ECNM 657 - Final - Set 2

Economics Land has a population of 300 million people. Of these, 80 million are retired, in the military, in institutions, or under 16 years old. There are 210 million who are employed and 10 million who are unemployed. What is the unemployment rate in Economics Land? Select one: a. 3.3% b. 3.6% c. 4.5% d. 5.2%

XX

The table below shows the quantity of labor (measured in hours) and the productivity of labor (measured in real GDP per hour) in a hypothetical economy in three different years. Refer to the above table. Between Year 1 and Year 2, real GDP increased by Select one: a. 1.5% b. 2.5% c. 5.0% d. 6.0%

a. 1.5% X

Kevin and Terry are two woodworkers who both make tables and chairs. In one month, Kevin can make 3 tables or 18 chairs, whereas Terry can make 8 tables or 24 chairs. Given this, we know that the opportunity cost of 1 chair is Select one: a. 1/6 table for Kevin and 1/3 table for Terry b. 1/6 table for Kevin and 3 tables for Terry c. 6 tables for Kevin and 1/3 table for Terry d. 6 tables for Kevin and 3 tables for Terry

a. 1/6 table for Kevin and 1/3 table for Terry

Refer to the chart above. Assume prior to specialization and trade Italy and Greece preferred points I and G on their production possibilities curves. After complete specialization according to comparative advantage, the resulting gains in output will be Select one: a. 5X and 15Y b. 10Y c. 15X and 5Y d. 25X

a. 5X and 15Y

The following diagram is a flexible exchange market for foreign currency. Refer to the diagram. Other things equal, a leftward shift of the supply curve would Select one: a. Appreciate the euro b. Cause a shortage of euros c. Increase the equilibrium quantity of euros d. Appreciate the dollar

a. Appreciate the euro

The following diagram is a flexible exchange market for foreign currency: Refer to the diagram. Other things equal, a leftward shift of the demand curve would Select one: a. Depreciate the dollar b. Appreciate the euro c. Reduce the equilibrium quantity of euros d. Cause a surplus of euros

a. Depreciate the dollar XX

An import quota or tariff on French wine that raises the prices for wine will probably: Select one: a. Hurt domestic wine drinkers but help domestic wineries, which will gain from the higher prices b. Hurt both domestic wine drinkers and domestic wineries, but this will be more than offset by a reduction in driving fatalities c. Hurt both domestic wine drinkers and domestic wine producers because of a reduction in competition d. Hurt domestic wineries, which will lose business as a result of the higher prices

a. Hurt domestic wine drinkers but help domestic wineries, which will gain from the higher prices

Answer the question on the basis of the following information. In 1985, the exchange rate between the U.S. dollar and the Japanese yen was $1 = 262 yen; in 2003, the rate was $1 = 110 yen. Refer to the given information. Which one of the following might be a plausible explanation for the change in the dollar-yen exchange rate from 1985 to 2003? Select one: a. Japan exported much more to the United States during this period than it imported from the United States. b. Japan greatly increased its purchases of military equipment from the United States during this period. c. Japan's economy grew far faster than the U.S. economy during this period. d. Japan's government devalued the yen during this period.

a. Japan exported much more to the United States during this period than it imported from the United States.

The following items describe the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment. 1. Landon just graduated from college and is now looking for work. Landon has had three job interviews in the past month but still has not gotten a job offer. 2. Brandon used to work in an automotive assembly plant. He was laid off 6 months ago as the economy weakened. He expects to return to work in a few months when national economic conditions improve. 3. Catherine worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the federal government cut defense spending. She has been looking for similar work for a year, but no company seems interested in her aircraft design skills. 4. Greg lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year but was unsuccessful and quit looking for work. Refer to the above information. Which individual is frictionally unemployed? Select one: a. Landon b. Brandon c. Catherine d. Greg

a. Landon

Apple has continued to be innovative to ensure that the demand for its products stays or becomes Select one: a. More inelastic b. More elastic c. Unitary elastic d. None of these

a. More inelastic

The one factor that stands out as the most significant explanation of large variations in living standards around the world is Select one: a. Productivity b. Population c. Preferences d. Prices

a. Productivity

Refer to the diagram where D and S are the U.S. demand for and supply of Swiss francs. At the equilibrium exchange rate, E, the U.S. balance of payments is in equilibrium. Under a system of flexible exchange rates, the shift in demand from D to D' will Select one: a. Ultimately reduce U.S. exports and raise U.S. imports b. Cause the dollar to appreciate c. Cause the Swiss franc to depreciate d. Cause the dollar to depreciate

a. Ultimately reduce U.S. exports and raise U.S. imports XX

Refer to the chart above. The price and domestic quantity demanded after trade are Select one: a. $8 and 300 b. $8 and 900 c. $14 and 900 d. $14 and 600

b. $8 and 900

Answer the question on the basis of the following table, which indicates the dollar price of libras, the currency used in the hypothetical nation of Libra. Assume that a system of freely floating exchange rates is in place. Refer to the table. The exchange rate is Select one: a. 4 libras for 1 dollar b. 0.25 libra for 1 dollar c. 0.40 libra for 1 dollar d. 3 libras for 1 dollar

b. 0.25 libra for 1 dollar

Suppose that a worker in Radioland can produce either 4 radios or 1 television per year, and a worker in TV Land can produce either 2 radios or 4 televisions per year. Each nation has 100 workers. Also suppose that each country completely specializes in producing the good in which it has a comparative advantage. If Radioland trades 100 radios to TV Land in exchange for 100 televisions each year, then each country's maximum consumption of new radios and televisions per year will be Select one: a. 100 radios, 300 televisions in Radioland and 300 radios, 100 televisions in TV Land b. 300 radios, 100 televisions in Radioland and 100 radios, 300 televisions in TV Land c. 200 radios, 100 televisions in Radioland and 100 radios, 200 televisions in TV Land d. 300 radios, 100 televisions in Radioland and 100 radios, 400 televisions in TV Land

b. 300 radios, 100 televisions in Radioland and 100 radios, 300 televisions in TV Land

The real interest rate is 11%, and the nominal interest rate is 15%. How much is the expected inflation? Select one: a. 16% b. 4% c. 11% d. 2.5%

b. 4%

Suppose that Economics Land produces 2400 units of output, employing the 60 units of input, and the price of the input is $30 per unit. Refer to the information above. If productivity increased such that 3000 units are now produced with the quantity of inputs still equal to 60, then per-unit production costs would Select one: a. Decrease and aggregate supply would decrease b. Decrease and aggregate supply would increase c. Increase and aggregate supply would decrease d. Remain unchanged and aggregate supply would remain unchanged

b. Decrease and aggregate supply would increase

If expected inflation is constant, then when the nominal interest rate decreases, the real interest rate Select one: a. Falls by more than the change in the nominal interest rate b. Falls by the change in the nominal interest rate c. Rises by the change in the nominal interest rate d. Rises by more than the change in the nominal interest rate

b. Falls by the change in the nominal interest rate

Low-wage U.S. laborers suffer from protectionism in all the industries that they do not work in, because protectionism Select one: a. Provides a barrier to entry to the job markets that the low-wage earners want entry to b. Forces them to pay higher prices for basic necessities like clothing and food c. Will encourage foreign workers to apply for American jobs d. Will prevent them from applying for those jobs in other industries

b. Forces them to pay higher prices for basic necessities like clothing and food

Which of the following is NOT associated with higher competitive rivalry in an industry? Select one: a. High fixed costs b. High levels of product differentiation c. Low levels of industry growth d. Low buyer-switching costs

b. High levels of product differentiation

Econ Sugar Co. is considering buying ACCT Honey Co. for $100 million. Based on information obtained from 500 supermarkets around the country, when the price of 1 pound of Econ Sugar Co. was reduced by 10%, the average number of 1-pound boxes of sugar rose by 20%. The following week, when 1-pound boxes of ACCT Honey Co. were reduced by 10%, the number of boxes of honey sold increased by 15%. If the sale of ACCT Honey Co. to Econ Sugar Co. goes through, what changes to each product's price should Econ Sugar Co. make? Select one: a. No change b. Increase the price of both, but increase the price of Econ Sugar Co. more c. Increase the price of both, but increase the price of ACCT Honey Co. more d. Lower the price of both

b. Increase the price of both, but increase the price of Econ Sugar Co. more

Your real income will increase by 3% if your nominal income Select one: a. Increases by 5% while the price index falls by 2% b. Increases by 5% while the price index rises by 2% c. Increases by 2% while the price index rises by 5% d. Increases by 2% while the price index falls by 5%

b. Increases by 5% while the price index rises by 2%

What is the biggest factor that accounts for a nation's prosperity? Select one: a. Amount of gold b. Output c. Money d. Employment

b. Output

Which of the following is CORRECT? Percentage change in Select one: a. Price level approximates percentage change in real income minus percentage change in nominal income b. Real income approximates percentage change in nominal income minus percentage change in price level c. Nominal income approximates percentage change in price level minus percentage change in real income d. Real income approximates percentage change in price level minus percentage change in nominal income

b. Real income approximates percentage change in nominal income minus percentage change in price level

