Final Examination EMB 502 DEV 501 Gour 203 21 January 2021

8:00PM-9:00PM

Name:S M AL AMIN
ID:2016291690
In-class Final Exam
203 EMB 502.1
DEV 501
Total Points: 100
 Questions: 60: Answer all the questions.

 Exam Time: 21 January 2021, Thursday 8:00PM-9:00PM

 Submission Method: Online via google classroom. No email

submission, please.

 Do not change the answer sheet. Do not change the order of

the questions.

 You must turn on your video for the whole exam time.

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Multiple Choice

Identify the letter of the choice that best completes the statement or
answers the question.
___D_ 1. Because a competitive firm is a price taker, it faces a demand curve that is:
a. perfectly inelastic.
b. relatively inelastic.
c. relatively elastic.
d. perfectly elastic.
___D_ 2. A perfectly competitive firm's short-run supply curve is the:
a. average total cost curve.
b. demand curve above the marginal revenue curve.
c. same as the market supply curve.
d. marginal cost curve above the average variable cost curve.
___D_ 3. Above the shutdown point, a competitive firm's supply curve coincides with its:
a. marginal revenue curve.
b. marginal cost curve.
c. average variable cost curve.
d. average total cost curve.
Exhibit 7-2 Total revenue and total cost graph

2
 TC TR
400
Total
revenue 300
and
total
cost 200
(dollars)
100

0 100 200 300 400

Quantity of output
(units per week)
__D__ 4. In Exhibit 7-2, economic profit for the firm is at a maximum when output per week equals:
a. zero units.
b. 100 units.
c. 200 units.
d. 250 units.
e. 300 units.
___B_ 5. At an output of 250 units, as shown in Exhibit 7-2, marginal cost is:
a. greater than marginal revenue.
b. equal to marginal revenue.
c. less than marginal revenue.
d. none of the above.
__D__ 6. The point of maximum profit for a business firm is where:
a. P = AC.
b. TR = TC.
c. MR = AR.
d. MR = MC.
e. TR = MR.
__D__ 7. If, at the point where MR = MC, the firm incurs losses, in the short run, the firm should:
a. shut down.
b. increase output.
c. decrease output.
d. continue at its current output if P > AVC.
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 e. continue at its current output if P > ATC.
Exhibit 7-7 A firm's cost and marginal revenue curves

ATC
MC

AVC
Cost
revenues
(dollars) 35 MR

Quantity
__C__ 8. In Exhibit 7-7, product price in this market is fixed at $35. This firm is currently operating where MR = MC.
Which of the following is true?
a. Price < AVC and this firm should shut down.
b. This firm is earning a profit of zero.
c. This firm could increase profits by increasing output.
d. Price > ATC and the firm is earning a positive profit.
e. Price > AVC, and the firm should continue to produce at its current output level.
Exhibit 7-8 Price and cost data for a firm

Q P AVC ATC MC
0 $12 - - -
1 12 3 5 5
2 12 5 6 7
3 12 7.3 8 12
4 12 9.5 10 16
__D__ 9. In Exhibit 7-8, following the rule regarding MR and MC, the most profitable output level is:
a. 0.
b. 1.
c. 2.
d. 3.
e. 4.
__A__ 10. Which of the following statements is true?
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 a. To maximize profits, a firm must maximize total revenue.
b. In long-run equilibrium, a competitive firm produces at the point of minimum average
total cost.
c. In the short run, a perfectly competitive firm produces where total cost is minimum.
d. In the short run, a perfectly competitive firm will close down whenever price is less than
average total cost.
Exhibit 7-12 A typical firm in a perfectly competitive market

SRATCA SRATCB SRATC

500
SRMCA SRMCC
Costs 400
per SRMCB
unit 300
(dollars)
200

100

0 200 400 600

Quantity of output
(units per week)
_C___ 11. As shown in Exhibit 7-12, the perfectly competitive firm is in long-run equilibrium at a price of:
a. $100.
b. $200.
c. $300.
d. $400.
_A___ 12. A monopolized market is characterized by:
a. a sole seller of a product for which there are few suitable substitutes.
b. very strong barriers to entry.
c. a single firm facing the market demand curve.
d. all of the above.
Exhibit 8-1 Monopolist’s demand curve

