In the figure above, both Joe and Jill initially produce at point A. If Joe and Jill realize
that they each possess a comparative advantage, which outcome can we expect?
Joe will specialize in shirts, and Jill will specialize in pants.
Joe and Jill each will be able to consume more than 2 shirts and 2 pairs of pants.
Joe will specialize in pants, and Jill will specialize in shirts.
Both answers B and C are true.
Dave can produce 10 pairs of shoes of 5 shirts each day. Judy can produce 9 pairs of
shoes or 3 shirts each day. We can say that
Dave has an absolute advantage in the production of shoes and shirts.
Judy is not operating on her PPF.
Judy has an absolute advantage in the production of only shirts.
Dave has a comparative advantage in the production of shoes.
Once a country has a comparative advantage in the production of a good
other countries might be able to gain the comparative advantage in that good
through a process called learning-by-doing.
the country loses its absolute advantage in the production of the good.
other countries can equal but not gain a comparative advantage in the production of
the good.
None of the above answers are correct.
Every spring, motorists do more driving than during the winter months. Every spring,
the price of gasoline increases and the motorists buy more gasoline. This experience
suggests that
the law of supply does not always hold for necessities like gasoline.
the laws of supply and demand are both contradicted for gasoline, though only
during the spring driving season.
the law of demand does not always hold for necessities like gasoline.
None of the above.
During the last decade, the price of a computer fell every year and the quantity sold
increased every year. This experience suggests that
the law of demand was definitely contradicted.
the law of supply was definitely contradicted.
the supply curve shifted rightward.
the demand curve shifted rightward.
If the demand curve for tacos is a downward sloping straight line, at which of the
following prices is the demand the most elastic?
A price of $1.52 per taco.
A price of $1.00 per taco.
There is not enough information given to determine at which price the demand is
most elastic.
A price of $0.50 per taco.
Which of the following can prevent markets from reaching efficiency?
I. price ceiling
II. increasing marginal cost
III. monopoly
I and II
I only
I and III
II and III
The above figure shows the apartment rental market in Bigtown. If there is a shortage
of 200,000 apartments in the Bigtown rental market, it may be because the Bigtown
Housing Authority has imposed
rent floor of $500.00 monthly
a rent floor of $750.00 monthly
a rent ceiling of $750.00 monthly
a rent ceiling of $500.00 monthly
The above figure shows the apartment rental market in Bigtown. If the Bigtown
Housing Authority imposes a rent ceiling of $500.00 per apartment, the deadweight
loss will be
$500,000.00
$125,000.00
$1,000,000.00
$250,000.00
The above figure shows the market for blouses. The government decides to impose a
sales tax on blouses. Using the figure, what is the tax per blouse?
$40 per blouse
$20 per blouse
$10 per blouse
$30 per blouse
The above figure shows the market for blouses. The government decides to impose a
sales tax on blouses. Using the figure, how much tax revenue does the government
raise?
$40,000
$80,000
$60,000
$20,000
The figure above shows the demand and cost curves for a single-price monopolist. If
the firm is a profit maximizer, it will produce units and set a price of
per unit.
15; $20
10; $30
10; $20
None of the above answers are correct
The figure above shows the demand and cost curves for a single-price monopolist. If
the firm is a profit maximizer, its economic profits will equal
$50
$0
$300
$100
The figure above shows the demand and cost curves for a single-price monopolist. If
the firm is a profit maximizer, which of the following statements is FALSE?
The firm will set marginal revenue equal to zero by producing 12.5 units.
The firm will set price where demand is elastic.
The firm will earn an economic profit.
The firm is a not natural monopoly.
Why can a monopoly earn an economic profit in the long run?
Because there is only a single firm in the market.
Because the firm is protected by barriers to entry.
Because there are close substitutes for the firm's product.
All of the above are reasons why a monopoly can earn an economic profit in the
long run.
The table above shows the payoff matrix for a prisoners' dilemma. In the dominant
strategy equilibrium,
both prisoners get 10 years in jail.
both prisoners get 3 years in jail.
both prisoners get 1 year in jail.
both prisoners get 2 years in jail.
The problem for the prisoners in the prisoners' dilemma game in the above table is that
the dominant strategy equilibrium is not the best outcome.
neither prisoner has a dominant strategy.
there is no equilibrium outcome.
All of the above.
Which of the following is an economic rationale for government actions in markets?
Externalities
Public goods
Monopoly
All of the above.
A museum is NOT a pure public good because
most museums receive donations from members of the public.
there can be no congestion.
the general public typically does not go to the museum.
an entry fee can be charged and people can be denied entry if they do not pay.
