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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
A. the supply of clothing has grown faster than the demand for clothing
B. demand for clothing has grown faster than the supply of clothing
C. the supply of and demand for clothing have grown by the same proportion
D. 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:
A. raise their price and reduce their quantity supplied
B. raise their price and increase their quantity supplied
C. lower their price and reduce their quantity supplied
D. lower their price and increase their quantity supplied
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
A. monopolistic competition
B. oligopoly
C. pure monopoly
D. pure competition
11) Price is constant or given to the individual firm selling in a purely competitive
market because
A. the firm's demand curve is downward sloping
B. of product differentiation reinforced by extensive advertising
C. each seller supplies a negligible fraction of total supply
D. there are no good substitutes for its product
12) The most important pricing strategy for a perfectly competitive firm is
A. minimizing cost
B. maximizing sales
C. product differentiation
D. advertising
19) Suppose productivity rises in a particular economy, but wages stay the same.
Other things equal,
A. the demand curve will shift leftward
B. the supply curve will shift rightward
C. the supply curve will shift leftward
D. expenditures curve will shift rightward
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
A. increase government expenditures by $100 billion
B. increase government expenditures by $50 billion
C. reduce taxes by $50 billion
D. reduce taxes by $200 billion
24) Other things equal, a decrease in the real interest rate will
A. shift the investment demand curve to the right
B. shift the investment demand curve to the left
C. move the economy upward along its existing investment demand curve
D. move the economy downward along its existing investment demand curve
25) Other things equal, a decrease in corporate income taxes will
A. decrease the market price of real capital goods
B. have no effect on the location of the investment demand curve
C. shift the investment demand curve to the right
D. shift the investment demand curve to the left
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?
A. The dollar should depreciate.
B. The peso should appreciate.
C. The peso should depreciate.
D. The dollar will be revalued.