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Eco 561 Final Exam

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ECO 561 Final Exam w/ corrected answers

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 the quantity …show more content…

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

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 proportion
18) An economy’s aggregate demand curve shifts leftward or rightward by more than changes in initial spending because of the A. net export effect B. wealth effect C. real-balances effect [D. multiplier effect]
19) Suppose productivity rises in a particular economy, but wages stay the same. Other things equal, A. the demand curve will shift leftward [B. the supply curve will shift rightward] C. the supply curve will shift leftward D. expenditures curve will shift rightward

20) If personal taxes were decreased and resource productivity increased simultaneously, the equilibrium [A. output would rise] B. output would fall C. price level would necessarily fall D. price level

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