ECON - 2302 Ch. 27, Ch 5 , Ch 6, Ch 28, Ch 21, Ch 32 Study Questions Final

Ch. 32 18. In the balance of payments, all of the following are deficit items EXCEPT A) imports of merchandise. B) funds placed in foreign depository institutions. C) tourism expenditures abroad. D) sales of dollars to foreigners.

sales of dollars to foreigners.

Ch 28 11. A primary objective of labor unions is to A) seek better pay and improved work conditions. B) secure equal pay for its members. C) have equal power with their employer. D) all of the above E) none of the above

seek better pay and improved work conditions

Ch. 5 1. Define externality in terms of the third party.

•Externalities -Consequences of an economic activity that spill over to affect third parties •Third parties -Parties who are not directly involved in a given activity or transaction, it is party that is affected a transaction - Externality is a type of market failure, which is a spillover effect on third parties not directly involved in producing or purchasing a good or service. - Externalities occur in an economy when the production or consumption of a specific good or service impacts a third party that is not directly related to the production or consumption of that good or service. Almost all externalities are considered to be technical externalities. - 3rd party problem when those not directly involved in a market activity nevertheless experience negative or positive externalities Social costs = internal cost + external costs External costs - the costs of a market actively paid by people who are not participants

Ch. 27 19. Suppose a dangerous workplace is made safer through the installation of guards and other equipment that reduce the physical hazards of the work environment. If we observe no reduction in injuries, we might conclude that A) workers responded to the safer environment by not exercising as much care themselves, generating more injuries than if they had not changed their behavior. B) the firm has responded by lowering wages and hiring less capable people who are more likely to be injured. C) the injury rate before installation of the safety equipment had been underreported. D) the safety equipment isn't adequate and better equipment should be installed.

workers responded to the safer environment by not exercising as much care themselves, generating more injuries than if they had not changed their behavior

Ch. 32 3. The sum of the current account, the capital account, and the official reserve transaction account is A) always negative. B) always positive. C) positive when exports are greater than imports. D) zero.

zero

Ch 6 Using the above table, a unit tax of $2 is imposed on the product. How much of this tax is paid by the supplier? A) $3 B) unable to determine C) $1 D) $2

$1

Ch 28 21. In the above table, what is the marginal factor cost of the 4th worker? A) $22 B) $30 C) $16 D) $64

$22

Ch 6 Using the above table, a unit tax of $2 is imposed on the product. The equilibrium price of this product after the tax is imposed is A) $4. B) $5. C) $3. D) $2.

$3

Ch.5 3. Understand how third parties are affected when positive and negative externalities exist.

- In the case of NEGATIVE externality, firms do not pay for the costs arising from spillover effects that their production of a good imposes on others, so they produce too much of the good in question. (steel mill firm polluting) - In the case of a POSITIVE externality, buyers fail to take into account the benefits that their consumption of a good yield to others, so they purchase too little of the good (vaccines) •Externalities are examples of market failures. •Pollution is an example of a negative externality. Inoculations are an example of positive externality

Ch. 5 2. Distinguish between positive and negative externalities. Is Price and/or Quantity too high or too low?

- POSITIVE externality (beneficial) In the case of a positive externality, market price is TOO HIGH; output TOO LOW, and the government should impose a SUBSIDY to rectify the situation, to lower price and increase output (vaccination) - NEGATIVE externality (market failure) In the case of a negative externality, market price is TOO LOW, output is TOO HIGH, and the government should impose a TAX to rectify the situation or may regulate company, could force company to recapture pollution to produce less (pollution)

Ch. 32 21. In the above table, the trade balance on goods and services for Country X is ________ billion dollars. A) +25 B) +100 C) -25 D) -100

-25

Ch 27 12. In the above figure, if the monopolist engages in marginal cost pricing, what are its output and price? A) 900, $7 B) 1,200, $3 C) 700, $7 D) 700, $10

1,200, $3

Ch 28 8. Strikes occur in about --- percent of the labor- management negotiations A) 40 B) 2 C) 16 D) 25

2

Ch 28 26. Use the above table. If the marginal revenue product is $30, how many workers will the profit maximizing monopsonist hire and what wage will they pay each worker? A) 4; $25 B) 1; $10 C) 3; $20 D) 2; $15

3; $20

Ch 28 19. According to the above table, if the marginal revenue product is $24, how many workers will the profit maximizing monopsonist hire? A) 7 B) 6 C) 4 D) 5

4

Ch 28 20. In the table above, if the marginal revenue product is $22, how many workers will the profit maximizing monopsonist hire and what wage will they pay each worker A) 4; $16 B) 4; $22 C) 5; $18 D) 3; $14

4; $16

Ch 21 6. Assuming a market rate of interest equal to 7 percent, what is the present value of $200 to be received one year from today? A)$187 B) $210 C) $123 D) $156

A) $187 (Future Value=Present Value (1+r)^n FV = PV x (1+r)^n PV = FV / (1+r)^n r = 0.07; FV = $200; n = 1 PV = 200 / (1+0.07)^1 = $186.92)

Ch 21 5. The double taxation of corporate profit in the United States refers to the fact that A) corporate profit is first taxed and then any dividends paid are subject to personal income tax. B) depreciation is not a deductible expense. C) proprietorships are not subject to any tax on earnings. D) tax rates on partnerships are very high.

