1) the presence of discouraged workers:
a.increases the size of the labor force, but does not affect the unemployment rate.
b.reduces the size of the labor force, but does not affect the unemployment rate.
c.may cause the official unemployment rate to understate the true amount of
unemployment.
d.may cause the official unemployment rate to overstate the true amount of
unemployment.
2) in economics, a physical establishment such as a factory, farm, mine, store, or
warehouse that performs one or more functions in fabricating and distributing goods is
called a(n):
a.industry.
b.plant.
c.conglomerate.
d.shop.
3) Suppose that real domestic output in an economy is 20 units, the quantity of inputs is
10, and the price of each input is $4. Answer the following question(s) on the basis of
this information.
The per unit cost of production in the economy described above is:
A.$.50.
B.$1.
C.$2.
D.$5.
4) free trade:
a.discourages growth by increasing competitive pressures on domestic firms.
b.encourages growth by effectively eliminating all patent and copyright barriers to
growth.
c.discourages growth compared to circumstances where the government strongly
controls foreign trade.
d.encourages growth by promoting the rapid spread of new inventions and innovations.
5) if the number of worker-hours in an economy is 100 and its labor productivity is $5
of output per worker-hour, the economy’s real gdp:
a.is $20.
b.is $500.
c.is $5000.
d.cannot be calculated.
6) which of the following is an economic explanation for why most college-aged movie
stars do not attend college.
a.they are too dumb to get into college
b.they would find college life boring
c.the opportunity cost in terms of reduced income is too great
d.they cannot afford the room, board, and tuition fees most colleges charge
7) during a severe recession, we would expect output to fall the most in:
a.the health-care industry.
b.the clothing industry.
c.agriculture.
d.the construction industry.
8) a natural monopoly occurs when:
a.long-run average costs decline continuously through the range of demand.
b.a firm owns or controls some resource essential to production.
c.long-run average costs rise continuously as output is increased.
d.economies of scale are obtained at relatively low levels of output.
9) Other things equal, if a change in the tastes of American consumers causes them to
purchase more foreign goods at each level of U.S. GDP, then:
A.unemployment will decrease domestically.
B.U.S. GDP will fall.
C.inflation will occur domestically.
D.U.S. real GDP will rise.
10) which of the following do national income accountants consider to be investment?
a.the purchase of an automobile for private, nonbusiness use
b.the purchase of a new house
c.the purchase of corporate bonds
d.the purchase of gold coins
11) which of the following activities is excluded from gdp, causing gdp to understate a
nation’s well-being?
a.the services of health care workers
b.the services of military personnel
c.the construction of new buildings
d.goods and services produced in the underground economy
12) The modern view of technological advance is that it:
A.is rooted in the independent advance of science, an element largely external to the
market system.
B.it is rarely carried out by oligopolists or pure monopolists.
C.is an internal element of capitalism, occurring in responses to profit incentives.
D.necessarily destroys existing monopoly power.
13) In considering yen and dollars, when the dollar rate of exchange for the yen rises:
A.the yen rate of exchange for the dollar will fall.
B.the yen rate of exchange for the dollar will also rise.
C.the yen rate of exchange for the dollar may either fall or rise.
D.U.S. net exports to Japan will fall.
14) an outward shift of a nation’s production possibilities curve:
a.ensures the nation of an increase in real gdp per capita.
b.ensures the nation of an increase in real gdp, but not of real gdp per capita.
c.neither ensures a nation of an increase in real gdp nor of an increase in real gdp per
capita.
d.ensures a nation of an increase in both real gdp and real gdp per capita.
15) Consider the following investment situations.
(a)A local bookseller is considering expanding store space to increase his capacity for
books. The rent for the additional space would cost $3000 per year. The bookseller
predicts that the added space will pull in an additional profit of $4000 per year. The
current interest rate is 12%. Should the bookseller invest in the extra space?
(b)A baker is considering expanding her business by adding an additional oven to her
kitchen. The new oven would cost $700. The baker expects the new oven to bring in
additional profits of $800. The baker can borrow at a nominal interest rate of 15% and
the current inflation rate is 4%. Should she make the investment?
(c)A mechanic is considering expanding his garage. After a strong year last year, the
mechanic is able to finance the expansion from last years profits. The expansion itself is
expected to cost $11,000. The mechanic estimates that the additional garage will bring
in revenue totaling $12,000. The mechanic is currently receiving an interest rate of 8%
on his saved profits. Should he make the investment?