Voluntary exchange ________ economic efficiency because neither the buyer nor the
seller would agree to a trade unless ________.
A) increases; they both benefit
B) increases; only one party benefits
C) decreases; neither benefit
D) decreases; they both benefit
Which of the following will not shift the demand for the euro to the right?
A) an increase in interest rates in the European Union
B) an increase in incomes in countries that buy goods from the European Union
C) expectations among speculators that the price of the euro will rise in the future
D) a decrease in the demand for European goods
In the short run, why does a production function eventually display diminishing returns
to labor?
A) As the number of workers increases it becomes difficult to monitor them.
B) As a firm hires more workers the skills and the work ethic of the additional workers
will eventually decline.
C) As the number of workers increases, eventually the gains from the division of labor
and specialization are used up.
D) The opportunity cost of hiring additional workers must eventually rise.
Figure 2-8
Figure 2-8 shows the production possibilities frontiers for Costa Rica and Guatemala.
Each country produces two goods, pineapples and coconuts.
Which country has a comparative advantage in the production of pineapples?
A) Guatemala
B) They have equal productive abilities.
C) Costa Rica
D) neither country
Georg, a German citizen, just purchased 10 shares of stock in Microsoft, a U.S.
company. This purchase is an example of
A) foreign direct investment.
B) foreign public investment.
C) foreign portfolio investment.
D) contractual globalization.
In October 2013, Abercrombie & Fitch (ANF) posted a price-earnings ratio of 13. If the
price of the stock at that time was $36 per share, which of the following must have been
true?
A) ANF’s revenues that month were $4.68 million.
B) ANF’s earnings per share was $2.77.
C) ANF’s coupon payment was $23.23 per year.
D) ANF’s dividend yield for the year was 47%.
If currencies around the world are based on the gold standard, and Japan raises the
amount of gold for which the yen will trade, then holding all else constant,
A) the yen will depreciate against the dollar.
B) the yen will appreciate against the dollar.
C) the value of the yen relative to the dollar will stay constant.
D) the value of U.S. exports to Japan in terms of the yen will increase.
Suppose the price of gasoline is $3.50 per gallon, the quantity of gasoline demanded is
150 billion gallons per year, the price elasticity of demand for gasoline is -0.06, and the
federal government decides to increase the excise tax on gasoline by $1.00 per gallon,
which increases the price of gasoline by $0.75 per gallon. How much revenue does the
federal government receive from the tax?
A) $95.44 billion
B) $111.20 billion
C) $148.27 billion
D) $161.61 billion
Home Depot sells new and used doors to contractors who build new homes. Home
Depot also sells new and used doors to homeowners. Which of the following would be
counted in GDP?
A) the sale of a used door to a homeowner
B) the sale of a new door to homeowner
C) the sale of a used door to TapKon construction for installation into a new home
D) the sale of a new door to TapKon construction for installation into a new home
Purchasing power parity is the theory that, in the long run, exchange rates move to
equalize
A) nominal interest rates across countries.
B) real GDP across countries.
C) corporate profits across countries.
D) the relative purchasing power of currencies across countries.
According to ________, in a market with an externality, private parties would
voluntarily negotiate an efficient outcome without government intervention.
A) A. C. Pigou
B) Adam Smith
C) Ronald Coase
D) John Maynard Keynes
A trademark is
A) a legal instrument which grants a firm the right to differentiate its product.
B) a legal right to position a firm’s product in high-traffic public areas such as airports
and post offices.
C) a patent on a firm’s product.
D) a distinguishing attribute such as a sign or logo that allows a firm to uniquely
identify its product.
The recession of 2007-2009 began in ________, with the end of the economic
expansion that had begun in ________.
A) January 2007; April 1984
B) December 2007; November 2001
C) July 2007; August 2006
D) March 2007; March 1995
In a typical year, ________ of new jobs are created by small firms.
A) less than 5 percent
B) 10 percent
C) 40 percent
D) 75 percent
An increase in the discount rate ________ bank reserves and ________ the money
supply if banks respond appropriately to the change in the rate.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases