Mary decides to spend 3 hours working overtime rather than watching a movie with her friends. She earns 100 NT$ an hour. Her opportunity cost of working is
the 300 NT$ she earns working
the 300 NT$ minus the enjoyment she would have received from watching the movie
the enjoyment she would have received had she watched the movie
nothing, since she would have received less than 300 NT$ of enjoyment from the movie
Suppose that a tax is placed on cigarettes. If the buyer pays the majority of the tax we know that the
supply curve is more inelastic than the demand curve
demand curve is more inelastic than the supply curve
government has placed the tax on the seller
government has placed the tax on the buyer
According to the graph, which of the following is true for Cliff and Paul?
Paul has a comparative advantage in both wheat and corn
Paul has a comparative advantage in wheat and Cliff has a comparative advantage in corn
Cliff has a comparative advantage in wheat and Paul has a comparative advantage in corn
Cliff has an absolute advantage in both wheat and corn
According to the graph, assume that Cliff and Paul were both producing wheat and corn,and each were dividing their time equally between the two. Then they decide to specialize in the product they have a comparative advantage in. As a result, total production of corn would
increase by 1 bushel
increase by 3 bushels
increase by 5 bushels
decrease by 2 bushels
During an unusually hot summer, the demand for soft drinks increases while the supply of soft drinks remains the same. The price of a soft drink
falls and the supply of soft drinks decreases
rises and the supply of soft drinks increases
rises and the quantity supplied increases
rises and the quantity supplied decreases
Suppose that the incomes of buyers in a particular market for a normal good decline and there is also a reduction in input prices. What would we expect to occur in this market?
The equilibrium price would increase, but the impact on the amount sold in the market would be unclear
the equilibrium price would decrease, but the impact on the amount sold in the market would be unclear
Both equilibrium price and equilibrium quantity would increase
Equilibrium quantity would increase, but the impact on equilibrium price would be unclear
If goods A and B are complements, an increase in the price of A will result in
more of good A sold
B)more of good B sold
less of good B sold
no difference in the quantity sold of either good
Holding all else constant, if a pencil manufacturer increases production by 20 percent when the market price of pencils increases from $0.50 to $0.60, then the price elasticity of supply, using the midpoint method, must be
elastic, since elasticity is equal to 1.10
inelastic, since elasticity is equal to 1.10
inelastic, since elasticity is equal to .90
elastic, since elasticity is equal to .90
Moving down a linear demand curve we know that elasticity gets
smaller, then larger
larger
smaller
larger, then smaller
A monopolistically competitive market could be considered inefficient because
marginal revenue exceeds average revenue
price exceeds marginal cost
efficient scale is realized in the long run, but not in the short run
markup pricing does not occur in any other market structure
The fact that there is a great deal of advertising of men’s shaving products indicates tha
the market for those products is perfectly competitive
it costs firms very little to product those products
those products are highly differentiated
All of the above are correct
In some cases, tradable pollution permits may be better than a corrective tax because
pollution permits allow for a market solution while a corrective tax does not
pollution permits generate more revenue for the government than a corrective tax
pollution permits are never preferred over a corrective tax
the government can set a maximum level of pollution using permits
Refer to Table 1. What is average fixed cost when output is 40 units?
$1.00
$3.32
$5.00
$8.00
Refer to Table 1. What is variable cost when output equals 30 units?
$4
$40
$90
$130
If marginal cost is below average total cost, then average total cost
is constant
is falling
is rising
may rise of fall depending on the size of fixed costs
Economies of scale occur when
long-run average total costs rise as output increases
long-run average total costs fall as output increases
average fixed costs are falling
average fixed costs are constant
Firms operating in competitive markets produce output levels where marginal revenue equals
price
average revenue
total revenue divided by output
All of the above are correct
If marginal cost exceeds marginal revenue, the firm
is most likely to be at a profit-maximizing level of output
should increase the level of production to maximize its profit
should reduce its average fixed cost in order to lower its marginal cost
may still be earning a positive accounting profit
Mr. Wang operates a business in a competitive market. The current market price is $8.50, and at her profit-maximizing level of production, the average variable cost is $8.00, and the average total cost is $8.25. Which of the following statements about Mrs.Smith’s firm is correct?
Mr. Wang should shut down her business in the short run but continue to operate in the long run
Mr. Wang should continue to operate in the short run but shut down in the long run
Mr. Wang should continue to operate in both the short run and long run
Mr. Wang should shut down in both the short run and long run
Mr. Wang operates a business in a competitive market. The current market price is $8.50, and at her profit-maximizing level of production, the average variable cost is $8.00, and the average total cost is $8.25. Which of the following statements about Mrs. Smith’s firm is correct?
Mr. Wang should shut down her business in the short run but continue to operate in the long run
Mr. Wang should continue to operate in the short run but shut down in the long run
Mr. Wang should continue to operate in both the short run and long run
Mr. Wang should shut down in both the short run and long run
When a monopolist increases the amount of output that it produces and sells, average revenue
increases, and marginal revenue increases
increases, and marginal revenue decreases
decreases, and marginal revenue increases
decreases, and marginal revenue decreases
Refer to Figure 1. What price will the monopolist charge?