Warren Buffet was once asked what the most important thing he looks for is when evaluating a company. He replied Select one: a. Replicable competitive advantage b. Sustainable competitive advantage c. A thorough industry analysis d. Low barriers to entry

b. Sustainable competitive advantage

The following table shows the aggregate supply and demand data for a country. If input prices decrease and aggregate supply shifts to the right by 3000 units at each price level . . . what will the new price equal? Select one: a. 600 b. 800 c. 300 d. 400

c. 300

The following table shows the aggregate supply and demand data for a country. What is the equilibrium output? Select one: a. 8000 b. 4000 c. 7000 d. 9000

c. 7000

The graph above reflects a significant increase in oil prices. What will the impact on aggregate supply most likely lead to? Select one: a. An increase in economic growth b. An increase in input prices c. A decrease in the natural unemployment rate d. Less inflationary pressures

c. A decrease in the natural unemployment rate

A transfer payment is Select one: a. A payment for moving expenses a worker receives when he or she is transferred by an employer to a new location b. A payment that is automatically transferred from your bank account to pay a bill or some other obligation c. A form of government spending that is not made in exchange for a currently produced good or service d. The benefit that a person receives from an expenditure by government minus the taxes that were collected by government to fund that expenditure

c. A form of government spending that is not made in exchange for a currently produced good or service

To figure out Gross Domestic Product (GDP), we Select one: a. Add up the wages paid to all workers b. Add up the costs of producing all final goods and services c. Add up the market values of all final goods and services d. Take the difference between the market values of all final goods and services and the costs of producing those final goods and services

c. Add up the market values of all final goods and services

Industries with high barriers to entry Select one: a. Push profits to normal returns b. Increase the likelihood of firms entering the industry c. Help firms sustain long-term profits d. Increase the number of competitors

c. Help firms sustain long-term profits

The Econ Corporation issued $25 million in new common stock in 2016. It used $18 million of the proceeds to replace obsolete equipment in its factory and $7 million to repay bank loans. As a result, investment Select one: a. Of $7 million has occurred b. Of $25 million has occurred c. Of $18 million has occurred d. Has not occurred

c. Of $18 million has occurred

Why might a business use an indirect price discrimination scheme versus direct price discrimination? Select one: a. The different customer types shop at different stores. b. The demand for each customer type is the same. c. The different customer types cannot be uniquely identified directly. d. The company can prevent arbitrage between its different customer types.

c. The different customer types cannot be uniquely identified directly.

Following an increase in Mexican interest rates relative to U.S. interest rates, which caused consumers in Mexico to borrow abroad and consume and invest domestically, which of the following is expected to occur? Select one: a. The dollar would appreciate relative to the peso, and Mexican prices would increase. b. The dollar would appreciate relative to the peso, and Mexican prices would decrease. c. The dollar would depreciate relative to the peso, and Mexican prices would increase. d. The dollar would depreciate relative to the peso, and Mexican prices would decrease.

c. The dollar would depreciate relative to the peso, and Mexican prices would increase.

Chile is an importer of computer chips, taking the world price of $12 per chip as given. Suppose Chile imposes a $7 tariff on chips. Which of the following outcomes is possible? Select one: a. The price of chips in Chile increases to $19, the quantity of Chilean-produced chips decreases, and the quantity of chips imported by Chile decreases. b. The price of chips in Chile increases to $16, the quantity of Chilean-produced chips increases, and the quantity of chips imported by Chile decreases. c. The price of chips in Chile increases to $19, the quantity of Chilean-produced chips increases, and the quantity of chips imported by Chile decreases. d. The price of chips in Chile increases to $16, the quantity of Chilean-produced chips increases, and the quantity of chips imported by Chile does not change.

c. The price of chips in Chile increases to $19, the quantity of Chilean-produced chips increases, and the quantity of chips imported by Chile decreases.

