Economists use the phrase “There is no such thing as a free lunch,” to illustrate the
principle that
inflation almost always results in higher prices over time.
nothing is free in a market economy.
making decisions requires trading off one goal against another.
if something looks too good to be true, it probably is not worth pursuing.
A likely effect of government policies that redistribute income and wealth from the
wealthy to the poor is that those policies
enhance equity.
reduce efficiency.
reduce the reward for working hard.
All of the above are correct.
Suppose some country had an adult population of about 50 million, the labor-force
participation rate was 60 percent, and the unemployment rate was 5 percent. What were
the number of people employed and the number of people in the labor force?
27.5 million, 30 million
28.5 million, 30 million
30 million, 31.5 million
30 million, 32.5 million
Which of the following statements is correct?
A general, persistent decline in stock prices may signal that the economy is about to
enter a boom period because people will be able to buy stock for less money.
A general, persistent decline in stock prices may signal that the economy is about to
enter a recession because low stock prices may mean that people are expecting low
corporate profits.
A general, persistent decline in stock prices may signal that the economy is about to
enter a recession because low stock prices mean that corporations have had low
profits in the past.
Expectations about the business cycle have no impact on stock prices.
Refer to Table 1. he opportunity cost of 1 airplane for Japan is
5 cars.
4 cars.
1/4 car.
1/5car.
Refer to Table 1. Japan has an absolute advantage in
both goods and the United States has a comparative advantage in cars.
both goods and the United States has a comparative advantage in airplanes.
cars (but not airplanes) and the United States has a comparative advantage in
airplanes.
airplanes (but not cars) and the United States has a comparative advantage in cars.
When the price of bubble gum is $0.50, the quantity demanded is 400 packs per day.
When the price falls to $0.40, the quantity demanded increases to 600. Given this
information and using the midpoint method, we know that the demand for bubble gum
is
inelastic.
elastic.
unit elastic.
perfectly inelastic.
Which of the following observations would be consistent with a binding price floor in a
market?
A smaller quantity of the good is bought and sold after the price floor becomes
effective than before the price floor became effective.
A smaller quantity of the good is demanded after the price floor becomes effective
than before the price floor became effective.
A larger quantity of the good is supplied after the price floor becomes effective than
before the price floor became effective.
All of the above are correct.
Russell spends an hour studying instead of playing tennis. The opportunity cost to him
of studying is
the improvement in his grades from studying for the hour.
the improvement in his grades from studying minus the enjoyment of playing
tennis.
the enjoyment and exercise he would have received had he played tennis.
zero. Since Russell chose to study rather than to play tennis, the value of studying
must have been greater than the value of playing tennis.
Suppose a tax of $5 per unit is imposed on a good. The supply curve and the demand
curve are straight lines. The tax decreases consumer surplus by $10,000 and it
decreases producer surplus by $15,000. The deadweight loss of the tax is $2,500. From
this information it follows that the tax decreased the equilibrium quantity of the good
from 6,500 to 5,500.
from 5,500 to 4,500.
from 5,000 to 3,000.
from 6,000 to 4,000.
Suppose that Taiwan imposed an import quota on beef. Sales of Taiwan’s beef
producers would
rise and exports of other industries would increase.
rise and exports of other industries would decline.
not change, exports of other industries would increase.
not change, exports of other industries would decline.
The Coase theorem suggests that private markets may not be able to solve the problem
of externalities
if the government does not become involved in the process.
when the number of interested parties is large and bargaining costs are high.
if the firm in the market is a monopoly.
if some people benefit from the externality.
Which of the following is a disadvantage of government provision of a public good
such as national defense?
(i) The government does not know the exact willingness of consumers to pay for the
public good.
(ii) The free-rider problem is more likely to occur when the government provides a
public good than when the private sector provides a public good.
(iii) Taxpayers do not agree on the optimal quantity of the public good that the
government should provide.
(i) only
(i) and (ii) only
(i) and (iii) only
(i), (ii), and (iii)
Who pays a corporate income tax?
owners of the corporation
customers of the corporation
workers of the corporation
All of the above are correct.
When a restaurant stays open for lunch service even though few customers patronize
the restaurant for lunch, which of the following principles is (are) best demonstrated?
(i) Fixed costs are sunk in the short run.
(ii) In the short run, only fixed costs are important to the decision to stay open for
lunch.
(iii) If revenue exceeds variable cost, the restaurant owner is making a profitable
strategic decision to remain open for lunch.
(i) and (ii) only
(ii) and (iii) only
(i) and (iii) only
All are demonstrated.
Felix deposited $500 into an account two years ago. The first year he earned 3 percent
interest and the second year he earned 5 percent interest. How much money does Felix
have in his account now?
$540.75
$540.80
$540.00
None of the above are correct to the nearest penny.
The Central Bank can increase the price level by conducting open market
sales and raising the discount rate.
sales and lowering the discount rate.
purchases and raising the discount rate.
purchases and lowering the discount rate.
Which of the following is true?
Efficiency refers to the size of the economic pie; equity refers to how the pie is
divided.
Government policies usually improve upon both equity and efficiency.
As long as the economic pie continually gets larger, no one will have to go hungry.
Efficiency and equity can both be achieved if the economic pie is cut into equal
pieces.
Suppose that the money supply tripled, but at the same time velocity fell by half and
real GDP was unchanged. According to the quantity equation the price level
is 1.5 times its old value
is 3 times its old value.
is 6 times its old value.
is the same as its old value.
Paul, a U.S. citizen, builds a telescope factory in Israel. His expenditures
increase U.S. and Israeli net capital outflow.
increase U.S. net capital outflow, but decrease Israeli net capital outflow.
decrease U.S. net capital outflow, but increase Israeli net capital outflow.
None of the above is correct.
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