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Business Administration Econ2340
Business Administration Econ2340
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If a firm expects that the price of its product will be lower in the future than it is today?
A the firm has an incentive o increase supply now and decrease supply in the future
Juanita goes to the Hardware Store to buy a new circular saw She is willing to pay $120 for a new saw but buys one on sale for $85 Consumer surplus
Which of the following is a characteristic of a bond?
D All of the above
Refer to Figure 3-4. At price of $25, how many units will be sold?
Refer to Figure 3-4. If the price is $25,
C there would be surplus of 300 units
Refer to Figure 3-4. If the current market price is $25, the market will achieve equilibrium by
B a price decrease, decreasing the quantity supplied and increasing the quantity demanded
Refer to Figure 6-2. The tariff revenue collected by the government equals
B $15 million
Refer to Figure 6-2. With the tariff in place, the United States
C imports 20 million pounds of coffee
Refer to Figure 6-2. As a result of the tariff, domestic producers increase their quantity supplied by
A 6 million pounds of coffee
Refer to Figure 6-2. The tariff causes domestic consumption of coffee
B to fall by 7 million pounds
If, in a competitive market, marginal benefit is greater than marginal cost
C the quantity sold is less than the equilibrium quantity
Economists refer to the conflict between the interests of shareholders and the interests of top management as
C a principal-agent problem
The price of lobster is typically lower in the summer than in the spring Which of the following explanations for this difference is given in the text
B The supply of lobster is greater in the summer than in the spring
Refer to Figure 2-7. What is the opportunity cost of producing 1 bolt of cotton in Pakistan?
B 5/8 of a pound of cashews
Refer to Figure 2-7. What is the opportunity cost of producing 1 both of cotton in Indonesia?
A 3/8 of a pound of cashews
Refer to Figure 2-7. Which country has a comparative advantage in the production of cotton?
Refer to Figure 3-6. The figure above represents the market for coffee grinders. Assume that the market price is $21. Which statement is true?
C There is a shortage that will cause the price to increase; quantity demanded with then decrease and quantity supplied will increase until the price equals $25
Refer to Figure 3-6. The figure above represents the market for coffee grinders. Assume that the price of tote bags is $50. At this price:
C there is a surplus equal to 90 coffee grinders that will be eliminated when the price falls to $25
Refer to Figure 4-5. With rent control, the quantity supplied is Q1. What is the highest rent they can get?
Refer to Figure 4-5. What is the area that represents the portion of producer surplus transferred to consumers as a result of the rent ceiling?
Refer to Figure 4-5. What area represents the deadweight loss after the imposition of the ceiling?
Refer to Figure 4-5. What is the area that represents the producer surplus after the imposition of the ceiling?
Refer to Figure 4-5. What is the area that represents consumer surplus after the imposition of the ceiling?
ON the two-dimensional graph, ___ allows for the effects of additional variables.
D) Shifting Curves
The term ___ in economics refers to a group of buyers and sellers of a product and the arrangement by which they come together to trade.
If the demand for letters written by Abraham Lincoln is higher than the demand for letter written for John Wilkes Booth, what would have to be true fo
A) The supply of Booth letter would hav
e to be less than the supply of Lincoln letters
Assume you set up a sole proprietorship and your lawyer tells you that as the owner you will face unlimited liability. What does that mean?
C) You could stand to lose your personal wealth if the business goes bankrupt
Refer to Table 2-1. Assume Tomaso's Trattoria only produces pizzas and calzones. A combination of 24 pizzas and 30 calzones could appear.
C) along Tomaso's production possibilities frontier
Refer to Table 2-1. Assume Tomaso's Trattoria only produces pizzas and calzones. A combination of 36 pizzas and 30 calzones could appear.
A) outside Tomaso's production possibilities frontier
Refer to Table 2-1. Assume Tomaso's Trattoria only produces pizzas and calzones. A combination of 24 pizzas and 30 calzones could appear.
A) inside Tomaso's production possibilities frontier
An economic ___ is a simplified version of some aspect of economic life used to analyze an economic issue.
What is the most common type of business?
