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ECO561-FinalExam fin571

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This 0 page Study Guide was uploaded by an elite notetaker on Wednesday November 11, 2015. The Study Guide belongs to fin571 at Kaplan University taught by in Fall 2015. Since its upload, it has received 25 views.


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Date Created: 11/11/15
ECO561 Final Exam Answers Economics MBA Program Remember to check out ACCNerdcom for the latest updates 1 Stabilizing a nation39s price level and the purchasing power of its money can be achieved A with neither scal nor monetary policy B only with scal policy C with both scal and monetary policy D only with monetary policy 2 Nonprice competition refers to A reductions in production costs that are not re ected in price reductions B price increases by a rm that is ignored by its rivals C advertising product promotion and changes in the real or perceived characteristics of a product D competition between products of different industries for example competition between aluminum and steel in the manufacture of automobile parts 3 Suppose the price level is xed the MPC is 5 and the GDP gap is a negative 100 billion To achieve fullemployment output exactly government should A reduce taxes by 200 billion B reduce taxes by 50 billion C increase government expenditures by 50 billion D increase government expenditures by 100 billion 4 If personal taxes were decreased and resource productivity increased simultaneously the equilibrium A price level would necessarily rise B price level would necessarily fall C output would fall D output would ri 5 Suppose that nominal wages fall and productivity rises in a particular economy Other things equal the aggregate A expenditures curve will shift downward B supply curve will shift leftward C supply curve will shift rightward D demand curve will shift leftward 6 Which of the following is not a possible source of natural monopoly A rentseeking behavior B greater use of specialized inputs C simultaneous consumption D largescale network effects 7 Suppose that the price of peanuts falls from 3 to 2 per bushel and that as a result the total revenue received by peanut farmers changes from 16 to 14 billion Thus A no inference can be made as to the elasticity of demand for peanuts B the demand for peanuts is elastic C the demand curve for peanuts has shifted to the right D the demand for peanuts is inelastic 8 Oligopoly is difficult to analyze primarily because A neither allocative efficiency nor productive efficiency is achieved B the price and output decisions of any one rm depend on the reactions of its rivals C output may be either homogenous or differentiated D the number of rms is too large to make collusion understandable 9 Firm X develops a new product and gets a head start in its production Other rms try to produce a similar product but discover they have higher average total costs than the existing rm This situation illustrates A spillover costs B learningbydoing C diminishing marginal returns D diseconomies of scale 10 Expansionary scal policy is so named because it A is designed to expand real GDP B involves an expansion of the nation39s money supply C is aimed at achieving greater price stability D necessarily expands the size of government 11 A rm that is motivated by selfinterest should A always use large amounts of cheap inputs and small amounts of expensive inputs in producing its output B hire each input so the productivity of each is equal at the margin C always use large amounts of the most productive inputs and small amounts of the least productive inputs in producing its output D employ the combination of resources that will produce the pro tmaximizing output at the minimum cost 12 Suppose that an industry is characterized by a few rms and price leadership We would expect that A marginal revenue would exceed marginal cost B price would exceed both marginal cost and average total cost C price would equal average total cost D price would equal marginal cos 13 Advertising can impede economic ef ciency when it A increases consumer awareness of substitute products B enables rms to achieve substantial economies of scale C reduces brand loyalty D increases entry barriers 14 A competitive rm will maximize pro ts at that output at which A the difference between marginal revenue and price is at a maximum B total revenue and total cost are equal C price exceeds average total cost by the largest amount D total revenue exceeds total cost by the greatesi amount 15 Price exceeds marginal revenue for the pure monopolist because the A demand curve lies below the marginal revenue curve B demand curve is downsloping C monopolist produces a smaller output than would a purely competitive rm D law of diminishing returns is inapplicable 16 Camille39s Creations and Julia39s Jewels both sell beads in a competitive market If at the market price of 5 both are running out of beads to sell they can39t keep up with the quantity demanded at that price then we would expect both Camille39s and Julia39s to A lower their price and increase their quantity supplied B raise their price and reduce their quantity supplied C lower their price and reduce their quantity supplied D raise their price and increase their quantity supplied 17 Suppose that US prices rise 4 percent over the next year while prices in Mexico rise 6 According to the purchasing power parity theory of exchange rates what should happen to the exchange rate between the dollar and the peso A The dollar will be revalued B The dollar should depreciate C The peso should depreciate D The peso should appreciate 18 When economists view technological change as internal to the economy they mean that it A arises mainly from government subsidies B arises deliberately from the pro t motive and competition C occurs accidentally D occurs randomly 19 A rm can hire six workers at a wage rate of 8 per hour but must pay 9 per hour to all of its employees to attract a seventh worker The marginal wage cost of the seventh worker is A 21 B 10 C 15 D 9 20 Paying an aboveequilibrium wage rate might reduce unit labor costs by A increasing the supply of labor B increasing the cost to workers of being red for shirking C increasing voluntary worker turnover D permitting the rm to attract lowerquality labor 21 If a rm decides to produce no output in the short run its costs will be A zero B its xed plus its variable costs C its xed costi D its marginal costs 22 In which of the following industries are economies of scale exhausted at relatively low levels of output A newspaper printing B automobile manufacturing C concrete mixing D aircraft production 23 If technology dictates that labor and capital must be used in xed proportions an increase in the price of capital will cause a rm 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 24 In a competitive market economy rms will select the leastcost production technique because A quotdollar votingquot by consumers mandates such a choice B such choices will result in the full employment of available resources C this will prevent new rms from entering the industry D to do so will maximize the rms39 pro ts 25 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 consumer needs and preferences C government regulations that provide a minimum income for all D the quantities and prices of the resources that households supply 26 In the long run a pure monopolist will maximize pro ts by producing that output at which marginal cost is equal to A average cost B average variable cost C marginal revenue D average total cost 27 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 supply of 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 demand for DVD players has increased 28 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 surplus will increase quantity demanded and decrease quantity supplied C surplus will decrease quantity demanded and increase quantity supplied D shortage will decrease quantity demanded and increase quantity sunplied 29 If a rm 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 30 Which of the following represents a longrun adjustment A a supermarket hires four additional clerks B unable to meet foreign competition a US watch manufacturer sells one of its branch plants C a steel manufacturer cuts back on its purchases of coke and iron ore D a farmer uses an extra dose of fertilizer on his corn crop


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