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
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 ...view middle of the document...
falls more rapidly than the general price level
B. increases at the same rate as labor productivity
C. increases more rapidly than the general price level
D. falls at the same rate as the general price level
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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
A. restrict the supply of construction workers
B. increase the elasticity of demand for construction workers
C. increase the demand for construction workers
D. increase the price of substitute inputs
8) Paying an above-equilibrium wage rate might reduce unit labour costs by
A. permitting the firm to attract lower-quality labour
B. increasing the cost to workers of being fired for shirking
C. increasing voluntary worker turnover
D. increasing the supply of labour
9) A good real-world example of monopolistic competition is
A. lawyers
B. gas stations
C. Time Warner Cable
D. groceries store
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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
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13) Which of the following is a nonprice barrier of entry?
A. Huge sunk cost
B. Discounts
C. Product differentiation
D. Advertising
14) A third-degree price discrimination can be applied to which of the following market structures?
A. A monopoly
B. An oligopoly
C. A monopolistic competition
D. A perfect competition
15) Investing in R&D is more likely to occur in markets where
A. firms have monopoly power protected by regulatory barriers
B. markets are closely competitive markets with close to zero economic profits
C. markets are oligopoly markets with strong collusion agreements
D. markets are monopolistic competitive markets
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16) All economies of scale are achieved at the minimum of
A. average total cost
B. total cost
C. average variable cost
D. average fixed cost
17) Inflation is undesirable because it
A. arbitrarily redistributes real income and wealth
B. invariably leads to hyperinflation
C. usually is accompanied by declining real GDP
D. reduces everyone’s standard of living in the same pro
portion
18) An economy’s...