A distinguishing characteristic of public/government transfer payments is that: Select one: a. they are used to subsidize the major transportation carriers to reduce transportation costs. b. they are counted as part of government purchases in the calculation of the gross domestic product. c. there is a tax on the amount of the subsidy above a certain income level. d. the recipients make no contribution to current production in return for them.

c. there is a tax on the amount of the subsidy above a certain income level.

Vertical relationships can increase profits through Select one: a. ​Preventing firms from evading regulation b. ​Creating a double-markup problem c. ​Better aligning the incentives of manufacturers and retailers d. ​Preventing price discrimination

c. ​Better aligning the incentives of manufacturers and retailers

In equilibrium, if $1 = 0.5 pound sterling and 1 pound sterling = 40 Swiss francs, the exchange rate between dollar and franc will be Select one: a. 1 franc = $.10 b. 1 franc = $.20 c. $1 = 80 francs d. $1 = 20 francs

d. $1 = 20 francs XX

An identical basket of goods costs $350 in the United States and 200 pounds in Britain. According to the purchasing power parity theory, the exchange rate should move towards: Select one: a. $0.67 per British pound b. $1.50 per British pound c. $0.75 per British pound d. $1.75 per British pound

d. $1.75 per British pound

Assume that Greece has a comparative advantage in fish and Germany has a comparative advantage in cars. Also assume that Germany has an absolute advantage in both fish and cars. If these two countries specialize and trade so as to maximize the benefits of specialization and trade, then Select one: a. The two countries' combined output of both goods will be higher than it would be in the absence of trade. b. Greece will produce more fish than it would produce in the absence of trade. c. Germany will produce more cars than it would produce in the absence of trade. d. All of these

d. All of these

What happens when a country's money supply increases (generally, all else equal)? Select one: a. A decrease in interest rates b. The exchange rate to depreciate c. Exports to increase d. All of these

d. All of these

Which of the following are ways to sell a customer additional units without dropping the price on previous purchases? Select one: a. Offer quantity discounts b. Offer two-part pricing, such as membership fees c. Bundle the goods together d. All of these

d. All of these

Which of the following could potentially capture the value created in a market Select one: a. Suppliers b. Industry rivals c. Buyers d. All of these

d. All of these

Assumptions that underlie the resource-based view include Select one: a. Resource heterogeneity b. Resource immobility c. Barriers to entry d. Both a and b

d. Both a and b

When a country that imports a particular good imposes an import quota on that good Select one: a. Consumer surplus increases, and total surplus increases in the market for that good. b. Consumer surplus increases, and total surplus decreases in the market for that good. c. Consumer surplus decreases, and total surplus increases in the market for that good. d. Consumer surplus decreases, and total surplus decreases in the market for that good.

d. Consumer surplus decreases, and total surplus decreases in the market for that good.

Purchasing power parity suggests that a USD should have the same purchasing power across countries, excluding the impact of Select one: a. Transportation costs b. Domestic inflation c. Real interest rate fluctuations d. Fiscal policy impacts

d. Fiscal policy impacts XX

The movement of workers from lower-productivity jobs to higher-productivity jobs would be an example of a(n) Select one: a. Technological advance b. Network effects c. Simultaneous consumption d. Improved resource allocation

d. Improved resource allocation

"Tariffs and other trade restrictions increase the domestic scarcity of products from abroad. Such policies benefit domestic producers of the restricted products at the expense of domestic consumers." This statement Select one: a. Contains one error; the trade restraints do not increase the scarcity of foreign-produced goods. b. Contains one error; domestic producers gain at the expense of foreign producers rather than domestic consumers. c. Contains two errors; trade restraints do not increase the domestic scarcity of product and neither do they harm domestic consumers. d. Is essentially correct.

d. Is essentially correct.

Nation Y's real GDP was $520 billion in 2013 and $550 billion in 2014. Its population was 150 million in 2013 and 155 million in 2014. On the other hand, Nation Z's real GDP was $200 billion in 2013 and $210 billion in 2014; and its population was 53 million in 2013 and 55 million in 2014. Which of the following statements is TRUE? Select one: a. Nation Y's GDP per capita increased from 2013 to 2014, whereas Nation Z's decreased. b. Nation Z's GDP per capita increased from 2013 to 2014, whereas Nation Y's decreased. c. Nation Y's and Nation Z's GDP per capita both decreased from 2013 to 2014. d. Nation Y's and Nation Z's GDP per capita both increased from 2013 to 2014.

d. Nation Y's and Nation Z's GDP per capita both increased from 2013 to 2014.