Monopoly
Which of the following is a characteristic of a natural monopoly?
A. Average cost exceeds marginal cost over large regions of output.
B. One firm can supply output at a lower cost than two firms.
C. The firm has exclusive ownership of a natural resource.
D. A & B
E. B & C
F. A & C
G. All of the above
D. A & B
Refer to Figure 3. To correct the externality depicted in this market, the government could
A. impose a tax of $10
B. impose a tax of $20
C. impose a tax of $30
D. provide a subsidy of $10
E. provide a subsidy of $20
F. provide a subsidy of $30
F. provide a subsidy of $30
A U.S. citizen buys a cell phone manufactured in China by a company that is owned and operated by U.S citizens. In which of the following components of U.S. GDP is this transaction accounted for?
A. imports but not consumption
B. consumption and imports
C. consumption but not imports
D. neither consumption nor imports
B. consumption and imports
The economy of Mainland uses gold as its money. If the government discovers a large reserve of gold on their land
A. the supply of money increases and the value of money falls.
B. the demand for money decreases and the value of money falls.
C. the supply of money decreases and the value of money rises.
D. the demand for money increases and the value of money rises.
A. the supply of money increases and the value of money falls.
Adam is looking for a job in marketing. He has had some offers and his prospects are promising, but he has not yet accepted a job. Amanda lost her job working for Mercury Bicycles because many customers decided they prefer bicycles manufactured by Ultimate Bicycles instead. Who is frictionally unemployed?
A. neither Amanda nor Adam
B. Amanda but not Adam
C. Adam but not Amanda
D. both Adam and Amanda
D. both Adam and Amanda
Suppose a monopolist is able to reduce his fixed costs. To maximize his profits after this reduction in costs, he will
A. decrease the price and increase the quantity produced.
B. increase the price and decrease the quantity produced.
C. not change price or quantity.
D. increase the price and increase the quantity produced.
E. decrease the price and decrease the quantity produced.
F. possible raise or lower price and quantity, depending on the elasticity of demand
C. not change price or quantity.
Refer to Figure 4. Taking into account private value and external benefits, the maximum total surplus that can be achieved in this market is
A. $4,320.
B. $5,880.
C. $6,480.
D. $9,480.
E. $10,800.
F. $13,230.
G. $15,360
F. $13,230.
The federal government pays a contractor living in Virginia $350 for his services in web design. This contractor then spends some of this income to buy a $100 blu-ray player made in Japan by a Japanese firm and $200 for fruit and vegetables from a local farmer. As a result of these transactions, U.S. GDP increases by
A. $100.
B. $200.
C. $300.
D. $350.
E. $450.
F. $550.
G. $650.
F. $550.
To decrease the money supply, the Fed could
A. sell government bonds.
B. increase the discount rate.
C. increase the reserve requirement.
D. A & B
E. A & C
F. B & C
G. A & B & C
G. A & B & C
An increase in the minimum wage
A. increases structural unemployment.
B. reduces frictional unemployment,
C. reduces structural unemployment.
D. increases frictional unemployment.
A. increases structural unemployment.
When several competing firms decide to collude,
A. they reduce consumer surplus.
B. they will decrease output to earn monopoly-like profits.
C. they will be at least as inefficient as a monopolist.
D. A & B
E. A & C
F. B & C
G. All of the above
G. All of the above
The difference between a corrective tax and a tradable pollution permit is that
A. a corrective tax creates a more efficient outcome than a permit.
B. a corrective tax sets the price of pollution and a permit sets the quantity of pollution.
C. a corrective tax sets the quantity of pollution and a permit sets the price of pollution.
D. a permit creates a more efficient outcome than a corrective tax.
B. a corrective tax sets the price of pollution and a permit sets the quantity of pollution.
AA Appliances sells refrigerators. In 2015 it added $100,000 to its inventory. $10,000 of this addition was from used refrigerators, and the remaining $90,000 was from their purchases of newly manufactured refrigerators. How much of AA’s inventory is included in 2015 GDP?