C) sole proprietorship
Select the phrase that correctly completes the following statement. "A positive change in technology caused an increase in the supply of flat-screen
D) the price of flat-screen televisions decreased and the quantity demanded of flat-screen televisions increased
Refer to Figure 3-1. An increase in the price of the product would be represented by a movement from
A) B to A
In the US, corporate profits are taxed
A) at both the corporate level and when investors receive dividends
Refer to Figure 3-8 The graph in this figure illustrates an initial competitive equilibrium in the market for applies at the intersection of D1 and S
D) the equilibrium point will move from A to E
Refer to Table 4-3. If a minimum wage of $7.50 is mandated there will be a
B) surplus of 20,000 units of labor
Refer to Table 4-3. What is the equilibrium hourly wage and the equilibrium quantity of labor?
D) $7 and 370,000
Voluntary exchange between buyers and sellers generates___ in a market economy
C) allocative efficiency
Refer to Figure 4-11. Suppose the market is initially in equilibrium at price P1 and then the government
C) The consumer will bear a greater share of the tax burden if the demand curve is D2.
The term "property rights" refers to
D) the ability to exercise control over one's own resources within the confines of the law
Refer to Figure 3-2. A technological advancement would be represented by a movement from
C) S1 to S2
Refer to Figure 4-9. How much of the tax is paid by buyers?
Refer to Figure 4-9. How much of the tax is paid by producers?
The economic analysis of minimum wage involves both normative and positive analysis. Consider the following consequences of a minimum wage:
A) a and b are positive statements, c and d are normative statement
The US has developed a comparative advantage in digital computers, airliners and many prescription drug. The source of it comparative advantage in th
Which of the following does not take place in the direct finance market?
A) Deposits from savers are accumulated and loans made to borrowers
Hurricane Katrina damaged a large portion of refining and pipeline capacity when it swept through the gulf coast states in Aug 2005. As a result of t
D) a shortage of gasoline
Adam Smith's behavioral assumption about humans was that people
C) usually act in a rational, self-interested way
FICA is a payroll tax imposed on employers and workers that is used to fund SS and Medicare. Which of the following statements regarding the tax is tr
D) Most economists believe the burden of the taz falls almost entirely
Economists reason that the optimal decision is to continue any activity uo to the point where the
B) marginal benefit equals the marginal cost
w are the fundamental economic questions answered in a market economy?
A) Households and firms interact to markets to decide the answers to these questions
Which of the following is a macroeconomics question?
C) What determines the inflation rate?
Refer to Figure 4-3. What area represents the deadweight loss at P2?
The growing popularity of energy conservation has enticed large home improvement stores like Home Depot and Lowes to offer tankless water heaters. H
A) The supply curve for tankless water heaters shifts to the right
A successful marketing campaign will increase the demand for Red Bull. This will ___ the equilibrium price and _ the equilibrium quantity of Red Bull
B) increase; increase
The WTO promotes foreign trade and investment or globalization. In recent years opposition to globalization has led to violent protests at meeting of
A) protester object to the loss of intellectual property (such as software programs and moves) that results from foreign trade and investment
During the recession of 2007-2009, McDonalds experiences increased sales. This increase in demand for food such as the Big Mac indicates that the Big
B) the demand for the Big Mac increases when income decreases
Deadweight loss refers to
B) the reduction in economic surplus resulting from not being in competitive equilibrium
suppose an excise tax of $0.75 is imposed on every pack of cigarettes sold and sellers are responsible for paying this tax. How would the imposition
B) The supply curve for cigarettes would shift to the left by $0.75
If you want to earn a real interest rate of 3% on money you lend, and you expect that inflation will be 2%, what nominal rate of interest will you cha
Refer to Table 10-1. Based on the table above, which country has a higher standard of living and why?
D) Ireland has a higher standard of living because their GDP per capita is higher
Which of the following accurately describes the impact of the rule of law on a country's economic growth rate?
D) Countries with a strong rule of law faster economic growth
In March 2009, the Seattle Post-Intelligencer newspaper converted to an online-only format. In making this transition, it laid off 145 of its 165
C) frictionally unemployed
Globalization is defined as the process of countries becomeing ___ open to foreign trade and ___ open to foreign investment
D) more; more
The best measure of the standard of living is
C) real GDP per capita
Which of the following is not a reason why the Industrial Revolution occurred when and where it did?
