Principles of Macroeconomics Final Exam
Course Introduction
Principles of Macroeconomics introduces students to the fundamental concepts and analytical tools used to understand the economy as a whole. The course explores topics such as national income determination, unemployment, inflation, economic growth, and the role of government in stabilizing the economy through fiscal and monetary policy. Students will examine how households, businesses, and governments interact within the global economic system, and learn to analyze real-world economic issues using theoretical models and current data. By the end of the course, students will be equipped to assess macroeconomic trends and policy decisions, both domestically and internationally.
Recommended Textbook foundations of macroeconomics 7th edition by robin bade
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Chapter 1: Getting Started
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Q1) Suppose the relationship between a person's age and his or her height is plotted with the age measured along the x-axis and the height measured along the y-axis.Then,the curve showing this relationship is
A) a straight line with a positive slope.
B) positively sloped and becoming less steep.
C) a straight line with a negative slope.
D) negatively sloped and becoming less steep.
E) positively sloped and becoming more steep.
Answer: B
Q2) Which of the following statements best describes the study of economics?
Economics studies how
A) to organize production so that scarcity does not occur.
B) firms make profits.
C) we make choices in the face of scarcity.
D) to create incentives so that scarcity does not exist.
E) businesses reach decisions.
Answer: C
Q3) In the figure above,what can you deduce about the slope of the curve?
Answer: The slope is positive and increasing in size as we move rightward along the curve.
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Chapter 2: The USand Global Economies
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Q1) What would be an example of consumption service?
A) Rhianna gets a haircut.
B) Jake buys an iPhone.
C) Antonio, the manager of the local Taco Hut, purchases a new deep fryer.
D) The local driver's license office purchases a new digital camera and printer.
E) Donald Trump purchases furniture for his office.
Answer: A
Q2) The personal distribution of income in the United States shows that A) income is equally distributed.
B) the poorest 20 percent of individuals receive approximately 20 percent of total income.
C) the richest 20 percent of individuals receive approximately 50 percent of total income.
D) the poorest 60 percent of individuals receive approximately 50 percent of total income.
E) the richest 20 percent of individuals receive approximately 25 percent of total income. Answer: C
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Chapter 3: The Economic Problem
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Q1) The opportunity cost of economic growth is
A) 0, because it means an expansion of production possibilities.
B) the decrease in the current production of productive factors.
C) a slower accumulation of human capital.
D) the decrease in the current production of consumption goods.
E) the increase in the nation's capital stock and/or its technology.
Answer: D
Q2) The above figure shows the production possibility frontier for a country.What is the opportunity cost per ton of rice to move from point B to point D?
A) 1000 bottles of wine
B) 500 bottles of wine
C) 2 bottles of wine
D) 1/2 of a bottle of wine
E) None of the above answers is correct.
Answer: B
Q3) Are all points inside the production possibilities frontier unattainable?
Answer: No,all points within the production possibilities frontier are attainable,though there are unemployed resources at these points.
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Chapter 4: Demand and Supply
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Q1) Consider the market for wheat.If there is an improvement in harvesting technology,
A) the supply curve for wheat shifts rightward.
B) the demand curve for wheat shifts rightward.
C) there is a movement up along the demand curve.
D) the equilibrium price rises.
E) the demand curve for wheat shifts leftward.
Q2) Consider the market for bread.If the price of wheat rises,then the
A) demand curve for bread shifts leftward.
B) supply curve of bread shifts leftward.
C) price of bread falls.
D) equilibrium quantity of bread increases.
E) demand curve for bread shifts rightward.
Q3) Which of the following will increase the supply of a product?
A) an increase in the price of the product
B) an increase in the demand for the product
C) an increase in the number of sellers
D) a decrease in the demand for the product
E) an increase in the price of inputs
Q4) When does a surplus occur?
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Chapter 5: Elasticities of Demand and Supply
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Q1) Suppose the local university charges $85 per credit hour.If tuition increases from $85 to $93 per credit hour,using the midpoint method,what is the percentage change in price?
A) 8.99 percent
B) 8.00 percent
C) 9.41 percent
D) 8.62 percent
E) 9.12 percent
Q2) When the price of bananas rises 2 percent,the quantity demanded of peanut butter falls 4 percent.
a.What is the cross elasticity of demand between these two goods?
b.How are these goods related?
c.If the price of bananas rises,how will that affect the demand curve for peanut butter?
