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4. A budget deficit will increase GNP only if
a) the government borrows money that
otherwise would have been spent on
investment
c) the government borrows from households
money that otherwise would have been
lent to firms
b) the government borrows money that
otherwise would not have been spent
at all
d) the government spends the money abroad
rather than at home
5. A fall in demand for the product of a monopolized industry is predicted to lead to
a) a fall in price c) a decrease in the number of firms in the
long run
b) a decrease in the output of each firm d) None of the above answers is satisfactory
6. The hypothesis of qualified joint profit-maximization implies that firms
a) are profit-maximizers c) will act as if they had a monopoly
b) are unselfish d) are able to exploit the gains from limiting
competition in some respects, but not in
all respects
7. A change in factor prices
a) changes long-run cost-curve positions c) alters the optimal factor proportions
b) changes short-run cost-curve positions d) is likely to do all of the above
8. Which of the following statements is correct for a profit-maximizing firm? Total Revenue
greater than or equal to Total Cost is
a) Necessary but not sufficient c) Necessary and sufficient
b) Sufficient but not necessary d) Neither necessary nor sufficient
9. The theory of price discrimination predicts that in comparison to single-price monopoly
a) output will increase, and average
revenue will decrease
c) output will decrease, and average revenue
will decrease
b) output will increase, and average
revenue will increase
d) output will decrease, and average revenue
will increase
10. A rightward shift in the supply curve of some product will reduce the equilibrium price to a
greater degree
a) the more elastic is the demand curve c) the more the elasticity of demand
diverges from unity in either direction
b) the less elastic is the demand curve d) the closer the elasticity of demand is to
unity
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