MICRO FINAL

When the MPP of labor is zero, ceteris paribus,

No further increases in output can be achieved by using additional units of labor. B/C Marginal physical product (MPP) is equal to the change in total output associated with one additional unit of input. If the MPP is zero, the last worker hired does not contribute any additional output.

An individual's labor supply curve

Slopes upward initially, and then may bend backward.

If a chair can be sold for $20 and it takes a worker two hours to make a chair, the marginal revenue product of this worker is

$10 PER HOUR

If a chair can be sold for $20 and it takes a worker two hours to make a chair, the marginal revenue product of this worker is

$10 per hour.

If Shoffner Inc., a publicly traded corporation, has a share price of $125, revenues of $15.35 per share, and profits of $5.25 per share, what is the P/E ratio for Shoffner Inc. shares?

23.81.

Which of the following is an example of an explicit income transfer?

A Social Security pension paid to a retired factory worker.

Which of the following programs is likely to have low target efficiency?

A cash payment that the recipient is encouraged to use for housing.

Suppose China can produce either 300 telephones or 200 DVD players, and Japan can produce either 200 telephones or 100 DVD players. Implicitly, Japan has

A comparative but not necessarily an absolute advantage in telephones.

Wealth is measured as

A stock only.

Overall NAFTA has resulted in

Accelerated economic growth and reduced inflationary pressures in Canada, Mexico, and the United States.

To prevent inflation caused by holding so much foreign currency, China must

Allow a floating yuan to cause it to appreciate.

Capital gains are

An increase in the market value of an asset.

The marginal revenue product establishes

An upper limit to the wage rate an employer is willing and able to pay.

A sales tax is a proportional tax.

FALSE

According to the official U.S. threshold, 35 percent of Americans live in poverty

FALSE

Providing basic health care and education for poor countries is cost-prohibitive.

FALSE

All of the following can be costs of environmental cleanup except

Fewer hospital visits.

Which of the following is a welfare program?

Food Stamps

The labor supply curve starts to bend backward once the

Income effect exceeds the substitution effect.

Higher wage rates allow a person to reduce the hours worked without losing income. This is known as the

Income effect.

Government attempts to create a more equitable income distribution by increasing marginal tax rates may do all of the following except

Increase work effort.

Bonds may be issued by all of the following except

Individuals.

Which of the following explains why the U.S. poverty threshold increased from $3,000 per year in 1963 to $25,000 per year in 2017?

Inflation has caused the price for basic necessities to increase since 1963.

Generally speaking, a country whose currency depreciates will experience, as a result,

Inflationary pressure because the prices of imports rise.

The quantity of loanable funds available to a corporation depends on the

Interest rate the company is willing to offer.

An inequality trap has a negative impact on human capital development.

TRUE

In his book The Other Path, de Soto suggests that countries will grow more quickly if bureaucratic barriers to free enterprise are reduced.

TRUE

In making comparisons of personal income among countries, care must be exercised because in poor countries much of what is produced does not pass through markets and thus does not get counted in the nation's income.

TRUE

The marginal revenue product sets an upper limit to the wage rate an employer will pay.

TRUE

The market supply of labor represents the sum of all individual labor supply decisions.

TRUE

The expected value of a future payment differs from the present discounted value in that the expected value

Takes into account the possibility of nonpayment.

The breakeven level of income is

The amount of income that can be earned without a loss of welfare benefits.

The marginal physical product of labor is equal to

The change in total output associated with one additional unit of labor.

As the price of an existing bond increases,

The current yield decreases.

If the expected rate of return decreases

The demand for loanable funds will decrease.

Which of the following is not true of venture capitalists?

They have the same financial liability as corporate stockholders.

When a program is means-tested, it means that

To be eligible, the recipient must have little income.

Which of the following is a goal of an in-kind transfer program but not a cash transfer program?

To ensure that recipients get the type of aid intended.

If a manufacturer does not have to pay for its contribution to pollution, it will produce

Too much output from a social viewpoint.

Large swings in stock prices are usually caused by

Widespread changes in expectations.

A summary record of a country's international economic transactions in a given time period is the

balance of payments

The U.N.'s Millennium Poverty Goal is to

cut the percentage of people in extreme poverty in half world wide

The World Bank defines _______ poverty as an income of less than $1.90 per day per person.

extreme

Which of the following is not true concerning economic growth?

it can be sustained in the short run but not the long run

Which of the following does not contribute to low farm productivity in poor nations?

lack of effort

Income inequalities are greatest in

poor countries

Output per unit of input measures

productivity

Which of the following contributes to an institutional structure that promotes economic growth?

property rights

In general, state and local taxes are

regressive

According to the World Bank, nearly 2 billion people are classified as being in _______ poverty.

severe

the U.S. dollar depreciates, in the long run the United States should experience a

smaller deficit in the US trade balance because A cheaper dollar makes U.S. exports cheaper abroad and increases the price of imports to U.S. consumers, thereby somewhat reducing the trade deficit.