A) corporate profit is first taxed and then any dividends paid are subject to personal income tax

Ch 21 13. The funds used to purchase capital goods are called A) financial capital. B) dividends and interest. C) investment. D) savings

A) financial capital

Ch 21 20. People basically borrow in order to A) have current consumption rather than waiting to consume in the future. B) have interest payments. C) go into debt. D) have more funds.

A) have current consumption rather than waiting to consume in the future

Ch 21 3. The greatest advantage of a corporation is A) limited liability. B) the double taxation of dividends. C) separation of ownership and control of the business. D) ease of setting up the business.

A) limited liability

Ch 21 11. In economics we assume that the goal of a firm is to A) maximize economic profits. B) maximize revenue C) maximize total sales. D) minimize costs.

A) maximize economic profits.

Ch. 21 1. A difference between a share of stock in a corporation and a corporate bond is that A) the bond owner is entitled to receive a fixed annual coupon payment plus a lump-sum payment at the bond's maturity date, whereas the stockholder is entitled to a share of future profits. B) stocks are issued in return for funds that are lent to the corporation. C) the share of stock is a legal claim while the bond is not. D) the bond owner has voting rights within the corporation whereas the stockholder does not.

A) the bond owner is entitled to receive a fixed annual coupon payment plus a lump-sum payment at the bond's maturity date, whereas the stockholder is entitled to a share of future profits.

Ch 21 12. When an entrepreneur invests his own financial capital in order to start a business A) the opportunity cost of capital should be included in the economic cost of doing business. B) the accounting costs increase because the funds would otherwise have to be borrowed. C) the firm's economic profits will exceed its accounting profits. D) the investment is treated as a fixed cost, so it should not be considered as a cost of doing business.

A) the opportunity cost of capital should be included in the economic cost of doing business

Ch 21 8. Implicit costs are measured by A) the value of the next-best alternative uses of inputs. B) actual expenses paid by a firm. C) the lowest value of all alternative uses of inputs. D) total revenues minus total costs.

A) the value of the next-best alternative uses of inputs.

Ch. 27 17. Which of the following is NOT exempt from antitrust laws? A) Public transit systems B) Labor unions C) Airlines D) Professional baseball

Airlines

Ch 5 By subsidizing the provision of public education, the government A) generates an increase in the quantity of educational services demanded. B) pushes the per-unit price that producers of educational services receive above the market clearing price. C) All answers are correct D) pushes the per-unit price that consumers pay for educational services below the market clearing price.

All answers are correct

Ch 5 Which of the following might be considered a positive externality? A) individuals who did not get the flu, yet did not receive a flu shot when those around them did receive the shot B) the pollination of an orange grove due to bees kept by a nearby beekeeper C) better fishing resulting from increased lake temperatures generated by the nearby power plant D) All answers are correct

All answers are correct

Ch. 21 2. Suppose you own $15,000 of personal property, $5,000 of stock in ABC Corporation, a $1,000 certificate of deposit, and $10,000 of government bonds. If ABC goes bankrupt, the most you could lose is A) $15,000 B) $5,000 C) $26,000 D) $31,000

B) $5,000 ($5000 stock in ABC corporation. This is because only the stock of ABC will be affected since ABC has limited liability. The liability of the shareholder is limited to the extent of stock held.)

Ch 21 23. The concept of economic rent is associated with the British economist David Ricardo (1772-1823). Ricardo analyzed economic rent for land. Which of the following is FALSE with respect to determining land rent? A) Ricardo assumed the quantity of land in a country is fixed. B) Payment for a resource below its opportunity cost is rent. C) Rent is payment for a resource above its opportunity cost. D) The supply curve for land is vertical (perfectly inelastic).

B) Payment for a resource below its opportunity cost is rent

Ch 21 24. In a partnership, debts accumulated by one partner A) are the responsibility of the other partners only up to the amount each partner initially invested in the partnership. B) are the responsibility of the other partners as well. C) are the responsibility of that partner only. D) are the responsibility of all the employees of the partnership, regardless of whether those employees are partners.

B) are the responsibility of the other partners as well

Ch 21 17. An investor who owns preferred stock has A) the same rights as a bond holder. B) preferential treatment in the payment of dividends. C) regular voting rights. D) unlimited liability for the debts of the firm.

B) preferential treatment in the payment of dividends

Ch 21 27. "Stocks and bonds" are collectively known as A) real property. B) securities. C) shares. D) equities.

B) securities

Ch. 32 35. Assume the U.S. government wants to hold the value of the dollar at $1.00 U.S. equals 100 Japanese yen, but it finds that the value of yen is appreciating against the U.S. dollar. What would be an appropriate policy to reverse this trend? A) Encourage U.S. investments abroad. B) Buy more Japanese goods. C) Sell U.S. dollars. D) Buy U.S. dollars.

Buy U.S. dollars.

Ch 21 7. What is the present value of $100 paid one year from now at an interest rate of 5%? A) $100 B) $5 C) $95.24 D) $105

C) $95.24 (Future Value=Present Value (1+r)^n FV = PV x (1+r)^n PV = FV / (1+r)^n r = 0.05; FV = $100; n = 1 PV = 100 / (1+0.05)^1 = $95.24)

Ch 21 15. Suppose that you borrow $10,000 for one year, and at the end of the year, you must repay $10,450. Also, during that year inflation was 2.5%. The real interest rate is A) 7.0 percent B) 4.5 percent C) 2.0 percent D) 12.0 percent

C) 2.0 percent (A = P(1+r)^t P = $10,000; t = 1yr; A = $10,450; inflation rate = 0.025; i (nominal interest rate) = ? 10450 = 10000 (1+i)^1 10450/10000 = 1 + i 1.045 = 1 + i 1.045 - 1 = i i = 0.045 Real interest rate = nominal interest rate - inflation rate Real interest rate = 0.045 - 0.025 Real interest rate = 0.02 or 2.0 percent

Ch 21 25. The payment for a factor of production that is completely inelastic in supply is A) discounting. B) limited liability. C) economic rent. D) opportunity cost.