B) The British government was able to more easily seize wealth
Workers laid off as a result of a recession suffer
D) cyclical unemployment
If a German firm produces cars in the US, that production should count towards
A) US GNP
Foreign direct investment occurs when a Chinese corporation
C) opens a new factory in France
Costco pays its employees higher wages, on average, than Wal-Mart pays it employees. Which of the following best explains that difference?
D) Higher wages increase the productivity of Costco workers and reduce turnover, thereby potentially increasing profit
A decrease in the real interest rate will
B) increase consumption and investment
Scott is a woodworker and charges $125 an hour for his time manufacturing custom-made wood products. For his wife's birthday, he designs and creates
C) GDP is not affected by Scott's production of the jewelry box
Because ___ in the government budget deficit increase the real interest rate, budget deficits can ___ firm investment.
C) increases; decreases
Which of the following are included in gross domestic product for an economy in a given year?
B) the value of final goods produced in that year
Between 2008 and 2009, the CPI of a small nation rose from 182 to 185. If household incomes rose by 3% during the period of time, which of the follow
B) The purchasing power of household income rose between 2008 and 2009
The Business Cycle Dating Committee, a part of the ____, officially decided when a recession begins and ends.
D) National Bureau of Economic Research
Refer to Figure 10-1. Which of the following would cause an economy to move from a point like A in the figure above to a point like B?
B) an increase in capital per hour worked
Refer to Figure 10-1. Technological change is shown in the figure above by the movement from
B) B to E
The real power within the federal reserve lies with the
C) Board of Governors
D) can engage in procyclical policy if it mistimes its policy response
Accumulating debt poses a problem for the US federal government because
C) a large debt-to-GDP ratio causes crowding out
Hurricane Katrine destroyed oil and natural gas refining capacity in the Gulf of Mexico. This subsequently
A) shift the short-run aggregate supply curve to the left
A permanent tax cut would likely ___ consumption spending ___ than would a tax rebate like the one issued in 2008.
C) increase; more
Refer to Figure 14-5. In the figure above, if the economy is at point A, the appropriate monetary policy by the Federal Reserve would be to
C) raise interest rates
Suppose Pres Obama is successful in passing a $5 billion tax increase. Assume that taxes are fixed, the economy is closed, and the marginal propensity
A) there is a $15 billion decrease in equilibrium GDP
An increase in investment cause the price level to ___ in the short run and ____ in the long run.
D) increase; increase further
Refer to Figure 12-3. Which of the points above graph are possible long-run equilibria?
A) A and C
Refer to Figure 12-3. Suppose the economy is at point C. If investment spending decreases in the economy, where will the eventual long-run equilibriu
Refer to Figure 12-3. Suppose the economy is at point A. If government spending increases in the economy, where will the eventual long-run equilibriu
Refer to Figure 12-3. Which of the points above graph are possible short-run equilibria?
D) A,B,C and D
Crowding out, following an increase in government spending, results from (the exchange rate is the foreign exchange price of the domestic currency)
C) higher interest rates and higher exchange rate
Hyperinflation is caused by
A) a high rate of growth in the money supply
Monetary policy refers to the actions the Federal Reserve takes to manage
B) the money supply and interest rates to pursue its economic objectives
Refer to Figure 11-3. Supposed that investment spending decreses by $5 million, decrease aggregate expenditure and decreasing real GDP from GDP2 to G
C) $25 million
Which of the following are goals of monetary policy?
C) price stability, economic growth, and high employment
Refer to Table 11-2. Given the consumption schedule in the table above, the marginal propensity to consume is
During the German hyperinflation of the 1920s, the large increases in the money supply were generated by the German government
D) selling large quantities of government bonds to the central bank, the Reichsbank
Refer to 14-3. IN the figure above, the movement from point A to point B in the money market would be caused by
B) an open market sale of Treasury securities by the Federal Government
One of the positive effects of the flat tax is that
B) it reduces compliance costs in payment of taxes
What impact does an increase in the price level in the US have on net exports and why?
B) an increase in the price level decreases net exports by increasing the relative cost of American goods
If the economy receives an influx of new workers from immigration
A) the long run aggragate supply curve will shift to the right
At macroeconomic equilibrium, total ___ equals total____.