Q3) The lower the level of income in a country,the
A) less income elastic is the demand for food.
B) more income elastic is the demand for food.
C) more negative the income elasticity of the demand for food.
D) Both answers A and C are correct.
E) None of the above is correct.
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Chapter 6: Efficiency and Fairness of Markets
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Q1) In a figure,the consumer surplus is equal to the area ________ the ________ curve and ________ the price.
A) above; demand; above B) below; supply; below C) below; demand; below D) below; demand; above E) above; supply; below
Q2) Which of the following statements is correct?
i.The demand curve shows the maximum price people are willing to pay for a given quantity of the good.
ii.The maximum price a consumer is willing to pay for an additional unit is the marginal benefit of that unit.
iii.Value is what a consumer receives and price is what a consumer pays.
A) i only
B) ii only
C) iii only
D) i and iii
E) i, ii, and iii
Q3) Briefly describe the concept of the "invisible hand."
Q4) the quantity demanded at a given price.In this view,the curve is a demand curve;
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Chapter 7: Government Actions in Markets
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Q1) Suppose the current equilibrium wage rate for housekeepers is $8.60 per hour.An increase in the minimum wage to $7.50 per hour leads to
A) a surplus of housekeepers.
B) a shortage of housekeepers.
C) no change in the market for housekeepers.
D) an increase in the quantity of housekeepers supplied.
E) unemployment of housekeepers.
Q2) Which of the following describes a difference between a price support and a price ceiling?
A) A price support creates a deadweight loss while a price ceiling does not.
B) A price ceiling is a regulated price while a price support is a regulated quantity.
C) A price support decreases the quantity while a price ceiling does not.
D) A price ceiling increases the price above the equilibrium price while a price support does not.
E) A price support attempts to raise the price above the equilibrium price while a price ceiling does not.
Q3) Suppose that producers are richer than consumers.Is a price support program fair? Explain your answer.
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Chapter 8: Taxes
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Q1) When a tax is imposed on a good or a service,the marginal benefit of the last unit bought ________ the marginal cost of the last unit. A) is equal to B) is greater than C) is less than
D) None of the above answers is correct because there is no consistent relationship between the marginal benefit of the last unit and its marginal cost.
E) is not able to be compared to
Q2) The figure above shows the impact of an income tax.The revenue collected by the government equals area A) bce.
B) feba.
C) fed.
D) acf.
E) None of the above answers is correct.
Q3) When a tax is imposed on a good,the resulting rise in the equilibrium price is usually less than the amount of the tax itself.Why doesn't the equilibrium price rise by the full amount of the tax?
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Chapter 9: Global Markets in Action
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Q1) The infant-industry argument is used by those who assert they want to
A) limit imports to protect new industries.
B) increase exports to encourage growth of new industries.
C) limit exports.
D) increase imports to earn money to support new industries.
E) encourage foreign firms to dump in the United States.
Q2) What is the dumping argument for protection from international trade?
A) Domestic firms must be protected until they gain a comparative advantage.
B) Any firm necessary in wartime must be protected.
C) Foreign producers selling below cost to drive domestic firms bankrupt must be stopped.
D) Domestic jobs must be protected from competition from low-paid foreign workers.
E) Foreigners selling products in the economy limit the nation's diversity and stability.
Q3) How does the United States attempt to compensate losers from lower trade restrictions?
Q4) Because wage rates are so low in Africa,why don't Microsoft,Cisco and other major corporations close down their American operations and move to Africa?
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Chapter 10: Externalities
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Q1) If the government taxes an industry that creates pollution,the tax
i.decreases the pollution.
ii.increases the price of the product produced by the firms.
iii.decreases the quantity of the good produced.
A) i only.
B) ii only.
C) ii and iii.
D) i and iii.
E) i, ii, and iii.
Q2) Externalities
A) can be either benefits or costs.
B) always create extra social costs.
C) always make society better off.
D) cannot be expressed in dollar amounts.
E) are always part of private costs or private benefits.
Q3) Explain the difference between a positive production externality and a positive consumption externality.
Q4) What do we mean by "property rights" and why are they important?
Q5) Use the idea of external costs to explain why some cities have laws against late-night rock concerts.
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Chapter 11: Public Goods and Common Resources
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Q1) Government bureaucracies over-provide public goods and grow larger because of their goal of ________ combined with ________ of the voters.
A) budget maximization; rational ignorance
B) budget minimization; irrational intelligence
C) budget maximization; minimum differentiation
D) budget maximization; irrational exuberance
E) minimum differentiation; budget maximization
Q2) What is the tragedy of the commons?
Q3) Which of the following is the best example of a private good?
A) a can of Diet Pepsi
B) a missile defense system
C) a library in St. Louis
D) a sidewalk in Fargo
E) a cod fish swimming in the middle of the ocean
Q4) When use of a good decreases the quantity available for someone else,the good is A) rival.
B) nonrival.
C) excludable.
D) nonexcludable.
E) a public good.
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Chapter 12: Markets with Private Information
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Q1) In the used car market,adverse selection is a problem primarily when
A) sellers cannot judge buyers' creditworthiness.
B) buyers cannot signal their willingness to buy.
C) buyers cannot determine the quality of a used car.
D) sellers offer warranties on all used cars.
E) sellers and buyers both agree that a particular used car is a lemon.
Q2) Adverse selection is the tendency for people who accept contracts to be those who
A) buy goods and then regret it later.
B) buy goods for more than their own reservation price.
C) want to avoid the lemons problem.
D) plan to use private information to the disadvantage of the less well-informed party.
E) engage in a number of searches larger than that specified in the contract.
Q3) In the market for automobile insurance,moral hazard implies that
A) those who are insured might take greater risks.
B) those who are uninsured might take greater risks.
C) insured and uninsured alike will take greater risks.
D) screening will have no effect in the market.
E) drivers with greater risks are more likely to buy insurance.
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Chapter 13: Consumer Choice and Demand
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Q1) You consume hamburgers and hot dogs.If the price of a hamburger increases while the price of a hot dog and your budget do not change,then your budget line will
A) not change because your budget hasn't changed.
B) shift outward and not change its slope.
C) rotate outward and change its slope.
D) rotate inward and change its slope.
E) shift inward and not change its slope.
Q2) To maximize utility,why does a consumer consume the combination of goods that equates marginal utility per dollar from the different goods rather than just equating the marginal utility of the different goods?
Q3) Tris is shopping for pants and belts.He has a budget of $100.The price of a pair of pants is $20 and the price of a belt is $5.His marginal utility schedules are above.What combination of pants and belts does Tris buy? Explain your answer.
Q4) "As Rob consumes more dates over the course of a day,it is likely that his marginal utility from date consumption will rise." Is the previous statement likely correct or incorrect?
Q5) What is "marginal utility"?
Q6) Why is the budget line negatively sloped?
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Chapter 14: Production and Cost
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Q1) The paramount goal of a firm is to
A) maximize profit.
B) maximize sales.
C) maximize total revenue.
D) minimize costs.
E) force its competitors into bankruptcy.
Q2) When the Rent-A-Limo Company negotiates its new labor contract it finds that the wages it must pay drivers have increased.How does this wage hike affect the Rent-A-Limo Company's average fixed cost,average variable cost,average total cost,and marginal cost?
Q3) The long-run average cost curve
A) is an upside down U-shape.
B) is constructed using the short-run marginal cost curves.
C) shows economies and diseconomies of scale.
D) Both answers A and B are correct.
E) Both answers A and C are correct.
Q4) What is the difference between a normal profit and an economic profit?
Q5) "In the short run,even when output is zero,the firm still has some variable costs it must pay." Is the statement correct or incorrect? Briefly explain your answer.
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Chapter 15: Perfect Competition
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Q1) The above table has the total revenue and total cost schedule for Omar,a perfectly competitive grower of rutabagas.When Omar maximizes his profit,Omar's profit equals
A) $80.
B) $11.
C) $30.
D) $16.
E) $105.
Q2) If there are 1,000 identical rice farmers who are each willing to supply 200 bushels of rice at $2 per bushel,what price and quantity combination is a point on the market supply curve for rice?
A) $2 and 200 bushels
B) $2 and 200,000 bushels
C) $2,000 and 200,000 bushels
D) $2,000 and 1,000 bushels
E) $2 and 1,000 farmers
Q3) In the long run,a perfectly competitive firm makes zero economic profit.What incentive does the firm have to stay in business if it is making zero economic profit?
Q4) In the long run,perfectly competitive firms cannot make an economic profit.Why?