C) economic rent

Ch 21 18. The term "economic rent" refers to payments A) to owners of real estate. B) equal to the opportunity cost of the use of land. C) for the use of any resource above its opportunity cost. D) for the use of housing in company owned properties.

C) for the use of any resource above its opportunity cost

Ch 21 22. The payment for current rather than future command over resources is A) opportunity cost. B) an implicit benefit. C) interest. D) an implicit cost.

C) interest

Ch 21 10. If all the return to a resource is economic rent, we know that A) the price of the resource equals its opportunity cost. B) the price of the resource is below its opportunity cost. C) the price of the resource is above its opportunity cost. D) the resource has no opportunity cost.

C) the price of the resource is above its opportunity cost

Ch. 27 8. Which of the following best describes the difference between cost-of-service regulation and rate-of-return regulation?

Costs determine prices in cost-of-service regulation and prices are set in rate-of return regulation so the firm can make a normal rate of return

Ch 21 16. If you want a say in the management of a corporation, you should buy A) preferred stock. B) bonds. C) either bonds or preferred stock. D) common stock.

D) common stock

Ch 21 9. Economic profits are found by total revenues minus A) all opportunity costs. B) implicit costs. C) explicit and implicit costs. D) explicit costs.

D) explicit and implicit costs

Ch 21 21. The normal rate of return is the A) the amount paid to an investor when the firm is an on-going concern. B) average rate of return earned in an industry at a given point in time. C) return on capital associated with zero accounting profits. D) opportunity cost of capital.

D) opportunity cost of capital

Ch 21 19. The opportunity cost of capital is A) the rate used to calculate a firm's tax liability. B) the rate of return realized on an investment. C) the rate of interest the government uses to calculate legal business tax penalties. D) the rate of return that could be earned by the owner's capital were it used elsewhere.

D) the rate of return that could be earned by the owner's capital were it used elsewhere.

Ch 21 26. Often single-owner proprietorships seem more profitable than they really are. The reason for this is that A) they are not allowed to deduct depreciation expense. B) they receive special tax benefits compared to corporations. C) they use different accounting procedures. D) they often fail to consider the opportunity cost of the labor provided by the owner.

D) they often fail to consider the opportunity cost of the labor provided by the owner.

Ch 21 14. The nominal rate of interest is A) not the rate observed in the market. B) not adjusted for inflation. C) expressed in dollars from the chosen base year. D) the rate observed in the market that includes an inflation premium.

D)the rate observed in the market that includes an inflation premium

Ch. 27 13. In the above figure, if this natural monopolist were forced to use marginal cost pricing, it would sell the product at the price ________. A) A B) C C) E D) F

F

Ch. 32 20. Refer to the above table. Suppose the transactions in the table are added to a balance of payments account that is already in balance. What will have to take place to keep the balance of payments in balance? A) Foreign governments will have to make official reserve transactions equal to -$10,000. B) Nothing will have to be done as the accounts are in balance. C) Nothing will have to be done as the accounts are in equilibrium. D) The U.S. government will have to make official reserve transactions equal to $10,000.

Foreign governments will have to make official reserve transactions equal to -$10,000.

Ch 28 2. Which of the following is a correct statement about unions in the United States A) Half of the top ten U.S. unions now have members who work in service and government occupations. B) Since the 1960s, there has been a gradual increase in the proportion of U.S. workers who are members of unions. C) The trend away from manufacturing and the deregulation of certain industries has promoted unionization of the U.S. workforce. D) Half of all U.S. workers are union members.

Half of the top ten U.S unions now have members who work in service and government occupations

Ch. 32 14. One problem that investors in foreign countries face is the possibility of a decline in the value of that foreign country's currency. Which of the following would be an effective way to offset this problem? A) Finance your investment outside of that country. B) Be ready to pull out at the first sign of trouble. C) Hedge through currency swaps. D) Convert as many of your dollars into their dollars as possible.

Hedge through currency swaps.

Ch. 5 4. What is the solution for a negative externality? Recognize on a graph with supply curve change.

In the case of negative externalities the government fixes them using: special taxes and legislative regulation or prohibition. - Taxing goal is to reduce supply of steel and raise price to consumers - Regulation in steel production example, specify a maximum allowable rate of pollution Supply curve will move to the left increasing the price to consumers and reducing the output

Ch 5 What is the assumption underlying public-choice theory? A) Individuals will act within the political process to maximize their collective well-being. B) Individuals act within the political process to improve their own individual well-being. C) Elected officials believe in cooperating with one another and they seek to avoid competition among themselves. D) The costs and benefits of being efficient are the same whether one is in the private sector or in the public sector.

Individuals act within the political process to improve their own individual well-being.

