Full employment
A) occurs when all unemployment is cyclical and structural.
B) occurs when all unemployment is frictional and discouraged.
C) occurs when there is zero unemployment.
D) occurs when there is zero frictional unemployment.
E) occurs when there is zero cyclical unemployment.
Use the figure below to answer the following question.
Figure 22.3.1
Refer to Figure 22.3.1. The country of Kemper is on its aggregate production function
at point W in the above figure. If the population increases with no change in capital or
technology, the economy will
A) move to point such as Y.
B) remain at point W.
C) move to point such as X.
D) move to point such as Z.
E) either remain at point W or move to point X.
A patent is an example of
A) a subsidy.
B) a pollution permit.
C) a voucher.
D) a tax.
E) a legal device for creating property rights.
The fundamental force that drives international trade is
A) comparative advantage.
B) absolute advantage.
C) a countries’ desire to increase their trade surplus.
D) cheap labour in countries like China and India.
E) unemployment of factors of production.
Refer to Figure 3.4.2. When the price is $10 a unit,
A) consumers will buy only 100 units of output.
B) consumers will buy 500 units of output.
C) consumers will buy nothing.
D) a shortage occurs.
E) the surplus is zero.
ACME, Inc. operates in a market structure in which there are many other firms that find
it easy to enter or exit. ACME is operating in ________ market.
A) definitely a perfectly competitive
B) a perfectly competitive or a monopolistically competitive
C) definitely a monopolistically competitive
D) neither a perfectly competitive nor a monopolistically competitive
E) a monopolistic
A fact that argues in favour of prohibition and against taxes on illegal drugs is that
A) prohibition sends a signal that might influence preferences.
B) penalties for illegal activities with prohibition are less than the penalties for tax
evasion.
C) a black market is easier to maintain under prohibition than under the tax code.
D) search activity decreases with prohibition.
E) all of the above
Since 1976 the Canadian Gini ratio has
A) decreased and then increased.
B) decreased.
C) increased.
D) been approximately equal to zero.
E) increased and then decreased.
If the price of an inferior good rises, the income effect
A) will have an uncertain effect on consumption of the good, and the substitution effect
will decrease consumption.
B) will decrease consumption of the good, and the substitution effect will decrease
consumption.
C) and the substitution effect will both increase consumption of the good.
D) and the substitution effect will both decrease consumption of the good.
E) will increase consumption of the good and the substitution effect will decrease
consumption.
Use the information below to answer the following question.
Fact 10.5.1
Two leading design firms, Astro Studios of San Francisco and Hers Experimental
Design Laboratory, Inc. of Osaka, Japan, worked with Microsoft to design the Xbox
360 video game console. IBM, ATI, and SiS designed the Xbox 360’s hardware. Three
firms, Flextronics, Wistron, and Celestica, manufacture the Xbox 360 at their plants in
China and Taiwan.
Refer to Fact 10.5.1. Microsoft works with a large number of other firms to bring the
Xbox to market, rather than performing all the required tasks at its headquarters in
Seattle because
A) Microsoft wants to control as many firms as possible and by sending Xbox design
and production to other firms, Microsoft gains control in a new market.
B) this is the method of production with the lowest cost.
C) Microsoft employees do not have the expertise to perform the necessary tasks.
D) Microsoft already dominates too many markets and the government requires that
other firms coordinate Xbox design and production.
E) All of the above
Refer to Figure 27.1.1. When disposable income is equal to $200 billion, saving is
A) zero.
B) $200 billion.
C) $150 billion.
D) $60 billion.
E) – $60 billion.
Dumping occurs when a foreign firm
A) pollutes international waters.
B) disposes of waste material internationally.
C) sells inferior output to foreigners.
D) sells its exports at a lower price than its cost of production.
E) sells its output at a lower price in a foreign country than in the country where it
produces the good.
Refer to Figure 28.2.2. The economy is in long-run equilibrium. If the short-run
aggregate supply curve shifts leftward from SAS0 to SAS1, ceteris paribus, then the
actual inflation rate
A) is greater than the expected inflation rate.
B) is less than the expected inflation rate.
C) is the same as the expected inflation rate.
D) cannot be determined without more information.
E) depends on what happens to wage settlements.
Complete the following sentence. A price floor set below the equilibrium price results
in
A) a surplus.
B) a shortage.
C) the equilibrium price.
D) an increase in supply.
E) a decrease in demand.
Everything else remaining the same, if aggregate demand changes, the amount by
which the AD curve shifts depends on
A) the change in aggregate supply.
B) the change in autonomous expenditure and the multiplier.
C) changes in induced expenditure.
