Investment is an important determinant of economic growth. Suppose that Congress passes an investment tax credit to encourage firms to spend more on investment. The impact of the investment tax credit would be:
An increase in the quantity of loanable funds exchanged and an increase in the interest rate
An increase in the quantity of loanable funds exchanged and a decrease in the interest rate
A decrease in the quantity of loanable funds exchanged and an increase in the interest rate
A decrease in the quantity of loanable funds exchanged and a decrease in the interest rate
In the AD and SRAS model, an increase in the rate of expected inflation causes
the short-run aggregate supply curve to shift down.
the short-run aggregate supply curve to shift up.
an upward movement along the short-run aggregate supply curve.
a downward movement along the short-run aggregate supply curve.
An increase in money growth will cause output growth to increase in
the short run only
the long run only
the short run and the long run
neither the short run nor the long run
Suppose a negative externality exists in a market. If transactions costs are low and parties are willing to bargain, then, according to the Coase theorem
an equitable solution can be reached only if property rights are assigned to polluters and not to the victims
government intervention is necessary to reach an efficient and equitable solution.
an efficient solution can be reached regardless of the initial assignment of property rights.
an efficient solution can be reached only if property rights are assigned to the victims of pollution and not
A potential problem with expansionary monetary policy is that banks can
will create deflation.
be unwilling to lend.
decide that a recession is best for the economy.
All of the above
At 8 units of production, the marginal cost is $50 per unit, and average cost is $30 per unit. If the price is $50, what is the profit of producing 8 units?
There is no profit
Mrs. Smith is operating a firm in a competitive market. The market price is $6.50. At her profit-maximizing level of output, her average total cost of production is $7.00 and her average variable cost of production is $6.00.
Mrs. Smith is earning a loss and should shutdown in the short run.
Mrs. Smith is earning a loss but should continue to operate in the short run.
Mrs. Smith is earning a profit since the price is above the average variable cost.
Without knowing Mrs. Smith's marginal cost we cannot determine whether she should stay in business or shut down.
If government legislation requires businesses to switch to a different method of production that generates 50% fewer greenhouse gas emissions, compliance to this policy (assuming no other changes) can be illustrated in the Solow model by _____ the aggregate production function that leads to a _____ level of real GDP per person
a movement to the left on; lower
a movement to the right on; higher
a shift up of; higher
a shift down of; lower
Which of the following counts towards GDP
Anything within a store's inventory
Which of the following is not an institution?
Competitive Open Markets
Secure Property Rights
Dependable Legal System
Fair Fiscal Policy
Compared to private goods, the free market would ______ public goods
sometimes overproduce, but oftentimes under produce
Why do some economist think that GDP my overestimate the actual level of economic activity in an economy?
There is no positive adjustment for the underground economy
It does not account for the distribution of income in a country
There is no negative adjustment for pollution
There is no positive adjustment for leisure and well-being
Marcie quit her job as a preschool teacher, which paid an annual salary of $28,000 and became a street food vendor. She used $8,000 out of her savings account that paid a 4% interest rate to buy a street cart to sell food. In her first year of operations, she spend $10,000 on food and supplies and earned revenue of $45,000. Accounting profit: ____ Economic profit:___
$35,000 ; -$1,000
$35,000 ; $6,680
$28,000 ; 20,000
$27,000 ; $17,000
In recent years, real GDP in China has grown
faster than real GDP in the US in some years, slower than real GDP in the US in other years
slower than real GDP in the US
at the same rate as real GDP in the US
faster than real GDP in the US
The economy's production function relates __________ to output
the inflation rate
the unemployment rate
the factors of production
Which of the following statements is FALSE?
A firm that produces 100 unites at a total cost of $500 has an average cost of $5 per unit
Firms will earn positive profits if price exceeds average cost
When marginal cost is below average cost, average cost is rising
Why does South Korea have a higher level of physical and human capital than NK?
1) Markets consitute much more of the primary organizations of economic activity in SK than in NK
2)Economic incentives are better in SK
3) SK has a different culture from NK
1 and 2 only
1, 2, and 3
2 and 3 only
Which of the following best illustrates a product sold in a perfectly competitive market?
Which is always true for monopolies?
P greater than MR
P less than AC
TR greater than TC
MR greater than D
After a hurricane, the prices of many items rise. How best might the government help poor people afford to buy goods and services?
Institute a wage freeze to keep the costs of production from rising too rapidly
give poor people debit cards for use in purchasing essential items, while leaving prices unregulated
institute price controls at pre-hurricane prices
set prices at zero, so consumers can buy what they need without financial distress
the US can make 50 tons of corn or 10 tons of potatoes. Mexico can make 40 tons of corn and 5 potatoes. Assume each country specializes in the production of the good in which they have a comparative advantage. Which identifies the trade price that both countries should find acceptable?
5 corns for 1 potato - trade price - 8 corns for 1 potato
.125 potatoes for 1 corn - trade price - 5 potatoes for 1 corn
.125 potatoes for 1 corn - trade price- 8 potatoes for 1 corn
.2 potatoes for 1 corn - trade price - 8 potatoes for 1 corn
Which of the following would not lead to a decrease in the price of a domestic automobile?
an economic recession, which decreases consumer income
a decrease in the wages paid to union auto workers
an increase in the number of domestic automakers
an increase in the price of foreign-made automobiles
If the conditions of the Coase theorem are met -__- the free market quantity of goods sold will _____.
well-informed consumers and well-defined property rights; maximize social surplus
well-informed consumers and nonexistant property rights; maximize consumer and producer surplus
low transaction costs and well-defined property rights; maximize social surplus
low transaction costs but nonexistant property rights; maximize consumer and producer surplus
When a binding price ceiling is in effect, goods and services
are neight necessarily supplied by their lowest-cost producer nor do they flow to their highest valued use
do not necessarily flow to their highest-valued use
are still allocated efficiently
are not necessarily supplied by their lowest-cost producer
A new per unit subsidy for almond production in the US increases the world supply of almonds. If almonds are inelastically demanded, what will happen to total revenues from almond production?
They will change in an indeterminate direction
They will rise
They will fall
They will remain the same
If the elasticity of supply is 1, and the elasticity of demand is 3, then for a tax of $1 buyers will pay:
an extra 75 cents, and sellers will receive 25 cents less
an extra 50 cents, and sellers will receive 50 cents less
nothing extra since this is the special case where demand is unit elastic
an extra 25 cents and sellers will receive 75 cents less
When the opportunity cost of a choice increases:
the marginal benefits of that choice decrease
individuals are more likely to chose that same option
individuals are less likely to choose that same option
the marginal benefits of that choice increase, as well
in the case of an external benefit, marginal private benefit is _____ marginal social benefit at all quantity of levels.