micro final

The present discounted value of $100 to be received one year from now, if the interest rate is 2.5 percent, is closest to $98. $100. $103. $95.

98

An increase in the value of an asset, such as a stock, is called Interest. Profit. A capital gain. A dividend.

A capital gain.

Air pollution best illustrates Market power. An externality. An inequity. Government failure.

An externality.

If Good X has social demand that is less than market demand, then Good X must be a Public good. Good with an external cost. Good with an external benefit. Good suffering from the free-rider problem.

Good with an external cost.

The present discounted value of a future payment will decrease when the Interest rate increases. Future payment is closer to the present. Risk of nonpayment increases. Opportunity cost of money decreases.

Interest rate increases.

Suppose Canada can produce either 300 tons of paper or 200 HDTVs, and India can produce either 200 tons of paper or 100 HDTVs. The terms of trade between the two countries will lie between 1/2 and 2/3 of an HDTV per ton of paper. 1/3 and 2/3 of an HDTV per ton of paper. 1/3 and 1/2 of an HDTV per ton of paper. 1/2 and 1 HDTV per ton of paper.

1/2 and 2/3 of an HDTV per ton of paper.

Using Figure 35.2, the opportunity cost of producing 1 pair of golf shoes in the United States is Less than the opportunity cost in Mexico. 2 baseballs. 1/3 of a baseball. 3 baseballs.

3 baseballs

When a country participates in international trade, its consumption possibilities Must still equal its production possibilities. May increase, but its trading partners consumption possibilities will decrease. Will increase if it is a rich country and will decrease if it is a poor country. Always exceed its production possibilities.

Always exceed its production possibilities.

In terms of the world as a whole, imports must equal exports because The United Nations requires it. It is part of international law. Most countries, other than the United States, have a balanced trade situation. Every good exported by one country becomes an import for another country.

Every good exported by one country becomes an import for another country.

A country has a comparative advantage in a good if It can produce more of the good than another country. It can produce a good at a lower opportunity cost relative to another country. It can specialize only in two goods. It always has an absolute advantage in the production of the good.

It can produce a good at a lower opportunity cost relative to another country.

Market failure implies that the market mechanism Leads the economy to a point outside the production possibilities curve. Leads the economy to the wrong mix of output. Causes shortages or surpluses in the market. Causes government failure.

Leads the economy to the wrong mix of output.

Refer to Figure 28.2. Assume this firm initially has marginal costs equal to Private MC1 and is polluting. If the government decides to use emission charges to reduce pollution, the firm's MC curve will shift to MC3 and the rate of output will decrease. MC3 and the rate of output will increase. MC2 and the rate of output will decrease. MC2 and the rate of output will increase.

MC3 and the rate of output will decrease.

Antitrust activity addresses Market power. Inequity. Macro instability. Public goods.

Market power.

Which of the following is a source of market failure? Private goods. Market power. Government intervention. None of the choices are correct.

Market power.

As long as interest-earning opportunities exist, present dollars are worth More than future dollars. Less than future dollars. More than previous periods' dollars. Less than inflation-adjusted dollars.

More than future dollars.

Compared to their initial positions at points A and B, as a result of complete specialization and trade, the output of the two countries added together in Figure 35.1 would result in an increase in Both DVD players and motorcycles. Motorcycles only. DVD players only. Neither DVD players nor motorcycles.

Motorcycles only.

Under the market mechanism, a market characterized by external costs will produce too Little output and too much pollution. Much output and too much pollution. Little output and too little pollution. Much output and too little pollution.

Much output and too much pollution.

Market participants are likely to save a portion of current income if they Place a higher value on future consumption than on current consumption. Place a higher value on current consumption than on future consumption. Believe that banks might fail. Believe that money will lose much of its value in the future.

Place a higher value on future consumption than on current consumption.

Expected value refers to the Future value of a current payment. Present value of a future payment. Probable value of a future payment. Difference in the rates of return on risky and safe investments.

Probable value of a future payment.

The market will overproduce goods that have external costs because Producers experience lower costs than society. Producers experience higher costs than society. The government is not able to produce these goods. Producers cannot keep these goods from consumers who do not pay, so they have to produce greater amounts.

Producers experience lower costs than society.

Suppose that if your income is $100,000, your tax is $20,000, but if your income is $200,000, your tax is $45,000. Such a tax is Regressive. Progressive. Proportional. A flat tax.

Progressive.