A. $90,000
B. $10,000
C. $0
D. $100,000
A. $90,000
Suppose over some period of time the money supply tripled, velocity was unchanged, and real GDP doubled. According to the quantity equation the price level is now
A. 6 times its old value.
B. 1.5 times its old value.
C. 0.75 times its old value
D. 3 times its old value.
B. 1.5 times its old value.
Which of the following is an example of an efficiency wage?
A. a higher wage paid to a more experienced worker
B. a below-equilibrium wage paid by a small business exempt from minimum-wage laws
C. a wage tied to participation in a government-sponsored job training program
D. an above-equilibrium wage paid by a firm to reduce turnover costs
D. an above-equilibrium wage paid by a firm to reduce turnover costs
Refer to Table 4. If a monopolist faces a constant marginal cost of $12, how much output should the firm produce in order to maximize profit?
A. 2 units
B. 3 units
C. 4 units
D. 5 units
E. 6 units
B. 3 units
Refer to Figure 4. To achieve efficiency in this market, the government could impose a
A. tax of $15
B. tax of $24
C. tax of $27
D. tax of $42
E. subsidy of $15
F. subsidy of $24
G. subsidy of $27
H. subsidy of $42
G. subsidy of $27
Refer to Table 7. In 2017, this country’s
A. real GDP was $1250, and the GDP deflator was 128.0.
B. real GDP was $1250, and the GDP deflator was 138.9.
C. real GDP was $900, and the GDP deflator was 128.0.
D. real GDP was $900, and the GDP deflator was 138.9
D. real GDP was $900, and the GDP deflator was 138.9
If actual inflation is lower than previously expected,
A. creditors receive a lower real interest rate than they had anticipated.
B. creditors pay a lower real interest rate than they had anticipated.
C. debtors receive a higher real interest rate than they had anticipated.
D. debtors pay a higher real interest rate than they had anticipated.
D. debtors pay a higher real interest rate than they had anticipated.
All else equal, which of the following would increase the unemployment rate and decrease the labor force participation rate?
(i) Many older workers leave their jobs to retire early.
(ii) The minimum wage is reduced in a market with highly inelastic labor demand.
(iii) People who had been searching for a job give up.
A. (i) only
B. (ii) only
C. (iii) only
D. (i) and (ii)
E. (i) and (iii)
F. (ii) and (iii)
G. (i) and (ii) and (iii)
A. (i) only
Refer to Figure 2. In order to maximize profits, the monopolist should charge a price of
A. $30.
B. $35.
C. $50.
D. $63.
E. $70.
E. $70.
Refer to Figure 3. If this competitive market operates freely, the resulting deadweight loss is
A. $0
B. $750
C. $1500
D. $2250
E. $3000
F. $4500
B. $750
Refer to Table 7. This country’s real output between 2016 and 2017 grew by
A. 12.5%.
B. 15.4%.
C. 42.0%.
D. 13.6%.
B. 15.4%.
The money supply in Muckland is $100 billion. Nominal GDP is $800 billion and real GDP is $200 billion. What are the price level and velocity in Muckland?
A. The price level and velocity are both 8.
B. The price level is 2 and velocity is 8.
C. The price level and velocity are both 4.
D. The price level is 4 and velocity is 8.
D. The price level is 4 and velocity is 8.
An Elders Quorum consists of the following members (with the employment status of each):
Alex - Full time student, but works part time.
Bob - Has been out of work for six months, but has some promising interviews lined up.
Charles - Independently wealthy, spends his time in volunteer work.
David - Has started a business, but isn't able to pay himself yet.
Ethan - Works in fast food despite being a college graduate.
What would the unemployment rate and labor force participation rate of this quorum?
A. Unemployment: 20%; LFP 80%.
B. Unemployment: 40%; LFP 60%.
C. Unemployment: 60%; LFP 40%.
D. Unemployment: 50%; LFP 80%.
E. Unemployment: 33%; LFP 60%.
F. Unemployment: 50%; LFP 40%.
G. Unemployment: 25%; LFP 80%.
H. Unemployment: 66%; LFP 60%.
I. Unemployment: 75%; LFP 40%
G. Unemployment: 25%; LFP 80%.