1) With imperfect competition, when the demand for a firm’s product is greater t

ID: 1119704 • Letter: 1

Question

1) With imperfect competition, when the demand for a firm’s product is greater than it planned, the firm will

A) increase the price of the product until supply equals demand.

B) meet the demand at its set price.

C) reduce the price until supply equals demand.

D) allow a shortage of the product to develop, without changing the product's price.

2) Which of the follow is NOT a justification for efficiency wages.

A) It improves worker retention.

B) Workers will be less likely to shirk on their responsibilities.

C) Workers will feel rewarded and will work harder as a result.

D) Workers have more income, increasing aggregate demand and profit margins.

3) In the Keynesian model with efficiency wages, effective labor demand increases when

A) labor supply increases.

B) unemployment rises.

C) output rises in the short-run.

D) the wage rate increases.

4) If the fiscal multiplier is greater than one, then

A) it must be the case that private consumption has declined by more than private investment has risen.

B) it must be the case that private consumption and private investment have declined.

C) it must be the case that private consumption and private investment have increased.

D) it must be the case that private consumption has risen by more than private investment has declined.

5) All of the following can explain why macroeconomic stabilization often fails, EXCEPT;

A) There is a significant lag between the implementation of a stabilization policy and when that policy has an effect.

B) Output is not affected by fiscal policy.

C) It is difficult to predict the quantitative effect a policy will have on output.

D) Estimates of how far the economy is from full-employment is often inaccurate or subject to data revisions.

ANS –(b) meet the demand at its set price.

2 Which of the follow is NOT a justification for efficiency wages.

Answer - Workers will be less likely to shirk on their responsibilities.

3. In the Keynesian model with efficiency wages, effective labor demand increases when

Answer - unemployment rises.

4. If the fiscal multiplier is greater than one, then

Answer - C) it must be the case that private consumption and private investment have increased.

ANS –(b) meet the demand at its set price.

Answer - Workers will be less likely to shirk on their responsibilities.

Answer - unemployment rises.

Answer - C) it must be the case that private consumption and private investment have increased.

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