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1
Living standards in ancient Rome remained relatively constant for 1000 years because:
A)population increased at approximately the same rate as output, leaving output per person unchanged.
B)average family sizes increased at the same rate as output per person.
C)constant wars reduced the size of the population at the same rate as output was falling, leaving output per person unchanged.
D)constant wars depleted the economy's capital stock, resulting in little or no growth of total output.
2
Compared to the beginning of the Industrial Revolution, living standards around the world:
A)have approximately tripled for both rich and poor countries, leaving the relative gap between rich and poor countries the same.
B)have grown fastest in what were then the poorest countries, resulting in much less variation between rich and poor nations.
C)currently show considerably more variation between rich and poor countries.
D)show no marked trend regarding the gap between rich and poor countries.
3
The purchase of corporate stock is considered:
A)an economic investment.
B)a financial investment.
C)dissaving.
D)the same as the purchase of new plant and equipment.
4
If all prices could quickly adjust to unexpected changes in demand:
A)output would fluctuate in inverse proportion to the price changes.
B)output would remain constant and resources remain fully employed.
C)output would fluctuate in direct proportion to the price changes.
D)output would fluctuate in inverse proportion to changes in employment.
5
If prices are inflexible, an unexpected reduction in demand for a firm's product would result in:
A)rising inventories followed by cuts in production.
B)falling inventories followed by cuts in production.
C)immediate cuts in both production and desired inventory levels.
D)rising inventories followed by increased employment of resources.
6
Refer to the following diagram:

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Suppose a factory minimizes its average costs by producing 50 metal bars per week. It can produce this output profitably at an expected price of $4 each, corresponding to expected demand of DM. With flexible prices, which of the following is the most likely initial consequence of a change in demand?
A)Production will drop to 35 bars per week if demand unexpectedly falls to DL
B)Production will rise to 65 bars per week if demand predictably rises to DH
C)Profits will rise if demand unexpectedly rises to DH
D)The price will rise to $6 and production will rise to 65 bars per week if demand unexpectedly rises to DH
7
Which product would most likely be characterized by "sticky" prices?
A)Feed corn
B)Oil
C)Natural gas
D)Magazines
8
The economy tends to exhibit short-run output fluctuations and long-run stability because:
A)prices are more flexible in the short run than the long run.
B)prices are more flexible in the long run than the short run.
C)demand shocks are more common in the short run while supply shocks are more common in the long run.
D)government and central bank policies are destabilizing in the short run but effective in the long run.
9
An unexpected drop in consumer spending would be classified as a:
A)negative demand shock.
B)negative supply shock.
C)positive demand shock.
D)positive supply shock.
10
Refer to the following diagram:

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Suppose a factory minimizes its average costs by producing 50 metal bars per week. It can produce this output profitably at an expected price of $4 each, corresponding to expected demand of DM. Production will likely fall to 35 bars per week if:
A)prices are flexible and demand unexpectedly falls to DL.
B)prices are inflexible and demand unexpectedly falls to DL.
C)prices are flexible and demand predictably falls to DL.
D)the price unexpectedly falls to $2.







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