C) spending; production
Spending on the war in Afghanistan is essentially categorized as government purchases. How do increases in spending on the war in Afghanistan affect
A) they will shift the aggregate demand curve to the right
IN recent economic history, the US federal budget was in surplus during
If the FED raises the interest rate, this will ___ inflation and ___ real GDP in the shot run
D) reduce; lower
When Barak Obama became president in Jan 2009, he propsed a package of spending ___ and tax ___ intended to increase aggregate demand
C) increases; decreases
The primary tool the Federal Reserve uses to increases the money supply is
C) buying Treasury securities
If tax reduction and simplification are effective, then
A) saving and investment in new capital will increase
Ceteris paribus, in the long-run, a negative supply shock causes
A) the price level to rise initially and then return to its lower level
Potential GDP is also referred to as
C) full-employment GDP
To reassure investors who were unwilling to buy mortgages in the secondary market, the US Congress used two government sponsored enterprises, ___, to
C) Fannie Mae and Freddie Mac
Refer to Figure 11-2. If the US economy is currently at point K, which is the following could cause it to move to point N?
C) the price level in the US falls relative to the price level in the other countries
Refer to Figure 11-2. Suppose that the level of GDP associated with point K is potential GDP. If the US economy is currently at point N
D) the economy is in an expansion
Refer to Figure 11-2. If the US economy is currently at point N, which of the following could cause it to move to point K?
A) Household wealth falls
When a grocery store accepts your $5 bill in exchange for bread and milk, the $5 bill serves as a
D) medium of exchange
Refer to Figure 11-4. Potential GDP equals $500 billion. The economy is currently producing GDP1 which is equal to $450 billion. if the MPC is 0.8, t
C) $10 billion
Open market operations refer to the buying and selling of ___ by the ___ to control the money supply
D) Treasury securities; Federal Reserve
When housing prices ___ as they did beginning in 2006 following the housing market bubble, most banks and other lenders tightened the requirement for
C) fell; harder
Refer to Figure 15-2. IN the graph above, suppose the economy is initially at point A. The movement of the economy to point B as shown in the graph
C) a decrease in income taxes
The federal budget deficit act as an automatic stabilizer because
A) government tax revenues decrease during a recession
The US Treasury Department initiated the TARP to assit banks in expanding their lending in an attempt to spur economic growth. Under TARP, 13 large
B) more; reduced
Which of the following criteria would make gold a poor medium of exchange?
C) its value depends on its purity, and its not easy to visibly identify
Refer to Figure 11-1. If the economy is at point J, what will happen?
C) inventories have fallen below their desired level, and firms increase production
Refer to Figure 11-1. If the economy is in equilibrium, it is at a level of aggregate expenditure given by point
A commercial bank like Comerica creates money by
D) making loans
Which of the following will reduce consumer expenditures?
A) a decrease in expected future income
Inflation targeting is a framework for carrying out monetary policy whereby
B) the central bank commits to achieving a public announced level of inflation
Refer to Figure 14-6. IN the figure above suppose the economy is initially at point A. The movement of the economy to point B as shown in the graph
D) an open market purchase of Treasury bills
The Federal Open Market Committee consists of
D) the Board of Governors plus five of the Federal Reserve Bank Presidents
To measure inflation, the Federal Reserve relies most upon the
A) core personal consumption expenditures price index??????????????????
Which of the following is considered a negative supply shock?
C) an unexpected increase in the price of natural gas
It is ____ difficult to effectively time fiscal policy than monetary policy because___.
D) more; fiscal policy takes longer to implement
Fiscal policy is defined as changes in federal ____ and ___ to achieve macroeconomics objectives such as price stability, high rates of economic
A) taxes; expenditures
IF the bank of Waterloo receives a $10,000 deposit, and the reserve requirement is 10%, how much can the bank loan out?
Poorly times discretionary policy can do more harm than good. Getting the timing right with fiscal policy is generally
D) more difficult than with monetary policy
The federal funds rate is
B) the interest rate banks charge each other for overnight loans
Given the equations for C, I, G, and NX below, what is the marginal propensity to save?
