Tesla Motors manufacturers its cars at a plant in Fremont, California. At this plant,
Tesla is able to take advantage of the high level of technical training possessed by its
American workers, but it also sacrifices the ability to pay lower wages had it chosen to
open its plant in a low-wage country such as Mexico, India, or China. In deciding to
open the Fremont plant, Tesla
A) faced no trade-offs because employing more technically-skilled workers increased
efficiency.
B) faced a trade-off between higher cost and lower precision.
C) adopted a negative technological change because it chose high-skilled workers over
low-paid workers.
D) eroded some of its competitiveness in the luxury electric car market because of its
increased cost of production.
Imposing tariffs in cases of dumping
A) is allowed under the WTO agreement.
B) is not allowed under the WTO agreement.
C) is not addressed by the WTO agreement.
D) has never occurred, even though it is allowed under the WTO agreement.
Jaycee Jeans sold 40 pairs of jeans at a price of $40. When it lowered its price to $20,
the quantity sold increased to 60 pairs. Calculate the absolute value of the price
elasticity of demand. Use the midpoint formula.
A) 1.67
B) 1.0
C) 0.6
D) 0.53
The M1 measure of the money supply equals
A) paper money plus coins in circulation.
B) currency plus checking account balances.
C) currency plus checking account balances plus traveler’s checks.
D) currency plus checking account balances plus traveler’s checks plus savings account
balances.
Creative destruction means that
A) firms develop new products that replace old products in the economy, thereby
encouraging economic growth.
B) economic growth can only be sustained if capital depreciates rapidly.
C) knowledge capital can be created through a system of government subsidies for
education and research and development.
D) research and development should only be financed if research and development is
incremental (a result of making small changes to existing products).
The multiplier is calculated as the
A) change in real GDP/ change in autonomous expenditure.
B) change in autonomous expenditure/ change in real GDP.
C) change in nominal GDP/ change in autonomous expenditure.
D) change in real GDP/ change in induced spending.
If the marginal cost curve is below the average variable cost curve, then
A) average variable cost is increasing.
B) average variable cost is decreasing.
C) marginal cost must be decreasing.
D) average variable cost could either be increasing or decreasing.
The term “property rights” refers to
A) the physical possession of a house or any other property which the owner legally
purchased.
B) the ability to exercise control over one’s own resources within the confines of the
law.
C) the government’s right to appropriate land from wealthy land owners to redistribute
to peasants.
D) the right of a business not to have its assets confiscated by the government in the
event that the business is accused of committing fraud.
Which of the following statements explains the difference between diminishing returns
and diseconomies of scale?
A) Diminishing returns are the result of changes in explicit costs. Diseconomies of
scale are the result of changes in explicit costs and implicit costs.
B) Diminishing returns refer to production while diseconomies of scale refer to costs.
C) Diminishing returns cause a firm’s marginal cost curve to rise; diseconomies of scale
cause a firm’s marginal cost curve to fall.
D) Diminishing returns apply only to the short run; diseconomies of scale apply only in
the long run.
If Canada has a comparative advantage relative to Mexico in the production of timber,
then
A) the explicit cost of production for timber is lower in Canada than in Mexico.
B) the opportunity cost of production for timber is lower in Canada than in Mexico.
C) the implicit costs of production for timber are lower in Canada than in Mexico.
D) the average cost of production for timber is lower in Canada than in Mexico.
If a firm shuts down, it
A) will suffer a loss equal to its fixed costs.
B) will produce nothing but must pay its variable costs.
C) will produce nothing but must pay its fixed and variable costs.
D) will earn enough revenue to cover its variable costs but not all of its fixed costs.
When every good or service is produced up to the point where the last unit provides
________, allocative efficiency occurs.
A) a marginal benefit to society equal to the marginal cost of producing it
B) a marginal benefit to society greater than the marginal cost of producing it
C) a marginal benefit to society less than the marginal cost of producing it
D) a marginal benefit to society equal to zero
For a perfectly competitive firm, at profit maximization
A) market price exceeds marginal cost.
B) total revenue is maximized.
C) marginal revenue equals marginal cost.
D) production must occur where average cost is minimized.
If the nominal interest rate is 6% and the inflation rate is 9%, then the real interest rate
is
A) -3%.
B) 3%.
C) 6.67%.
D) 15%.
The stated interest rate on a loan is the
A) real interest rate.
B) nominal interest rate.
C) actual inflation rate.
D) expected inflation rate.
Significant economic growth did not begin in the world until
A) 1000 A.D.
B) 1750 A.D.
C) 1820 A.D.
D) the 20th century A.D.