5
 A
40

Price 30
per
unit C
(dollars) 20
DEMAND
10

D B
0 100 200 300 400
Quantity of output
(units per time period)
___A_ 13. At an output of 100 units, marginal revenue for a monopolist with the demand curve shown in Exhibit 8-1
would be:
a. positive.
b. zero.
c. negative.
d. infinity.
_C___ 14. A monopolist can earn an economic profit only when:
a. marginal cost equals marginal revenue.
b. marginal cost equals price.
c. average total cost is less than price.
d. all of the above.
___B_ 15. Assume a monopolist charges a price corresponding to the intersection of the marginal cost and marginal
revenue curves. If this price is between its average variable cost and average total cost curves, the firm will:
a. earn an economic profit.
b. continue to operate in the short run.
c. shut down.
d. all of the above are true.
Exhibit 8-5 Monopoly

6
 MC
ATC
10

Price 8
7
(dollars) 6

4
D

MR

0 6 8 9 10
Quantity
___E_ 16. The monopoly price that maximizes profits in Exhibit 8-5 is:
a. $4.
b. $6.
c. $7.
d. $8.
e. $10.
__B__ 17. When the monopolist is maximizing total profit in Exhibit 8-5, the average total cost of producing that
output level is:
a. $4.
b. $6.
c. $7.
d. $8.
e. $10.
__D__ 18. A monopoly:
a. can increase price and increase output at the same time.
b. can charge any price it wants and still sell all of its output.
c. must lower price in order to increase output.
d. faces a perfectly elastic demand curve.
Exhibit 8-6 Monopolist

7
 MC

10

8
(dollars)
6

MR

0
Quantity
___C_ 19. As shown in Exhibit 8-6, in the short run, the monopoly will:
a. earn an hourly profit of $240.
b. earn an hourly profit of $80.
c. break even (i.e., earn zero economic profit).
d. suffer an hourly loss of $160.
Exhibit 8-7 Profit maximizing for a monopolist

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__C__ 20. The profit-maximizing output for the monopolist in Exhibit 8-7 is:
a. zero.
b. OQ1.
c. OQ2
d. OQ3.
__D__ 21. The monopolist, unlike the perfectly competitive firm, can continue to earn an economic profit in the long
run because of:
a. collusive agreements with competitors.
b. price leadership.
c. cartels.
d. extremely high barriers to entry.
___A_ 22. If pizza used to be produced in a perfectly competitive market, and now the pizza market has become a
monopoly, we can expect:
a. less pizza to be sold at a higher price.
b. more pizza to be sold at a higher price.
c. less pizza to be sold at a lower price.
d. more pizza to be sold at a lower price.
e. the same amount of pizza to be sold at the same price.
__E__ 23. GDP:
a. is the dollar value of all the final goods and services produced within the borders of a
nation.
b. includes intermediate and final goods and services.
c. minus an allowance for depreciation of fixed capital equals GNP.
d. is a less-than-perfect measure of social well-being because it does not include exports and
imports.
e. all of the above.
__B__ 24. Intermediate goods are goods and services used:
a. by the ultimate user.
b. by state and local governments.
c. as inputs.
d. both as inputs and final goods.
__D__ 25. Personal consumption expenditures include:
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 a. all commodities that business firms buy.
b. the purchase prices paid for stocks and bonds by individual households.
c. the construction of residential housing.
d. all goods and services bought by households.
e. the corrected value of housewives' services.
__D__ 26. Gross private domestic investment:
a. excludes all investment in the United States by foreign firms.
b. includes all capital in the United States.
c. includes net additions to the capital stock plus all new corporate stocks and bonds.
d. includes business expenditures on new factories, tools, and machinery.
_C___ 27. Using the expenditure approach, total spending by households for durable goods, nondurable goods, and
services is a category called:
a. gross private domestic investment.
b. capital consumption allowance.
c. personal consumption expenditures.
d. household investment.
___E_ 28. If net exports is a negative number, then:
a. we are not buying enough exports.
b. we are buying too many exports.
c. GDP will underestimated when measured using the expenditure approach.
d. we are exporting more than we are importing.
e. we are exporting less than we are importing.
__D__ 29. Which of the following would not be included in the gross private domestic investment (I) category of GDP?
a. A bakery's purchase of a new oven.
b. A retailer's additions to its inventories.
c. Newly built residential construction.
d. A bank's purchase of a U.S. Treasury bond.
_A___ 30. Using the expenditure approach, GDP equals:
a. C + I + G + (X - M).
b. C + I + G + (X + M).
c. C + I - G + (X - M).
d. C + I + G - (X - M).
__B__ 31. GDP does not count:
a. the estimated value of homemaker production.
b. state and local government purchases.
c. spending for new homes.
d. changes in inventories.
__B__ 32. Because GDP does not account for improvements in the quality of goods, the GDP calculation:
a. tends to overstate the true value of output in the United States.
b. tends to understate the true value of output in the United States.
c. provides an accurate value of output in the United States.
d. provides the best measure of output in the United States.
e. measures the value correctly because price changes always capture the value of
quality changes.
__C__ 33. To calculate net national product and national income,
a. national income is calculated first, and capital depreciation is subtracted from it to get net
national product.
b. national income is calculated first, and indirect business taxes are subtracted from it to get
net national product.
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 c. net national product is calculated first, and indirect business taxes are subtracted from it to
get national income.
d. net national product is calculated first, and compensation of employees is added to it to get
national income.
e. net national product is calculated first, and capital depreciation is added to it to get
national income.
__A__ 34. The income that people earn in factor markets is called:
a. national income.
b. personal income.
c. disposable personal income.
d. transfer payments.
e. net national product.
__D__ 35. Personal income is:
a. total income received by households before taxes.
b. the amount households have available for consumption, savings, and payment of personal
taxes.
c. national income minus corporate profits and FICA plus transfer payments, and dividends.
d. all of the above.
__B__ 36. The income that people receive is called:
a. national income.
b. personal income.
c. disposable personal income.
d. transfer payments.
e. net national product.
__B__ 37. Suppose U.S. nominal GDP was $7,500 billion in 2000 and the GDP chain price index is 120.0. Real GDP in
constant 1996 dollars is:
a. $5,488 billion.
b. $6,250 billion.
c. $6,740 billion.
d. $7,789 billion.
Exhibit 11-1 GDP data

Personal consumption expenditures $5,207.6

Interest 425.1
Corporate profit 735.9
Government purchases 1,406.7
Depreciation 830.1
Rent 146.3
Gross private domestic investment 1,116.5
Compensation of employees 4,426.9
Exports 870.9
Imports 965.7
Indirect business taxes 553.1
Proprietors' income 520.3
Direct taxes 886.9
Income earned but not received 617.3
Income received but not earned 376.6
__C__ 38. In Exhibit 11-1, personal income is:

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 a. $6,254.5 billion.
b. $6,495.2 billion.
c. $6,013.8 billion.
d. $7,082.9 billion.
__C__ 39. What stage of the business cycle immediately follows the trough?
a. Peak.
b. Recovery.
C. Recession.
d. Depression.
__D__ 40. Retired persons are officially classified as:
a. unemployed.
b. self-employed.
c. underemployed.
d. not in the civilian labor force.
__D__ 41. Brian Vargo, an auto repair mechanic who remains unemployed because he refuses to work for less than
$1,000 an hour, is:
a. counted as part of the civilian labor force.
b. considered frictionally unemployed.
c. an underemployed worker.
d. not counted as part of the civilian labor force.
e. considered as productively active.
___E_ 42. Elisa Kilhafer, a housewife in St. Louis, Missouri, who claims on a Bureau of Labor Statistics (BLS) survey that
she is neither gainfully employed nor looking for work, is, according to the BLS,
a. considered retired.
b. counted as unemployed.
c. considered reemployable.
d. counted as a member of the civilian labor force.
e. not counted as a member of the civilian labor force.
__C__ 43. A person who has given up searching for work is called:
a. frictionally unemployed.
b. structurally unemployed.
c. a discouraged worker.
d. unemployed.
___D 44. Eric lost his job because a recession caused his employer's sales to fall. This is an example of:
a. involuntary unemployment.
b. frictional unemployment.
c. structural unemployment.
d. cyclical unemployment.
__A__ 45. Which of the following is true?
a. The GDP gap is the difference between full-employment, real GDP, and actual real GDP.
b. We desire economic growth because it increases the nation's standard of living.
c. Economic growth is measured by the annual percentage increase in a nation's real GDP.
d. Discouraged workers are a reason critics say the unemployment rate is understated.
e. All of the above are true.
__C__ 46. Of the four groups listed below, the highest unemployment rate is typically experienced by:
a. females as a group.
b. males as a group.
c. teenagers.
d. persons who completed 1-3 years of high school.
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___E_ 47. Losers from inflation include:
a. savers and borrowers.
b. landlords and the government.
c. borrowers and the government.
d. those on a fixed income and borrowers.
e. those on a fixed income and savers.
__D__ 48. Union contracts with built-in cost-of-living adjustments and home mortgages that vary with the rate of
inflation are:
a. inappropriate ways of combating inflation.
b. examples of bracket creep.
c. means of implementing fiscal policy.
d. steps that can be taken to decrease the adverse impacts of inflation.
___C_ 49. Those hurt by inflation include:
a. labor unions with COLA clauses.
b. borrowers.
c. savers.
d. owners of real estate.
__B__ 50. In periods of high inflation,
a. people want to hold on to as much money as possible.
b. the purchasing power of money is decreasing.
c. nobody wants to work and earn income.
d. low nominal interest rates are likely to result.
e. nobody wants to buy goods and services.
__D__ 51. Which of the following is true about inflation?
a. Inflation promotes social harmony by uniting people against the government.
b. Inflation is more damaging if it is anticipated.
c. Accurate anticipation of inflation is possible for everyone who is well informed about
economic events.
d. Those who lend money at a rate below the rate of inflation suffer economic losses.
e. If people accurately anticipate inflation, their actions will prevent it.
__A__ 52. One way the consumer price index (CPI) differs from the GDP chain price index is that the CPI:
a. includes purchases of items bought by typical urban consumers.
b. uses only current year quantities.
c. is based on all final goods and services.
d. includes services.
__C__ 53. Suppose the consumer price index (CPI) stands at 250 this year. If the inflation rate is 10 percent, then next
year's CPI will equal:
a. 250.
b. 260.
c. 275.
d. 500.
Exhibit 13-1 Consumer Price Index

Year Consumer Price Index

1 80
2 100
3 105
4 125

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 5 150
__D__ 54. As shown in Exhibit 13-1, the rate of inflation for Year 2 is:
a. 5 percent.
b. 10 percent.
c. 20 percent.
d. 25 percent.
__A__ 55. As shown in Exhibit 13-1, the rate of inflation for Year 3 is:
a. 5 percent.
b. 10 percent.
c. 20 percent.
d. 25 percent.
__A__ 56. As the price of gasoline rose during the 1970s, consumers cut back on their use of gasoline relative to other
consumer goods. This situation contributed to which bias in the consumer price index?
a. Substitution bias.
b. Transportation bias.
c. Quality bias.
d. Indexing bias.
___B_ 57. Which of the following would understate the consumer price index?
a. Substitution bias.
b. Deteriorating quality of products.
c. Improving quality of products.
d. Law of demand bias.
___C_ 58. The real interest rate is defined as the:
a. actual interest rate.
b. fixed-rate on consumer loans.
c. nominal interest rate minus the inflation rate.
d. expected interest rate minus the inflation rate.
___C_ 59. Assume that the real rate of interest is 5 percent and a lender charge a nominal interest rate of 15 percent. If a
borrower expects that the rate of inflation next year will be 10 percent and the actual rate of inflation next
year is 12 percent,
a. neither the borrower nor the lender benefits from inflation.
b. both the borrower and the lender lose from inflation.
c. the borrower benefits from inflation, while the lender loses from inflation.
d. the lender benefits from inflation, while the borrower loses from inflation.
__C__ 60. During the 1970s, the Organization of Petroleum Exporting Countries (OPEC) sharply increased the price of
oil, which triggered higher inflation rates in the United States. This type of inflation is best classified as:
a. pseudo-inflation.
b. demand-pull inflation.
c. cost-push inflation.
d. hyperinflation.

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