M2 includes M1 plus
D) savings account balances, money market deposit accounts in banks, small-denomination time deposits, and non-institutional money market fund shares
If the GDP deflator is 142, by how much have prices changed since the base year?
B) prices have increased by 42%
Jack just told his boss that he thinks his boss is an idiot. It is likely that Jack will be experiencing ____ unemployment in the near future.
A full-time student who is not working is catagorized as
B) not in the labor force
A final good is one that
B) is purchased by its final user
Which of the following explains why many European countries have unemployment rates that are higher than in the US?
B) European countries offer higher unemployment benefits than the US
The Soviet Union consistently increased the amount of capital available to its workers, but found that increases in capital resulted in
A) diminishing returns to capital
When the economy reaches a trough in a business cycle, which of the following will occur?
C) Income, production, and employment will begin to rise
Which of the following causes the unemployment rate to understate the true extent of joblessness?
A) Discouraged workers are not counted as unemployed
When production in an economy grows more quickly than the population in that economy, which of the following must be occurring?
C) Real GDP per capita is rising
Discouraged workers are
D) workers who have stopped looking for work because they believe there are no jobs for them
When the labor market is at full employment
A) there is no cyclical unemployment in the economy
____ Are financial securities that represent that represent partial ownership of a firm.
Which of the following are NOT considered part of government purchases?
B) welfare benefits
Labor productivity will increase if the ____ increases and _____.
D) quantity of capital per hour worked; technology improves
The measure of production that values output using base-year prices is called
A) real GDP
If inflation increases unexpectedly, then
D) lenders receive a lower real interest rate than they expected
Potential GDP is defined as
D) the level of GDP attained when all firms are producing at capacity
During the recession of 2007-2009, the demand for print advertising has ____ and this has ____ unemployment in the newspaper industry.
A) declined; increased
Which of the following is counted in GDP?
C) the cost of a speed boat purchased by drug smugglers
C) curtails economic growth
Knowledge capital is ____ in production and ___. As a result, firms____ free ride.
B) nonrival; nonexcludable; can
Refer to Table 8-8. Looking at the table above, real average hourly earning in 2005 were
What is human capital?
A) accumulated knowledge and skills acquired by a worker
Which of the following is a true statement about the impact of WWII on the US economy?
D) Increased production of tanks, ships, planes, and munitions accounted for most of the increase in GDP.
If an economy is growing at a rate of 2.5% per year, how long will it take the economy to double in size?
D) 28 years
In the circular flow diagram, ___ supply the factors of production, and ___ goods and services.
A) households; buy
Which of the following accurately describes an effect of hurricane Katrina on GDP?
C) GDP would increase reflecting the costs of cleanup
_____ Are financial securities that represent promises to repay a fixed amount of funds
The "underground economy" is also referred to as
D) the informal sector
Entrepreneurship in China is
B) a relatively new resource
You lend $5,000 to a friend for one year at a nominal interest rate of 10%. the CPI over that year rises from 180 to 190. what is the real rate of
An increase in government purchases, ceteris paribus, will
A) reduce investment
Mike has been unemployed for over a year. He hasn't looked for a job in the lat three months, but he's just started looking for work again. Because
D) the unemployment rate increased
Georg, a German citizen, just purchased 10 shares of stock in Microsoft, a US company. This purchase is an example of
A) foreign portfolio investment
If property rights are not enforced in a country
C) entrepreneurs are unlikely to risk their own funds investing in such an economy
Suppose that real GDP for 2008 was $10,000 billion and real GDP for 2009 was $9,500 billion. What is the rate of growth of real GDP between 2008
Empirical evidence from 1960 to 2008 shows that convergence in economic growth is occurring in which of the following cases?
C) low income industrial countries are catching up to high income industrial countries
The Business Cycle Dating Committee defines a recession as
C) a significant decline in activity visible in industrial production, employment, real income, and wholesale/retail trade lasting more than a few months
In periods when prices are falling, on average,
D) real GDP will grow faster than nominal GDP
Which of the following would increase disposable personal income?
B) a decrease in taxes paid
If, between 1999 and 2009. the economy's real GDP grew from $20 billion to $40 billion, what was the average annual growth rate in the economy?
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