving greater price stability

can motivate an expansion of real GDP

22) 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

increase government expenditures by $100 billion

increase government expenditures by $50 billion

reduce taxes by $50 billion

reduce taxes by $200 billion

23) GDP understates the value of output produced by an economy because it

includes transactions that do not take place in organized markets, such as home
cooked meals

includes environmental degradation caused by increased output production

excludes value added from the underground economy, such as tips taken under
the table

excludes the value of the wages and benefits of government employee

24) Other things equal, a decrease in the real interest rate will

shift the investment demand curve to the right

shift the investment demand curve to the left

move the economy upward along its existing investment demand curve

move the economy downward along its existing investment demand curve

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25) Other things equal, a decrease in corporate income taxes will

decrease the market price of real capital goods

have no effect on the location of the investment demand curve

shift the investment demand curve to the right

shift the investment demand curve to the left

26) Inflation in U.S. prices will cause

an increase in the demand for U.S. dollars and an appreciation in the exchange
rate

an increase in the supply of U.S. dollars and a depreciation in the exchange rate

a decrease in the demand for U.S. dollars and a depreciation in the exchange
rate

a decrease in the supply of U.S. dollars and an appreciation in the exchange rate

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27) The quantity theory of money states that

the money supply divided by the velocity of money equals the price level divided
by real output

the money supply times the velocity of money equals the price level times real
output

the money supply times the price level equals real output divided by the velocity
of money

the money supply times the price level equals real output times the velocity of
money

28) Suppose that U.S. prices rise 4% over the next year while prices in Mexicorise
6%. According to the purchasing power parity theory of exchange rates,what
should happen to the exchange rate between the dollar and the peso?

The dollar should depreciate.

The peso should appreciate.

The peso should depreciate.

The dollar will be revalued.

29) A rise in the domestic interest rate leads to capital

outflows and exchange rate appreciation

outflows and exchange rate depreciation

inflows and exchange rate depreciation

inflows and exchange rate appreciation

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30) A firm under monopolistic competition will earn

a positive economic profit as it has some monopoly power

zero economic profit as it sets P = MC

zero economic profit as its P = ATC

a positive economic profit as it sets MC = MR

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of ECO 561 Final Exam Assignment from UOP. Other topics in the class are as
follows:

ECO 561 Week 1 DQ 1

ECO 561 Week 1 DQ 2
ECO 561 Week 1 DQ 3
ECO 561 Week 1 DQ 4
ECO 561 Week 1 Quiz or Knowledge Check (Latest)
ECO 561 Week 1 Complete
ECO 561 Week 2 DQ 1
ECO 561 Week 2 DQ 2
ECO 561 Week 2 DQ 3
ECO 561 Week 2 Market Equilibration Process Paper
ECO 561 Week 2 Quiz or Knowledge Check (Latest)
ECO 561 Week 2 Complete
ECO 561 Week 3 DQ 1
ECO 561 Week 3 DQ 2
ECO 561 Week 3 Quiz or Knowledge Check (Latest)
ECO 561 Week 3 Complete
ECO 561 Week 4 Business Proposal
ECO 561 Week 4 Quiz or Knowledge Check (Latest)
ECO 561 Week 4 Complete
ECO 561 Week 5 DQ 1
ECO 561 Week 5 DQ 2
ECO 561 Week 5 DQ 3

ECO 561 Week 5 DQ 4

ECO 561 Week 5 Peer Review
ECO 561 Week 5 Quiz or Knowledge Check (Latest)
ECO 561 Week 5 Complete
ECO 561 Week 6 DQ 1
ECO 561 Week 6 DQ 2
ECO 561 Week 6 Final Proposal
ECO 561 Week 6 Quiz or Knowledge Check (Latest)
ECO 561 Week 6 Complete
ECO 561 Final Exam

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