D) the change in the price level.
E) potential GDP.
A firm’s total fixed cost is $100. If total cost is $200 for one unit of output and $310 for
two units, what is the marginal cost of the second unit?
A) $100
B) $110
C) $200
D) $210
E) $310
Among the following, the domestic government gains the most revenue when it
A) imposes an import quota.
B) eliminates an import quota.
C) encourages freer trade.
D) imposes a tariff.
E) increases the demand for a domestically-produced good.
A firm with a lower unit cost from producing a wider range of goods and services has
economies of
A) transactions costs.
B) scale.
C) scope.
D) team production.
E) market coordination.
An increase in ________ will shift the supply of loanable funds curve ________.
A) expected future income; rightward
B) wealth; leftward
C) disposable income; leftward
D) default risk; rightward
E) the real interest rate; rightward
Refer to Figure 29.3.1, which shows the outlays and revenues for the government of
Pianoland. If potential GDP is $750 billion, and actual real GDP is $650 billion, the
cyclical deficit is
A) zero.
B) $60 billion.
C) $40 billion.
D) equal to the structural deficit.
E) $180 billion.
Advertising by firms in monopolistic competition
A) does not provide consumers with useful information.
B) increases the marginal cost of production.
C) is inefficient.
D) is a waste of valuable resources because firms are forced by the entry of rival firms
to be price takers.
E) generates the perception among consumers that product differentiation exists.
The income elasticity of demand equals the percentage change in ________, other
things remaining the same.
A) price divided by the percentage change in income
B) price divided by the percentage change in quantity demanded
C) income divided by the percentage change in quantity demanded
D) quantity demanded divided by the percentage change in price
E) quantity demanded divided by the percentage change in income
If the present value of the $1,000 to be received in one year is $800, the interest rate is
A) 25 percent per year.
B) 8 percent per year.
C) 10 percent per year.
D) 12 percent per year.
E) 125 percent per year.
The marginal propensity to import is equal to
A) disposable income minus consumption expenditure minus saving divided by real
GDP.
B) the change in imports divided by the change in real GDP that brought it about, other
things remaining the same.
C) the change in net imports divided by the change in disposable income, other things
remaining the same.
D) imports minus exports.
E) 1 – MPS – MPC.
The maximum total economic profit that can be made by colluding duopolists
A) equals the economic profit made by a monopoly.
B) exceeds the economic profit made by a monopoly.
C) is less than the economic profit made by a monopoly.
D) is zero.
E) cannot be determined.
Nominal consumption expenditure is $1,500 billion and Real consumption expenditure
is $1,200 billion.
The CPIC is
A) 0.80.
B) 125.
C) 80.
D) 1.25.
E) 150.
Real GDP per person in the country of Flip is $10,000, and the growth rate is 10 percent
a year. Real GDP per person in the country of Flap is $20,000 and the growth rate is 5
percent a year. When will real GDP per person be greater in Flip than in Flap?
A) in 2 years
B) in 15 years
C) never
D) in 10 years
E) in 7 years
Refer to Fact 11.1.1. The decisions made on ________ are long-run decisions because
they ________.
A) June 2; are changes to labour which affect people for the long term
B) January 31 and July 18; change Starbucks’ plant
C) February 25, June 2, and July 18; all deal with stores located in the United States
D) January 31 and February 25; are the earliest decisions
E) none of the above
Refer to Figure 5.3.1. If the quantity produced is 100,
A) marginal social benefit exceeds marginal social cost.
B) marginal social cost exceeds marginal social benefit.
C) production is efficient.
D) marginal social benefit is minimized.
E) deadweight loss is zero.
Suppose the Bank of Canada follows a fixed-exchange rate of 0.50 U.K. pounds per
Canadian dollar. If the demand for dollars temporarily decreases, to maintain the target
exchange rate, the Bank can
A) sell dollars.
B) buy dollars.
C) increase Canadian exports.
D) increase Canadian imports.
E) violate purchasing power parity.
If the Ricardo-Barro effect occurs, ________ in private saving finances the government
budget deficit, and the real interest rate ________.
A) an increase; remains the same
B) a decrease; increases
C) an increase; falls
D) a decrease; remains the same
E) an increase; rises
Team production is a production process in which
A) an assembly line is used.
B) individuals rotate from one task to another.
C) competing groups perform identical tasks.
D) individuals specialize in mutually supportive tasks.
E) pay is based on group output.
If an increase in the supply of good A increases the demand for good B, then
A) the demands for A and B are independent.
B) the elasticity of supply for good A is greater than 1.
C) A and B are complements.
D) A and B are substitutes.
E) the demand for A is price elastic.