18. In the short run, there are 500 identical firms in a competitive market. The firms do not use any resources that are available in limited quantities, and each of them has the following cost structure:

Which of the following is a point on the long-run supply curve?
(A) P=$10, Q=500.
(B) P=$6, Q=1,000.
(C) P=$5, Q=500.
(D) P=$5, Q=1,500. 

19. Assume that Mary decides to consume $100,000 in the work period. How much money will she have available for consumption in her retirement period? (A) $100,000 (B) $150,000 (C) $165,000 (D) $265,000

20. If the interest rate on savings increases, it is possible that (A) Mary will decrease her savings in the work period. (B) Mary will increase her savings in the work period. (C) Mary will not change her consumption in the work period. (D) All of the above are possible.

21. If the interest rate on savings increases, (A) Mary will decrease her savings in the work period if the income effect is greater than the substitution effect for her. (B) Mary will increase her savings in the work period if the income effect is greater than the substitution effect for her. (C) Mary will increase her savings in the work period if the substitution effect is greater than the income effect for her. (D) Both a and c are correct.

22. In an imaginary economy, consumers buy only sandwiches and magazines. The fixed basket consists of 20 sandwiches and 30 magazines. In 2006, a sandwich cost $4 and a magazine cost $2. In 2007, a sandwich cost $5. The base year is 2006. If the consumer price index in 2007 was 125, then how much did a magazine cost in 2007? (A) $0.83 (B) $2.25 (C) $2.50 (D) $3.00

23. Other things the same, if the government increases transfer payments to households, then the effect of this on the government's budget (A) will make equilibrium interest rate rise and equilibrium investments increase. (B) will make equilibrium interest rate rise and equilibrium investments decrease. (C) will make equilibrium interest rate fall and equilibrium investments increase. (D) will make equilibrium interest rate fall and equilibrium investments decrease.

24. Assume there is a multiplier effect, some crowding out, and no accelerator effect. An increase in government expenditures changes aggregate demand more, (A) the smaller the MPC and the stronger the influence of income on money demand. (B) the smaller the MPC and the weaker the influence of income on money demand. (C) the larger the MPC and the stronger the influence of income on money demand. (D) the larger the MPC and the weaker the influence of income on money demand.

25. Assume the multiplier is 5 and that the crowding-out effect is $30 billion. An increase in government purchases of $20 billion will shift the aggregate-demand curve to the (A) right by $130 billion. (B) right by $70 billion. (C) right by $50 billion. (D) right by $10 billion.

26. If the natural rate of unemployment falls, (A) both the short-run and long-run Phillips curves shift left. (B) the short-run Phillips curve shifts left, the long-run Phillips curve is unchanged. (C) the short-run Phillips curve is unchanged, the long-run Phillips curve shifts right. (D) the short-run and the long-run Phillips curves shift right.

27. A policy that raised the natural rate of unemployment would shift (A) both the short-run and the long-run Phillips curves to the right. (B) the short-run Phillips curve right but leave the long-run Phillips curve unchanged. (C) the long-run Phillips curve right but leave the short-run Phillips curve unchanged. (D) neither the long-run Phillips curve nor the short-run Phillips curve right.

28. More flexible labor markets will shift (A) both the long-run Phillips curve and the long-run aggregate supply curve to the right. (B) both the long-run Phillips curve and the long-run aggregate supply curve to the left. (C) the long-run Phillips curve to the right and the long-run aggregate supply curve to the left. (D) the long-run Phillips curve to the left and the long-run aggregate supply curve to the right.

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