Ch. 27 11. In marginal cost pricing, the natural monopoly would have to set price equal to A) ATC B) AFC C) AVC D) MC

MC

Ch. 27 18. This agency regulates workplace safety and health conditions. A) Occupational Safety and Health Administration B) Equal Employment Opportunity Commission C) Consumer Product Safety Commission D) Environmental Protection Agency

Occupational Safety and Health Administration

Ch. 27 10. A regulated natural monopolist allowed to earn a "fair" rate of return would produce to the point at which A) MR = LAC. B) P = LAC. C) MR = MC. D) P = MR

P = LAC

Ch. 27 9. Refer to the above figure. What are the price and quantity if this monopolist is required to use rate-of-return or average cost pricing? A) P3, Q3 B) P2, Q1 C) P1, Q4 D) P5, Q1

P3, Q3

Ch 28 1. Union membership, in terms of percentage of the U.S civilian labor force A) peaked about 1960 and has since declined. B) has increased steadily since the passage of the Wagner Act. C) was over 50 percent in 1987. D) has increased dramatically since 1970.

Peaked about 1960 and has since declined

Ch. 27 23. Which of the following is a possible market solution to the lemons problem? A) Government agencies might be charged with directly overseeing production and distribution of certain products. B) Producers might be required to meet certain legal standards to obtain licenses granting the right to sell their products. C) Producers might offer product guarantees and warranties. D) Liability laws might be established to ensure that firms selling certain products must face penalties in the event the products function poorly.

Producers might offer product guarantees and warranties

Ch 28 18. In the above figure, what is the quantity of workers that would be hired by a monopsonist A) Q1 B) Q2 C) Q4 D) Q3

Q2

Ch. 5 5. What is the economic result of subsidies to education in terms of equilibrium Price and Quantity?

Result of subsidies is excess quantity supplies of variety of goods available and excess quantity demand due to subsidies less out of pocket expenses for the consumers of healthcare and education. There is an imbalance, market can't find equilibrium, since subsidies are producing both, excess in quantity supplied and excess in quantity demanded. Subsidy is a negative tax and is a per-unit payment made either to a business or to a consumer when the business produces of the consumer buy a good or a service. (ex. with vaccinations, government could subsidize people that get vaccinated by reimburse them or make per-unit payments to private firms that provide the vaccines). The supply cure shifts rightward which generates a lower market clearing price and a higher equilibrium quantity.)

Ch. 27 24. Which antitrust act was passed to protect independent retailers from "unfair discrimination" by chain stores? A) Wheeler-Lea Act B) Robinson-Patman Act C) Federal Trade Commission Act D) Sherman Act

Robinson-Patman Act

Ch 5 8. What is the primary assumption underlying Public Choice Theory?

Self interest dominates the behavior in the private market and in the public sector Elected officials behave in ways that are motivated on their self interest - In the private sector what determines a rate of products that are for sale or are available is the proportion of spending associated with various spendings of product types. So if money is spending on blue car, then we will see blue cars in the market., if the demand is for high tech automobiles with internet, that will be what we will see in the market place. The proportional rule, the proportion demand will determine the variety of products or what products are for sale - In the public sector, officials need to win election. Majority rule determines. Theory of public choice - is the study of collective decision making •Collective decision making -How voters, politicians, and other interested parties act and how these actions influence nonmarket decisions •Theory of public choice -The study of collective decision making -Assumes that individuals will act within the political process to maximize their individual (not collective) well-being •Similarities in market and public-sector decision making: -Self-interest -Opportunity cost -Competition -Similarity of individuals but different incentive structures •Incentive structure -The system of rewards and punishments individuals face with respect to their actions •Differences between market and collective decision making: -Government goods at zero price -Use of force -Voting versus spending

Ch. 32 34. Assume the U.S. government wants to hold the value of the dollar at $1.00 U.S. equals 10 Chinese yuan, but it finds that the value of yuan is depreciating against the U.S. dollar. What would be an appropriate policy to reverse this trend? A) Sell U.S. dollars. B) Increase the money supply in the U.S. C) Buy U.S. dollars. D) Increase government spending within the U.S.

Sell U.S. dollars.

Ch 28 9. The president of the united states can obtain a court injunction that will stop a strike for an 80- day cooling off period if the strike is expected to imperil national safety or health. This power is granted in the A) Taft-Hartley Act. B) Landrum-Griffin Act. C) National Industrial Recovery Act. D) Wagner Act.

Taft-Hartley Act

Ch 6 1. U.S. Income Tax is Progressive

The higher the tax brackets the higher the income tax The income tax is progressive by design, bracket in $10,000 increments. The first $10,000 you earn is tax at lower rate, next bracket is higher tax rate. By design, as you earn more income you are paying a higher rate on that brackets income. Progressive taxation - a tax system in which, as income increases, a higher percentage of the additional income is paid as taxes. The marginal tax rate exceeds the average tax rate as income rises

Ch 5 How does pollution tax change the equilibrium Price and Quantity for the above steel firm? A) They change from P1 and Q1 to P2 and Q2. B) They change from P2 and Q2 to P1 and Q1. C) The equilibrium price increases from P1 and P2, but the equilibrium quantity is unchanged. D) They are unchanged

They change from P1 and Q1 to P2 and Q2.

Ch. 5 6. What is the goal of antitrust legislation? To promote competition and efficiency

To promote competition and efficiency anti trust legislation - laws that restrict the formation of monopolies and regulate certain anticompetitive business practices Such legislations makes illegal certain (but not all) economic activities that might restrain trade, that is, that might prevent free competition among actual and potential rival firms in the marketplace. The avowed aim to reduce the power of monopolies -- firms that can determine the market price of the goods they sell.

Ch 6 2. Who pays the unit tax? The consumer or producer?

Unit tax - a constant tax assessed on each unit of a good that consumers purchase Producer or seller collects the tax, by the gallon. Producer, seller, or supplier will try to pass all the tax to the consumer but the seller ends up paying some himself. This is because of the slope of the demand curve constraint. Demand curve is the collection of consumers and what they are willing to pay. S1 meeting demand is the beginning equilibrium and S2 meeting demand is after the tax, the difference in price is what the consumer is willing to pay. Consumer is only willing to pay some of the tax. Is the vertical distance between the supply curves. From table is number of beginning supply curve and after tax supply curve. -In our example, the price that each consumer pays is $0.30 per gallon higher. -Therefore, consumers pay three-fourths of the excise tax, and producers absorb the remainder.

Ch 28 12. Refer the the above figure. If the union wants to maximize the total income of its members who work, it will set wages at A) W1 B) W2 C) W3 D) W4

W2

Ch 6 3. Recognize from a graph or table the revenue collected from a unit tax

What consumer pays and what seller contributes, is the vertical distance of the beginning of the supply curve and the after tax curve. •Who pays the tax? -In our example, the price that each consumer pays is $0.30 per gallon higher. -Therefore, consumers pay three-fourths of the excise tax, and producers absorb the remainder. On the graph, the supply curve moves vertically up $0.40 to show the increase in tax of gasoline, but where the S2 meets the demand curve is what the consumer is willing to pay extra. In this case is $0.30 (found by the difference between where the S2 meets the demand minus S1 meets the demand) so the seller has to pay the difference of $0.10 On a table, the beginning supply coordinates and the ending supply coordinates after tax - what consumer pays - what producer or supplier pays - what is the tax

Ch. 32 11. Changes in which of the following will cause a change in exchange rates? A) consumer preferences B) perceptions of economic and political stability C) real interest rates D) all of the above

all of the above

Ch. 32 6. The current account is A) the reserve assets created by the International Monetary Fund for countries to use in settling international payment obligations. B) a category of the balance of payments transactions that measures the exchange of merchandise, the exchange of services, and unilateral transfers. C) the price of one nation's currency in term of the currency of another country. D) a category of the balance of payments transactions that measures flows of real and financial assets.

a category of the balance of payments transactions that measures the exchange of merchandise, the exchange of services, and unilateral transfers.

Ch. 32 31. In a fixed exchange rate system A) market forces and the country's stock of gold determine its exchange rate. B) the International Monetary Fund determines exchange rates. C) market forces play a role in determining the fixed value of a currency. D) a central bank affects the value of a currency by changing its foreign exchange reserves.

a central bank affects the value of a currency by changing its foreign exchange reserves.

Ch. 32 28. An important problem with the gold standard was that A) one country could easily manipulate the system to its advantage and the disadvantage of other countries. B) a country did not have control of its domestic monetary policy. C) exchange rates tended to fluctuate a great deal, making it difficult for businesses to make long-run plans. D) it was too complicated and restricted business activity.

a country did not have control of its domestic monetary policy.

Ch. 32 37. Which of the following will lead to a depreciation of the U.S. dollar against the British pound? A) a decrease in British demand for U.S. assets B) a decrease in U.S. demand for British goods C) an increase in British demand for U.S. imports D) an increase in U.S. interest rates

a decrease in British demand for U.S. assets

Ch. 32 10. If the foreign exchange rate for 1 Hungarian forint is 0.5 cent, then A) a dinner priced at 400 forints will cost $20. B) a hotel room renting for 40,000 forints will cost $200. C) a wine that sells for 600 forints will cost $3,000. D) a Big Mac hamburger priced at 50 forints will cost $1.

a hotel room renting for 40,000 forints will cost $200 (40,000 forints x 0.5 cent/1 forint x $1/100 cents = $200)

Ch. 32 25. If the price of the Brazilian real is 60 cents and a U.S. resident purchases a Brazilian-manufactured item for 60,000 real, there will be A) a quantity supplied of 60,000 real and a quantity demanded of 60,000 yen. B) a quantity demanded of 60,000 real and a quantity supplied of $60,000. C) a quantity demanded of 60,000 real and a quantity supplied of $36,000. D) a quantity demanded of 60,000 real, but we cannot determine the effect in the market for dollars.

a quantity demanded of 60,000 real and a quantity supplied of $36,000.

Ch. 32 27. An example of a transaction that will be a surplus item on the U.S. balance of payments is A) a tourist from Germany buying a ticket to fly from New York to Chicago on American Airlines. B) a French subsidiary's plant in New Jersey purchasing parts from the main plant in Paris. C) a gift of wheat from the U.S. government to India. D) a U.S. resident purchasing French wine.

a tourist from Germany buying a ticket to fly from New York to Chicago on American Airlines.

Ch 28 10. Collective Bargaining contracts between management and the union negotiations A) usually are settled only after a strike. B) cover wages and fringe benefits only. C) cover wages only. D) also apply to the workers who are not members of the union.

also apply to the workers who are not members of the union

Ch. 32 23. If there is an outward shift in U.S. demand for French goods, the result will be A) a decrease in euros traded. B) an inward shift in French demand for U.S. goods. C) an increase in the demand for the euro that is derived from demand for French goods D) a decrease in the dollar price of a euro.

an increase in the demand for the euro that is derived from demand for French goods

Ch. 32 33. Suppose U.S. interest rates fall. This reduction in U.S. interest rates will cause which of the following to occur? A) an outflow of capital from the United States B) no change in foreign investment in the United States C) an inflow of capital to the United States D) an increase in the value (appreciation) of the U.S. dollar

an outflow of capital from the United States

Ch 28 23. Featherbedding is the term for A) the practice of trying to recruit union members among public employees. B) attempts by management to eliminate a union. C) training programs initiated by unions to make their less-skilled members more productive. D) any practice that forces employers to use more labor than they would otherwise.

any practice that forces employers to use more labor than they would otherwise.

Ch. 27 5. The Sherman Antitrust Act of 1890 prohibited A) interstate commerce. C) all existing monopolies. B) export tariffs. D) attempts to restrain trade.

attempts to restrain trade

Ch. 32 1. A system of accounts that measures the transactions of goods, services, income, and financial assets 1) between domestic households, businesses, and governments and residents of the rest of the world during a specific time period is the A) balance of payments. B) capital account C) balance of trade. D) current account

balance of payments

Ch. 32 5. Capital account transactions occur A) when an U.S. company purchases goods from a foreign company. B) when you move money from one U.S. bank to another U.S. bank. C) when an U.S. citizen purchases stock in an U.S. corporation. D) because of cross-border flows of financial assets.

because of cross-border flows of financial assets.

Ch 28 27. In a monopsonistic market A) employment is higher but wages are lower than in a comparable competitive market B) both employment and wages are lower than in a comparable competitive market C) employment is lower but wages are higher than in a comparable competitive market D) both employment and wages are higher than in a comparable competitive market

both employment and wages are lower than in a comparable competitive market

Ch 28 16. A monopsonistic market A) both employment and wages are lower than in a comparable competitive market. B) employment is higher but wages are lower than in a comparable competitive market. C) both employment and wages are higher than in a comparable competitive market. D) employment is lower but wages are higher than in a comparable competitive market.

both employment and wages are lower than in a comparable competitive market

Ch 28 24. A closed shop is a A) business enterprise in which employees must belong to the union before they can be hired and must remain in the union after they are hired. B) strike by a union in sympathy with another union's strike or cause. C) dispute involving two or more unions over which should have control of a particular jurisdiction. D) legal environment in which businesses may hire nonunion members conditional on their joining the union by some specified date after employment begins.

business enterprise in which employees must belong to the union before they can be hired and must remain in the union after they are hired

Ch. 27 16. The hypothesis that regulators eventually are controlled by the regulated firms and their special interests is the A) control-group hypothesis. B) public interest theory. C) share-the-gains, share-the-pains hypothesis. D) capture hypothesis.

capture hypothesis

Ch 28 3. Legislation that makes it illegal to require union membership as a condition of continuing employment is the A) Congress of Industrial Organizations. B) collection of right-to-work laws. C) Wagner Act. D) National Labor Relations Act

collection of right-to-work laws

Ch. 32 4. Which of the following combinations is plausible for a nation's balance of payments? (All numbers in billions.) A) current account = 30, capital account = -20, official reserve transaction account = -10 B) current account = 40, capital account = 20, official reserve transaction account = -50 C) current account = 10, capital account = 40, official reserve transaction account = 50 D) current account = 50, capital account = -30, official reserve transaction account = 20

current account = 30, capital account = -20, official reserve transaction account = -10

Ch. 32 2. The balance of payments consists of the A) current account, capital account, and gold flows. B) capital account, official reserve transactions account, and recent account. C) current account, official reserve transactions account, and monetary account. D) current account, capital account, and official reserve transactions account.

current account, capital account, and official reserve transactions account.

Ch. 32 17. Any transaction that leads to a payment by a country's residents or government is a(n) A) asset B) surplus item C) debt D) deficit item

deficit item

Ch. 32 8. Refer to the above table. Nation "A" has a current account A) deficit of 15 B) surplus of 15 C) surplus of 60 D) deficit of 60

deficit of 15

Ch. 27 2. The possession of monopoly power and the willful acquisition of that power is A) defined by the Supreme Court as monopolization. B) not defined as monopolization until a statement about profits is included. C) defined in the Sherman Antitrust Act as monopolization. D) not the definition of monopolization.

defined by the Supreme Court as monopolization

Ch. 32 22. If there is an increase in the demand for U.S. automobiles, the A) supply of dollars will fall. B) demand for dollars will fall. C) demand for dollars will rise. D) supply of dollars will rise.

demand for dollars will rise.

Ch. 32 24. Every transaction concerning the importation of goods into the United States constitutes a A) supply of foreign currency with no effect on the market for the dollar. B) demand for dollars with no effect on markets for foreign currencies. C) demand for foreign currencies and a supply of dollars. D) supply of foreign currencies and a demand for dollars.

demand for foreign currencies and a supply of dollars.

Ch. 27 29. A firm that responds to a regulatory rule in a way that permits technical compliance while allowing the firm to violate the spirit of the regulation has A) shared the gains and pains of regulation. B) become a captured regulator. C) engaged in a creative response to regulation. D) reduced the scope of the lemons problem

engaged in a creative response to regulation

Ch. 32 29. Under the gold standard, because all currencies had values fixed in units of gold A) exchange rates were set to a crawling peg. B) exchange rates were essentially fixed. C) exchange rates were essentially floating. D) none of the above

exchange rates were essentially fixed.

Ch. 32 9. The price of one currency in terms of another is the A) foreign exchange rate. B) price of foreign stock. C) price of gold. D) price of a SDR.

foreign exchange rate.

Ch. 32 12. The possibility that changes in the value of a nation's currency will result in variations in the market value of a business's assets is referred to as A) foreign exchange risk. B) conversion risk. C) transaction risk. D) hedge risk.

foreign exchange risk.

Ch 28 6. If a union negotiates and obtains a wage rate above the competitive wage rate, A) unemployment will increase in the nonunion sector relative to the union sector. B) employment in the union sector will increase relative to employment in the nonunion sector. C) it must find a way to ration jobs among the excessive number of workers who wish to work in the union sector. D) it must find a way to make workers more productive

it must find a way to ration jobs among the excessive number of workers who wish to work in the union sector

Ch. 27 27. The "primary motive" of regulators, according to the share-the-gains, share-the-pains theory, is to A) keep their jobs. B) ensure that all customers share the benefits of regulation, and not just the wealthiest consumers. C) maximize their income through accepting monetary payoffs from groups. D) ensure that every group gets what it wants.

keep their jobs

Ch. 27 22. The potential for asymmetric information to bring about a general decline in product quality in an industry is known as the ________ problem. A) lemons B) moral hazard C) liability D) capture

lemons

Ch 28 7. One method unions use to ration available excess workers is A) collective bargaining. B) lengthy apprenticeships. C) to hire only white collar workers. D) refuse to unionize.

lengthy apprenticeships

Ch 28 17. The monopsonist will employ labor to the point at which the A) marginal revenue product equals the wage rate. B) demand equals the supply of labor. C) marginal factor cost equals the marginal revenue product of labor. D) marginal cost of output equals the marginal revenue.

marginal factor cost equals the marginal revenue product of labor

Ch. 27 21. The two most important rationales for government intervention in non-monopolistic markets are A) unfair pricing and usury. B) market failure and asymmetric information. C) substandard products and job creation for public employees. D) job creation and income maintenance.

market failure and asymmetric information

Ch 5 When positive externalities exist, the private market equilibrium represents a A) market price which is too high and a market quantity which is too low. B) market price which is too low and a market quantity which is too low C) market price which is too low and a market quantity which is too high. D) market price which is too high and a market quantity which is too high.

market price which is too high and a market quantity which is too low.

Ch 28 13. When there is only one buyer of labor in a community, we talk of a A) monopolistic market. B) labor cooperative. C) monopoly. D) monopsony.

monopsony

Ch 28 14. A company town in the lumber or mining industry in an example of a A) monopoly. B) monopsony. C) bilateral monopoly. D) buyer's monopoly.

monopsony

Ch. 32 19. Which of the following is NOT a deficit item on a country's balance of payments? A) gold sales to foreigners B) a personal gift to a foreign individual C) imports D) none of the above

none of the above

Ch 21 4. Corporations are able to raise large amounts of financial capital because A) of limited liability and the treatment of a corporation as an individual entity. B) of the tax breaks corporations are given relative to partnerships or proprietorships. C) of their greater ability to monitor the performance of decision makers. D) of the elimination of the problem of separation of ownership and control.

of limited liability and the treatment of a corporation as an individual entity

Ch. 27 1. The main goal of antitrust policy is to A) regulate natural monopolies. B) encourage firms to produce at the MR = demand level. C) prevent the nationalization of industries. D) prevent the monopolization of industries.

prevent the monopolization of industries

Ch. 27 25. Which of the following is illegal according to the antitrust laws? A) price fixing B) the use of coupons C) vertical mergers D) price discrimination based on cost differences

price fixing

Ch 28 4. All of the following are true regarding the current status of labor unions EXCEPT A) the deregulation of certain industries has also contributed to a decline in unionism. B) recent labor laws have diminished worker's rights. C) organized labor's heyday occurred from the 1940s through the 1970s. D) part of the explanation for the decline in union membership has to do with the shift away from manufacturing

recent labor laws have diminished worker's rights

Ch. 32 13. A currency swap can A) reduce foreign exchange risk. B) make foreign goods more expensive in the domestic market. C) make domestic goods more expensive in foreign countries. D) make the foreign exchange rate more volatile over time.

reduce foreign exchange risk.

Ch 5 An externality exists when A) goods are sold in specific geographic locations B) some of the benefits or costs associated with a good are borne by third parties C) the government subsidizes a good D) the government taxes a good

some of the benefits or costs associated with a good are borne by third parties

Ch. 32 15. Currency reserves on account with the International Monetary Fund used to settle accounts between countries are known as A) unilateral transfer. B) federal reserves. C) official reserve account transactions. D) special drawing rights.

special drawing rights.

Ch. 32 16. In the balance of payments, any transaction that leads to a receipt by a resident of a country is a A) debit item. B) minus item. C) surplus item. D) deficit item.

surplus item.

Ch. 27 3. Enforcement of antitrust policy is the responsibility of A) the Food and Drug Administration and Congress. B) the World Trade Organization and the FDA. C) the Federal Trade Commission and the Antitrust Division of the Department of Justice. D) the Trust Division of Congress and the World Trade Organization.

the Federal Trade Commission and the Antitrust Division of the Department of Justice

Ch. 32 7. Unilateral transfers represent A) the balance of government bonds bought and sold by residents of a country. B) the balance of financial giftsboth private and publicentering and leaving a country. C) the balance of official transfers within an economy. D) the balance of services coming into a country.

the balance of financial giftsboth private and publicentering and leaving a country.

