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Economics Final Review

Which is true of partnerships?
Each partner is responsible for all business debts
A group of three plants which is owned operated by a single firm and which consists of a farm growing wheat, a flour-milling plant, and a plant which bakes and sells bread would best be an example of…
Vertically integrated firm
Which legal organization is the smallest percentage in America according to the pie chart?
Partnerships
Sole proprietorships constitute approximately what proportion of business firms in the US?
73%
Other things being equal, the law of demand implies that as:
the demand for CDs increases, the price will decrease
If two goods are close substitutes…
a fall in the price of one will decrease the demand for the other
People demand more of product X when the price of product Y decreases. This means X & Y are…
Complements
Refer to the above table. The quantity demanded for wheat is…
37 bushels at $4 and 52 bushels at $3
Which is most consistent with the law of demand?
An increase in the price of heating oil causes a decrease in the quantity of heating oil demanded
A headline reads “Storms destroy half of the lettuce crop.” This leads to…
Increase in price of lettuce and decrease of quantity purchased
A headline reads “Gasoline Prices Are Higher.” A

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likely explanation for this event would be a..
decrease in supply of gas and increase in demand for gas
A news story states that “Videotapes lose their appeal as consumers switch to DVDs for movies.” In a competitive market for the purchase of video takes of movies, this situation would lead to a…
Decrease in price of videotapes and quantity sold
Which is most characteristic of a pure monopoly?
The firm produces a good or service for which there are no close substitutes
There would be some control over price within rather narrow limits in which market model?
Monopolistic Competition
An exclusive right granted by government for 20 years to an inventor of a product is a…
patent
Under which market model are the conditions of entry the most difficult?
Pure monopoly
A merger between one firm and another firm that is its supplier is known as a…
vertical merger
Assume there is no way to prevent someone from using an interstate highway, regardless of whether or not he/she helps pay for it. This characteristic is associated with…
public goods
In which industry is monopolistic competition most likely to be found?
Retail Trade
There is NO control over price by firms in…
Pure competition
Kevin has lost his job in an automobile plant because of the use of robots for the welding on the assembly line. Kevin plans to go to technical school to learn how to repair microcomputers. The type of unemployment Kevin is faced with is…
Structural
Official unemployment rate statistics may…
UNDERSTATE the amount of unemployment because of the presence of “discouraged” workers who are not actively seeking employment
The rate of unionization is lowest in…
Retail trade
A requirement that a nonunion worker pays union dues or donates an equivalent amount to charity is a characteristic of an…
agency shop
Acts by states to make compulsory union membership, or the union shop, illegal are…
right to work laws
A primary function of the National Labor Relations Board is to
Investigate unfair labor practices and certify union for bargaining
If a worker must be a member of the union before he or she is eligible for employment in the firm, then this is called a…
closed shop
One way that unions may contribute to increasing productivity is by…
Reducing worker turnover
The best example of a “frictionally unemployed” worker is one who…
is in the process of voluntarily switching jobs
Assuming the total population is 200 million, the labor force is 100 million, and 92 million workers are employed, the unemployment rate is…
8%
According to the NLRA, union members may do which of the following..
erect picket lines in front of businesses
If someone earning $10,000 pays $1,000 in taxes and someone earning $20,000 pays $3,000, this tax must be…
progressive
Which of the following taxes would most likely be regressive?
a 6% sales tax
The incidence of taxation refers to…
who in society actually pays the tax
A proportional tax means that someone earning $30,000 would pay…
just as much tax in percentage terms as someone earning $10,000
Which combination of fiscal policy actions would be most stimulative for an economy in a deep recession?
Decrease taxes and increase government spending
A budget surplus means that…
Government revenues are greater than expenditures in a given years
A government budget deficit occurs when government expenditures are…
Greater than government revenues
To track the public debt over time and compare it to the productive capacity of the economy, it is best…
measured relative to the gross domestic product
The combination of fiscal policies that would reinforce each other and be most expansionary would be a
Increase in government spending and a decrease in taxes
If the Congress passes legislatioini to increase government spending to counter the effects of a recession then this would be an example of a…
expansionary fiscal policy
In an aggregate demand and aggregate supply graph, a contractionary fiscal policy can be illustrated by a…
leftward shift in the aggregate demand curve
If the Congress passes legislation to raise taxes to control demand-pull inflation, then this would be an example of a…
contractionary fiscal policy
Approximately what percentage of the public debt is held by foreign individuals and institutions?
22 %
Changes in government spending and tax revenues for the purpose of achieving a foll-employment and noninflationary level of deomestic output is called..
fiscal policy
A major reason that a public debt cannot bankrupt the Federal government is because…
The public debt can be easily refinanced
Which policy to finance the public debt might crowd-out private spending?
Borrowing money from the public in the money market
The paper money issued by the US goverment is…
fiat money
When money serves as a means for determining the relative worth of goods, services, and resources, it is functioning as a…
measure of value
The Federal backing for the money in the US comes from..
