1) Answer the next three questions on the basis of the following production possibilities
data for Francia and Galacia. All data are in tons.
FRANCIA PRODUCTION
POSSIBILITIES:
GALACIA PRODUCTION
POSSIBILITIES:
(a) If trade occurs between Francia and Galacia, which nation should export what
product? Why?
(b) What are the limits of the terms of trade between Francia and Galacia?
(c) Assume that prior to specialization and trade, Francia and Galacia chose production
possibility “C.” Now each specializes according to comparative advantage. What will be
the resulting gains from trade? Explain your answer.
2)
Refer to the above diagram and assume the economy is operating at equilibrium point
w. If wages and other resource prices are flexible downward, in the long run a decrease
in the price level from P2 to P1 would move the economy from point w to point:
A.v
B.x
C.t
D.y
3) Use the figures in the table below to answer the following questions.
(a)What is the value of M1?
(b)What is the value of M2?
4) The value of money varies:
A.inversely with the price level.
B.directly with the volume of employment.
C.directly with the price level.
D.directly with the interest rate.
5)
Refer to the above diagram. Assume that G and T2 are the relevant curves, the economy
is currently at A, and the full-employment GDP is B. This economy has a(n):
A.standardized budget surplus.
B.actual budget deficit.
C.standardized budget deficit.
D.actual budget surplus.
6) the assertion that “there is no free lunch” means that:
a.there are always tradeoffs between economic goals.
b.all production involves the use of scarce resources and thus the sacrifice of alternative
goods.
c.marginal analysis is not used in economic reasoning.
d.choices need not be made if behavior is rational.
7) a purely competitive firm’s short-run supply curve is:
a.perfectly elastic at the minimum average total cost.
b.upsloping and equal to the portion of the marginal cost curve that lies above the
average variable cost curve.
c.upsloping and equal to the portion of the marginal cost curve that lies above the
average total cost curve.
d.upsloping only when the industry has constant costs.
8) Reserves must be deposited in the Federal Reserve Banks by:
A.only commercial banks which are members of the Federal Reserve System.
B.all depository institutions, that is, all commercial banks and thrift institutions.
C.state chartered commercial banks only.
D.federally chartered commercial banks only.
9) Refer to the above diagram. Assume that nominal wages initially are set on the basis
of the price level P2 and that the economy initially is operating at its full-employment
level of output Qf. In the short run, demand-pull inflation could best be shown as:
A.a move from b to c on AS2.
B.a move from b to c to d.
C.a change of aggregate supply from AS2 to AS3.
D.a move from b to d.
10) In which of the following cases did the final court decision result in a breakup of
the firm into competing businesses?
A.Microsoft case
B.Standard Oil case
C.U.S. Steel case
D.DuPont cellophane case
11) Which of the following statements is true about falling birthrates?
A.They tend to lag behind falling death rates, allowing population growth to continue
for at least one or two more generations.
B.They tend to precede declines in death rates, causing a temporary dip in population
before it stabilizes in a generation or two.
C.They tend to lag behind declining standards of living.
D.They always cause population to decline.
12)
refer to the above diagram. which line(s) show(s) a positive relationship between x and
y?
a.a only.
b.a and d only.
c.a, b, and d.
d.both c and e.
13)
refer to the above diagram, in which s1 and d1 represent the original supply and
demand curves and s2 and d2 the new curves. in this market:
a.supply has decreased and equilibrium price has increased.
b.demand has increased and equilibrium price has decreased.
c.demand has decreased and equilibrium price has decreased.
d.demand has increased and equilibrium price has increased.
14) (consider this) gross investment is a:
a.flow, as is depreciation.
b.flow, as is capital.
c.stock, whereas depreciation is a flow.
d.stock, whereas capital is a flow.
15) marginal utility is the:
a.sensitivity of consumer purchases of a good to changes in the price of that good.
b.change in total utility obtained by consuming one more unit of a good.
c.change in total utility obtained by consuming another unit of a good divided by the
change in the price of that good.
d.total utility associated with the consumption of a certain number of units of a good
divided by the number of units consumed.
16) economists:
a.always put the independent variable on the horizontal axis and the dependent variable
on the vertical axis.
b.always put the dependent variable on the horizontal axis and the independent variable
on the vertical axis.
c.are somewhat arbitrary in assigning independent and dependent variables to the
horizontal and vertical axes.
d.measure the slope of a line differently than do mathematicians.
17) In a mixed open economy, which of the following all affect the equilibrium GDP in
the same direction?
A.Ca, Ig, Sa, and M
B.Sa, T, and M
C.Ig, T, and Ca
D.Sa, Ig, and X
18)
Refer to the above diagrams. At the profit-maximizing level of employment for this
firm, the amount available to pay to nonlabor resources:
A.is 0abc.
B.is 0wbc.
C.is wab.
D.cannot be determined.
19)
Assuming no currency drains, when the Federal Reserve Banks purchase government
securities the reserves of commercial banks are:
A.decreased by a multiple of the amount of the purchase.
B.decreased by the amount of the purchase.
C.increased by a multiple of the amount of the purchase.
D.increased by the amount of the purchase.