Exhibit 11-5
Assume that the farmer grows wheat and sells it to the miller, the miller turns the wheat
into flour and sells it to the baker, and the baker turns the flour into bread and sells it to
the final consumer.Which summarizes the situation prior to the value added tax
(VAT).The value added by the farmer is ______________.If the government imposes a
VAT rate of 10 percent, the farmer must pay ___________ in VAT tax and will need to
raise the price he charges the miller to _______________.
a. $0.60; $0.06; $0.66
b. $0.80; $0.08; $0.88
c. $1.40; $0.14; $1.54
d. $0.60; $0.60; $1.20
If the cyclical unemployment rate is negative, then the
a. natural unemployment rate is less than the actual unemployment rate in the economy.
b. natural unemployment rate is greater than the actual unemployment rate in the
economy.
c. structural unemployment rate is greater than the frictional unemployment rate.
d. structural unemployment rate is less than the frictional unemployment rate.
e. a and d
A man moves from a large city to a small town.In the small town he seems like a very
different person than the person he was in the big city.For instance, he is more polite in
the small town than he was in the big city.This could be because
a. the costs of his being impolite are higher in the big city than in the small town.
b. the costs of his being impolite are higher in the small town than in the big city.
c. he is a happier person in the small town and it could be that happier people are more
polite.
d. b and c
e. a and c
When the economy is producing Real GDP at the level at which the LRAS curve
intersects the AD curve the economy is
a. in a recessionary gap.
b. in long-run equilibrium.
c. in an inflationary gap.
d. operating at less than full-employment output.
At a price of $9.99, Danielle buys 3 digital books per month. When the price decreases
to $7.99, Danielle buys 4 digital books per month. Jason says that Danielle’s demand for
digital books has increased. Is Jason correct?
a. Yes, Jason is correct.
b. No, Jason is incorrect. Danielle’s demand has decreased.
c. No, Jason is incorrect. Danielle’s quantity demanded has decreased, but her demand
has stayed the same.
d. No, Jason is incorrect. Danielle’s quantity demanded has increased, but her demand
has stayed the same.
e. No, Jason is incorrect. Danielle’s quantity demanded has increased and her demand
has decreased.
A price floor creates a situation in which one party wins and another party loses, and the
gains for the winner are equal to the losses for the loser.
a. True
b. False
If people value clean air over dirty air, and if the air in city A is cleaner than the air in
city B (by a wide margin), then we would expect that ____________________, all else
equal between the two cities.
a. comparable houses in the two cities will sell for the same price.
b. comparable house in A will be more expensive than comparable house in B.
c. comparable house in B will be more expensive than comparable house in A.
d. There is not enough information to answer the question.
GDP includes some nonmarket goods.
a. True
b. False
Research by economists Bloom, Draca, and Van Reenen revealed that imports from
China were associated with not only lower consumer goods prices, but also a
______________ cost of inputs for domestic firms, a(n) ______________ in the variety
of products those domestic firms sold, and a(n) _______________ in U.S. productivity.
a. lower; increase; increase
b. higher; decrease; increase
c. lower; increase; decrease
d. higher; increase; decrease
e. lower; decrease; decrease
Classical economics refers to an era in the history of economic thought that stretched
from the late 1600s to the mid-1800s.
a. True
b. False