ECONOMICS MCQs Set-III

Which of the following is not a goal of macro intervention? Economic growth. Price stability. Full employment. Market power.The distinction between public goods and private goods is based on: Who produces the goods. The link between payment and consumption. How much the goods cost. Government regulation.Patents and copyrights contribute to market power for a firm. FALSE TRUEIn a market economy, producers will produce the goods and services that: Consumers demand. Are least expensive to produce. The government finds most beneficial. Consumers need the most.If you play your music too loud and your neighbor cannot study, this is an example of a negative externality. FALSE TRUEEven if society is producing a combination of goods and services on the production possibilities curve, it may not be producing the optimal mix of output. TRUE FALSEMacro instability refers to the underproduction of public goods. TRUE FALSEA distinguishing characteristic about public goods is that they can be jointly consumed. FALSE TRUEFigure 9.2 In Figure 9.2, the market demand curve is above the social demand curve because: There are internal costs associated with cigarette smoking. The external costs of cigarette smoking are being passed on to those who do not smoke. Positive externalities are being passed on to those who do not smoke. There are free riders associated with cigarette smokingFigure 9.2 Based on Figure 9.2: All the costs associated with cigarette smoking are paid by those who smoke. There are external costs associated with cigarette smoking. Social costs and private costs for cigarette smoking are equal. Cigarette smoking results in equity issues.The free-rider dilemma is associated with: Externalities. Private goods. Public goods. Market power.Which of the following is not an example of market failure? Government intervention. Market power. Public goods. Externalities.The problem with public goods is that those who do not pay receive: None of the good. More of the good than those who pay. Some of the good but less than those who pay. The same amount of the good as those who pay.Figure 9.3 In Figure 9.3, if the rate of output is 320 units: Social costs exceed private costs. External costs equal private costs. Social costs equal private costs. Private costs exceed social costs. Externalities are always harmful to third parties. FALSE TRUEWhich of the following is an example of the price effect during a period of inflation? You own municipal bonds that pay a low interest rate while the price level is rising. Your income increases, but not as rapidly as the price level does. You own a house, and its value rises more rapidly than the price level does. You buy a lot of gasoline, and the price of gasoline rises more rapidly than the price level does. Which of the following is characteristic of a downturn in the business cycle? Lower unemployment rates A decrease in real output A decrease in population An increase in population Suppose that at the start of this year you got a salary increase of 10 percent from your employer. The prices of the goods and services you typically purchase increase 10 percent during the year. At the end of the year you have experienced on balance: Higher real income but lower nominal income. No change in real income. Higher real income and higher nominal income. No change in nominal income.Immediately following the years 1929-1933, the U.S. economy: Resumed growing at the long-term trend for real GDP of 6 percent. Grew dramatically and steadily over a 20-year period with a record long growth period. Experienced World War II, which resulted in rapid growth and rapid deflation. Suffered sporadic decreases in the growth rate of GDP, which led to lower GDP per capita.When there is no deflation or inflation in an economy: Full employment is achieved. Relative prices remain unchanged. Average prices remain unchanged. Prices of all goods change by the same percentage. Alternating periods of growth and contraction in real GDP define: The business cycle. Macro equilibrium. Capitalism. Inflation. The Great Depression in the United States: Caused real GDP to fall dramatically between 1929 and 1933. Was marked by hyperinflation. Was ended by World War I. Ended with a higher real GDP per capita than when it began. Which of the following is likely if an economy is in a recession or headed for one? An increase in consumer confidence An increase in the rate of inflation An increase in the rate of output An increase in unemployment