Free riders are not a problem in the market for a private good because
the good is a rival good.
non-payers can be excluded from consuming the good.
the good can be produced only at a positive marginal cost.
the free rider will not get caught.
The figure above shows the costs and demand curves for the Bigshow Cable Company.
If the regulator of Bigshow Cable Company set its rate a $4, the company would
enjoy a producer surplus equal to $18 million.
incur an economic loss of $7 million.
earn a normal profit.
None of the above.
The figure above shows the costs and demand curves for the Bigshow Cable Company.
If the firm is required to set its price according to the efficient rule, the price is
and the quantity produced is million.
$6; 2
$4; 2
$4; 3
$8; 1
Rate of return regulation, as currently applied to many public utilities,
gives the firms an incentive to cut their costs as much as possible.
generally keeps their prices higher than if they were unregulated monopolists.
gives the firms an incentive to inflate their costs.
generally involves the use of price caps.
If 1998 is the base year, what is the price index for a market basket of goods for 1999
in the above table?
97.3
128.0
102.8
Zero because the price of CDs fell and the price of gasoline increased.
The GDP deflator is
the least used price index because it is so costly to calculate.
an index that measures real production.
an index used to calculate inflation at the wholesale level.
a measure of the average level of prices of all goods and services included in GDP.
Which of the following is TRUE regarding a chain-weighted output index?
I. It is the method used to measure the growth rate of nominal GDP.
II. It uses data from the current year and from the previous year.
III. It is a method of measuring the growth rate of real GDP.
I and III
I and II
I, II and III
II and III
Using the definition of unemployment, which of the following individuals would be
unemployed?
Because of the increased level of automobile imports, an employee of General
Motors is laid off but expects to be called back to work soon.
Because of a reduction in the military budget, your next door neighbor loses her job
in a plant where nuclear warheads are made and must look for a new job.
A full-time student quits school, enters the labor market for the first time, and
searches for employment.
All of these individuals are unemployed.
Which of the following is TRUE regarding the labor force participation rate?
I. The labor force participation rate has gradually trended higher over the last thirty
years.
II. Discouraged workers can affect the labor force participation rate.
III. Adding the labor force participation rate plus the unemployment rate equals the
employment-to-population ratio.
I and II
II and III
I only
I and III
Which of the following individuals is the best example of a structurally unemployed
worker?
A recent college graduate who has entered the labor force.
An individual who quits one job in the hope of finding a better job.
An automobile worker who has lost her job because of an increase in automobile
imports and does not have the skills currently needed by businesses.
An individual who has been laid off from his job because of a business cycle
recession.
Based upon the above table, if disposable income is $400 billion, saving equals
$50 billion
$0 billion
$-50 billion
$100 billion
Based upon the above table, saving equals $100 billion when disposable income equals
$1200 billion
$1000 billion
some amount but we need more information to calculate the amount.
$800 billion
Based upon the above table, the MPC for the consumption function is
constant at 0.75
increasing as income rises
equal to 1.0 at $600 billion
constant at 0.25
If the MPC equals 0.75, then
for every $100 increase in disposable income, saving increases by $25.
consumption expenditure is always more than disposable income.
for every $100 increase in disposable income, saving increases by $75.
for every $100 increase in consumption expenditure, disposable income increases
by $75.
Suppose real GDP increases from $4 trillion to $5 trillion. As a result, consumption
expenditure increases from $4 trillion to $4.75 trillion. This result implies the MPS equals
0.75
0
0.25
some amount that cannot be determined without more information.
Figure A
Figure B
Both figures show the supply-side view
Neither figure shows the supply-side view
Which of the following is true?
I. checks are considered money because they can be used as a medium of exchange.
II. Checks represent a transfer of money.
I only
II only
Both I and II
Neither I nor II
Credit cards
are a part of M2 but not a part of M1.
are not a part of the money supply because they are not a means of payment.
are a part of the money supply because they are used to purchase goods and services.
are a part of M1 but not of M2
The opportunity cost of holding money refers to
the interest that could have been earned if the money balances had been changed
into an interest-bearing asset.
the service fees charged to withdraw currency from an ATM.
the price level.
the pleasure that would have been received if the money balances had been used to
buy a good or service.
an increase in investment.
a decrease in interest rates.
an increase in exports.
All of the above occur.
In the above figure, suppose the economy was initially in an equilibrium at point A. In
the very short run, where would the economy move if the Fed makes an open market
purchase of bonds?
A, that is, the economy would not change its equilibrium.
C.
D.
B.
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