The purpose of an initial public offering is to See if there is a demand for a company's new product. Change the membership of the board of directors. Borrow funds for investment and growth. Raise funds for investment and growth by selling shares of the company to the public.

Raise funds for investment and growth by selling shares of the company to the public.

The free-rider problem Arises from the ability to exclude an individual from the benefits of someone else's purchase. Is a government failure resulting from consumption of private goods. Reflects the inability to exclude an individual from the benefits of someone else's purchase. Means that the market mechanism is the most efficient way to produce public goods.

Reflects the inability to exclude an individual from the benefits of someone else's purchase.

Figure 32.1 represents the market for loanable funds. The equilibrium interest rate Is less than the rate of return on capital. Is greater than the rate of return on capital. Represents the price paid for the use of money. Is equal to the risk premium.

Represents the price paid for the use of money.

A completely successful emission charge would Shift the private MC curve until the curve intersects with price at zero output and pollution is completely eliminated. Shift the private MC curve to the same position as the social MC curve. Shift the social MC curve to the same position as the private MC curve. Not shift either the private or social MC curve.

Shift the private MC curve to the same position as the social MC curve.

As the price of an existing bond increases, The current yield decreases. The par value decreases. The coupon rate decreases. There is increased risk that the U.S. Treasury will default on the bond.

The current yield decreases.

When there is a decrease in the unemployment rate, The economy moves closer to the production possibilities curve. The production possibilities curve shifts outward. The production possibilities curve shifts inward. There is a movement along the production possibilities curve.

The economy moves closer to the production possibilities curve.

The advantage to a corporation of issuing bonds instead of stock is that The owners keep control of the company. Bond prices do not fluctuate. The owners do not have to make interest payments on the loan. The possibility of default is lower when bonds are issued.

The owners keep control of the company.

Using Figure 4.1, suppose that point B represents the optimal mix of output for a society. If market forces cause society to produce and consume at point C, then There is government failure. The forces of supply and demand will return society to point B. Points A and D are unattainable with the given resources and technology. There is market failure.

There is market failure.

If the economy relies entirely on the market mechanism to answer the WHAT, HOW, and FOR WHOM questions, it tends to Overproduce goods that yield external benefits and overproduce those that generate external costs. Overproduce goods that yield external benefits and underproduce those that generate external costs. Underproduce goods that yield external benefits and overproduce those that generate external costs. Underproduce goods that yield external benefits and underproduce those that generate external costs.

Underproduce goods that yield external benefits and overproduce those that generate external costs.

Which of the following is most likely a private good? Cars. National defense. Sidewalks. The administration of justice.

cars

As the uncertainty attached to a future payment _______, the expected value _______. decreases; decreases increases; stays the same decreases; increases increases; becomes positive

decreases; increases

If the present discounted value of a payment is $1,000,000 and there is a 40 percent chance that the payment will not occur, then the expected value is $600,000. $400,000. $1,000,000. $1,400,000.

$600,000.

Suppose Regis has a 25 percent chance of not collecting $1,000 in one year. If the interest rate is 10 percent, what is the expected value of the future payment? $750. $682. $227. $909.

$682.

The present discounted value of a future payment can be calculated using which of the following formulas? [(1 + Interest rate) N] ÷ (Current payment). (Current payment) ÷ [(1 + Interest rate) N]. [(1 + Interest rate) N] ÷ (Future payment). (Future payment) ÷ [(1 + Interest rate) N].

(Future payment) ÷ [(1 + Interest rate) N].

Which of the following is a gain from trade? A higher standard of living for all trading countries. A shorter workweek for all trading countries. A level of self-sufficiency for all trading countries. A higher price level for all trading countries.

A higher standard of living for all trading countries.

The Social Security tax is A progressive tax. A regressive tax. A proportional tax. A proportional tax at low income levels and a progressive tax at higher income levels.

A regressive tax.

Over a given period of time, if imports are greater than exports, the result is A trade war. A trade deficit. An embargo. A trade surplus.

A trade deficit.

Using Figure 4.2, suppose point C represents the optimal mix of public and private goods for a society. The market mechanism is likely to result in a mix of output represented by point F because the market mechanism is inefficient. B because the market mechanism tends to overproduce public goods. C because the market mechanism is efficient. D because the market mechanism tends to underproduce public goods.

D because the market mechanism tends to underproduce public goods.

The risk premium is the Interest rate paid to savers. Interest rate charged to borrowers. Difference in rates of return on safe and risky investments. Interest rate divided by the expected value.

Difference in rates of return on safe and risky investments