Question: is a theoretical extreme used for analysis

Answer: Perfect competition is important to study because it:

Question: economic profit.

Answer: The difference between total revenue and total cost is:

Question: total cost rises with increases in output

Answer: When a firm's total revenue exceeds its total cost:

Question: marginal cost equals price.

Answer: The profit-maximizing level of output for a perfectly competitive firm in the short run occurs where:

Question: average variable cost.

Answer: A perfectly competitive firm will continue producing in the short run as long as it can cover its:

Question: industry supply curve will shift to the right.

Answer: If some firms in a perfectly competitive industry are earning positive economic profits, then in the long run, the:

Question: industry supply curve is horizontal

Answer: If a perfectly competitive industry is characterized by constant costs in the long run, its long-run:

Question: increase in the quantity supplied in the short run and an increase in market supply in the long run.

Answer: An increase in demand in a perfectly competitive industry characterized by constant costs will cause a/an:

Question: experiences economies of scale over a wide range of output

Answer: A natural monopoly is most likely to result if a single firm:

Question: is the only seller in a small town or community

Answer: A location-based monopoly is most likely to result if a single firm:

Question: network effects

Answer: Situations in which the more users of a product there are, the more useful the product becomes are called:

Question: has some monopoly power

Answer: A firm that faces a downward-sloping demand curve:

Question: Monopolies produce too little and charge too much from the standpoint of efficiency.

Answer: Which of the following is true regarding monopoly?

Question: is a price taker.

Answer: In contrast to a monopoly firm, a perfectly competitive firm:

Question: sets marginal cost equal to marginal revenue rather than price.

Answer: A feature of monopoly that leads to unfavorable consequences is that it:

Question: Imperfect competition includes these market types

Answer: monopolistic competition and oligopoly.

Question: In large shopping areas, the retail market is most illustrative of:

Answer: monopolistic competition.

Question: Due to the existence of a large number of similar, but not identical, substitutes in most communities, the market for chiropractors is best considered:

Answer: monopolistic competition.

Question: The market for plumbing services in a city can be characterized by the model of monopolistic competition. Suppose that the market is initially in long-run equilibrium, and then there is an increase in demand for plumbing services. We expect that in the long run:

Answer: new firms will enter the plumbing market.

Question: A criticism of oligopolistic firms is that they:

Answer: have high concentration ratios.

Question: An oligopoly knows

Answer: that its actions affect(s) its rivals and that the reactions of its rivals will affect it.

Question: Suppose that each of two prisoners has the independent choice of confessing to a crime or not confessing. If neither confesses, they spend 2 years in jail; if both confess, they spend 3 years in jail; and if one confesses while the other does not, the confessor gets off with 1 year in jail while the other gets 6 years in jail. According to game theory, the likely strategy by the prisoners is:

Answer: both will confess.

Question: A strategy that is the same regardless of the action of the other player in a game is said to be a:

Answer: dominant

Question: A complete business cycle is defined by the passage from:

Answer: one peak to the next peak.

Question: To determine whether an economy's output is growing or shrinking, one must keep track of:

Answer: changes in real GDP.

Question: Which of the following is an example of structural unemployment?

Answer: A geologist who is permanently laid off from an oil company due to a new technological advance.

Question: Which of the following statements is true?

Answer: Unexpected deflation benefits lenders and hurts borrowers.

Question: true or false: They indicate what is happening to the general level of prices

Answer: TRUE

Question: true or false: They are used to estimate the rate of inflation or deflation.

Answer: TRUE

Question: true or false: They are used to convert nominal values to real values, so comparisons can be made across time.

Answer: TRUE

Question: true or false: They indicate what the economy will do in the following months

Answer: FALSE

Question: If the cost of a market basket is $200 in 2006 and $230 in 2007, the price index for 2007 using 2006 as the base year is:

Answer: 1.15

Question: Suppose in 2007, nominal GDP in Clarendon was $12,840 billion and real GDP was $10,560 billion. Calculate the value of the implicit price deflator. Follow the convention of multiplying price indexes by 100.

Answer: 121.59

Question: The natural rate of unemployment:

Answer: equals the sum of frictional and structural unemployment.

Question: Potential output is:

Answer: the level of real GDP that exists when the quantity of labor supplied is equal to the quantity of labor demanded.

Question: Which of the following is a source of wage stickiness?

Answer: will change nominal GDP but will not change real GDP in the long run.

Question: In the short-run, an output gap occurs because:

Answer: wages and some prices have not adjusted sufficiently to maintain output at its potential level.

Question: Gross domestic product:

Answer: is a flow variable.

Question: Which of the following is an example of an intermediate good?

Answer: purchase of lumber by a property developer to be used in building a new house

Question: The largest component of factor income is:

Answer: employee compensation.

Question: Executive salaries and bonuses are included in the income category of:

Answer: employee compensation.

Question: Which of the following is an example of an indirect business tax?

Answer: property tax

Question: Changes in nominal GDP:

Answer: are due to changes in output and price while changes in real GDP are attributed to movements in output only.

Question: "Titanic," a movie released in 1998, was, as of 1999, the top-grossing movie of all time. However, in real terms, it ranked eighth in box office receipts, below an older hit movie, "Gone With the Wind." We can conclude that:

Answer: more people went to see "Gone with the Wind" than "Titanic."

Question: All else constant, an outbreak of avian flu:

Answer: is likely to increase GDP because it drives up health-care spending.

Question: In the generation of GDP, pollution often occurs. As a result:

Answer: GDP is not always a good measure of economic or social welfare.