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Chapter 16: Monopoly
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Q1) Which of the following statements about price discrimination is false?
A) Price discrimination is a method for a seller to capture some consumer surplus.
B) Compared to a single-price monopoly, the number of units sold increases when a monopoly price discriminates.
C) Charging less for a second pizza that is identical to the first is an example of price discrimination.
D) Price discrimination increases a monopoly's profit.
E) All forms of price discrimination are illegal.
Q2) Assume someone organizes all farms in the nation into a monopoly.As a result,consumer surplus will
A) not change.
B) increase.
C) decrease.
D) either increase, decrease, or not change depending if the monopoly's marginal revenue curve lies below, above, or is the same as its demand curve.
E) None of the above answers is correct because the effect on consumer surplus depends on whether the monopoly is a single-price or a price-discriminating monopoly.
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Chapter 17: Monopolistic Competition
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Q1) In the long run,firms in monopolistic competition make zero economic profit.When firms make zero economic profit,in the long run they exit the industry.
A) The first sentence is correct and the second sentence is incorrect.
B) The first sentence is incorrect and the second sentence is correct.
C) Both sentences are correct.
D) Both sentences are incorrect.
E) More information about the presence or absence of barriers to entry and exit is needed to determine if the statements are true or false.
Q2) To maintain their economic profits,firms in monopolistic competition must continually engage in
A) product development and marketing.
B) lowering their product's price.
C) raising their product's price.
D) realizing short-run losses.
E) making the demand for their product more elastic.
Q3) Explain the role of advertising in monopolistic competition.Describe how advertising by all firms in a monopolistically competitive industry impacts a firm's ATC curve,its MC curve,its demand curve,and its MR curve.
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Chapter 18: Oligopoly
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Q1) A firm faces a small number of competitors.This firm is competing in A) a monopoly.
B) monopolistic competition.
C) an oligopoly.
D) perfect competition.
E) a perfect multi-firm monopoly.
Q2) What are the merger rules used by the Federal Trade Commission to help decide whether firms are allowed to merge?
Q3) Even though four firms can profitably sell hotdogs downtown,the government licenses only two firms.This market is a
A) natural duopoly.
B) legal duopoly.
C) natural monopoly.
D) legal monopoly.
E) market-limited oligopoly.
Q4) "The Clayton Act repealed the Sherman Act so that only the Clayton Act remains in force." Is the previous statement correct or incorrect?
Q5) Briefly explain resale price maintenance.Is it legal or illegal? Does it create efficiency or inefficiency?
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Chapter 19: Markets for Factors of Production
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Q1) If the price of a firm's product falls,the firm's demand for labor curve
A) does not shift and there is no movement along it.
B) shifts leftward.
C) shifts rightward.
D) does not shift but there is a movement along it.
E) might shift leftward or rightward depending on whether the demand for the firm's product is elastic or inelastic.
Q2) The supply of nonrenewable natural resources is
A) perfectly inelastic.
B) perfectly elastic.
C) always elastic but not necessarily perfectly elastic.
D) inelastic at high prices and elastic at low prices.
E) elastic at high prices and inelastic at low prices.
Q3) The value of marginal product is equal to the
A) additional revenue from selling one more unit of the product.
B) change in total revenue from selling one more unit of product.
C) additional cost of hiring one more unit of a factor of production.
D) change in revenue from hiring one more unit of a factor of production.
E) change in total cost when one more unit of the product is produced.
Q4) Why is the supply of an nonrenewable natural resource perfectly elastic?
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Chapter 20: Economic Inequality
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Q1) Describe the characteristics of the typical lowest income household in the United States and the characteristics of the typical richest household in the United States.
Q2) When government redistributes income,one dollar collected from a rich person translates into ________ received by a poor person.
A) exactly one dollar
B) less than one dollar
C) more than one dollar
D) zero dollars
E) either exactly one dollar or, with some programs, more than one dollar
Q3) What is the difference between wealth and income?
Q4) If you attended public school in your hometown,you have received ________ because the government has provided ________.
A) a subsidized service; a service below the cost of its production
B) a TANF grant; you a free education
C) the benefit of a negative tax; you an education without having to pay taxes
D) a subsidized service; a free education using a negative income tax
E) a utilitarian benefit; an education to help promote equality
Q5) What is a Lorenz curve?
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