control over the money supply designed to keep the value of money relatively stable over time
Holding the money deposits of businesses and households and making loans to the public are the basic functions of…
commercial banks and thrift institutions
One major advantage of the medium of exchange function of money is that it allows society to
escape the complications of barrter
What function is money serving when you take it on a trip and keep it in your wallet or purse in case you need it?
A store of value
What function is money serving when you buy a ticket to a movie?
A medium of exchange
US currency has value primarily because it..
is relatively scarce, is legal tender, and is generally acceptable in exchange for goods and services
What is one significant characteristic of fractional reserve banking?
Banks can create money through lending their reserves
The level GDP will tend to increase when
the Federal Reserve buys government securities in the open market
Which is the most important function of the Federal Reserve System?
Controlling the money supply
Inflation that occurs when total spending is greater than the economy’s ability to produce output at the existing price level is..
demand-pull inflation
The view that unions may be a source of inflation would be best associated with the ..
wage-push view of inflation
Inflation caused by a rise in per unit production costs is referred to as..
cost-push inflation
In 1993, Zaire experienced an inflation rate of several thousand percent per year. This economic condition would best be described as…
hyperinflation
Which would most likely shift the aggregate supply curve? A change in…
prices of imported resources
An increase in taxes on consumers will most likely cause a
decrease in aggregate demand
A decrease in government spending will cause a
decrease in aggregate demand
The successor to GATT created in the Uruguay Round is the
World Trade Organization
The US has a trade deficit when US…
Imports are greater than US exports
An increase in the US demand for Japanese goods will..
increase the demand for Japanese yen and increase the dollare price of yen
Licensing requirements, excessive regulations, unreasonable quality standards, and other actions taken by nations to impede imports are…
nontariff barriers
The depreciation of the US dollar relative to the French franc would make a vacation trip to..
the US less expensive for the French
Excise taxes or duties placed on imported products are…
protective tariffs
With which nation is the volume of US trade the greatest in terms of the dollar volume of imports and exports?
Canada
An example of economic integration in the Western hemisphere that created a free-trade zone is the…
North American Free Trade Agreement
The European Union promotes…
free trade among member nations, but not necessarily with other nations
When a nation has a comparative advantage in some product this means that…
it can produce that product at a lower domestic opportunity cost than can a potential trading partner
Which factor has contributed significantly to more international trade since the Second World War?
A general decline in tariffs
If the exchange rate for German marks changes from $1= 1.8 marks to $1=2.10 marks then the…
dollar has appreciated in value
The above diagram is best described as an idealized…
business cycle
Refer to the above diagram. The phases of the business cycle from points A to D are, respectively..
peak, recession, trough, recovery
A trough in the business cycle occurs when..
employment and output reach their lowest levels
A recession is a decline in…
GDP that lasts six months or longer
If the price index is 130, this means that…
prices are 30% higher than in the base year
An example of an intermediate good or service would be…
A desk bought by an accountant for her office
The consumption of fixed capital in each year’s production is called
depreciation
Government purchases in national income accounts would include expenditures for payments of..
salaries for current US military officers
GDP measured using current prices is called
nominal GDP
An example of a public transfer payment is a…
veteran’s benefit payment
GDP tends to underestimate the productive activity in the economy because it excludes..
the personal labor time homeowners spend on home repairs
GDP is the market value of…
all final goods and services produced in an economy in a given year
Adding the market value of all final and intermediate goods and services in an economy in a given year would result in…
an amount greater than GDP for that year
Holding the money deposits of businesses and households and making loans to the public are the basic functions of…
commercial banks and thrift institution
The Board of Governors of the federal reserve system can increase commercial bank reserves by…
buying government securities in the open market
The Fed alters the amount of the nations money supply by..
manipulating the size of excess reserves held by commercial banks
Economic profit exists when…
total revenues exceed the payment of all economic costs
Which condition will encourage competition?
the freedom of sellers and buyers to enter or exit an industry
The most efficient combination of resources in producing any output is that which…
can be employed at the least possible cost
What economic goal would be closely associated with producing more and better goods and services and a higher standard of living for a nation?
economic growth
How do workers typically express self-interest?
By seeking jobs with the best combination of wages and benefits
If opportunity costs were constant, then the production possibilities curve would be
a straight line
A tradeoff exists between two economic goals, X and Y. This tradeoff means that…
getting more of X requires getting less of Y
The production possibilities curve represents which of the following?
Maximum combinations of goods attainable with fixed resources
The key economic concept that serves as basis for economics is…
scarcity
With productive efficiency…
there is production of any particular mix of goods and services in the least costly way
The economizing problem of economics is…
that productive resources are scare relative to economic wants..
A movement along the production possibilities curve would imply that…
society has chosen a different set of output

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