A
B
C
F
Refer to Figure 1. How much output will the monopolist produce?
O
J
K
L
Refer to Figure 1. What area measures the monopolist’s profit?
(B− F)×K
(A −H)× J
(B−G)×K
0.5[(B− F)× (L −K)]
work only if student 2 works
work regardless of the decision made by student2
not work if student 2 works
not work regardless of what student 2 decides
Which of the following is a defining characteristic of oligopoly?
barriers to entry
selling a homogeneous good
selling a differentiated good
collusion
The real exchange rate is the
relative price of foreign-produced output relative to U.S. -produced output
price of foreign goods relative to the price of domestic goods
trade-weighted index
current account balance
In the macroeconomic short run,
actual real GDP may be less than or more than potential GDP
the unemployment rate is zero
the economy is always moving away from full employment
actual real GDP always equals potential GDP
In the above figure, which movement illustrates the impact of a rising price level and a constant money wage rate?
E to I
E to F
E to G
E to K
In the above figure, which part corresponds to a destruction of part of the nation’s capital stock?
Figure A
Figure B
Figure C
Figure D
In the above figure, which part corresponds to an increase in the money wage rate?
Figure A
Figure B
Figure C
Figure D
In the long-run
the aggregate supply curve is upward sloping
real GDP is equal to potential GDP
aggregate supply depends on the price level
All of the above answers are correct
Which of the following statements is incorrect?
Fiscal policy is the attempt to influence the economy using taxes, transfer payments, and government expenditures
Government expenditures affect aggregate demand directly because government expenditures are a component of aggregate demand
Taxes and transfer payments affect aggregate demand by changing disposable income
An increase in disposable income leads to a decrease in aggregate demand
In the above figure, which movement illustrates the impact of a falling price level and a constant money wage rate?
E to I
E to F
E to J
E to H
If the marginal propensity to consume is 0.8, every $10 increase in disposable income increases
consumption expenditure by $0.80
consumption expenditure by $18.00
saving by $0.20
consumption expenditure by $8.00
Demand-pull inflation can start when
money wage rates rise but the price level does not change
money wage rates rise faster than prices
the short-run aggregate supply curve shifts rightward
the aggregate demand curve shifts rightward
If an economy at potential GDP experiences a demand shock that shifts the aggregate demand curve rightward, there will be
an eventual leftward shift in the short-run aggregate supply curve
unemployment below the natural rate
upward pressure on money wage rates
All of the above answers are correct
In the above figure, which path represents a demand-pull inflation?
point A to C to D to F to G
point A to B to D to E to G
point A to C to D to E to G
point A to B to D to F to G
Cost-push inflation starts with
an increase in aggregate demand
a decrease in aggregate demand
an increase in short-run aggregate supply
a decrease in short-run aggregate supply
If oil prices increase, then in the short run, real GDO will ________ and the price level will ________ .
increase; rise
increase; fall
decrease; rise
decrease; fall
Which of the following leads to an rightward shift in the short-run Phillips curve?
I. a reduction in inflationary expectations
II. an increase in the natural unemployment rate
I only
II only
I and II
neither I nor II
The long-run Phillips curve shows the relationship between the inflation rate and the unemployment rate when the
real interest rate equals the nominal interest rate
real interest rate is zero
actual inflation rate equals the expected inflation rate
inflation rate is zero
An increase in the natural unemployment rate shifts
both the short-run and the long-run Phillips curves rightward
the short-run but not the long-run Phillips curve rightward
the long-run but not the short-run Phillips curve rightward
neither the short-run nor the long-run Phillips curve
If people correctly anticipate an increase in inflation so that their money wage rate adjusts immediately, then, assuming the economy is initially at potential GDP,
only real GDP increases with no change in the price level
only the price level rises with no change in real GDP
both the price level and real GDP increase
neither the price level nor real GDP increase
A rational expectation of inflation is
how economists make perfect forecasts of inflation
how unexpected inflation affects the economy
why unexpected inflation redistributes income
a forecast of inflation that uses all relevant information
A budget surplus occurs when government
outlays exceeds tax revenues
tax revenues exceeds outlays
tax revenues equals outlays
tax revenues equal social security expenditures
When interest income is taxed and the inflation rate rises, the tax revenue collected by the government
increases
doesn’t change
decreases
could either increase or decrease
The Laffer curve shows that increasing ________ increases ________ when ________ low.
tax revenue; potential GDP; tax revenue is
tax rates; tax revenue; tax rates are
potential GDP; tax revenue; tax revenue is
None of the above answers is correct.
Discretionary fiscal policy is the
control of the money supply as a tool of macroeconomic policy
use of taxation but not government spending to pursue macroeconomic goals
control of government expenditures but not taxes
use of government expenditures and taxation to pursue macroeconomic goals
In the short run, and increase in government expenditure will
I. shift the aggregate demand curve rightward.
II. increase real GDP.
III. increase the government expenditure multiplier.
IV. increase the autonomous tax multiplier.
I and II
I and III
I,II and III
III and IV
The government’s fiscal policy includes automatic stabilizers that automatically
increase spending during a recession
decrease spending during an expansionary boom
increase transfer payments in a recession
All of the above answers are correct
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