Ch 28 15. The main difference between a monopsonist and a competitive buyer of labor is that A) the competitor is a small firm while the monopsonist is a large firm. B) the competitor can hire as many workers as it wants at the going wage while a monopsonist must raise wages to hire additional workers. C) the competitor is also a competitor in product markets while the monopsonist is also a monopoly in product markets. D) the competitor can hire as many workers as it wants at the going wage while a monopsonist can force wages down when hiring additional workers.

the competitor can hire as many workers as it wants at the going wage while a monopsonist

Ch. 27 20. In some cases, social regulation may alter individuals' behavior. For example, there is evidence to indicate that as more automobile safety regulations have been introduced, more individuals have begun to drive recklessly. This phenomenon is known as A) the share-the-gains effect. B) the feedback effect. C) the share-the-pains effect. D) the capture effect.

the feedback effect

Ch. 27 7. Under rate-of-return regulation, the price is set so that A) the firm earns a monopoly profit. B) the firm earns a normal rate of return on investment. C) price equals the marginal cost of production. D) the firm earns a positive economic profit.

the firm earns a normal rate of return on investment

Ch. 27 14. Suppose that a regulatory agency has imposed marginal cost pricing on a natural monopolist. We expect that A) the firm will earn economic profits. B) the firm will eventually go out of business. C) the firm's average total cost of production is rising over the relevant range of production. D) the firm will earn only a normal profit.

the firm will eventually go out of business

Ch. 27 4. According to U.S. antitrust enforcement guidelines, a merger is likely to be challenged if A) the industry after the merger has an HHI above 1,000 and the HHI rises by more than 10. B) the industry after the merger has an HHI above 1,800 and the HHI rises by more than 50. C) the HHI decreases after the merger. D) the industry after the merger has an HHI above 1,800 and the HHI falls by more than 100.

the industry after the merger has an HHI above 1,800 and the HHI rises by more than 50

Ch. 27 28. Under the U.S. system of regulation, most regulars are selected from A) politicians and their friends. B) consumer advocacy groups. C) the industry that is to be regulated. D) university professors who understand the nature of the industry and who understand the true interests of consumers.

the industry that is to be regulated

Ch. 32 32. Under flexible exchange rates, the exchange rate is set by A) the International Monetary Fund. B) the intersection of demand and supply curves in the currency markets. C) the U.S. Federal Reserve's Board of Governors. D) negotiations among central banks of the major industrial powers.

the intersection of demand and supply curves in the currency markets.

Ch. 32 36. Which of the following would NOT be official reserves for Germany? A) the official currency of Germany B) gold C) U.S. dollars D) SDRs

the official currency of Germany

Ch 5 Which of the following functions of government gives property owners the incentive to use their property efficiently? A) the protection of property rights B) the enforcement of antitrust legislation C) the financing of public goods D) regulation

the protection of property rights

Ch. 32 26. An example of a transaction that will be a surplus item on the U.S. balance of payments is A) a Nissan plant in Tennessee buying parts from the main plant in Japan. B) a gift of wheat from the United States government to Egypt. C) the purchase of General Motors stock by a French resident. D) the purchase of a Mercedes-Benz by an American.

the purchase of General Motors stock by a French resident.

Ch. 32 30. With the Bretton Woods system of international exchange rates A) there were fixed exchange rates, and most countries were obligated to intervene to maintain the values of their currencies within 1 percent of par value. B) the value of a country's currency was determined strictly by the laws of supply and demand. C) a nation's balance of payments was eliminated. D) the value of a country's currency was determined by its stock of gold.

there were fixed exchange rates, and most countries were obligated to intervene to maintain

Ch. 27 15. The Supreme Court's decision in the Standard Oil of New Jersey case was A) to increase the fine imposed by a lower court. B) to force the company to pay $10 billion in fines. C) to break up the company. D) to force the company to send refund checks to customers.

to break up the company

Ch. 27 6. The purpose of social regulation is A) to control the quality of service provided by a monopolist. B) to force a firm to produce at the point where marginal cost equals marginal revenue. C) to focus on the impact of production on the environment and society, the working conditions under which goods and services are produced, and sometimes the physical attributes of goods. D) to control the price that regulated enterprises are allowed to charge.

to focus on the impact of production on the environment and society, the working conditions under which goods and services are produced, and sometimes the physical attributes of goods

Ch 28 25. A company can hire non-union workers, but a condition of their employment is that they must join the union within their first 90 days on the job. This is an example of a A) voluntary craft union. B) right-to-work law. C) union shop. D) closed-shop.

union shop.

Ch. 27 26. The act of selling an item in slightly altered forms at different prices and to different groups of consumers is known as A) versioning. B) lemons marketing. C) tie-in sales. D) bundling.

versioning

Ch 28 22. A monopsony has an upward sloping supply curve because A) each additional unit of labor costs less. B) diminishing marginal product to scale does not exist in a monopsony. C) when more units of labor are hired, only the new workers receive the higher wage. D) when more units of labor are hired, all laborers must receive the higher wage.

when more units of labor are hired, all laborers must receive the higher wage.

Ch 28 5. If a union negotiates and obtains a wage rate above the competitive product market to increase wages above the equilibrium level, then the level of unemployment A) will increase. B) will decrease. C) may increase or decrease. D) will remain constant.

will increase

Ch 5 7. Which function of government gives property owners the incentive to use their property efficiently?

•Property rights or right of property ownership - are fundamental for the foundation of a market economy and protection -Rights of an owner to use and exchange property Protection of property rights. Government enforces those rights and allows their transferal, the owners of property have an incentive to use that property efficiently. Any mistakes in their decisions about the use of property have negative consequences that the owners suffer. Owners of property have an incentive to maintain that property so that if they ever desire to sell it, it will fetch a better price