A change in the exchange rate for a country's currency alters the prices of

Both exports and imports.

The owners of which type of firm have the least liability?

Corporation.

The existence of income transfer programs can

Decrease the incentive to work and reduce income and output.

Higher marginal tax rates for welfare programs will

Decrease the incentive to work.

As the uncertainty attached to a future payment _______, the expected value _______.

Decreases, Increases

Women in poor countries are more likely to experience all of the following except

Being prohibited from bringing a dowry to a marriage.

A flat tax

Is a single-rate tax system.

Suppose the United States can produce 2,000 cars or 2,000 trucks. Japan can produce either 2,000 cars or 1,000 trucks. In terms of car production, we can conclude that

Japan has a comparative advantage

The percentage of the working-age population that is working or seeking work is the

Labor force participation rate.

Welfare benefits reduce the need to work and result in a shift in the

Labor supply curve to the left.

The law of diminishing returns states that, ceteris paribus, the

MPP of labor declines as more of it is employed with a given quantity of other (fixed) inputs.

The cost efficiency of labor is equal to the

MPP of labor divided by the wage rate.

In competitive markets, the marginal revenue product curve and marginal physical product curve have similar shapes because

MRP = P × MPP.

As the interest rate increases, ceteris paribus, the trade-off between present and future consumption

Makes it more appealing to sacrifice current consumption.

Tariffs tend to reduce the volume of imports by

Making them more expensive to domestic consumers.

Except for any statistical errors, any current account deficit

Must be completely offset by a capital account surplus. Correct

Because of the law of diminishing returns, as additional workers are hired, total output

Rises at a diminishing rate initially and eventually falls.

Requiring that a firm engage in pollution abatement will likely do all of the following except

Shift the firm's ATC curve downward

In order to maximize social welfare, a firm's production of a good should occur at the output where

Social marginal cost equals social marginal benefit.

Which of the following is an example of a financial intermediary?

Stock markets.

The labor supply curve will be positively sloped if the substitution effect of wages is

Stronger than the income effect of wages.

If the number of available workers of a particular type increases, which of the following shifts should occur in the labor market for the particular type of labor?

Supply of labor should shift to the right.

If the MPP is declining, ceteris paribus, the MRP must decline.

TRUE

The largest portion of Social Security expenditures is for

Retirement benefits.

Ceteris paribus, if incomes increase faster in the United States than in less developed countries, then the currencies of less developed countries should

Appreciate, and the dollar should depreciate. B/C Wealthier Americans will buy more of everything, including exports from LDCs, resulting in an appreciation of the LDC's currencies.

Which of the following is not a reason to restrict trade?

Concern about high prices for consumers.

The price of a stock will decrease, ceteris paribus, for all of the following reasons except

Consumer confidence increases.

As interest rates decline, all of the following will result except

Demand curve for loanable funds shifts to the left.

An abrupt depreciation of a currency whose value was fixed or managed by the government is referred to as

Devaluation.

The decision to save is influenced by all of the following except

Occupation.

Which of the following is associated with global poverty?

Opportunities for education.

A polluting company may be able to purchase the right to pollute through

Pollution permits.

The intersection of the demand for loanable funds and the supply of loanable funds determines the

Prevailing interest rate.

Which of the following is not a true barrier to human capital development in poor nations?

Prohibitive costs to meet basic needs.

Protectionism achieves which of the following goals?

Protection of infant industries.

Producers of paper products are most likely to be in favor of

Protectionism in the paper product market but free trade in the lumber market.

A tax system in which tax rates fall as incomes rise is

REGRESSIVE

Which of the following is least likely to reduce poverty?

Raising taxes within the poor nation.

Lower interest rates

Reflect a lower opportunity cost of money.

investment rate

The percentage of total output allocated to the production of new plants, equipment, and structures is the

Which of the following is a critical key to reducing poverty in the poorest nations?

The relationship between output growth and population growth.

There is resistance to exchange rate fluctuations because changes in the value of a currency are likely to cause all of the following except

The return to a worldwide gold standard.

The owners of a corporation are

The shareholders of the corporation's stock.

If U.S. quotas on imported sugar were eliminated,

The supply of sugar in the United States would shift to the right and sugar prices would fall.

When private and social costs are equal,

There are no external costs.

Treasury bonds typically have lower coupon rates than corporate bonds because

There is a lower risk that the U.S. Treasury will default.

Which of the following is not consistent with a minimum wage that is set above the equilibrium wage?

There will be no unemployment.